EMPLOYMENT
AGREEMENT
This Employment Agreement (“Agreement”), dated as of
October 24, 2006 is made and entered into by RICHARD P. GOUDIS
(“Executive”) and HERBALIFE INTERNATIONAL OF AMERICA,
INC., a California corporation (“Company”). The parties
to this Agreement agree as follows:
1. Employment At-Will . The Company and Executive
acknowledge and agree that each can terminate the employment
relationship at any time upon written notice to the other, with or
without prior notice, for any reason or for no reason. Executive
has received no promise of continued employment or employment for
any specific period of time, and no employee of the Company,
including without limitation the Company’s officers, has the
authority to alter the at-will nature of the employment
relationship except in a written employment contract signed by an
authorized Company executive and by Executive.
2. Duties . Executive shall serve in the Los
Angeles, California area as Chief Financial Officer of the Company,
with all of the authority, duties, and responsibilities
commensurate with such position. Executive shall report only to the
Chief Executive Officer or Chairman of the Company.
Executive’s service on any outside board of directors,
including any non-profit board, shall be subject to joint approval
by the Chief Executive Officer and the Company’s Board of
Directors (the “Board”); provided, however, the board
set forth in Schedule A attached hereto is deemed
approved.
3. Compensation and Related Matters .
(a) Salary . Executive shall
receive a salary at the per annum rate of Five Hundred Twenty Five
Thousand Dollars ($525,000), payable in accordance with the
Company’s payroll practices for Senior Executives (as defined
in Section 3(b) below). Executive’s Salary shall be subject
to an annual review and adjustment in the discretion of the Chief
Executive Officer, subject to approval by the Board’s
Compensation Committee. In the event that the Chief Executive
Officer’s salary is increased, then Executive’s Salary
shall be increased the same percentage; provided, however, that if
Executive accepts a higher percentage increase in base Salary than
the Chief Executive Officer in any period, then from that day
forward, increases in Executive’s Salary will no longer be
tied to increases in the Chief Executive Officer’s salary.
Executive’s Salary shall be subject to a reduction of not
more than ten percent in the event that the Company adopts an
across-the-board reduction for Senior Executives and the Chief
Executive Officer, in which event such percentage reduction shall
not exceed the smallest percentage reduction imposed on any Senior
Executive or the Chief Executive Officer.
(b) Employee Benefits .
Executive and Executive’s qualified dependents shall be
entitled to participate in or receive benefits under each benefit
plan or arrangement made available by the Company to its most
senior executives (including its President and Chief Operating
Officer but specifically excluding its Chief Executive Officer
(“Senior Executives”)) including, without limitation,
those relating to group medical, dental, vision, long-term
disability, D&O, accidental death and dismemberment, and life
insurance, subject to and on a basis consistent with the terms,
conditions and overall administration of such plans and subject to
the Company’s right to modify, amend or terminate any such
plan or arrangement with or without prior notice. Executive shall
be eligible to participate in the Company’s 401K program and
the Company’s Deferred Compensation program. Executive shall
be entitled to reimbursement of reasonable business expenses in
accordance with the Company’s practices and procedures.
Executive shall be entitled to paid vacation in accordance with
Company policy.
(c) Bonus . If the Company
shall achieve the applicable bonus target set annually by the
Board’s Compensation Committee (the “Performance
Target”), then the Company shall pay Executive a cash bonus
in an amount equal to one hundred percent (100%) of
Executive’s Target Bonus (as defined below) calculated in
accordance with the Company’s then current bonus plan in
effect for its Senior Executives. The Performance Target utilized
for calculating Executive’s bonus shall be the same as that
utilized in calculating the primary bonus (and not the APT bonus)
for its Chief Executive Officer. Executive’s “Target
Bonus” shall be in an amount no less than fifty percent of
Executive’s annual salary for the year with respect to which
the bonus is to be paid. Any bonus will be paid following the
completion of the relevant calendar year at such time bonuses are
paid to the Company’s other Senior Executives.
(d) Long-Term Incentives .
Executive shall be eligible to participate in the Company’s
long-term incentive plan for Senior Executives, if any. The size,
form, and timing of grants, if any, shall be consistent with
competitive practice, internal position responsibilities, and
subject to the joint approval of the Chief Executive Officer and
the Board’s Compensation Committee.
