<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
HERBALIFE INTERNATIONAL, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
-------------------------------------------------------------------------
<PAGE>
[logo]HERBALIFE(TM)
HERBALIFE INTERNATIONAL, INC.
1800 Century Park East, Los Angeles, CA 90067
(310) 410-9600 FAX: (310) 557-3929
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 30, 1996
The 1996 Annual Meeting of Shareholders of Herbalife International, Inc., a
Nevada corporation (the "Company"), will be held beginning at 6:00 p.m. on
Thursday, May 30, 1996 at the DoubleTree Hotel, 5400 West Century Boulevard, Los
Angeles, California, 90045, to consider and vote on the following matters:
1. The election of seven directors to serve on the Company's Board of
Directors;
2. A proposal to amend and restate the Company's 1994 Performance-Based Annual
Incentive Compensation Plan (the "1994 Plan"), among other things, to
permit the making of awards under the 1994 Plan in shares of common stock
of the Company ("Common Stock");
3. A proposal to amend and restate the Company's 1992 Executive Incentive
Compensation Plan (the "1992 Plan"), among other things, to permit the
making of awards under the 1992 Plan in shares of Common Stock;
4. A proposal to amend and restate the Company's 1991 Stock Option Plan (the
"Option Plan"), among other things, to remove the restriction on 10% and
greater shareholders from participating in the Option Plan and to increase
the aggregate number of shares which may be issued upon exercise of all
options granted under the Option Plan (excluding shares previously issued
upon option exercise but including shares subject to existing outstanding
options) from 3,500,000 to 5,400,000; and
5. Such other business as may properly come before said Annual Meeting or any
adjournment or postponement thereof (the "Meeting").
April 8, 1996 has been fixed as the record date for shareholders entitled to
vote at the Meeting, and only holders of record of shares of the Company's
Common Stock at the close of business on that day will be entitled to receive
notice of and to vote at the Meeting.
All shareholders are cordially invited to attend the Meeting. To insure your
representation at the Meeting, whether or not you plan to attend, you are urged
to complete and promptly return the enclosed proxy, which is solicited by the
Board of Directors, in the return envelope provided. Returning your proxy does
not deprive you of your right to attend the Meeting and to vote your shares in
person, should you desire to do so.
BY ORDER OF THE BOARD OF DIRECTORS
CHRISTOPHER PAIR
SECRETARY
Dated: April 24, 1996
PLEASE DATE AND SIGN THE ACCOMPANYING PROXY CARD
AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE.
<PAGE>
______________________________
PROXY STATEMENT
______________________________
ANNUAL MEETING OF SHAREHOLDERS
MAY 30, 1996
_________________________
GENERAL INFORMATION
This Proxy Statement is first being mailed on or about April 24, 1996 to all
of the holders of shares of the Common Stock of Herbalife International, Inc., a
Nevada corporation (the "Company"), in connection with the solicitation by the
Board of Directors of the Company of proxies in the enclosed form to be used at
the Annual Meeting of Shareholders to be held on Thursday, May 30, 1996
beginning at 6:00 p.m. at the DoubleTree Hotel, 5400 West Century Boulevard, Los
Angeles, California 90045, and at any adjournment or postponement thereof (the
"Meeting"), pursuant to the accompanying Notice of Annual Meeting.
Shares represented by a properly executed proxy will be voted as indicated on
the proxy. The form of proxy accompanying this Proxy Statement and the persons
named therein as proxies have been approved by the Board of Directors of the
Company. Any proxy given pursuant to this solicitation is revocable at any time
prior to the voting at the Meeting by (i) notice in writing delivered to the
Secretary of the Company; (ii) submitting a subsequently dated proxy; or (iii)
attending the Meeting, withdrawing the proxy, and voting in person.
It is proposed that at the Meeting action will be taken on the matters set
forth in the accompanying Notice of Annual Meeting and described in this Proxy
Statement. The Board of Directors knows of no other matters which may properly
be presented for action at the Meeting. If any other matters do properly come
before the Meeting, the persons named on the enclosed proxy will have
discretionary authority to vote thereon in accordance with their best judgment.
When proxies in the form accompanying this Proxy Statement are returned
properly executed, the shares represented thereby will be voted as indicated
thereon, and where a choice has been specified by the shareholder on the proxy,
the shares will be voted in accordance with the specification so made. The
expense of soliciting proxies, including the cost of preparing, assembling, and
mailing the material submitted herewith, will be paid for by the Company. In
addition to solicitations by mail, directors, officers and regular employees of
the Company may solicit proxies personally or by telephone, mail, or other
means, for which no compensation shall be paid other than their regular salary
or other usual compensation. Arrangements will also be made as appropriate with
banks, brokerage houses, and other custodians, nominees, and fiduciaries to
forward solicitation materials to the beneficial owners of stock held of record
by such persons, and the Company will, upon request, reimburse said persons for
their reasonable expenses in so doing.
-1-
<PAGE>
OUTSTANDING SHARES AND VOTING RIGHTS
At the close of business on April 8, 1996, there were outstanding and entitled
to vote at the Meeting 29,821,864 shares of common stock of the Company ("Common
Stock" or "Company Common Stock"). Each share of Common Stock outstanding on
such date entitles the shareholder of record to one vote on all matters
submitted at the Meeting.
The presence in person or by proxy of shareholders entitled to cast a majority
of all the votes entitled to be cast will constitute a quorum for the
transaction of business at the Meeting.
PRINCIPAL SHAREHOLDERS AND SECURITY OWNERSHIP OF MANAGEMENT
The following table lists, as of February 29, 1996, information as to the
beneficial ownership of Common Stock by (i) each of the Company's directors,
(ii) the Company's Chief Executive Officer and each of the four other most
highly compensated executive officers as indicated in the Summary Compensation
Table under "Compensation of Directors and Executive Officers--Executive
Compensation" below, (iii) all directors and executive officers as a group, and
(iv) each person believed by the Company to beneficially own more than five
percent (5%) of the Common Stock outstanding. In each instance, information as
to the number of shares owned and the nature of ownership has been provided by
the individuals identified or described and is not within the direct knowledge
of the Company.
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT PERCENT OF
OF BENEFICIAL OWNER/1/ BENEFICIALLY OWNED CLASS
- ---------------------------------------- ------------------ -----------
<S> <C> <C>
Mark Hughes/2/ 17,629,138 58.98%
1800 Century Park East
Century City, CA 90067
Dr. David B. Katzin/3/ 201,381 *
1800 Century Park East
Century City, CA 90067
Christopher Pair/4/ 115,000 *
1800 Century Park East
Century City, CA 90067
David R. Addis/5/ 150,000 *
2101 L Street, N.W.
Washington, D.C. 20037
Michael Rosen/6/ 95,000 *
1800 Century Park East
Century City, CA 90067
Paul Buxbaum 0 *
17337 Ventura Blvd
Suite 101
Encino, CA 91316
Edward Hall 0 *
Cruttenden Roth Incorporated
18301 Von Karman, Suite 100
Irvine, CA 92715
</TABLE>
-2-
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT PERCENT OF
OF BENEFICIAL OWNER/1/ BENEFICIALLY OWNED CLASS
- ---------------------------------------- ------------------ -----------
<S> <C> <C>
Alan Liker 0 *
150 South Doheny Drive
Beverly Hills, CA 90211
Christopher M. Miner 0 *
Workstation Technologies
18010 Sky Park Circle
Irvine, CA 92714
All executive officers and
directors as a group (10 persons)/7/ 18,240,519 61.03%
_____________________
*Less than one percent (1%).
</TABLE>
_____________________
/1/ The persons in this table have sole voting, investment, and dispositive
power with respect to all shares of the Common Stock shown as beneficially
owned by them, subject to community property laws where applicable.
/2/ Includes 550,000 shares owned by the Herbalife Family Foundation, as to
which Mr. Hughes acts as the sole trustee but has no pecuniary interest.
/3/ Includes 174,400 shares issuable upon exercise of stock options which are
presently exercisable or will become exercisable within 60 days of the date
of this Proxy Statement.
/4/ Includes an aggregate of 115,000 shares issuable upon exercise of stock
options which are presently exercisable or will become exercisable within
60 days of the date of this Proxy Statement.
/5/ Includes 80,000 unvested restricted shares of Common Stock. See
"Compensation of Directors and Executive Officers--Executive
Compensation---Employment Contracts and Change in Control Arrangements."
/6/ Includes 60,000 unvested restricted shares of common stock and 35,000
shares issuable upon exercise of stock options which are presently
exercisable or will become exercisable within 60 days.
/7/ Includes an aggregate of 374,400 shares issuable upon exercise of stock
options which are presently exercisable or will become exercisable within
60 days of the date of this Proxy Statement.
-3-
<PAGE>
PROPOSAL 1
ELECTION OF DIRECTORS
The Company's Board of Directors is presently comprised of seven members, all
of whom hold office after election until the next annual meeting of
shareholders, or until their respective successors are elected and qualified.
Accordingly, all seven of the Company's directors are to be elected at the
Meeting to one-year terms expiring in 1997.
Each nominee has consented to being named in the Proxy Statement and to serve
if elected. All of the nominees are currently serving as directors of the
Company.
Directors are elected by a plurality of the votes cast. It is the intention
of the persons named in the enclosed form of proxy, unless authorization to do
so is withheld, to vote FOR the election of the seven nominees listed below. If
---
prior to the Meeting any nominee should become unavailable for election, an
event which is not now anticipated by the Board of Directors, the proxies will
be voted for the election of such other person or persons as shall be determined
by the persons named in the enclosed form of proxy in accordance with their
judgment.
Biographical information follows for each person nominated. Directors' ages
are as of February 29, 1996.
MARK HUGHES, 40, founded the Company's business in 1980. Since that time Mr.
Hughes has controlled the operations of the business either as the sole
individual general partner of the California limited partnership through which
the business was conducted from inception to December 1985, as the President and
Chairman of the Board of the California corporation through which the business
was conducted for the interim period from October 1981 through August 1983, or
as the President and Chairman of the Board of Herbalife of America, Inc., which
was the corporate general partner of the California limited partnership from May
through December 1985 and the corporation through which the business was
conducted from January 1986 to November 1986. In November 1986, Mr. Hughes
became Chairman of the Board, Chief Executive Officer and President of the
Company (then called Sage Court Ventures, Inc.) when it acquired Herbalife of
America, Inc. in a stock-for-stock reorganization and has continued in those
positions since that time. Mr. Hughes serves on the Board of Directors of the
Direct Selling Association, a national trade organization for direct sales
companies.
CHRISTOPHER PAIR, 41, joined the Company's predecessor in March 1985 as
Executive Assistant to the President. From 1986 to 1989, he served as Vice
President--Administration for the Company and its predecessors and supervised
all administrative departments of the Company. In May 1991, Mr. Pair became the
Company's Executive Vice President--International and Corporate Administration
and Secretary, and is responsible for the Company's international development.
Mr. Pair has been a director of the Company since May 1990. Prior to 1985, Mr.
Pair served in various management positions with U.S. Leasing, Raytheon Data
Systems and Consolidated Foods. Mr. Pair serves on the Board of Directors of
the Direct Selling Educational Foundation and also serves on the Direct Selling
Association Long Range Planning Committee. Mr. Pair received his B.S. and
M.B.A. from the University of Redlands.
MICHAEL ROSEN, 49, joined the Company in August 1993 and is currently the
Executive Vice President--Corporate Marketing. Mr. Rosen's responsibilities
include investor relations, external affairs, developing the Company's domestic
and international sales and product literature and managing its expansion into
catalog sales. Since 1986, Mr. Rosen has served as the Chief Executive Officer
of Shop Television Network, a company which he founded. From February 1992 to
September 1993, Shop Television Network was subject to a Chapter 11
reorganization proceeding. In
-4-
<PAGE>
September 1993, the proceeding was dismissed without the necessity of confirming
a reorganization plan and all creditors were fully repaid. Shop Television
Network has no current operations. Mr. Rosen was elected a director of the
Company in January, 1996.
PAUL M. BUXBAUM, 41, is presently Executive Vice President of Buxbaum,
Ginsberg and Associates, a nationwide retail and merchandising consulting firm
based in California. In this capacity, Mr. Buxbaum has served as a consultant
to a wide range of national, regional and local retail companies on all phases
of their operations since 1984. He has also conducted evaluations of retailers,
wholesale distributors and consumer product manufacturers for major financial
institutions. Mr. Buxbaum was elected a director of the Company in August 1991.
Mr. Buxbaum is also the Chairman of the Board of Ames Department Stores, Inc.
Mr. Buxbaum serves on the Audit, Compensation, Stock Option, Finance and
Business Development Committees of the Board.
EDWARD J. HALL, 49, has served as the Chief Financial Officer of Cruttenden
Roth Incorporated, an investment banking firm, since April 1995. He served in a
similar capacity for H.J. Meyers & Co., Inc., an investment banking firm based
in Beverly Hills, California from March 1991 through March 1995. Between May
1990 and March 1991, Mr. Hall, a certified public accountant, was an independent
investor. From March 1988 through May 1990, Mr. Hall was an Executive Vice
President of Angeles Corporation, an investment management firm. Prior to
joining Angeles Corporation, Mr. Hall was with Deloitte & Touche, where he had
been a partner in the Audit and Emerging Business Group since 1980. Mr. Hall
was elected a director of the Company in March 1992. Mr. Hall serves on the
Audit, Compensation, Stock Option, Finance and Business Development Committees
of the Board.
ALAN LIKER, 58, has served as a business advisor to a number of individuals
and companies during the past several years, including currently Budget Rent-A-
Car of Southern California. Until their sale in 1989, Mr. Liker was a director
of Shaklee Corporation and its Japanese affiliate, Shaklee KK. From 1976 to
1980, he was a principal of Xerox Development Corporation, a strategic planning
unit of Xerox Corporation. Mr. Liker was previously a law professor at the
Harvard University, University of California (Los Angeles) and University of
Southern California law schools. He was elected to the Company's Board in
December 1993 and is currently also a director of Team Rental Group, Inc.
Previously he was a director of First Charter Bank and Shop Television Network.
Mr. Liker serves on the Finance Committee of the Board.
CHRISTOPHER M. MINER, 44, co-founded Workstation Technologies, Inc., a leading
developer of interactive communications software and hardware products, in 1989
and currently serves as director of that company. Prior to founding Workstation
Technologies, from 1987 to 1989, Mr. Miner served as Chief Financial Officer of
Technology Marketing, Inc., a custom electronic engineering organization and
board level test product manufacturer. Prior to joining Technology Marketing,
he served as Chief Financial Officer and Director for Media Systems Technology,
Inc., a software manufacturer from 1981 to 1987. Mr. Miner received his M.B.A.
from California State University in 1976. He was elected a director of the
Company in March 1996.
ATTENDANCE AT MEETINGS
The Board of Directors held 12 meetings and acted by unanimous written
consent on 9 occasions during the fiscal year ended December 31, 1995. The
Board has five standing committees, the Audit Committee, established in March
1992, the Compensation Committee, established in August 1991, the Stock Option
Committee, established in September 1991, the Finance Committee, established in
February 1994, and the Business Development Committee, established in April
1994. The Audit Committee recommends engagement of the Company's independent
accountants, approves the services performed by such accountants and reviews and
evaluates the Company's accounting systems and its system of internal accounting
controls. The Compensation Committee makes recommendations to the full Board of
Directors
-5-
<PAGE>
regarding levels and types of compensation of the Company's executive officers
and administers the 1992 Executive Incentive Compensation Plan and the 1994
Performance-Based Annual Incentive Compensation Plan. See "Compensation of
Directors and Executive Officers--Executive Compensation--Description of Certain
Plans." The Stock Option Committee administers the Company's 1991 Stock Option
Plan. See "Compensation of Directors and Executive Officers--Executive
Compensation--Description of Certain Plans." The Finance Committee reviews
certain aspects of the Company's cash management systems. The Business
Development Committee develops and investigates the Company's financing
alternatives, tax planning structures and expansion opportunities. In 1995, the
Audit, Compensation, Stock Option, Finance and Business Development Committees
met and acted by unanimous written consent on 4 and 0, 3 and 4, 8 and 0, 1 and
0, and 0 and 0 occasions, respectively. In 1995, no director failed to attend
at least 75% of the aggregate number of Board and committee meetings held during
the period of his service.
OTHER KEY EMPLOYEES
DR. DAVID B. KATZIN, 50, began providing services to the Company in 1985 and
currently serves as its Executive Vice President, Chief Medical Affairs Officer
and Chairman of the Herbalife Scientific Board. Dr. Katzin has 22 years
experience in the health care field as an educator, physician and scientist.
Dr. Katzin conducted a private practice in Los Angeles from 1981 to 1989,
dealing with preventive medicine, lifestyles and nutritional medicine. Dr.
Katzin has conducted seminars, lectured publicly and written extensively on
health care issues. Since 1983, he has served as medical director and owner of
Westwood Medical Group, a multi-discipline medical practice in Los Angeles.
