Form 8-K

 

 

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): February 7, 2013

 

 

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

 

(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))

 

 

 


Item 1.01 Entry into a Material Definitive Agreement.

In connection with the initial public offering by Health Insurance Innovations, Inc. (the “Company”) of its Class A common stock covered by the Registration Statement on Form S-1 (File No. 333-185596) as originally filed with the Securities and Exchange Commission on December 20, 2012, as amended (the “Registration Statement”), the Third Amended and Restated Limited Liability Company Agreement of Health Plan Intermediaries Holdings, LLC (“HPIH”) was entered into by and among the Company, as the managing member of HPIH, and the other members of HPIH.

In addition, on February 13, 2013, the Company entered into the following agreements: (i) the Registration Rights Agreement; (ii) the Tax Receivable Agreement and (iii) the Exchange Agreement.

The Registration Rights Agreement, the Third Amended and Restated Limited Liability Company Agreement of Health Plan Intermediaries Holdings, LLC, the Tax Receivable Agreement and the Exchange Agreement are filed herewith as Exhibits 4.1, 10.1, 10.2 and 10.3, respectively, and are incorporated herein by reference. The terms of these agreements are substantially the same as the terms set forth in the forms of such agreements filed as exhibits to the Registration Statement and as described therein.

Entities controlled by Michael W. Kosloske, the Company’s Chairman, President and Chief Executive Officer, have various relationships with the Company. For further information concerning the material relationships between the Company and Mr. Kosloske and these entities, see the section entitled “Relationships and Related Transactions” in the Registration Statement.

 

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

In connection with the initial public offering, (i) on February 7, 2013, the Health Insurance Innovations, Inc. Long Term Incentive Plan became effective (following stockholder approval), (ii) on February 13, 2013, the Restricted Stock Award Agreement pursuant to the Health Insurance Innovations, Inc. Long Term Incentive Plan between Health Insurance Innovations, Inc. and Michael D. Hershberger became effective and (iii) on February 13, 2013, the employment agreements between Health Insurance Innovations, Inc., and each of the following executive officers were entered into: Michael W. Kosloske, Lori Kosloske and Michael D. Hershberger.

The Health Insurance Innovations, Inc. Long Term Incentive Plan, the Restricted Stock Award Agreement pursuant to the Health Insurance Innovations, Inc. Long Term Incentive Plan between Health Insurance Innovations, Inc. and Michael D. Hershberger and the employment agreements are filed herewith as Exhibits 10.4, 10.5, 10.6, 10.7 and 10.8, respectively, and are incorporated herein by reference. The terms of these agreements are substantially the same as the terms set forth in the forms of such agreements filed as exhibits to the Registration Statement and as described therein.

Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.

On February 13, 2013, the Amended and Restated Certificate of Incorporation, the Certificate of Correction to the Amended and Restated Certificate of Incorporation and the Amended and Restated Bylaws of the Company became effective. A description of the Company’s capital stock giving effect to the adoption of the Amended and Restated Certificate of Incorporation and the Amended and Restated Bylaws is described in the Registration Statement. The Amended and Restated Certificate of Incorporation, the Certificate of Correction to the Amended and Restated Certificate of Incorporation and the Amended and Restated Bylaws are filed herewith as Exhibit 3.1, Exhibit 3.2 and Exhibit 3.3, respectively, and are incorporated herein by reference.

Item 8.01 Other Events.

On February 13, 2013, the Company completed its initial public offering by issuing 4,666,667 shares of its Class A common stock, par value $0.001 per share, at a price to the public of $14.00 per share. The proceeds to the Company from this offering, before deducting underwriting discounts and expenses, are approximately $65.3 million.


Item 9.01 Financial Statements and Exhibits.

 

(d) Exhibits

 

Exhibit

No.

  

Description

  3.1    Amended and Restated Certificate of Incorporation of Health Insurance Innovations, Inc.
  3.2    Certificate of Correction to the Amended and Restated Certificate of Incorporation of Health Insurance Innovations, Inc.
  3.3    Amended and Restated Bylaws of Health Insurance Innovations, Inc.
  4.1    Registration Rights Agreement dated as of February 13, 2013
10.1    Third Amended and Restated Limited Liability Company Agreement of Health Plan Intermediaries Holdings, LLC dated as of February 13, 2013
10.2    Tax Receivable Agreement dated as of February 13, 2013
10.3    Exchange Agreement dated as of February 13, 2013
10.4    Health Insurance Innovations, Inc. Long Term Incentive Plan
10.5    Restricted Stock Award Agreement pursuant to the Health Insurance Innovations, Inc. Long Term Incentive Plan between Health Insurance Innovations, Inc. and Michael D. Hershberger dated as of February 13, 2013
10.6    Employment Agreement between Michael W. Kosloske and Health Insurance Innovations, Inc. dated as of February 13, 2013
10.7    Employment Agreement between Michael D. Hershberger and Health Insurance Innovations, Inc. dated as of February 13, 2013
10.8    Employment Agreement between Lori Kosloske and Health Insurance Innovations, Inc. dated as of February 13, 2013


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.

 

HEALTH INSURANCE INNOVATIONS, INC.
By:  

/s/ Michael W. Kosloske

  Name:   Michael W. Koslsoke
  Title:   Chairman, President and Chief Executive Officer

Date: February 13, 2013

Amended and Restate Certificate of Incorporation

Exhibit 3.1

AMENDED AND RESTATED CERTIFICATE OF INCORPORATION

OF

HEALTH INSURANCE INNOVATIONS, INC.

Pursuant to the provisions of § 242 and § 245 of the

General Corporation Law of the State of Delaware

The present name of the corporation is Health Insurance Innovations, Inc. (the “Corporation”). The Corporation was incorporated under the name “Health Insurance Innovations, Inc.” by the filing of its original certificate of incorporation (the “Original Certificate of Incorporation”) with the Secretary of State of the State of Delaware on October 26, 2012. This Amended and Restated Certificate of Incorporation of the Corporation, which both restates and further amends the provisions of the Original Certificate of Incorporation, was duly adopted in accordance with the provisions of Sections 228, 242 and 245 of the General Corporation Law of the State of Delaware. This Amended and Restated Certificate of Incorporation shall become effective as of February 13, 2013. The Original Certificate of Incorporation of the Corporation is hereby amended and restated to read in its entirety as follows:

ARTICLE 1

Section 1.01. Name. The name of the Corporation is Health Insurance Innovations, Inc.

ARTICLE 2

Section 2.01. Address. The address of its registered office in the State of Delaware is 12711 Centerville Road, Suite 400, City of Wilmington, County of New Castle, Delaware 19808. The name of its registered agent at such address is Corporation Service Company.

ARTICLE 3

Section 3.01. Purpose. The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware as the same exists or may hereafter be amended (“Delaware Law”).


ARTICLE 4

Section 4.01. Capitalization. The total number of shares of stock which the Corporation shall have authority to issue is 125,000,000, consisting of (a) 100,000,000 shares of Class A Common Stock, par value $0.001 per share (the “Class A Common Stock”), (b) 20,000,000 shares of Class B Common Stock, par value $0.001 per share (the “Class B Common Stock” and, together with the Class A Common Stock, the “Common Stock”) and (c) 5,000,000 shares of Preferred Stock, par value $0.001 per share (the “Preferred Stock”). Holders of capital stock do not have preemptive rights.

Section 4.02. Reclassifications. At the time that this Amended and Restated Certificate of Incorporation becomes effective under Delaware Law (the “Effective Time”) each share of common stock, par value $0.01 per share, of the Corporation, which was designated as Common Stock in the Original Certificate of Incorporation and was authorized, issued and outstanding or held as treasury stock immediately prior to the Effective Time shall, automatically and without further action by any stockholder, be reclassified into 86,667.67 shares of Class B Common Stock.

Section 4.03. Common Stock.

(a) Voting Rights.

(i) Each holder of Class A Common Stock, as such, shall be entitled to one vote for each share of Class A Common Stock held of record by such holder on all matters on which stockholders generally are entitled to vote; provided, however, that, except as otherwise required by law, holders of Class A Common Stock, as such, shall not be entitled to vote on any amendment to this Amended and Restated Certificate of Incorporation (including any certificate of designations relating to any series of Preferred Stock) that relates solely to the terms of one or more outstanding series of Preferred Stock if the holders of such affected series are entitled, either separately or together with the holders of one or more other such series, to vote thereon pursuant to this Amended and Restated Certificate of Incorporation (including any certificate of designations relating to any series of Preferred Stock) or pursuant to Delaware Law.

(ii) Each holder of Class B Common Stock, as such, shall be entitled to one vote for each share of Class B Common Stock held of record by such holder on all matters on which stockholders generally are entitled to vote; provided, however, that except as otherwise required by law, holders of Class B Common Stock, as such, shall not be entitled to vote on any amendment to this Amended and Restated Certificate of Incorporation (including any certificate of designations relating to any series of Preferred Stock) that relates solely to the terms of one or more outstanding series of Preferred Stock if the holders of such affected series

 

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are entitled, either separately or together with the holders of one or more other such series, to vote thereon pursuant to this Amended and Restated Certificate of Incorporation (including any certificate of designations relating to any series of Preferred Stock) or pursuant to Delaware Law. A holder of one share of Class B Common Stock, as such, shall be entitled at all times to the same number of vote or votes as a holder of one share of Class A Common Stock, as such, on all matters on which stockholders generally are entitled to vote.

(iii) Except as otherwise required in this Amended and Restated Certificate of Incorporation or by applicable law, the holders of Common Stock shall vote together as a single class on all matters (or, if any holders of Preferred Stock are entitled to vote together with the holders of Common Stock, as a single class with such holders of Preferred Stock).

(b) Dividends. Subject to applicable law and the rights, if any, of the holders of any outstanding series of Preferred Stock or any class or series of stock having a preference over or the right to participate with the Class A Common Stock with respect to the payment of dividends, dividends may be declared and paid on the Class A Common Stock out of the assets of the Corporation that are by law available therefor at such times and in such amounts as the Board of Directors of the Corporation (the “Board”) in its discretion shall determine. Dividends shall not be declared or paid on the Class B Common Stock.

(c) Liquidation, Dissolution or Winding Up. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation, after payment or provision for payment of the debts and other liabilities of the Corporation and of the preferential and other amounts, if any, to which the holders of Preferred Stock shall be entitled, the holders of all outstanding shares of Class A Common Stock shall be entitled to receive the remaining assets of the Corporation available for distribution ratably in proportion to the number of shares held by each such stockholder. The holders of shares of Class B Common Stock, as such, shall not be entitled to receive any assets of the Corporation in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation.

(d) Transfer of Class B Common Stock.

(i) A holder of Class B Common Stock may only transfer shares of Class B Common Stock to another person if such holder transfers a corresponding number of Series B Membership Interests to such person in accordance with the provisions of the Third Amended & Restated Limited Liability Company Agreement of Health Plan Intermediaries Holdings, LLC, a Delaware limited liability company (the “Company”), as such agreement may be amended from time to time in accordance with the terms thereof.

 

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(ii) Any purported transfer of shares of Class B Common Stock in violation of the restrictions described in the immediately preceding paragraph (the “Restrictions”) shall be null and void. If, notwithstanding the foregoing prohibition, a person shall, voluntarily or involuntarily, purportedly become or attempt to become, the purported owner (“Purported Owner”) of shares of Class B Common Stock in violation of the Restrictions, then the Purported Owner shall not obtain any rights in and to such shares of Class B Common Stock (the “Restricted Shares”), and the purported transfer of the Restricted Shares to the Purported Owner shall not be recognized by the Corporation’s transfer agent (the “Transfer Agent”).

(iii) Upon a determination by the Board that a person has attempted or may attempt to transfer or to acquire Restricted Shares, the Board may take such action as it deems advisable to refuse to give effect to such transfer or acquisition on the books and records of the Corporation, including without limitation to cause the Transfer Agent to record the Purported Owner’s transferor as the record owner of the Restricted Shares, and to institute proceedings to enjoin or rescind any such transfer or acquisition.

(iv) The Board may, to the extent permitted by law, from time to time establish, modify, amend or rescind, by bylaw or otherwise, regulations and procedures not inconsistent with the provisions of this Section 4.03(d) for determining whether any acquisition of shares of Class B Common Stock would violate the Restrictions and for the orderly application, administration and implementation of the provisions of this Section 4.03(d). Any such procedures and regulations shall be kept on file with the Secretary of the Corporation and with its Transfer Agent and shall be made available for inspection by any prospective transferee and, upon written request, shall be mailed to any holder of shares of Class B Common Stock.

(v) The Board shall have all powers necessary to implement the Restrictions, including without limitation the power to prohibit the transfer of any shares of Class B Common Stock in violation thereof.

(vi) Upon the transfer of any shares of Class B Common Stock to HII by HPI, HPIS or their successors and assigns, such shares of Class B Common Stock shall immediately be cancelled on the books and records of HII and shall no longer be deemed to be issued and outstanding capital stock of HII.

(vii) As used in this Amended and Restated Certificate of Incorporation, (i) “Series B Membership Interests” shall mean Series B Membership Interests of the Company, or any successor entity thereto, issued under its Third Amended & Restated Limited Liability Company

 

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Agreement, as the same may be amended or amended and restated from time to time in accordance with the terms thereof and (ii) “person” means any individual, firm, corporation, partnership, limited liability company, trust, joint venture or other enterprise or entity.

(e) In the event of a reclassification or other similar transaction as a result of which the shares of Class A Common Stock are converted into another security, then a holder of shares of Class B Common Stock shall be entitled to receive upon exchange of such shares (together with a commensurate number of Series B Membership Interests) the amount of such security that such holder would have received if such exchange had occurred immediately prior to the record date of such reclassification or other similar transaction, taking into account any adjustment as a result of any subdivision (by any stock split or dividend, reclassification or otherwise) or combination (by reverse stock split, reclassification or otherwise) of such security that occurs after the effective time of such reclassification or other similar transaction.

(f) The Corporation covenants that it will at all times reserve and keep available out of its authorized but unissued shares of Class A Common Stock, solely for the purpose of issuance upon exchange of the outstanding shares of Class B Common Stock and Series B Membership Interests for Class A Common Stock, such number of shares of Class A Common Stock that are issuable upon any such exchange and shall exchange such shares of Class B Common Stock and a commensurate number of Series B Membership Interests for shares of Class A Common Stock pursuant to the exchange agreement among the Corporation, the Company and the holders from time to time of Series B Membership Interests governing such exchanges; provided that nothing contained herein shall be construed to preclude the Corporation from satisfying its obligations in respect of any such exchange by delivery of shares of Class A Common Stock which are held in the treasury of the Corporation. The Corporation covenants that all shares of Class A Common Stock issued upon any such exchange will, upon issuance, be validly issued, fully paid and non-assessable.

Section 4.04. Preferred Stock. (a) The Board is hereby empowered to authorize by resolution or resolutions from time to time the issuance of one or more classes or series of Preferred Stock and to fix the designations, powers, preferences and relative, participating, optional or other rights, if any, and the qualifications, limitations or restrictions thereof, if any, with respect to each such class or series of Preferred Stock and the number of shares constituting each such class or series, and to increase or decrease the number of authorized shares of any such class or series to the extent permitted by Delaware Law.

(b) Except as otherwise required by law, holders of a series of Preferred Stock, as such, shall be entitled only to such voting rights, if any, as shall expressly be granted thereto by this Amended and Restated Certificate of Incorporation (including any certificate of designations relating to such series).

 

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Section 4.05. Changes in Common Stock. If the Corporation in any manner subdivides or combines the outstanding shares of Class A Common Stock, the outstanding shares of the Class B Common Stock shall be proportionately subdivided or combined, as the case may be. If the Corporation in any manner subdivides or combines the outstanding shares of Class B Common Stock, the outstanding shares of Class A Common Stock shall be proportionately subdivided or combined, as the case may be.

Section 4.06. Reorganization or Merger. (a) In the case of any reorganization, share exchange, consolidation, conversion or merger of the Corporation with or into another person in which shares of Class A Common Stock and Class B Common Stock are converted into (or entitled to receive with respect thereto) shares of stock and/or other securities or property (including, without limitation, cash), each holder of a share of Class A Common Stock shall be entitled to receive with respect to each such share the same kind and amount of shares of stock and other securities and property (including, without limitation, cash), but each holder of a share of Class B Common Stock shall only be entitled to receive with respect to each such share the same number of shares of stock as is received by a holder of a share of Class A Common Stock, and shall not be entitled to receive other securities or property (including, without limitation, cash); and such shares of stock received by a holder of shares of Class B Common Stock shall afford the holder thereof no more rights, privileges or preferences than would be afforded the holders of Class B Common Stock hereunder, including without limitation rights, privileges or preferences with respect to dividends, upon voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation or in connection with any reorganization, share exchange, consolidation, conversion or merger of the Corporation with or into another person (each, a “Business Combination Transaction”).

(b) In connection with any Business Combination Transaction, the Corporation shall not adversely affect, alter, repeal, change or otherwise impair any of the powers, preferences, rights or privileges of the Class A Common Stock (whether directly, by the filing of a certificate of designations, powers, preferences, rights or privileges, by a Business Combination Transaction or otherwise) (i) in a manner that is disproportionate and adverse compared to the manner in which the powers, preferences, rights or privileges of the holders of the Class B Common Stock are affected, altered, repealed, changed or otherwise impaired, including, without limitation (x) any of the voting rights of the holders of the Class A Common Stock in a manner that is disproportionate and adverse compared to the manner in which the voting rights of the holders of the Class B Common Stock are affected, altered, repealed, changed or otherwise impaired, and (y) the requisite vote or percentage required to approve or take any action described in this ARTICLE 4, in ARTICLE 11 or elsewhere in this Amended and Restated Certificate of Incorporation or described in the bylaws of the Corporation in a manner that is disproportionate and adverse compared to the manner in which the voting rights of the holders of the Class B Common Stock

 

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are affected, altered, repealed, changed or otherwise impaired, or (ii) with respect to the economic rights, privileges or preferences of the holders of Class A Common Stock relative to the holders of Class B Common Stock, including, without limitation, with respect to dividends, upon voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation or in connection with a Business Combination Transaction, without, in each case (i) and (ii), the affirmative vote of the holders of a majority of the shares of Class A Common Stock, voting as a separate class.

