General Counsel Severance Agreement

Exhibit 10.40


SEPARATION AGREEMENT AND GENERAL RELEASE


This Separation Agreement and General Release is entered into by and between Robert A. Sandler ("Sandler"), and Herbalife International of America, Inc./Herbalife International, Inc., and/or any affiliate, subsidiary, parent or any other associated entity of Herbalife International of America, Inc./Herbalife International, Inc. (collectively, "Herbalife" or "the Company"). Sandler and Herbalife are referred to herein collectively as "the Parties."


R E C I T A L S


A. Whereas Sandler is employed as Executive Vice President, Corporate Secretary and General Counsel of Herbalife.


B. Whereas Sandler and Herbalife have agreed that Sandler will resign his employment with Herbalife.


C. Whereas Sandler and Herbalife wish their relationship to end amicably.


D. Whereas Sandler and Herbalife are parties to an Employment Agreement dated August 20, 2000 ("Employment Agreement").


E. Whereas Sandler is an "Eligible Employee" pursuant to the Herbalife Senior Executive Change in Control Plan ("Plan").


F. Whereas the parties have agreed that any of Herbalife's obligations to pay or provide to Sandler compensation, benefits or any other consideration under the Employment Agreement and/or the Plan will be satisfied by a lump sum payment to Sandler pursuant to this Agreement.


NOW, THEREFORE, Sandler and Herbalife incorporate the foregoing recitals as part of this Agreement, and further agree and promise as follows:


1


A. Consideration.


1. Sandler's employment with Herbalife will terminate effective May 19, 2002 ("the Termination Date"). Sandler's compensation, benefits and perquisites of employment will cease as of the Termination Date.


2. Sandler shall be paid severance in the amount of Two Million, Six-Hundred and Twenty-Two Thousand and Five Hundred Dollars ($2,622,500.00) ("Severance") in a lump sum, less applicable withholdings, within ten days after execution of this Agreement without prior revocation of the Agreement by Sandler pursuant to paragraph 26 of this Agreement.


3. (a) Notwithstanding anything to the contrary contained in the Plan, Sandler's Stock Options will vest and be exercisable in accordance with Sandler's August 20, 2000 Employment Agreement (attached hereto as Exhibit "A"). Sandler and the Company represent and agree that the number and strike price of vested and unvested stock options Sandler holds are currently set forth in the attached schedule, which is made a part of this Agreement as Exhibit "B."


(b) Herbalife will provide safe transport of artwork, and other personal property owned by Sandler currently located at Herbalife, to be delivered to Sandler's personal residence or an alternative local location designated by Sandler, at no expense to Sandler.


4. The release set forth at paragraph 24(a) herein is not a waiver of Sandler's rights to payments of monies to which he is entitled by virtue of the Company's Senior Executive Reimbursement Plan ("SERP"), Deferred Compensation Plan, 401K Plan or paid vacation policy. These monies will be paid to Sandler in accordance with the Company's SERP, Deferred Compensation and 401K plan documents, Company policy, and the law.


2
5. Sandler has been relieved of his obligations and duties as General Counsel, Corporate Secretary and Executive Vice President and Sandler agrees that he has no authority to act as an officer or employee of Herbalife.


6. Sandler agrees that after his departure, he will fully cooperate with Herbalife in an orderly transfer of his work to others, and that he will be available to respond to inquiries about his work. Sandler further agrees, on behalf of himself and his legal successors and assigns, to execute such additional documents and instruments and to take such additional actions as Herbalife may request from time to time after the date hereof, in order to complete, effectuate, perfect and better evidence the agreements of the parties set forth in this Agreement. Sandler will also reasonably cooperate with Herbalife in the defense of any legal, administrative or other action brought by any third party against Herbalife after his departure, in which event, Herbalife will pay the reasonable cost of legal representation for Sandler in connection therewith.


7. Sandler's entitlement to the consideration described herein is expressly contingent upon his execution and delivery of this Agreement to Herbalife. The consideration set forth in this Agreement fully satisfies and extinguishes any and all rights Sandler may have pursuant to any other Herbalife plan, agreement or policy, including, but not limited to all agreements, plans, policies and other arrangements provided by Herbalife or any of its subsidiaries or trusts sponsored, established or maintained by any of such entities, including, without limitation, the Employment Agreement dated August 20, 2000, the Senior Executive Change of Control Plan, the 1994 Performance-Based Annual Incentive Compensation Plan, the 1992 Executive Incentive Compensation Plan, the 1991 Stock Option Plan, the Management Deferred Compensation Plan and related trust(s), the Senior Executive Compensation Plan and related trust(s), the Supplemental Executive Retirement Plan and related trust(s), the Executive Medical Plan and all other health insurance and benefit plans, the Executive Long-Term Disability Plan, the Executive Life Insurance Plan, Herbalife's expense


3 reimbursement plans and policies, and Herbalife's vacation plan. Although Sandler expressly waives all rights or claims with respect to compensation, remuneration, payments or consideration due to him now or in the future under his Employment Agreement, Sandler's obligations under the Employment Agreement shall remain in full force and effect, including, but not limited to Sandler's obligations pursuant to paragraph 6, subparts (a) - (c) of the Employment Agreement, which provisions are incorporated herein by reference.


B. Confidentiality.


8. Sandler agrees not to disclose or misappropriate any and all trade secrets or confidential or proprietary information of Herbalife (collectively "Protected Information"). Protected Information means all information pertaining in any manner to the business of Herbalife and its employees, distributors, suppliers, vendors, customers, manufacturers, sales representatives, consultants, lawyers, accountants, and business associates. This definition includes, but is not limited to: (i) information about costs, profits, markets, sales, financial and marketing data and bids; (ii) plans for business, marketing, future development and new product concepts; (iii) employee personnel files and information about employee compensation and benefits; (iv) identity of and other business information relating to Herbalife's customers and/or distributors, past, present or future, together with each such customer's or distributor's habits or needs; (v) identity of and other business information relating to Herbalife's past, present or future vendors, manufacturers and suppliers; and (vi) design drawings and computer programs.


9. Sandler agrees to return to Herbalife by the Termination Date, any and all Company documents, books, manuals, drawings, lists, writings, computer records and other tangible Company property in his possession or control, including, but not limited to the Herbalife pass key in his possession (including all copies thereof) which he procured during or in connection with his employment with Herbalife.


4


10. For and in consideration for Herbalife's commitments, Sandler agrees and promises not to disclose the substance, contents, amounts or terms of this Agreement, except to Sandler's legal, tax or financial advisors, or pursuant to legal court process or federal or state tax authorities or other agencies. In the event Sandler reveals any terms of this Agreement as permitted in this Paragraph 10, said person or persons to whom such information is disclosed shall be instructed and must agree that this is a private Agreement and that the terms of this Agreement may not be revealed to any other person for any reason whatsoever. Sandler acknowledges ...