EX-10.1

Exhibit 10.1

DAVID C. SHONKA

Acting General Counsel

JANET AMMERMAN, CA Bar No. 113996

CHRISTINE M. TODARO, OH Bar No. 0084976

DANIEL O. HANKS, DC Bar No. 495823; VA Bar No. 65523

600 Pennsylvania Ave. NW, Mailstop: CC 8528, Washington, D.C. 20580

(202) 326-2222/(202) 326-3395 (fax)

jammerman1@ftc.gov; ctodaro@ftc.gov; dhanks@ftc.gov

LAURA SOLIS, WA Bar No. 36005

915 Second Ave., Suite 2896, Seattle, WA 98174

(206) 220-4544/(206) 220-6366 (fax)

lsolis@ftc.gov

Local Counsel

BARBARA CHUN, CA Bar No. 186907

Email: bchun@ftc.gov

Federal Trade Commission

10877 Wilshire Blvd., Suite 700

Los Angeles, CA 90024

Tel: (310) 824-4343

Fax: (310) 824-4380

Attorneys for Plaintiff

Federal Trade Commission

UNITED STATES DISTRICT COURT

FOR THE CENTRAL DISTRICT OF CALIFORNIA

FEDERAL TRADE COMMISSION,

Plaintiff,

HERBALIFE INTERNATIONAL OF

AMERICA, INC.,

a corporation;

HERBALIFE INTERNATIONAL, INC.,

a corporation; and

Case No.

STIPULATION TO ENTRY OF

ORDER FOR PERMANENT

INJUNCTION AND MONETARY

JUDGMENT

HERBALIFE, LTD.,

a corporation,

Defendants.

Plaintiff, the Federal Trade Commission (“Commission”), filed its Complaint for

Permanent Injunction and Other Equitable Relief (“Complaint”) in this matter, pursuant to

Section 13(b) of the Federal Trade Commission Act (“FTC Act”), 15 U.S.C. § 53(b). The

Commission and Defendants stipulate to entry of a Stipulated Order for Permanent

Injunction and Monetary Judgment (“Order”), lodged concurrently with this Stipulation,

with the following terms and provisions:

THEREFORE, IT IS ORDERED as follows:

FINDINGS

Plaintiff and Defendants stipulate to the following findings:

This Court has jurisdiction over this matter.

The Complaint charges that Defendants participated in unfair and deceptive

acts or practices in violation of Section 5 of the FTC Act, 15 U.S.C. § 45, by: promoting

participation in a multi-level marketing program with a compensation structure that causes

or is likely to cause harm to participants; making false or misleading income

representations; making unsubstantiated claims regarding the retail sales income earned by

participants in Defendants’ program; and providing participants in Defendants’ program

with the means and instrumentalities to engage in deceptive acts and practices.

Defendants neither admit nor deny any of the allegations in the Complaint,

except as specifically stated in this Order. Only for purposes of this action, Defendants

admit the facts necessary to establish jurisdiction.

Defendants waive any claim that they may have under the Equal Access to

Justice Act, 28 U.S.C. § 2412, concerning the prosecution of this action through the date of

this Order, and agree to bear their own costs and attorney fees.

Defendants waive all rights to appeal or otherwise challenge or contest the

validity of this Order.

DEFINITIONS

For the purpose of this Order, the following definitions apply:

A.	“Business Opportunity Participant” or “Participant” means any individual who

is participating in a Multi-Level Marketing Program. “Business Opportunity

Participant” or “Participant” does not include Preferred Customers.

B.	“Business Venture” means any written or oral business arrangement, however

denominated, whether or not covered by 16 C.F.R. Part 437, that consists of the

payment of any consideration for the right or means to offer, sell, or distribute goods

or services (whether or not identified by a trademark, service mark, trade name,

advertising or other commercial symbol). The definition of “Business Venture”

includes Multi-Level Marketing Programs.

C.	“Defendants” means all of the Defendants and their successors and assigns,

individually, collectively, or in any combination.

D.	“Downline” refers to the collection of all Business Opportunity Participants whom a

Business Opportunity Participant has personally recruited or sponsored (first level),

all Participants and Preferred Customers recruited or sponsored by first level

Participants (second level), all Participants and Preferred Customers recruited or

sponsored by second level Participants (third level), and so forth, however

denominated (including, but not limited to, “downline,” “tree,” “cooperative,” or

“income center”), whose activities are the basis, in whole or part, for any payment

or compensation from Defendants to the Business Opportunity Participant.

E.	“Multi-Level Compensation” means any payment or compensation (including, but

not limited to, “wholesale profit,” “commissions,” “royalties,” “overrides,” and

“bonuses”) in a Multi-Level Marketing Program from Defendants to a Business

Opportunity Participant that is based, in whole or in part, on the activities of the

Participant’s Preferred Customers and the Participant’s Downline.

F.	“Multi-Level Marketing Program” or “Program” means any marketing program

in which Business Opportunity Participants have the right to (1) sell goods or

services; (2) recruit others into the Program; and (3) receive payment or other

compensation that is based, in whole or in part, upon the Product purchases, sales,

or other activities of the Participant’s Downline.

G.	“Net Rewardable Sales” for Defendants means the annual total of

Net Sales generated by Preferred Customer Sales and Product sales that result

in Profitable Retail Sales; and

Net Sales generated by Rewardable Personal Consumption, determined

pursuant to Subsection I.E.

Provided, however, that if the total of G.2 would exceed one-third of the combined

total of G.1 and G.2, then Net Rewardable Sales shall equal one-and-a-half times the

total of G.1.

