EMPLOYEE STOCK PURCHASE PLAN
(Adopted in March 15, 2007 and Approved by Shareholders April 26, 2007)
Herbalife Ltd. (the Company) hereby establishes and adopts the Herbalife Ltd.
Employee Stock Purchase Plan (the Plan).
The purpose of the Plan is to provide eligible employees of the Company and its subsidiaries
with an opportunity to participate in the Companys success by purchasing the Companys Common
Shares through payroll deductions. The Company intends the Plan to qualify as an employee stock
purchase plan within the meaning of Section 423 of the Internal Revenue Code of 1986, as amended
(the Code), and the provisions of the Plan shall be construed in a manner consistent with
the requirements of Section 423 of the Code. Notwithstanding the foregoing, a subplan established
pursuant to Section 11 hereof shall not be considered part of the Plan for purposes of Section 423
of the Code.
2.1. Account shall mean the account maintained on behalf of the Committee to which
are credited (i) payroll deductions pursuant to Section 6 and (ii) Common Shares acquired upon
exercise of an option pursuant to Section 7.
2.2. Authorization Form shall mean a form established by the Committee authorizing
payroll deductions as set forth in Section 4 and such other terms and conditions as the Committee
from time to time may determine.
2.3. Board shall mean the board of directors of the Company.
2.4. Committee shall mean a committee of one or more members, designated by the
Board to administer the Plan, which may consist of directors, officers or other employees.
2.5. Common Shares means the Companys common shares, par value $.001, subject to
adjustment as provided in Section 14.
2.6. Compensation shall mean the regular salary of a Participant from the Company or
a Designated Subsidiary. Compensation shall be determined prior to the Employees pre-tax
contributions pursuant to Section 125 and Section 401(k) of the Code, and shall exclude bonuses,
compensation from the exercise of stock options or from non-taxable fringe benefits provided by the
Company or a Designated Subsidiary.
2.7. Designated Subsidiaries shall mean Subsidiaries that have been designated by
the Committee from time to time, in its sole discretion, as eligible to participate in the Plan.
2.8. Eligible Employee shall mean any Employee who has completed at least sixty (60)
days of continuous employment with the Company or a Subsidiary excluding:
(a) any Employee who customarily is employed for 20 hours or less per week;
(b) any Employee who customarily is employed for not more than five (5) months in a calendar
(c) any Employee who would own for purposes of Section 424(b)(3) of the Code, stock possessing
five percent (5%) or more of the total combined voting power or value of all classes of stock of
the Company (or of a Subsidiary or parent, if any).
2.9. Employee means any individual classified as an employee (within the meaning of
Section 3401(c) of the Code) by the Company or a Designated Subsidiary on the Companys or such
Designated Subsidiarys payroll records during the relevant participation period. Individuals
classified as independent contractors, consultants, advisers, or members of the Board or the board
of directors of a Designated Subsidiary are not considered Employees solely by virtue of such
2.10. Exercise Date shall mean the last business day of each Offering Period in
which payroll deductions are made under the Plan.
2.11. Fair Market Value per share as of a particular date shall mean the per share
closing sales price of the Common Shares as reported on the New York Stock Exchange on that date
(or if there were no reported prices on such date, on the last preceding date on which the prices
were reported) or, if the Company is not then listed on the New York Stock Exchange, on such other
principal securities exchange on which the Common Shares are traded.
2.12. Offering Date shall mean the first business day of each Offering Period.
2.13. Offering Period shall mean a period of six (6) months, or such other period of
time as determined from time to time by the Committee. In no event shall an Offering Period exceed
twenty-seven (27) months. The first Offering Period shall commence after shareholder approval of
2.14. Participant shall mean an Eligible Employee who participates in the Plan.
2.15. Subsidiary shall mean any corporation having the relationship to the Company
described in Section 424(f) of the Code.
3. SHARES SUBJECT TO THE PLAN
Subject to Section 14, 1,000,000 Common Shares may be issued under the Plan. Such shares may
be authorized but unissued Common Shares or Common Shares acquired by the Company in the open
market or otherwise. If the total number of shares which would otherwise be subject to options
granted under the Plan on an Offering Date exceeds the number of shares then available under the
Plan (after deduction of all shares for which options have been exercised or are then outstanding),
the Committee shall make a pro rata allocation of the shares remaining
available for option grant in as uniform a manner as shall be practicable and as it shall
determine to be equitable. In such event, the Committee shall give written notice to each
Participant of such reduction of the number of option shares affected thereby and shall similarly
reduce the rate of payroll deductions, if necessary.