(c) In connection with any Business Combination Transaction, the Corporation shall not adversely affect, alter, repeal, change or otherwise impair any of the powers, preferences, rights or privileges of the Class B Common Stock (whether directly, by the filing of a certificate of designations, powers, preferences, rights or privileges, by a Business Combination Transaction or otherwise) in a manner that is disproportionate and adverse compared to the manner in which the powers, preferences, rights or privileges of the holders of the Class A Common Stock are affected, altered, repealed, changed or otherwise impaired, including, without limitation (i) any of the voting rights of the holders of the Class B Common Stock in a manner that is disproportionate and adverse compared to the manner in which the voting rights of the holders of the Class A Common Stock are affected, altered, repealed, changed or otherwise impaired, and (ii) the requisite vote or percentage required to approve or take any action described in this ARTICLE 4, in ARTICLE 11 or elsewhere in this Amended and Restated Certificate of Incorporation or described in the bylaws of the Corporation in a manner that is disproportionate and adverse compared to the manner in which the voting rights of the holders of the Class A Common Stock are affected, altered, repealed, changed or otherwise impaired, without in each case the affirmative vote of the holders of a majority of the shares of Class B Common Stock, voting as a separate class.

ARTICLE 5

Section 5.01. Bylaws. In furtherance and not in limitation of the powers conferred by Delaware Law, the Board is expressly authorized to make, amend, alter, change, add to or repeal the bylaws of the Corporation without the assent or vote of the stockholders in any manner not inconsistent with Delaware Law or this Amended and Restated Certificate of Incorporation. The affirmative vote of the holders of at least 75% of the voting power of all the then outstanding shares of stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required for the stockholders to make, amend, alter, change, add to or repeal any provision of the bylaws of the Corporation.

 

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ARTICLE 6

Section 6.01. Board of Directors. (a) The business and affairs of the Corporation shall be managed by or under the direction of the Board.

(b) Each director shall hold office until such director’s successor shall have been duly elected and qualified or until such director’s earlier death, resignation or removal. In no event will a decrease in the number of directors shorten the term of any incumbent director.

(c) There shall be no cumulative voting in the election of directors. Election of directors need not be by written ballot unless the bylaws of the Corporation so provide.

(d) Vacancies on the Board resulting from death, resignation, removal or otherwise and newly created directorships resulting from any increase in the number of directors may be filled solely by a majority of the directors then in office (although less than a quorum) or by the sole remaining director, and each director so elected shall hold office until his or her successor is elected and qualified or until his or her earlier death, resignation or removal.

(e) Notwithstanding the foregoing, whenever the holders of one or more classes or series of Preferred Stock shall have the right, voting separately as a class or series, to elect directors, the election, term of office, filling of vacancies, removal and other features of such directorships shall be governed by the terms of the resolution or resolutions adopted by the Board pursuant to ARTICLE 4 applicable thereto, and such directors so elected shall not be subject to the provisions of this ARTICLE 6 unless otherwise provided therein.

ARTICLE 7

Section 7.01. Meetings Of Stockholders. Any action required or permitted to be taken at any annual or special meeting of stockholders may be taken only upon the vote of stockholders at an annual or special meeting duly noticed and called in accordance with Delaware Law, as amended from time to time, and may not be taken by written consent of stockholders without a meeting; provided, however, if the shares of capital stock of the Corporation beneficially owned by the Investor Group (as defined below) constitute more than 50% of the total voting power of all the then outstanding capital stock of the Corporation, any action required or permitted to be taken at any annual or special meeting of stockholders may be taken by written consent of stockholders without a meeting; provided, further, that any action required or permitted to be taken by the holders of Class B Common Stock, voting separately as a class, or, to the extent expressly permitted by the certificate of designation relating to one or more series of Preferred Stock, by the holders of such series of Preferred Stock, voting separately as a series or separately as a class with one or more other such series,

 

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may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding shares of the relevant class or series having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered to the Corporation by delivery to its registered office in Delaware, its principal place of business, or to an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Special meetings of the stockholders may be called by the Board, the Chairman of the Board or the Chief Executive Officer of the Corporation and may not be called by any other person; provided, however, if the shares of capital stock of the Corporation beneficially owned by the Investor Group constitute more than 50% of the total voting power of all the then outstanding capital stock of the Corporation, special meetings of the stockholders may be called by the holders of a majority of the total voting power of all the then outstanding capital stock of the Corporation. Notwithstanding the foregoing, whenever holders of one or more classes or series of Preferred Stock shall have the right, voting separately as a class or series, to elect directors, such holders may call, pursuant to the terms of the resolution or resolutions adopted by the Board of Directors pursuant to ARTICLE 4 hereto, special meetings of holders of such Preferred Stock. As used in this Amended and Restated Certificate of Incorporation, (i) “HPI” means Health Plan Intermediaries, LLC, a Florida limited liability company, (ii) “HPIS” means Health Plan Intermediaries Sub, LLC, a Delaware limited liability company, (iii) “Investor Group” means, collectively, Michael W. Kosoloske, HPI, HPIS, any of their respective affiliates (other than the Corporation and its subsidiaries), and any Investor Nominee, and (iv) “Investor Nominee” means any officer, director, manager, partner, employee or other agent of HPI or HPIS who serves as a director of the Corporation.

ARTICLE 8

Section 8.01. Limited Liability Of Directors. No director of the Corporation will have any personal liability to the Corporation or its stockholders for monetary damages for any breach of fiduciary duty as a director, except to the extent such exemption from liability or limitation thereof is not permitted under Delaware Law as the same exists or hereafter may be amended. Neither the amendment nor the repeal of this ARTICLE 8 shall eliminate or reduce the effect thereof in respect of any matter occurring, or any cause of action, suit or claim that, but for this ARTICLE 8, would accrue or arise, prior to such amendment or repeal.

 

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ARTICLE 9

Section 9.01. Indemnification. (a) Each person (and the heirs, executors or administrators of such person) who was or is a party or is threatened to be made a party to, or is involved in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that such person is or was a director or officer of the Corporation or is or was serving at the request of the Corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise, shall be indemnified and held harmless by the Corporation to the fullest extent permitted by Delaware Law. The right to indemnification conferred in this ARTICLE 9 shall also include the right to have the Corporation pay directly or cause to be paid directly the expenses incurred in connection with any such proceeding in advance of its final disposition to the fullest extent authorized by Delaware Law. The right to indemnification conferred in this ARTICLE 9 shall be a contract right.

(b) The Corporation may, by action of its Board, provide indemnification to such of the employees and agents of the Corporation to such extent and to such effect as the Board shall determine to be appropriate and authorized by Delaware Law.

(c) The Corporation shall have power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another person against any expense, liability or loss incurred by such person in any such capacity or arising out of such person’s status as such, whether or not the Corporation would have the power to indemnify such person against such liability under Delaware Law.

(d) The rights and authority conferred in this ARTICLE 9 shall not be exclusive of any other right which any person may otherwise have or hereafter acquire.

(e) Neither the amendment nor repeal of this ARTICLE 9, nor the adoption of any provision of this Amended and Restated Certificate of Incorporation or the bylaws of the Corporation, nor, to the fullest extent permitted by Delaware Law, any modification of law, shall eliminate or reduce the effect of this ARTICLE 9 in respect of any acts or omissions occurring prior to such amendment, repeal, adoption or modification.

ARTICLE 10

Section 10.01. Severability. If any provision or provisions of this Amended and Restated Certificate of Incorporation shall be held to be invalid, illegal or unenforceable as applied to any circumstance for any reason

 

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whatsoever: (a) the validity, legality and enforceability of such provisions in any other circumstance and of the remaining provisions of this Amended and Restated Certificate of Incorporation (including, without limitation, each portion of any paragraph of this Amended and Restated Certificate of Incorporation containing any such provision held to be invalid, illegal or unenforceable that is not itself held to be invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby and (b) to the fullest extent possible, the provisions of this Amended and Restated Certificate of Incorporation (including, without limitation, each such portion of any paragraph of this Amended and Restated Certificate of Incorporation containing any such provision held to be invalid, illegal or unenforceable) shall be construed so as to permit the Corporation to protect its directors, officers, employees and agents from personal liability in respect of their good faith service to or for the benefit of the Corporation to the fullest extent permitted by law.

ARTICLE 11

Section 11.01. Amendment. The Corporation reserves the right to amend (whether directly, by the filing of a certificate of designations, powers, preferences, rights or privileges, by a Business Combination Transaction or otherwise) this Amended and Restated Certificate of Incorporation in any manner permitted by Delaware Law, subject to Section 11.02, and all rights and powers conferred upon stockholders, directors and officers herein are granted subject to this reservation. Notwithstanding the foregoing, if the shares of the capital stock of the Corporation beneficially owned by the Investor Group constitute less than a majority of the total voting power of all capital stock of the Corporation then outstanding, the provisions set forth in ARTICLES 4, 5, 6, 7, 8, 9 and this ARTICLE 11 may not be repealed or amended (whether directly, by the filing of a certificate of designations, powers, preferences, rights or privileges, by a Business Combination Transaction or otherwise) in any respect, and no other provision may be adopted, amended (whether directly, by the filing of a certificate of designations, powers, preferences, rights or privileges, by a Business Combination Transaction or otherwise) or repealed which would have the effect of modifying or permitting the circumvention of the provisions set forth in ARTICLES 4, 5, 6, 7, 8 and 9 and this ARTICLE 11, unless such action is approved by the affirmative vote of the holders of not less than 75% of the total voting power of all outstanding securities of the Corporation then entitled to vote generally in the election of directors, voting together as a single class.

Section 11.02. Increases and Decreases of Authorized Shares. The number of authorized shares of Class A Common Stock or Class B Common Stock may be increased or decreased (but not below the number of shares of Class A Common Stock or Class B Common Stock then outstanding and reserved for) by the affirmative vote of the holders of a majority of the shares of Class A Common Stock and Class B Common Stock, voting together as a single class.

 

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ARTICLE 12

Section 12.01. Section 203. The Corporation expressly elects not to be governed by Section 203 of Delaware Law for so long as the shares of the capital stock of the Corporation beneficially owned by the Investor Group constitute at least 25% of the total voting power of all capital stock of the Corporation.

ARTICLE 13

Section 13.01. Forum Selection. The sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Corporation, (ii) any action asserting a claim of breach of fiduciary duty owed by any director, officer or other employee of the Corporation to the Corporation or the Corporation’s stockholders, (iii) any action asserting a claim arising pursuant to any provision of the General Corporation Law of the State of Delaware, or (iv) any action asserting a claim governed by the internal affairs doctrine shall be the Delaware Chancery Court or, if such court shall not have jurisdiction, any federal court located in the State of Delaware or other Delaware state court. Any person or entity purchasing or otherwise acquiring any interest in shares of capital stock of the Corporation shall be deemed to have notice of and consented to the provisions of this Article 13.

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IN WITNESS WHEREOF, the undersigned has executed this Amended and Restated Certificate of Incorporation as of this 11th day of February, 2013.

 

HEALTH INSURANCE INNOVATIONS, INC.
By:  

/s/ Michael W. Kosloske

  Name:   Michael W. Kosloske
  Title:   Chief Executive Officer
Certificate of Correction

Exhibit 3.2

CERTIFICATE OF CORRECTION

OF

AMENDED AND RESTATED CERTIFICATE OF INCORPORATION

OF

HEALTH INSURANCE INNOVATIONS, INC.

Pursuant to the provisions of § 103(f) of the General

Corporation Law of the State of Delaware

FIRST: The name of the corporation is Health Insurance Innovations, Inc. (the “Corporation”).

SECOND: The Amended and Restated Certificate of Incorporation of the Corporation was filed in the office of the Secretary of State of the State of Delaware on February 11, 2013.

THIRD: The Amended and Restated Certificate of Incorporation of the Corporation so filed is an inaccurate record of the corporate action therein referred to in that Section 4.02 misstated the conversion of shares of common stock into shares of Class B common stock.

FOURTH: The Amended and Restated Certificate of Incorporation is corrected so that Section 4.02 shall read in its entirety as follows:

“Section 4.02. Reclassifications. At the time that this Amended and Restated Certificate of Incorporation becomes effective under Delaware Law (the “Effective Time”) each share of common stock, par value $0.01 per share, of the Corporation, which was designated as Common Stock in the Original Certificate of Incorporation and was authorized, issued and outstanding or held as treasury stock immediately prior to the Effective Time shall, automatically and without further action by any stockholder, be reclassified into 86,666.67 shares of Class B Common Stock.”


IN WITNESS WHEREOF, the undersigned has executed this Certificate of Correction this 13th day of February, 2013.

 

HEALTH INSURANCE INNOVATIONS, INC.
By:   /s/ Michael D. Hershberger
  Name:   Michael D. Hershberger
  Title:   Chief Financial Officer

 

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Amended and Restated Bylaws

Exhibit 3.3

AMENDED AND RESTATED BYLAWS

OF

HEALTH INSURANCE INNOVATIONS, INC.

ARTICLE 1

OFFICES

Section 1.01. Registered Office. The registered office of the Corporation shall be in the City of Wilmington, County of New Castle, State of Delaware.

Section 1.02. Other Offices. The Corporation may also have offices at such other places both within and without the State of Delaware as the Board of Directors may from time to time determine or the business of the Corporation may require.

Section 1.03. Books. The books of the Corporation may be kept within or without the State of Delaware as the Board of Directors may from time to time determine or the business of the Corporation may require.

ARTICLE 2

MEETINGS OF STOCKHOLDERS

Section 2.01. Time and Place of Meetings. All meetings of stockholders shall be held at such places, either within or without the State of Delaware, on such dates, and at such times, as may be determined from time to time by the Board of Directors (or the Chairman in the absence of a designation by the Board of Directors).

Section 2.02. Annual Meetings. An annual meeting of stockholders, commencing with the year 2014, shall be held for the election of directors and to transact such other business as may properly be brought before the meeting.

Section 2.03. Special Meetings. Subject to the rights of the holders of any class or series of preferred stock of the Corporation, and except as otherwise provided in Section 7.01 of the amended and restated certificate of incorporation of the Corporation (the “Certificate of Incorporation”), special meetings of the stockholders of the Corporation may be called only by or at the direction of the Board of Directors, the Chairman of the Board of Directors or the Chief Executive Officer of the Corporation.


Section 2.04. Notice of Meetings and Adjourned Meetings; Waivers of Notice. (a) Whenever stockholders are required or permitted to take any action at a meeting, a written notice of the meeting shall be given which shall state the place, date and hour of the meeting, the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called. Unless otherwise provided by the General Corporation Law of the State of Delaware as the same exists or may hereafter be amended (“Delaware Law”), such notice shall be given not less than 10 nor more than 60 days before the date of the meeting to each stockholder of record entitled to vote at such meeting. Unless these Bylaws otherwise require, when a meeting is adjourned to another time or place (whether or not a quorum is present), notice need not be given of the adjourned meeting if the time, place, if any, and the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such meeting, are announced at the meeting at which the adjournment is taken. At the adjourned meeting, the Corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than 30 days, or after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.

(b) A written waiver of any such notice signed by the person entitled thereto, or a waiver by electronic transmission by the person entitled to notice, whether before or after the time of the meeting stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends the meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice.

Section 2.05. Quorum. Unless otherwise provided under the Certificate of Incorporation or these Bylaws and subject to Delaware Law, the presence, in person or by proxy, of the holders of a majority of the outstanding capital stock of the Corporation entitled to vote at a meeting of stockholders shall constitute a quorum for the transaction of business. If, however, such quorum shall not be present or represented at any meeting of the stockholders, the Chairman of the meeting or a majority of the voting interest of the stockholders present in person or represented by proxy shall adjourn the meeting, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented any business may be transacted which might have been transacted at the meeting as originally notified.

Section 2.06. Voting. (a) Unless otherwise provided in the Certificate of Incorporation and subject to Delaware Law, each stockholder shall be entitled to

 

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one vote for each outstanding share of capital stock of the Corporation held by such stockholder. Any share of capital stock of the Corporation held by the Corporation shall have no voting rights. Except as otherwise provided by law, the Certificate of Incorporation or these Bylaws, in all matters other than the election of directors, the affirmative vote of the majority of the outstanding shares of capital stock of the Corporation present in person or represented by proxy at the meeting and entitled to vote on the subject matter shall be the act of the stockholders. Subject to the rights of the holders of any series of preferred stock to elect additional directors under specific circumstances, directors shall be elected by a plurality of the votes of the shares of capital stock of the Corporation present in person or represented by proxy at the meeting and entitled to vote on the election of directors.

(b) Each stockholder entitled to vote at a meeting of stockholders or, to the extent permitted by the Certificate of Incorporation and these Bylaws, to express consent or dissent to a corporate action in writing without a meeting may authorize another person or persons to act for such stockholder by proxy, appointed by an instrument in writing, subscribed by such stockholder or by his attorney thereunto authorized, or by proxy sent by facsimile transmission or by any other means of electronic communication permitted by law, which results in a writing from such stockholder or by his attorney, and delivered to the secretary of the meeting. No proxy shall be voted after one year from its date, unless said proxy provides for a longer period.