H.	“Net Sales” means gross Product sales in the United States by Defendants,

including packaging and handling, freight recovery, and surcharges, and net of any

returns, refunds, Product Discounts, and allowances, including Wholesale

Commissions.

I.	“Preferred Customer” means an individual who joins or registers with a Multi-

Level Marketing Program as a customer only, and who does not have the right to

(1) sell goods or services; (2) recruit others into the Program; or (3) receive Multi-

Level Compensation.

J.	“Preferred Customer Sales” or “Sales to Preferred Customers” means sales of

Products made directly from Defendants to Preferred Customers.

K.	“Product” means any good sold by Defendants that can potentially generate Multi-

Level Compensation pursuant to Defendants’ compensation plan.

L.	“Product Discount” refers to the difference between Defendants’ suggested retail

price for a Product and the Product price charged by Defendants to the purchaser in

a purchase made directly from Defendants.

M.	“Profitable Retail Sale” means a sale of Product by a Business Opportunity

Participant to a Retail Customer or a Preferred Customer that is a genuine sale made

at a price above the Business Opportunity Participant’s average wholesale cost over

the preceding twelve (12) months for the items sold (including tax and the actual or

approximate cost of shipping, handling, and any similar fees) and for which retail

sale information is collected and maintained by Defendants.

N.	“Retail Customer” means a purchaser of Products sold through a Multi-Level

Marketing Program who is not a Business Opportunity Participant or a Preferred

Customer, is not registered with the Program, and is not otherwise participating in

the Program.

O.	“Rewardable Personal Consumption” means sales of Product by Defendants to a

Business Opportunity Participant, for his own or his household’s use, that can

potentially be used to generate Multi-Level Compensation as set forth in Subsection

I.E.

P.	“Total Net Sales” for Defendants means the total of Net Sales in a fiscal year.

Q.	“Wholesale Commissions” means Multi-Level Compensation generated by a

Product purchase from Defendants that, in total for the transaction, equals the

difference between the purchaser’s Product Discount and the lesser of either the

maximum Product Discount for the Product under Defendants’ compensation plan

or 50% of the suggested retail price of the Product, and is paid by Defendants to

Participants whose Product Discount is greater than that of the purchaser and who

have such purchaser either in their Downline or as a Preferred Customer whom they

recruited or sponsored.

ORDER

PROHIBITED BUSINESS PRACTICES

IT IS ORDERED that Defendants, Defendants’ officers, agents, employees, and all

other persons in active concert or participation with any of them, who receive actual notice

of this Order, whether acting directly or indirectly, are permanently restrained and enjoined

from advertising, marketing, promoting, or offering any Multi-Level Marketing Program

unless such program has the following characteristics:

Limitations on Multi-Level Compensation. The program shall include, and

Defendants shall enforce, the following provisions:

Any Multi-Level Compensation paid to a Participant for a given period shall be

generated solely by the following categories of transactions (“Rewardable

Transactions”) occurring in the same period or, during such Participant’s first six

months as a Business Opportunity Participant, the three months prior to that

period:

Sales to Preferred Customers whom the Participant has personally recruited

or sponsored;

Sales to Preferred Customers in the Participant’s Downline;

Profitable Retail Sales of the Participant’s Downline, as calculated by

Defendants using the information collected pursuant to Subsection I.C; and

All or a portion of Rewardable Personal Consumption transactions,

determined pursuant to Subsection I.E., of the Participant’s Downline;

provided that the Rewardable Personal Consumption transactions included in

a Participant’s Rewardable Transactions shall be limited such that no more

than one-third of the total value of the Participant’s Multi-Level

Compensation may be attributable to or generated by such transactions.

If a Participant has transactions that are not Rewardable Transactions (“Non-

Rewardable Transactions”) in his or her Downline, the amount of any Multi-

Level Compensation that the Participant may receive shall not vary from the

amount of Multi-Level Compensation that the Participant would be entitled to

receive if such Non-Rewardable Transactions were not in his or her Downline;

i.e., the total amount of a Participant’s Multi-Level Compensation shall not be

increased because the Non-Rewardable Transactions were in the Participant’s

Downline rather than in any other Participant’s Downline.

Any point system or other method used to measure Rewardable Transactions

shall assign the same value to a given Product regardless of whether the Product

was sold to a Preferred Customer, to a Retail Customer, or to a Business

Opportunity Participant. Any system that calculates Multi-Level Compensation

shall not vary the compensation for a Rewardable Transaction based on whether

the Product was sold to a Preferred Customer, to a Retail Customer, or to a

Business Opportunity Participant for personal consumption.

For any fiscal year, if the total of Net Rewardable Sales is less than 80% of Total

Net Sales, the sum of Multi-Level Compensation payments excluding Wholesale

Commissions by Defendants to Participants may not exceed forty-one point

seven five percent (41.75%) of the amount of Net Rewardable Sales, which

reflects a ten-percent (10%) increase over the percentage of Multi-Level

Compensation excluding Wholesale Commissions paid by Defendants in fiscal

year 2015.

No compensation shall be paid solely for enrolling or recruiting a Participant or a

Preferred Customer into the Program.

Preferred Customer Category. The program shall differentiate between Preferred

Customers and Business Opportunity Participants, including through the following

requirements:

A Preferred Customer’s classification cannot change to Business Opportunity

Participant except upon the Preferred Customer’s written request or application

or other written expression of intent made directly to and approved by

Defendants.