4.1. Each Eligible Employee on an Offering Date shall become a Participant as of the Offering
Date by completing an Authorization Form and filing it with the Committee by the date required by
the Committee pursuant to such method as it may be establish from time to time in its sole
discretion. Such authorization will remain in effect for subsequent Offering Periods, until
modified or terminated by the Participant.
4.2. Any person who first becomes an Eligible Employee during an Offering Period shall become
a Participant as of the first day of a subsequent Offering Date by completing an Authorization Form
and filing it with the Committee by the date required by the Committee pursuant to such method as
may be established by the Committee from time to time in its sole discretion. Such authorization
will remain in effect for subsequent Offering Periods, until modified or terminated by the
4.3. A person shall cease to be a Participant upon the earliest to occur of:
(a) the date the Participant ceases to be an Eligible Employee for any reason;
(b) the first day of the Offering Period beginning after the date on which the Participant
ceases payroll deduction under the Plan pursuant to Section 6.1; or
(c) the date of a withdrawal from the Plan by the Participant as provided in Section 9.
5. GRANT OF OPTION
5.1. On each Offering Date the Company shall grant each Participant an option to purchase
Common Shares, subject to the limitations set forth in Sections 3 and 5.3.
5.2. The option price per Common Share subject to an offering shall be, unless otherwise
determined by the Committee and communicated to Participants prior to the deadline for Participants
to file their Authorization Forms for the Offering Period to which the Authorization Form applies,
eighty-five percent (85%) of the Fair Market Value of a Common Share on the Exercise Date.
5.3. No Participant shall be granted an option which permits the Participants rights to
purchase Common Shares under the Plan and all other employee stock purchase plans of the Company to
accrue at a rate which exceeds $25,000 of the Fair Market Value of the Common Shares on the
Offering Date for each calendar year in which such option is outstanding at any time; for purposes
of this limitation, there shall be counted only options to which Section 423 of the Code applies.
6. PAYROLL DEDUCTIONS
6.1. A Participant may, in accordance with rules adopted by the Committee, file an
Authorization Form that authorize a payroll deduction of any whole number percentage from one
percent (1%) to ten percent (10%) (or such other percentage as may be established by the Committee
from time to time in its sole discretion) of such Participants Compensation on each pay period
during the Offering Period. A Participant may increase such payroll deduction effective as of each
Offering Date provided the Participant files an Authorization Form requesting the increase in
accordance with rules established by the Committee. A Participant may decrease or cease payroll
deductions during an Offering Period by filing an Authorization Form requesting the decrease or
cessation in accordance with rules established by the Committee.
6.2. All payroll deductions made by a Participant shall be credited to the Participants
Account. A Participant may not make any additional payments to the Participants Account.
7. EXERCISE OF OPTION
7.1. Unless a Participant withdraws from the Plan as provided in Section 9, the Participants
option to purchase Common Shares will be exercised automatically on the Exercise Date, and the
maximum number of full Common Shares subject to such option will be purchased for such Participant
at the applicable option price with the accumulated payroll deductions in the Participants
Account. No fractional shares shall be issued under the Plan.
7.2. The Common Shares purchased upon exercise of an option hereunder shall be credited to the
Participants Account and shall be deemed to be transferred to the Participant on the Exercise Date
and, except as otherwise provided herein, the Participant shall have all rights of a shareholder
with respect to such shares. Common Shares received upon stock dividends or stock splits shall be
treated as having been purchased on the Exercise Date of the shares to which they relate.
8. DELIVERY OF COMMON SHARES
As promptly as practicable after receipt by the Committee of a request for withdrawal of
Common Shares from any Participant in accordance with rules established by the Committee, the
Committee shall arrange for delivery to such Participant of the Common Shares which the Participant
requests to withdraw. Withdrawals may be made no more frequently than twice each calendar year
unless approved by the Committee in its sole discretion.
9. WITHDRAWAL; TERMINATION OF EMPLOYMENT
9.1. A Participant may withdraw all, but not less than all, the payroll deductions and cash
dividends credited to the Participants Account at any time by giving written notice to the
Committee which is received at least thirty (30) days prior to the Exercise Date (or such other
notice period as may be established by the Committee from time to time in its sole discretion).
All such payroll deductions and cash dividends credited to the Participants Account will be paid
to the Participant promptly after receipt of such Participants notice of withdrawal and the
Participants option for the Offering Period in which the withdrawal occurs will be automatically
terminated. No further payroll deductions for the purchase of Common Shares will be made for
the Participant during such Offering Period, and any additional cash dividends during the Offering
Period will be distributed to the Participant.