Westwood Medical Group has not been an active practice since March 1989. Since
1985, Dr. Katzin has performed consulting services for the Company through a
contractual arrangement between the Company and Nutrient Research Consultants
Ltd., a California corporation which is wholly owned by him. See "Certain
Transactions." Dr. Katzin was elected a director of the Company in May 1990 and
served on the Board through March 1996. Dr. Katzin received his Ph.D. in
cardiovascular physiology and his M.D. from the University of California at Los
Angeles.
DAVID R. ADDIS, 47, became Chief Counsel of the Company in December 1992. From
1979 to 1992, he was a member of the Washington, D.C. law firm of Dickstein,
Shapiro and Morin. While at that firm, Mr. Addis provided legal services to the
Company. Previously, Mr. Addis was a Senior Trial Attorney for the U.S.
Department of Justice and was an Assistant U.S. Attorney for the District of
Columbia. Mr. Addis received his B.S. degree from Northwestern University and
his J.D. degree from Yale Law School.
TIMOTHY GERRITY, 45, joined the Company in May 1985 and is currently the
Senior Vice President and Chief Financial Officer. Mr. Gerrity, a certified
public accountant, is responsible for the accounting and finance operations of
the Company. His previous experience includes management positions with Wickes
Corporation, Deloitte & Touche, and Fluor Corporation. Mr. Gerrity received his
B.S. degree from California State University at Northridge and his M.B.A. from
the University of Southern California.
All of the officers and directors of the Company are subject to a permanent
injunction entered in October 1986 pursuant to the settlement of an action
instituted by the California Attorney General, the State Health Director and the
Santa Cruz County District Attorney. The Company consented to the entry of this
injunction without in any way admitting the allegations of the complaint. The
injunction prevents the Company and such officers and directors from making
certain specified claims in future advertising of the Company's products and
requires the Company to implement certain documentation systems with respect to
payments to the Company's distributors. At the same time, the injunction does
not prevent the Company from continuing to make certain specified claims
concerning its products which have been and are being made, provided that it has
a reasonable basis for making such claims.
-6-
<PAGE>
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
DIRECTORS
Effective January 1996, each director who is not an officer of or consultant
to the Company receives $45,000 per year for his services as a director plus,
effective May 1994, $5,000 per year for each committee of the Board on which he
serves ($10,000 if he serves as chairman of that committee). From December 1992
to April 1994, the additional amount paid to directors for their services on
committees of the Board was $10,000 per year for any one or more committees of
the Board. Any outside directors serving on the board of any of the foreign
subsidiaries of the Company are paid fees of $2,500 annually for each such board
on which they serve. Additionally, the Board authorized the issuance, as of
April 19, 1993, to each of Messrs. Buxbaum and Hall of a cash-only stock
appreciation right ("SAR") covering 25,000 shares of Common Stock. The SARs
vest in annual installments and are automatically exercised and redeemed on the
date of vesting of each installment. The amount payable upon each such
automatic exercise is equal to the fair market value of the Common Stock on the
date of exercise less the "exercise price" of $9.00 (the closing sale price of
the Common Stock on April 19, 1993) in the case of the installments that vested
in 1994 and 1995 and $7.375 (the closing sale price of the Common Stock on
November 1, 1995, the effective date of a repricing of the SARs) in the case of
the installments that will vest thereafter, in each case multiplied by the
number of SARs being exercised and redeemed. In addition, the Board authorized
the issuance, as of November 1, 1995, to each of Messrs. Buxbaum, Hall and Liker
of a cash-only SAR covering 10,000 shares of Common Stock. The SARs vest in
five annual installments and are automatically exercised and redeemed on the
date of vesting of each installment for an amount equal to the fair market value
of the Common Stock on such date less the "exercise price" of $7.375 (the
closing sale price of the Common Stock on November 1, 1995) multiplied by the
number of SARs being exercised and redeemed. Directors who are also officers or
consultants receive no separate compensation for their services as directors.
EXECUTIVE COMPENSATION
(1) SUMMARY COMPENSATION TABLE
The following table sets forth the annual and long-term compensation of the
Company's Chief Executive Officer and four additional most highly compensated
executive officers (including, for this purpose, a consultant to the Company;
see footnote 5 to the table below) whose total annual salary and bonus exceeded
$100,000 during the fiscal year ended December 31, 1995 (the "Named Officers").
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
----------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Sec's.
Name and Restricted Udrlying
Principal Other Annual Stock Options/ LTIP All Other
Position Year Salary($) Bonus($)(1) Compensation($)(2) Award(s)($)(3) SARs(#) Payouts($) Compensation($)(4)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
MARK HUGHES 1995 $999,211 $-- $-- $-- -- $-- $20,418
President and 1994 1,000,000 2,018,000 -- -- -- -- 20,525
Chief Executive 1993 1,499,992 1,991,436 -- -- -- -- 4,381
Officer
DR. DAVID B. KATZIN 1995 1,002,564 -- -- -- 40,000 -- 4,281
Executive Vice 1994 814,279 342,000 -- -- -- -- 5,857
President(5) 1993 516,666 450,000 -- -- 300,000 -- 2,475
DAVID R. ADDIS 1995 500,006 -- -- -- 35,000 -- 14,872
Chief Counsel 1994 500,006 302,000 -- -- -- -- 10,063
1993 500,006 350,000 -- -- -- -- 3,113
</TABLE>
-7-
<PAGE>
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
------------------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
-------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Sec's.
Name and Restricted Udrlying
Principal Other Annual Stock Options/ LTIP All Other
Position Year Salary($) Bonus($)(1) Compensation($)(2) Award(s)($)(3) SARs(#) Payouts($) Compensation($)(4)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CHRISTOPHER PAIR 1995 647,116 -- -- -- 32,500 -- 22,294
Executive Vice 1994 496,160 450,000 -- -- -- -- 20,019
President
International and 1993 300,014 300,000 -- -- 150,000 -- 16,432
Corporate
Administration and Secretary
MICHAEL ROSEN 1995 496,160 -- 600,000 -- 25,000 -- 17,058
Executive Vice 1994 399,049 104,000 -- -- 175,000 -- 7,762
President
Corporate Development 1993 121,158 20,260 -- 1,300,000 -- -- 2,592
- -------------------------
</TABLE>
(1) 1994 amounts (other than for Mr. Pair) include bonuses earned under the
Company's 1994 Performance-Based Annual Incentive Compensation Plan. The 1994
amount for Mr. Pair, a portion of the 1994 amount for Dr. Katzin and all 1993
amounts (other than for Mr. Hughes) include bonuses paid under a bonus program
falling within the framework of the Company's 1992 Executive Incentive
Compensation Plan. The 1993 amount for Mr. Hughes was paid pursuant to an
incentive formula described in the paragraph following this table. See
"Description of Certain Plans" and "Compensation Committee Report."
(2) For each individual named, excludes perquisites, other personal benefits,
securities and property, which did not exceed in any year the lesser of $50,000
or 10% of the total annual salary and bonus reported for such individual for
such year. In the case of Mr. Rosen, the listed amount reflects deferred
compensation pursuant to a Deferred Compensation Agreement between the Company
and Mr. Rosen -- see "Employment Contracts and Change in Control Arrangements."
(3) Reflects the issuance of a 100,000 share restricted stock grant to Mr.
Rosen in August 1993. Vesting of the restricted stock occurs in cumulative 20%
installments commencing one year from the date of issuance, with full vesting
occurring on the fifth anniversary date. As of December 31, 1995, the aggregate
remaining stock holdings of 60,000 shares had a value of $517,500 at the then
current market value (as represented by the closing price of the Company's
Common Stock at December 31, 1995), without giving effect to the diminution of
value attributed to the restrictions on such stock. Regular dividends are paid
on the restricted shares reported in this column. No restricted shares were
awarded to Mr. Rosen in 1995 or 1994.
(4) For 1995, these amounts represent payments under the Company's 401(k) Tax-
Sheltered Savings Plan, Executive Medical Plan, Executive Long Term Disability
Plan and Executive Life Insurance Plan. See "Description of Certain Plans."
Amounts with respect to the 401(k) Tax-Sheltered Savings Plan were $4,913 and
$4,913 for Mr. Pair and Mr. Rosen, respectively; amounts with respect to the
Executive Medical Plan were $2,451, $3,363, $1,096, $9,429 and $2,694 for Mr.
Hughes, Dr. Katzin, Mr. Addis, Mr. Pair and Mr. Rosen, respectively; amounts
with respect to the Executive Long Term Disability Plan were $4,093, $7,903,
$6,057 and $5,802 for Mr. Hughes, Mr. Addis, Mr. Pair and Mr. Rosen,
respectively; and amounts with respect to the Executive Life Insurance Plan were
$13,874, $918, $5,873, $2,526 and $3,649 for Mr. Hughes, Dr. Katzin, Mr. Addis,
Mr. Pair and Mr. Rosen, respectively. For 1994, these amounts represent
payments under the Company's 401(k) Tax-Sheltered Savings Plan, Executive
Medical Plan, Executive Long Term Disability Plan and Executive Life Insurance
Plan. Amounts with respect to the 401(k) Tax-Sheltered Savings Plan were
$10,550 for Mr. Pair; amounts with respect to the Executive Medical Plan were
$8,173, $5,238, $124, $4,839 and $4,000 for Mr. Hughes, Dr. Katzin, Mr. Addis,
Mr. Pair and Mr. Rosen, respectively; amounts with respect to the Executive Long
Term Disability Plan were $4,462, $2,039 and $1,210 for Mr. Addis, Mr. Pair and
Mr. Rosen, respectively; and amounts with respect to the Executive Life
Insurance Plan were $12,352, $620, $5,477, $2,591 and $2,552 for Mr. Hughes, Dr.
Katzin, Mr. Addis, Mr. Pair and Mr. Rosen, respectively. For 1993, amounts
represent payments under the Company's 401(k) Tax-Sheltered Savings Plan,
Executive Medical Plan, Executive Long Term Disability Plan and Executive Life
Insurance Plan. Amounts with respect to the 401(k) Tax-Sheltered Savings Plan
were $9,018 for Mr. Pair; amounts with respect to the Executive Medical Plan
were $3,841, $1,982, $882 and $4,578 for Mr. Hughes, Dr. Katzin, Mr. Addis and
Mr. Pair, respectively; amounts with respect to the Executive Long Term
Disability Plan were $540, $2,231, $2,039 and $2,403 for Mr. Hughes, Mr. Addis,
Mr. Pair and Mr. Rosen, respectively; and amounts with respect to the Executive
Life Insurance Plan were $493, $798 and $189 for Dr. Katzin, Mr. Pair and Mr.
Rosen, respectively.
(5) Dr. Katzin has served as Executive Vice President and Chief Medical Affairs
Officer of the Company since March 1996. In 1995, Dr. Katzin was not an
executive officer of the Company but was a director of and served as a
consultant to the Company through March 1996. See "Management--Directors and
Executive Officers." Dr. Katzin provided a variety of consulting and related
services to the Company through his wholly-owned company, Nutrient Research
Consultants, Ltd. See "Certain Transactions." As a consequence of these
business relationships, Dr. Katzin devoted a substantial portion of his working
time to Company matters and, as a result, was reflected in the table above. The
amounts reflected as "salary" for Dr. Katzin are the amounts of contractual
consulting payments made to his wholly-owned consulting firm, and the amounts
reflected as "bonus" are the amounts of an award under a bonus program falling
within the framework of the Company's 1992 Executive Incentive Compensation Plan
for 1993 and a similar such award plus an award under the Company's 1994
Performance-Based Annual Incentive Compensation Plan for 1994.
In order to facilitate the completion of the Company's October 1993 offering
of Common Stock, Mr. Hughes, the majority stockholder of the Company, agreed
with the Compensation Committee of the Board of Directors that, following the
completion of the offering but effective for the entire year, his compensation
for 1993 would consist of (i) a base salary of $1.5 million, (ii) an incentive
bonus of $20,000 for each one percent increase in the Company's primary earnings
per share in 1993 as compared to 1992 (prorated based upon any fractional
increase in primary earnings per share), and (iii) perquisites and reimbursement
for expenses in accordance with the Company's prior practice. For 1995 and
1994, in order to preserve the deductibility by the Company of his compensation
for tax purposes, Mr. Hughes agreed to a further reduction in his salary, to
$1,000,000, and his bonus for 1994 was paid under the Company's 1994
Performance-Based Annual Incentive Compensation Plan.
-8-
<PAGE>
(2) OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table sets forth grants of stock options during the fiscal year
ended December 31, 1995 to the Named Officers. No stock appreciation rights
were granted during such fiscal year.
<TABLE>
<CAPTION>
Individual Grants
- --------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f)
Percentage of
Total
Options/SARs
Options/SARs Granted to Exercise or Grant Date
Granted Employees in Base Price Expiration Present
Name (#)(1) Fiscal Year ($/Sh) (2) Date Value ($)(3)
- ------------------------ ------------ ------------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Mark Hughes............. -- -- -- -- $ --
Dr. David B. Katzin..... 40,000 3.69% 7.375 11/1/05 124,800
David R. Addis.......... 35,000 3.23% 7.375 11/1/05 109,200
Christopher Pair........ 32,500 3.00% 7.375 11/1/05 101,400
Michael Rosen........... 25,000 2.31% 7.375 11/1/05 78,000
</TABLE>
- -------------------
(1) All options granted in 1995 are exercisable in cumulative 50% installments
commencing one year from date of grant, with full vesting occurring on the
second anniversary date.
(2) All options were granted based on the closing price for the Company Common
Stock (as reported in the Wall Street Journal) at the date of grant.
(3) Valuation based upon the Black-Scholes pricing model. Assumptions include:
0.58 price volatility, 5.99% risk-free rate of return, 8% dividend yield
and exercise at the end of the 10 year term. No adjustment was made for
non-transferability or risk of forfeiture.
(3) AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES
The following table sets forth information with respect to shares acquired on
exercise and unexercised options to purchase Common Stock granted in fiscal 1995
and prior years.
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
Number of Shares
Underlying Unexercised Value of Unexercised
Options/SARS at In-the-Money Options/SARS
Shares Acquired Value Fiscal Year-End (#) at Fiscal Year-End ($)(1)
Name on Exercise (#) Realized ($) Exercisable/Unexercisable Exercisable/Unexercisable
- ---------------------- ---------------- ------------ -------------------------- ---------------------------
<S> <C> <C> <C> <C>
Mark Hughes -- $ -- -- -- $ -- $ --
Dr. David B. Katzin 134,400 709,464 167,200 274,400 485,314 639,578
David R. Addis -- -- -- 35,000 -- 41,562
Christopher Pair 90,000 1,241,700 115,000 177,500 298,937 373,156
Michael Rosen -- -- 35,000 165,000 41,562 195,937
- ----------------------
</TABLE>
(1) Represents the difference between the market price of the Company Common
Stock on December 31, 1995 and the exercise price of the options.
-9-
<PAGE>
(4) TEN YEAR OPTION/SAR REPRICINGS
The following table sets forth information with respect to the repricing of
options held by any current executive officer of the Company at any time during
the last ten fiscal years of the Company.
<TABLE>
<CAPTION>
NUMBER OF LENGTH OF
SECURITIES MARKET PRICE ORIGINAL
UNDERLYING OF COMMON EXERCISE PRICE OPTION TERM
OPTIONS/SARS STOCK AT TIME AT TIME OF NEW REMAINING AT
REPRICED OR OF REPRICING REPRICING OR EXERCISE DATE OF
AMENDED OR AMENDMENT PRICE REPRICING OR
NAME DATE (#) AMENDMENT ($) ($) AMENDMENT
(a) (b) (c) ($) (e) (f) (g)
(d)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Mark Hughes -- -- $-- $-- $-- --
Dr. David B. Katzin 11/1/95 300,000 7.375 15.25 7.375 3 years,
1 month
David R. Addis -- -- -- -- -- --
Christopher Pair 11/1/95 60,000 7.375 8.87 7.375 2 years
150,000 7.375 15.25 7.375 3 years,
1 month
Michael Rosen 11/1/95 175,000 7.375 19.875 7.375 3 years,
9 months
Timothy Gerrity 11/1/95 50,000 7.375 15.25 7.375 3 years,
1 month
===================================================================================================================
</TABLE>
(5) DESCRIPTION OF CERTAIN PLANS
1994 Performance-Based Annual Incentive Compensation Plan
Subject to shareholder approval at the Meeting, the Board of Directors has
approved certain amendments to the 1994 Performance-Based Annual Incentive
Compensation Plan (the "1994 Plan"), including an amendment to allow the Company
the option of paying awards under the 1994 Plan in Common Stock. See
"Proposal 2 - Approval of Amended and Restated 1994 Performance-Based Annual
Incentive Compensation Plan." The full text of the 1994 Plan, with the proposed
amendments indicated by cross-outs and underlines, is attached to this Proxy
Statement as Appendix A. The following summary is qualified in its entirety by
reference to the actual text of the 1994 Plan.
