HIIQ Health Insurance Innovations Inc

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): March 30, 2015

 

 

Health Insurance Innovations, Inc.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware		001-35811		46-1282634
(State or other jurisdiction of incorporation)		(Commission File Number)		(IRS Employer Identification No.)

 

15438 N. Florida Avenue, Suite 201 Tampa, Florida		33613
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (877) 376-5831

Not Applicable

(Former name or former address, if changed since last report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

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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.

On March 30, 2015, Dirk A. Montgomery resigned as the Company’s Executive Vice President and Chief Financial Officer to pursue another business opportunity. Also on March 30, 2015, Joan Rodgers retired as the Company’s Chief Accounting Officer. Michael D. Hershberger, the Company’s current Senior Vice President of Finance and Business Development, has been appointed to serve as the Company’s interim Chief Financial Officer, and in that capacity, he will serve as the Company’s principal financial officer and principal accounting officer.

Mr. Hershberger, age 52, has served as the Company’s Senior Vice President of Finance and Business Development since November 2013, served as the Company’s Chief Financial Officer from February 2012 through November 2013, and served as the Company’s interim Chief Financial Officer from July 31, 2014 until September 2, 2014. Mr. Hershberger served as senior manager at Baker Tilly, a full service accounting and advisory firm, from 2005 to 2011, where he was responsible for managing housing research from 2009 until joining the Company in 2011. Mr. Hershberger holds a bachelor of science degree in accounting from Augustana College and earned his masters of science degree in urban land economics/finance from the University of Wisconsin Graduate School of Business. He is a Certified Public Accountant in the State of Illinois.

In connection with assuming the position of interim Chief Financial Officer, Mr. Hershberger’s Amended and Restated Employment Agreement, dated November 7, 2013, with the Company (the “Amended and Restated Employment Agreement”) has been amended in the manner described below (the “Interim Amendment”). A copy of the Interim Amendment is attached as Exhibit 10.1 to this Form 8-K, and the Amended and Restated Employment Agreement has been previously filed as Exhibit 10.13 to the Company’s Annual Report on Form 10-K filed on March 18, 2015.

Under the Amended and Restated Employment Agreement, Mr. Hershberger’s term of employment ended on November 7, 2014 but remains in effect under successive one-year extensions. Under the agreement, Mr. Hershberger is entitled to an annual salary of $200,000 (which was subsequently increased to $250,000) and is eligible to participate in the Company’s long-term incentive plan and in annual bonus awards and other employee benefits in accordance with their terms. Under the Interim Amendment, Mr. Hershberger’s annual base salary has been increased to $350,000 for the duration of his service as interim Chief Financial Officer (the “Interim Period”), and also under the Interim Amendment, Mr. Hershberger has been given a target bonus of $192,500 (and minimum bonus of $25,000) under the Company’s management bonus program for calendar year 2015. The Interim Amendment also provides for a $5,000 per month retention bonus, payable as follows: If the Interim Period is less than six months, Mr. Hershberger will be paid a retention bonus of $50,000 if he is not appointed to as the Company’s permanent Chief Financial Officer, but if he is appointed as permanent Chief Financial Officer during the first six months of the Interim Period, the bonus will be based on the actual number of months in the Interim Period. If the Interim Period is longer than six months, Mr. Hershberger will be paid $30,000 at the end of the initial six-month period and $30,000 at the end of each subsequent 6-month period during the Interim Period, but the retention bonus will in no event be less than $50,000 if Mr. Hershberger is not appointed as permanent Chief Financial Officer. The Interim Amendment also provides that Mr. Hershberger will be granted 40,000 restricted shares and 30,000 share-settled stock appreciation rights on July 1, 2015 so long as Mr. Hershberger is still employed by the Company on such date, and he will be granted 33,333 restricted shares and 66,667 stock appreciation rights if and when he is appointed to the role of permanent Chief Financial Officer.

In the event that the Company determines not to extend Mr. Hershberger’s agreement at the end of each one-year extension, terminates Mr. Hershberger’s employment without cause or Mr. Hershberger terminates his employment for good reason, Mr. Hershberger will be entitled to an amount equal to 24 months base salary payable in 24 equal monthly installments beginning on the termination date, provided that Mr. Hershberger executes a general release in the Company’s favor. Under the agreement, “good reason” includes certain changes in Mr. Hershberger’s responsibilities or duties, reductions in salary or a material reduction in benefits and a material breach by the Company of the agreement that remains uncured following notice of the breach. Mr. Hershberger is subject to non-competition and non-solicitation covenants that expire 24 months following termination of employment and confidentiality obligations.