A Business Opportunity Participant’s classification cannot change to Preferred

Customer except upon the Participant’s written request or application or other

written expression of intent made directly to and approved by Defendants.

A Preferred Customer who becomes a Business Opportunity Participant may not

receive any benefit or status that depends in any way on that individual’s activity

as a Preferred Customer, except that any discount that the individual obtained as

a Preferred Customer may continue to be used to purchase Product that is

designated, at the time of purchase, as being for the individual’s own or

household use.

All individuals who are registered with or participating in the Program as of the

Effective Date of this Section and who have not affirmatively elected to be

classified as Preferred Customers pursuant to Subsection I.B.2, above, shall be

classified as Business Opportunity Participants.

Collection of Retail Sales Information. Defendants shall collect from Business

Opportunity Participants and maintain in a standardized format the following

information for any claimed Profitable Retail Sale:

the method of payment;

the Products and quantities sold;

the date;

the price paid by the purchaser;

the first and last name of the purchaser;

contact information for the purchaser, including at least two of the following:

telephone number, address or e-mail address; and

for any paper receipt submitted to Defendants, the signature of the Retail

Customer or Preferred Customer.

Verification of Retail Sales and Preferred Customer Sales. The following

requirements shall apply regarding Profitable Retail Sales and Preferred Customer

Sales:

Defendants shall take all reasonable steps, including both random and targeted

audits, to monitor Profitable Retail Sales and Preferred Customer Sales in order

to ensure that they are genuine sales of Products, rather than an attempt to

manipulate the Program’s compensation plan.

Defendants shall take all reasonable steps, including both random and targeted

audits, to monitor Profitable Retail Sales in order to ensure that they in fact

occurred as reported in the information collected and maintained pursuant to

Subsection I.C.

If the total amount of Product claimed by any Business Opportunity Participant

as Profitable Retail Sales exceeds the total amount of Product purchased by the

Participant subsequent to the Effective Date of this Section, less any amount

designated at the time of purchase as being for the Participant’s own or

household use, Defendants shall not pay any Multi-Level Compensation on the

excess amount of claimed Profitable Retail Sales.

Limitations on Rewardable Personal Consumption. The Rewardable Personal

Consumption of a Business Opportunity Participant in a given period shall be

limited to purchases in that period that are designated by the Business Opportunity

Participant at the time of purchase as being for the Business Opportunity

Participant’s own or household use. Rewardable Personal Consumption shall also

be subject to the following additional limitations:

For the first twelve (12) months following the date this Subsection becomes

effective, an individual Business Opportunity Participant’s own purchases in a

given month may be Rewardable Personal Consumption in an amount not to

exceed $200 of wholesale Product expenditures (including tax and actual or

approximate shipping, handling, and similar fees).

Beginning twelve (12) months after the date this Subsection becomes effective,

an individual Business Opportunity Participant’s own purchases (including tax

and actual or approximate shipping, handling, and similar fees) in a given month

may be Rewardable Personal Consumption in an amount not to exceed the

greater of:

$125 in wholesale Product expenditures; or

the 75th percentile of average monthly wholesale Product expenditures

among Preferred Customers over the prior twelve (12) months (the

“measurement window”). The population of Preferred Customers from

which the 75th percentile shall be computed shall consist exclusively of all

Preferred Customers who had the status of Preferred Customer for at least six

(6) months of the measurement window and who purchased product directly

from Defendants at least once during each of the calendar quarters in which

they had the status of Preferred Customer during the measurement window.

Each Preferred Customer’s “average monthly wholesale Product

expenditure” shall be calculated by summing up all Product expenditures

(including tax and shipping, handling, and similar fees) made by the

Preferred Customer directly from Defendants during the measurement

window and made while he or she had the status of Preferred Customer, and

dividing that sum by the total number of months in the measurement window

for which he or she had the status of Preferred Customer, regardless of

whether he or she made purchases in any of those months. This latter limit

option shall be available only if the population of Preferred Customers being

ranked consists of not less than 20,000 individuals.

The limitation of Subsection I.E.2 shall be re-set annually, based on the prior

twelve (12) months of activity, through the procedure set forth in that

Subsection.

Limitations on Thresholds, Targets, and Requirements. The Program shall

include, and Defendants shall enforce, the following policies:

Business Opportunity Participants shall not be required to purchase a minimum

quantity of products, except that Defendants may require Business Opportunity

Participants to purchase an initial start-up package or its equivalent, provided

that no Multi-Level Compensation is generated or paid on the purchase.

To the extent the Program requires that a Participant meet a threshold or target in

order to (a) obtain or maintain a level or designation necessary to receive any

particular type or amount of Multi-Level Compensation; (b) qualify or become

eligible to receive Multi-Level Compensation; (c) otherwise increase the

Participant’s amount of Multi-Level Compensation; or (d) obtain, maintain,

increase, or qualify for a discount or rebate on Product purchased for resale; such

threshold or target shall be met exclusively through Profitable Retail Sales and

Sales to Preferred Customers.

Business Opportunity Participants are prohibited from participating in any auto-

shipment program or any similar program involving standing orders of product.

Refund Policies. The program shall include, and Defendants shall enforce, the

following policies related to product refunds or buybacks:

For at least the first twelve (12) months after becoming a Business Opportunity

Participant, Participants are entitled to a full refund from Defendants of the cost

of any start-up package or its equivalent. If Defendants require, as part of their

refund procedure, that any part of the start-up package or its equivalent be

returned, Defendants will pay for any shipping costs associated with such return.