The purpose of the 1994 Plan is to provide additional compensation as an
incentive to certain key executives and consultants to attain specified
performance objectives of the Company and its subsidiary and affiliated
corporations and to ensure the continued availability of their full-time or
part-time services to the Company. Specifically, the individuals entitled to
participate in the 1994 Plan are those executive officers and consultants of the
Company whose compensation might be required to be included in the Company's
proxy materials in connection with its annual meeting of shareholders in the
year following the conclusion of an award period, as determined by the committee
administering the 1994 Plan. In addition, the proposed amendments to the 1994
Plan would permit the committee administering the 1994 Plan to designate other
executive officers and consultants to participate in the 1994 Plan.
-10-
<PAGE>
The 1994 Plan will be administered by the Compensation Committee of the
Company's Board, so long as that committee consists entirely of "outside
directors" within the meaning of Section 162(m) of the Internal Revenue Code of
1986, as amended (the "Code"), or, if that committee fails to consist entirely
of "outside directors," then by another committee of at least two members of the
Board entirely so consisting that is designated by the Board to administer the
1994 Plan (in either event, the "1994 Plan Committee"). Subject only to the
specific provisions of the 1994 Plan, the 1994 Plan Committee is vested with
full powers of administration. The proposed amendments to the 1994 Plan would
permit the 1994 Plan Committee to consist of members of the Board who do not
qualify as "outside directors" under the Code. However, the board members who
currently administer the 1994 Plan qualify as "outside directors" under the
Code, and the Board of Directors does not currently intend to appoint
individuals to the 1994 Plan Committee who are not both "outside directors"
under the Code and "disinterested directors" within the meaning of Rule 16b-3(c)
under the Securities Exchange Act of 1934, as amended (the "Exchange Act").
The amount of an available award to a participant or the aggregate amount of
available awards to all participants for each award period is determined based
upon an objective computation (the "Formula") of the actual performance of the
Company relative to pre-established performance goals. The performance goal or
goals included in the Formula for each award period is selected by the 1994 Plan
Committee from among the following performance measures: level of retail sales
(in the aggregate or for a particular category or categories of retail sales);
net cash flow; net income; operating income; earnings per share; return on
sales; reduction in expenditure levels for a particular category or categories
of expenses versus a prior period; return on total capital; and return on
equity. The proposed amendments would add to the foregoing list of performance
measures a measure based on the increase in the Common Stock price over a
specified period.
The 1994 Plan Committee determines the performance measure or measures, the
performance goal or goals and all computations included within each Formula,
each of which may be different for different award periods or for different
participants within a single award period. The 1994 Plan Committee does not
have the discretion to increase any award to an amount in excess of that
determined in accordance with the 1994 Plan and the Formula applicable to a
particular award period. However, the 1994 Plan Committee, may, in its
discretion, (a) designate in advance a maximum dollar award for any award period
with respect to any participant, and/or (b) designate in advance that certain
other incentive award payments (under the 1994 Plan or otherwise) made to a
participant will be deducted from award amounts otherwise earned under the 1994
Plan. In addition, the proposed amendments would grant the 1994 Plan Committee
the discretion to decrease any award under the 1994 Plan. Notwithstanding
anything in the 1994 Plan to the contrary, no participant is entitled to earn in
excess of $10 million under the 1994 Plan with respect to any single calendar
year.
Award periods under the 1994 Plan may be quarters, calendar years or such
other periods as the 1994 Plan Committee may designate. All award periods,
performance measures, performance goals and other aspects of each Formula are
designated in advance of the commencement of each award period by the 1994 Plan
Committee, except as otherwise permitted by the regulations under Section
162(m). The proposed amendments would expressly permit the determinations based
on a calendar year award period to be made by the 1994 Plan Committee on or
before March 31 of the calendar year.
To be entitled to receive a full award with respect to an award period, a
participant must continue to be employed by the Company or rendering services to
the Company on the last day of such award period. With respect to participants
whose service relationship terminates during an award period, the 1994 Plan
Committee provides for prorated awards based upon satisfaction of performance
goals for the entire award period, with the proration formula to be set by the
1994 Plan Committee in its discretion in advance of the commencement of each
award period. In addition, no award can be paid unless the 1994 Plan Committee
certifies that the objective performance goal or goals for the award have been
satisfied and that the amount
-11-
<PAGE>
of the award is no greater than that dictated by the Formula for the applicable
award period. The 1994 Plan Committee makes such determinations by means of
written resolutions of the 1994 Plan Committee that are maintained in the
records of the Company.
The 1994 Plan currently provides that awards be made in cash. The proposed
amendments to the 1994 Plan would provide that awards pursuant to the 1994 Plan
may be made, at the discretion of the 1994 Plan Committee, in cash, through the
issuance of shares of Common Stock, or through a combination of both methods.
The proposed amendments further provide that the total number of shares of
Common Stock that may be issued under the 1994 Plan in any fiscal year of the
Company, and the total number of shares of Common Stock that may be issued under
the 1994 Plan in any fiscal year of the Company to any single participant, may
not exceed 5% of the number of issued and outstanding shares of Common Stock at
the beginning of the prior fiscal year.
Awards under the 1994 Plan are subject to withholding for applicable
employment and income taxes. The 1994 Plan Committee may, in its discretion and
subject to the consent of each affected participant, approve the advance of all
or a portion of a target cash award to a participant prior to the conclusion of
an award period. Each such advance, if made, is a full recourse obligation of
the participant and bears interest from the date of the advance until repaid or
deemed earned at the applicable Federal rate (as specified in the 1994 Plan) for
loans of comparable term. Each such advance is evidenced by a promissory note
executed by the participant and delivered to the Company.
The 1994 Plan will continue in place until terminated by the Board of
Directors. The Board of Directors may from time to time amend, suspend or
terminate in whole or in part any or all of the provisions of the 1994 Plan;
provided, however, that no such action will adversely affect the right of any
participant with respect to (a) any award to which he or she may have become
entitled under the 1994 Plan prior to the effective date of such amendment,
suspension or termination, or (b) any award period that commenced prior to the
taking of such action by the Board.
1992 Executive Incentive Compensation Plan
In 1992, the Board adopted the Herbalife International, Inc. Executive
Incentive Compensation Plan (as amended in 1993, the "1992 Plan"). Subject to
shareholder approval at the Meeting, the Board of Directors has approved certain
amendments to the 1992 Plan, including an amendment to allow the Company the
option of paying awards under the 1992 Plan in Common Stock. See "Proposal 3 --
Approval of 1992 Amended and Restated Executive Incentive Compensation Plan."
Eligible participants under the 1992 Plan consist of the Company's executive
vice presidents, vice presidents, country managers and other executive officers
and key employees (other than the Company's Chief Executive Officer and
President) and consultants as designated by the Chief Executive Officer in
conjunction with the committee administering the 1992 Plan.
The 1992 Plan will be administered by the Compensation Committee of the
Company's Board (the "1992 Plan Committee") in conjunction with the Chief
Executive Officer. The proposed amendments to the 1992 Plan would permit the
1992 Plan Committee to consist of other members of the Board. However, the
current members of the 1992 Plan Committee are the members of the Compensation
Committee, and the Board of Directors does not currently intend to appoint
individuals to the 1992 Plan Committee who are not "disinterested directors"
within the meaning of Rule 16b-3(c) under the Exchange Act. In addition, the
proposed amendments would provide that notwithstanding any contrary provision of
the 1992 Plan, any awards of Common Stock under the 1992 Plan would be
determined and administered solely by the 1992 Plan Committee.
-12-
<PAGE>
The 1992 Plan provides for the payment of bonuses to participants for each
year that the 1992 Plan is in effect, beginning with 1992. Awards are made to
participants based upon the extent to which certain corporate performance goals
and individual performance goals (set in advance by the Chief Executive Officer
together with, in the case of corporate performance goals, the 1992 Plan
Committee) are met. If a goal applicable to a participant is exceeded or not
met, then the participant is entitled to receive an award in excess of, or a pro
rata portion of, as applicable, the targeted amount. In addition, the 1992 Plan
Committee, in conjunction with the Chief Executive Officer, may make
discretionary awards to participants. To be eligible for payment with respect
to a particular award period, a participant is required to be employed by the
Company on the last day of such award period. The proposed amendments to the
1992 Plan would permit the Chief Executive Officer and the 1992 Plan Committee
to make exceptions to this eligibility requirement.
The 1992 Plan currently provides that awards be made in cash. The proposed
amendments to the 1992 Plan would provide that awards pursuant to the 1992 Plan
may be made, at the discretion of the 1992 Plan Committee, in cash, through the
issuance of shares of Common Stock, or through a combination of both methods.
The proposed amendments further provide that the total number of shares of
Common Stock that may be issued under the 1992 Plan in any fiscal year of the
Company, and the total number of shares of Common Stock that may be issued under
the 1992 Plan in any fiscal year of the Company to any single participant, may
not exceed the excess of (i) 5% of the number of issued and outstanding shares
of Common Stock at the beginning of the prior fiscal year, over (ii) the number
of shares of Common Stock issued during the prior fiscal year pursuant to the
1994 Plan.
The Board of Directors may from time to time amend, suspend or terminate in
whole or in part any or all of the provisions of the 1992 Plan; provided,
however, that no such action will adversely affect the right of any participant
with respect to any award to which he or she may have become entitled under the
1992 Plan prior to the effective date of such amendment, suspension or
termination. The proposed amendments provide that the 1992 Plan will continue
in place until terminated by the Board of Directors.
For 1994 and 1995, the Company utilized a bonus arrangement falling within the
framework of the 1992 Plan, although the Named Officers did not participate in
the 1992 Plan for 1995. See "Compensation Committee Report -- Annual Incentive
Compensation." The 1992 Plan is expected to continue to be utilized with
respect to certain executives for future periods.
1991 Stock Option Plan
General
Subject to shareholder approval at the Meeting, the Board of Directors has
approved certain amendments to the 1991 Stock Option Plan (the "Option Plan"),
including an amendment to remove certain eligibility restrictions for
participation in the Option Plan and an amendment to increase the aggregate
number of shares which may be issued upon exercise of all options under the
Option Plan. See "Proposal 4 -- Approval of Amended and Restated 1991 Stock
Option Plan."
The Option Plan currently permits the granting to key employees, directors,
consultants and other persons of stock options to purchase up to 3,500,000
shares of Common Stock. However, currently options may not be granted to any
person who owns shares possessing more than 10% of the total voting power of all
classes of capital stock of the Company. The proposed amendments would
eliminate this restriction.
The purpose of the Option Plan is to secure for the Company and its
shareholders the benefits arising from stock ownership by key employees,
directors, consultants and other persons selected by the Stock Option Committee
of the Board of Directors. As of February 29, 1996, approximately 70 persons
were eligible to participate in the Option Plan.
-13-
<PAGE>
The Option Plan will be administered by the Stock Option Committee of the
Company's Board, which is required to be composed of "disinterested persons"
within the meaning of Rule 16b-3 under the Exchange Act. The proposed
amendments to the Stock Option Plan would permit the Stock Option Committee to
consist of members of the Board who were not "disinterested persons." However,
the Board of Directors does not currently intend to appoint individuals to the
Stock Option Committee who are not both "disinterested directors" within the
meaning of Rule 16b-3(c) under the Exchange Act and "outside directors" within
the meaning of Section 162(m) under the Code. Currently, the Stock Option
Committee consists of Messrs. Hall and Buxbaum.
Options under the Option Plan may be designated as "incentive stock options"
for federal income tax purposes or as options which are not qualified for such
treatment, or "non-qualified stock options." See "Federal Income Tax Matters"
below.
All options granted under the Option Plan are non-transferable and exercisable
in installments determined by the Stock Option Committee, except that each
option is to be exercisable in minimum annual installments of 20% commencing
with the first anniversary of the option's grant date. Each option granted has
a term specified in the option agreement, but all options expire no later than
ten years from the date of grant. Incentive stock options granted to a person
holding more than 10% of the total voting power of the Company's capital stock
must expire within five years from the date of grant.
In the case of incentive stock options, the exercise price must be at least
equal to 100% of the fair market value of the Common Stock on the date the
option is granted. The exercise price for incentive stock option grants to a
person holding more than 10% of the total voting power of the Company's capital
stock must equal 110% of the fair market value of the Common Stock. The
exercise price of a non-qualified option need not be equal to the fair market
value of the Common Stock at the date of grant, but may be granted with any
exercise price which is not less than 85% of fair market value at the time the
option is granted, as the Stock Option Committee may determine. Upon exercise
of any option, the purchase price must generally be paid in full either in cash
or by certified or cashier's check. However, in the discretion of the Stock
Option Committee, the terms of a stock option grant may permit payment of the
purchase price by means of (i) cancellation of indebtedness owed by the Company,
(ii) delivery of shares of Common Stock already owned by the optionee (valued at
fair market value as of the date of exercise), (iii) delivery of a promissory
note secured by the shares issued, (iv) delivery of a portion of the shares
issuable upon exercise (i.e., exercise for the "spread" on the option payable in
shares), or (v) any combination of the foregoing or any other means permitted by
the Stock Option Committee.
No participant in the Option Plan may be awarded, during any single calendar
year, stock options with respect to more than 500,000 shares of Common Stock.
The aggregate fair market value (determined at the time the options are granted)
of the shares covered by incentive stock options granted to any employee under
the Option Plan (or any other incentive stock option plan of the Company) which
may become exercisable for the first time in any one calendar year may not
exceed $100,000.
Federal Income Tax Matters
As stated above, participants in the Option Plan may be granted either
"incentive" stock options (qualified as such under the Code) or "non-incentive"
stock options (customarily referred to as "non-qualified" stock options).
Persons who receive non-qualified stock options under the Option Plan will
realize no tax consequence upon receipt. On the date of option exercise,
however, the optionee will generally have income (and the Company will have a
deduction) equal to the excess of (a) the fair market value of the stock
received upon such date less (b) the option exercise price. If the stock
acquired upon exercise of the option is non-transferable and subject to a
"substantial risk of forfeiture," however, the taxable event will generally be
delayed to the earliest of the date on which the stock becomes transferable or
-14-
<PAGE>
the date on which the risk of forfeiture ends, at which time the participant
will be taxed on the excess of the stock's fair market value on such date over
the cost of such stock, and the Company will be entitled to an equal deduction
at that time.
In the case of an incentive stock option, however, the employee will generally
not have taxable income (although the alternative minimum tax may apply, as
described below) upon exercise or lapse of any forfeiture restrictions or
transfer restrictions. The employee will be taxed only upon the sale of stock
received on the incentive option exercise. If the employee holds the stock for
more than one year after exercise and two years after option grant, the
employee's gain will generally be long-term capital gain, and the Company will
not be entitled to a deduction for compensation paid. Any earlier sale will
result at least in part in ordinary income to the employee and a deduction for
the Company equal to the amount of ordinary income recognized by the employee.
Depending upon a particular option holder's circumstances, there may be a
favorable differential tax rate applicable to long-term capital gains.
Upon exercise of incentive stock options, the alternative minimum tax may
apply to optionees because the excess of the fair market value of the shares
received over the exercise price of an incentive stock option constitutes an
item of tax preference. The alternative minimum tax may produce a higher tax
than the regular income tax applicable to an optionee.
The above summary of tax matters is general in scope and does not apply to
every specific transaction which may arise. Moreover, the rules of government
taxation of non-qualified and incentive stock options are complex, and the
statement of tax consequences set forth herein is necessarily general. Finally,
Congress is considering many additional proposals to change the tax laws, and
the interpretation of existing laws and any additional revisions ultimately
adopted could significantly alter the tax requirements and effects covered in
this discussion.
Deferred Compensation Plans
The Company maintains two deferred compensation plans for select groups of
management or highly compensated employees: the Herbalife Management Deferred
Compensation Plan, effective January 1, 1996 (the "Management Plan", applicable
to eligible employees below the rank of Senior Vice President) and the Herbalife
Senior Executive Compensation Plan, effective January 1, 1996 (the "Senior
Executive Plan", applicable to eligible employees at the rank of Senior Vice
President and higher) (collectively with the Management Plan, the "Deferred
Compensation Plans"). The Deferred Compensation Plans allow eligible employees,
who are selected by the administrative committee that manages and administers
the plans (the "Deferred Compensation Committee"), to elect annually to defer up
to fifty percent (50%) of their base annual salary and up to one hundred percent
(100%) of their annual bonus for each calendar year (the "Annual Deferral
Amount"). The Company makes matching contributions on behalf of each
participant in the Senior Executive Plan ("Company Matching Contributions") of
one hundred percent (100%) of the amount deferred by each such participant up to
ten percent (10%) of the participant's base annual salary. Each participant in
either Deferred Compensation Plan has at all times a fully vested and
nonforfeitable interest in each year's contribution, including interest credited
thereto, and in any Company Matching Contributions, if applicable. In
connection with a participant's election to defer an Annual Deferral Amount, the
participant may also elect to receive a short-term payout, equal to the Annual
Deferral Amount plus interest and payable five or more years from the first day
of the year in which the Annual Deferral Amount is actually deferred. Subject
to the short term payout provision and certain exceptions for unforeseeable
financial emergencies, a participant may not withdraw, without incurring a ten
percent (10%) withdrawal penalty, all or any portion of his or her account under
the Deferred Compensation Plans prior to the date that such participant either
(a) is determined by the Deferred Compensation Committee to have incurred
permanent and total disability or (b) terminates employment with the Company.