9.2. Upon termination of a Participants status as an Employee during the Offering Period for
any reason the payroll deductions and cash dividends remaining credited to the Participants
Account will be returned (and any future cash dividends will be distributed) to the Participant or,
in the case of the Participants death, the estate of the Participant, and the Participants option
will be automatically terminated. A Participants status as an Employee shall not be considered
terminated in the case of a leave of absence agreed to in writing by the Company or a Subsidiary
(including but not limited to, military and sick leave), provided that such leave is for a period
of not more than six (6) months or reemployment upon expiration of such leave is guaranteed by
contract or statute.
9.3. A Participants withdrawal from an offering will not have any effect upon such
Participants eligibility to participant in a subsequent offering.
10.1. Cash dividends paid on Common Shares held in a Participants Account shall be
distributed to Participants as soon as practicable. Dividends paid in Common Shares or stock
splits of the Common Shares shall be credited to the Accounts of Participants. Dividends paid on
Common Shares in property (other than cash or Common Shares) shall be distributed to Participants
as soon as practicable.
10.2. No interest shall accrue on or be payable with respect to the payroll deductions or
credited cash dividends or a Participant in the Plan.
The Plan shall be administered by the Committee, and the Committee may select a third party
administrator to whom its duties and responsibilities hereunder may be delegated. The Committee
shall have full power and authority, subject to the provisions of the Plan, to promulgate such
rules and regulations as it deems necessary for the proper administration of the Plan, to interpret
the provisions and supervise the administration of the Plan, and to take all action in connection
therewith or in relation thereto as it deems necessary or advisable. Any decision reduced to
writing and signed by a majority of the members of the Committee shall be fully effective as if it
had been made at a meeting duly held. The determination of the Committee on any matters relating
to the Plan shall be final, binding and conclusive. The Company will pay all expenses incurred in
the administration of the Plan. No member of the Committee shall be personally liable for any
action, determination, or interpretation made in good faith with respect to the Plan, and all
members of the Committee shall be fully indemnified by the Company with respect to any such action,
determination or interpretation.
The Committee may adopt rules or procedures relating to the operation and administration of
the Plan to accommodate the specific requirements of local laws and procedures. Without limiting
the generality of the foregoing, the Committee is specifically authorized to adopt rules and
procedures regarding handling of payroll deductions or other
contributions by Participants, payment of interest, conversion of local currency, data privacy
security, payroll tax, withholding procedures and handling of stock certificates which vary with
local requirements; however, if such varying provisions are not in accordance with the provisions
of Section 423(b) of the Code, including but not limited to the requirement of Section 423(b)(5) of
the Code that all options granted under the Plan shall have the same rights and privileges unless
otherwise provided under the Code and the regulations promulgated thereunder, then the individuals
affected by such varying provisions shall be deemed to be participating under a sub-plan and not in
the Plan. The Committee may also adopt subplans applicable to particular Subsidiaries or
locations, which sub-plans may be designed to be outside the scope of Section 423 of the Code and
shall be deemed to be outside the scope of Section 423 of the Code unless the terms of the sub-plan
provide to the contrary. The rules of such subplans may take precedence over other provisions of
this Plan, with the exception of Section 3, but unless otherwise superseded by the terms of such
subplan, the provisions of this Plan shall govern the operation of such subplan. The Committee
shall not be required to obtain the approval of shareholders prior to the adoption, amendment or
termination of any subplan unless required by the laws of the foreign jurisdiction in which
Eligible Employees participating in the subplan are located.
12. NO TRANSFERABILITY
Neither payroll deductions credited to a Participants Account nor any rights with regard to
the exercise of an option or to receive Common Shares under the Plan may be assigned, transferred,
pledged or otherwise disposed of in any way (other than by will or the laws of descent and
distribution) by the Participant. Any such attempt at assignment, transfer, pledge or other
disposition shall be without effect, except that the Committee may treat such act as an election to
withdraw funds in accordance with Section 9.
13. USE OF FUNDS
All payroll deductions received or held by the Company under the Plan may be used by the
Company for any corporate purpose, and the Company shall not be obligated to segregate such payroll
14. EFFECT OF CERTAIN CHANGES
14.1. In the event of any recapitalization, merger, consolidation, reorganization, stock
dividend, stock split, reverse stock split, combination or exchange of shares, repurchase of
shares, distribution of cash or property (other than a regular cash dividend) spin-off or similar
transaction or other change in corporate structure affecting the Common Shares or the value
thereof, the Committee shall determine the equitable adjustments to be made under the Plan,
including without limitation adjustments to the number of Common Shares which have been authorized
for issuance under the Plan but have not yet been granted under options, as well as the price per
Common Share covered by each option under the Plan which has not yet been exercised.
