Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory
Arrangements of Certain Officers.
On November 1, 2016, the Company announced that, effective June 1, 2017 (the “Transition Date”), Richard
P. Goudis will become the Chief Executive Officer of the Company and Michael O. Johnson will serve as Executive Chairman of the Company.
Mr. Goudis, 55,
has served as the Company’s Chief Operating Officer since 2010, and prior to that served as the Company’s Chief Financial Officer since joining the Company in 2004. Mr. Johnson, 62, has served as the Company’s Chief Executive Officer
since 2003 and has served as Chairman of the Board of Directors (the “Board”) of the Company since 2007.
In connection with his appointment,
Mr. Goudis, the Company and Herbalife International of America, Inc. (“Herbalife International”) entered into an Amended and Restated Employment, dated as of November 1, 2016 (the “Amended Goudis Agreement”). Pursuant
to the Amended Goudis Agreement, effective on the Transition Date, Mr. Goudis will receive an annual salary of $1,000,000 and will be eligible for an annual bonus targeted at 120% of his annual salary. Mr. Goudis will continue to be eligible to
participate in the Company’s long-term incentive plan, with the size, form, and timing of grants, if any, subject to the approval of the Board’s Compensation Committee (the “Compensation Committee”). Additionally, on the
Transition Date, Mr. Goudis will be entitled to an award of performance share units having a grant date fair value equal to $5,000,000, reduced by the grant date fair value of the equity incentive awards previously granted to Mr. Goudis in 2017 in
the ordinary course. Effective on the Transition Date, Mr. Goudis will participate in the Herbalife International of America, Inc. Executive Officer Severance Plan (the “Severance Plan”) in accordance with the terms and conditions thereof
(as described below). Prior to the Transition Date, Mr. Goudis will be eligible to receive severance compensation on the same terms and conditions as set forth in his employment agreement as in effect prior to the Amended Goudis Agreement.
On October 31, 2016, the Compensation Committee approved the Severance Plan and designated Mr. Goudis as the sole participant, effective as of the Transition
Date. Other executive officers of Herbalife International (other than the Executive Chairman) are eligible to participate in the Severance Plan, subject to being designated to participate by the Compensation Committee. Under the Severance
Plan, in the event an executive’s employment is terminated by Herbalife International without “Cause” (as defined in the Severance Plan), other than in connection with the executive’s death or disability, or by the executive for
“Good Reason” (as defined in the Severance Plan), the executive will be entitled to: (i) all accrued obligations, (ii) a lump sum severance payment equal to a multiple of the executive’s annualized base salary (2.0
x
for the
Chief Executive Officer, reduced to 1.5
x
after five years of participation in the Severance Plan), payable on the 60th day following the date of termination, and (iii) a payment of a pro-rata annual cash bonus payment for the fiscal year in
which the date of termination occurs (based on the actual performance of Herbalife International over the entire year and the number of days worked by the executive in such year), payable at the same time as bonuses are paid to executives generally
for such year. Payment of the severance payments is subject to and conditioned upon the execution of a general release in favor of the Company and additional requirements set forth in the Severance Plan.
In connection with his transition to Executive Chairman, Mr. Johnson, the Company and Herbalife International entered into a Letter Agreement (the
“Johnson Letter Agreement”), dated November 1, 2016. Pursuant to the Johnson Letter Agreement, Mr. Johnson’s current employment agreement with the Company and Herbalife International dated as of March 27, 2008 (the “Johnson
Agreement”) will terminate and no longer be of any force or effect from and after the Transition Date. In addition, pursuant to the Johnson Letter Agreement, effective on the Transition Date, Mr. Johnson will receive an annual salary of
$650,000 and will be eligible for an annual bonus targeted at 80% of his annual salary. Mr. Johnson will continue to be eligible to participate in the Company’s long-term incentive plan, with the size, form, and timing of grants, if any,
subject to the approval of the independent members of the Board. The severance entitlements described in the Johnson Agreement will terminate and be of no further force or effect from and after the Transition Date.
Neither of Messrs. Goudis or Johnson is a party to any transaction required to be disclosed pursuant to Item 404(a) of
Regulation S-K.