-15-
<PAGE>
401(k) Tax-Sheltered Savings Plan
The Company maintains a qualified "savings plan" pursuant to Section 401(k) of
the Code. This plan allows any employee who has completed one year of
employment with the Company to contribute each pay period from 2% to 17% of the
employee's earnings for investment in annuity contracts and mutual funds. The
maximum aggregate contribution of all participating employees for any calendar
year may not exceed 20% of the total earnings paid to such participants during
each such year. The Company makes contributions to the plan matching each
employee's contribution up to 3% of the employee's earnings. The plan also
imposes certain restrictions on the aggregate amount which may be contributed by
higher-paid employees in relation to the amount contributed by the remaining
employees. A participating employee is fully vested at all times in his or her
contribution and in the interest credited to such employee's account. However,
the employee may not withdraw all or any portion of his or her account prior to
the date that such employee either (a) incurs total and permanent disability or
(b) terminates employment with the Company. The employee is not fully vested in
the Company's matching contributions until he or she has completed seven years
of service with the Company.
Executive Medical Plan
The Executive Medical Plan is an insured hospital and medical reimbursement
plan covering executives and key employees and their dependents during the
executive's or employee's employment by the Company. The Plan provides coverage
of medical expenses incurred beyond the Company's basic plan. For the fiscal
year ended December 31, 1995, the Plan's cost to the Company was an aggregate of
approximately $19,000.
Executive Long-Term Disability Plan
The Executive Long-Term Disability Plan is an insured disability plan covering
executives and key employees. It provides for extended disability insurance for
such participants with premiums paid by the Company. For the fiscal year ended
December 31, 1995, the Plan's cost to the Company was an aggregate of
approximately $24,000.
Executive Life Insurance Plan
The Executive Life Insurance Plan covers executives and key employees and
provides for life insurance benefits in excess of those available under the
Company's basic plan. Premiums are paid by the Company. For the fiscal year
ended December 31, 1995, the Plan's cost to the Company was an aggregate of
approximately $27,000.
(6) EMPLOYMENT CONTRACTS AND CHANGE IN CONTROL ARRANGEMENTS
Effective as of December 1, 1992, the Company entered into a five-year
Employment Agreement (as amended, the "Addis Agreement") with David R. Addis,
engaging him as the Chief Counsel of the Company. For his services, Mr. Addis
is entitled to receive an annual salary of $500,000, subject to upward
adjustment by the Chief Executive Officer of the Company. In addition, Mr.
Addis is entitled to participate in incentive compensation plans on the same
basis as other comparable level executives. At the time his employment
commenced, Mr. Addis received a 200,000 share restricted stock grant. Such
shares vest in cumulative annual installments of 20% commencing on January 1,
1994 (except with respect to the January 1, 1995 tranche, the vesting of which
was deferred to April 1, 1995).
The Addis Agreement provides that Mr. Addis is entitled to certain other
benefits paid for by the Company, including, among other things, an automobile
allowance and participation in various benefit plans.
-16-
<PAGE>
Under the Addis Agreement, if the Company terminates Mr. Addis's employment at
any time during the term of the Addis Agreement without cause (as defined in
such agreement), it must pay him (in addition to other accrued amounts and
benefits), an amount equal to one year of base compensation. In addition, if
such a termination were to occur following Mark Hughes' ceasing to serve as the
Chief Executive Officer of the Company or certain other defined change-of-
control events, then Mr. Addis's restricted stock grant would fully vest.
Effective as of April 3, 1994, the Company entered into a five-year Employment
Agreement (the "Pair Agreement") with Christopher Pair, engaging him as
Executive Vice President of International and Corporate Administration of the
Company. For his services, Mr. Pair is entitled to receive an annual salary of
$650,000 subject to upward adjustment as the Board or the Compensation Committee
of the Board deems appropriate. In addition, Mr. Pair is entitled to
participate in incentive compensation plans on the same basis as other
comparable level executives.
The Pair Agreement provides that Mr. Pair is entitled to certain other
benefits paid for by the Company, including, among other things, an automobile
allowance, reimbursement of the cost of a health club membership, and
participation in various benefit plans.
Under the terms of the Pair Agreement, if the Company terminates Mr. Pair's
employment at any time during the term of the Pair Agreement without cause (as
defined in such agreement), it must pay him (in addition to other accrued
amounts and benefits) an amount equal to one year of base compensation, plus an
amount equal to the actual bonuses paid to Mr. Pair under the executive
incentive compensation plan in respect of the one fiscal or plan year completed
immediately prior to the date of termination.
Effective as of August 23, 1993, the Company entered into a Restricted Stock
Agreement with Michael Rosen, pursuant to which Mr. Rosen received a 100,000
share restricted stock grant. Such shares vest in cumulative annual
installments of 20%, commencing on August 23, 1994. Under such Restricted Stock
Agreement, if the Company were to terminate Mr. Rosen without cause, or if Mr.
Rosen were to die or retire, in any such event if the event were to occur
following Mark Hughes' ceasing to serve as the Chief Executive Officer of the
Company or certain other defined change-of-control events, then Mr. Rosen's
restricted stock grant would fully vest.
In addition, effective as of August 9, 1994, the Company entered into a
Deferred Compensation Agreement with Mr. Rosen, pursuant to which Mr. Rosen has
received and will continue to receive Six Hundred Thousand Dollars ($600,000) in
cash deferred compensation from the Company on each of the first five
anniversary dates of such Deferred Compensation Agreement on which Mr. Rosen
remained continuously employed by the Company. If the Company were to terminate
Mr. Rosen without cause (as such term is defined in the Deferred Compensation
Agreement), Mr. Rosen will be deemed to have earned, as of the termination date,
deferred compensation for the year in which termination occurs in an amount
equal to Six Hundred Thousand Dollars ($600,000) prorated on a daily basis for
the number of days in the calendar year through and including the date of
termination. Mr. Rosen is eligible to receive such deferred compensation on or
before the tenth day following the day the deferred compensation is earned,
subject to the right of the Company to delay payment in certain circumstances
specified in the Deferred Compensation Agreement.
(7) COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
During 1995, the Company's Compensation Committee consisted of Paul Buxbaum
and Edward Hall. No additional information concerning the Compensation
Committee or the Company's executive officers is required by Item 402 of
Regulation S-K.
-17-
<PAGE>
(8) COMPENSATION COMMITTEE REPORT
The Company's executive compensation programs are administered by the
Compensation Committee of the Board of Directors and, to the extent summarized
below, the Company's Chief Executive Officer. During 1995, the Compensation
Committee was comprised of two non-employee directors, Messrs. Buxbaum and Hall.
The compensation policy of the Company is designed to motivate the overall
success of the Company by:
. Attracting, retaining, and rewarding highly qualified and productive
individuals;
. Delivering a significant portion of compensation through performance-based
incentives;
. Directly relating incentive compensation to overall Company and individual
performance; and
. Encouraging executive stock ownership to align the interests of management
with those of shareholders.
Base Salary and Annual Incentive Compensation
The base salary of the Chief Executive Officer is established through
negotiations between the Compensation Committee and Mr. Hughes. For 1995, in
order to preserve the tax deductibility of his compensation by the Company, Mr.
Hughes agreed to maintain his base salary at $1,000,000. See "Summary
Compensation Table." Base salaries for each of the other Named Officers were
established through negotiations between Mr. Hughes and each Named Officer. In
particular, the 1995 base salary paid to Mr. Addis was that specified in the
Addis Agreement, described above. See "Employment Contracts and Change in
Control Arrangements."
In setting Mr. Hughes' annual salary and target incentive compensation for
1995, the Compensation Committee considered numerous factors, including Mr.
Hughes' cash compensation relative to that of the Company's leading distributors
and Mr. Hughes' unique role as the preeminent personality in the selling of the
Company's products, the motivation of the sales organization and the formulation
of sales promotional programs. The Compensation Committee provided an
opportunity for Mr. Hughes to earn incentive compensation for 1995 based
strictly upon a formula performance measure adopted in accordance with the 1994
Plan.
During 1995, the Compensation Committee utilized an earnings per share formula
to establish target awards under both the 1994 Plan and the 1992 Plan, subject
to maximum award amounts in the case of each participant and discretionary
authority to reduce awards in the case of certain of the Named Officers. See
"Description of Certain Plans" above. Because the Company failed to meet the
earnings per share threshold necessary for the Named Officers to receive
incentive awards for 1995, the Named Officers were not awarded bonuses for 1995.
In order to increase the flexibility and effectiveness of the 1994 Plan, the
Board of Directors, based upon the recommendation of the Compensation Committee,
is seeking shareholder approval of the Company's 1994 Performance-Based Annual
Incentive Compensation Plan, as amended and restated, among other things, to
allow the Company the option of paying awards made pursuant to the 1994 Plan in
Common Stock. The amendments to the 1994 Plan are further described in Proposal
2 and the 1994 Performance-Based Annual Incentive Compensation Plan, as amended
and restated, is attached to this proxy statement as Appendix A. Similarly, the
Board of Directors, based upon the recommendation of the Compensation Committee,
is seeking shareholder approval of the Company's 1992 Executive
-18-
<PAGE>
Incentive Compensation Plan, as amended and restated, among other things, to
allow the Company the option of paying bonuses awarded pursuant to the 1992
Incentive Plan in Company Stock. The amendments to the 1992 Incentive Plan are
further described in Proposal 3 and the 1992 Executive Incentive Compensation
Plan, as amended and restated, is attached to this proxy statement as Appendix
B. By providing the flexibility to make Common Stock awards, the amendments to
both plans should permit the making of awards that further align the interests
of managements with those of the Company's public shareholders.
Long-Term Incentive Plans
Executives of the Company are encouraged to own shares of the Company's Common
Stock, thereby aligning the interests of management with those of shareholders
and tying a significant portion of executive compensation to long-term market
performance. The Option Plan currently permits the granting to key employees,
directors, and consultants of stock options to purchase up to 3,500,000 shares
of the Company's Common Stock. See "Description of Certain Plans -- Stock
Option Plan." Vesting restrictions on stock options are set by the Stock Option
Committee, which during 1995 consisted of Messrs. Buxbaum and Hall. All options
granted to executive officers during the last three years have had an exercise
price equal to 100% of fair market value at the time of grant. Mr. Hughes has
not received stock option awards in the past.
Effective November 1, 1995, the Stock Option Committee of the Board
(consisting of the same individuals as the Compensation Committee) repriced all
outstanding Option Plan stock options with an exercise price greater than the
market value of the Common Stock as of that date. The reset exercise price for
the affected options is $7.375 per share, the closing price of the Common Stock
as of that date. The reason for the action was the significant decline in the
market price of the Common Stock during 1995. The Committee determined that, as
a result of such decline, the incentivization purpose of the affected
outstanding stock options was impaired, given the degree to which the options
were rendered "out of the money." For the effects of the repricing on options
held by the Named Officers, see the "Ten-Year Options/SAR Repricings" table
above.
In order to preserve the effectiveness of the Option Plan as an incentive for
executive performance, the Board of Directors, based upon the recommendation of
the Compensation Committee, is seeking shareholder approval of the Company's
1991 Stock Option Plan, as amended and restated, among other things, to increase
the aggregate number of shares which may be issued upon exercise of all options
under the Option Plan (excluding shares previously issued upon option exercise
but including shares subject to existing outstanding options) to 5,400,000 and
to remove certain eligibility restrictions for participation in the Option Plan.
The amendments to the Option Plan are further described in Proposal 4 and the
1991 Stock Option Plan, as amended and restated, is attached to this proxy
statement as Appendix C.
Tax Issues
For 1996 and later years, the Compensation Committee intends to continue to
seek to structure executive compensation arrangements to preserve the
deductibility of Named Officer compensation under applicable federal and state
income tax laws, including the Omnibus Budget Reconciliation Act of 1993, while
also taking into account the need to provide appropriate incentives to the
Company's key executives. However, no assurance can be given that the Company
will preserve the deductibility of all executive compensation.
April 15, 1996 COMPENSATION COMMITTEE
Paul Buxbaum
Edward Hall
-19-
<PAGE>
(9) PERFORMANCE GRAPH
Set forth below is a comparison of the yearly percentage change in total
shareholder return of the Company's Common Stock and the returns for the NASDAQ
Composite Index and a designated Peer Group. The total shareholder return
calculation is for the five-year period commencing on December 31, 1990 and
includes the reinvestment of dividends.
The Peer Group for the total shareholder return chart is comprised of
publicly-traded companies possessing the following characteristics similar to
those of the Company:
. Size, as measured by net sales;
. Similarity in selling methodology;
. Comparable products including companies engaged in the distribution of
weight control products, health and nutritional supplements, and skin,
hair, or other personal care products;
. Relatively high insider ownership; and/or
. Particular emphasis on the talents and visibility of the chief executive
officer.
Companies included in the Peer Group are: Beauticontrol Cosmetics, Inc.;
Nature's Sunshine Products, Inc.; Avon Products; Premark International, Inc.;
Amway Japan; and Amway Asia Pacific. Amway Japan is included with respect to
American Depositary Receipts commencing September 1993 (when such securities
began trading in the United States). No data is included for Amway Asia Pacific
through December 31, 1993 since that company began publicly trading in December
1993, but such data is included commencing January 1, 1994.
-20-
<PAGE>
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN/(1)/
AMONG HERBALIFE INTERNATIONAL, INC., NASDAQ COMPOSITE INDEX
AND PEER GROUP/(2)/
PERFORMANCE GRAPH APPEARS HERE
<TABLE>
<CAPTION>
Measurement Period HERBALIFE NASDAQ
(Fiscal Year Covered) INTERNATIONAL, INC. PEER GROUP COMPOSITE INDEX
- -------------------- ------------------- ---------- ----------------
<S> <C> <C> <C>
Measurement Pt- 1990 $100 $100 $100
FYE 1991 $509 $189 $157
FYE 1992 $1,836 $225 $181
FYE 1993 $2,678 $152 $208
FYE 1994 $2,643 $200 $201
FYE 1995 $1,449 $298 $281
</TABLE>
(1) ASSUMES $100 INVESTED ON DECEMBER 31, 1990 IN THE STOCK OF HERBALIFE AND IN
EACH OF THE OTHER INDICES AND THAT DIVIDENDS ARE REINVESTED.
(2) WEIGHTED BY MARKET CAPITALIZATION.
-21-
<PAGE>
CERTAIN TRANSACTIONS
The Company purchases its powder products from Raven Industries, Inc., a
California corporation ("Raven"), one-third of whose stock is owned by Mark
Hughes. In addition, one of the Company's tablet products, Activated Fiber(TM),
is manufactured by D & F Industries, Inc., a California corporation ("D & F"),
pursuant to a licensing agreement from Dynamic Products, Inc., a California
corporation ("Dynamic"), twenty percent and five percent of whose stock is owned
by Mark Hughes and Dr. David B. Katzin, respectively. Two individuals (not
affiliates of the Company) are principal stockholders of each of D & F, Raven
and Dynamic.
In May 1993, the Company entered into requirements contracts with each of
Raven and Dynamic that extend to January 1998. Pursuant to these requirements
contracts, the Company has agreed to purchase all of its requirements of powder
products from Raven and all of its requirements of tablet, capsule, liquid,
cream and lotion products from Dynamic or D & F to the extent each such
manufacturer is capable or becomes capable of manufacturing such products.
However, the Company has obtained waivers to permit the purchase of Dermajetics
products from other manufacturers. The requirements contracts also provide
Raven and Dynamic (as well as D & F) a right of first refusal to establish any
manufacturing facility outside of North America that the Company proposes to
develop or acquire, and the right to receive certain royalty payments in the
event that such a manufacturing facility were constructed or acquired and the
right of first refusal was not exercised.
During 1995, the Company's purchases from Raven and Dynamic amounted to
approximately $26.2 million and $3.1 million, respectively. Mr. Hughes'
ownership interest in Raven and Dynamic and Dr. Katzin's ownership interest in
Dynamic entitle them to a proportionate interest in the profits of those
companies, if any. In 1995, Mr. Hughes' share of the earnings of Raven and
Dynamic totalled approximately $2.6 million and $0.3 million, respectively, and
Dr. Katzin's share of the earnings of Dynamic totalled approximately
$66,000. Management believes that the price paid under these requirements
contracts is appropriate taking into account the product research, development
and formulation services provided by the companies.