Business Opportunity Participants are entitled to a full refund from Defendants

of the cost, including tax and any fees, of any unopened products purchased from

Defendants within the previous twelve (12) months. If Defendants require, as

part of their refund procedure, that refundable products be returned, Defendants

will pay for any shipping costs associated with such return.

Defendants shall take effective steps to notify Participants of both (i) the right to

return unopened product for a full refund and (ii) contact information, including

a telephone number, that may be used to promptly initiate a product return for

refund. Such steps shall include, at a minimum, providing clear and conspicuous

notice of the same on the following:

Every product purchase invoice or receipt sent from Defendants to a

Participant;

Any websites maintained by Defendants that promote or otherwise provide

information about the Program;

Any application to join the Program as a Business Opportunity Participant;

and

Any of Defendants’ booklets, brochures, or similar printed materials

promoting the Program.

Preferred Customers are entitled to product refunds on terms and through

procedures that are at least as generous as those for Retail Customers.

Required Training for Business Opportunity Participants. Defendants shall not

pay Multi-Level Compensation to any Participant, and shall prohibit and prevent

such Participant from recruiting or sponsoring other Participants, until such

Participant has successfully completed a training course conducted by Defendants

that is focused on the following topics: (a) the importance of purchasing only the

amount of product that the Participant expects to sell in the near future; (b) how to

document retail sales; (c) prohibitions on and consequences for falsifying retail sales

documentation; (d) how to identify and account for business-related expenses and

calculate profit or loss; (e) how to create a business budget and manage income and

expenses; (f) prohibited and permissible representations to Participants and potential

Participants; (g) how to receive a refund or buyback for unwanted product; and

(h) how to submit a complaint about the business opportunity to Defendants and to

law enforcement.

Policies Relating to Leased or Purchased Business Locations. The program shall

include, and Defendants shall enforce, the following policies relating to leased or

purchased business locations:

Participants are prohibited from entering into any lease, sublease, or purchase of

a physical location or a portion of a physical location (other than their homes or

dwellings) for their Program-related businesses until they have:

been Business Opportunity Participants for at least twelve (12) consecutive

months;

successfully completed a training course conducted by Defendants that

focuses on the following topics as related to the operation of a leased or

purchased business location: (i) how to identify and account for all business-

related expenses and calculate profit or loss; (ii) how to create a budget and

manage income and expenses; (iii) how to learn about and comply with local

laws that may affect the Participant’s business; and (iv) how to create a

business plan meeting the requirements set forth in Subsection I.I.c, below;

and

prepared a written business plan that such Participant must retain and make

available to Defendants or to the Independent Compliance Auditor upon

request, and that (i) identifies the facilities and equipment that will be used

for business operations and the costs of acquiring such facilities and

equipment; (ii) identifies applicable city, county, and state regulations and

the steps and costs necessary for the Participant to operate in compliance

therewith; (iii) estimates start-up costs and identifies the source of funding

for such costs; (iv) presents a promotional plan for attracting customers to the

location; (v) estimates the monthly and annual volume of customers and sales

necessary for the Participant’s retail business to operate profitably; and

(vi) forecasts income, overhead, and operating expenses by month for the

first two years of operation.

II.

PROHIBITED MISREPRESENTATIONS

IT IS FURTHER ORDERED that Defendants, Defendants’ officers, agents, and

employees, and all other persons in active concert or participation with any of them, who

receive actual notice of this Order, whether acting directly or indirectly, in connection with

the advertising, marketing, promoting, or offering of any Business Venture, are

permanently restrained and enjoined from misrepresenting or assisting others in

misrepresenting, including by providing others with the means and instrumentalities with

which to misrepresent, expressly or by implication:

That participants will or are likely to earn substantial income;

The amount of revenue, income, or profit a participant actually earned or can likely

earn;

The reasons participants do not earn significant income, including but not limited to

representations that participants fail to devote substantial or sufficient effort; and

Any other fact material to participants concerning the Business Venture, such as:

the total costs to participate, including trainings, brochures, and sales aids; any

material restrictions, limitations, or conditions on operating the Business Venture; or

any material aspect of its performance, efficacy, nature, or central characteristics.

III.

PROHIBITED LIFESTYLE REPRESENTATIONS

IT IS FURTHER ORDERED that Defendants, Defendants’ officers, agents, and

employees, and all other persons in active concert or participation with any of them, who

receive actual notice of this Order, whether acting directly or indirectly, in connection with

the advertising, marketing, promoting, or offering of any Business Venture, are

permanently restrained and enjoined from representing that participation in the Business

Venture is likely to result in a lavish lifestyle, and from using images or descriptions to

represent or imply that participation in the Business Venture is likely to result in a lavish

lifestyle. For the purposes of this Section, the following are examples of prohibited claims

when made to a general audience of prospective or current participants:

Statements that participants can “quit your job,” “be set for life,” “earn millions of

dollars,” “make more money than they ever have imagined or thought possible,”

“realize unlimited income,” or any substantially similar representations; and

Descriptions or images of opulent mansions, private helicopters, private jets, yachts,

exotic automobiles, or any substantially similar representations.

IV.

