HERBALIFE LTD. 2005 STOCK INCENTIVE PLAN STOCK APPRECIATION RIGHT AWARD AGREEMENT
EXHIBIT 99.2
HERBALIFE LTD.
2005 STOCK INCENTIVE PLAN
2005 STOCK INCENTIVE PLAN
STOCK APPRECIATION RIGHT AGREEMENT (this “Agreement”) dated as of , 2006
(the “Grant Date”) between HERBALIFE LTD. (the “Company”), and
(“Participant”).
WHEREAS, pursuant to the Herbalife Ltd. 2005 Stock Incentive Plan (the “Plan”), the
Committee designated under the Plan (or an officer of the Company to who the authority to grant
Awards has been delegated), desires to grant to Participant an award of stock appreciation rights;
and
WHEREAS, Participant desires to accept such award subject to the terms and conditions of this
Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements
contained herein, the Company and Participant, intending to be legally bound, hereby agree as
follows:
| 1. | Grant. |
(a) The Company hereby grants to the Participant an Award of Stock Appreciation
Rights (the “Award”) in accordance with Section 8 of the Plan and subject to the terms and
conditions set forth herein and in the Plan (each as amended from time to time). Each Stock
Appreciation Right represents the right to receive, upon exercise of the Stock Appreciation Right
pursuant to this Agreement, from the Company, a payment, paid in Common Shares, par value $.002 per
share, of the Company (the “Common Shares”), equal to (i) the excess of the Fair Market
Value, on the date of exercise, of one Common Share (as adjusted from time to time pursuant to
Section 12 of the Plan) over the Base Price (as defined below) of the Stock Appreciation Right,
divided by (ii) the Fair Market Value, on the date of exercise, of one Common Share, subject to
terms and conditions set forth herein and in the Plan (each as amended from time to time).
(b) The “Base Price” for the Stock Appreciation Right shall be $ per share
(subject to adjustment as set forth in Section 12 of the Plan).
(c) Except as otherwise defined herein, capitalized terms used herein shall have the meanings
set forth in the Plan.
2. Time for Exercise.
(a) The Award will become vested and exercisable in quarterly 5% increments beginning on the
last day of the calendar quarter during which the Grant Date occurs and on the last day of each
subsequent calendar quarter until the Award becomes fully exercisable on the last day of the
calendar quarter immediately preceding the fifth anniversary of the Grant Date.
(b) Notwithstanding anything herein or in the Plan to the contrary, upon the occurrence of a
Change of Control, the vesting of the Award shall be accelerated such that 50% of the then unvested
portion of the Award shall become vested and exercisable as of the date of the Change of Control;
and
(c) Notwithstanding anything herein or in the Plan to the contrary:
(i) in the event that, (x) within the 90-day period immediately preceding a Change in
Control or (y) at any time following a Change of Control, Participant’s employment with the
Company and its Subsidiaries (or their respective successors) is terminated for any reason
other than by reason of Participant’s resignation without Good Reason or a termination for
Cause, the Award shall become immediately and fully vested and exercisable as of immediately
prior to such termination of employment;
(ii) except as set forth in Paragraph 2(c)(i), in the event that (A) Participant’s
employment with the Company and its Subsidiaries (or their respective successors) is
terminated for any reason other than by reason of Participant’s resignation for any reason
or a termination by the Company for Cause (as defined below) and (B) at the time of such
termination of employment, Xxxxxxx X. Xxxxxxx is no longer serving as the Chief Executive
Officer of the Company, the vesting of the Award shall be accelerated such that 50% of the
then unvested portion of the Award shall become vested and exercisable as of immediately
prior to such termination of employment; and
(iii) in the event of Participant’s death or disability (as such term is defined in
Section 22(e) of the Code), the Award shall become immediately and fully vested and
exercisable.
(d) In addition to the foregoing, subject to Paragraph 6 below, in the event of a Change of
Control, the Committee as constituted immediately before such Change of Control may, in its sole
discretion, accelerate the vesting and exercisability of this Award upon such Change of Control or
take such other actions as provided in Section 13 of the Plan.
3. Expiration. The Award shall expire on the tenth (10th) anniversary of the date hereof;
provided, however, that the Award may earlier terminate as provided in this Paragraph 3 and/or in
Section 13 of the Plan.