(c) Votes may be cast by any stockholder entitled to vote in person or by his proxy. In determining the number of votes cast for or against a proposal or nominee, shares abstaining from voting on a matter (including elections) will not be treated as a vote cast. A non-vote by a broker will be counted for purposes of determining a quorum but not for purposes of determining the number of votes cast.

Section 2.07. Action by Consent. Any action required or permitted to be taken at any annual or special meeting of stockholders may be taken only upon the vote of stockholders at an annual or special meeting duly noticed and called in accordance with Delaware Law and may not be taken by written consent of stockholders without a meeting; provided, however, if the shares of capital stock the Corporation held by the Investor Group (as defined in the Certificate of Incorporation) constitute more than 50% of the total voting power of all the then outstanding capital stock of the Corporation, any action required or permitted to be taken at any annual or special meeting of stockholders may be taken by written consent of stockholders without a meeting; provided, further, that any action required or permitted to be taken by the holders of the Corporation’s Class B Common Stock, voting separately as a class, or, to the extent expressly permitted by the certificate of designation relating to one or more series of the Corporation’s preferred stock, by the holders of such series of preferred stock, voting separately as a series or separately as a class with one or more other such series, may be taken without a meeting, without prior notice and without a vote, if a consent or

 

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consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding shares of the relevant class or series having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered to the Corporation by delivery to its registered office in Delaware, its principal place of business, or to an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded, which officer or agent may be the Secretary or an Assistant Secretary.

Section 2.08. Organization. At each meeting of stockholders, the Chairman of the Board of Directors, if one shall have been elected, or in the Chairman’s absence or if one shall not have been elected, the director designated by the vote of the majority of the directors present at such meeting, shall act as chairman of the meeting. The Secretary of the Corporation (or in the Secretary’s absence or inability to act, the person whom the chairman of the meeting shall appoint secretary of the meeting) shall act as secretary of the meeting and keep the minutes thereof.

Section 2.09. Order of Business. The order of business at all meetings of stockholders shall be as determined by the chairman of the meeting.

Section 2.10. Nomination of Directors. Only persons who are nominated in accordance with the procedures set forth in these Bylaws shall be eligible to serve as directors. Nominations of persons for election to the Board of Directors of the Corporation may be made at a meeting of stockholders (a) by or at the direction of the Board of Directors (or any committee thereof) or (b) by any stockholder of the Corporation who is a stockholder of record at the time of giving of notice provided for in this Section 2.10, who shall be entitled to vote for the election of directors at the meeting and who complies with the notice procedures set forth in this Section 2.10. Such nominations, other than those made by or at the direction of the Board of Directors (or any committee thereof), shall be made pursuant to timely notice in writing to the Secretary of the Corporation. To be timely, (i) in connection with an annual meeting of stockholders, a stockholder’s notice shall be delivered to or mailed and received at the principal executive offices of the Corporation not less than 120 days nor more than 180 days prior to the first anniversary of the preceding year’s annual meeting of stockholders; provided, however, that in the event that the date of the annual meeting is advanced more than 30 days prior to such anniversary date or delayed more than 60 days after such anniversary date, then to be timely such notice must be received by the Corporation no later than the close of business on the later of the 120th day prior to the date of the meeting and the 10th day following the day on which public announcement of the date of the meeting was made, and (ii) in connection with a special meeting of stockholders, a stockholder’s notice shall be delivered to or mailed and received at the principal executive offices of the Corporation not less than 40 days nor more than 60 days prior to the date of the special meeting; provided, however, that if less than 55

 

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days’ notice or prior public disclosure of the date of the special meeting of the stockholders is given or made to the stockholders, then to be timely such notice must be received by the Corporation no later than the close of business on the 10th day following the day on which a notice of the date of the special meeting was mailed to the stockholders or the public disclosure of the date of the meeting was made. In no event shall the public announcement of an adjournment or postponement of an annual meeting commence a new time period (or extend any time period) for the giving of a stockholder’s notice as described above. Such stockholder’s notice shall set forth:

(a) as to each person whom the stockholder proposes to nominate for election or reelection as a director all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (including such person’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected); and

(b) as to the stockholder giving the notice:

(i) the name and address, as they appear on the Corporation’s books, of such stockholder and any Stockholder Associated Person (defined below) covered by clause (ii) below and

(ii) (A) the class and number of shares of capital stock of the Corporation which are held of record or are beneficially owned by such stockholder and any Stockholder Associated Person and (B) any derivative positions held or beneficially held by the stockholder and any Stockholder Associated Person with respect to the Corporation’s securities and whether and the extent to which any hedging or other transaction or series of transactions has been entered into by or on behalf of, or any other agreement, arrangement or understanding has been made, the effect or intent of which is to increase or decrease the voting power of, or economic exposure of, such stockholder and any Stockholder Associated Person with respect to the Corporation’s securities.

At the request of the Board of Directors, any person nominated by the Board of Directors (or any committee thereof) for election as a director shall furnish to the Secretary of the Corporation that information required to be set forth in a stockholder’s notice of nomination which pertains to the nominee. No person shall be eligible to serve as a director of the Corporation unless nominated in accordance with the procedures set forth in this Bylaw. The chairman of the meeting shall, if the facts in his judgment warrant, determine and declare to the meeting that a nomination was not made in accordance with the procedures prescribed by the Bylaws, and if he should so determine and declare, the defective

 

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nomination shall be disregarded. In addition to the foregoing provisions of this Section 2.10, a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this Section 2.10.

Stockholder Associated Person” of any stockholder means (A) any person controlling or controlled by, directly or indirectly, or acting in concert with, such stockholder, (B) any beneficial owner of shares of stock of the Corporation owned of record or beneficially by such stockholder and/or (C) any person controlling, controlled by or under common control with such Stockholder Associated Person.

Section 2.11. Notice of Business. At any meeting of the stockholders, only such business shall be conducted as shall have been brought before the meeting (a) by or at the direction of the Board of Directors (or any committee thereof) or (b) by any stockholder of the Corporation who is a stockholder of record at the time of giving of the notice provided for in this Section 2.11, who shall be entitled to vote at such meeting and who complies with the notice procedures set forth in this Section 2.11. For business to be properly brought before a stockholder meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation. To be timely, (i) in connection with an annual meeting of stockholders, a stockholder’s notice shall be delivered to or mailed and received at the principal executive offices of the Corporation not less than 120 days nor more than 180 days prior to the first anniversary of the preceding year’s annual meeting of stockholders; provided, however, that in the event that the date of the annual meeting is advanced more than 30 days prior to such anniversary date or delayed more than 60 days after such anniversary date, then to be timely such notice must be received by the Corporation no later than the close of business on the later of the 120th day prior the date of the meeting and the 10th day following the day on which public announcement of the date of the meeting was made, and (ii) in connection with a special meeting of stockholders, a stockholder’s notice shall be delivered to or mailed and received at the principal executive offices of the Corporation not less than 40 days nor more than 60 days prior to the date of the special meeting; provided, however, that if less than 55 days’ notice or prior public disclosure of the date of the special meeting of the stockholders is given or made to the stockholders, then to be timely such notice must be received by the Corporation no later than the close of business on the 10th day following the day on which a notice of the date of the special meeting was mailed to the stockholders or the public disclosure of the date of the meeting was made. A stockholder’s notice to the Secretary of the Corporation shall set forth as to each matter the stockholder proposes to bring before the meeting:

(a) a brief description of the business desired to be brought before the meeting and the reasons for conducting such business at the meeting;

 

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(b) the name and address, as they appear on the Corporation’s books, of the stockholder proposing such business and any Stockholder Associated Person covered by clauses (c) and (d) below;

(c) (i) the class and number of shares of the Corporation which are held of record or are beneficially owned by such stockholder and by any Stockholder Associated Person with respect to the Corporation’s securities and (ii) any derivative positions held or beneficially held by the stockholder and any Stockholder Associated Person and whether and the extent to which any hedging or other transaction or series of transactions has been entered into by or on behalf of, or any other agreement, arrangement or understanding has been made, the effect or intent of which is to increase or decrease the voting power of, such stockholder and/or any Stockholder Associated Person with respect to the Corporation’s securities; and

(d) any material interest of the stockholder or any Stockholder Associated Person in such business.

Notwithstanding anything in the Bylaws to the contrary, no business shall be conducted at a stockholder meeting except in accordance with the procedures set forth in this Section 2.11. The chairman of the meeting shall, if the facts in his or her judgment warrant, determine and declare to the meeting that business was not properly brought before the meeting and in accordance with the provisions of the Bylaws, and if he should so determine and declare, and any such business not properly brought before the meeting shall not be transacted. In addition to the foregoing provisions of this Section 2.11, a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this Section 2.11.

ARTICLE 3

DIRECTORS

Section 3.01. General Powers. Except as otherwise provided in Delaware Law or the Certificate of Incorporation, the business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors.

Section 3.02. Number, Election and Term of Office. The Board of Directors shall consist of not less than three nor more than nine directors, with the exact number of directors to be determined from time to time solely by resolution adopted by the affirmative vote of a majority of the Whole Board. For purposes of these Bylaws, the term “Whole Board” shall mean the total number of authorized directors whether or not there exist any vacancies in previously authorized directorships. The election and terms of office of directors shall be governed by the Certificate of Incorporation. Directors need not be stockholders.

 

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Section 3.03. Quorum and Manner of Acting. A majority of the total number of directors shall constitute a quorum for the transaction of business, and the affirmative vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors. When a meeting is adjourned to another time or place (whether or not a quorum is present), notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting, the Board of Directors may transact any business which might have been transacted at the original meeting. If a quorum shall not be present at any meeting of the Board of Directors the directors present thereat shall adjourn the meeting, from time to time, without notice other than announcement at the meeting, until a quorum shall be present.

Section 3.04. Time and Place of Meetings. The Board of Directors shall hold its meetings at such places, either within or without the State of Delaware, and at such times as may be determined from time to time by the Board of Directors (or the Chairman in the absence of a determination by the Board of Directors).

Section 3.05. Annual Meeting. The Board of Directors shall meet for the purpose of organization, the election of officers and the transaction of other business, as soon as practicable after each annual meeting of stockholders, on the same day and at the same place where such annual meeting shall be held. Notice of such meeting need not be given. In the event such annual meeting is not so held, the annual meeting of the Board of Directors may be held at such place either within or without the State of Delaware, on such date and at such time as shall be specified in a notice thereof given as hereinafter provided in Section 3.07 herein or in a waiver of notice thereof signed by any director who chooses to waive the requirement of notice.

Section 3.06. Regular Meetings. After the place and time of regular meetings of the Board of Directors shall have been determined and notice thereof shall have been once given to each member of the Board of Directors, regular meetings may be held without further notice being given.

Section 3.07. Special Meetings. Special meetings of the Board of Directors may be called by the Chairman of the Board of Directors, Chief Executive Officer (if any) or the President and shall be called by the Chairman of the Board of Directors, Chief Executive Officer, President or Secretary on the written request of three directors. Notice of special meetings of the Board of Directors shall be given to each director at least 24 hours before the meeting in such manner as is determined by the Board of Directors, Chief Executive Officer or President (including personal delivery or by mail, telecopy, e-mail, facsimile or telephone). Notwithstanding the foregoing, a meeting of the Board of Directors may be held at any time without notice if all the directors are present, or if those not present sign (or electronically transmit) a waiver of notice of the meeting, either before or after the meeting.

 

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Section 3.08. Committees. The Board of Directors may designate one or more committees, each committee to consist of one or more of the directors of the Corporation. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in a resolution of the Board of Directors, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to the following matters: (a) approving or adopting, or recommending to the stockholders, any action or matter expressly required by Delaware Law to be submitted to the stockholders for approval or (b) adopting, amending or repealing any Bylaw of the Corporation. Each committee shall keep regular minutes of its meetings and report the same to the Board of Directors from time to time.

Section 3.09. Action by Consent. Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if all members of the Board of Directors or committee, as the case may be, consent thereto in writing or by electronic transmission, and the writing or writings or electronic transmission or transmissions, are filed with the minutes of proceedings of the Board of Directors or committee thereof.

Section 3.10. Telephonic Meetings. Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, members of the Board of Directors, or any committee designated by the Board of Directors, may participate in a meeting of the Board of Directors, or such committee, as the case may be, by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting.

Section 3.11. Resignation. Any director may resign at any time by giving notice in writing or by electronic transmission to the Board of Directors or to the Secretary of the Corporation. The resignation of any director shall take effect upon receipt of notice thereof or at such later time as shall be specified in such notice; and unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.

Section 3.12. Vacancies. Unless otherwise provided in the Certificate of Incorporation or these Bylaws, vacancies on the Board of Directors resulting from death, resignation, removal or otherwise and newly created directorships resulting

 

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from any increase in the number of directors may be filled solely by a majority of the directors then in office or by the sole remaining director. Each director so elected shall hold office until his or her successor is elected and qualified or until his or her earlier death, resignation or removal. If there are no directors in office, then an election of directors may be held in accordance with Delaware Law. Unless otherwise provided in the Certificate of Incorporation, when one or more directors shall resign from the Board of Directors, effective at a future date, a majority of the directors then in office, including those who have so resigned, shall have the power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective, and each director so chosen shall hold office as provided in the filling of the other vacancies.

Section 3.13. Removal. Any director or the entire Board of Directors may be removed, with cause, by the affirmative vote of the holders of at least 75% of the voting power of all the then outstanding shares of capital stock of the Corporation; provided, however, if the shares of capital stock of the Corporation held by the Investor Group (as defined in the Certificate of Incorporation) constitute more than 50% of the total voting power of all the then outstanding capital stock of the Corporation, any director or the entire Board of Directors may be removed, with or without cause, by the affirmative vote of the holders of a majority of the outstanding capital stock of the Corporation then entitled to vote at any election of directors and the vacancies thus created may be filled in accordance with Section 3.12 herein.

Section 3.14. Compensation. Unless otherwise provided in the Certificate of Incorporation or these Bylaws, the Board of Directors shall have authority to fix the compensation of directors, including fees and reimbursement of expenses.

Section 3.15. Preferred Stock Directors. Notwithstanding anything else contained herein, whenever the holders of one or more classes or series of preferred stock shall have the right, voting separately as a class or series, to elect directors, the election, term of office, filling of vacancies, removal and other features of such directorships shall be governed by the terms of the resolution or resolutions applicable thereto adopted by the Board of Directors pursuant to the Certificate of Incorporation, and such directors so elected shall not be subject to the provisions of Sections 3.02, 3.12 and 3.13 of this Article 3 unless otherwise provided therein.

ARTICLE 4

OFFICERS

Section 4.01. Principal Officers. The principal officers of the Corporation shall be a President, one or more Vice Presidents, a Treasurer and a Secretary who shall have the duty, among other things, to record the proceedings of the meetings of stockholders and the Board of Directors in a book kept for that

 

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purpose. The Corporation may also have such other principal officers, including a Chief Executive Officer and one or more Controllers, as the Board of Directors may in its discretion appoint. One person may hold the offices and perform the duties of any two or more of such offices, except that no one person shall hold the offices and perform the duties of President and Secretary.

Section 4.02. Election and Term of Office. The principal officers of the Corporation shall be elected annually by the Board of Directors at the meeting of the Board of Directors immediately following the annual meeting of Stockholders. Each such officer shall hold office until his or her successor is elected and qualified, or until his or her earlier death, resignation or removal. The remuneration of all officers of the Corporation shall be fixed by the Board of Directors. Any vacancy in any office shall be filled in such manner as the Board of Directors shall determine.

Section 4.03. Subordinate Officers. In addition to the principal officers enumerated in Section 4.01 herein, the Corporation may have one or more Assistant Vice Presidents, Assistant Treasurers, Assistant Secretaries and Assistant Controllers and such other subordinate officers, agents and employees as the Board of Directors may deem necessary, each of whom shall hold office for such period as the Board of Directors may from time to time determine. The Board of Directors may delegate to any principal officer the power to appoint and to remove any such other officers enumerated in this Section 4.03.

Section 4.04. Removal. Any officer may be removed, with or without cause, at any time, by resolution adopted by the Board of Directors. Any officer appointed by a principal officer pursuant to authority delegated by the Board of Directors under Section 4.03 hereof may be removed by that principal officer or any other principal officer to whom the Board of Directors delegates such power to remove.

Section 4.05. Resignations. Any officer may resign at any time by giving written notice to the Board of Directors or to any principal officer. The resignation of any officer shall take effect upon receipt of notice thereof or at such later time as shall be specified in such notice; and unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.

Section 4.06. Powers and Duties. The officers of the Corporation shall have such powers and perform such duties incident to each of their respective offices and such other duties as may from time to time be conferred upon or assigned to them by the Board of Directors or, if applicable, by the principal officer who appointed them.

 

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ARTICLE 5

CAPITAL STOCK

Section 5.01. Certificates For Stock; Uncertificated Shares. The shares of capital stock of the Corporation shall be uncertificated shares, provided that the Board of Directors of the Corporation may provide by resolution or resolutions that some or all of any or all classes or series of its stock shall be represented by certificates. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the Corporation. Except as otherwise provided by law, the rights and obligations of the holders of uncertificated shares and the rights and obligations of the holders of shares represented by certificates of the same class and series shall be identical. Every holder of stock represented by certificates shall be entitled to have a certificate signed in the name of the Corporation by (x) the Chairman of the Board of Directors, the Chief Executive Officer (if any), the President or a Vice President of such Corporation, and (y) by the Treasurer, an assistant Treasurer, the Secretary or an assistant Secretary of such Corporation, representing the number of shares registered in certificate form. Either or both of the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if such person were such officer, transfer agent or registrar at the date of issue. The Corporation shall not have power to issue a certificate in bearer form.