PROHIBITION AGAINST MATERIAL OMISSIONS AND UNSUBSTANTIATED

INCOME REPRESENTATIONS

IT IS FURTHER ORDERED that Defendants, Defendants’ officers, agents, and

employees, and all other persons in active concert or participation with any of them, who

receive actual notice of this Order, whether acting directly or indirectly, in connection with

advertising, marketing, promoting, or offering any Business Venture, are permanently

restrained and enjoined from:

Failing to disclose, clearly and conspicuously, before any potential participant pays

any money to Defendants, all information material to the decision of whether to

participate in the Business Venture, including, but not limited to whether

Defendants have a refund or buyback policy and if so, all material terms and

conditions of the refund or buyback policy, including the specific steps consumers

must follow to obtain a refund or buyback; and

Making any representation, expressly or by implication, regarding the amount or

level of income, including full-time or part-time income, that a participant can

reasonably expect to earn unless the representation is non-misleading and, at the

time such representation is made, Defendants possess and rely upon competent and

reliable evidence sufficient to substantiate that the representation is true. Implied

representations regarding the amount or level of income that a participant

reasonably can expect to earn include but are not limited to representations

involving and images used to show an improved lifestyle.

COMPLIANCE MONITORING BY DEFENDANTS

IT IS FURTHER ORDERED that Defendants, Defendants’ officers, agents,

employees, and all other persons in active concert or participation with any of them, who

receive actual notice of this Order, whether acting directly or indirectly, in connection with

advertising, marketing, promoting, or offering any Multi-Level Marketing Program, are

hereby permanently restrained and enjoined from:

Failing to take all reasonable steps necessary to monitor and ensure that Defendants’

agents, representatives, employees, and independent contractors act in compliance

with the requirements of Sections I–IV of this Order. For purposes of this

Subsection, an individual’s status as a Business Opportunity Participant alone does

not render him or her an agent, representative, employee, or independent contractor

of Defendants.

Failing to take all reasonable steps necessary to monitor and ensure that Business

Opportunity Participants and Preferred Customers act in compliance with the

requirements of Sections II–IV of this Order.

Providing any monetary compensation to any Business Opportunity Participant

when Defendants know or should know that such monetary compensation is or

would be based on claimed transactions that are not in accordance with the

requirements of Section I.

Failing to claw back any monetary compensation to any Business Opportunity

Participant when Defendants learn or should have learned that such monetary

compensation was based on claimed transactions that were not in accordance with

the requirements of Section I.

Failing to implement and maintain a corrective action program that deters and

corrects behaviors of Business Opportunity Participants and Preferred Customers

that are not in compliance with the requirements of this Order.

Failing to promptly and thoroughly investigate any complaint received by

Defendants relating to compliance with this Order and to notify the complainant of

the resolution of the complaint and the reason therefor, unless legitimate business

reasons exist not to notify the complainant.

VI.

INDEPENDENT COMPLIANCE AUDITOR

IT IS FURTHER ORDERED that an Independent Compliance Auditor (“ICA”)

shall be appointed to further ensure compliance with Section I.A–F and I.I of this Order, as

set forth below. The ICA shall be an independent third party, not an employee or agent of

the Commission or of Defendants, and no attorney-client or other professional relationship

shall be formed between the ICA and Defendants. No later than sixty (60) days after the

entry of this Order, Commission staff and Defendants shall select the ICA by mutual

agreement. If the parties are unable to agree on an ICA who is willing and able to perform

the ICA’s duties under this Order, they shall submit the matter to the Court for

determination. Defendants shall consent to the following terms and conditions regarding

the ICA:

The ICA shall serve, without bond or other security, at the expense of Defendants.

Defendants shall execute an agreement that, subject to the prior approval of

Commission staff, confers upon the ICA all the rights and powers necessary to

permit the ICA to perform its duties and responsibilities pursuant to and in

accordance with the provisions of this Order. Any individual who serves as ICA or

performs duties at the ICA’s direction shall agree not to be retained by the

Commission or Defendants for a period of two years after the conclusion of the

engagement.

Beginning at the Effective Date applicable to Section I of this Order, the ICA shall

have the duty and responsibility to diligently and competently review, assess, and

evaluate Defendants’ compliance with the following requirements of Section I of

this Order, namely the requirements that:

Defendants are paying Multi-Level Compensation only in accordance with

Subsection I.A, and subject to the limitations set forth in Subsections I.D., I.E,

I.F, and I.H;

Defendants are differentiating between Preferred Customers and Business

Opportunity Participants as required by Subsection I.B;

Defendants are collecting and maintaining retail sales information as required by

Subsection I.C;

Defendants are taking all reasonable steps necessary to monitor and ensure that

Profitable Retail Sales and Preferred Customer Purchases are genuine sales of

Products, rather than an attempt to manipulate the program’s compensation plan,

as required by Subsection I.D.1;

Defendants are taking all reasonable steps necessary to monitor and ensure that

Profitable Retail Sales in fact occurred as reported in the information collected

and maintained pursuant to Subsection I.D.2;

Defendants are complying with the requirements and limitations relating to

claimed Profitable Retail Sales set forth in Subsection I.D.3;

Defendants are complying with the requirements and limitations relating to

Rewardable Personal Consumption set forth in Subsection I.E;

Defendants are complying with the limitations on thresholds, targets, and

requirements set forth in Subsection I.F;

Defendants are complying with and enforcing the requirements and limitations

on leased or purchased business locations set forth in Subsection I.I.

Subject to the terms of this Order, the ICA shall have authority to engage

professional staff, at the expense of Defendants, to assist the ICA in carrying out the

ICA’s duties and responsibilities.

Except for information protected by any demonstrated legally-recognized privilege,

the ICA shall have full and complete access to all reasonably available information

in the possession, custody, or control of Defendants that is relevant to

accomplishing the ICA’s duties and responsibilities described in Section VI.