(a) Upon termination of Participant’s employment with the Company for any reason other than by
reason of Participant’s Retirement (as defined below), that portion of the Award that is not vested
and exercisable (after giving effect to any acceleration of vesting pursuant to this Agreement or
otherwise) will terminate on the date of such termination of employment.
(b) Upon termination of Participant’s employment with the Company by reason of Participant’s
Retirement (as defined below), the Award shall continue to vest in accordance with the terms of
Paragraph 2 as if Participant remained employed by the Company for a period of three years
following such retirement, at which time that portion of the Award that is not then vested and
exercisable will terminate. For purposes of this Agreement, the term “Retirement”
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shall mean termination of Participant’s employment with the Company and its Subsidiaries if
the sum of Participant’s age and years of continuous service with the Company and its Subsidiaries
is then equal to at least 75.
(c) Upon termination of Participant’s employment with the Company, that portion of the Award
that is vested and exercisable, and any portion of the Award that becomes vested and exercisable in
accordance with Paragraph 2(b), will terminate in accordance with the following:
(i) if Participant’s employment with the Company is terminated for Cause, the vested
and exercisable portion of the Award will terminate on the date of such termination;
(ii) if Participant’s employment with the Company is terminated by reason of
Participant’s death or disability (as such term is defined in Section 22(e) of the Code),
the vested and exercisable portion of the Award will terminate on the date that is one year
immediately following the date of such termination;
(iii) expect as set forth in Paragraph 3(c)(iv), if Participant’s employment with the
Company is terminated by the Company without Cause or by reason of Participant’s resignation
for Good Reason, the vested and exercisable portion of the Award will terminate on the date
that is three years immediately following the date of such termination;
(iv) if Participant’s employment with the Company is terminated by reason of
Participant’s Retirement, the vested and exercisable portion of the Award (including any
portion of the Award that becomes vested and exercisable in accordance with Paragraph 2(b))
will terminate on the date that is three years and thirty days immediately following the
date of such termination;
(v) expect as set forth in Paragraph 3(c)(iv), if Participant’s employment with the
Company is terminated by reason of Participant’s resignation without Good Reason, the vested
and exercisable portion of the Award will terminate on the date that is thirty days
immediately following the date of such termination.
(d) Notwithstanding anything herein to the contrary, if Participant’s employment with the
Company is terminated for any reason other than a termination by the Company for Cause, and at any
time during the thirty-day period following the effective date of such termination of employment
Participant is subject to a “trading blackout” or “quiet period” with respect to the Common Shares
or if the Company determines, upon the advice of legal counsel, that Participant may not to trade
in the Common Shares due to Participant’s possession of material non-public information, the
Company shall extend the period during which Participant may exercise his then remaining vested
portion of this Award until the later of (i) the expiration date of the Award determined pursuant
to Paragraph 3(c) and (ii) the date that is thirty days following the first date on which
Participant is no longer subject to such restrictions on trading with respect to the Common Shares.
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(e) For purposes of this Agreement, the term “Cause” shall have the meaning ascribed
to such term in any written employment agreement between Participant and the Company or one or more
of its Subsidiaries, as the same may be amended or modified from time to time.
(f) For purposes of this Agreement, the term “Good Reason” shall have the meaning
ascribed to such term in any written employment agreement between Participant and the Company or
one or more of its Subsidiaries, as the same may be amended or modified from time to time.
4. Method of Exercise. The Award may be exercised by delivery to the Company (attention:
Secretary) of a notice of exercise in the form specified by the Company specifying the number of
shares with respect to which the Award is being exercised.
5. Fractional Shares. No fractional shares may be purchased upon any exercise.
6. Adjustments of Shares and Awards.
(a) Subject to Section 12(a) of the Plan, in the event of any change in the outstanding Shares
by reason of an acquisition, spin-off or reclassification, recapitalization or merger, combination
or exchange of Common Shares or other corporate exchange, Change of Control or similar event, the
Committee shall adjust appropriately the number or kind of shares or securities subject to the
Award and Base Prices related thereto and make such other revisions to the Award as it deems are
equitably required.
