HERBALIFE LTD.

 

March 16, 2009

 

Dear Fellow Shareholder:

 

We are pleased to enclose information about the 2009 Annual General Meeting of Shareholders, or the Meeting, of Herbalife Ltd., or the Company, to be held on Thursday, April 30, 2009 at 9:00 a.m., Pacific Daylight Time, at the principal executive offices of one of the Company’s U.S. subsidiaries located at 800 W. Olympic Blvd., Suite 406, Los Angeles, California 90015. As discussed in more detail in the enclosed Proxy Statement, at the Meeting you will be asked to consider proposals to:

 

 

MY FELLOW DIRECTORS AND I HAVE UNANIMOUSLY APPROVED THE PROPOSALS INCLUDED HEREIN AND RECOMMEND YOU VOTE FOR THEIR APPROVAL.

 

Best Regards,

 

 

MICHAEL O. JOHNSON

Chairman and Chief Executive Officer

 

 

 

 

HERBALIFE LTD.

 

NOTICE OF ANNUAL GENERAL MEETING OF SHAREHOLDERS

To Be Held Thursday, April 30, 2009

 

To the Shareholders:

 

NOTICE IS HEREBY GIVEN that the 2009 Annual General Meeting of Shareholders, or the Meeting, of Herbalife Ltd., a Cayman Islands exempted limited liability company, or the Company, will be held on Thursday, April 30, 2009 at 9:00 a.m., Pacific Daylight Time, at the principal executive offices of one of the Company’s U.S. subsidiaries located at 800 W. Olympic Blvd., Suite 406, Los Angeles, California 90015 for the following purposes:

 

 

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 2, 2009, are entitled to notice of and to vote at the Meeting and any subsequent adjournment(s) or postponement(s) thereof.

 

All shareholders are cordially invited to attend the Meeting in person. However, to assure your representation at the Meeting, you are urged to vote promptly. You may vote your shares via a toll-free telephone number or over the Internet. If you received a paper copy of the proxy card by mail, you may sign, date and mail the proxy card in the envelope provided. Instructions regarding voting are contained in the Notice of Internet Availability of Proxy Materials or proxy card.

 

Sincerely,

 

BRETT R. CHAPMAN

General Counsel and Corporate Secretary

 

Los Angeles, California

March 16, 2009

HERBALIFE LTD.

 

PROXY STATEMENT FOR 2009

ANNUAL GENERAL MEETING OF SHAREHOLDERS

 

Herbalife Ltd., also referred to as we, our, us, Herbalife or the Company, is calling its 2009 Annual General Meeting of Shareholders, or the Meeting, to be held on Thursday, April 30, 2009 at 9:00 a.m., Pacific Daylight Time, at the principal executive offices of one of the Company’s U.S. subsidiaries located at 800 W. Olympic Blvd., Suite 406, Los Angeles, California 90015.

 

At the Meeting, our shareholders will be asked to consider proposals to:

 

 

Our Board of Directors unanimously recommends that you vote in favor of the proposals outlined herein. YOUR VOTE IS VERY IMPORTANT. Whether or not you plan to attend the Meeting, please take the time to vote. You may vote your shares via a toll-free telephone number or over the Internet. If you received a paper copy of the proxy card by mail, you may sign, date and mail the proxy card in the envelope provided. Instructions regarding voting are contained in the Notice of Internet Availability of Proxy Materials or 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 16, 2009, and is first being made available to shareholders of the Company on or about March 20, 2009. A Notice Regarding Internet Availability of Proxy Materials for the Annual General Meeting was mailed to shareholders of the Company on or about March 20, 2009, which contained instructions on how to access our proxy materials, including our Proxy Statement and Annual Report.

Table of Contents

 

 

Information Concerning Solicitation and Voting

 

Place, Time and Date of Meeting.  This Proxy Statement is being furnished to the Company’s shareholders in connection with the solicitation of proxies on behalf of our Board of Directors for use at the Meeting to be held on Thursday, April 30, 2009, at 9:00 a.m., Pacific Daylight Time, and at any subsequent adjournment(s) or postponement(s) thereof, for the purposes set forth herein and in the accompanying Notice of Annual General Meeting of Shareholders. The Meeting will be held at the executive offices of the Company’s wholly-owned U.S. subsidiary, Herbalife International, Inc., at 800 W. Olympic Blvd., Los Angeles, California 90015. Our telephone number is (213) 745-0500.

 

Internet Availability of Proxy Materials.  Under rules recently adopted by the U.S. Securities and Exchange Commission, or the SEC, we are furnishing proxy materials to our shareholders primarily via the Internet, instead of mailing printed copies of those materials to each shareholder. On March 20, 2009, we mailed to our shareholders a Notice of Internet Availability of Proxy Materials containing instructions on how to access our proxy materials, including our Proxy Statement and our Annual Report.

 

Record Date and Voting Securities.  Only shareholders of record at the close of business on March 2, 2009, 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 61,498,148 Common Shares were issued and outstanding and held of record by 929 registered holders.

 

Voting.  Each shareholder is entitled to one vote for each Common Share held on the Record Date on all matters submitted for consideration at the Meeting. A quorum, representing the holders of not less than a majority of the issued and outstanding Common Shares entitled to vote at the Meeting, must be present in person or by proxy at the Meeting for the transaction of business. Common Shares that reflect abstentions are treated as Common Shares that are present and entitled to vote for the purposes of establishing a quorum and for purposes of determining the outcome of any matter submitted to the shareholders for a vote. However, abstentions do not constitute a vote “for” or “against” any matter and thus will be disregarded in the calculation of a plurality.