14.2. In the event of the proposed liquidation or dissolution of the Company, the Offering
Period will terminate immediately prior to the consummation of such proposed
transaction, unless otherwise provided by the Board in its sole discretion, and all
outstanding options shall automatically terminate and the amounts of all payroll deductions will be
refunded without interest to the Participants.
14.3. In the event of a proposed sale of all or substantially all of the assets of the
Company, or the merger or consolidation or similar combination of the Company with or into another
entity, then in the sole discretion of the Board, either (1) each option shall be assumed or an
equivalent option shall be substituted by the successor corporation or parent or subsidiary of such
successor entity, (2) a date established by the Board on or before the date of consummation of such
merger, consolidation, combination or sale shall be treated as a Exercise Date, and all outstanding
options shall be exercised on such date, (3) all outstanding options shall terminate and the
accumulated payroll deductions will be refunded without interest to the Participants, or
(4) outstanding options shall continue unchanged.
15. TERMINATION OR AMENDMENT
The Board may at any time terminate, suspend or amend the Plan as it shall deem advisable. No
such termination may adversely affect options previously granted without the consent of affected
Participants. No amendment shall be effective unless approved by the shareholders of the Company
if shareholder approval of such amendment is required to comply with applicable law, including the
rules and regulations of the New York Stock Exchange (or such other principal securities market on
which the Common Shares are traded).
16. NO EMPLOYMENT RIGHTS
Nothing in the Plan shall confer upon any Participant the right to continue in the employment
of the Company or any Subsidiary or affect any right which the Company or any Subsidiary may have
to terminate the employment of any Participant at any time for any reason.
17. REGULATIONS AND OTHER APPROVALS; GOVERNING LAW
17.1. This Plan and the right of all persons claiming an interest hereunder shall be construed
and determined in accordance with the laws of the State of California without reference to
principles of conflict of laws.
17.2. The obligation of the Company to sell or deliver Common Shares with respect to options
granted under the Plan shall be subject to all applicable laws, rules and regulations, including
all applicable Federal and state securities laws, and the obtaining of all such approvals by
governmental agencies as may be deemed necessary or appropriate by the Committee.
18. WITHHOLDING OF TAXES
If the Participant makes a disposition, within the meaning of Section 424(c) of the Code and
regulations promulgated thereunder, of any Common Shares issued to such Participant pursuant to the
Participants exercise of an option, and such disposition occurs within the two-year period
commencing on the day after the Offering Date or within the one-year period commencing on the day
after the Exercise Date, such Participant shall, within five (5) days of such disposition, notify
the Company thereof and thereafter immediately deliver to the Company
any amount of Federal, state or local income taxes and other amounts, if any, which the
Company informs the Participant the Company is required to withhold.
19.1. If any provision of the Plan shall be held unlawful or otherwise invalid or
unenforceable in whole or in part by a court of competent jurisdiction, such provision shall (a) be
deemed limited to the extent that such court of competent jurisdiction deems it lawful, valid
and/or enforceable and as so limited shall remain in full force and effect, and (b) not affect any
other provision of the Plan or part thereof, each of which shall remain in full force and effect.
If the making of any payment or the provision of any other benefit required under the Plan shall be
held unlawful or otherwise invalid or unenforceable by a court of competent jurisdiction, such
unlawfulness, invalidity or unenforceability shall not prevent any other payment or benefit from
being made or provided under the Plan, and if the making of any payment in full or the provision of
any other benefit required under the Plan in full would be unlawful or otherwise invalid or
unenforceable, then such unlawfulness, invalidity or unenforceability shall not prevent such
payment or benefit from being made or provided in part, to the extent that it would not be
unlawful, invalid or unenforceable, and the maximum payment or benefit that would not be unlawful,
invalid or unenforceable shall be made or provided under the Plan.
19.2. As used in the Plan, the words include and including, and variations thereof, shall
not be deemed to be terms of limitation, but rather shall be deemed to be followed by the words
19.3. The captions in the Plan are for convenience of reference only, and are not intended to
narrow, limit or affect the substance or interpretation of the provisions contained herein.
20. EFFECTIVE DATE; APPROVAL OF STOCKHOLDERS
The Plan is effective as of April 26, 2007. The Plan shall be submitted to the shareholders
of the Company for approval within twelve (12) months after the date the Plan is adopted by the
Board. The Plan is conditioned upon the approval of the shareholders of the Company, and failure
to receive their approval shall render the Plan and all outstanding options issued thereunder null
and void and of no effect.