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Item 5.02.    Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

 

Executive Transition

 

On October 23, 2019, the Company’s Board of Directors (the “Board”) appointed Dr. John Agwunobi, currently Co-President and Chief Health and Nutrition Officer, as Chief Executive Officer of the Company, and John DeSimone, currently Co-President and Chief Strategic Officer, as President of the Company. Both appointments will be effective March 30, 2020 (the “Effective Date”).

 

Dr. Agwunobi will be succeeding Michael Johnson, who will step down as Chief Executive Officer of the Company as of the Effective Date, but will continue to serve as Chairman of the Board.

 

Dr. Agwunobi, 55, has served as the Company’s Chief Health and Nutrition Officer since February 2016, and assumed the additional role of Co-President in February 2018. Prior to joining the Company, Dr. Agwunobi advised a number of privately-held health-related companies and, from September 2007 to April 2014, served as Senior Vice President and President, Health and Wellness for Walmart Stores, Inc.  From December 2005 to September 2007, he served as the Assistant Secretary of Health for the U.S. Department of Health and Human Services, where he was responsible for disease prevention and health promotion.  From December 2014 to June 2019, Dr. Agwunobi served on the board of directors of Magellan Health Services, Inc., a publicly-traded managed health care company. He is also currently a director at the U.S. African Development Foundation, and at bluebird bio, a publicly-traded biotechnology company, where he is also a member of its nominating and corporate governance committee.

 

Employment Agreement with Dr. Agwunobi

 

In connection with this transition, Dr. Agwunobi, the Company and Herbalife International of America, Inc. (“Herbalife International”) entered into a new employment agreement, dated October 23, 2019 (the “CEO Employment Agreement”), reflecting his new position.  The payments and benefits to which Dr. Agwunobi is entitled under the CEO Employment Agreement include (i) annual base salary of $900,000, (ii) eligibility for an annual bonus targeted at 115% of base salary, (iii) participation 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”) and (iv) following the Effective Date, an equity incentive award for 2020 having a grant date fair value equal to $3,500,000, of which 75% will be granted in the form of performance-based stock units (with performance criteria previously approved by the Compensation Committee) and 25% will be granted in the form of time-based stock units.  Additionally, Dr. Agwunobi will continue to 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).

 

Employment Agreement with Mr. DeSimone

 

In connection with this transition, Mr. DeSimone, the Company and Herbalife International entered into a new employment agreement, dated October 23, 2019 (the “President Employment Agreement”), reflecting his new position.  The payments and benefits to which Mr. DeSimone is entitled under the President Employment Agreement include (i) annual base salary of $695,000, (ii) eligibility for an annual bonus targeted at 80% of base salary, (iii) participation in the Company’s long-term incentive plan, with the size, form, and timing of grants, if any, subject to the approval of the Compensation Committee and (iv) following the Effective Date, an equity incentive award for 2020 having a grant date fair value equal to $2,250,000, of which 75% will be granted in the form of performance-based stock units (with performance criteria previously approved by the Compensation Committee) and 25% will be granted in the form of time-based stock units.  Additionally, from and after the Effective Date, Mr. DeSimone will participate in the Severance Plan in accordance with the terms and conditions thereof (as described below). Prior to the Effective Date, Mr. DeSimone will be eligible to receive severance compensation on the same terms and conditions as set forth in his employment agreement as currently in effect, which employment agreement will terminate and be of no further force or effect from and after the Effective Date.

 

Severance Plan

 

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 (2.0x for the Chief Executive Officer, reduced to 1.5x after five years of participation in the Severance Plan, and 1.0x for the President), 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.

 

Neither Dr. Agwunobi nor Mr. DeSimone is a party to any transaction required to be disclosed pursuant to Item 404(a) of Regulation S-K.

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