 

“Broker non-votes” are Common Shares held in “street name” through a broker or other nominee over which the broker or nominee lacks discretionary power to vote and for which the broker or nominee has not received specific voting instructions. Thus, if you do not give your broker or nominee specific instructions, your Common Shares may not be voted on certain matters. Common Shares that reflect “broker non-votes” are treated as Common Shares that are present and entitled to vote for the purposes of establishing a quorum. However, for the purposes of determining the outcome of any matter as to which the broker or nominee has indicated on the proxy that it does not have discretionary authority to vote, those Common Shares will be treated as not present and not entitled to vote with respect to that matter, even though those Common Shares are considered present and entitled to vote for the purposes of establishing a quorum and may be entitled to vote on other matters.

 

If you are a beneficial shareholder and your broker or nominee holds your Common Shares in its name, the broker or nominee is permitted to vote your Common Shares on matters such as the election of directors and the ratification of the appointment of independent registered public accountants, even if the broker or nominee does not receive voting instructions from you.

 

Directors are elected by a plurality, and the three nominees who receive the most votes will be elected. Abstentions and “broker non-votes” will not affect the outcome of the election.

 

In respect of all other proposals, to be approved, any such proposal must receive the affirmative vote of a majority of the Common Shares present or represented by proxy and entitled to vote. In determining the outcome of such proposals, abstentions have the effect of a negative vote. “Broker non-votes” will not affect the outcome of any such proposals.

 

Revocability of Proxies.  Any proxy given pursuant to this solicitation may be revoked by the person giving it at any time before its use by either (a) delivering to the Corporate Secretary of the Company a written notice of

revocation or a duly executed proxy bearing a later date, (b) granting a subsequent proxy through the Internet or telephone or (c) attending the Meeting and voting in person.

 

Solicitation Expenses.  This solicitation of proxies is made by the Board of Directors and all related costs will be borne by the Company. Proxies may be solicited by certain of our directors, officers, and regular employees, without additional compensation, in person, by telephone, facsimile, or electronic mail. We will, upon request, reimburse brokerage firms and others for their reasonable expenses in forwarding solicitation material to the beneficial owners of Common Shares.

 

Additional Information.  This Proxy Statement contains summaries of certain documents, but you are urged to read the documents themselves for the complete information. The summaries are qualified in their entirety by reference to the complete text of the document. In the event that any of the terms, conditions or other provisions of any such document is inconsistent with or contrary to the description or terms in this Proxy Statement, such document will control. Each of these documents, as well as those documents referenced in this Proxy Statement as being available in print upon request, are available upon request to the Company by following the procedures described under “Additional Information — Annual Report, Financial and Additional Information.”

 

Important Notice Regarding the Availability of Proxy Materials for the Annual General
Meeting of Shareholders to Be Held on April 30, 2009.
The Proxy Statement and Annual Report to Shareholders are available at
http://bnymellon.mobular.net/bnymellon/hlf

 

Our Amended and Restated Memorandum and Articles of Association, or the Memorandum and Articles of Association, presently provide for not less than one nor more than fifteen directors. The Board of Directors has, by resolution, presently fixed the number of directors at eight. 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 II directors end at the Meeting. The current terms of office of Classes III and I directors end at the annual general meetings in 2010 and 2011, respectively. Currently Class I has three directors, Class II has two directors, and Class III has two directors.

 

The nominees for Class II directors are to be voted upon at the Meeting. The Board of Directors has nominated Pedro Cardoso, Murray H. Dashe and Colombe M. Nicholas for election as Class II directors to serve three-year terms expiring at the 2012 annual general meeting. Valeria Rico, a former Class II director, resigned from the Board on March 6, 2009. Leon Waisbein, a Class II director, has notified the Board of his decision to not stand for reelection. We are very sorry to report that Mr. Gaba, a member of the Company’s Board of Directors since 2008, passed away on March 9, 2009. Mr. Gaba served as a Class III director.

 

The Company did not receive any shareholder nominations for director.

 

The persons named as proxies on the accompanying proxy card intend to vote the Common Shares as to which they are granted authority to vote for the election of the nominees listed above. The form of proxy card does not permit shareholders to vote for a greater number of nominees than three. Although the Board of Directors does not know of any reason why any nominee will be unavailable for election, in the event any nominee should be unavailable at the time of the Meeting, the proxies may be voted for a substitute nominee as selected by the Board of Directors.

 

The table below sets forth information about the three nominees and the directors whose terms of office continue beyond the Meeting.

 

THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” PEDRO CARDOSO, MURRAY H. DASHE AND COLOMBE M. NICHOLAS.

 

NOMINEES

 

 

CONTINUING DIRECTORS

 

 

Director Independence

 

Our Board of Directors has affirmatively determined that each of Messrs. Barnes, Bermingham and Higby and Mme. Nicholas is, and Mme. Rico and Mr. Gaba were, during their tenures, independent under section 303A.02 of the New York Stock Exchange, or the NYSE, Listed Company Manual and the Company’s Categorical Standards of Independence, which are attached hereto as Appendix A. The NYSE’s independence guidelines and the Company’s 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 Company’s independent directors had any relationship with the Company.