Defendants may consult with the ICA concerning the ICA’s work, including but not

limited to the ICA’s findings and recommendations, as appropriate.

The ICA, and any staff engaged to assist the ICA in carrying out the ICA’s duties

and responsibilities, shall maintain the confidentiality of any of Defendants’

information obtained in accordance with this Order, and shall not disclose such

information to any other person except in accordance with this Order; except that,

upon request, the ICA shall share records and information with Commission staff.

Nothing in this Section shall affect or impair the Commission’s ability to obtain

records and information pursuant to Section XII.

Defendants may require the ICA, and any staff engaged to assist the ICA in carrying

out the ICA’s duties and responsibilities, to sign a customary confidentiality

agreement; provided, however, that such agreement shall not restrict the ICA (and

its representatives) from providing any information to Commission staff.

Commission staff may require the ICA, and any staff engaged to assist the ICA in

carrying out the ICA’s duties and responsibilities, to sign an appropriate

confidentiality agreement related to Commission materials and information received

in connection with the performance of the ICA’s duties, and to take other

appropriate steps to protect the confidentiality of the same.

The ICA shall serve for seven (7) years after the Effective Date applicable to

Section I of this Order.

The ICA shall periodically report in writing to Commission staff and to Defendants

on Defendants’ compliance with each of the subsections of Section I. For the first

three (3) years, the ICA shall make such reports every six (6) months, beginning six

months following the Effective Date applicable to Section I. After the first three

(3) years, the frequency of such reports shall be decreased to annually.

If, at any time, the ICA determines that Defendants are not in substantial compliance

with Section I.A–F or I.I of this Order, the ICA shall so notify Commission staff and

consult with Defendants. Defendants may at any time submit to Commission staff

and to the ICA a written response to the ICA’s notification.

The ICA shall prepare a budget and work plan as follows:

No later than ninety (90) days prior to the Effective Date applicable to Section I

of this Order, the ICA shall, in consultation with Commission staff and

Defendants, prepare and present to Commission staff and Defendants an annual

budget and work plan (the “ICA Budget”) describing the scope of work to be

performed and the fees and expenses of the ICA and any professional staff to be

incurred during the first year following the Effective Date of Section I of this

Order.

The scope of work, fees, and expenses to be incurred by the ICA and any

professional staff shall be reasonable and not excessive, in light of the ICA’s

defined duties, responsibilities, and powers prescribed in this Order.

The ICA shall prepare and submit to Defendants and to Commission staff an

annual ICA Budget no later than ninety (90) days prior to the beginning of each

subsequent year of the ICA’s term. If Defendants and Commission staff both

approve the ICA Budget, the ICA shall adhere to and shall not exceed the

approved ICA Budget, unless such deviations are authorized by agreement of the

parties or order of the Court.

Within 21 days of receipt of any ICA Budget, either Commission staff or

Defendants may serve an objection to the ICA, who, within 21 days of such

objection, shall provide to Commission staff and Defendants a revised ICA

Budget or a notice that no such revision will be made.

Following the ICA’s response to an objection provided in accordance with

Subsection VI.K.3, either Commission staff or Defendants may apply to the

Court to modify the ICA Budget.

Pending the Court’s decision concerning any application pursuant to Subsection

VI.K.4, the ICA shall continue to perform its duties and implement the ICA

Budget as prepared by the ICA.

Defendants shall indemnify the ICA and hold the ICA harmless against all losses,

claims, damages, liabilities, or expenses arising out of, or in connection with, the

performance of the ICA’s duties, including all reasonable fees of counsel and other

reasonable expenses incurred in connection with the preparations for, or defense of,

any claim, whether or not resulting in any liability, except to the extent that such

losses, claims, damages, liabilities, or expenses result from gross negligence, willful

or wanton acts, or bad faith by the ICA.

In the event Commission staff determines that the ICA has ceased to act or failed to

act consistently with the terms of this Subsection, Commission staff may relieve the

ICA of its duties.

If the ICA has been relieved of its duties, or if the ICA is no longer willing or able

to continue to serve, Commission staff and Defendants shall mutually agree on a

replacement ICA. If the parties are unable to agree on a replacement ICA within

thirty (30) days, they shall submit the matter to the Court for determination. If more

than three (3) months elapse without an ICA in place, the overall term of the ICA set

forth in Subsection VI.H shall be extended for a commensurate period.

Not later than ten (10) days after the appointment of the replacement ICA,

Defendants shall execute an agreement that, subject to the prior approval of

Commission staff, confers upon the replacement ICA all the rights and powers

necessary to permit the replacement ICA to perform its duties and responsibilities

pursuant to this Order.

VII.

MONETARY JUDGMENT

IT IS FURTHER ORDERED that:

Judgment in the amount of Two Hundred Million Dollars ($200,000,000) is entered

in favor of the Commission against Defendants, jointly and severally, as equitable

monetary relief.

Defendant Herbalife International of America, Inc. is ordered to pay to the

Commission Two Hundred Million Dollars ($200,000,000), within 7 days of entry

of this Order by electronic fund transfer in accordance with instructions previously

provided by a representative of the Commission.

Defendants relinquish dominion and all legal and equitable right, title, and interest

in all assets transferred pursuant to this Order and may not seek the return of any

assets.

The facts alleged in the Complaint will be taken as true, without further proof, in

any subsequent civil litigation by or on behalf of the Commission in a proceeding to

enforce its rights to any payment or monetary judgment pursuant to this Order, such

as a nondischargeability complaint in any bankruptcy case.