During 1995, the Company engaged Nutrient Research Consultants, Ltd., a
California corporation ("Consultant"), which is wholly owned by Dr. Katzin, to
perform consulting services. Such services consisted of assistance in
distributor and supervisor education, identification of new product concepts,
product reformulation and governmental and public relations. Consultant was
engaged on a month-to-month basis pursuant to an oral agreement which had been
in effect since the expiration of a written six-month contract entered into
between Consultant and the Company in 1985. Since January 1995, the Company has
paid Consultant a fee of $80,000 per month. In 1994, the Company paid
Consultant a retainer fee of $70,000 per month. Before January 1994, the
retainer fee was $42,000 per month. Management believes that the terms of its
agreement with Consultant fairly reflected the value of the services provided by
Consultant. During the year ended December 31, 1995, Consultant received
approximately $1,003,000 from the Company.
In accordance with the 1994 Plan, the Company has made advances to plan
participants of targeted performance bonus amounts. During 1995, advances were
made to Mr. Addis. In addition, such advances were made during 1994 to each of
Messrs. Hughes, Katzin, Addis and Rosen. As of December 31, 1995, the remaining
outstanding principal and accrued interest obligations of such individuals were
$159,000 in the case of Mr. Hughes; $158,000 in the case of Dr. Katzin; $598,000
in the case of Mr. Addis; and $63,000 in the case of Mr. Rosen. Each advance is
a full recourse obligation of the executive with a maturity date of two years
following the date of the advance. In addition, the advances bear interest at
the applicable federal rate (AFR) for two-year notes at the time of the
advances. The rates for existing outstanding advances range from 5.75% to
7.93%.
-22-
<PAGE>
PROPOSAL 2
APPROVAL OF AMENDED AND RESTATED
1994 PERFORMANCE-BASED ANNUAL INCENTIVE COMPENSATION PLAN
BACKGROUND
The 1994 Plan currently provides that awards be made in cash. The Board of
Directors of the Company, on March 8, 1996, subject to shareholder approval at
the Meeting, approved the amendment and restatement of the 1994 Plan described
below.
DESCRIPTION OF 1994 PLAN AMENDMENTS
The terms of the 1994 Plan and the proposed amendments thereto are described
above under "Executive Compensation -- Description of Certain Plans -- 1994
Performance-Based Annual Incentive Compensation Plan." That description and the
description of the following proposed amendments to the 1994 Plan are subject to
the full text of the 1994 Plan, as amended, which is attached to this Proxy
Statement as Appendix A. Proposed amendments to the 1994 Plan are indicated in
the attached Appendix A by cross-outs and underlines. Shareholders are urged to
review carefully all of the proposed amendments.
As indicated above, the 1994 Plan currently provides that awards be made in
cash. The principal proposed amendment to the 1994 Plan would, among other
things, provide that awards pursuant to the 1994 Plan may be made, at the
discretion of the Compensation Committee, in cash, through the issuance of
shares of Common Stock, or through a combination of both methods. The proposed
amendments further provide that the total number of shares of Common Stock that
may be issued under the 1994 Plan in any fiscal year of the Company, and the
number of shares of Common Stock that may be issued under the 1994 Plan in any
fiscal year of the Company to any single participant, may not exceed 5% of the
number of issued and outstanding shares of Common Stock at the beginning of the
prior fiscal year.
The Board believes that the principal amendment proposed, the addition of the
flexibility to make 1994 Plan awards in Common Stock, is advantageous since it
will permit the making of awards while preserving cash for working capital
purposes. Further, to the extent that participants retain awards made in Common
Stock rather than reselling the shares in the public market, the Board believes
that such participants' interests will be further aligned with those of the
Company's public shareholders, which is in the best interests of the Company and
such shareholders.
VOTE REQUIRED
Approval of the Board of Directors' action in adopting the 1994 Plan, as
amended and restated, requires the affirmative vote of the holders of at least a
majority of the shares of outstanding Company Common Stock represented and
voting at the Meeting and cast on this Proposal 2. Broker abstentions and non-
votes will have the effect of a vote against the Proposal.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR APPROVAL OF THE
PROPOSED ADOPTION OF THE 1994 PLAN, AS AMENDED AND RESTATED, AND, UNLESS
DIRECTED OTHERWISE, IT IS THE INTENTION OF THE PROXIES NAMED IN THE FORM OF
PROXY THAT ACCOMPANIES THIS PROXY STATEMENT TO VOTE FOR THE APPROVAL OF SUCH
ADOPTION.
-23-
<PAGE>
PROPOSAL 3
APPROVAL OF 1992 AMENDED AND RESTATED
EXECUTIVE INCENTIVE COMPENSATION PLAN
BACKGROUND
As in the case of the 1994 Plan, the 1992 Plan currently provides that bonus
awards be made in cash. The Board of Directors of the Company, on March 8,
1996, subject to shareholder approval at the Meeting, approved certain
amendments to the 1992 Plan described below.
DESCRIPTION OF 1992 PLAN AMENDMENTS
The terms of the 1992 Plan and the proposed amendments thereto are described
above under "Executive Compensation -- Description of Certain Plans -- Executive
Incentive Compensation Plan." That description and the description of the
following proposed amendments to the 1992 Plan are subject to the full text of
the 1992 Plan, as amended, which is attached to this Proxy Statement as Appendix
B. Proposed amendments to the 1992 Plan are indicated in the attached Appendix
B by cross-outs and underlines. Shareholders are urged to carefully review all
of the proposed amendments.
As indicated above, the 1992 Plan currently provides that awards be made in
cash. As in the case of the 1994 Plan, the proposed amendments to the 1992 Plan
would, among other things, provide that awards made pursuant to the 1992 Plan
may be made, at the discretion of the Compensation Committee, in cash, through
the issuance of shares of Common Stock, or through a combination of both
methods. The proposed amendments further provide that the total number of
shares of Common Stock that may be issued under the 1992 Plan in any fiscal year
of the Company, and the number of shares of Common Stock that may be issued
under the 1992 Plan in any fiscal year of the Company to any single participant,
shall not exceed the excess of (a) Five Percent (5%) of the number of issued and
outstanding shares of Common Stock at the beginning of the prior fiscal year
over (b) the number of shares of Common Stock issued during the prior fiscal
year under the 1994 Plan.
The Board believes that the addition of the flexibility to make awards in
Common Stock is advantageous and in the best interests of the Company and its
shareholders. See the discussion above under "Proposal 2 -- Approval of Amended
and Restated 1994 Performance-Based Annual Incentive Compensation Plan."
VOTE REQUIRED
Approval of the Board of Directors' action in adopting the 1992 Plan, as
amended and restated, requires the affirmative vote of the holders of at least a
majority of the shares of outstanding Common Stock represented and voting at the
Meeting and cast on this Proposal 3. Broker abstentions and non-votes will have
the effect of a vote against the Proposal.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR APPROVAL OF THE
PROPOSED ADOPTION OF THE 1992 PLAN, AS AMENDED AND RESTATED, AND, UNLESS
DIRECTED OTHERWISE, IT IS THE INTENTION OF THE PROXIES NAMED IN THE FORM OF
PROXY THAT ACCOMPANIES THIS PROXY STATEMENT TO VOTE FOR THE APPROVAL OF SUCH
ADOPTION.
-24-
<PAGE>
PROPOSAL 4
APPROVAL OF AMENDED AND RESTATED 1991 STOCK OPTION PLAN
BACKGROUND
The Option Plan currently provides that the aggregate number of shares of
Common Stock that may be issued upon the exercise of all options under the Plan
shall not exceed Three Million Five Hundred Thousand (3,500,000). As of March
8, 1996, 494,400 shares had been issued pursuant to the Option Plan and an
additional 2,875,822 shares were subject to outstanding options. In addition,
the Option Plan currently provides that no stock options may be granted to any
employee, consultant or director who, at the time the option is granted, owns
shares possessing more than ten percent (10%) of the total combined voting power
of all classes of stock of the Company and of its subsidiary corporations (a
"Ten Percent Holder"). The Board of Directors of the Company, on March 8, 1996,
subject to shareholder approval at the Meeting, approved certain amendments to
the Option Plan described below.
DESCRIPTION OF OPTION PLAN AMENDMENTS
The terms of the Option Plan and the proposed amendments thereto are described
above under "Executive Compensation -- Description of Certain Plans -- Stock
Option Plan." That description and the description of the following proposed
amendments to the Option Plan are subject to the full text of the Option Plan,
as amended and restated, which is attached to this Proxy Statement as Appendix
C. Proposed amendments to the Option Plan are indicated in the attached
Appendix C by cross-outs and underlines. Shareholders are urged to review
carefully all of the proposed amendments.
The proposed amendments to the Option Plan would, among other things, provide
that the aggregate number of shares of Common Stock that may be issued under the
Option Plan, excluding shares issued upon the exercise of options prior to the
adoption of the amended and restated Option Plan by the Board of Directors on
March 8, 1996 but including shares issuable upon exercise of options outstanding
on that date, shall not exceed Five Million Four Hundred Thousand (5,400,000).
This would permit the issuance of options with respect to approximately 2.5
million additional shares of Common Stock. The effect of the proposed
amendment is to preserve the benefits to the Company of the Option Plan by
ensuring that employees, consultants and directors who are eligible to receive
options to purchase shares of Common Stock pursuant to the Option Plan may
continue to receive such options. Without such amendment, the Company would, in
the near future, reach the limit of authorized shares which may be validly
issued upon exercise of all options under the Option Plan.
In addition, the proposed amendments to the Option Plan would remove the
current prohibition against participation in the Option Plan by Ten Percent
Holders. The principal purpose of the amendment is to permit Mark Hughes, the
Company's Chairman, President and Chief Executive Officer, to be eligible to
receive stock option grants under the Option Plan. As discussed above under
"Compensation of Directors and Executive Officers," in connection with the
Company's public stock offering in 1993 and the adoption of Section 162(m) of
the Code, Mr. Hughes' cash compensation from the Company has been significantly
reduced relative to the amount of such compensation in prior years. The Board
believes that it is important that means be available to continue to compensate
Mr. Hughes appropriately, given his unique role as the preeminent personality in
the selling of the Company's products, the motivation of the sales organization
and the formulation of promotional programs for the Company. Given the factors
that may continue to limit the amount of cash compensation that may be paid to
Mr. Hughes, the Board believes that having stock options available to award to
Mr. Hughes may assist in continuing to formulate an appropriate overall
compensation package, and therefore is in the best interests of the Company and
its shareholders. Neither the Board nor the Stock Option Committee
administering the Option Plan has any current intention to make an option
-25-
<PAGE>
grant to Mr. Hughes, although the Stock Option Committee may consider such
grants during 1996 and thereafter.
OPTION GRANT INFORMATION
The following table sets forth the number of stock options received through
March 8, 1996 under the Option Plan by the Named Officers and all current
executive officers and consultants as a group. No directors who are not also
employees or consultants have received any grant under the Option Plan.
<TABLE>
<CAPTION>
TOTAL OPTIONS
GRANTED
NAME UNDER PLAN (#)
---- --------------
<S> <C>
MARK HUGHES...................................... 0
DR. DAVID B. KATZIN.............................. 576,000
DAVID R. ADDIS................................... 35,000
CHRISTOPHER PAIR................................. 382,500
MICHAEL ROSEN.................................... 200,000
ALL CURRENT EXECUTIVE OFFICERS AND CONSULTANTS
AS A GROUP....................................... 1,193,500
</TABLE>
VOTE REQUIRED
Approval of the Board of Directors' action in adopting the Option Plan, as
amended and restated, requires the affirmative vote of the holders of at least a
majority of the shares of outstanding Common Stock represented and voting at the
Meeting and cast on this Proposal 4. Broker abstentions and non-votes will have
the effect of a vote against the Proposal.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR APPROVAL OF THE
PROPOSED ADOPTION OF THE OPTION PLAN, AS AMENDED AND RESTATED, AND, UNLESS
DIRECTED OTHERWISE, IT IS THE INTENTION OF THE PROXIES NAMED IN THE FORM OF
PROXY THAT ACCOMPANIES THIS PROXY STATEMENT TO VOTE FOR THE APPROVAL OF SUCH
ADOPTION.
INDEPENDENT CERTIFIED PUBLIC AUDITORS
The firm of Deloitte & Touche LLP ("D&T") has audited the financial statements
of the Company for the year ended December 31, 1995, and has been selected by
the Board of Directors to perform such service for the 1996 fiscal year. A
representative of D&T is expected to be present at the Meeting, with the
opportunity to make a statement if the representative desires to do so. That
representative is also expected to be available to respond to appropriate
questions.
SHAREHOLDER PROPOSALS FOR THE NEXT ANNUAL MEETING
Proposals intended to be submitted to the Company for presentation at its next
Annual Meeting to be held in 1997 must be received by the Company at its
principal executive office shown on the first page of this Proxy Statement no
later than December 26, 1996, in order to be included in the proxy material for
the 1997 meeting.
-26-
<PAGE>
1995 ANNUAL REPORT
On April 1, 1996, the Company filed with the Securities and Exchange
Commission its Annual Report on Form 10-K for the fiscal year ended December 31,
1995. Copies of the 1994 Form 10-K may be obtained without charge by writing to
Herbalife International, Inc., 1800 Century Park East, Century City, California
90067, Attention: Investor Relations.
BY ORDER OF THE BOARD OF
DIRECTORS
CHRISTOPHER PAIR
Secretary
-27-
<PAGE>
APPENDIX A
HERBALIFE INTERNATIONAL, INC.
-----------------------------
AMENDED AND RESTATED 1994 PERFORMANCE-BASED
--------------------
ANNUAL INCENTIVE COMPENSATION PLAN
1. NAME AND EFFECTIVE DATE. The plan hereby created will be known as the
Herbalife International, Inc. Amended and Restated 1994 Performance-Based Annual
--------------------
Incentive Compensation Plan (the "Plan"). [1] The Plan was originally adopted
-------------------------------
effective January 1, 1994 and was approved at the 1994 annual meeting of
- ------------------------------------------
shareholders. [2] Subject to shareholder approval at the 1996 annual meeting of
-------------------------------------------------------------
shareholders, the Plan will be amended and restated as set forth herein
- -----------------------------------------------------------------------
effective as of January 1, 1996 [3], and will first apply with respect to
----
the calendar year ending December 31, 1996 [4].
----
2. PURPOSE. The purpose of the Plan is to provide additional compensation
as an incentive to key executives and consultants to attain certain specified
performance objectives of Herbalife International, Inc. and its subsidiary and
affiliated corporations (collectively, the "Company") and to ensure the
continued availability of their full-time or part-time services to the Company.
3. ADMINISTRATIVE COMMITTEE. The Plan will be administered by the
Compensation Committee of the Company's Board of Directors, [5] consisting
----------
entirely of two or more persons who are both: (i) "outside directors" within the
- -------------------------------------------------
meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended
(including proposed, temporary and final regulations promulgated thereunder from
time to time, the "Code") [6], and (ii) "disinterested persons" within the
-------------------------------------------
meaning of Rule 16b-3(c)(2)(i) of the General Rules and Regulations under the
- -----------------------------------------------------------------------------
Securities Exchange Act of 1934 ("Exchange Act"), or, whether or not that
- --------------------------------------------------------------------
committee fails to consist entirely of persons who are both "outside directors"
--------------------
[7] and "disinterested persons," by another committee of at least two members of
----------------------------
the Board [8] that is designated by the Board to administer the Plan (in either
event, the "Committee"). The Committee is hereby vested with full powers of
administration, subject only to the provisions set forth herein.
4. ELIGIBLE EXECUTIVES. For each Plan award period, the participants
entitled to share in the benefits of the Plan are the executive officers of and
---
consultants to the Company whose compensation might be required to be included
- --------------
in the Company's proxy materials in connection with its annual meeting of
shareholders to be held in the year following the conclusion of the award
period, as [9] well as other executive officers and consultants designated by
-----------------------------------------------------------
the Committee (hereinafter, collectively, "executives" or "participants"). An
executive whose employment or service relationship with the Company is
terminated for any reason prior to the end of any award period will not be
entitled to participate in the Plan or receive any benefits with respect to any
later award period. With respect to the award period in which termination
occurs, the Committee will provide for prorated awards based upon satisfaction
of performance goals for the entire award period, with the proration formula to
be set by the Committee in its discretion in advance of the commencement of the
award period.
5. AVAILABLE BONUS FUNDS.
5.1 Award or Pool Amounts and Allocations. The amount of an available
---
award to a participant or the aggregate amount of available awards to all
participants for each award period shall be determined based upon an objective
computation (the "Formula") of the actual performance of the Company relative to
preestablished performance goals (as described in Section 5.2 below). The
Committee shall determine the level of performance goals and all computations
included within each Formula. The Formula may be different for different
participants during a single award period. The performance goal or goals
included in each Formula for each award period shall be determined by the
Committee from among the following performance measures: level of retail sales
(in the aggregate or for a particular
A-1
<PAGE>
category or categories of retail sales); net cash flow; net income; operating
income; earnings per share; return on sales; reduction in expenditure levels for
a particular category or categories of expenses versus a prior period; return on
total capital; increase in the price of the Company's stock over a specified
-------------------------------------------------------------
period; and return on equity. If the Committee sets an aggregate amount of
- ------
available awards to all participants for a particular award period (a "Bonus
Pool"), to determine the amount of the [10] award for each participant under the
---------
Plan for that award period, the Committee shall designate a percentage of the
Bonus Pool [11] awarded to each such participant for such award period. If the
-------
Committee establishes a Bonus Pool, the determination of the amount of the Bonus
Pool and each participant's participation therein shall be based strictly upon
the Formula and such percentage participations, except that the Committee may,
in its discretion, (a) designate in advance a maximum dollar award for any award
period with respect to any participant, and/or (b) designate in advance that
certain prior incentive [12] awards (under this Plan or otherwise) made to a
------
participant will be deducted from award amounts otherwise earned under the Plan.