 

Board Meetings

 

The Board of Directors met 10 times during fiscal 2008. All Board members attended at least 75% of the aggregate number of Board meetings and applicable committee meetings held while such individuals were serving on the Board of Directors, or such committees. Under the Company’s Principles of Corporate Governance, which are available on the Company’s website www.herbalife.com, by following the links through “Investor Relations” to “Corporate Governance,” each director is expected to dedicate sufficient time, energy and attention to ensure the diligent performance of his or her duties, including attending meetings of the shareholders of the Company, the Board of Directors and committees of which he or she is a member. All then-current members of the board of directors attended the 2008 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. Colombe Nicholas currently serves as the Director In Charge of Executive Sessions.

2008 Director Compensation

 

The table below summarizes the compensation paid by the Company to non-management directors for the fiscal year ended December 31, 2008.

 

 

 

 

Each non-management director receives $25,000 per year for services as a director and $5,000 for each board committee on which the director serves (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 director’s annual retainer within two years of such director’s appointment or election to the Board of Directors.

The table below summarizes the equity based awards held by the Company’s non-management directors as of December 31, 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 restricted stock units, or RSUs, to independent directors and to allow for deferral of compensation realized in connection with such RSUs and other director compensation. The purpose of the Independent Directors Plan is to promote the long term financial interest and growth of the Company by attracting and retaining independent directors who can make a substantial contribution to the success of the Company, and to motivate and to align their interests with those of the equity holders. The Independent Directors Plan is part of the Herbalife Ltd. 2005 Stock Incentive Plan. Effective January 27, 2009, the Independent Directors Plan and award agreements granted thereunder were amended to eliminate the ability to make further deferrals of compensation by independent directors. In addition, the Independent Directors Plan was amended such that awards to independent directors in 2009 and thereafter will be in the form of stock-settled stock appreciation rights, or SARs, instead of RSUs.

 

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 Colombe Nicholas in her capacity as the Director In Charge of Executive Sessions, may do so by writing to Herbalife Ltd., c/o Corporate Secretary, 800 W. Olympic Blvd, Suite 406, Los Angeles, CA 90015, or by email at corpsec@herbalife.com, indicating to whose attention the communication should be directed. Under a process approved by the Board of Directors for handling 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 Company’s internal audit department and handled in accordance with procedures established by the audit committee with respect to such matters.

 

Committees of the Board

 

Our Board of Directors has a standing audit committee, nominating and corporate governance committee, and compensation committee.

Audit Committee

 

From January 1, 2008 to April 1, 2008, the audit committee consisted of Messrs. Barnes and Bermingham and Ms. Rico, each of whom is independent as discussed above under “— Director Independence.” From April 1, 2008 to March 9, 2009, the audit committee consisted of Messrs. Barnes, Bermingham and Gaba, each of whom is or was independent as discussed above under “— Director Independence.” Mr. Gaba passed away on March 9, 2009. Since March 10, 2009, the audit committee has consisted of Messrs. Barnes, Bermingham and Higby, each of whom is independent as discussed above under “— Director Independence.” As required by Rule 303A.07 of the NYSE Listed Company Manual, the Board of Directors has affirmatively determined that each of Messrs. Barnes, Bermingham and Higby are, and Mr. Gaba and Ms. Rico (while on the audit committee) were, 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 two public companies in addition to that of the Company and, through October 20, 2008, had also served on the audit committee of Longs Drug Stores Corporation. As required by Rule 303A.07 of the NYSE Listed Company Manual, the Board of Directors had affirmatively determined that Mr. Barnes’ simultaneous service on the audit committee of more than three public companies would not impair his ability to effectively serve on the Company’s audit committee. As a result of his departure from the audit committee of Longs Drug Stores, Mr. Barnes no longer serves on the audit committee of more than three public companies.

 

The principal duties of the audit committee are as follows:

 

 

Our Board of Directors has adopted a written charter for the audit committee which is available on the Company’s 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 2008, the audit committee met six times.

 

Nominating and Corporate Governance Committee

 

From January 1, 2008 to March 6, 2009, the nominating and corporate governance committee consisted of Mmes. Nicholas and Rico and Mr. Barnes, each of whom is or was independent as discussed above under “— Director Independence.” Ms. Rico resigned from the Board on March 6, 2009. Since March 9, 2009, the nominating and corporate governance committee has consisted of Mme. Nicholas and Messrs. Barnes and Bermingham, each of whom is independent as discussed above under “— Director Independence.” The principal duties of the nominating and corporate governance committee are as follows:

 

 

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 committee’s own knowledge, supplemented as appropriate by inquiries to third parties. The preliminary determination is based primarily on the need for additional directors and the 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 nominee’s background and experience and to report its findings to the nominating and corporate governance committee. The nominating and corporate governance committee then evaluates the prospective nominee’s qualifications against any specific criteria that it may establish for the position, as well as the standards and qualifications set out in the Company’s Principles of Corporate Governance. Among other things, the committee considers the candidate’s:

 

 

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 committee’s 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 Company’s 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 2008, the nominating and corporate governance committee met five times.