The facts alleged in the Complaint establish all elements necessary to sustain an

action by the Commission pursuant to Section 523(a)(2)(A) of the Bankruptcy

Code, 11 U.S.C. § 523(a)(2)(A), and this Order will have collateral estoppel effect

for such purposes.

Defendants acknowledge that their Taxpayer Identification Numbers or Employer

Identification Numbers, which Defendants must submit to the Commission, may be

used for collecting and reporting on any delinquent amount arising out of this Order,

in accordance with 31 U.S.C. § 7701.

All money paid to the Commission pursuant to this Order may be deposited into a

fund administered by the Commission or its designee to be used for equitable relief,

including consumer redress and any attendant expenses for the administration of any

redress fund. If a representative of the Commission decides that direct redress to

consumers is wholly or partially impracticable or money remains after redress is

completed, the Commission may apply any remaining money for such other

equitable relief (including consumer information remedies) as it determines to be

reasonably related to Defendants’ practices alleged in the Complaint. Any money

not used for such equitable relief is to be deposited to the U.S. Treasury as

disgorgement. Defendants have no right to challenge any actions the Commission

or its representatives may take pursuant to this Subsection.

VIII.

CUSTOMER INFORMATION

IT IS FURTHER ORDERED that Defendants, Defendants’ officers, agents, and

employees, and all other persons in active concert or participation with any of them, who

receive actual notice of this Order, are permanently restrained and enjoined from directly

or indirectly failing to provide sufficient customer information to enable the Commission

to efficiently administer consumer redress. Defendants represent that they have provided

this redress information to the Commission. If a representative of the Commission requests

in writing any information related to redress, Defendants must provide it, in the form

prescribed by the Commission, within 14 days.

IX.

ORDER ACKNOWLEDGMENTS

IT IS FURTHER ORDERED that Defendants obtain acknowledgments of receipt

of this Order:

Each Defendant, within 7 days of entry of this Order, must submit to the

Commission an acknowledgment of receipt of this Order sworn under penalty of

perjury.

For ten (10) years after entry of this Order, Defendants must deliver a copy of this

Order to: (1) all principals, officers, directors, and LLC managers and members,

including Participants who serve as principals, officers, directors, and LLC

managers and members; (2) all employees, agents, and representatives having

managerial responsibilities concerning conduct covered by Sections I–IV of this

Order; (3) Business Opportunity Participants who are members of the Founder’s

Circle or Chairman’s Club or any group with similar stature under the marketing

plan; (4) any business entity resulting from any change in structure as set forth in the

Section titled Compliance Reporting. Delivery must occur within 7 days of entry of

this Order for current personnel. For all others, delivery must occur before they

assume their responsibilities.

From each individual or entity to which a Defendant delivered a copy of this Order,

that Defendant must obtain, within 30 days, a signed and dated acknowledgment of

receipt of this Order.

COMPLIANCE REPORTING

IT IS FURTHER ORDERED that Defendants make timely submissions to the

Commission:

One year after entry of this Order, each Defendant must submit a compliance report,

sworn under penalty of perjury. Each Defendant must:

Identify the primary physical, postal, and email address and telephone number,

as designated points of contact, which representatives of the Commission may

use to communicate with Defendant;

Identify all of that Defendant’s businesses by all of their names, telephone

numbers, and physical, postal, email, and Internet addresses;

Describe the activities of each business, including the goods and services

offered, the means of advertising, marketing, and sales, and the involvement of

any other Defendant;

Describe in detail whether and how that Defendant is in compliance with each

Section of this Order; and

Provide a copy of each Order Acknowledgment obtained pursuant to this Order,

unless previously submitted to the Commission.

For nine (9) years after entry of this Order, each Defendant must submit a

compliance notice, sworn under penalty of perjury, within 14 days of any change in

the following:

Any designated point of contact; or

The structure of Defendant or any entity that Defendant has any ownership

interest in or controls directly or indirectly that may affect compliance

obligations arising under this Order, including: creation, merger, sale, or

dissolution of the entity or any subsidiary, parent, or affiliate that engages in any

acts or practices subject to this Order.

Each Defendant must submit to the Commission notice of the filing of any

bankruptcy petition, insolvency proceeding, or similar proceeding by or against such

Defendant within 14 days of its filing.

Any submission to the Commission required by this Order to be sworn under

penalty of perjury must be true and accurate and comply with 28 U.S.C. § 1746,

such as by concluding: “I declare under penalty of perjury under the laws of the

United States of America that the foregoing is true and correct. Executed on:

” and supplying the date, signatory’s full name, title (if applicable), and

signature.

Unless otherwise directed by a Commission representative in writing, all

submissions to the Commission pursuant to this Order must be emailed to

DEbrief@ftc.gov or sent by overnight courier (not the U.S. Postal Service) to:

Associate Director for Enforcement, Bureau of Consumer Protection, Federal Trade

Commission, 600 Pennsylvania Avenue NW, Washington, DC 20580. The subject

line must begin: FTC v. Herbalife, Ltd., et al.

XI.

RECORDKEEPING

IT IS FURTHER ORDERED that Defendants must create certain records for nine

(9) years after entry of the Order, and retain each such record for five (5) years.