4. Severance .
(a) Although nothing in this
Section 4 shall be construed to alter the at-will nature of
employment as set forth in Section 1 above, if Executive is
terminated by the Company without Cause or resigns for Good Reason,
Executive will be paid a lump sum amount equal to two times
Executive’s then-current annual salary (the “Salary
Severance”), in addition to all other accrued entitlements
such as unpaid salary and accrued vacation, if any. If Executive is
terminated by the Company without Cause or resigns for Good Reason,
the Company will also provide Executive with outplacement services
for up to six months by a provider selected and paid for by the
Company in an amount not to exceed $20,000; Executive shall not be
entitled to cash in lieu of outplacement services. If Executive is
terminated by the Company without Cause, resigns for Good Reason,
retires, dies, or resigns as a result of a disability, Executive
will be entitled to receive a pro rata bonus payment, at such time
bonuses are paid to the Company’s other Senior Executives,
based on the number of months worked in the applicable fiscal year
of the Company (the “Bonus Severance”). Executive will
have no duty to mitigate. As a precondition to the Company’s
obligation to pay Executive severance of two years of salary and a
pro rata bonus, Executive agrees to execute and deliver to the
Company a fully effective general release in the form attached to
this Agreement as Attachment A. Company shall pay Executive the
Salary Severance on the date which is the later of ten days after
the date on which it receives the signed release or six months
after the date of separation from service, and the Company shall
pay the Bonus Severance on the date which is the later of ten days
after the date on which it receives the signed release, the date on
which Company pays bonuses to Company’s Senior Executives for
the applicable year, or the date that is six months after the date
of separation from service. Executive understands and agrees that
Executive shall not be entitled to any other severance benefit not
set forth in this Section 4, and accordingly Executive
expressly acknowledges that the Company will not be obligated to
make 401(k) contributions following the termination of
Executive’s employment.
(b) In the event that Executive
is qualified for and elects COBRA coverage under the
Company’s health plans after a termination without Cause or a
resignation for Good Reason, the Company will continue to pay its
share of the cost of premiums under such plans until Executive is
reemployed, or for a period of two years, whichever occurs first.
Upon a termination for Cause and upon a resignation without Good
Reason (other than due to death, disability or retirement), except
as set forth in Section 4(a) above and/or one or more separate
written agreements between Company and Executive, all unearned
compensation, benefits and unvested options shall be forfeited.
(c) If Executive is terminated
by the Company without Cause or resigns for Good Reason, and on the
effective date of such termination Executive is subject to a
“trading blackout” or “quiet period” with
respect to the Company’s common shares or if the Company
determines, upon the advice of legal counsel, that on the effective
date of such termination Executive may not to trade in the
Company’s common shares due to Executive’s possession
of material non-public information, in each case, which restriction
or prohibition continues for a period of at least twenty
consecutive calendar days, Executive will be paid an additional
lump sum amount equal to $125,000 (the “Blackout Period
Severance”). Company shall pay Executive the Blackout Period
Severance on the same date that the Salary Severance is paid.
(d) For purposes of this
Agreement, the Company shall have “Cause” to terminate
the Executive’s services in the event of any of the following
acts or circumstances: (i) Executive’s conviction of a felony
or entering a plea of guilty or nolo contendere to any crime
constituting a felony (other than a traffic violation or by reason
of vicarious liability); (ii) Executive’s substantial
and repeated failure to attempt to perform Executive’s lawful
duties as contemplated in Section 2 of this Agreement, except
during periods of physical or mental incapacity;
(iii) Executive’s gross negligence or willful misconduct
with respect to any material aspect of the business of the Company
or any of its affiliates, which gross negligence or willful
misconduct has a material and demonstrable adverse effect on the
Company; (iv) Executive’s material violation of a
Company policy resulting in a material and demonstrable adverse
effect to the Company or an affiliate, including but not limited to
a violation of the Company’s Code of Business Conduct and
Ethics; or (v) any material breach of this Agreement or any
material breach of any other written agreement between Executive
and the Company’s affiliates governing Executive’s
equity compensation arrangements (i.e., any agreement with respect
to Executive’s stock and/or stock options of any of the
Company’s affiliates); provided, however, that Executive
shall not be deemed to have been terminated for Cause in the case
of clause (ii), (iii), (iv) or (v) above, unless any such
breach is not fully corrected prior to the expiration of the thirty
(30) calendar day period following delivery to Executive of
the Company’s written notice of its intention to terminate
his employment for Cause describing the basis therefore in
reasonable detail.