 

Compensation Committee

 

From January 1, 2008 to March 6, 2009, the compensation committee consisted of Mr. Bermingham and Mmes. Nicholas and Rico, each of whom is independent as discussed above under “— Director Independence.” Ms. Rico resigned from the Board on March 6, 2009. Since March 9, 2009, the compensation committee has consisted of Mme. Nicholas and Messrs. Barnes and Bermingham, each of whom is independent as discussed above under “— Director Independence.” The principal duties of the compensation committee are as follows:

 

 

 

Our Board of Directors has adopted a written charter for the compensation committee which is available on the Company’s 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 2008, the compensation committee met eight times.

 

Compensation Committee Interlocks and Insider Participation

 

During the fiscal year ended December 31, 2008, Messrs. Bermingham and Mme. Nicholas and Rico served on the compensation committee of the Board of Directors. During the fiscal year ended December 31, 2008, there were no relationships or transactions between the Company and any member of the compensation committee requiring disclosure hereunder.

 

The audit committee has selected KPMG LLP as the Company’s independent registered public accountants for the fiscal year ending December 31, 2009. Services provided to the Company and its subsidiaries by KPMG LLP in fiscal 2007 and 2008 are described under “— Fees to Independent Registered Public Accountants for Fiscal 2007 and 2008.” 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 COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS FOR FISCAL 2009.

 

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 2008 were prepared in accordance with U.S. generally accepted accounting principles.

 

The audit committee hereby reports as follows:

 

 

 

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, 2008, which have been filed with the SEC. The audit committee also selected, subject to shareholder ratification, KPMG LLP to serve as our independent registered public accounting firm for the year ending December 31, 2009.

 

AUDIT COMMITTEE OF
THE BOARD OF DIRECTORS

 

Leroy T. Barnes, Jr., Chairman

Richard P. Bermingham

 

Fees to Independent Registered Public Accountants for Fiscal 2007 and 2008

 

The following services were provided by KPMG LLP during fiscal 2007 and 2008:

 

 

 

 

Pre-Approval Policy

 

The audit committee adopted pre-approval policies and procedures for audit and non-audit services which the Company’s independent auditors have historically provided. Pursuant to those policies and procedures, the Company’s 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.

 

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 “2008 Summary Compensation Table,” or the Named Executive Officers. The Compensation Committee of the Board of Directors, or the Committee, has responsibility for establishing, developing and implementing such programs. Compensation and employment agreements for our Chairman and Chief Executive Officer, Michael O. Johnson, are recommended by the Committee. These recommendations are then approved by the independent members of our Board of Directors.

 

How Compensation is Established

 

The Committee approves the compensation and benefits programs for our Named Executive Officers (other than Mr. Johnson) with input from Mr. Johnson and the Committee’s independent compensation advisor. With respect to Mr. Johnson’s compensation, the Committee develops its recommendations with the assistance of its compensation advisor without input from management. Mr. Johnson makes recommendations to the Committee regarding the pay of the other Named Executives Officers. Recommendations regarding Mr. Johnson’s compensation are then developed by the Committee and presented to the independent members of the Board of Directors for final approval.

 

Independent Compensation Advisor

 

The Committee has retained Towers Perrin, a nationally recognized compensation consulting firm, to assist the Committee in evaluating executive compensation programs and in setting executive officers’ compensation, although compensation decisions are made solely by the Committee (and, with respect to Mr. Johnson, the independent members of the Board of Directors). The use of an independent compensation advisor provides additional perspective so that the Committee can determine if our executive compensation programs are reasonable and consistent with our objectives (as described in more detail below). The advisor reports directly to the Committee. The advisor regularly participates in Committee meetings and advises the Committee with respect to compensation trends and best practices, plan design, and the reasonableness of individual compensation awards.

 

Overall Objectives of Executive Compensation Program

 

As a global leader in network marketing through independent distributors, we operate in an environment of challenging regulatory and political issues. Our success depends on the leadership of highly-talented, adaptive and dedicated executives who can apply the necessary skills to operate effectively in our unique business model. Thus, our compensation program for the Named Executive Officers provides highly-competitive rewards to executives who contribute to our success, which we define primarily by superior growth, profitability and shareholder returns.

 

The Committee believes that it advances shareholder interests to assemble and maintain a high-performing management team. Our compensation standards reflect the competitive market for the highly-talented executives that are required for our success. Because recruitment and retention of such executives generally requires highly-competitive pay, the Committee sets compensation targets for our executives in the upper end of the range of competitive practices. We also tie realization of compensation in our incentive plans to achievement of superior performance.

 

In developing our executive compensation program, the Committee was guided by the following underlying principles:

 

 

 

Competitive Benchmarking

 

The Committee evaluates total direct compensation (consisting of base salary, annual cash incentive compensation, and long-term equity incentive compensation) for the Named Executive Officers relative to the upper end of the range among the Herbalife Peer Group (described in more detail below). However, actual base salary and target incentives for each Named Executive Officer are set by the Committee in consideration of the executive’s current position in the pay range, sustained level of individual contribution, scope of responsibilities and level of capabilities and experience.

 

Each year the Committee assesses the competitiveness of each Named Executive Officer’s target total direct compensation. For 2008 the Committee was aided in its assessment by competitive pay analyses prepared by Towers Perrin that reflected compensation program design and pay levels among the Herbalife Peer Group and from a Towers Perrin survey of more than 1,000 companies in general industry classification with revenues between $1 billion and $3 billion or pay that has been size-adjusted based on Herbalife’s revenue size (approximately $2.4 billion). The survey data are not used as a benchmark for our Named Executive Officers but, rather, are used to verify that the pay levels reflected in the Herbalife Peer Group are consistent with those of similarly-sized companies generally.