Section 5.02. Transfer Of Shares. Shares of the stock of the Corporation may be transferred on the record of stockholders of the Corporation by the holder thereof or by such holder’s duly authorized attorney upon surrender of a certificate therefor properly endorsed or upon receipt of proper transfer instructions from the registered holder of uncertificated shares or by such holder’s duly authorized attorney and upon compliance with appropriate procedures for transferring shares in uncertificated form, unless waived by the Corporation; provided that transfers of shares of the Class B Common Stock shall be made only in accordance with the provisions related thereto contained in the Certificate of Incorporation.

Section 5.03. Authority for Additional Rules Regarding Transfer. The Board of Directors shall have the power and authority to make all such rules and regulations as it may deem expedient concerning the issue, transfer and registration of certificated or uncertificated shares of the stock of the Corporation, as well as for the issuance of new certificates in lieu of those which may be lost or destroyed, and may require of any stockholder requesting replacement of lost or destroyed certificates, bond in such amount and in such form as the Board of Directors may deem expedient to indemnify the Corporation, and/or the transfer agents, and/or the registrars of its stock against any claims arising in connection therewith.

 

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ARTICLE 6

GENERAL PROVISIONS

Section 6.01. Fixing the Record Date. (a) In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date shall not be more than 60 nor less than 10 days before the date of such meeting. If no record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day immediately preceding the day on which notice is given, or, if notice is waived, at the close of business on the day immediately preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.

(b) In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than 60 days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.

Section 6.02. Dividends. Subject to limitations contained in Delaware Law and the Certificate of Incorporation, the Board of Directors may declare and pay dividends upon the shares of capital stock of the Corporation, which dividends may be paid either in cash, in property or in shares of the capital stock of the Corporation.

Section 6.03. Year. The fiscal year of the Corporation shall commence on January 1 and end on December 31 of each year.

Section 6.04. Corporate Seal. The corporate seal shall have inscribed thereon the name of the Corporation, the year of its organization and the words “Corporate Seal, Delaware”. The seal may be used by causing it or a facsimile thereof to be impressed, affixed or otherwise reproduced.

Section 6.05. Voting of Securities Owned by the Corporation. The Board of Directors may authorize any person, on behalf of the Corporation, to attend, vote at and grant proxies to be used at any meeting of stockholders of any

 

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corporation or other entity (except this Corporation) in which the Corporation may hold stock or other securities or interests.

Section 6.06. Amendments. These Bylaws or any of them, may be made, amended, altered, changed, added to or repealed at any meeting of the Board of Directors or of the stockholders; provided, in the case of a meeting of the Board of Directors, that the affirmative vote of at least 75% of all directors in office shall be required for the Board of Directors to amend, alter, change, add to, repeal, or adopt any Bylaw inconsistent with, Articles 2 and 3; and, provided further, in the case of a meeting of the stockholders, that notice of the proposed change was given in the notice of the meeting of the stockholders and that notwithstanding any provision of law which might otherwise permit a lesser vote of the stockholders, the affirmative vote of the holders of at least 75% of the voting power of all the then outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required for the stockholders to make, amend, alter, change, add to or repeal any provision of these Bylaws.

* _ * _ * _ * _ * _ * _ * _ * _ * _ * _ * _ * _ * _ * _

 

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Registration Rights Agreement

Exhibit 4.1

 

 

REGISTRATION RIGHTS AGREEMENT

among

HEALTH INSURANCE INNOVATIONS, INC.

and

THE STOCKHOLDERS NAMED HEREIN

Dated as of February 13, 2013

 

 

 


REGISTRATION RIGHTS AGREEMENT

among

HEALTH INSURANCE INNOVATIONS, INC.

and

THE STOCKHOLDERS NAMED HEREIN

REGISTRATION RIGHTS AGREEMENT, dated as of February 13, 2013 (as amended from time to time, this “Agreement”), among Health Insurance Innovations, Inc., a Delaware corporation (“HII”), and each of the parties listed on Annex A (the “Initial Stockholders” and, as Annex A is updated and amended pursuant to Section 11(c), the “Stockholders”).

W I T N E S S E T H:

WHEREAS, HII has agreed to provide the Stockholders the registration rights provided herein;

NOW, THEREFORE, the parties hereto hereby agree as follows:

SECTION 1. Definitions. As used in this Agreement, the following terms have the following meanings:

Agreement” is defined in the preamble.

Business Day” means any day except a Saturday, Sunday or other day on which commercial banks in Tampa, Florida or New York City, New York are authorized by law to close.

Class A Shares” means shares of Class A common stock, par value $0.001 per share, of HII.

Class B Shares” means shares of Class B common stock, par value $0.001 per share, of HII.

Commission” means the U.S. Securities and Exchange Commission or any successor thereto.

Common Equity Securities” means the Class A Shares and all shares hereafter authorized of any class or series of common stock or other common equity interests of HII and any and all securities of any kind whatsoever of HII or any successor thereof which may be issued on or after the date hereof in respect of, in exchange for, or upon conversion of shares of Common Equity Securities


pursuant to a merger, consolidation, stock split, reverse split, stock dividend, recapitalization of HII or otherwise, which shares have the right (subject to the rights of any class or series of preferred stock or other preferred equity interests of HII) to participate in the distribution of the assets and earnings of HII without limit as to per share (or other denomination) amount; provided that Common Equity Securities shall not include the Class B Shares.

Company” means Health Plan Intermediaries Holdings, LLC, a Delaware limited liability company.

Demanding Stockholder” is defined in Section 2(a).

Demand Notice” is defined in Section 2(a).

Demand Registration” is defined in Section 2(a).

Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended from time to time, and any successor statute thereto and the rules and regulations of the Commission promulgated thereunder.

Exchange Agreement” means the Exchange Agreement dated as of the date hereof among HII, the Company and the other parties thereto, as the same may be amended from time to time in accordance with the terms thereof.

indemnified party” and “indemnifying party” are defined in Section 7(c).

Initial Stockholders” is defined in the preamble.

Existing Shares” means the Registrable Securities issued to the holders of Series B Membership Interests immediately prior to the IPO pursuant to the LLC Agreement.

IPO” means the initial public offering of Class A Shares by HII.

“HPI” means Health Plan Intermediaries, LLC, a Florida limited liability company.

LLC Agreement” means the Third Amended and Restated Limited Liability Company Agreement of the Company dated as of February 13, 2013, as such agreement may be amended from time to time.

Losses” is defined in Section 7(a).

 

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Notice” is defined in Section 2(a).

Partner Distribution” is defined in Section 2(a).

Permitted Transferee” is defined in Section 11(c).

Person” means any natural person, corporation, limited partnership, general partnership, limited liability company, joint stock company, joint venture, association, company, estate, trust, bank trust company, land trust, business trust or other organization, whether or not a legal entity, custodian, trustee-executor, administrator, nominee or entity in a representative capacity and any government or agency or political subdivision thereof.

Piggyback Notice” is defined in Section 3(a).

Piggyback Registration” is defined in Section 3(a).

Proceeding” means an action, claim, suit, arbitration or proceeding (including, without limitation, an investigation or partial proceeding, such as a deposition), whether commenced or threatened.

Prospectus” means the prospectus included in any Registration Statement (including, without limitation, a prospectus that discloses information previously omitted from a prospectus filed as part of an effective Registration Statement in reliance upon Rule 430A promulgated under the Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by such Registration Statement, and all other amendments and supplements to the Prospectus, including, without limitation, post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such Prospectus.

Registrable Securities” means (a) all shares or other denominations of Common Equity Securities issuable upon exchange or conversion of any Series B Membership Interests in the Company (together with a corresponding number of Class B Shares) and (b) any other shares or other denominations of Common Equity Securities otherwise held by the Stockholders from time to time (including, without limitation, any Common Equity Securities issued or distributed by way of dividend, stock split or other distribution after the date hereof). For the avoidance of doubt, a holder of Registrable Securities may include in any registration (including, without limitation, “shelf” registration) Common Equity Securities issuable upon exchange or conversion of Class B Shares and/or Series B Membership Interests in the Company without having effected such exchange or conversion as long as such exchange or conversion is effected prior to disposition thereof in accordance with such registration. As to any particular Registrable

 

3


Securities, once issued such securities shall cease to be Registrable Securities when (i) a Registration Statement covering such Registrable Securities has been declared effective under the Securities Act by the Commission and such Registrable Securities have been disposed of pursuant to such effective Registration Statement, (ii) they have been distributed to the public pursuant to Rule 144, or (iii) they have been sold to any Person to whom the rights under this Agreement are not assigned in accordance with this Agreement. No Registrable Securities may be registered under more than one Registration Statement at any one time.

Registration Statement” means any registration statement of HII under the Securities Act which permits the public offering of any of the Registrable Securities pursuant to the provisions of this Agreement, including, without limitation, the Prospectus, amendments and supplements to such registration statement, including post-effective amendments, all exhibits and all material incorporated by reference or deemed to be incorporated by reference in such registration statement.

Rule 144” means Rule 144 under the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission.

Shelf Offering” is defined in Section 2(e).

Securities Act” means the U.S. Securities Act of 1933, as amended from time to time, and any successor statute thereto and the rules and regulations of the Commission promulgated thereunder.

Series B Membership Interests” is defined in the LLC Agreement.

Sub” means Health Plan Intermediaries Sub, LLC, a Delaware limited liability company.

Stockholders” is defined in the preamble.

Subsequent Holder” is defined in Section 11(c).

Take-Down Notice” is defined in Section 2(e).

underwritten registration” or “underwritten offering” means a registration in which securities of HII are sold to an underwriter for reoffering to the public.

HII” is defined in the preamble.

 

4


SECTION 2. Demand Registration.

(a) Requests for Registration. Subject to the limits set forth below, at any time after the completion of the IPO, each of HPI (or its designated Permitted Transferee) and Sub (or its designated Permitted Transferee) shall have the right by delivering a written notice to HII (a “Demand Notice”, and the Stockholder submitting such Demand Notice, a “Demanding Stockholder”) to require HII to register, pursuant to the terms of this Agreement under and in accordance with the provisions of the Securities Act, the number of Registrable Securities requested to be so registered pursuant to the terms of this Agreement (a “Demand Registration”). Within ten (10) days after receipt by HII of a Demand Notice, HII shall give written notice (the “Notice”) of such Demand Notice to all other holders of Registrable Securities and shall, subject to the provisions of subsection (b), include in such registration all Registrable Securities with respect to which HII received written requests for inclusion therein within ten (10) days after such Notice is given by HII to such holders. A Demand Notice (including a Demand Notice that is also a Take-Down Notice) shall only be binding on HII if the sale of all Registrable Securities requested to be registered (pursuant to the Demand Notice and in response to the Notice) is reasonably expected to result in aggregate gross proceeds in excess of $25,000,000.

Following receipt of a Demand Notice for a Demand Registration, HII shall use its reasonable best efforts to file a Registration Statement as promptly as practicable, but not later than 60 days after such Demand Notice, and shall use its reasonable best efforts to cause such Registration Statement to be declared effective under the Securities Act as promptly as practicable after the filing thereof.

Each of HPI and Sub shall be entitled to request four (4) Demand Registrations; provided, however, that there shall be no limit to the number of Demand Registrations that constitute “shelf” registrations as contemplated by the next succeeding sentence. After such time as HII shall become eligible to use Form S-3 (or comparable form) for the registration under the Securities Act of any of its securities, HPI or Sub shall be entitled to request that any Demand Registration for which such Stockholder is delivering a Demand Notice be a “shelf” registration pursuant to Rule 415 under the Securities Act, and each of HPI and Sub shall be entitled to an unlimited number of Demand Registrations that constitute “shelf” registrations. Notwithstanding any other provisions of this Section 2, in no event shall more than one Demand Registration occur within any six (6) month period from the effective date of any Registration Statement filed pursuant to a prior Demand Notice.

No Demand Registration shall be deemed to have occurred for purposes of this Section 2 if (i) the Registration Statement relating to such Demand Registration does not become effective, (ii) the Registration Statement relating to such Demand Registration is not maintained effective for the period required pursuant to this subsection (a), (iii) the offering of the Registrable Securities

 

5


pursuant to the Registration Statement relating to such Demand Registration is subject to a stop order, injunction or similar order or requirement of the Commission during such period, or (iv) the Demand Registration does not become effective because the Demanding Stockholder withdraws its Demand Notice because a material adverse change has occurred, or is reasonably likely to occur, in the condition (financial or otherwise), prospects, business, assets or results of operations of HII and its subsidiaries taken as a whole subsequent to the date of the delivery of the Demand Notice.

All requests made pursuant to this Section 2 will specify the amount of Registrable Securities to be registered and the intended methods of disposition thereof.

HII shall be required to maintain the effectiveness of the Registration Statement (except in the case of a requested “shelf” registration) with respect to any Demand Registration for a period of at least 180 days after the effective date thereof or such shorter period in which all Registrable Securities included in such Registration Statement have actually been sold; provided, however, that such period shall be extended for a period of time equal to the period the holder of Registrable Securities refrains from selling any securities included in such registration at the request of (x) an underwriter or (y) HII pursuant to the provisions of this Agreement. HII shall be required to maintain the effectiveness of a “shelf” Registration Statement with respect to any Demand Registration at all times until the third anniversary of the effective date thereof, or, if earlier, until all Registrable Securities included in such Registration Statement have actually been sold; provided, however, that any Stockholder owning Common Equity Securities that have been included on a “shelf” Registration Statement may request that such Common Equity Securities be removed from such Registration Statement, in which event HII shall promptly either withdraw such Registration Statement if the Common Equity Securities of such Stockholder are the only Common Equity Securities still covered by such Registration Statement or file a post-effective amendment to such Registration Statement removing such Common Equity Securities.

Notwithstanding anything contained herein to the contrary, HII hereby agrees that (i) each Demand Registration that is a “shelf” registration pursuant to Rule 415 under the Securities Act shall contain all language (including, without limitation, on the Prospectus cover sheet, the principal stockholders’ chart and the plan of distribution) as may be reasonably requested by a holder of Registrable Securities to allow for a distribution to, and resale by, the direct and indirect affiliates, partners, members or stockholders of a holder of Registrable Securities (a “Partner Distribution”) and (ii) HII shall, at the reasonable request of any holder of Registrable Securities seeking to effect a Partner Distribution, file any Prospectus supplement or post-effective amendments and otherwise take any action reasonably necessary to include such language, if such language was not included in the initial Registration Statement, or revise such language if deemed reasonably necessary by such holder to effect such Partner Distribution.

 

6


(b) Priority on Demand Registration. If any of the Registrable Securities registered pursuant to a Demand Registration are to be sold in a firm commitment underwritten offering, and the managing underwriter or underwriters advise the holders of such securities in writing that in its or their view the total number or dollar amount of Registrable Securities proposed to be sold in such offering is such as to adversely affect the success of such offering (including, without limitation, securities proposed to be included by other holders of securities entitled to include securities in such offering pursuant to incidental or piggyback registration rights), then the number of Registrable Securities that in the opinion of such managing underwriter or underwriters can be sold without adversely affecting such offering shall be included in the following order:

(i) first, subject to the following paragraph, Existing Shares, on a pro rata basis based upon the number of Registrable Securities owned; and

(ii) second, any other shares of Common Equity Securities, on a pro rata basis based upon the number of Common Equity Securities owned.

In connection with any Demand Registration to which the provisions of this subsection (b) apply, no securities other than Registrable Securities shall be covered by such Demand Registration, and such registration shall not reduce the number of available Demand Registrations under this Section 2 in the event that the Registration Statement excludes more than 20% of the aggregate number of Registrable Securities requested to be included by the Demanding Stockholder. Notwithstanding anything herein to the contrary, if the managing underwriter or managing underwriters (if any) determine that the inclusion of the number of Existing Shares proposed to be included in any such offering would adversely affect the marketability of such offering, HII may exclude such number of Existing Shares as necessary or desirable to negate such adverse impact.

(c) Postponement of Demand Registration. HII shall be entitled to postpone (but not more than once in any twelve-month period), for a reasonable period of time not in excess of 75 days, the filing of a Registration Statement (but not the preparation of such Registration Statement) if HII delivers to the holders requesting registration a resolution of the board of directors of HII that, in the good faith judgment of the board of directors of HII, such registration and offering would reasonably be expected to materially adversely affect any bona fide material financing of HII or any material transaction under consideration by HII or would require disclosure of information that has not been disclosed to the public and is not otherwise required to be disclosed at that time, the premature

 

7


disclosure of which would materially adversely affect HII. Such board resolution shall contain a statement of the reasons for such postponement and an approximation of the anticipated delay. The holders receiving such board resolution shall keep the information contained in such board resolution confidential on the same terms set forth in Section 5(p). If HII shall so postpone the filing of a Registration Statement, the holder who made the Demand Registration shall have the right to withdraw the request for registration by giving written notice to HII within 20 days of the anticipated termination date of the postponement period, as provided in the board resolution delivered to the holders, and in the event of such withdrawal, such request shall not be counted for purposes of the number of Demand Registrations to which such holder is entitled pursuant to the terms of this Agreement.