(b) Notwithstanding anything in the Plan to the contrary, with respect to any merger or
consolidation of the Company into another corporation, the sale or exchange of all or substantially
all of the assets of the Company, a Change of Control or the recapitalization, reclassification,
liquidation or dissolution of the Company or any other similar fundamental transaction involving
the Company or any of its Subsidiaries (any of the foregoing, a “Qualifying Event”), the
Committee shall provide either: (i) that the Award cannot be exercised after such Qualifying Event,
provided that the Award shall be immediately and fully vested immediately prior to the consummation
of any such Qualifying Event, and provided further that nothing in this Paragraph 6(b) shall
prohibit Participant from exercising any then exercisable portion of the Award (including any
portion thereof which will become exercisable by virtue of such Qualifying Event) prior to, or
simultaneously with, the occurrence of such Qualifying Event and that, upon the occurrence of such
Qualifying Event, the Award will terminate and be of no further force or effect and no longer be
outstanding; (ii) that the Award will remain outstanding after such Qualifying Event, and from and
after the consummation of such Qualifying Event, the Award will be exercisable for the kind and
amount of securities and/or other property receivable as a result of such Qualifying Event by the
holder of a number of Common Shares for which the Award could have been exercised immediately prior
to such Qualifying Event; or (iii) the Award (including both the exercisable and unexercisable
portions thereof) will be cancelled in its entirety and repurchased by the Company at a specific
price equal to the excess, if any, of the Fair Market Value of the relevant underlying Common
Shares less the applicable Base Price and that, upon the occurrence of such Qualifying Event, the
Award will terminate and be of no
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further force or effect and no longer be outstanding. In the event of any conflict or
inconsistency between the terms and conditions of this Paragraph 6(b) and the terms and conditions
of Sections 12(b) and/or 13 of the Plan, the terms and condition of this Paragraph 6(b) shall
control. The Committee’s election pursuant to this Paragraph 6(b) will be applied in the same
manner to all other holders of the Company’s stock options and stock appreciation rights whose
award agreements contain a similar provision. The Committee may only elect the alternatives
specified in clauses (i) or (iii) of the first sentence of this Paragraph 6(b) in connection with
any Qualifying Event described in clauses (iii)(A) or (iii)(C) of the definition of “Change of
Control” (as such term is defined in the Plan).
7. Compliance With Legal Requirements.
(a) The Award shall not be exercisable and no Common Shares shall be issued or transferred
pursuant to this Agreement or the Plan unless and until the Tax Withholding Obligation (as defined
below), and all legal requirements applicable to such issuance or transfer have, in the opinion of
counsel to the Company, been satisfied. Such legal requirements may include, but are not limited
to, (i) registering or qualifying such Common Shares under any state or federal law or under the
rules of any stock exchange or trading system, (ii) satisfying any applicable law or rule relating
to the transfer of unregistered securities or demonstrating the availability of an exemption from
applicable laws, (iii) placing a restricted legend on the Common Shares issued pursuant to the
exercise of the Award, or (iv) obtaining the consent or approval of any governmental regulatory
body.
(b) Participant understands that the Company is under no obligation to register for resale the
Common Shares issued upon exercise of the Award. The Company may impose such restrictions,
conditions or limitations as it determines appropriate as to the timing and manner of any exercise
of the Award and/or any resales by Participant or other subsequent transfers by Participant of any
Common Shares issued as a result of the exercise of the Award, including without limitation (i)
restrictions under an xxxxxxx xxxxxxx policy, (ii) restrictions that may be necessary in the
absence of an effective registration statement under the Securities Act of 1933, as amended,
covering the Award and/or the Common Shares underlying the Award and (iii) restrictions as to the
use of a specified brokerage firm or other agent for exercising the Award and/or for such resales
or other transfers. The sale of the shares underlying the Award must also comply with other
applicable laws and regulations governing the sale of such shares.
8. Shareholder Rights. Participant shall not be deemed a shareholder of the Company with
respect to any of the Common Shares subject to the Award, except to the extent that such shares
shall have been purchased and transferred to Participant.
9. Withholding Taxes.
(a) Participant is liable and responsible for all taxes owed in connection with the Award,
regardless of any action the Company takes with respect to any tax withholding obligations that
arise in connection with the Award. The Company does not make any representation or undertaking
regarding the treatment of any tax withholding in connection with the grant, vesting or settlement
of the Award or the subsequent sale of Common Shares issuable
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pursuant to the Award. The Company does not commit and is under no obligation to structure
the Award to reduce or eliminate Participant’s tax liability.