The foregoing description of the Interim Amendment and Amended and Restated Employment Agreement does not purport to be complete and is subject to, and qualified in its entirety by reference to, the full text of the Interim Amendment, which is filed as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated herein by reference, and the full text of the Amended and Restated Employment Agreement, which is attached as Exhibit 10.13 to the Company’s Annual Report on Form 10-K filed on March 18, 2015.

 

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There was no arrangement or understanding pursuant to which Mr. Hershberger was selected as an officer of the Company. There are no family relationships between Mr. Hershberger and any director or executive officer of the Company, or any person chosen by the Company to become a director or executive officer. There are no related party transactions of the kind described in Item 404(a) of Regulation S-K in which Mr. Hershberger was or is a participant.

 

Item 7.01.

Regulation FD Disclosure.

On March 30, 2015, the Company issued a press release announcing the matters described in Item 5.02 above. A copy of the press release is attached hereto as Exhibit 99.1 and incorporated herein by reference.

The information in this item shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”), or otherwise subject to the liabilities of Section 18, nor shall it be deemed incorporated by reference in any of the Company’s filings under the Securities Act of 1933, as amended or the Exchange Act, except to the extent, if any, expressly set forth by specific reference in such filing.

 

Item 9.01.

Financial Statements and Exhibits.

 

(d)

Exhibits.

 

Exhibit Number		Description
10.1		Amendment, dated March 30, 2015, to Amended and Restated Employment Agreement between Michael D. Hershberger and Health Insurance Innovations, Inc.
99.1		Press release of Health Insurance Innovations, Inc. dated March 30, 2015.

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

Date: March 30, 2015

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EXHIBIT INDEX

 

Exhibit Number		Description
10.1		Amendment, dated March 30, 2015, to Amended and Restated Employment Agreement between Michael Hershberger and Health Insurance Innovations, Inc.
99.1		Press release of Health Insurance Innovations, Inc. dated March 30, 2015

Exhibit 10.1

 

March 30, 2015

Michael D. Hershberger

4100 Misty Valley Drive

Middleton, Wisconsin 53562

Dear Mike,

We are conducting a search to fill the role of Chief Financial Officer of Health Insurance Innovations, Inc. (“HII”). As we discussed, you will be considered among the pool of potential candidates to fill this position.

During this period, I am pleased to offer you the position of interim Chief Financial Officer of HII on the terms and subject to the conditions contained in this letter and in the Amended and Restated Employment Agreement, dated as of November 13, 2013, by and between HII and you (your “Employment Agreement”).

The terms of this offer are as follows:

 

1.	Title. During the Interim Period (as defined below), your title will be interim Chief Financial Officer.

 

2.	Interim Period. The period during which you will hold the role of interim Chief Financial Officer will begin on the effective date of the resignation of HII’s current Chief Financial Officer and conclude on the date this position is filled on a permanent basis.

 

3.

Reporting; Duties and Powers. During the Interim Period, you will report directly to the Chief Executive Officer of HII, and will perform such duties and exercise such powers which the Chief Executive Officer and the Board of Directors of HII may assign to you from time to time in your capacity as interim Chief Financial Officer. Without limiting the generality of the foregoing, in your capacity as interim Chief Financial Officer, you will be designated as the “principal financial officer” and the “principal accounting officer” of the Company.

 

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4.	Location. During the Interim Period, your duties will be performed primarily at HII’s home office in Tampa, Florida, subject to reasonable travel requirements on HII’s behalf.

 

5.

Salary. Effective March 30, 2015, your Salary (as defined in your Employment Agreement) will be increased to $29,166.67 per month (i.e., an annual rate of $350,000). At the conclusion of the Interim Period, your salary will revert to $20,833.33 per month (i.e., an annual rate of $250,000), unless you are appointed to the position of Chief Financial Officer.

 

6.

2015 Management Bonus Program: For calendar year 2015, you will be eligible to participate in HII’s management bonus program (“MBP”) in such amounts, on such terms and subject to such conditions as determined by the Compensation Committee of HII. For calendar year 2015, your target bonus under the MBP will be equal to $192,500; provided, that you will be paid a minimum bonus of $25,000 for calendar year 2015 no later than March 15, 2016 if you are employed by HII at such time.