(d) Use, and Suspension of Use, of “Shelf” Registration Statement. If HII has filed a “shelf” Registration Statement and has included Registrable Securities therein, HII shall be entitled to suspend (but not more than an aggregate of 90 days in any twelve month period), for such period of time as is reasonably necessary not in excess of 75 days, the offer or sale of Registrable Securities pursuant to such Registration Statement by any holder of Registrable Securities if (i) a “road show” is not then in progress with respect to a proposed offering of Registrable Securities by such holder pursuant to such Registration Statement and such holder has not executed an underwriting agreement with respect to a pending sale of Registrable Securities pursuant to such Registration Statement and (ii) HII delivers to the holders of Registrable Securities included in such Registration Statement a resolution of the board of directors of HII that, in the good faith judgment of the board of directors of HII, such offer or sale would reasonably be expected to materially adversely affect any bona fide material financing of HII or any material transaction under consideration by HII or would require disclosure of information that has not been disclosed to the public and is not otherwise required to be disclosed at that time, the premature disclosure of which would materially adversely affect HII. Such board resolution shall contain a statement of the reasons for such postponement and an approximation of the anticipated delay. The holders receiving such board resolution shall keep the information contained in such certificate confidential on the same terms set forth in Section 5(p). In addition, a holder of Registrable Securities may not use a “shelf” Registration Statement to effect the sale of any such securities unless such holder has given HII at least two Business Days advance written notice of the date or dates of a proposed sale of such securities by such holder pursuant to such Registration Statement (which notice may be given as often as such holder desires), and upon receipt of such a notice, HII agrees to provide prompt written notice to such holder if such “shelf” Registration Statement is not then usable (whether for reasons described above or otherwise).

 

8


(e) Underwritten “Shelf” Take-Downs. Subject to Section 2(d), at any time that any “shelf” Registration Statement is effective, if any holder or group of holders of Registrable Securities delivers a notice to HII (a “Take-Down Notice”) stating that it intends to effect an underwritten offering or distribution of all or part of the Registrable Securities included by it on such “shelf” Registration Statement (a “Shelf Offering”) and stating the number of the Registrable Securities to be included in the Shelf Offering, then HII shall use reasonable best efforts to amend or supplement the “shelf” Registration Statement as may be necessary in order to enable such Registrable Securities to be distributed pursuant to the Shelf Offering (taking into account the inclusion of Registrable Securities by any other holders thereof pursuant to this Section 2(e)). In connection with any Shelf Offering: (i) HII shall, promptly after receipt of a Take-Down Notice, deliver such notice to all other holders of Registrable Securities included in such “shelf” Registration Statement and permit each holder to include its Registrable Securities included on the “shelf” Registration Statement in the Shelf Offering if such holder notifies the proposing holders and HII within two (2) Business Days after delivery of the Take-Down Notice to such holder, and in the event that the managing underwriter or underwriters advise the holders of such securities in writing that in its or their view the total number or dollar amount of Registrable Securities proposed to be sold in such offering is such as to adversely affect the success of such offering (including, without limitation, securities proposed to be included by other holders of securities entitled to include securities in such offering pursuant to incidental or piggyback registration rights), such underwriter(s), if any, may limit the number of shares which would otherwise be included in such Shelf Offering in the same manner as is described in Section 2(b).

SECTION 3. Piggyback Registration.

(a) Right to Piggyback. If, at any time after the completion of the IPO, HII proposes to file a registration statement under the Securities Act with respect to an offering of Common Equity Securities (other than a registration statement (i) on Form S-4, Form S-8 or any successor forms thereto, (ii) filed solely in connection with an exchange offer or any employee benefit or dividend reinvestment plan or (iii) filed pursuant to Section 2 hereof), whether or not for its own account, then, each such time, HII shall give prompt written notice of such proposed filing at least fifteen (15) days before the anticipated filing date (the “Piggyback Notice”) to all of the holders of Registrable Securities. The Piggyback Notice shall offer such holders the opportunity to include in such registration statement the number of Registrable Securities as each such holder may request (a “Piggyback Registration”). Subject to subsection (b) hereof, HII shall include in each such Piggyback Registration all Registrable Securities with respect to which HII has received written requests for inclusion therein within ten (10) days after notice has been given to the applicable holder. The holders of Registrable Securities exercising their rights under this subsection (a) shall be permitted to withdraw all or part of the Registrable Securities from a Piggyback Registration at any time prior to the effective date of such Piggyback Registration. HII shall not be required to maintain the effectiveness of the Registration

 

9


Statement for a Piggyback Registration beyond the earlier to occur of (i) 180 days after the effective date thereof and (ii) consummation of the distribution by the holders of the Registrable Securities included in such Registration Statement; provided, however, that any Stockholder owning Common Equity Securities that has been included in such Registration Statement may request that such Common Equity Securities be removed from such Registration Statement, in which event HII shall promptly either withdraw such Registration Statement or file a post-effective amendment to such Registration Statement removing such Common Equity Securities.

(b) Priority on Piggyback Registrations. HII shall use its reasonable best efforts to cause the managing underwriter or underwriters of a proposed underwritten offering to permit holders of Registrable Securities requested to be included in the registration for such offering to include all such Registrable Securities on the same terms and conditions as any other shares of capital stock, if any, of HII included therein. Notwithstanding the foregoing, if the managing underwriter or underwriters of such underwritten offering have informed HII in writing that in its or their view the total number or dollar amount of Common Equity Securities that the holders, HII and any other Persons having rights to participate in such registration, intend to include in such offering is such as to adversely affect the success of such offering, then the number of Common Equity Securities that in the opinion of such managing underwriter can be sold without adversely affecting such offering shall be included in the following order:

(i) first, the Common Equity Securities for the account of HII or, if the holders of Registrable Securities have in accordance with this Agreement approved the granting of registration rights to any third party, any third party initiating such registration;

(ii) second, subject to the following paragraph, the Existing Shares, on a pro rata basis based upon the number of Registrable Securities owned; and

(iii) third, Common Equity Securities for the account of any other Persons, on a pro rata basis based upon the number of Registrable Securities owned.

Notwithstanding anything contained herein to the contrary, HII hereby agrees that (i) any Piggyback Registration that is a “shelf” registration pursuant to Rule 415 under the Securities Act shall contain all language (including, without limitation, on the Prospectus cover sheet, the principal stockholders’ chart and the plan of distribution) as may be reasonably requested by a holder of Registrable Securities to allow for a Partner Distribution and (ii) HII shall, at the reasonable request of any holder of Registrable Securities seeking to effect a Partner Distribution, file any Prospectus supplement or post-effective amendments and

 

10


otherwise take any action reasonably necessary to include such language, if such language was not included in the initial Registration Statement, or revise such language if deemed reasonably necessary by such holder to effect such Partner Distribution. Notwithstanding anything herein to the contrary, if the managing underwriter or managing underwriters (if any) determine that the inclusion of the number of Existing Shares proposed to be included in any such offering would adversely affect the marketability of such offering, HII may exclude such number of Existing Shares as necessary or desirable to negate such adverse impact.

Notwithstanding anything herein to the contrary, in respect of any offering under this Agreement (whether under Section 2, Section 3 or otherwise) no Stockholder or any of its affiliates (other than HII), officers, directors, members, stockholders or representatives shall be required directly or indirectly to make any representations or warranties to, or agreements with, HII or the underwriters (including, without limitation, agreements with respect to indemnification) other than representations, warranties or agreements regarding such Stockholder, its ownership of and title to the Registrable Securities and its intended method of distribution, and any liability of any such Stockholder or its affiliates (other than HII) to any underwriter or other Person under such underwriting agreement shall be limited to liability arising from breach of its representations and warranties and shall be limited to an amount equal to the total price at which the securities sold by such Stockholder were offered to the public (net of discounts and commissions paid by such Stockholder in connection with such offering).

SECTION 4. Restrictions On Sale During Registration.

(a) Each holder of Registrable Securities agrees, in connection with any underwritten offering made pursuant to a Registration Statement filed pursuant to Section 2 or Section 3 hereof (whether or not such holder elected to include Registrable Securities in such Registration Statement), if requested (pursuant to a written notice) by the managing underwriter or underwriters in an underwritten offering, not to effect any sale or distribution of any Common Equity Securities (except as part of such underwritten offering), including a sale pursuant to Rule 144, or to give any Demand Notice during the period commencing on the date of the request (which shall be no earlier than 14 days prior to the expected “pricing” of such offering) and continuing for not more than 90 days (with respect to any underwritten public offering other than the IPO made prior to the second anniversary of the completion of the IPO and thereafter 60 days rather than 90) after the date of the Prospectus (or Prospectus supplement if the offering is made pursuant to a “shelf” registration) pursuant to which such public offering shall be made or such shorter period as is required by the managing underwriter; provided, however, that HII and all executive officers and directors of HII must be subject to the same restrictions, and provided further, that such restrictions shall expire as to any such request if the relevant offering is not consummated within 45 days of the date of such request. Each holder of Registrable Securities agrees to enter into


a “lock-up” agreement containing provisions consistent in all material respects with this Section 4(a) for the benefit of the managing underwriters of any such underwritten offering. HII agrees to request each of its executive officers and independent directors to enter into a “lock-up” agreement containing provisions consistent in all material respects with this Section 4(a) for the benefit of the managing underwriters of any such underwritten offering, but HII shall have no further obligation if any executive officer or independent director does not so agree.

(b) HII, if requested (pursuant to a written notice) by the managing underwriter or underwriters of any underwritten offering made pursuant to a Registration Statement filed pursuant to Section 2 or Section 3 hereof, shall not effect any public sale or distribution of its Common Equity Securities during the 14 days prior to and the 90-day period (or, after the second anniversary of the completion of the IPO, the 60-day period) beginning on the “pricing” of such offering, except as part of such underwritten registration, or unless such managing underwriter or underwriters otherwise agree in writing, provided that such restrictions shall expire as to any such request if the relevant offering is not consummated within 45 days of the date of such request, and provided further that this Section 4(b) shall not apply to any sale pursuant to a registration statement (i) on Form S-4, Form S-8 or any successor forms thereto or (ii) filed solely in connection with an exchange offer or any employee benefit or dividend reinvestment plan, or apply to any sales or grants of Common Equity Securities pursuant to employee benefit plans or contracts of HII or its subsidiaries.

SECTION 5. Registration Procedures. If and whenever HII is required to effect the registration of any Registrable Securities under the Securities Act as provided in Section 2 or Section 3 hereof, HII shall effect such registration to permit the sale of such Registrable Securities in accordance with the intended method or methods of disposition thereof, and pursuant thereto HII shall cooperate in the sale of the securities and shall, as expeditiously as reasonably possible:

(a) Prepare and file with the Commission a Registration Statement or Registration Statements on any form which shall be available for the sale of the Registrable Securities by the holders thereof or HII in accordance with the intended method or methods of distribution thereof (including, without limitation, a Partner Distribution), and use its reasonable best efforts to cause such Registration Statement to become effective and to remain effective as provided herein; provided, however, that no later than ten (10) days before filing a Registration Statement or Prospectus or any amendments or supplements thereto (including, without limitation, documents that would be incorporated or deemed to be incorporated therein by reference), HII shall furnish or otherwise make available to the holders of the Registrable Securities covered by such Registration Statement, their counsel and the managing underwriters, if any, copies of all such

 

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documents proposed to be filed. HII shall not file any such Registration Statement or Prospectus or any amendments or supplements thereto (including, without limitation, such documents that, upon filing, would be incorporated or deemed to be incorporated by reference therein) with respect to a Demand Registration to which the holders of a majority of the Registrable Securities covered by such Registration Statement, their counsel, or the managing underwriters, if any, shall reasonably object, unless, in the opinion of HII and its counsel, such filing is necessary to comply with applicable law.

(b) Prepare and file with the Commission such amendments and post-effective amendments to each Registration Statement as may be necessary to keep such Registration Statement continuously effective during the period provided herein and comply in all material respects with the provisions of the Securities Act with respect to the disposition of all securities covered by such Registration Statement; and cause the related Prospectus to be supplemented by any Prospectus supplement as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of the securities covered by such Registration Statement, and as so supplemented to be filed pursuant to Rule 424 (or any similar provisions then in force) under the Securities Act; provided, however, that any holder of Registrable Securities that has been included on a “shelf” registration statement may request that such holder’s Registrable Securities be removed from such registration statement, in which event HII shall promptly either withdraw such registration statement or file a post-effective amendment to such registration statement removing such Registrable Securities.

(c) Notify each selling holder of Registrable Securities, its counsel and the managing underwriters, if any, promptly, and (if requested by any such Person) confirm such notice in writing, (i) when a Prospectus or any Prospectus supplement or post-effective amendment has been filed, and, with respect to a Registration Statement or any post-effective amendment, when the same has become effective, (ii) of any notice from the Commission that there will be a review of a Registration Statement and, to the extent requested by a holder of Registrable Securities, promptly provide such holders, their counsel and the managing underwriters, if any, with a copy of any SEC comments received by HII in connection therewith, (iii) of any request by the Commission or any other Federal or state governmental authority for amendments or supplements to a Registration Statement or related Prospectus or for additional information, (iv) of the issuance by the Commission of any stop order suspending the effectiveness of a Registration Statement or the initiation of any proceedings for that purpose, (v) if at any time the representations and warranties of HII contained in any agreement (including, without limitation, any underwriting agreement) contemplated by Section 5(o) below cease to be true and correct, (vi) of the receipt by HII of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction, or the initiation or threatening of any proceeding for

 

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such purpose, and (vii) of the happening of any event that makes any statement made in such Registration Statement or related Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires the making of any changes in such Registration Statement, Prospectus or documents so that, in the case of the Registration Statement, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, not misleading, and that in the case of the Prospectus, it will not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.

(d) Use its reasonable best efforts to obtain the withdrawal of any order suspending the effectiveness of a Registration Statement, or the lifting of any suspension of the qualification (or exemption from qualification) of any of the Registrable Securities for sale in any jurisdiction.

(e) If requested by the managing underwriters, if any, or any holder of Registrable Securities being sold in connection with an underwritten offering, promptly include in a Prospectus supplement or post-effective amendment such information as the managing underwriters, if any, and such holders may reasonably request in order to permit the intended method of distribution of such securities and make all required filings of such Prospectus supplement or such post-effective amendment as soon as practicable after HII has received such request.

(f) Furnish or make available to each selling holder of Registrable Securities, its counsel and each managing underwriter, if any, without charge, at least five conformed copies of the Registration Statement, the Prospectus and Prospectus supplements, if applicable, and each post-effective amendment thereto, including financial statements (but excluding schedules, all documents incorporated or deemed to be incorporated therein by reference and all exhibits, unless requested by such holder, counsel or underwriter).

(g) Deliver to each selling holder of Registrable Securities, its counsel and the underwriters, if any, without charge, as many copies of the Prospectus or Prospectuses (including each form of Prospectus) and each amendment or supplement thereto as such Persons may reasonably request in connection with the distribution of the Registrable Securities; and HII, subject to the last paragraph of this Section 5, hereby consents to the use of such Prospectus and each amendment or supplement thereto by each of the selling holders of Registrable Securities and the underwriters, if any, in connection with the offering and sale of the Registrable Securities covered by such Prospectus and any such amendment or supplement thereto.

 

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(h) Prior to any public offering of Registrable Securities, use its reasonable best efforts to register or qualify or cooperate with the selling holders of Registrable Securities, the underwriters, if any, and their respective counsel in connection with the registration or qualification (or exemption from such registration or qualification) of such Registrable Securities for offer and sale under the securities or “Blue Sky” laws of such jurisdictions within the United States as any seller or underwriter reasonably requests and to keep each such registration or qualification (or exemption therefrom) effective during the period such Registration Statement is required to be kept effective and to take any other action that may be necessary or advisable to enable such holders of Registrable Securities to consummate the disposition of such Registrable Securities in such jurisdiction; provided, however, that HII will not be required to (i) qualify generally to do business in any jurisdiction where it is not then so qualified or (ii) take any action that would subject it to general service of process in any such jurisdiction where it is not then so subject.

(i) Unless the Registrable Securities to be sold are uncertificated, cooperate with the selling holders of Registrable Securities and the managing underwriters, if any, to facilitate the timely preparation and delivery of certificates (not bearing any legends) representing Registrable Securities to be sold after receiving written representations from each holder of such Registrable Securities that the Registrable Securities represented by the certificates so delivered by such holder will be transferred in accordance with the Registration Statement, and enable such Registrable Securities to be in such denominations and registered in such names as the managing underwriters, if any, or holders may request at least two Business Days prior to any sale of Registrable Securities in a firm commitment public offering, but in any other such sale, within ten (10) Business Days prior to having to issue the securities.

(j) Use its reasonable best efforts to cause the Registrable Securities covered by the Registration Statement to be registered with or approved by such other governmental agencies or authorities within the United States, except as may be required solely as a consequence of the nature of such selling holder’s business, in which case HII will cooperate in all reasonable respects with the filing of such Registration Statement and the granting of such approvals, as may be necessary to enable the seller or sellers thereof or the underwriters, if any, to consummate the disposition of such Registrable Securities.

(k) Upon the occurrence of any event contemplated by subsection (c)(vii) above, prepare a supplement or post-effective amendment to the Registration Statement or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, or file any other required document so that, as thereafter delivered to the purchasers of the Registrable Securities being sold thereunder, such Prospectus will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.

 

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(l) Prior to the effective date of the Registration Statement relating to the Registrable Securities, provide a CUSIP number for the Registrable Securities.

(m) Provide and cause to be maintained a transfer agent and registrar for all Registrable Securities covered by such Registration Statement from and after a date not later than the effective date of such Registration Statement.

(n) Use its reasonable best efforts to cause all shares of Registrable Securities covered by such Registration Statement to be authorized to be listed on a national securities exchange if shares of the particular class of Registrable Securities are at that time listed on such exchange.

