Exhibit 10.38
FORM OF INCENTIVE STOCK OPTION AGREEMENT
AGREEMENT (this "Agreement") entered into as of the ____ day of __________,
____ by and between WH Holdings (Cayman Islands) Ltd., a Cayman Islands company
(the "Company"), and the undersigned employee (the "Employee") of the Company or
its Subsidiaries.
WHEREAS, pursuant to the WH Holdings (Cayman Islands) Ltd. Executive
Officer Stock Option Plan (the "Plan"), the Committee designated under the Plan
desires to grant to the Employee an option to acquire Common Shares, par value
$0.001 per share, of the Company; and
WHEREAS, the Employee desires to accept such option subject to the terms
and conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements contained herein, the Company and the Employee,
intending to be legally bound, hereby agree as follows:
1. Grant of Option. On the terms and conditions hereinafter set forth, the
Company hereby grants to the Employee an option to purchase all (or any part) of
______ Shares (the "Option"). This Option is granted on ____________ , ____ (the
"Grant Date"). The Option is intended to be an Incentive Stock Option; provided
that in the event all or any portion of the Option fails to comply as an
Incentive Stock Option, such portion shall be deemed to be a Non-Statutory Stock
Option. This Option is granted pursuant to the Plan, and is governed by the
terms and conditions of the Plan. All defined terms used herein, unless
specifically defined in this Agreement, have the meanings assigned to them in
the Plan.
2. Exercise Price. The exercise price (the "Exercise Price") for the Shares
covered by the Option will be $ _____ per share (such price to be not less than
the Fair Market Value of a Share of the Grant Date).
3. Time of Exercise of Option.
(a) The Option will become exercisable in quarterly 5% increments beginning
on the last day of the calendar quarter during which the Grant Date occurs and
each subsequent last day of each following calendar quarter until the Option
becomes fully exercisable on the last day of the calendar quarter immediately
preceding the fifth anniversary of the Grant Date.
(b) Notwithstanding any provision in this Agreement or the Plan to the
contrary, unless otherwise approved by a written resolution of the Committee
prior to or contemporaneously with the closing of any such transaction, any
portion of the Option (whether vested or unvested and whether or not then
exercisable) which has not been exercised prior to or in connection with any
merger or consolidation of the Company into another corporation, the exchange of
all or substantially all of the assets of the Company for the securities of
another corporation, a Change of Control or the recapitalization,
reclassification, liquidation or dissolution of the Company or any other
fundamental corporate transaction involving the Company or any of its
Subsidiaries with the same or a similar purpose or effect (as determined by the
Committee in its sole discretion) shall expire and be cancelled and of no
further force and effect effective upon the closing of any such transaction.
4. Term of Options and Repurchase Rights.
(a) The Option will expire 10 years from the date hereof, but will be
subject to earlier termination as provided below.
(b) Upon termination:
(i) the unexercisable portion of the Option hereby granted will
terminate on the date of such termination.
(ii) the exercisable portion of the Option hereby granted will be
treated as follows:
(A) Subject in each case to the repurchase rights described in
clause (c) below and the Shareholders' Agreement, if the Employee is terminated
for any reason except for Cause, the exercisable portion of the Option hereby
granted will be exercisable for thirty days following the termination, unless
the Employee terminates employment on account of a disability as defined in Code
Section 22(e) or if the Employee dies, in which case, such Employee, or such
Employee's personal representative, respectively, may exercise the exercisable
portion of the Option hereby granted for 90 days following the termination of
employment on account of disability or the Employee's death.
(B) If the Employee is terminated for Cause, the exercisable
portion of the Option hereby granted will terminate on the date of such
termination.
(c) The Company has the right to repurchase the Shares acquired upon the
exercise of Options for a period of 90 days after the Employee terminates
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employment or 90 days after the Shares for which the Option is exercised are
acquired, whichever is later. Notwithstanding anything to the contrary in the
Shareholders' Agreement, the purchase price per Share payable under Section 6(a)
or (b) of the Shareholder's Agreement where such Termination (as defined in the
Shareholders' Agreement):
(i) was due to resignation or for Cause shall be the amount equal to
the lesser of: (A) the Fair Market Value at the time of such termination; or (B)
the Exercise Price;
(ii) was without Cause or because of death, retirement or disability
shall be the amount equal to the greater of: (A) the Fair Market Value at the
time of such termination; or (B) the Exercise Price.