 

7.	Retention Bonus. During the Interim Period, you will accrue $5,000 per month, pro-rated for any partial month at the beginning or end of the Interim Period (the aggregate of such amounts, the “Retention Bonus”). The Retention Bonus will be payable to you as follows:

 

a.

If the Interim Period is less than six (6) months, you will be paid as follows: (i) $50,000 if you are not appointed to the position of Chief Financial Officer of the Company, or (ii) the amount of the Retention Bonus accrued during the Interim Period if you are appointed to the position of Chief Financial Officer of HII. Such payment will be made to you in a lump sum following the end of the Interim Period in accordance with HII’s customary payroll practices.

 

b.

If the Interim Period is longer than six (6) months you will be paid (i) $30,000 at the end of the initial six (6) month period, and (ii) as applicable (A) for subsequent periods of less than six (6) months, the amount of the Retention Bonus

 

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accrued during such period or (B) $30,000 at the end of each subsequent six (6) month period; provided, that the minimum aggregate Retention Bonus for which you shall be eligible if you are not appointed to the position of Chief Financial Officer of HII will be at least $50,000. Such payments will be made to you in lump sums following the end of the applicable periods and at the end of the Interim Period in accordance with HII’s customary payroll practices.

Please note the following:

 

a.

If during the Interim Period your employment is terminated for Cause (as defined in your Employment Agreement) or you resign in the absence of a Good Reason Event (as defined in your Employment Agreement), you will forfeit any portion of the Retention Bonus which has been accrued, but not paid to you.

 

b.

If during the Interim Period you die, or your employment is terminated because you are Disabled (as defined in your Employment Agreement), your employment is terminated without Cause or you resign as a result of a Good Reason Event, you will be paid the amount of the Retention Bonus which has accrued, but not been paid to you; provided, that the amount of such payment shall not be less than an amount equal to $50,000 less the aggregate amount of Retention Bonuses previously paid to you. As a condition to HII’s obligations, if any, to make any such payment, you or your personal representative must execute, deliver to HII and not revoke a general release substantially in the form attached to your Employment Agreement as Exhibit A.

 

8.	Amendment to Employment Agreement – Salary Severance. Your Employment Agreement is amended as follows:

 

a.

in Section 2 of your Employment Agreement, the text “12 months” is replaced with the text “24 months”;

 

b.

in Section 4(b)(iii)(C) of your Employment Agreement, the text “one-twelfth” and “12 months” are replaced, respectively, with “one-twenty fourth” and “24 months”; and

 

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c.

for the purposes of Section 2 and Section 4(b)(iii)(C) of your Employment Agreement, the term “Executive’s annual Salary hereunder (at the rate then in effect)” means, as applicable:

 

i.

your average annualized salary over the preceding six (6) month period, if your employment ends during the Interim Period; or

 

ii.

your Salary under your Employment Agreement at the rate then in effect, if your employment ends after the Interim Period.

 

9.	LTIP Awards. If you are employed by HII on the following dates, then on the terms and subject to the conditions of the Health Insurance Innovations, Inc. Long Term Incentive Plan (the “LTIP”) and the applicable grant document:

 

a.

you will be granted, on July 1, 2015, (i) 40,000 Class A Shares of HII (the “Restricted Shares”) and (ii) 30,000 Class A Share-settled stock appreciation rights (“SSARs”) with a strike price equal to the market closing price on July 1, 2015; and

 

b.

if you are appointed to the permanent role of Chief Financial Officer, on such date you will be granted (i) 33,333 Restricted Shares and (ii) 66,667 SSARs with a strike price equal to the market closing price on such date.

The foregoing grants will vest 25% on each of the first two anniversaries of the applicable grant date, and 50% on the third anniversary of the applicable grant date. Unvested Restricted Shares and unvested or unexercised SSARs will be subject to forfeiture if you resign absent a Good Reason Event or are terminated for Cause. Similarly, unvested Restricted Shares and unvested or unexercised SSARs will be subject to 100% accelerated vesting if you resign as a result of a Good Reason Event or are terminated without Cause. In the event your employment is terminated because you resign as a result of a Good Reason Event or are terminated without Cause, the

 

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SSARs forming part of the foregoing grants, to the extent that they are otherwise vested and exercisable at the time of your termination of service, shall terminate at 5:00 p.m. (Eastern time) on the date that is one year after the date of your termination of service. In addition, each grant document will provide that unvested Restricted Shares and unvested or unexercised SSARs will be subject to 100% accelerated vesting at the time a Change in Control (as defined in the LTIP) occurs. The applicable grant documents will otherwise be on terms, and contain such conditions, offered to other similarly situated executive officers of HII.