(o) Enter into such agreements (including, without limitation, an underwriting agreement in form, scope and substance as is customary in underwritten offerings) and take all such other actions reasonably requested by the holders of a majority of the Registrable Securities being sold in connection therewith (including those reasonably requested by the managing underwriters, if any) to expedite or facilitate the disposition of such Registrable Securities, and in such connection, whether or not an underwriting agreement is entered into and whether or not the registration is an underwritten registration, (i) make such representations and warranties to the holders of such Registrable Securities and the underwriters, if any, in form, substance and scope as are customarily made by issuers to underwriters in underwritten offerings, and, if true, confirm the same if and when requested, (ii) furnish to the selling holders of such Registrable Securities opinions of counsel and a negative assurance letter to HII and updates thereof (which counsel, opinions and letter (in form, scope and substance, in the case of such opinions and such letter) shall be reasonably satisfactory to the selling holders of such Registrable Securities, the managing underwriters, if any, and counsels to the selling holders of the Registrable Securities), addressed to each selling holder of Registrable Securities and each of the underwriters, if any, covering the matters customarily covered in opinions and negative assurance letters requested in underwritten offerings and such other matters as may be reasonably requested by such holders, counsel and underwriters, (iii) obtain “cold comfort” letters and updates thereof from the independent certified public accountants of HII (and, if necessary, any other independent certified public accountants of any subsidiary of HII or of any business acquired by HII for which financial statements and financial data are, or are required to be, included in the Registration Statement) who have certified the financial statements included in such Registration Statement, addressed to each selling holder of Registrable Securities (unless such accountants shall be prohibited from so addressing such letters by applicable standards of the accounting profession) and each of the underwriters, if any, such letters to be in customary form and covering matters of

 

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the type customarily covered in “cold comfort” letters in connection with underwritten offerings, which form and substance shall be acceptable to the selling holders of the Registrable Securities, (iv) if an underwriting agreement is entered into, the same shall contain indemnification provisions and procedures substantially to the effect set forth in Section 7 hereof with respect to all parties to be indemnified pursuant to said Section and (v) deliver such documents and certificates as may be reasonably requested by any holder of Registrable Securities being sold, such holder’s counsel and the managing underwriters, if any, to evidence the continued validity of the representations and warranties made pursuant to subsection (o)(i) above and to evidence compliance with the conditions contained in the underwriting agreement or other agreement entered into by HII. The above shall be done at each closing under such underwriting or similar agreement, or as and to the extent required thereunder.

(p) Make available for inspection by the selling holders of Registrable Securities, any underwriter participating in any such disposition of Registrable Securities, if any, and any attorneys or accountants retained by such selling holders or underwriter, at the offices where normally kept, during reasonable business hours, all financial and other records, pertinent corporate documents and properties of HII and its subsidiaries, and cause the officers and employees of HII and its subsidiaries to supply all information in each case reasonably requested by any such holder, underwriter, attorney or accountant in connection with such Registration Statement; provided, however, that any information that is not publicly available at the time of delivery of such information shall be kept confidential by such Persons (other than disclosure by such Persons to such Persons’ respective affiliates) unless (i) disclosure of such information is required by court or administrative order or other legal process, (ii) disclosure of such information is required by law, or (iii) such information becomes generally available to the public other than as a result of a disclosure or failure to safeguard by such Person. In the case of a proposed disclosure pursuant to (i) or (ii) above, such Person shall, to the extent practical, be required to give HII written notice of the proposed disclosure prior to such disclosure and, if requested by HII, at HII’s expense, assist HII in seeking to prevent or limit the proposed disclosure.

(q) Comply with all applicable rules and regulations of the Commission and make available to its security holders earning statements satisfying the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder, or any similar rule promulgated under the Securities Act, no later than forty-five (45) days after the end of any twelve (12) month period (or ninety (90) days after the end of any twelve (12) month period if such period is a fiscal year) (i) commencing at the end of any fiscal quarter in which Registrable Securities are sold to underwriters in a firm commitment or best efforts underwritten offering and (ii) if not sold to underwriters in such an offering, commencing on the first day of the first fiscal quarter of HII after the effective date of a Registration Statement, which statements shall cover one of said twelve (12) month periods.

 

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(r) Cause its officers to support the marketing of the Registrable Securities covered by the Registration Statement (including, without limitation, participation in “road shows”), to the extent reasonably requested.

Notwithstanding anything contained herein to the contrary, HII hereby agrees that (i) any Demand Registration that is a “shelf” registration pursuant to Rule 415 under the Securities Act shall contain all language (including, without limitation, on the prospectus cover sheet, the principal stockholders’ chart and the plan of distribution) as may be reasonably requested by a holder of Registrable Securities. HII may require each seller of Registrable Securities as to which any registration is being effected to furnish to HII in writing such information required in connection with such registration regarding such seller and the distribution of such Registrable Securities as HII may, from time to time, reasonably request in writing.

Each holder of Registrable Securities agrees if such holder has Registrable Securities covered by such Registration Statement that, upon receipt of any notice from HII of the happening of any event of the kind described in subsection (c) (iii), (iv), (v), (vi) or (vii) hereof, such holder will forthwith discontinue disposition of such Registrable Securities covered by such Registration Statement or Prospectus until such holder is advised in writing by HII that the disposition may be resumed and, if applicable, has received copies of the supplemented or amended Prospectus contemplated by subsection (k) hereof, together with any additional or supplemental filings that are incorporated or deemed to be incorporated by reference in such Prospectus; provided, however, that HII shall extend the time periods under Section 2 with respect to the length of time that the effectiveness of a Registration Statement must be maintained by the amount of time the holder is required to discontinue disposition of such securities.

SECTION 6. Registration Expenses. All fees and expenses incident to the performance of or compliance with this Agreement by HII (including, without limitation, (i) all registration and filing fees (including, without limitation, fees and expenses (A) with respect to filings required to be made with the Financial Industry Regulatory Authority and the Commission, (B) of compliance with securities or Blue Sky laws, including, without limitation, any fees and disbursements of counsel for the underwriters in connection with Blue Sky qualifications of the Registrable Securities pursuant to Section 5(h) and (C) of listing and registration with a national securities exchange or national market interdealer quotation system), (ii) printing expenses (including, without limitation, expenses of printing certificates for Registrable Securities in a form eligible for deposit with The Depository Trust Company and of printing Prospectuses if the printing of Prospectuses is requested by the managing underwriters, if any, or by the holders of a majority of the Registrable Securities included in any Registration Statement), (iii) messenger, telephone and delivery expenses of HII, (iv) fees and disbursements of counsel for HII, (v) expenses of HII incurred in connection with

 

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any road show, (vi) fees and disbursements of all independent certified public accountants referred to in Section 5(o)(iii) hereof (including, without limitation, the expenses of any “cold comfort” letters required by this Agreement) and any other persons, including special experts retained by HII, (vii) rating agency fees and (viii) reasonable fees and disbursements of one counsel reasonably acceptable to HII for the holders of Registrable Securities whose shares are included in a Registration Statement, which counsel shall be selected by the holders of a majority of the Registrable Securities included in such Registration Statement) shall be borne by HII whether or not any Registration Statement is filed or becomes effective. In addition, HII shall pay its internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit, the fees and expenses incurred in connection with the listing of the securities to be registered on any securities exchange on which similar securities issued by HII are then listed and rating agency fees and the fees and expenses of any Person, including special experts, retained by HII.

HII shall not be required to pay (i) fees and disbursements of any counsel retained by any holder of Registrable Securities or by any underwriter (except as set forth in clauses 6(i)(B) and (viii)), (ii) any underwriter’s fees (including discounts, commissions or fees of underwriters, selling brokers, dealer managers or similar securities industry professionals) relating to the distribution of the Registrable Securities (other than with respect to Registrable Securities sold by HII) or (iii) any other expenses of the holders of Registrable Securities not specifically required to be paid by HII pursuant to the first paragraph of this Section 6.

SECTION 7. Indemnification.

(a) Indemnification by HII. HII shall, without limitation as to time, indemnify and hold harmless, to the fullest extent permitted by law, each holder of Registrable Securities whose Registrable Securities are covered by a Registration Statement or Prospectus, the affiliates, officers, directors, partners, members, managers, stockholders, accountants, attorneys, agents and employees of each of them, each Person who controls each such holder (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) and the officers, directors, partners, members, managers, stockholders, accountants, attorneys, agents and employees of each such controlling person, each underwriter, if any, and each Person who controls (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) such underwriter, from and against any and all losses, claims, damages, liabilities, costs (including, without limitation, costs of preparation and reasonable attorneys’ fees and any legal or other fees or expenses incurred by such party in connection with any investigation or Proceeding), expenses, judgments, fines, penalties, charges and amounts paid in settlement (collectively, “Losses”), as incurred, arising out of or based upon

 

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any untrue statement (or alleged untrue statement) of a material fact contained in any Prospectus, offering circular or other document (including, without limitation, any related Registration Statement, notification or the like) incident to any such registration, qualification, or compliance, or based on any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, or any violation by HII of the Securities Act or any rule or regulation thereunder applicable to HII and relating to action or inaction required of HII in connection with any such registration, qualification, or compliance, and will reimburse each such holder, each of its affiliates, officers, directors, partners, members, managers, stockholders, accountants, attorneys, agents and employees and each person controlling such holder, each such underwriter, and each person who controls any such underwriter, for any legal and any other expenses reasonably incurred in connection with investigating and defending or settling any such claim, loss, damage, liability, or action, provided, however, that HII will not be liable in any such case to the extent that any such claim, loss, damage, liability, or expense arises out of or is based on any untrue statement or omission by such holder or underwriter, but only to the extent, that such untrue statement (or alleged untrue statement) or omission (or alleged omission) is made in such Registration Statement, Prospectus, offering circular, or other document in reliance upon and in conformity with written information furnished to HII by such holder. It is agreed that the indemnity agreement contained in this Section 7(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of HII (which consent shall not be unreasonably withheld).

(b) Indemnification by Holder of Registrable Securities. In connection with any Registration Statement in which a holder of Registrable Securities is participating, such holder of Registrable Securities shall furnish to HII in writing such information as HII reasonably requests for use in connection with any Registration Statement or Prospectus and agrees to indemnify, to the fullest extent permitted by law, severally and not jointly, HII, its directors, officers, accountants, attorneys, agents and employees, each Person who controls HII (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, partners, members, managers, stockholders, accountants, attorneys, agents or employees of such controlling persons, and each underwriter, if any, and each person who controls such underwriter (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), from and against all Losses arising out of or based on any untrue statement of a material fact contained in any such Registration Statement, Prospectus, offering circular or other document, or any omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse HII and such directors, officers, partners, members, managers, stockholders, accountants, attorneys, employees, agents, persons,

 

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underwriters, or control persons for any legal or any other expenses reasonably incurred in connection with investigating or defending any such claim, loss, damage, liability or action, in each case to the extent, but in each case only to the extent, that such untrue statement or omission is made in such Registration Statement, Prospectus, offering circular or other document in reliance upon and in conformity with written information furnished to HII by such holder specifically for use in connection with the preparation of such Registration Statement, Prospectus, offering circular or other document; provided, however, that the obligations of such holder hereunder shall not apply to amounts paid in settlement of any such claims, losses, damages, or liabilities (or actions in respect thereof) if such settlement is effected without the consent of such holder (which consent shall not be unreasonably withheld); and provided further, however, that the liability of each selling holder of Registrable Securities hereunder shall be limited to the net proceeds received by such selling holder from the sale of Registrable Securities covered by such Registration Statement. In addition, insofar as the foregoing indemnity relates to any such untrue statement or omission made in the preliminary Prospectus but eliminated or remedied in the amended Prospectus on file with the Commission at the time the Registration Statement becomes effective or in the final Prospectus filed pursuant to applicable rules of the Commission or in any supplement or addendum thereto and such new Prospectus is delivered to the underwriter, the indemnity agreement herein shall not inure to the benefit of such underwriter, any controlling person of such underwriter and their respective Representatives, if a copy of the final Prospectus filed pursuant to such rules, together with all supplements and addenda thereto was not furnished to the Person asserting the loss, liability, claim or damage at or prior to the time such furnishing is required by the Securities Act.

(c) Conduct of Indemnification Proceedings. If any Person shall be entitled to indemnity hereunder (an “indemnified party”), such indemnified party shall give prompt notice to the party from which such indemnity is sought (the “indemnifying party”) of any claim or of the commencement of any Proceeding with respect to which such indemnified party seeks indemnification or contribution pursuant hereto; provided, however, that the delay or failure to so notify the indemnifying party shall not relieve the indemnifying party from any obligation or liability except to the extent that the indemnifying party has been prejudiced by such delay or failure. The indemnifying party shall have the right, exercisable by giving written notice to an indemnified party promptly after the receipt of written notice from such indemnified party of such claim or Proceeding, to, unless in the indemnified party’s reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist in respect of such claim, assume, at the indemnifying party’s expense, the defense of any such claim or Proceeding, with counsel reasonably satisfactory to such indemnified party; provided, however, that an indemnified party shall have the right to employ separate counsel in any such claim or Proceeding and to participate in the defense

 

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thereof, but the fees and expenses of such counsel shall be at the expense of such indemnified party unless: (i) the indemnifying party agrees to pay such fees and expenses or (ii) the indemnifying party fails promptly to assume, or in the event of a conflict of interest cannot assume, the defense of such claim or Proceeding or fails to employ counsel reasonably satisfactory to such indemnified party; in which case the indemnified party shall have the right to employ counsel and to assume the defense of such claim or proceeding; provided further, however, that the indemnifying party shall not, in connection with any one such claim or Proceeding or separate but substantially similar or related claims or Proceedings in the same jurisdiction, arising out of the same general allegations or circumstances, be liable for the fees and expenses of more than one firm of attorneys (together with appropriate local counsel) at any time for all of the indemnified parties, or for fees and expenses that are not reasonable. Whether or not such defense is assumed by the indemnifying party, such indemnified party will not be subject to any liability for any settlement made without its consent (but such consent will not be unreasonably withheld, delayed or conditioned). The indemnifying party shall not consent to entry of any judgment or enter into any settlement that does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release, in form and substance reasonably satisfactory to the indemnified party, from all liability in respect of such claim or litigation for which such indemnified party would be entitled to indemnification hereunder.

(d) Contribution. If the indemnification provided for in this Section 7 is unavailable to an indemnified party in respect of any Losses (other than in accordance with its terms), then each applicable indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such Losses, in such proportion as is appropriate to reflect the relative fault of the indemnifying party, on the one hand, and such indemnified party, on the other hand, in connection with the actions, statements or omissions that resulted in such Losses as well as any other relevant equitable considerations. The relative fault of such indemnifying party, on the one hand, and indemnified party, on the other hand, shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact, has been taken by, or relates to information supplied by, such indemnifying party or indemnified party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent any such action, statement or omission.

The parties hereto agree that it would not be just and equitable if contribution pursuant to this subsection (d) were determined by pro rata allocation or by any other method of allocation that does not take account of the equitable considerations referred to in the immediately preceding paragraph. Notwithstanding the provisions of this subsection (d), an indemnifying party that

 

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is a selling holder of Registrable Securities shall not be required to contribute any amount in excess of the amount by which the net proceeds from the sale of the Registrable Securities sold by such indemnifying party exceeds the amount of any damages that such indemnifying party has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation.

(e) Notwithstanding the foregoing, to the extent that the provisions on indemnification and contribution contained in any underwriting agreement entered into in connection with any underwritten public offering are in conflict with the foregoing provisions, the provisions in the underwriting agreement shall control.

SECTION 8. Rule 144. After the completion of the IPO, HII shall file the reports required to be filed by it under the Securities Act and the Exchange Act in a timely manner, and will take such further action as any holder of Registrable Securities may reasonably request, all to the extent required from time to time to enable such holder to sell Registrable Securities without registration under the Securities Act within the limitations of the exemption provided by Rule 144. Upon the request of any holder of Registrable Securities, HII shall deliver to such holder a written statement as to whether it has complied with such requirements.

SECTION 9. Underwritten Registrations. If any Demand Registration is an underwritten offering or there is any Shelf Offering, the holders of a majority of the Registrable Securities to be sold pursuant to such underwritten Demand Registration or to be included in such Shelf Offering shall have the right to select the investment banker or investment bankers and managers to administer the offering, provided such Persons are reasonably acceptable to HII. HII shall have the right to select the investment banker or investment bankers and managers to administer any Piggyback Registration.

SECTION 10. Limitation On Subsequent Registration Rights. From and after the date of this Agreement HII shall not, without the prior written consent of the holders of two-thirds of the Registrable Securities, enter into any agreement with any holder or prospective holder of any securities of HII, giving such holder or prospective holder any registration rights the terms of which are equivalent to or more favorable than the registration rights granted to holders of Registrable Securities hereunder, or which would reduce the amount of Registrable Securities the holders can include in any registration filed pursuant to Section 2 hereof, unless such rights are subordinate to those of the holders of Registrable Securities.

 

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SECTION 11. Miscellaneous.

(a) Amendments and Waivers. The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given without the written consent of holders of two-thirds of the Registrable Securities; provided, however, that in no event shall the obligations of any holder of Registrable Securities be materially increased or the rights of any Stockholder be adversely affected (without similarly adversely affecting the rights of all Stockholders), except upon the written consent of such holder. Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of holders of Registrable Securities whose securities are being sold pursuant to a Registration Statement and that does not directly or indirectly affect the rights of other holders of Registrable Securities may be given by holders of at least two-thirds of the Registrable Securities being sold by such holders pursuant to such Registration Statement.

(b) Notices. All notices, requests, consents and other communications hereunder to any party shall be in writing and shall be delivered in person or sent by facsimile (provided a copy is thereafter promptly delivered as provided in this subsection (b)) or nationally recognized overnight courier, addressed to such party at the address or facsimile number set forth in HII’s records in the case of a Stockholder, or below with respect to HII, or such other address or facsimile number as may hereafter be designated in writing by such party to the other parties:

If to HII, to:

15438 N. Florida Avenue, Suite 201

Tampa, Florida, 33613

Telephone: (877) 376-5831

Facsimile: (877) 376-5832

Attention: Michael W. Kosloske

with a copy (which shall not constitute notice to HII) to:

Davis Polk & Wardwell LLP

450 Lexington Avenue

New York, NY 10017

Telephone: (212) 450-4135

Facsimile: (212) 701-5135

Attention: Deanna Kirkpatrick

Each such notice or other communication shall be deemed received on the date sent to the recipient thereof in accordance with this subsection (b), if sent prior to 5:00 p.m. in the place of receipt and such day is a Business Day; otherwise, such Notice shall be deemed not to have been received until the next succeeding Business Day.