 

For 2008, 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 $2.4 billion, the median 2008 revenue of the Herbalife Peer Group was essentially equal to that of Herbalife. Herbalife’s market capitalization at the end of 2008 approximated the 25th percentile of the Herbalife Peer Group. The Committee reviews and makes adjustments to the corporations that comprise the Herbalife Peer Group annually to ensure that it remains appropriate. The Committee made no adjustments to the Herbalife Peer Group for 2008.

The following table presents the Herbalife Peer Group list that was used for 2008.

 

 

Individual Pay Determination

 

To facilitate individual pay decisions, the Committee uses an executive grading structure in which each executive is assigned to a particular grade based on the range of competitive pay for their position and 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. The Committee uses the pay grade structure as a framework for making individual pay decisions. Actual base salary and target incentives for each Named Executive Officer were set by the Committee in consideration of the executive’s current position in the pay range, sustained level of individual contribution, scope of responsibilities and level of capabilities and experience.

 

Pay Elements

 

The compensation and benefits programs for our Named Executive Officers consist of:

 

 

 

 

 

Mix of Compensation Elements

 

The mix of values in our compensation program for Named Executive Officers places emphasis on variable (at-risk) cash incentives and long term equity incentive compensation versus base salary and other fixed aspects in order to focus our Named Executive Officers on the achievement of our short-term operating and long-term strategic objectives. However, the Committee does not target a specified mix of compensation elements.

 

Base Salaries

 

Information from the competitive benchmarking studies described above is used to develop our salary range structure for each executive. The midpoint of the salary ranges is set at the 75th percentile. Individual base salaries for Named Executive Officers are reviewed in the fourth quarter of each year in preparation for the upcoming fiscal year. The review takes into consideration the incumbent’s current position in range, scope of responsibilities, maturity in role, and demonstrated level of performance of duties. Our Chairman and Chief Executive Officer evaluates and proposes to the Committee changes in the base salaries for each of the other Named Executive Officers. At the same time, the Committee, separately and without the involvement of the Chairman and Chief Executive Officer, evaluates and proposes changes to the Chairman and Chief Executive Officer’s 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 2008:

 

 

 

 

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 Committee establishes performance criteria for our Named Executive Officers each year. For 2008, this goal was a targeted earnings per share, or EPS, of $3.17. The annual incentive funded and payable to each of Messrs. Johnson, Goudis, and Chapman is based solely on EPS performance, without Committee discretion. With respect to the other Named Executive Officers, the Committee retains the discretion to adjust the funded amounts in determining the actual incentive payout based upon the Chief Executive Officer’s overall qualitative review with the Committee of each executive’s performance during the year.

 

Targets and Determination

 

For 2008, annual target incentive award opportunities for the Named Executive Officers were set in consideration of competitive practices and individual scope of job responsibilities.

 

Pursuant to his employment agreement, Mr. Johnson’s annual incentive award is composed of two components, the “regular” and the “alternative” awards. Mr. Johnson’s incentive award is structured in this manner to allow the Committee a degree of flexibility in rewarding him for the achievement of key strategic, as well as financial, targets. For 2008, the Committee established EPS as the goals under both the “regular” and the “alternative” performance awards. The Committee reviews the alternative performance award annually with Mr. Johnson and makes changes to the relevant target metric as it deems appropriate.

 

For 2008, the Committee established a performance goal for our other Named Executive Officers that was also based upon EPS. Annual incentive compensation for each of our Named Executive Officers (including Mr. Johnson) is payable only upon meeting or exceeding 100% of the target performance level. Achievement of the 100% target level for the EPS goal for 2008 would equal our budgeted EPS 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.

 

Named Executive Officers (other than Messrs. Johnson, Goudis, and Chapman) participate in the Company’s Senior Management Bonus Incentive Plan with payouts based on the achievement of specific objectives set through the Company’s Performance Management Program. In addition to the EPS goals described above, bonuses for these other Named Executive Officers are dependent, in part, upon the achievement of qualitative performance criteria determined by Mr. Johnson and approved by the Committee. For 2008 these qualitative performance criteria included goals related to strategic planning and the evaluation of strategic alternatives, evaluation of programs related to distributors, increasing operating efficiencies, and product development related matters.

 

The budgeted EPS target for 2008 was $3.17 per share, which amount represented a 17.0% 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.

 

Under the terms of the Company’s Senior Management Bonus Incentive Plan in effect for 2008 (as summarized in the following chart), there is no bonus funding for any of the Named Executive Officers unless the Company achieves its threshold EPS of $3.17. Bonus funding and payout amounts remain constant through an EPS of $3.26, and increase by 50% upon achievement of an EPS of $3.27. Funding levels increase for EPS above $3.27 by 1% or 1.5%, depending on job level, for each $0.01 increase to EPS.

 

 

The following table describes the potential range of annual incentive awards for 2008 for our Named Executive Officers based upon specified levels of performance:

 

 

Based on the Company’s 2008 EPS, after making adjustments related to nonrecurring expenses arising under our 2008 Reorganizing for Growth Plan and an increase in a tax valuation allowance, and for each of Messrs. Walsh and Henig, the achievement of 100% of his applicable qualitative performance criteria for 2008, the Committee reviewed and approved the full amount under the applicable achievement tiers to each of the Named Executive Officers as set forth in the incentive award schedule above. The specific dollar amounts paid are referenced in the “2008 Summary Compensation Table” under the heading “Non-Equity Incentive Plan Compensation”.