In the event that your employment is terminated because you resign as a result of a Good Reason Event or are terminated without Cause, in either case prior to July 1, 2015, you will be awarded (a) 40,000 Class A Shares of HII and (b) 30,000 SSARs with a strike price equal to the market closing price on the date your employment is terminated, provided that such SSARs shall terminate at 5:00 p.m. (Eastern time) on the date that is one year after the date of your termination of service.

 

10.	Withholding. Any payments provided hereunder or under your Employment Agreement shall be subject to applicable withholding.

 

11.	Governance. In your role as interim Chief Financial Officer HII will look to you to play an integral role in refining and developing our procedures regarding the delegation of authority to members of the senior management team.

Your employment with HII will continue to be “at will,” which means that you or HII may terminate your employment at any time, for any reason or no reason, with or without cause, and with or without prior notice or prior disciplinary action. All terms and conditions of your Employment Agreement not expressly amended or modified hereby shall remain in full force and effect. Without limiting the generality of the foregoing, you acknowledge and agree that a “Good Reason Event” (as defined in your Employment Agreement) will not be triggered if HII decides not to appoint you to the position of Chief Financial Officer.

 

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If you agree with our offer as specified above, please sign and date this letter where indicated below and send it to me via e-mail (mkosloske@hiiquote.com), with a copy to Michael A. Petrizzo, Jr., our General Counsel (mpetrizzo@hiiquote.com).

We hope you find this offer attractive, and look forward to your continuing contributions to the HII team. Please feel free to call or e-mail me if you have any questions.

 

Very truly yours,

HEALTH INSURANCE INNOVATIONS, INC.

/s/ Michael W. Kosloske

Michael W. Kosloske

Chairman, President and Chief Executive Officer

AGREED AND ACCEPTED:

/s/ Michael D. Hershberger

Michael D. Hershberger

DATE: March 30, 2015

 

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Exhibit 99.1

Health Insurance Innovations, Inc. Announces Finance Organization Changes

TAMPA, Fla., March 30, 2015 (GLOBE NEWSWIRE) — Health Insurance Innovations, Inc. (NASDAQ:HIIQ) (“HII” or “Company”), a leading developer, distributor and virtual administrator of affordable, cloud-based individual health insurance plans and ancillary products, announced Finance organization changes including the transition and search for a new Chief Financial Officer and the retirement of its Chief Accounting Officer.

Dirk Montgomery will be resigning as Chief Financial Officer to pursue another opportunity. Mr. Montgomery has agreed to make himself available during April to transition his responsibilities. Michael Hershberger, Senior Vice President of Finance and Business Development, has been named the interim Chief Financial Officer, and in such capacity he will be designated as the Company’s principal financial officer and principal accounting officer, effective March 30, 2015. Mr. Hershberger has worked at HII since 2011 in various senior financial executive roles. The Company has initiated a search for a new Chief Financial Officer.

Joan Rodgers, HII’s Chief Accounting Officer, will be retiring in April. Her responsibilities will be filled internally.

“We greatly appreciate the contributions that both Dirk and Joan made to HII and to the finance and accounting organization, and we look forward to building on the strong foundation that has been established,” said Michael Kosloske, CEO and President of Health Insurance Innovations.

About Health Insurance Innovations, Inc.

Health Insurance Innovations, Inc. (“HII”) develops affordable, high-quality health insurance products through partnerships with best-in-class insurance carriers, distributed through licensed insurance agents as plan configurations customized for the individual consumer. These transactions take place via the industry’s first virtual administrator, an entirely cloud-based proprietary process —Quote-Buy-Print— providing proof-of-coverage to insured in minutes rather than weeks. HII is a data-driven digital business informed by its consumer division.

HII’s consumer division includes HealthPocket.com’s Research & Data business, the largest repository (of any kind) of health insurance information. Additional information about HII can be found at www.hiiquote.com.

 

CONTACTS:
		Susan Noonan
		S.A. Noonan Communications, LLC
		(212) 966 3650
		susan@sanoonan.com