Specifically, Defendants must create and retain the following records:

Accounting records showing the revenues from all goods or services sold to

participants in a Business Venture;

Personnel records showing, for each person providing services, whether as an

employee or otherwise, that person’s name; addresses; telephone numbers; job title

or position; dates of service; and (if applicable) the reason for termination;

Records accurately reflecting current Preferred Customers’ and Participants’ name,

address, telephone number, and e-mail address, and former Preferred Customers’

and Participants’ name and last known address, telephone number, and e-mail

address;

Records of all consumer complaints and refund requests, whether received directly

or indirectly, such as through a third party, and any response;

All records necessary to demonstrate full compliance with each provision of this

Order, including all submissions to the Commission;

A copy of each unique advertisement or other marketing material used or

disseminated by Defendants to consumers, Preferred Customers, or Participants;

A copy of each unique training material used or disseminated by Defendants to

Preferred Customers or Participants; and

Copies of all contracts or agreements entered into between Defendants and any

participant in Defendants’ Business Venture.

XII.

COMPLIANCE MONITORING

IT IS FURTHER ORDERED that for the purpose of monitoring Defendants’

compliance with this Order and any failure to transfer any assets as required by this Order:

Within 14 days of receipt of a written request from a representative of the

Commission each Defendant must: submit additional compliance reports or other

requested information, which must be sworn under penalty of perjury; appear for

depositions; and produce documents for inspection and copying. The Commission

is also authorized to obtain discovery, without further leave of court, using any of

the procedures prescribed by Federal Rules of Civil Procedure 29, 30 (including

telephonic depositions), 31, 33, 34, 36, 45, and 69.

For matters concerning this Order, the Commission is authorized to communicate

with each Defendant through its counsel. Defendant must permit representatives of

the Commission to interview any employee or other person affiliated with any

Defendant who has agreed to such an interview. The person interviewed may have

counsel present.

The Commission may use all other lawful means, including posing through its

representatives as consumers, suppliers, or other individuals or entities, to

Defendants or any individual or entity affiliated with Defendants, without the

necessity of identification or prior notice. Nothing in this Order limits the

Commission’s lawful use of compulsory process, pursuant to Sections 9 and 20 of

the FTC Act, 15 U.S.C. §§ 49, 57b-1.

XIII.

EFFECTIVE DATE

IT IS FURTHER ORDERED that this Order shall become effective upon entry,

except that Section I shall become effective ten (10) months after entry of the Order.

XIV.

RETENTION OF JURISDICTION

IT IS FURTHER ORDERED that this Court retains jurisdiction of this matter for

purposes of construction, modification, and enforcement of this Order.

SO STIPULATED AND AGREED:

FOR PLAINTIFF FEDERAL TRADE COMMISSION


/s/ Janet Ammerman		Date: July 15, 2016

JANET AMMERMAN, California Bar No. 113996

Email: jammerman1@ftc.gov

CHRISTINE M. TODARO, OH Bar No. 0084976

Email: ctodaro@ftc.gov

DANIEL O. HANKS, DC Bar No. 495823; VA Bar No. 65523

Email: dhanks@ftc.gov

600 Pennsylvania Ave. NW, Mailstop: CC 8528, Washington, D.C. 20580

Tel: 202-326-3145 (Ammerman)

Tel: 202-326-3711 (Todaro)

Tel: 202-326-2472 (Hanks)

Fax: (202) 326-3395

LAURA SOLIS, WA Bar No. 36005

Email: lsolis@ftc.gov

915 Second Ave., Suite 2896, Seattle, WA 98174

Tel: (206) 220-4544

Fax: (206) 220-6366

Local Counsel

BARBARA CHUN, California Bar No. 186907

Email: bchun@ftc.gov

Federal Trade Commission

10877 Wilshire Blvd., Suite 700

Los Angeles, California 90024

Tel: (310) 824-4312

Fax: (310) 824-4380

FOR DEFENDANTS HERBALIFE INTERNATIONAL OF AMERICA, INC.,

HERBALIFE INTERNATIONAL, INC., AND HERBALIFE, LTD.


/s/ Douglas A. Axel		Date: July 14, 2016

DOUGLAS A. AXEL

Email: daxel@sidley.com

NITIN REDDY

Email: nreddy@sidley.com

Sidley Austin LLP

555 West Fifth Street

Los Angeles, CA 90013

Tel: (213) 896-6035 (Axel)

Tel: (213) 896-6929 (Reddy)

Fax: (213) 896-6600

ANDREW J. STRENIO, JR.

Email: astrenio@sidley.com

Sidley Austin LLP

1501 K Street NW

Washington, DC 20005

Tel: (202) 736-8614

Fax: (202) 736-8711


/s/ John E. Villafranco		Date: July 14, 2016

JOHN E. VILLAFRANCO

Email: jvillafranco@kelleydrye.com

Kelley Drye & Warren LLP

3050 K Street NW

Washington, DC 20007

Tel: (202) 342-8400

Fax: (202) 342-8451


/s/ JB Kelly		July 14, 2016

JB KELLY

Email: jbkelly@cozen.com

Cozen O’Connor

1200 19th Street NW, 3rd Floor

Washington, DC 20036

Tel: (202) 471-3418

Fax: (202) 861-1905

FOR DEFENDANTS HERBALIFE INTERNATIONAL OF AMERICA, INC.,

HERBALIFE INTERNATIONAL, INC., AND HERBALIFE, LTD.


/s/ Mark J. Friedman		Date: July 14, 2016

MARK J. FRIEDMAN, as an officer of

Herbalife International of America, Inc.


/s/ Mark J. Friedman		Date: July 14, 2016

MARK J. FRIEDMAN, as an officer of

Herbalife International, Inc.


/s/ Mark J. Friedman		Date: July 14, 2016

MARK J. FRIEDMAN, as an officer of

Herbalife, Ltd.