(d) For purposes of this Agreement, "Cause" shall have the meaning ascribed
to such term in any written employment agreement between Employee and the
Company or one or more of its Subsidiaries, as the same may be amended or
modified from time to time, or if Employee and the Company or one or more of its
Subsidiaries are not party to any such written employment agreement, then the
Company and its Subsidiaries shall have "Cause" to terminate the Employee's
services in the event of any of the following acts or circumstances: (i)
commission of a felony, a crime of moral turpitude, dishonesty, breach of trust
or unethical business conduct, or any crime involving the Company or any of its
Subsidiaries; (ii) willful misconduct, willful or gross neglect, fraud,
misappropriation or embezzlement; (iii) performance of the Employee's duties in
a manner that is detrimental to the Company or any of its Subsidiaries,
including, but not limited to that which results in, the severe deterioration of
the financial performance of the Company or any of its Subsidiaries; (iv)
failure to adhere to the directions of the Chief Executive Officer or the Board
of Directors, to adhere to the Company's or any of its Subsidiary's policies or
practices or to devote substantially all of the Employee's business time and
efforts to the business of the Company and its Subsidiaries; (v) breach of any
provision of any agreement, including an employment agreement, between the
Company or any of its Subsidiaries, on the one hand, and the Employee which
covers confidentiality or proprietary information, nonsolicitation or
non-competition provisions; or (vi) breach in any material respect of the terms
and provisions of the Employee's employment agreement, if any, or any agreement
between the Company or any of its Subsidiaries, on the other hand, and the
Employee.
5. Manner of Exercise of Option. The Option may be exercised by delivery,
via first class mail, interoffice mail, fax or electronic mail of a Notice of
Option Exercise and related forms to the Company stating the number of Shares
with respect to which the Option is being exercised and accompanied by payment
of the Total Exercise Cost in cash or by check, bank draft or money order
payable to the order of the Company
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or, subsequent to an Initial Public Offering, through the delivery to the
Company of an Authorization for Exercise of Options "Cashless" Exercise Form
with irrevocable instructions to a broker to deliver promptly to the Company an
amount equal to the Total Exercise Cost, subject to such limitations as the
Committee may adopt from time to time or by any combination of the above methods
of payment.
6. Non-Transferability. The right of the Employee to exercise the Option
(as and when exercisable) may not be assigned or transferred by the Employee
other than by will or the laws of descent and distribution. The Option may be
exercised and the Shares may be purchased during the lifetime of the Employee
only by the Employee (or the Employee's legal representative in the event that
the Employee's employment is terminated due to "Disability" within the meaning
of Code Section 22(e)). Any attempted assignment or transfer, except as
hereinabove provided, including without limitation any purported assignment,
whether voluntary or by operation of law, pledge, hypothecation or other
disposition contrary to the provisions hereof, or any levy of execution,
attachment, trustee process or similar process, whether legal or equitable, upon
the Option, will in each instance be null and void.
7. Representation Letter and Investment Legend.
(a) In the event that for any reason the issuance of the Shares to be
issued upon exercise of an exercisable Option will not be effectively registered
under the 1933 Act, upon any date on which the Option is exercised, the Employee
(or the person exercising the Option pursuant to Paragraph 6) will give a
written representation to the Company in the form attached hereto as Exhibit A,
and the Company will place the legend described in Exhibit A, upon any
certificate for the Shares issued by reason of such exercise.
(b) The Company will be under no obligation to qualify Shares or to cause a
registration statement or a post-effective amendment to any registration
statement to be prepared for the purpose of covering the issuance of Shares.
8. Adjustments of Shares and Options.
Subject to Paragraph 7 of the Plan, in the event of any change in the
outstanding Shares by reason of an acquisition, spin-off or reclassification,
recapitalization or merger, combination or exchange of Shares or other corporate
exchange, Change of Control or similar event, the Committee may adjust
appropriately the number or kind of Shares or securities subject to the Option
and exercise prices related thereto and make such other revisions to the Option
as it deems are equitably required.