If the Committee does not establish a Bonus Pool, the determination of each
participant's award shall be based strictly upon the Formula applicable to each
such participant for the corresponding award period, subject to the same caveats
(a) and (b) indicated in the preceding sentence. The Committee shall not have
the discretion to increase, but shall have the discretion to decrease, any award
------------------------------------------
[13] determined in accordance with the Plan. The reduction in any participant's
award with respect to any award period as a result of the Committee's exercise
of such discretion shall not increase the amount of an award to any other
participant (through reallocation of unutilized [14] awards from a Bonus Pool or
------
otherwise) with respect to such award period. Notwithstanding anything in the
Plan to the contrary, no participant shall be entitled to earn in excess of
$10,000,000 (in the case of awards of Common Stock, determined in accordance
----------------------------------------------------------------
with the fair market value thereof as determined pursuant to Section 6.5) under
- -------------------------------------------------------------------------
the Plan with respect to any single calendar year.
5.2 Timing of Committee Determinations. The Committee shall (a) set the
---
Formula (including the identification of performance measures and goals) for
determining the size of the Bonus Pool and the allocated percentages of the
participants in the Bonus Pool, and (b) set the Formula (including the
identification of performance measures and goals) for non-Bonus Pool awards, as
applicable, for each award period in advance of the commencement of such award
period; provided, however, that with respect to [15] any award period consisting
---------------------------
of at least a full calendar year, such determinations may be made on or before
- --------------------------------
March 31 [16] of such year provided that the award period corresponding to those
------------
determinations shall conclude no earlier than nine months following the date on
which the Committee's determinations are made.
5.3 Determination of Performance Measures. The Committee may adjust the
---
Formula (including the identification of performance measures and goals)
relative to the elements thereof utilized for prior award periods, within the
limits specified herein, with respect to each award period of the Plan. The
Committee shall make such adjustments, if at all, with respect to each award
period prior to the commencement of such award period.
6. AWARD PERIODS; PAYMENT OF AWARDS.
6.1 Award Periods. Award periods may be quarters, calendar years or
---
such other periods as the Committee may designate. In particular, the Committee
may, but shall not be required to, utilize 12-month award periods ending on the
last day of each fiscal quarter of the Company.
6.2 Payments in Cash and Common Stock; Advances. Awards under the Plan
--- ------------------------
will be [17] made reasonably promptly following the conclusion of each award
----
period. [18] Awards will be made, at the discretion of the Committee (i) in cash
-------------------------------------------------------------------
by Company check, (ii) subject to Section 6.4, through the issuance of shares of
- --------------------------------------------------------------------------------
the Company's authorized but unissued Common Stock, $0.01 par value ("Common
- ----------------------------------------------------------------------------
Stock"), or (iii) through any combination of (i) and (ii). All awards under the
- ---------------------------------------------------------------------
Plan will be subject to withholding for applicable employment and income taxes
[19]. Such withholding obligations shall be satisfied either in cash, or in any
-------------------------------------------------------------------------
other method approved by the Committee, in its discretion. No awards under the
- --------------------------------------------------------------------
Plan will be made
A-2
<PAGE>
to any participant following the termination of such participant's employment or
service relationship with the Company (other than any amount earned for a
concluded award period that remains unpaid, and provided that the Committee will
provide for prorated awards based upon satisfaction of performance goals for the
entire award period in which termination occurs, with the proration formula to
be set by the Committee in its discretion in advance of the commencement of the
award period). For all purposes of the Plan, awards shall be deemed fully
earned (notwithstanding that the amounts thereof have not been computed) as of
the last day of each award period. The Committee may, in its discretion and
subject to the consent of each affected participant, approve the advance of all
or a portion of the cash portion of a target award to such participant prior to
-------------------
the conclusion of an award period. Each such advance, if made, shall be a full
recourse obligation of the participant and shall bear interest from the date of
the advance until repaid or deemed earned, payable at the amount of the
applicable Federal rate (as referenced in Section 1274 of the Code) for loans of
comparable term in effect on the date such advance is made.
6.3 Committee Certifications. As a condition precedent to the payment
---
of any award, the Committee shall certify that the objective performance goal
for the award has been satisfied and that the amount of the award is no greater
than that dictated by the Formula and the participant's allocated percentage of
the Bonus Pool, if applicable, for the applicable award period. The Committee
shall make such determination by means of a written resolution of the Committee
that is maintained in the minute book of the Company.
6.4 Provisions Applicable to Grants of Common Stock. Common Stock
--- --------------------------------------------------------------
issued in respect of an award under the Plan shall be issued subject to such
- ----------------------------------------------------------------------------
conditions or restrictions (including restrictions on transfer), if any, as the
- -------------------------------------------------------------------------------
Committee shall deem appropriate in its discretion. Common Stock issued in
- ---------------------------------------------------------------------------
respect of an award under the Plan shall, except to the extent that the
- -----------------------------------------------------------------------
Committee makes a contrary determination, be subject to restrictions prohibiting
- --------------------------------------------------------------------------------
any disposition within six months following the date of grant. No person
- -------------------------------------------------------------------------
entitled to receive an award of Common Stock under the Plan shall have any of
- -----------------------------------------------------------------------------
the rights or privileges of a stockholder of the Company in respect of any
- --------------------------------------------------------------------------
Common Stock until certificates representing such shares shall have been issued
- -------------------------------------------------------------------------------
and delivered. Notwithstanding anything to the contrary herein, no shares shall
- --------------------------------------------------------------------------------
be issued and delivered hereunder unless and until, in the opinion of counsel
- -----------------------------------------------------------------------------
for the Company, there shall have been full compliance with any applicable
- --------------------------------------------------------------------------
registration requirements of the Securities Act of 1933, any applicable listing
- -------------------------------------------------------------------------------
requirements of any national securities exchange on which the Common Stock is
- -----------------------------------------------------------------------------
then listed, and any other requirements of law or of any regulatory bodies
- --------------------------------------------------------------------------
having jurisdiction over such issuance and delivery. The total number of shares
- --------------------------------------------------------------------------------
of Common Stock that may be issued under this Plan in any fiscal year of the
- ----------------------------------------------------------------------------
Company, and the number of shares of Common Stock that may be issued under this
- -------------------------------------------------------------------------------
Plan in any fiscal year of the Company to any single participant, shall not
- ---------------------------------------------------------------------------
exceed Five Percent (5%) of the number of issued and outstanding shares of
- --------------------------------------------------------------------------
Common Stock at the beginning of the prior fiscal year. If the outstanding
- ---------------------------------------------------------------------------
shares of the Common Stock of the Company are increased, decreased, changed into
- --------------------------------------------------------------------------------
or exchanged for a different number or kind of shares or securities of the
- --------------------------------------------------------------------------
Company through a reorganization, recapitalization, reclassification, stock
- ---------------------------------------------------------------------------
dividend, stock split, reverse stock split or other similar transaction, an
- ---------------------------------------------------------------------------
appropriate and proportionate adjustment shall be made in the number of shares
- ------------------------------------------------------------------------------
to be issued pursuant to any award and the maximum number of shares which may be
- --------------------------------------------------------------------------------
issued under this Plan, as determined by the Committee in its sole discretion.
- ------------------------------------------------------------------------------
The dollar amount of each award of Common Stock under the Plan shall, for all
- -----------------------------------------------------------------------------
purposes of the Plan, be deemed equal to the fair market value thereof
- ----------------------------------------------------------------------
(determined in accordance with Section 6.5) as of the date of the award or other
- --------------------------------------------------------------------------------
applicable date of determination, as determined by the Committee.
- -----------------------------------------------------------------
6.5 Fair Market Value of Common Stock. The fair market value of a share
--- ---------------------------------- --------------------------------
of Common Stock of the Company shall be determined for purposes of this Plan by
- -------------------------------------------------------------------------------
reference to the mean between the bid and asked price of a share as supplied by
- -------------------------------------------------------------------------------
the National Association of Securities Dealers through NASDAQ (or its successor
- -------------------------------------------------------------------------------
in function) or, if such shares are then traded on NASDAQ/NMS, the New York
- ---------------------------------------------------------------------------
Stock Exchange or another principal stock exchange, by reference to the closing
- -------------------------------------------------------------------------------
sale price of a share of such principal stock exchange on which such shares are
- -------------------------------------------------------------------------------
traded, in each case as reported by The Wall Street
- ---------------------------------------------------
A-3
<PAGE>
Journal for the most recent business day immediately preceding the date on which
- --------------------------------------------------------------------------------
the fair market value is determined (or, if for any reason no such price is
- --------------------------------------------------------------------------------
available, in such other manner as the Committee may deem appropriate to reflect
- --------------------------------------------------------------------------------
the then fair market value thereof). Such determination shall be conclusive and
- --------------------------------------------------------------------------------
binding on all persons.
- -----------------------
7. NONASSIGNMENT. The interest of any [20] participant in the Plan is not
-----------------------
assignable either by voluntary or involuntary assignment or operation of law
(except that, in the event of death, earned and unpaid amounts shall be payable
to the legal successor of a participant).
8. INDEMNIFICATION. No employee, member of the Committee, or director of the
Company will have any liability for any decision or action if made or done in
good faith, nor for any error or miscalculation unless such error or
miscalculation is the result of his or her fraud or deliberate disregard of any
provisions of the Plan. The Company will indemnify each director, member of the
Committee and any employee acting in good faith pursuant to this Plan against
any loss or expense arising therefrom.
9. AMENDMENT, SUSPENSION OR TERMINATION. The Board of Directors may from
time to time amend, suspend or terminate, in whole or in part, any or all the
provisions of this Plan; provided, however, that no such action will adversely
affect the right of any [21] participant participating hereunder with respect
-----------
to (a) any award to which he or she may have become entitled hereunder prior to
the effective date of such amendment, suspension or termination, or (b) any
award period that commenced prior to the taking of such action by the Board. In
particular, but without limitation, the Board of Directors shall have the
authority to amend or modify the Plan from time to time in order to reflect
amendments to or regulations promulgated under Section 162(m) of the Code and
---
amendments to the Rules promulgated under Section 16 of the Exchange Act or to
- ------------------------------------------------------------------------
continue the compliance of the Plan under such provisions (or any successor
provisions). Notwithstanding the foregoing, in the event that any amendment or
other modification of or to the Plan requires shareholder approval in order to
continue the compliance of the Plan as a "performance-based" plan under Section
162(m) of the Code or to continue compliance with the requirements of Rule 16b-3
-------------------------------------------------------------
promulgated under the Exchange Act, such amendment or modification shall be
- ----------------------------------
contingent on the receipt of shareholder approval.
10. LIMITATIONS; PARTICIPATION IN OTHER PLANS. This Plan is not to be
construed as constituting a contract of employment or for services. Nothing
contained herein will affect or impair the Company's right to terminate the
employment or other contract for services of [22] a participant hereunder. The
-------------
Company's obligation hereunder to make [23] awards merely constitutes the
unsecured promise of the Company to make [24] such awards (in the case of cash
--------------------------------
awards, from its general assets), and no [25] participant hereunder will have
- ------- -----------
any interest in, or a lien or prior claim upon, any property of the Company.
Nothing herein nor the participation by any [26] participant shall limit the
-----------
ability of such [27] participant to participate in any other compensatory plan
-----------
or arrangement of the Company.
11. GOVERNING LAW. The terms of this Plan will be governed by and construed
in accordance with the laws of the State of California, without regard to
principles of conflict of laws.
12. TERM. This Plan shall continue in place until terminated by the Board of
Directors. The Plan is subject to shareholder approval at the [28] 1996 annual
----
meeting of shareholders of the Company. In addition, consistent with Section
162(m) of the Code, unless earlier required to continue the compliance of the
Plan under Section 162(m), the continued utilization of the Plan shall be
subject to shareholder ratification at each fifth annual meeting of shareholders
after the [29] 1996 annual meeting of shareholders commencing with the annual
----
meeting of shareholders to be held in [30] 2001.
----
List of Deleted Text
[1] subject to shareholder approval
[2] the Plan will be adopted
[3] 1994
[4] 1994
[5] so long as that committee consists entirely of
[6] or, if
[7] then
[8] entirely so consisting
[9] determined
[10] bonus payable to
[11] payable
[12] award payments
[13] to an amount in excess of that
[14] funds
[15] the 1994 year only
[16] 1994
[17] paid by company check
[18] all payments
[19] and to deferral to the extent required under Section 7
below. No payments.
[20] executive participating hereunder
[21] executive
[22] an executive participating
[23] payment of incentive compensation
[24] payment
[25] executive participating
[26] executive herein
[27] executive
[28] 1994
[29] 1994
[30] 1999
A-4
<PAGE>
APPENDIX B
HERBALIFE INTERNATIONAL, INC.
1992 AMENDED AND RESTATED EXECUTIVE INCENTIVE
----------------
COMPENSATION PLAN
1. Name and Effective Date. The plan hereby created shall be known as the
-----------------------
Herbalife International, Inc. 1992 Amended and Restated Executive Incentive
-------------------------
Compensation Plan (the "Plan"). The Plan [31] was originally adopted effective
----------------------
as of July 1, 1992. Subject to shareholder approval at the 1996 annual meeting
------------------------------------------------------------
of shareholders, the Plan shall be amended and restated as set forth herein
- ---------------------------------------------------------------------------
effective as of January 1, 1996 (the "Effective Date"), and shall first apply
- -------------------------------
with respect to the calendar year ending December 31, [32] 1996.
----
2. Purpose. The purpose of this Plan is to provide additional compensation
-------
as an incentive to key executives and consultants upon whose efforts the
continued successful and profitable operations of Herbalife International, Inc.
(the "Company") and its subsidiaries and affiliates are largely dependent and to
----------------
ensure the continued availability of their full-time or part-time services to
---------
the Company and its subsidiaries and affiliates.
-----------------------------------
3. Administrative Committee. The Plan shall be administered by the
------------------------
Compensation Committee of the Company's Board of Directors [33], consisting
----------
entirely of two or more persons who are "disinterested persons" within the
- --------------------------------------------------------------------------
meaning of Rule 16b-3(c)(2)(i) of the General Rules and Regulations under the
- -----------------------------------------------------------------------------
Securities Exchange Act of 1934 ("Exchange Act"), or, whether or not that
- -------------------------------------------------------------------------
committee fails to consist entirely of persons who are "disinterested persons,"
- -------------------------------------------------------------------------------
by another committee of at least two members of the Board of Directors that is
- ------------------------------------------------------------------------------
designated by the Board of Directors to administer the Plan (in either event,
- -----------------------------------------------------------------------------
the "Committee"), and, to the extent provided herein, by the Company's Chief
- -----------------
Executive Officer [34]. The Committee is hereby vested with full powers of
---
administration, subject only to the provisions [35] set forth herein. In
------
connection with the administration of this Plan, the Committee shall give
consideration to the recommendations and advice of the Company's Chief Executive
officer; provided, however, notwithstanding anything to the contrary herein, all
-----------------------------------------------------------------------
aspects of the Plan (including without limitation, the determination of award
- -----------------------------------------------------------------------------
amounts and performance objectives) shall be administered solely by the
- -----------------------------------------------------------------------
Committee with respect to awards under the Plan of the Company's authorized but
- -------------------------------------------------------------------------------
unissued Common Stock, $0.01 par value ("Common Stock").
- -------------------------------------------------------
4. Eligible Executives. The participants entitled to share in the benefits
-------------------
of the Plan are the Company's executive vice presidents, vice presidents,
country managers and any other individual employed by or who provides services
to the Company who occupies an executive or other key position (other than the
Company's Chief Executive Officer and President) designated by the Chief
Executive Officer in conjunction with the Committee (hereinafter, collectively,
"executives" or "participants"). [36] A participant whose employment or service
-------------
relationship with the Company is terminated for any reason prior to the end of
the period for which the award is earned shall not be entitled to share in the
benefits of the Plan with respect to that period.
5. Funds Available for [37] Awards. Awards [38] under the Plan shall be [39]
-------------------------------
made only to the extent that the Company earns pre-tax income (prior to
- ----
reflecting incentive compensation awards hereunder) in the award period. For
purposes of the Plan, the Company's pre-tax income (prior to reflecting
incentive compensation awards hereunder) for each award period shall be adjusted
to exclude nonrecurring and nonoperating gains and losses and such other
adjustments as the Committee deems necessary to carry out the purposes of this
Plan.
