Item
5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements
of Certain Officers.
On
November 15, 2016, the Board of Directors of Health Insurance Innovations, Inc. (the “Company”) made the following
executive leadership changes at the Company:
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The
Company entered into a Separation Agreement and General Release with Patrick R. McNamee, the Company’s Chief Executive
Officer, pursuant to which Mr. McNamee’s employment with the Company was mutually terminated and pursuant to which Mr.
McNamee resigned as a director of the Company (the “McNamee Separation Agreement”);
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The
Company entered into an Amended and Restated Employment Agreement with Gavin D. Southwell, the Company’s President,
pursuant to which Mr. Southwell was appointed as the Company’s President and Chief Executive Officer (the “Amended
Southwell Employment Agreement”). Mr. Southwell was also elected as director of the Company;
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The
Company and Josef Denother, the Company’s Chief Operating Officer, entered into a Separation Agreement and General Release
under which Mr. Denother’s employment with the Company was mutually terminated (the “Denother Separation Agreement”);
and
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Paul
G. Gabos was elected as the non-executive Chairman of the Board of Directors of the Company, succeeding Michael W. Kosloske,
who previously served as Executive Chairman and will continue to serve as a director and as Chief of Product Innovation of
the Company.
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Summaries
of the material terms and conditions of the above-referenced agreements are set forth below.
Amended
Southwell Employment Agreement
The
Amended Southwell Employment Agreement amends and restates the Employment Agreement that Mr. Southwell and the Company originally
entered into on July 20, 2016 (the “Original Employment Agreement”). A summary of the material terms of the Original
Employment Agreement and biographical information about Mr. Southwell were disclosed in a Form 8-K filed by the Company on July
20, 2016 and are incorporated herein by this reference.
The
Amended Southwell Employment Agreement amends the Original Employment Agreement by increasing Mr. Southwell’s based salary
to $550,000 and increasing his target bonus to 75% of his base salary. Mr. Southwell will also receive a housing allowance of
$4,500 per month through September 2017. The Amended Southwell Employment Agreement also increases Mr. Southwell’s annual
discretionary target equity grant under the Company’s Long Term Incentive Plan to 100% of his base salary, with one-third
of such grant consisting of restricted shares of the Company’s Class A common stock and two-thirds of such grant consisting
of stock appreciation rights. If awarded, these grants will vest 25% on each of the first four anniversaries of the grant date.
Pursuant
to the Amended Southwell Employment Agreement, the Company made a new grant to Mr. Southwell of 200,000 restricted shares and
100,000 stock appreciation rights under the Company’s Long Term Incentive Plan, with the stock appreciation rights having
an exercise price equal to $10.30 per share. The restricted shares and stock appreciation rights will vest in increments of 25%
on each of the first four anniversary of the grant date, subject to acceleration upon a change in control.
The
other terms and conditions of the Amended Southwell Employment Agreement are materially consistent with the terms and conditions
of the Original Employment Agreement.
The
foregoing does not purport to be a complete description of the Amended Southwell Employment Agreement and is qualified by reference
to the full text of such agreement attached as an exhibit to this Current Report on Form 8-K.
Separation
Agreements
The
McNamee Separation Agreement provides that Mr. McNamee’s employment with the Company ended on November 15, 2016. Under the
McNamee Separation Agreement, the Company will pay Mr. McNamee severance in an amount equal to his base salary under his Employment
Agreement (i.e., $550,000 per year) for a period of 12 months, and he will receive $453,750 in lieu of an accrued bonus. The 1,022,090
stock appreciation rights held by Mr. McNamee were vested immediately upon his separation and will be exercisable by him for a
period of one year following his employment separation. The McNamee Separation Agreement provides for a full and unconditional
release of the Company by Mr. McNamee.
The
Denother Separation Agreement provides that Mr. Denother’s employment with the Company ended on November 15, 2016. Under
the Denother Separation Agreement, the Company will pay Mr. Denother severance in an amount equal to his base salary under his
Employment Agreement (i.e., $255,000 per year) for a period of 6 months, and he will receive $70,125 in lieu of an accrued bonus.
The 39,239 stock appreciation rights held by Mr. Denother were vested immediately upon his separation and will be exercisable
by him for a period of one year following his employment separation. The Denother Separation Agreement provides for a full and
unconditional release of the Company by Mr. Denother.
The
foregoing does not purport to be a complete description of the McNamee Separation Agreement and Denother Separation Agreement
and is qualified by reference to the full text of such agreements attached as exhibits to this Current Report on Form 8-K.