 

24


(c) Successors and Assigns; Stockholder Status. This Agreement shall inure to the benefit of the recipients of a Partner Distribution (provided that in connection with a Partner Distribution a single Person shall have been appointed and duly authorized to serve as agent on behalf of all such transferees with respect to all matters that are the subject of this Agreement, including the giving and receiving of notice on behalf of such transferees) and shall inure to the benefit of and be binding upon the successors and permitted assigns of each of the parties, including subsequent holders (each, a “Subsequent Holder”) of Registrable Securities that, alone or taken together with their Affiliates, acquired, directly or indirectly, from a Stockholder or Stockholders, not less than 20% of the Registrable Securities held by such Stockholder or Stockholders (together with their Affiliates) as of the date hereof (each, a “Permitted Transferee”); provided, however, that such Permitted Transferee shall not be entitled to such rights unless such Permitted Transferee shall have executed and delivered to HII an Addendum Agreement substantially in the form of Exhibit A hereto promptly following the acquisition of such Registrable Securities, in which event such Permitted Transferee shall be deemed a Stockholder for purposes of this Agreement and Annex A shall be updated by HII accordingly, and provided further that no such Subsequent Holder shall have any rights under this Agreement at such time as such Subsequent Holder’s Registrable Securities are freely tradable without volume limitations under Rule 144. Nothing expressed or mentioned in this Agreement is intended or shall be construed to give any Person other than the parties hereto and their respective Permitted Transferees any legal or equitable right, remedy or claim under, in or in respect of this Agreement or any provision herein contained. It is understood and agreed that no assignment or transfer by any of HPI and Sub of any of the Demand Registrations to which it is entitled pursuant to the third paragraph of Section 2(a) will result in an increase in the number of Demand Registrations (that do not constitute “shelf” registrations) to which HII is otherwise subject.

(d) Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

(e) Headings. The section and paragraph headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

(f) Governing Law. This Agreement and the rights of the parties hereunder will be governed by, construed and enforced in accordance with the laws of the State of New York without regard to conflicts of law principles thereof.

 

25


(g) Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.

(h) Entire Agreement. This Agreement is intended by the parties as a final expression of their agreement, and is intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein, with respect to the registration rights granted by HII with respect to Registrable Securities. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter.

(i) Securities Held by HII or its Subsidiaries. Whenever the consent or approval of holders of a specified percentage of Registrable Securities is required hereunder, Registrable Securities held by HII or its subsidiaries shall not be counted in determining whether such consent or approval was given by the holders of such required percentage.

(j) Termination. This Agreement shall terminate on the date when no Registrable Securities remain outstanding; provided that Section 6 and Section 7 shall survive any termination.

(k) Specific Performance. The parties hereto recognize and agree that money damages may be insufficient to compensate the holders of any Registrable Securities for breaches by HII of the terms hereof and, consequently, that the equitable remedy of specific performance of the terms hereof will be available in the event of any such breach.

(l) Consent to Jurisdiction. The parties hereto agree that any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby shall be brought and maintained exclusively in the United States District Court for the Southern District of New York or the Supreme Court of the State of New York located in the County of New York. Each of the parties irrevocably consents to submit to the personal jurisdiction of such courts (and of the appropriate appellate courts therefrom) in any such suit, action or proceeding.

 

26


Process in any such suit, action or proceeding in such courts may be served, and shall be effective, on any party anywhere in the world, whether within or without the jurisdiction of any such court, by any of the methods specified for the giving of notices pursuant to subsection (b) of this Section 11. Each of the parties irrevocably waives, to the fullest extent permitted by law, any objection or defense that it may now or hereafter have based on venue, inconvenience of forum, the lack of personal jurisdiction and the adequacy of service of process (as long as the party was provided notice in accordance with the methods specified in subsection (b) of this Section 11) in any suit, action or proceeding brought in such courts.

(m) EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT.

[Signature pages follow]

 

27


IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized representatives as of the day and year first above written.

 

HEALTH INSURANCE INNOVATIONS, INC.

By:

  /s/ Michael W. Kosloske
  Name: Michael W. Kosloske
  Title: Chief Executive Officer

 

HEALTH PLAN INTERMEDIARIES, LLC

By:   /s/ Michael W. Kosloske
  Name: Michael W. Kosloske
  Title: Chief Executive Officer
HEALTH PLAN INTERMEDIARIES SUB, LLC
By:   /s/ Michael W. Kosloske
  Name: Michael W. Kosloske
  Title: Chief Executive Officer


Annex A

STOCKHOLDERS

Health Plan Intermediaries, LLC

Health Plan Intermediaries Sub, LLC


Exhibit A

ADDENDUM AGREEMENT

This ADDENDUM AGREEMENT is made this             day of             , 20    , by and between                      (the “New Stockholder”) and Health Insurance Innovations, Inc. (“HII”), pursuant to a Registration Rights Agreement (as amended from time to time, the “Agreement”) dated as of             , 2013, by and among HII and the Stockholders.

Capitalized terms used herein but not otherwise defined herein shall have the meanings ascribed to them in the Agreement.

W I T N E S S E T H:

WHEREAS, HII has agreed to provide registration rights with respect to the Registrable Securities as set forth in the Agreement;

WHEREAS, the New Stockholder has acquired Registrable Securities directly or indirectly from a Stockholder; and

WHEREAS, HII and the Stockholders have required in the Agreement that all persons desiring registration rights must enter into an Addendum Agreement binding the New Stockholder to the Agreement to the same extent as if it were an original party thereto;

NOW, THEREFORE, in consideration of the mutual promises of the parties, the New Stockholder acknowledges that it has received and read the Agreement and that the New Stockholder shall be bound by, and shall have the benefit of, all of the terms and conditions set out in the Agreement to the same extent as if it were a Stockholder originally party to the Agreement.

 

[NAME]

By:

   
  Name:
  Title:
Address for Notices:
Facsimile No.  


AGREED TO pursuant to Section 11(c) of the Agreement.

 

HEALTH INSURANCE INNOVATIONS, INC.

By:

   
  Name:
  Title:
Third Amended and Restated Limited Liability Agreement

Exhibit 10.1

 

 

THIRD AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT

of

HEALTH PLAN INTERMEDIARIES HOLDINGS, LLC

Dated as of February 13, 2013

 

 

THE MEMBERSHIP INTERESTS REPRESENTED BY THIS AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY OTHER APPLICABLE SECURITIES LAWS. SUCH MEMBERSHIP INTERESTS MAY NOT BE SOLD, ASSIGNED, PLEDGED OR OTHERWISE DISPOSED OF AT ANY TIME WITHOUT REGISTRATION UNDER SUCH ACT AND LAWS OR EXEMPTION THEREFROM, AND COMPLIANCE WITH THE OTHER SUBSTANTIAL RESTRICTIONS ON TRANSFERABILITY SET FORTH HEREIN.

 

 


TABLE OF CONTENTS

 

 

 

         PAGE  
  ARTICLE 1   
  DEFINED TERMS   
Section 1.01.  

Definitions

     2   
Section 1.02.  

Other Definitional and Interpretative Provisions

     9   
  ARTICLE 2   
  ORGANIZATION   
Section 2.01.  

Formation; Amendment and Restatement

     10   
Section 2.02.  

Company Name

     10   
Section 2.03.  

Purposes of the Company

     10   
Section 2.04.  

Principal Place of Business

     10   
Section 2.05.  

Registered Office and Agent

     11   
Section 2.06.  

Qualification in Other Jurisdictions

     11   
Section 2.07.  

Term

     11   
Section 2.08.  

No State-law Partnership

     11   
  ARTICLE 3   
  CAPITALIZATION   
Section 3.01.  

Membership Interests; Capitalization

     11   
Section 3.02.  

Authorization and Issuance of Additional Membership Interests

     13   
Section 3.03.  

Repurchase or Redemption of Class A Shares

     14   
Section 3.04.  

Changes in Common Stock

     14   
  ARTICLE 4   
  MEMBERS   
Section 4.01.  

Names and Addresses

     14   
Section 4.02.  

No Liability for Status as Member

     15   
Section 4.03.  

No Restrictions of Business Pursuits of Member

     15   
Section 4.04.  

Transactions Between Members and the Company

     15   
Section 4.05.  

Meeting of Members

     15   
Section 4.06.  

Action by Members Without Meeting

     16   
Section 4.07.  

Limited Rights of Members

     16   

 

i


  ARTICLE 5   
  DISTRIBUTIONS   
Section 5.01.  

Distributions

     16   
Section 5.02.  

Distributions for Payment of Income Tax

     16   
Section 5.03.  

Limitations on Distributions

     17   
Section 5.04.  

Withholding

     17   
  ARTICLE 6   
  ALLOCATIONS AND TAX MATTERS   
Section 6.01.  

Capital Accounts and Adjusted Capital Accounts

     18   
Section 6.02.  

Additional Capital Contributions

     19   
Section 6.03.  

Allocations of Net Profits and Net Losses

     19   
Section 6.04.  

Special Allocations

     19   
Section 6.05.  

Allocation for Income Tax Purposes

     21   
Section 6.06.  

Other Allocation Rules

     22   
Section 6.07.  

Regulatory Compliance

     22   
Section 6.08.  

Certain Costs And Expenses

     22   
  ARTICLE 7   
  MANAGEMENT AND CONTROL OF BUSINESS   
Section 7.01.  

Management

     23   
Section 7.02.  

Certain Covenants

     23   
Section 7.03.  

Investment Company Act

     23   
  ARTICLE 8   
  OFFICERS   
Section 8.01.  

Officers

     23   
Section 8.02.  

Other Officers and Agents

     24   
Section 8.03.  

Chief Executive Officer

     24   
Section 8.04.  

Treasurer

     24   
Section 8.05.  

Secretary

     24   
Section 8.06.  

Other Officers

     24   
  ARTICLE 9   
  TRANSFERS OF INTERESTS; ADMITTANCE OF NEW MEMBERS   
Section 9.01.  

Transfer of Membership Interests

     25   
Section 9.02.  

Transfer of HII’s Interest

     25   
Section 9.03.  

Recognition of Transfer; Substituted and Additional Members

     25   
Section 9.04.  

Expense of Transfer; Indemnification

     27   
Section 9.05.  

Exchange Agreement

     27   
Section 9.06.  

Recapitalization

     27   

 

ii


  ARTICLE 10   
  DISSOLUTION AND TERMINATION   
Section 10.01.  

Dissolution

     27   
Section 10.02.  

Termination

     29   
  ARTICLE 11   
  EXCULPATION AND INDEMNIFICATION   
Section 11.01.  

Exculpation

     29   
Section 11.02.  

Indemnification

     30   
Section 11.03.  

Expenses

     30   
Section 11.04.  

Non-Exclusivity

     30   
Section 11.05.  

Insurance

     31   
  ARTICLE 12   
  ACCOUNTING AND RECORDS; TAX MATTERS   
Section 12.01.  

Accounting and Records

     31   
Section 12.02.  

Tax Returns

     31   
Section 12.03.  

Tax Partnership

     31   
Section 12.04.  

Tax Elections

     31   
Section 12.05.  

Tax Matters Member

     32   
  ARTICLE 13   
  ARBITRATION   
  ARTICLE 14   
  MISCELLANEOUS PROVISIONS   
Section 14.01.  

Entire Agreement

     34   
Section 14.02.  

Binding on Successors

     34   
Section 14.03.  

Managing Member’s Business

     34   
Section 14.04.  

Debt or Equity Financing

     34   
Section 14.05.  

Governing Law

     34   
Section 14.06.  

Headings

     34   
Section 14.07.  

Severability

     35   
Section 14.08.  

Notices

     35   
Section 14.09.  

Amendments

     35   
Section 14.10.  

Consent to Jurisdiction

     36   
Section 14.11.  

WAIVER OF JURY TRIAL

     36   

 

iii


THIRD AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT

of

HEALTH PLAN INTERMEDIARIES HOLDINGS, LLC

This THIRD AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT (the “Agreement”) of Health Plan Intermediaries Holdings, LLC, a Delaware limited liability company ( the “Company”), dated as of February 13, 2013, is adopted, executed and agreed to, for good and valuable consideration, by Health Insurance Innovations, Inc., a Delaware corporation (“HII”), Health Plan Intermediaries, LLC, a Florida limited liability company (“HPI”) and Health Plan Intermediaries Sub, LLC, a Delaware limited liability company (“HPIS”), as Members. Capitalized terms used but not simultaneously defined are defined in or by reference to Section 1.01.

W I T N E S S E T H:

WHEREAS, the Company was formed as a limited liability company on July 16, 2012, pursuant to the Delaware Limited Liability Company Act (6 Del.C. §18-101, et seq.) (as amended from time to time, the “Delaware LLC Act”) by the filing of its Certificate of Formation (as amended, the “Certificate”) with the Secretary of State;

WHEREAS, HII and the Company have entered into an underwriting agreement (the “IPO Underwriting Agreement”) with the several underwriters (the “IPO Underwriters”) named therein, providing for the initial public offering (the “IPO”) of 5,066,667 Class A Shares (as defined below) of HII;

WHEREAS, prior to the execution hereof, HPI and HPIS were the sole members of the Company (the “Prior Members”) under the Second Amended and Restated Liability Company Agreement of the Company dated as of November 7, 2012 (the “Prior LLC Agreement”) pursuant to which the Company has heretofore been governed;

WHEREAS, in connection with the IPO, it is contemplated that (i) immediately prior to consummation of the IPO (the “Effective Time”), all of the limited liability company interests in the Company held by the Prior Members (the “Prior LLC Interests”) will be converted into the number of Series B Membership Interests (as defined below) set forth opposite each Prior Member’s name in Exhibit A hereto, (ii) at the Effective Time, all of the shares of common stock of HII held by the Prior Members will be converted into the number of Class B Shares (as defined below) equal to the number of Series B Membership Interests issued to such Prior Member, (iii) immediately after the IPO, HII will contribute the net proceeds thereof to the Company in exchange for 5,066,667 Series A Membership Interests (as defined below), and (iv) if and to the extent the IPO Underwriters exercise their over-allotment option to purchase Optional Securities (as defined below) pursuant to Section 3 of the IPO Underwriting Agreement,


HII will issue additional Class A Shares and use the net proceeds thereof to purchase an equal number of Series B Membership Interests and Class B Shares from HPI, which Series B Membership Interests will immediately thereafter be recapitalized into Series A Membership Interests and which Class B Shares will immediately thereafter be cancelled (collectively, the “IPO Transactions”); and

WHEREAS, the Prior Members desire to amend and restate the Prior LLC Agreement as set forth herein to give effect to IPO Transactions and to reflect the admission of HII as a Member and as sole managing member.

NOW, THEREFORE, the Members and the Company hereby agree as follows:

ARTICLE 1

DEFINED TERMS

Section 1.01. Definitions. As used in this Agreement, the following terms have the following meanings:

Adjusted Capital Account” means, with respect to any Member, the balance in such Member’s Capital Account as of the end of the relevant Fiscal Year or period, adjusted as follows:

(a) increased by the sum of (x) any amounts which such Member is obligated or has agreed to contribute (but has not yet contributed) to the Company and (y) the amounts which such Member is obligated to restore or is deemed to be obligated to restore pursuant to Treas. Reg. §1.704-1(b)(2)(ii)(c), Treas. Reg. §1.704-2(g)(1) and Treas. Reg. §1.704-2(i)(5); and

(b) decreased by the items described in subclauses (4), (5) and (6) of Treas. Reg. §1.704-1(b)(2)(ii)(d) with respect to such Member.

Affiliate” means, when used with respect to a specified Person, any Person which (a) directly or indirectly Controls, is Controlled by or is Under Common Control with such specified Person, (b) is an officer, director, general partner, trustee or manager of such specified Person or of a Person described in clause (a), or (c) is a Relative of such specified Person or of an individual described in clauses (a) or (b).

Agreement” is defined in the preamble.

Applicable Law” means, to the extent applicable to the Company or its activities or any Member, as applicable: (a) all U.S. federal and state statutes and laws and all statutes and laws of foreign countries; (b) all rules and regulations (including interpretations thereof) of all regulatory

 

2


agencies, organizations and bodies; and (c) all rules and regulations (including interpretations thereof) of all self-regulatory agencies, organizations and bodies now or hereafter in effect.

Assumed Tax Liability” means an amount equal to the Assumed Tax Rate multiplied by the aggregate amount of all items of income, gain, deduction, loss, and credit allocated to such Member pursuant to Section 6.05 (computed without regard to (i.e., ignoring) any reduction in income attributable to any basis adjustments with respect to a Member as a result of the Company’s election pursuant to Section 754 of the Code).

Assumed Tax Rate” means, for any taxable year, the highest marginal effective rate of federal, state, and local income tax applicable to an individual resident in Tampa, Florida (or, if higher, a corporation doing business in Tampa, Florida), taking into account any allowable deductions in respect of such state and local taxes in computing a Member’s liability for federal income tax; provided that the Assumed Tax Rate will initially be set at 45.5 percent, and will be adjusted, at the discretion of the Managing Member, at any time that the applicable tax rates change.