6. Target Incentive Compensation Award Amounts. Based on the Chief
-------------------------------------------
Executive Officer's recommendations, the Committee in conjunction with the Chief
Executive Officer shall establish target amounts to be awarded as corporate and
individual performance awards in the case of each [40] participant hereunder or
all [41] participants as a group. The target award amounts shall be expressed as
------------
a stated percentage of each [42] participant's annual base salary or
-------------
B-1
<PAGE>
compensation or in such other manner as the Chief Executive Officer and the
--------------------------------------------------------------
Committee shall designate; provided, however, that in the case of [43] a
- ------------------------- -
participant who becomes a participant during an award period, his or her base
- -----------
salary or compensation for purposes of this Section 6 shall be considered to be
equal to zero for that period, unless the Chief Executive Officer and the
--------------------------------------------
Committee shall expressly provide for a different treatment. Once determined,
- -----------------------------------------------------------
the target incentive compensation award amounts shall be earned, in whole or in
part, by the respective [44] participants on the basis of predetermined
------------
corporate and individual performance goals set by the Chief Executive Officer
pursuant to Sections 7 and 8 below. Notwithstanding the foregoing, no award
shall be made to any [45] participant who is not in the employ of or rendering
-----------
services to the Company on the last day of the period for which the award is
earned, unless the Chief Executive Officer and the Committee shall expressly
----------------------------------------------------------------------
provide for a different treatment.
- ---------------------------------
7. Corporate Performance Award. At the beginning of each year, the
---------------------------
Company's Chief Executive Officer, in conjunction with the Committee, shall
develop a set of corporate performance objectives for the Company applicable to
each award period. Such objectives may include, but are not limited to, retail
sales, cash flow from operations, cost reductions, earnings per share, volume
points and price per share. Each [46] participant shall be notified in writing
-----------
of the specified set of corporate performance objectives for each award period
within the year. If the Company achieves such performance objectives, the [47]
participant shall be entitled to his or her target corporate performance award
- -----------
amount as determined pursuant to Section 6 hereof. If the corporate performance
objectives for the award period are either exceeded or not fully satisfied, the
[48] participant shall be entitled to an award greater than, or a pro rata share
-----------
of, whichever is applicable, his or her target corporate performance award as
determined solely by the Chief Executive Officer.
8. Individual Performance Awards. Each year, the Company's Chief Executive
-----------------------------
Officer shall develop a set of individual performance objectives for each [49]
participant hereunder covering each award period. Each [50] participant shall be
- ----------- -----------
notified in writing of the specific performance objectives that shall apply in
his or her case. If the [51] participant achieves his or her individual
-----------
performance objectives for an award period, the [52] participant shall be
-----------
entitled to the target individual performance award amount as determined
pursuant to Section 6 hereof. If the individual performance objectives are
either exceeded or not fully satisfied, the [53] participant shall be entitled
-----------
to an award greater than, or a pro rata share of, whichever is applicable, his
or her target individual performance award amount as determined solely by the
Chief Executive Officer.
9. Discretionary Awards. Notwithstanding the provisions of Sections 7 and 8
--------------------
herein, the Committee, in conjunction and following consultation with the Chief
Executive Officer, may make discretionary awards to Plan participants for any
award period, which awards, if made, shall be in addition to awards earned under
Sections 7 and 8 herein.
10. Payment of Award. [54] Subject to the satisfaction of the conditions and
---------------- -------------------------------------------------
requirements of Section 11 hereof, awards under the Plan shall be made
- ----------------------------------------------------------------------
reasonably promptly following the conclusion of each award period and the
- -------------------------------------------------------------------------
determination of the extent of achievement of performance objectives. Awards
- -----------------------------------------------------------------------------
will be made, at the discretion of the Committee, in conjunction with the Chief
- -------------------------------------------------------------------------------
Executive Officer, (i) in cash by Company check, (ii) subject to Section 11,
- ----------------------------------------------------------------------------
through the issuance of Common Stock, or (iii) through any combination of (i)
- -----------------------------------------------------------------------------
and (ii). All awards under the Plan will be subject to withholding for
- --------------------------------------------
applicable employment and income taxes [55]. Such withholding obligations shall
----------------------------------
be satisfied either in cash, or in any other method approved by the Committee,
- ------------------------------------------------------------------------------
in its discretion.
- ------------------
11. Provisions Applicable to Grants of Common Stock.
--- -----------------------------------------------
Common Stock issued in respect of an award under the Plan shall be issued
- -------------------------------------------------------------------------
subject to such conditions or restrictions (including restrictions on transfer),
- --------------------------------------------------------------------------------
if any, as the Committee shall deem appropriate in its discretion. Common Stock
- --------------------------------------------------------------------------------
issued in respect of an award under the Plan to a participant who is subject to
- -------------------------------------------------------------------------------
the reporting requirements imposed under Section 16 of
- ------------------------------------------------------
B-2
<PAGE>
the Exchange Act shall, except to the extent that the Committee makes a contrary
- --------------------------------------------------------------------------------
determination, be subject to restrictions prohibiting any disposition within six
- --------------------------------------------------------------------------------
months following the date of grant. No person entitled to receive an award of
- ------------------------------------------------------------------------------
Common Stock under the Plan shall have any of the rights or privileges of a
- ---------------------------------------------------------------------------
stockholder of the Company in respect of any Common Stock until certificates
- -----------------------------------------------------------------------------
representing such shares shall have been issued and delivered. Notwithstanding
- -------------------------------------------------------------------------------
anything to the contrary herein, no shares shall be issued and delivered
- ------------------------------------------------------------------------
hereunder unless and until, in the opinion of counsel for the Company, there
- ----------------------------------------------------------------------------
shall have been full compliance with any applicable registration requirements of
- --------------------------------------------------------------------------------
the Securities Act of 1933, any applicable listing requirements of any national
- -------------------------------------------------------------------------------
securities exchange on which the Common Stock is then listed, and any other
- ---------------------------------------------------------------------------
requirements of law or of any regulatory bodies having jurisdiction over such
- -----------------------------------------------------------------------------
issuance and delivery. The total number of shares of Common Stock that may be
- ------------------------------------------------------------------------------
issued under this Plan in any fiscal year of the Company, and the number of
- ---------------------------------------------------------------------------
shares of Common Stock that may be issued under this Plan in any fiscal year of
- -------------------------------------------------------------------------------
the Company to any single participant, shall not exceed the excess of (a) Five
- ------------------------------------------------------------------------------
Percent (5%) of the number of issued and outstanding shares of Common Stock at
- ------------------------------------------------------------------------------
the beginning of the prior fiscal year over (b) the number of shares of Common
- ------------------------------------------------------------------------------
Stock issued during the prior fiscal year pursuant to the Company's Amended and
- -------------------------------------------------------------------------------
Restated 1994 Performance-Based Annual Incentive Compensation Plan. If the
- ---------------------------------------------------------------------------
outstanding shares of the Common Stock of the Company are increased, decreased,
- -------------------------------------------------------------------------------
changed into or exchanged for a different number or kind of shares or securities
- --------------------------------------------------------------------------------
of the Company through a reorganization, recapitalization, reclassification,
- ----------------------------------------------------------------------------
stock dividend, stock split, reverse stock split or other similar transaction,
- ------------------------------------------------------------------------------
an appropriate and proportionate adjustment shall be made in the number of
- --------------------------------------------------------------------------
shares to be issued pursuant to any award and the maximum number of shares which
- --------------------------------------------------------------------------------
may be issued under this Plan, as determined by the Committee in its sole
- -------------------------------------------------------------------------
discretion. The dollar amount of each award of Common Stock under the Plan
- ---------------------------------------------------------------------------
shall, for all purposes of the Plan, be deemed equal to the fair market value
- -----------------------------------------------------------------------------
thereof (determined in accordance with Section 12) as of the date of the award
- ------------------------------------------------------------------------------
or other applicable date of determination, as determined by the Committee.
- --------------------------------------------------------------------------
12. Fair Market Value of Common Stock. The fair market value of a share of
--- --------------------------------- -----------------------------------
Common Stock of the Company shall be determined for purposes of this Plan by
- ----------------------------------------------------------------------------
reference to the mean between the bid and asked price of a share as supplied by
- -------------------------------------------------------------------------------
the National Association of Securities Dealers through NASDAQ (or its successor
- -------------------------------------------------------------------------------
in function) or, if such shares are then traded on NASDAQ/NMS, the New York
- ---------------------------------------------------------------------------
Stock Exchange or another principal stock exchange, by reference to the closing
- -------------------------------------------------------------------------------
sale price of a share of such principal stock exchange on which such shares are
- -------------------------------------------------------------------------------
traded, in each case as reported by The Wall Street Journal for the most recent
- -------------------------------------------------------------------------------
business day immediately preceding the date on which the fair market value is
- -----------------------------------------------------------------------------
determined (or, if for any reason no such price is available, in such other
- ---------------------------------------------------------------------------
manner as the Committee may deem appropriate to reflect the then fair market
- ----------------------------------------------------------------------------
value thereof). Such determination shall be conclusive and binding on all
- --------------------------------------------------------------------------
persons.
- --------
13. Nonassignment. The interest of any [56] participant hereunder shall not
--- ------------- -----------
be assignable either by voluntary or involuntary assignment or operation of law.
14. Indemnification. No employee, member of the Committee, or director of
--- ---------------
the Company shall have any liability for any decision or action if made or done
in good faith, nor for any error or miscalculation unless such error or
miscalculation is the result of his or her fraud or deliberate disregard of any
provisions of the Plan. The Company shall indemnify each director, member of
the Committee and any employee acting in good faith pursuant to this Plan
against any loss or expense arising therefrom.
15. Amendment, Suspension or Termination. The Board of Directors may from
--- ------------------------------------
time to time amend, suspend or terminate, in whole or in part, any or all the
provisions of this Plan; provided, however, that no such action shall adversely
affect the right of any [57] participant hereunder with respect to any award to
-----------
which he or she may have become entitled hereunder prior to the effective date
of such amendment, suspension or termination.
16. Limitations; Participation in Other Plans. This Plan is not to be
--- ------------------------------
construed as constituting a contract of employment or for services. Nothing
contained herein shall affect or
B-3
<PAGE>
impair the Company's right to terminate the employment or other contract for
services of [58] any participant hereunder. The Company's obligation hereunder
---------------
to make [59] incentive compensation awards merely constitutes the unsecured
promise of the Company to make [60] such awards (in the case of cash awards,
----------------------------------------
from its general assets), and no [61] participant hereunder shall have any
--- -----------
interest in, or a lien or prior claim upon, any property of the Company. Nothing
-------
herein nor the participation by any participant shall limit the ability of such
- -------------------------------------------------------------------------------
participant to participate in any other compensatory plan or arrangement of the
- -------------------------------------------------------------------------------
Company.
- --------
17. Governing Law. The terms of this Plan shall be governed by and construed
--- -------------
in accordance with the laws of the State of California, without regard to
principles of conflict of laws.
18. Term. This Plan shall continue in place until terminated by the Board of
--- -------------------------------------------------------------------------
Directors. The Plan is subject to shareholder approval at the 1996 annual
- --------------------------------------------------------------------------
meeting of shareholders of the Company.
- ---------------------------------------
List of Deleted Text
[31] shall be
[32] 1992
[33] (the "Committee")
[34] and that
[35] herein
[36] An executive
[37] Payment of
[38] paid
[39] funded
[40] executive participating
[41] participating executives
[42] executive's
[43] an executive
[44] executives
[45] executive
[46] participating executive
[47] executive
[48] executive
[49] executive participating
[50] executive
[51] executive
[52] executive
[53] executive
[54] Any award made pursuant to the provisions of the Plan shall be paid, in
cash or by Company check, in a single sum,
[55] on or before forty-five (45) days following the end of the award period
[56] executive participating
[57] executive participating
[58] an executive participating
[59] payment of
[60] payment
[61] executive participating
B-4
<PAGE>
APPENDIX C
AMENDED AND RESTATED 1991 STOCK OPTION PLAN
-------------------------------------------
OF HERBALIFE INTERNATIONAL, INC.
--------------------------------
1. PURPOSE.
The purpose of this Amended and Restated 1991 Stock Option Plan (the "Plan")
--------------------
of Herbalife International, Inc., a Nevada corporation (the "Company"), is to
secure for the Company and its stockholders the benefits arising from stock
ownership and participation by selected employees of the Company or its
subsidiaries, directors, consultants or other persons ("Participants") as the
Board of Directors of the Company (the "Board"), or a committee thereof
constituted for the purpose, may from time to time determine. The Plan will
provide a means whereby (i) such employees may purchase shares of the Common
Stock of the Company pursuant to options that will qualify as "incentive stock
options" under Section 422 of the Internal Revenue Code of 1986, as amended
(including proposed, temporary and final regulations promulgated thereunder from
- --------------------------------------------------------------------------------
time to time, the "Code") and (ii) such employees, directors, consultants or
- ------------
other persons may purchase shares of the Common Stock of the Company pursuant to
"non-qualified stock options". Incentive stock options and non-qualified stock
options are sometimes referred to collectively as "options." The Plan shall
--------------
also be deemed to be a plan of and adopted by the Company's present and future
- ------------------------------------------------------------------------------
direct and indirect subsidiary corporations and entities, and in its discretion
- -------------------------------------------------------------------------------
the Committee (as hereinafter defined) may direct that options hereunder be
- ---------------------------------------------------------------------------
issued and represented by option agreements at the subsidiary corporation or
- ----------------------------------------------------------------------------
entity level.
- -------------
2. ADMINISTRATION
2.1 The Plan shall be administered under the supervision of the Board by a
Plan Administration Committee (the "Committee"). The Committee shall consist of
not less than two (2) persons appointed by the Board, each of whom shall be both
----
(i) a "disinterested person" as the term is defined in Rule 16b-3(c)(2)(i) of
- ---
the General Rules and Regulations under the Securities Exchange Act of 1934, and
-----
(ii) an "outside director" within the meaning of Section 162(m) of the Code, or
- -------------------------------------------------------------------------------
by at least two other members of the Board designated to act as the Committee.
- ------------------------------------------------------------------------------
The Committee shall hold meetings at such times and places as it shall determine
and shall keep minutes of its meetings and of actions taken by it without a
meeting. Any action of the Committee with respect to administration of the Plan
shall be taken by unanimous vote or written consent of its members.
2.2 Subject to the provisions of the Plan, the Committee shall have the
authority (i) to construe and interpret the Plan, (ii) to define the terms used
therein, (iii) to prescribe, amend and rescind rules and regulations relating to
the Plan, (iv) to determine the individuals to whom and the time or times at
which options shall be granted, whether any options granted will be incentive
stock options or non-qualified stock options, the number of shares to be subject
to each option, the exercise price of an option, the number of installments, if
any, in which each option may be exercised, and the duration of each option, (v)
to approve and determine the duration of leaves of absence which may be granted
to Participants without constituting a termination of their employment for the
purposes of the Plan and (vi) to make all other determinations necessary or
advisable for the administration of the Plan. Unless otherwise determined by
the Board, all determinations and interpretations made by the Committee shall be
binding and conclusive on all Participants in the Plan and their legal
representatives and beneficiaries. No member of the Committee shall be
personally liable for any action or inaction or determination made in good faith
with respect to this Plan or any option issued hereunder.
3. SHARES SUBJECT TO THE PLAN.
Subject to adjustment as provided in Paragraph 14 hereof, the shares to be
under the Plan shall consist of the Company's authorized but unissued
Common Stock, $0.01
C-1
<PAGE>
par value (the "Common Stock"), and the aggregate amount of such stock which may
be issued upon exercise of all options under the Plan [62] (excluding options
------------------
exercised prior to the adoption of this Amended and Restated Plan by the Board
- ------------------------------------------------------------------------------
on March 8, 1996) shall not exceed 5,400,000 shares. If any option granted
- --------------------------------------------
under the Plan shall expire or terminate for any reason, without having been
exercised in full, the unpurchased shares subject thereto shall again be
available for options to be granted under the Plan.
4. ELIGIBILITY AND PARTICIPATION.
4.1 All employees (including officers and directors) of the Company or any
subsidiary corporation (as defined in Section 424(f) of the Code) shall be
eligible to receive incentive stock options and non-qualified stock options
under this Plan. Directors and consultants of the Company or any subsidiary
corporation are not eligible to receive incentive stock options (except that
directors who are also employees of the Company may be eligible to receive
incentive stock options), but are eligible to receive non-qualified stock
options.
[63]
4.2 The aggregate fair market value of the Common Stock for which incentive
---
stock options granted to any one employee under this Plan or any other incentive
stock option plan of the Company may by their terms first become exercisable
during any calendar year shall not exceed One Hundred Thousand Dollars
($100,000), determining fair market value as of the date each respective option
is granted. Should it be determined that any incentive stock option granted
pursuant to this Plan exceeds such maximum, such incentive stock option shall be
considered to be a non-qualified stock option and not to qualify for treatment
as an incentive stock option under Section 422 of the Code to the extent, but
only to the extent, of such excess.