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9. No Special Employment Rights. Nothing contained in this Agreement will
be construed or deemed by any person under any circumstances to bind the Company
or any of its Subsidiaries to continue the employment of the Employee for the
period within which this Option may vest or for any other period.
10. Rights as a Shareholder. The Employee will have no rights as a
shareholder with respect to any Shares which may be purchased upon the exercise
of this Option unless and until a certificate or certificates representing such
Shares are duly issued and delivered to the Employee. If at any time during the
term of the Option, the Company is advised by its counsel that the Shares are
required to be registered under the Securities Act or under applicable state
securities laws, or that delivery of the Shares must be accompanied or preceded
by a prospectus meeting the requirements of such laws, delivery of Shares by the
Company may be deferred until a registration is effective or a prospectus is
available or an appropriate exemption from registration is secured.
11. Withholding Taxes. The Employee hereby agrees, as a condition to any
exercise of the Option, to provide to the Company an amount sufficient to
satisfy its obligation to withhold certain federal, state and local taxes
arising by reason of such exercise (the "Withholding Amount"), if any, by (a)
authorizing the Company to withhold the Withholding Amount from the Employee's
cash compensation, or (b) remitting the Withholding Amount to the Company in
cash; provided that, to the extent that the Withholding Amount is not provided
by one or a combination of such methods, the Company may at its election
withhold from the Shares delivered upon exercise of the Option that number of
Shares having a Fair Market Value as of the date immediately prior to the
issuance of such Shares equal to the Withholding Amount.
12. Execution of Shareholders' Agreement and of Release and Waiver of
Rights. The Employee acknowledges that, in connection with his or her prior or
future purchase of Shares of the Company, he or she will execute and deliver the
Shareholders' Agreement or a joinder or counterpart signature page thereto. The
Employee further agrees that all Shares acquired by such Employee upon exercise
of the Option will be subject to the terms and conditions of the Shareholders'
Agreement as modified hereby. Prior to participation in the Plan, if the
Committee requires, the Employee will execute a Release and Waiver to Rights to
payments and benefits under certain plans of Herbalife International, Inc.
13. Lock-Up Agreements. The Employee agrees that notwithstanding anything
to the contrary contained in this Agreement, in the event of an Initial Public
Offering or any other offering of securities of the Company, except to the
extent that: (a) the Employee sells his or her Shares obtained upon the exercise
of the Option to the underwriters of the Company's securities in connection with
such offering or (b) the underwriters do not request the following restrictions,
such Employee shall not (i) offer,
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hedge, pledge, sell or contract to sell any such Shares, (ii) sell any option or
contract to purchase any Shares, (iii) purchase any option or contract to sell
any Shares, (iv) grant any option, right or warrant for the sale of any Shares,
or (v) lend or otherwise dispose of or transfer any Shares during the longer of
(A) any black-out period requested by the underwriters conducting any such
offering of securities on behalf of the Company and (B)during the seven days
prior to and during the 180 day period beginning on the effective date of such
initial public offering or other offering of securities; provided, however, that
such Employee shall, in any event, be entitled to sell his or her Shares
commencing on the expiration of the black-out period described in the
aforementioned clause (A) or (B).
14. Delivery of Certificates. The Employee will have no interest in the
Shares unless and until certificates for the Shares are issued following
exercise of the Option.
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[Signatures on Following Page]
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OPTION AGREEMENT
Counterpart Signature Page
--------------------------
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed,
by its officer thereunto duly authorized, and the Employee has executed this
Agreement, all as of the day and year first above written.
WH HOLDINGS EMPLOYEE
(CAYMAN ISLANDS) LTD.
By:
--------------------------- ---------------------------------
Title:
Address:
- ------------------------------
(print name)
Facsimile Number:
---------------------------------
Social Security Number
Email Address:
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EXHIBIT A
TO: WH HOLDINGS (CAYMAN ISLANDS) LTD.