(e) Executive will be deemed to
have a “Good Reason” if Executive terminates his
employment because of (i) a material diminution of
Executive’s duties as Chief Financial Officer, (ii) the
failure by any successor of the Company to assume in writing the
Company’s obligations under this Agreement, (iii) the
breach by the Company in any respect of any of its obligations
under this Agreement, and, in any such case (but only if correction
or cure is possible), the failure by the Company to correct or cure
the circumstance or breach on which such resignation is based
within 30 days after receiving notice from Executive
describing such circumstance or breach in reasonable detail,
(iv) the relocation of Executive’s primary office
location of more than 50 miles that places the primary office
farther from Executive’s residence than it was before, or
(v) the imposition by the Company of a requirement that
Executive report to a person other than the Chief Executive Officer
of the Company or the Chairman of the Board. Executive shall not
have a Good Reason to resign if the Company suspends Executive due
to an indictment of Executive on felony charges, provided that the
Company continues to pay Executive’s salary and benefits. No
Salary Severance is payable after Executive turns age 65,
regardless of whether Executive has a Good Reason for resignation
and regardless whether the Company has Cause to terminate
Executive.
5. Adjustment to Payments Triggering Excise Tax .
In the event that any amount or benefit that may be paid or
otherwise provided to or in respect of the Executive by the Company
or any affiliated company, whether pursuant to this Agreement or
otherwise (collectively, “Covered Payments”), is or may
become subject to the tax imposed under Section 4999 of the
Internal Revenue Code of 1986, as amended (or any successor
provision) (“Excise Tax”), the Company shall pay to the
Executive a “Reimbursement Amount,” defined as an
amount, which when added to the Covered Payments and after taking
into account any federal, state or local tax resulting from the
Covered Payment and the Reimbursement Amount will provide Executive
with after tax net income equal to the amount Executive would have
earned had no Excise Tax been imposed on the Covered Payments.
6. Confidential and Proprietary Information .
(a) The parties agree and
acknowledge that during the course of Executive’s employment,
Executive will be given and will have access to and be exposed to
trade secrets and confidential information in written, oral,
electronic and other forms regarding the Company and its affiliates
(which includes but is not limited to all of its business units,
divisions and affiliates) and their business, equipment, products
and employees, including, without limitation: the identities of the
Company’s and its affiliates’ distributors and
customers and potential distributors and customers (hereinafter
referred to collectively as “Distributors”), including,
without limitation, the identity of Distributors that Executive
cultivates or maintains while providing services at the Company or
any of its affiliates using the Company’s or any of its
affiliates’ products, name and infrastructure, and the
identities of contact persons with respect to those Distributors;
the particular preferences, likes, dislikes and needs of those
Distributors and contact persons with respect to product types,
pricing, sales calls, timing, sales terms, rental terms, lease
terms, service plans, and other marketing terms and techniques; the
Company’s and its affiliates’ business methods,
practices, strategies, forecasts, pricing, and marketing
techniques; the identities of the Company’s and its
affiliates’ licensors, vendors and other suppliers and the
identities of the Company’s and its affiliates’ contact
persons at such licensors, vendors and other suppliers; the
identities of the Company’s and its affiliates’ key
sales representatives and personnel and other employees;
advertising and sales materials; research, computer software and
related materials; and other facts and financial and other business
information concerning or relating to the Company or any of its
affiliates and their business, operations, financial condition,
results of operations and prospects. Executive expressly agrees to
use such trade secrets and confidential information only for
purposes of carrying out his duties for the Company and its
affiliates as he deems appropriate in his good faith judgment, and
not for any other purpose, including, without limitation, not in
any way or for any purpose that could reasonably be foreseen to be
detrimental to the Company or any of its affiliates; provided,
Executive shall be permitted to disclose such trade secrets and
confidential information to third parties in the course of
performing his duties for the Company and its affiliates as he
deems appropriate in his good faith judgment provided that prior to
such disclosure Executive causes the intended recipient of such
information to sign a confidentiality agreement. Executive shall
not at any time, either during the course of his employment
hereunder or after the termination of such employment, use for
himself or others, directly or indirectly, any such trade secrets
or confidential information, and, except as required by law or as
permitted hereunder, Executive shall not disclose such trade
secrets or confidential information, directly or indirectly, to any
other person or entity. Trade secret and confidential information
hereunder shall not include any information which (i) is
already in or subsequently enters the public domain, other than as
a result of any unauthorized direct or indirect disclosure by
Executive, (ii) becomes available to Executive on a
non-confidential basis from a source other than the Company or any
of its affiliates, provided that Executive has no knowledge that
such source is subject to a confidentiality agreement or other
obligation of secrecy or confidentiality (whether pursuant to a
contract, legal or fiduciary obligation or duty or otherwise) to
the Company or any of its affiliates or any other person or entity
or (iii) is approved for release by the Chief Executive
Officer or the board of directors of the Company or any of its
affiliates or which the Chief Executive Officer or the board of
directors of the Company or any of its affiliates makes available
or authorizes Executive to make available to third parties without
an obligation of confidentiality.
(b) All physical property and
all notes, memoranda, files, records, writings, documents and other
materials of any and every nature, written or electronic, which
Executive shall prepare or receive