(b) Prior to any event in connection with the Award (e.g., vesting or payment in respect of
the Award) that the Company determines may result in any domestic or foreign tax withholding
obligation, whether national, federal, state or local, including any social tax obligation (the
“Tax Withholding Obligation”), Participant is required to arrange for the satisfaction of
the amount of such Tax Withholding Obligation in a manner acceptable to the Company.
(c) Unless the Committee provides otherwise, at any time not less than five (5) business days
before any Tax Withholding Obligation arises (e.g., at the time the Award is exercised, in whole or
in part), Participant shall notify the Company of Participant’s election to pay Participant’s Tax
Withholding Obligation by wire transfer, cashier’s check or other means permitted by the Company.
In such case, Participant shall satisfy his or her tax withholding obligation by paying to the
Company on such date as it shall specify an amount that the Company determines is sufficient to
satisfy the expected Tax Withholding Obligation by (i) wire transfer to such account as the Company
may direct, (ii) delivery of a cashier’s check payable to the Company, Attn: General Counsel, at
the Company’s principal executive offices, or such other address as the Company may from time to
time direct, or (iii) such other means as the Company may establish or permit (including by means
of a “same day sale” program developed under Regulation T as promulgated by the Federal Reserve
Board to the extent permitted by the Company and applicable law). Participant agrees and
acknowledges that prior to the date the Tax Withholding Obligation arises, the Company will be
required to estimate the amount of the Tax Withholding Obligation and accordingly may require the
amount paid to the Company under this Paragraph 9(c) to be more than the minimum amount that may
actually be due and that, if Participant has not delivered payment of a sufficient amount to the
Company to satisfy the Tax Withholding Obligation (regardless of whether as a result of the Company
underestimating the required payment or Participant failing to timely make the required payment),
the additional Tax Withholding Obligation amounts shall be satisfied such other means as the
Committee deems appropriate.
10. Assignment or Transfer Prohibited. The Award may not be assigned or transferred
otherwise than by will or by the laws of descent and distribution, and may be exercised during the
life of Participant only by Participant or Participant’s guardian or legal representative. Neither
the Award nor any right hereunder shall be subject to attachment, execution or other similar
process. In the event of any attempt by Participant to alienate, assign, pledge, hypothecate or
otherwise dispose of the Award or any right hereunder, except as provided for herein, or in the
event of the levy or any attachment, execution or similar process upon the rights or interests
hereby conferred, the Company may terminate the Award by notice to Participant, and the Award shall
thereupon become null and void.
11. Committee Authority. Any question concerning the interpretation of this Agreement or
the Plan, any adjustments required to be made under this Agreement or the Plan, and any controversy
that may arise under this Agreement or the Plan shall be determined by the
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Committee in its sole and absolute discretion. All decisions by the Committee shall be final and
binding.
12. Application of the Plan. The terms of this Agreement are governed by the terms of the
Plan, as it exists on the date of hereof and as the Plan is amended from time to time. In the
event of any conflict between the provisions of this Agreement and the provisions of the Plan, the
terms of the Plan shall control, except as expressly stated otherwise herein. As used herein, the
term “Section” generally refers to provisions within the Plan, and the term “Paragraph” refers to
provisions of this Agreement.
13. No Right to Continued Employment. Nothing in the Plan, in this Agreement or any other
instrument executed pursuant thereto or hereto shall confer upon Participant any right to continued
employment with the Company or any of its subsidiaries or affiliates.
14. Further Assurances. Each party hereto shall cooperate with each other party, shall do
and perform or cause to be done and performed all further acts and things, and shall execute and
deliver all other agreements, certificates, instruments, and documents as any other party hereto
reasonably may request in order to carry out the intent and accomplish the purposes of this
Agreement and the Plan.
15. Entire Agreement. This Agreement and the Plan together set forth the entire agreement
and understanding between the parties as to the subject matter hereof and supersede all prior oral
and written and all contemporaneous or subsequent oral discussions, agreements and understandings
of any kind or nature.
16. Successors and Assigns. The provisions of this Agreement will inure to the benefit of,
and be binding on, the Company and its successors and assigns and Participant and Participant’s
legal representatives, heirs, legatees, distributees, assigns and transferees by operation of law,
whether or not any such person will have become a party to this Agreement and agreed in writing to
join herein and be bound by the terms and conditions hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above
written.
| HERBALIFE LTD. |
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| By: | ||||
| Name: | ||||
| Title: | ||||
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