 

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 Committee would evaluate whether such adjustments are appropriate based upon the facts and circumstances surrounding the restatement and the existing laws. The Committee intends to consider the adoption of a formal policy in 2009.

 

Long Term Incentive Awards

 

Equity grants were made to Named Executive Officers in 2008 under our 2005 Stock Incentive Plan. The Committee believes these incentives foster long-term decision making and growth necessary for continued success.

 

During 2008, we awarded two forms of long term incentives: SARs and time-vested RSUs. Each form of grant represented 50% of the total long-term incentive grant value. Stock-settled SARs provide an opportunity for Named Executive Officers to earn additional compensation only if our share price increases. RSUs provide stock ownership to executives thus exposing them to the same gains and losses in value as are experienced by our shareholders.

 

For 2008, guideline equity grant values for the named Executive Officers were established in consideration of competitive practices and individual scope of job responsibilities. Our Chairman and Chief Executive Officer evaluates individual contributions to the Company’s success and proposes to the Committee equity grants for each of the other Named Executive Officers. At the same time, the Committee, separately and without the involvement of the Chairman and Chief Executive Officer, evaluates and proposes equity grants for the Chairman and Chief Executive Officer to the independent members of the Board of Directors. The grant values are translated into shares of SARs and RSUs using our desired mix and the SFAS 123R, “Share Based Payments” values for each type of grant.

 

The SAR exercise price equaled the closing traded share price of our Common Shares on the grant dates. The SARs vest to the executives 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, except for the March 27, 2008 grants to our Chief Executive Officer, which are described in more detail under note 3 to the “2008 Grants of Plan-Based Awards” table on page 26. Executives may exercise vested SARs at any time while employed at Herbalife up to ten years following the date of grant. The RSUs awarded to the Named Executive Officers vest over a three-year period based upon continued service, one-third on each anniversary of the

grant, except for the March 27, 2008 grants to our Chief Executive Officer. Dividend equivalents are paid with respect to vested but deferred and unvested RSUs.

 

Summary of Mix of Compensation Elements for 2008

 

Consistent with our philosophy as described above, the mix of compensation elements — which are comprised of base salary, annual incentives and long term incentives — provided to our Named Executive Officers for 2008 is set forth in the following table:

 

 

 

 

Equity Award Grant Policy

 

In 2008, an annual grant of SARs and RSUs to the Named Executive Officers and other executives was made in February 2008 at a meeting of the Committee. It is the Company’s policy to conduct its annual grant award process at a time subsequent to the release of financial results for the preceding year. We currently operate a monthly grant approval process where awards are authorized for new hires, certain selected retention situations, and to newly promoted 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 Committee. The policy provides that the exercise price of stock options and SARs granted to executives will be established as the closing traded stock price on the date the awards are granted.

 

Hedging

 

Company policy prohibits executives from entering into hedging transactions that would operate to lock-in the value of their equity compensation awards at specified levels.

 

Stock Ownership Guidelines

 

The Committee believes that Named Executive Officers should be shareholders and maintain significant holdings of Common Shares. Because a significant portion of each Named Executive Officer’s compensation is paid in the form of equity-based incentive compensation awards, the Committee believes this is an appropriate and beneficial policy to provide additional motivation to act in the long-term best interests of shareholders.

 

Pursuant to our policy, the CEO is encouraged to acquire and hold Common Shares with a market value equal to five times his base salary by 2013. The other Named Executive Officers are encouraged to acquire and hold Common Shares with a market value equal to two times their respective base salaries by 2013 or within five years of becoming a Named Executive Officer. The Committee reviews progress toward these standards annually.

Benefits and Perquisites

 

U.S.-based employees, including the Named Executive Officers, participate in a variety of savings, health and welfare, and paid time-off benefits typically provided by competitors for the services of the Company’s employees. Health and welfare and paid time-off benefits help ensure that Herbalife has a healthy, productive and focused workforce. Through our 401(k) savings plan, the Company helps employees save and prepare financially for retirement.

 

In addition, our Named Executive Officers are eligible to participate in the following executive benefits and perquisites that we offer:

 

 

 

 

Employment Agreements

 

The current employment agreement between the Company and Mr. Johnson was entered into on March 27, 2008. In addition, each of Messrs. Goudis, Chapman and Noack, while he was employed by the Company, but not our other Named Executive Officers, was party to an employment agreement with the Company during fiscal 2008. Those agreements establish the terms and conditions for the employment relationship each executive has with the Company and specifies compensation, executive benefits, severance provisions, change in control provisions, preservation of confidential and proprietary information, non-solicitation, non-disparagement, and other conditions. In 2005, the Committee’s compensation advisor engaged in an in-depth competitive analysis of the employment agreements between Herbalife and each of Messrs. 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 2008.

 

Severance and Change in Control Arrangements

 

Each of Messrs. Johnson, Goudis, and Chapman is eligible for certain benefits and payments if his employment terminates for various reasons or as a result of a change in control of the Company. The Company has provided these benefits to these three Named Executive Officers to allow them to focus on the value of strategic alternatives to shareholders without concern for the impact on their continued employment, as each of their offices is at heightened risk of turnover in the event of a change in control. Separation benefits include cash payments and other benefits in an amount the Company believes is appropriate, taking into account the time it is expected to take a separated executive to find another job. Separation benefits are intended to ease the consequences to the executive of an unexpected termination of employment. The Company requires a general release with non-compete and non-solicitation provisions in connection with the individual separation agreements.

