HERBALIFE LTD. 2005 STOCK INCENTIVE PLAN STOCK APPRECIATION RIGHT AWARD AGREEMENT
EXHIBIT 10.4
STOCK APPRECIATION RIGHT AWARD AGREEMENT
STOCK
APPRECIATION RIGHT AGREEMENT (this “Agreement”) dated as of April 4, 2008 (the
“Grant Date”) between HERBALIFE LTD., an entity organized under the laws of the Cayman
Islands (the “Company”), and Xxxxxxx X. Xxxxxxx (“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 151,580 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 $50.00 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) Subject to Section 2(c) and Participant’s continued employment with the Company and/or its
Subsidiaries (or as otherwise provided in Section 2(b)), the Award shall become vested and
exercisable on the fourth anniversary of the Grant Date (the period between the Grant Date and the
fourth anniversary of the Grant Date the “Performance Period”) provided
that during the Performance Period the Company’s Common Shares closed at a price for thirty
(30) consecutive trading days that is equal to or greater than $80.43 per share (the “Price
Performance Standard”).
(b) Notwithstanding anything herein or in the Plan to the contrary,
(i) upon the occurrence of a Change of Control in which either (A) the Price
Performance Standard or the Alternate Price Performance Standard (as defined below) has been
satisfied prior to the date of such Change of Control or (B) the price per Common Share
received by the Company’s shareholders in connection with such Change of Control transaction
(as determined in good faith by the Committee as in existence immediately prior to the
Change of Control) is equal to or greater than the Alternate Price Performance Standard (as
defined below), the vesting of the Award shall be accelerated such that 100% of the then
unvested portion of the Award shall become vested and exercisable as of the date of the
Change of Control; and
(ii) in the event that Participant’s employment with the Company and/or its
Subsidiaries (or their respective successors) is terminated by the Company without “Cause”
or by Participant for “Good Reason” (each as defined below), or in the event of
Participant’s death or disability (as such term is defined in Section 22(e) of the Code) and
either (A) the Price Performance Standard has been satisfied as of the date of such event or
(B) during the period between the Grant Date and the date of such event, the Company’s
Common Shares closed at a price for thirty (30) consecutive trading days that is equal to or
greater than $60.82 per share (the “Alternate Price Performance Standard”), the
Award shall become immediately and fully vested and exercisable.
(c) Participant acknowledges and agrees that he shall be deemed to be subject to Section 304
of the Xxxxxxxx-Xxxxx Act of 2002.
3. Expiration.
(a) The Award shall expire on the seventh (7th) anniversary of the Grant Date;
provided, however, that the Award may earlier terminate as provided
in this Paragraph 3 and/or Paragraph 6 (b).
(b) Subject to Section 3(c) hereof, in the event that the Price Performance Standard is not
achieved during the Performance Period, the Award shall expire on the fourth (4th)
anniversary of the Grant Date.
(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;
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(ii) 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;
(iii) 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; and
(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 two years immediately following the
date of such termination, unless the Award became vested and exercisable solely due to the
achievement of the Alternate Price Performance Standard (and not the Price Performance
Standard), in which event the Award will terminate on the date that is 90 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 permitted exercise 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.
(e) For purposes hereof, the terms “Cause” and “Good Reason” shall have the
meaning set forth in the employment agreement by and between the Company and Participant dated as
of October 10, 2006, as amended.
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. Any adjustments made pursuant to this Section 6 shall be
implemented in accordance with Section 409A of the Internal Revenue Code of 1986, as amended.
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(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, subject to the satisfaction of the provisions of Section 2(b)(i) hereof, 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 and/or the provisions of Section 2(b)(i))
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, subject to the satisfaction of
the provisions of Section 2(a) or 2(b) hereof, 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 will be cancelled in its entirety and repurchased by
the Company at a specific aggregate price equal to the excess, if any, of the Fair Market Value of
the relevant underlying Common Shares less the applicable Base Price multiplied by then exercisable
portion of the Award (including any portion thereof which will become exercisable by virtue of such
Qualifying Event and/or the provisions of Section 2(b)(i)) 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. 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.
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(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 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) Participant shall notify the Company of Participant’s election to pay Participant’s Tax
Withholding Obligation by wire transfer, cashier’s check or by authorizing the Company to withhold
a portion of the Common Shares that would otherwise be issued to Participant in connection with the
Award or by tendering Common Shares (either actually or by attestation) previously acquired, 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, (iii) authorizing the Company to withhold a
portion of the Common Shares that would otherwise
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be issued to Participant in connection with the Award or by tendering Common Shares (either
actually or by attestation) previously acquired, or (iv) such other means as the Company may
establish or permit. 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 or otherwise provided 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 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.
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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. | ||||||||
/s/
Xxxxxxx X. Xxxxxxx
|
By: | /s/ Xxxxx X. Xxxxxxx | ||||||
Xxxxxxx X. Xxxxxxx
|
Name: Xxxxx X. Xxxxxxx | |||||||
| Title: General Counsel | ||||||||
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