4.3 All options granted under the Plan shall be granted within ten (10) years
---
from the effective date of this Plan.
4.4 No participant in the Plan shall, during any single calendar year, be
---
awarded stock options with respect to more than 500,000 shares of Common Stock.
5. DURATION OF OPTIONS; VESTING.
5.1 Each option and all rights associated therewith shall expire on such date
as the Committee may determine, but in no event later than ten (10) years from
the date on which the option is granted, and shall be subject to earlier
termination as provided herein; provided, however, any incentive stock option
-----------------------------------------------
granted to any employee who, at the time the option is granted, owns shares
- ---------------------------------------------------------------------------
possessing more than ten percent (10%) of the total combined voting power of all
- --------------------------------------------------------------------------------
classes of stock of the Company (and of its subsidiary corporations as defined
- ------------------------------------------------------------------------------
in Section 424(f) of the Code) (a "Ten Percent Holder"), shall expire in no
- ---------------------------------------------------------------------------
event later than five (5) years from the date on which such option was granted.
- -------------------------------------------------------------------------------
5.2 Subject to Paragraph 16 hereof, options shall be exercisable at such time
or times and in such installments, if any, as the Committee shall determine;
provided, however, that each option shall be exercisable in minimum installments
of at least twenty percent (20%) of the number of shares of Common Stock covered
by the option on each anniversary date of the date such option is granted. In
the event any option is exercisable in installments, any shares which may not be
purchased during any year or other period which are not purchased during such
year or other period may be purchased at any time or from time to time during
any subsequent year or period during the term of the option unless otherwise
specified in the option being exercised.
6. PRICE AND EXERCISE OF OPTIONS.
6.1 The purchase price of the Common Stock issuable upon exercise of an
option ("Option Shares") shall be determined by the Committee, but (i) in the
---
case of an incentive stock option granted to a person other than a Ten Percent
--------------------------------------------
Holder, shall not be less than one hundred percent (100%) of the fair market
- -------
value of such Common Stock on the date the incentive stock option is granted,
(ii) in the case of an incentive stock option granted to a Ten Percent Holder,
- ------------------------------------------------------------------------------
C-2
<PAGE>
shall not be less than one hundred ten percent (110%) of the fair market value
- ------------------------------------------------------------------------------
of such Common Stock on the date the incentive stock option is granted, and
- -----------------------------------------------------------------------
(iii) in the case of a non-qualified stock option shall not be less than eighty-
- -----
five percent (85%) of the fair market value of such Common Stock on the date the
non-qualified stock option is granted. The purchase price for Option Shares
generally shall be paid in full at the time of exercise of the related option in
cash or by certified or cashier's check payable to the order of the Company.
However, in the discretion of the Committee, the terms of an option may provide
for the right of the Participant to make the foregoing payment (i) by
cancellation of indebtedness owned by the Company to the Participant, (ii) by
delivery of shares of Common Stock of the Company already owned by, and in the
possession of the Participant, (iii) by a promissory note made by the
Participant in favor of the Company, subject to terms and conditions determined
by the Board [64] or the Committee, secured by the Option Shares and in
--
compliance with applicable law (including, without limitation, state corporate
and federal margin requirements), (iv) by application (instead of actual
issuance) of a portion of the Option Shares (at their fair market value as of
the business day preceding the date of such exercise) to the satisfaction of all
or a portion of the exercise price of such option, (v) by any combination
thereof, or (vi) in such other manner as the Committee may specify in order to
facilitate the exercise of options by the holders thereof. In the event [65] an
--
option is exercised, in whole or in part, pursuant to Paragraph 12 hereof by a
person other than the Participant, a notice of election shall be accompanied by
proof satisfactory to the Company of the rights of such person to exercise such
option. Shares of Common Stock used to satisfy the exercise price of an option
shall be valued at their fair market value determined in accordance with
Paragraph 7 hereof.
6.2 No option granted under this Plan shall be exercisable if such exercise
would involve a violation of any applicable law or regulation (including,
without limitation, federal and state securities laws and regulations). No
option may be exercised for a fraction of a share and no partial exercise of any
option may be for less than one hundred (100) shares. Unless otherwise
determined by the Committee, the Company shall not be required to pay to the
person exercising the option the cash equivalent of any fractional share
interest.
7. FAIR MARKET VALUE OF COMMON STOCK.
The fair market value of a share of Common Stock of the Company shall be
determined for purposes of this Plan by reference to the mean between the bid
and asked price of a share as supplied by the National Association of Securities
Dealers through NASDAQ (or its successor in function) or, if such shares are
then traded on NASDAQ/NMS, the New York Stock Exchange or another principal
-----------------------------
stock exchange, by reference to the closing sale price of a share of such
----
principal stock exchange on which such shares are traded, in each case as
reported by The Wall Street Journal for the most recent business day immediately
preceding the date on which the fair market value is determined (or, if for any
reason no such price is available, in such other manner as the Committee may
deem appropriate to reflect the then fair market value thereof). Such
determination shall be conclusive and binding on all persons.
8. WITHHOLDING TAX.
Upon (i) the disposition by an employee or other person of shares of Common
Stock acquired pursuant to the exercise of an incentive stock option granted
pursuant to the Plan within two (2) years of the grant of the incentive stock
option or within one (1) year after exercise of the incentive stock option, or
(ii) the exercise of a non-qualified stock option, the Company shall have the
right to require such employee or other person, and such employee or other
person by accepting the options granted under the Plan agrees, to pay the
Company the amount of any taxes [66] which the Company may be required to
withhold with respect thereto. -----
9. NONTRANSFERABILITY.
An option granted under the Plan shall, by its terms, be nontransferable by
the holder either voluntarily or by operation of law, other than by will [67] or
--
the laws of descent and distribution, and shall be exercisable during the
holder's lifetime only by the holder, regardless of any
C-3
<PAGE>
community property interest therein of the spouse of the holder or such spouse's
interest in an option, the holder, or the holder's permitted successors in
interest, may exercise the option on behalf of the spouse of the holder of such
spouse's successors in interest.
10. HOLDING OF STOCK AFTER EXERCISE OF OPTION.
At the discretion of the Committee, any option may provide that the
Participant, by accepting such option, represents and agrees, for the
Participant and the Participant's permitted transferees, that none of the shares
acquired upon exercise of an option will be acquired with a view to any sale,
transfer or distribution of said shares in violation of the Securities Act of
1933, as amended, and the rules and regulations promulgated thereunder.
11. TERMINATION OF EMPLOYMENT OR RELATIONSHIP.
In the event of the termination of employment or other relationship with the
Company and its subsidiary corporations (as defined in Section [68] 424(f) of
------
the Code) by the holder of an option for any reason other than the holder's
death or permanent disability (within the meaning of Section 22(e)(3) of the
Code), such option may be exercised to the extent exercisable on the date of
such cessation of employment or other relationship within thirty (30) days after
the date the holder terminates employment or such other relationship with the
Company or such subsidiary (except to the extent that the Committee provides for
an alternative treatment following termination of employment or such other
relationship, including, without limitation, for continued vesting and
exercisability in accordance with the terms of an optionee's option agreement
following such termination). In the case of an employee, a leave of absence
approved in writing by the Board [69] or the Committee shall not be deemed a
termination of employment for the purposes of this Paragraph 11, but no
incentive stock option may be exercised during any such leave of absence, except
during the first three (3) months thereof.
12. DEATH OR PERMANENT DISABILITY OF OPTION HOLDER.
If the holder of an option dies or becomes permanently disabled (within the
meaning of Section 22(e)(3) of the Code) while the option holder during the
period of employment or other relationship with the Company or one of its
subsidiary corporations (as defined in Section 424(f) of the Code), the holder's
option shall expire one (1) year after the date of such death or permanent
disability unless by its terms it expires sooner. During such period after
death, such option may, to the extent that it remained unexercised (but
exercisable by the holder according to such option's terms) on the date of such
death, be exercised by the person or persons to whom the option holder's rights
under the option shall pass by the option holder's will or by the laws of
descent and distribution.
13. PRIVILEGES OF STOCK OWNERSHIP.
No person entitled to exercise any option granted under the Plan shall have
any of the rights or privileges of a stockholder of the Company in respect of
any Option Shares until certificates representing such shares shall have been
issued and delivered. No shares shall be issued and delivered upon exercise of
any option unless and until, in the opinion of counsel for the Company, there
shall have been full compliance with any applicable registration requirements of
the Securities Act of 1933, any applicable listing requirements of any national
securities exchange on which the Common Stock is then listed, and any other
requirements of law or of any regulatory bodies having jurisdiction over such
issuance and delivery.
14. ADJUSTMENTS.
14.1 If the outstanding shares of the Common Stock of the Company are
increased, decreased, changed into or exchanged for a different number or kind
of shares or securities of the Company through a reorganization,
recapitalization, reclassification, stock dividend, stock split, reverse stock
split or other similar transaction, an appropriate and proportionate adjustment
shall be made in the maximum number of shares as to which options may be granted
under this Plan.
C-4
<PAGE>
A corresponding adjustment changing the number of shares allocated to
unexercised options or portions thereof, which shall have been granted prior to
any such change shall likewise be made. Any such adjustment in the outstanding
options shall be made without change to the aggregate purchase price applicable
to the unexercised portion of the option but with a corresponding adjustment in
the purchase price for each share covered by the option.
14.2 Anything herein to the contrary notwithstanding, including, without
limitation, the provisions of Paragraphs 11 and 12, but subject to the
restrictions of Section 422(d) of the Code with respect to incentive stock
options, in connection with (i) any tender offer for a majority of the
outstanding shares of Common Stock by any person or entity other than an
affiliate (as defined in Rule 405 promulgated under the Securities Act of 1933,
as amended) of the Company, (ii) any proposed sale or conveyance of all or
substantially all of the property and assets of the Company or (iii) any
proposed consolidation or merger of the Company with or into any other
corporation, unless the Company is the surviving corporation, the Company shall
give written notice to the holder of any option that such option may, to the
extent exercisable by the holder according to such option's terms, be exercised
within a reasonable period after the date of such notice. Upon consummation of
the tender offer or proposed sale, conveyance, consolidation or merger to which
such notice shall relate, all rights under said option which shall not have been
so exercised shall, terminate unless the agreement governing the transaction
shall provide otherwise.
14.3 Notwithstanding the foregoing, the Committee may provide in writing in
connection with a transaction described in Subparagraph 14.2 for any or all of
the following alternatives (separately or in combinations): (i) for the options
theretofore granted to become immediately exercisable; (ii) for the assumption
by the successor corporation of the options theretofore granted or the
substitution by such corporation for such options of new options covering the
stock of the successor corporation, or a parent or subsidiary thereof, with
appropriate adjustments as to the number and kind of shares and prices; or (iii)
for the continuance of the Plan by such successor corporation in which event the
Plan and the options theretofore granted shall continue in the manner and under
the terms so provided.
14.4 Adjustments under this Paragraph 14 shall be made by the Committee,
whose determination as to what adjustments shall be made, and the extent
thereof, shall be final, binding and conclusive. No fractional shares of stock
shall be issued under the Plan on any such adjustment.
15. AMENDMENT AND TERMINATION OF PLAN.
15.1 The Board [70] or the Committee may at any time suspend or terminate the
Plan. The Board [71] or the Committee may also at any time amend or revise the
terms of the Plan, provided that no such amendment or revision shall, unless
appropriate stockholder approval of such amendment or revision is obtained, (i)
materially increase the benefits accruing to Participants under this Plan, (ii)
increase the maximum number of shares which may be acquired pursuant to options
granted under the Plan, except as permitted under the provisions of Paragraph
14, (iii) change the minimum purchase price set forth in Paragraph 6, (iv)
increase the maximum term of options provided for in Paragraph 5, [72] (v)
---
change the designation of persons eligible to receive options as provided in
Paragraph 4, or (vi) otherwise make any change or alteration for which
-----------------------------------------------------------
shareholder approval is required in order to continue the compliance of the
- ---------------------------------------------------------------------------
Plan as a "performance-based" plan under Section 162(m) of the Code, to meet
- ----------------------------------------------------------------------------
the requirements of Section 422(b)(1) of the Code, or to continue compliance
- ----------------------------------------------------------------------------
with the requirements of Rule 16b-3 promulgated under the Exchange Act.
- -----------------------------------------------------------------------
15.2 No amendment, suspension or termination of the Plan shall, without the
consent of the holder, alter or impair any rights or obligations under any
option theretofore granted under the Plan.
15.3 Unless otherwise terminated as provided herein, this Plan shall
terminate on, and no option shall be granted hereunder after, [73] March 8,
--------
2006.
- -----
C-5
<PAGE>
16. EFFECTIVE DATE OF PLAN.
The initial effective date of [74] the Plan is July 26, 1991. This Plan was
------- --- -------------
amended and restated effective March 8, 1996, subject to shareholder approval at
- --------------------------------------------------------------------------------
the 1996 annual meeting of shareholders of the Company. No option may be
- -------------------------------------------------------
granted under the Plan unless and until (i) the options and underlying shares
have been registered under the Securities Act of 1933 and qualified with the
appropriate state regulatory agencies, or (ii) the Company has been advised by
counsel that such options and shares are exempt from such registration and/or
qualification.
17. INDEMNIFICATION.
Any member of the Committee who is made, or threatened to be made, a party to
any action or proceeding, whether civil or criminal, by reason of the fact that
he is a member of the Committee insofar as relates to this Plan, shall be
indemnified by the Company, and the Company may advance his related expenses to
the full extent permitted by law and/or by By-Laws of the Company.
18. LIMITATIONS; PARTICIPATION IN OTHER PLANS.
--- ------------------------------------------
Neither the Plan nor any stock option granted hereunder is to be construed as
-----------------------------------------------------------------------------
constituting a contract of employment or for services. Nothing contained herein
- --------------------------------------------------------------------------------
or therein will affect or impair the Company's right to terminate the employment
- --------------------------------------------------------------------------------
or other contract for services of any person participating hereunder. Nothing
- ------------------------------------------------------------------------------
herein or therein nor the participation by any person herein shall limit the
- ----------------------------------------------------------------------------
ability of such person to participate in any other compensatory plan or
- -----------------------------------------------------------------------
arrangement of the Company.
- ---------------------------
List of Deleted Text
[62] shall not exceed Three Million Five Hundred Thousand (3,500,000)
[63] 4.2 No stock options may be granted to any employee, consultants or
director who, at the time the option is granted, owns shares possessing
more than a ten percent (10%) of the total combined voting power of all
classes of stock of the Company (and of its subsidiary corporations as
defined in Section 424 (f) of the Code).
[64] of Directors of
[65] our
[66] with
[67] of
[68] 22(e)(3)
[69] of Directors
[70] of Directors
[71] of Directors
[72] or
[73] July 25, 2001
[74] this
C-6
<PAGE>
HERBALIFE INTERNATIONAL, INC.
1800 CENTURY PARK EAST
LOS ANGELES, CALIFORNIA 90067
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints Christopher Pair and David R. Addis, and each
of them, as Proxy, with the power to appoint his or their substitutes, and
hereby authorizes each of them to represent and to vote as designated below all
shares of Common Stock of Herbalife International, Inc. held of record by the
undersigned on April 8, 1996 at the Annual Meeting of Shareholders to be held
on May 30, 1996, or at any adjournment or postponement thereof.
1. ELECTION OF DIRECTORS [_] FOR all nominees [_] WITHHOLD AUTHORITY
(Mark Hughes, to vote for all
Christopher Pair, nominees
Michael Rosen, except as indicated
Paul Buxbaum, to the contrary
Edward Hall, below)
Alan Liker,
Christopher Miner
(INSTRUCTION: To withhold authority to vote for any individual nominee,
write the nominee's name on the line below)
----------------------------------------------------------------------------
2. RESTATED 1994 PERFORMANCE-BASED ANNUAL INCENTIVE COMPENSATION PLAN
FOR [_]AGAINST [_]ABSTAIN [_]
3. RESTATED 1992 EXECUTIVE INCENTIVE COMPENSATION PLAN
FOR [_]AGAINST [_]ABSTAIN [_]
4. RESTATED 1991 STOCK OPTION PLAN
FOR [_]AGAINST [_]ABSTAIN [_]
5. In his discretion, the Proxy is authorized to vote upon such other
business as may properly come before the meeting.
- --------------------------------------------------------------------------------
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR THE ELECTION OF ALL NOMINEES LISTED IN ITEM 1.
Please sign exactly as name
(or names) appears below. When
shares are held by joint
tenants, both must sign. When
signing as attorney, executor,
administrator, parent or
guardian, please give full title
as such. If a corporation,
please sign in full corporate
name by the President or other
authorized officer. If a
partnership, please sign in
partnership name by an
authorized person.
Date: ___________________________
_________________________________
Signature
_________________________________
Signature if held jointly
PLEASE MARK, SIGN, DATE, AND PROMPTLY RETURN THE PROXY CARD USING THE ENCLOSED
ENVELOPE.