 

We consider it likely that it will take more time for higher-level employees to find new employment commensurate with their prior experience, and therefore senior management generally are paid severance for a longer period. Additional payments may be approved by the Committee in some circumstances as a result of negotiation with executives, especially where the Company desires particular non-disparagement, cooperation with litigation, non-competition and non-solicitation terms.

 

The employment agreement for each of Messrs. Johnson, Goudis, and Chapman specifically details various provisions for benefits and cash payments in the event of a separation. Generally, these agreements provide for certain benefits upon death, disability, resignation by the executive with good reason or termination by the Company without cause. Prior to his resignation on September 17, 2008, Mr. Noack was party to an employment agreement with the Company that provided him with separation benefits similar to those afforded to Messrs. Goudis and Chapman.

 

The equity compensation awards granted to Messrs. Johnson, Goudis and Chapman contain change in control and termination provisions. In general, these arrangements provide for benefits upon a termination of such executive’s 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 the Company. Based on a competitive analysis of the severance and change in control arrangements maintained by the corporations in the Herbalife Peer Group, the Committee believes that these benefits are customary among the Herbalife Peer Group for executives in similar positions as these three executives.

 

Please refer to the discussion on page 27 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.

 

Accounting and Tax Implications

 

Section 162(m) of the Code

 

Section 162(m) of the Internal Revenue Code of 1986, as amended, limits deductions for certain executive compensation in excess of $1,000,000 in any fiscal year. Certain types of compensation are deductible only if performance criteria are specified in detail and payments are contingent on stockholder approval of the

compensation arrangement. We attempt to structure our compensation arrangements to achieve deductibility under Section 162(m), unless the benefit of such deductibility is outweighed by the need for flexibility or the attainment of other corporate objectives. The Committee will continue to monitor issues concerning the deductibility of executive compensation and will take appropriate action if and when it is warranted. Since corporate objectives may not always be consistent with the requirements for full deductibility, the Committee is prepared, if it deems appropriate, to enter into compensation arrangements under which payments may not be deductible under Section 162(m). Thus, deductibility will not be the sole factor used by the Committee in ascertaining appropriate levels or modes of compensation.

 

Section 280G of the Code

 

Section 280G of the Code disallows a company’s tax deduction for what are defined as ‘excess parachute payments’ and Section 4999 of the Code imposes a 20% excise tax on any person who receives excess parachute payments in connection with a change in control. Each of Messrs. Johnson, Goudis, and Chapman, as part of their employment agreements, would be provided with tax gross-up payments in the event their change in control payments become subject to this excise tax. The Committee believes that the provision of tax gross-up protection is appropriate and necessary for executive retention and consistent with the current practices of the Herbalife Peer Group. Please refer to the discussion under “— Potential Payments upon Termination or Change in Control” for more detail on the potential gross-up payments and lost tax deductions.

 

Compensation Committee Report

 

The Committee has reviewed and discussed the foregoing Compensation Discussion and Analysis with management. Based on its review and discussion with management, the Committee has recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement.

 

COMPENSATION COMMITTEE OF
THE BOARD OF DIRECTORS

 

Richard P. Bermingham, Chairman

Leroy T. Barnes, Jr.

Colombe M. Nicholas

 

Executive Officers of the Registrant

 

 

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.

Desmond Walsh is Executive Vice President for Worldwide Operations and Sales of the Company. Mr. Walsh joined the Company in January 2004, after serving as Senior Vice President of the commercial division of DMX Music from 2001 to 2004. Prior to DMX Music, Mr. Walsh spent five years as Vice President and General Manager of Supercomm, Inc., a subsidiary of The Walt Disney Company. Mr. Walsh also previously served in management positions at MovieQuik Systems, a division of The Southland Corporation (now 7-Eleven) and at Commtron Corporation, a leading consumer electronics and video distribution company. Mr. Walsh received his Bachelor of Laws degree from the University of London.

 

Richard Goudis is Chief Financial Officer of the Company. Mr. Goudis joined the Company in June 2004 after serving in several positions and ultimately as the Chief Operating Officer of Rexall Sundown, a Nasdaq 100 company that was sold to Royal Numico in 2000, from 1998 to 2001. After the sale to Royal Numico, Mr. Goudis had operations responsibility for all of Royal Numico’s U.S. investments, including General Nutrition Centers, Unicity International and Rexall Sundown. From 2002 to May 2004, Mr. Goudis was a partner at Flamingo Capital Partners, a firm he founded in 2002. Mr. Goudis also previously worked at Sunbeam Corporation and Pratt & Whitney. Mr. Goudis graduated from the University of Massachusetts with a degree in Accounting and he received his MBA from Nova Southeastern University.

 

Brett R. Chapman is General Counsel and Corporate Secretary of the Company. Mr. Chapman joined the Company in October 2003 after spending thirteen years at The Walt Disney Company, most recently as its Senior Vice President and Deputy General Counsel, with responsibility for all legal matters relating to Disney’s Media Networks Group, including the ABC Television Network, the company’s cable properties including The Disney Channel and ESPN, and Disney’s 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.