The undersigned hereby irrevocably exercises the right to purchase
______________ of the shares of Common Shares, par value $0.001 per share
("Common Shares") of WH Holdings (Cayman Islands) Ltd., a Cayman Islands company
(the "Company"), evidenced by the attached Option, and herewith makes payment of
the Exercise Price with respect to such shares in full, all in accordance with
the conditions and provisions of said Option.
1. The undersigned hereby represents and warrants to and agrees with the
Company as follows:
(a) The undersigned understands and acknowledges that an investment in the
Common Shares issuable upon exercise of this Option involves a high degree of
risk and that there are limitations on the liquidity of the Common Shares
issuable upon exercise of this Option. The undersigned is able to bear the
economic risk of an investment in the Common Shares issuable upon exercise of
this Option. The undersigned has adequate means of providing for the
undersigned's current needs and contingencies; is able to afford to hold the
Common Shares issuable upon exercise of this Option for an indefinite period;
and has such knowledge and experience in financial and business matters such
that the undersigned is capable of evaluating the merits and risks of the
investment in the Common Shares issuable upon exercise of this Option;
(b) The undersigned is acquiring the Common Shares issuable upon exercise
of this Option for its own account for investment and not as a nominee and not
with a present view to the distribution thereof in violation of the Securities
Act of 1933, as amended (the "1933 Act"). The undersigned understands that the
undersigned must bear the economic risk of this investment indefinitely unless
such shares are registered pursuant to the 1933 Act and any applicable state
securities laws, or an exemption from such registration is available. The
undersigned has no plan or intention to sell the Common Shares issuable upon
exercise of this Option at any predetermined time, and has made no predetermined
arrangements to sell such shares;
(c) The undersigned will not make any sale, transfer or other disposition
of the shares of Common Shares issuable upon exercise of this Option in
violation of (1) the 1933 Act, the Securities Exchange Act of 1934, as amended,
any other applicable Federal or state securities laws or the rules and
regulations of the Securities and Exchange Commission or of any state securities
commissions or similar state authorities promulgated under any of the foregoing,
or (2) any applicable securities laws of jurisdictions outside the United States
and the rules and regulations thereunder.
2. The undersigned agrees not to offer, sell, transfer or otherwise dispose
of any of the Common Shares obtained on exercise of the Option, except in
accordance with the provisions of the Option, and consents that the following
legend may be affixed to the stock certificates for the Common Shares hereby
subscribed for, if such legend is applicable:
"THE SALE, TRANSFER OR ENCUMBRANCE OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE SUBJECT TO THE TERMS AND CONDITIONS OF A SHAREHOLDERS'
AGREEMENT, DATED AS OF JULY 31, 2002 AMONG WH HOLDINGS (CAYMAN ISLANDS)
LTD. AND CERTAIN HOLDERS OF ITS OUTSTANDING SHARE CAPITAL, AS SUCH
AGREEMENT MAY BE AMENDED. COPIES OF SUCH AGREEMENT MAY BE OBTAINED AT NO
COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO
THE SECRETARY OF WH HOLDINGS (CAYMAN ISLANDS) LTD.
IN ADDITION, THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR ANY
PROVINCIAL OR STATE SECURITIES LAW, AND MAY NOT BE SOLD, TRANSFERRED,
PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNTIL A REGISTRATION
STATEMENT UNDER THE 1933 ACT AND APPLICABLE PROVINCIAL OR STATE SECURITIES
LAWS SHALL HAVE BECOME EFFECTIVE WITH REGARD THERETO, OR AN EXEMPTION FROM
REGISTRATION UNDER THE 1933 ACT OR APPLICABLE PROVINCIAL OR STATE
SECURITIES LAWS IS AVAILABLE IN CONNECTION WITH SUCH OFFER, SALE OR
TRANSFER."
3. The undersigned requests that stock certificates for such shares be
issued, and a new option agreement representing any unexercised portion hereof
be issued in the name of the registered holder and delivered to the undersigned
at the address set forth below:
[Signature on the Following Page]
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Dated:
- ------------------------------
Signature of Registered Holder
- ------------------------------
Name of Registered Holder (Print)
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