 

Steve Henig, Ph.D. is Chief Scientific Officer of the Company. Mr. Henig joined the Company in July 2005 after spending six years at Ocean Spray Cranberries, Inc. as Senior Vice President, Technology and Innovation with responsibility for the company’s new products program and medical research program. Prior to working at Ocean Spray Cranberries, Inc. Mr. Henig served as Senior Vice President, Technology and Marketing Services at Con Agra’s Grocery products. Mr. Henig holds a Ph.D. in food science from Rutgers University, a M.S. in food and biotechnology and a B.S. in chemical engineering from Technion-Israel Institute of Technology.

2008 Summary Compensation Table

 

The following table sets forth the total compensation for the fiscal years ended December 31, 2008, 2007 and 2006, of the Company’s Chairman and Chief Executive Officer, Chief Financial Officer, each of the three other most highly compensated executive officers and one additional individual for whom disclosure would have been provided as one of the three most highly compensated executive officers but for the fact that he was not serving as an executive officer at the end of fiscal 2008. 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.

 

 

 

 

 

 

 

 

2008 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, 2008. For further discussion regarding the grants see ‘‘— Compensation Discussion and Analysis — Annual Incentive Awards — Long Term Incentive Awards.”

 

 

 

 

Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards

 

We have entered into employment agreements and award agreements with respect to grants made under the 2005 Plan with each of Messrs. Johnson, Chapman and Goudis, certain terms of which are summarized below. The Company was also party to an employment agreement and award agreements with Mr. Noack prior to his departure. A more detailed description of payments that would be due to the Named Executive Officers in connection with certain terminations or a change in control of the Company is set forth under “— Potential Payments Upon Termination or Change in Control.”

 

Michael O. Johnson.  The Company and one of our subsidiaries, Herbalife International of America, Inc., or Herbalife America, entered into an executive employment agreement with Mr. Johnson effective as of March 27, 2008, or the Johnson Employment Agreement, pursuant to which he serves as the Company’s Chairman and Chief Executive Officer.

 

Pursuant to the Johnson Employment Agreement, Mr. Johnson currently receives an annual salary of $1,200,000. Mr. Johnson is also eligible to receive an annual cash bonus in an amount based on targets that are established annually by the Board of Directors. In addition to his salary and bonus, Mr. Johnson is also entitled to participate in or receive benefits under each benefit plan or arrangement made available to the Company’s senior executives on terms no less favorable than those generally applicable to senior executives of Herbalife America. Mr. Johnson received a signing bonus of $1,500,000 in connection with the execution of the Johnson Employment Agreement. In consideration for entering into the Johnson Employment Agreement, Mr. Johnson received a grant of 130,480 RSUs (the “2008 RSUs”) and 759,790 SARs (the “2008 SARs”). Thirty percent of the 2008 RSUs vest on March 27 of each of 2009, 2010 and 2011, with the remaining 10% vesting on March 27, 2012. The 2008 SARs vest on March 27, 2012, provided that, during the four years following their grant date, (i) as to 363,670 SARs, the Company’s share price closed for thirty consecutive trading days at a price equal to or greater than $67.33, and (ii) as to 396,120 SARs, the Company’s share price closed for thirty consecutive trading days at a price equal to or greater than $80.43.

 

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 America’s General Counsel and Corporate Secretary. The base salary for Mr. Chapman, effective August 20, 2007, is $550,000. Should the Company adopt an across-the-board reduction in salaries for senior executives and its Chief Executive Officer, then Mr. Chapman’s 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 Company’s employee benefit plans and arrangements made available to the Company’s most senior executives, including the Chief Operating Officer but excluding the Chief Executive Officer, as well as the Company’s long-term incentive plan for senior executives, including the Chief Operating Officer but excluding the Chief Executive Officer. Pursuant to the Chapman Employment Agreement, should the Company achieve certain targets established by the compensation committee, Mr. Chapman shall be entitled to a target bonus of no less than 50% of his annual salary for the year in question.

 

Richard Goudis.  We have also entered into an executive employment agreement with Mr. Goudis, or the Goudis Employment Agreement, effective on October 24, 2006, through our subsidiary Herbalife America. Pursuant to the Goudis Employment Agreement, Mr. Goudis serves as Herbalife America’s Chief Financial Officer. The base salary for Mr. Goudis, effective August 4, 2008, is $606,375. Should the Company adopt an across-the-board reduction in salaries for senior executives and its Chief Executive Officer, then Mr. Goudis’ salary shall be reduced by a percentage equal to the smallest percentage reduction imposed on any senior executive or the Chief Executive Officer, but in no case shall such reduction exceed ten percent.

 

Mr. Goudis is entitled to participate in the Company’s employee benefit plans and arrangements made available to the Company’s most senior executives, including the Chief Operating Officer but excluding the Chief Executive Officer, as well as the Company’s 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 no less than 50% of his annual salary for the year in question.

 

Paul Noack.  We were party to 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, until his departure from the Company on September 17, 2008, Mr. Noack served as Herbalife America’s Managing Director, Asia-Pacific Region. The base salary for Mr. Noack, effective December 18, 2007 and through his departure, was $550,000. Mr. Noack was also entitled to participate in the Company’s employee benefit plans and arrangements made available to the Company’s most senior executives, as well as the Company’s long-term incentive plan for senior executives.

Outstanding Equity Awards at 2008 Fiscal Year-End

 

The following table sets forth equity awards of the Named Executive Officers outstanding as of December 31, 2008.