Book Value” means, with respect to any property, such property’s adjusted basis for federal income tax purposes, except as follows:

(a) The initial Book Value of any property contributed by a Member to the Company shall be the Fair Market Value of such property as reasonably determined by the Managing Member;

(b) The Book Values of all properties shall be adjusted to equal their respective Fair Market Values as determined in the Managing Member’s discretion in connection with (i) the acquisition of an interest in the Company by any new or existing Member in exchange for more than a de minimis capital contribution to the Company, (ii) the distribution by the Company to a Member of more than a de minimis amount of property as consideration for an interest in the Company, or (iii) the liquidation of the Company within the meaning of Treas. Reg. §1.704-1(b)(2)(ii)(g)(I) (other than pursuant to Section 708(b)(1)(B) of the Code);

(c) The Book Value of property distributed to a Member shall be the Fair Market Value of such property as determined by the Managing Member; and

(d) The Book Value of all property shall be increased (or decreased) to reflect any adjustments to the adjusted tax basis of such property pursuant to Section 734(b) of the Code or Section 743(b) of the Code, but only to the extent that such adjustments are taken into account in determining Capital Accounts pursuant to Treas. Reg. §1.704-1 (b)(2)(iv)(m) and clause (f) of the definition of Net Profits and Net Losses; provided, however, that Book Value shall not be adjusted pursuant to this clause (d) to the extent the Managing Member determines that an adjustment pursuant to clause (b) hereof

 

3


is necessary or appropriate in connection with the transaction that would otherwise result in an adjustment pursuant to this clause (d).

If the Book Value of property has been determined or adjusted pursuant to clauses (b) or (d) hereof, such Book Value shall thereafter be adjusted by the Depreciation taken into account with respect to such property for purposes of computing Net Profits and Net Losses and other items allocated pursuant to Article 6.

Business Day” means any day except a Saturday, Sunday or other day on which commercial banks in Tampa, Florida or New York, New York are authorized by law to close.

Capital Account” is defined in Section 6.01(a).

Capital Contribution” means the amount of all cash capital contributions by a Member to the Company and the Fair Market Value of any property contributed by a Member to the Company (net of any liabilities secured by such property that the Company is considered to assume or take subject to under Section 752 of the Code).

Certificate” is defined in the recitals.

Class A Shares” means the class A common stock, par value $0.001 per share, of HII.

Class B Shares” means the class B common stock, par value $0.001 per share, of HII.

Code” means the Internal Revenue Code of 1986, as amended.

Company” is defined in the preamble.

Company Minimum Gain” means “partnership minimum gain” as that term is defined in Treas. Reg. §1.704-2(d).

Control,” including the correlative terms “Controlling,” “Controlled by” and “Under Common Control with” means possession, directly or indirectly (through one or more intermediaries), of the power to direct or cause the direction of management or policies (whether through ownership of securities or any partnership or other ownership interest, by contract or otherwise) of a Person.

Delaware LLC Act” is defined in the recitals.

Depreciation” means, for each Fiscal Year, an amount equal to the depreciation, amortization or other cost recovery deduction allowable for federal income tax purposes with respect to property for such taxable year, except that with respect to any property the Book Value of which differs from its adjusted tax basis at the beginning of such taxable year, Depreciation shall be an amount which bears the same ratio to such beginning Book Value as the federal

 

4


income tax depreciation, amortization or other cost recovery deduction for such taxable year bears to such beginning adjusted tax basis; provided that if the adjusted tax basis of any property at the beginning of such taxable year is zero, Depreciation with respect to such property shall be determined with reference to such beginning value using any reasonable method selected by the Managing Member.

Dispute” is defined in Article 13.

Economic Risk of Loss” has the meaning assigned to such term in Treas. Reg. §1.752-2(a).

Effective Time” is defined in the recitals.

Equity Securities” means, as applicable, (a) any capital stock, membership interests, other share capital or securities containing any profit participation features, (b) any securities directly or indirectly convertible or exercisable into or exchangeable for any capital stock, membership interests, other share capital or securities containing any profit participation features, (c) any rights or options directly or indirectly to subscribe for or to purchase any capital stock, membership interests, other share capital or securities containing any profit participation features or to subscribe for or to purchase any securities directly or indirectly convertible or exercisable into or exchangeable for any capital stock, membership interests, other share capital or securities containing any profit participation features, (d) any share appreciation rights, phantom share rights or other similar rights, or (e) any equity securities, rights or instruments issued or issuable with respect to any of the foregoing referred to in clauses (a) through (d) above in connection with a combination, subdivision, recapitalization, merger, consolidation, conversion, share exchange or other reorganization or similar event or transaction.

Exchange Agreement” means the Exchange Agreement dated as of the date hereof among HII, HPI, HPIS and the Company.

Exchange Rate” is defined in the Exchange Agreement; provided that for purposes of Section 3.02 and Section 3.03, the “Exchange Rate” for determining the number of Series A Membership Interests to be issued, forfeited, vested, redeemed, repurchased or otherwise dealt with in connection with similar actions involving Class A Shares shall be the same for Series A Membership Interests as it is at the time under the Exchange Agreement for Exchanges (as defined in the Exchange Agreement) of Series B Membership Interests for Class A Shares.

Fair Market Value” means, with respect to specified property as of any date, the fair market value for such property as between a willing buyer under no compulsion to buy and a willing seller under no compulsion to sell in an arm’s length transaction occurring on such date, taking into account all relevant factors determinative of value (including in the case of securities any restrictions on transfer applicable thereto), as is reasonably determined in good faith by the Managing Member.

 

5


Fiscal Year” means, except as otherwise required by Applicable Law, for the Company’s financial reporting and federal income tax purposes, a period commencing January 1 and ending December 31 of each year, or such other period as the Managing Member may determine.

Indemnitee” is defined in Section 11.02.

Initiating Party” is defined in Article 13.

Investment Company Act” means the Investment Company Act of 1940, as amended from time to time.

IPO” is defined in the recitals.

IPO Underwriters” is defined in the recitals.

IPO Underwriting Agreement” is defined in the recitals.

Losses” is defined in Section 11.02.

Majority Holders,” at any time, means Members holding a majority of the Series B Membership Interests at such time outstanding; provided, however, that if the outstanding Series B Membership Interests represent less than 25% of the aggregate Series B Membership Interests issued at the Effective Time, “Majority Holders” shall mean the Managing Member.

Managing Member” means HII.

Member” means each Person listed on Exhibit A hereto and each other Person that becomes a member of the Company as provided herein, so long as such Person continues as a member of the Company.

Member Nonrecourse Debt” has the meaning assigned to the term “partner nonrecourse debt” in Treas. Reg. §1.704-2(b)(4).

Member Nonrecourse Debt Minimum Gain” has the meaning assigned to the term “partner nonrecourse debt minimum gain” in Treas. Reg. §1.704-2(i)(2).

Member Nonrecourse Deductions” has the meaning assigned to the term “partner nonrecourse deductions” in Treas. Reg. §1.704-2(i)(1).

Net Profits” and “Net Losses” for any Fiscal Year or other period means, respectively, an amount equal to the Company’s taxable income or loss for such taxable year, determined in accordance with Section 703(a) of the Code (for this purpose, all items of income, gain, loss, or

 

6


deduction required to be stated separately pursuant to Section 703(a)(1) of the Code shall be included in taxable income or loss), with the following adjustments (without duplication):

(a) Any income of the Company that is exempt from federal income tax and not otherwise taken into account in computing Net Profits and Net Losses pursuant to this definition of “Net Profits” and “Net Losses” shall be added to such taxable income or loss;

(b) Any expenditures of the Company described in Section 705(a)(2)(B) of the Code or treated as Section 705(a)(2)(B) of the Code expenditures pursuant to Treas. Reg. §1.704-1(b)(2)(iv)(i) and not otherwise taken into account in computing Net Profits or Net Losses pursuant to this definition of “Net Profits” and “Net Losses” shall be subtracted from such taxable income or loss;

(c) In the event the Book Value of any asset is adjusted pursuant to clause (b), clause (c) or clause (d) of the definition of Book Value, the amount of such adjustment shall be treated as an item of gain (if the adjustment increases the Book Value of the asset) or an item of loss (if the adjustment decreases the Book Value of the asset) from the disposition of such asset and shall be taken into account for purposes of computing Net Profits or Net Losses;

(d) Gain or loss resulting from any disposition of property with respect to which gain or loss is recognized for federal income tax purposes shall be computed by reference to the Book Value of the property disposed of, notwithstanding that the adjusted tax basis of such property differs from its Book Value;

(e) In lieu of the depreciation, amortization, and other cost recovery deductions taken into account in computing such taxable income or loss, there shall be taken into account Depreciation for such taxable year;

(f) To the extent an adjustment to the adjusted tax basis of any asset pursuant to Section 734(b) of the Code is required, pursuant to Treas. Reg. §1.704-1(b)(2)(iv)(m)(4), to be taken into account in determining Capital Account balances as a result of a distribution other than in liquidation of a Member’s interest in the Company, the amount of such adjustment shall be treated as an item of gain (if the adjustment increases the basis of the asset) or an item of loss (if the adjustment decreases such basis) from the disposition of such asset and shall be taken into account for purposes of computing Net Profits or Net Losses; and

(g) Any items that are allocated pursuant to Section 6.04 shall be determined by applying rules analogous to those set forth in clauses (a) through (f) hereof but shall not be taken into account in computing Net Profits and Net Losses.

Nonrecourse Deductions” is defined in Treas. Reg. §1.704-2(b).

 

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Notice” is defined in Section 14.08.

Optional Securities” as used herein has the meaning ascribed to it in the IPO Underwriting Agreement.

Prior LLC Agreement” is defined in the preamble.

Panel” is defined in Article 13.

Percentage Interest” of each Member is set forth on Exhibit A hereto, which may be amended from time to time and which shall be equal to a fraction (expressed as a percentage), the numerator of which is the number of Series A Membership Interests and Series B Membership Interests held by such Member and the denominator of which is the number of Series A Membership Interests and Series B Membership Interests held by all the Members (it being understood that if the Company hereafter issues any Equity Securities other than Series A Membership Interests or Series B Membership Interests, then this definition shall be changed pursuant to an amendment of this Agreement in accordance with the terms hereof).

Permitted Transferee” means (i) the spouse of such Member, (ii) any trust, or family partnership or family limited liability company, the sole beneficiary of which is such Member, the spouse of, or any Person related by blood or adoption to, such Member, (iii) an Affiliate of such Member, (iv) in the context of a distribution by such Member to its direct or indirect equity owners substantially in proportion to such ownership, the partners, members or stockholders of such Member, or the partners, members or stockholders of such partners, members or stockholders, (v) any Member and (vi) any Transferee in a Transfer that complies with Article 9.

Permitted Transferee Member” means a Permitted Transferee that is admitted as a Member pursuant to the terms of this Agreement.

Person” means any natural person, corporation, limited partnership, general partnership, limited liability company, joint stock company, joint venture, association, company, estate, trust, bank trust company, land trust, business trust, or other organization, whether or not a legal entity, custodian, trustee-executor, administrator, nominee, or entity in a representative capacity, and any government or agency or political subdivision thereof.

Registration Rights Agreement” means the Registration Rights Agreement dated as of the date hereof among HII and the other parties thereto.

Regulatory Allocations” is defined in Section 6.04(b).

Relative” means any Person’s child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including adoptive relationships and any Person sharing such Person’s household (other than a tenant or employee).

 

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Responding Party” is defined in Article 13.

Secretary of State” means the Secretary of State of the State of Delaware.

Securities Act” means the Securities Act of 1933, as amended.

Series A Membership Interests” is defined in Section 3.01(a).

Series B Membership Interests” is defined in Section 3.01(a).

Subsidiary” means (a) any corporation, limited liability company or other entity, a majority of the capital stock or other equity interests of which having ordinary voting power to elect a majority of the board of directors or other Persons performing similar functions is at the time owned, directly or indirectly, with power to vote, by the Company or any direct or indirect Subsidiary of the Company or (b) a partnership in which the Company or any direct or indirect Subsidiary is a general partner.

Subsidiary Partnership” means an entity which is a partnership for U.S. federal income tax purposes and which is Controlled by the Company.

Tax Distribution Date” is defined in Section 5.02.

Tax Matters Member” is defined in Section 12.05(a).

Tax Receivable Agreement” means the Tax Receivable Agreement dated February 13, 2013 among HII, the Company and the other parties thereto.

Transfer” is defined in Section 9.01.

Transaction Documents” means, collectively, this Agreement, the Exchange Agreement, the Registration Rights Agreement and the Tax Receivable Agreement.

Treasury Regulations” or “Treas. Reg.” means the Federal income tax regulations promulgated under the Code, as such Treasury Regulations may be amended from time to time (it being understood that all references herein to specific sections of the Treasury Regulations shall be deemed also to refer to any corresponding provisions of succeeding Treasury Regulations).

Section 1.02. Other Definitional and Interpretative Provisions. The words “hereof,” “herein” and “hereunder” and words of like import used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. The headings and captions herein are included for convenience of reference only and shall be ignored in the construction or interpretation hereof. References to Articles, Sections, Exhibits and Annexes are to Articles, Sections, Exhibits and Annexes of this Agreement unless otherwise specified. Any

 

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capitalized term used in any Exhibit and not otherwise defined therein has the meaning ascribed to such term in this Agreement. Any singular term in this Agreement shall be deemed to include the plural, and any plural term the singular. Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation,” whether or not they are in fact followed by those words or words of like import. “Writing,” “written” and comparable terms refer to printing, typing and other means of reproducing words (including electronic media) in a visible form. References to any agreement or contract are to that agreement or contract as amended, restated, modified or supplemented from time to time in accordance with the terms thereof. References to any Person include the successors and permitted assigns of that Person. References from or through any date mean, unless otherwise specified, from and including or through and including, respectively. References to “law,” “laws” or to a particular statute or law shall be deemed also to include any and all Applicable Laws.

ARTICLE 2

ORGANIZATION

Section 2.01. Formation; Amendment and Restatement. The Company was formed as a Delaware limited liability company under and pursuant to the Delaware LLC Act. The Members agree to continue the Company as a limited liability company under the Delaware LLC Act, upon the terms and subject to the conditions set forth in this Agreement. The rights, powers, duties, obligations and liabilities of the Members shall be determined pursuant to the Delaware LLC Act and this Agreement. To the extent that the rights, powers, duties, obligations and liabilities of any Member are different by reason of any provision of this Agreement than they would be in the absence of such provision, this Agreement shall, to the extent permitted by the Delaware LLC Act, control.

Section 2.02. Company Name. The name of the Company is Health Plan Intermediaries Holdings, LLC. The business of the Company may be conducted under that name or such other names as the Managing Member may from time to time designate; provided, however, that the Company complies with Applicable Law relating to name changes and the use of fictitious and assumed names.

Section 2.03. Purposes of the Company. The purposes of the Company are to carry on any lawful business or activity and to have and exercise all of the powers, rights and privileges which a limited liability company organized pursuant to the Delaware LLC Act may have and exercise. The Company shall not conduct any business which is forbidden by or contrary to Applicable Law.

Section 2.04. Principal Place of Business. The principal place of business of the Company shall be 15438 N. Florida Avenue, Suite 201, Tampa, Florida, 33613 or such other place as the Managing Member may designate from time to time. The Company may establish

 

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or abandon from time to time such additional offices and places of business as the Managing Member may deem appropriate in the conduct of the Company’s business.

Section 2.05. Registered Office and Agent. The name of the registered agent for service of process of the Company and the address of the Company’s registered office in the State of Delaware shall be the initial registered agent named in the Certificate and the office of the initial registered agent named in the Certificate, or such other agent or office in the State of Delaware as the Managing Member or the officers may from time to time determine.

Section 2.06. Qualification in Other Jurisdictions. The Managing Member or a duly authorized officer of the Company shall execute, deliver and file certificates (and any amendments and/or restatements thereof) necessary for the Company to qualify to do business in the jurisdictions in which the Company may wish to conduct business. In those jurisdictions in which the Company may wish to conduct business in which qualification or registration under assumed or fictitious names is required or desirable, the Managing Member or a duly authorized officer of the Company shall cause the Company to be so qualified or registered in compliance with Applicable Law.

Section 2.07. Term. The term of the Company shall continue indefinitely unless the Company is dissolved in accordance with the provisions of this Agreement and the Delaware LLC Act.

Section 2.08. No State-law Partnership. The Members intend that the Company shall not be a partnership (including a limited partnership) or joint venture, and that no Member or officer shall be a partner or joint venturer of any other Member or officer by virtue of this Agreement, for any purposes other than as is set forth in the last sentence of this Section 2.08, and this Agreement shall not be construed to the contrary. The Members intend that the Company be treated as a partnership for U.S. federal income tax purposes and under state tax laws, and the Company shall not elect to be treated as an association taxable as a corporation.

ARTICLE 3

CAPITALIZATION

Section 3.01. Membership Interests; Capitalization.

(a) Membership Interests; Capitalization. Each Member’s interest in the Company, including such Member’s interest, if any, in the capital, income, gain, loss, deduction and expense of the Company and the right to vote, if any, on certain Company matters as provided in this Agreement, shall be represented by units of limited liability company interest (each, a “Membership Interest”). The Company shall have two authorized classes of Membership Interests, designated “Series A Membership Interests” and “Series B Membership Interests.” The total number of authorized Membership Interests consists of an unlimited number of

 

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authorized Series A Membership Interests and 20,000,000 Series B Membership Interests. The ownership by a Member of Membership Interests shall entitle such Member to allocations of profits and losses and other items and distributions of cash and other property as is set forth in Article 5 and Article 6, respectively.

(b) Issuances of Series A Membership Interests to Managing Member. Immediately after consummation of the IPO, the Company shall issue to the Managing Member the number of Series A Membership Interests set forth opposite the Managing Member’s name under the column “Series A Membership Interests” set forth on Exhibit A. The Managing Member shall hold all Series A Membership Interests and additional Series A Membership Interests may only be issued to the Managing Member in accordance with the terms and conditions of this Agreement.

(c) Issuances of Series B Membership Interests. At the Effective Time, the Company shall convert the Membership Interests of the Prior Members issued pursuant to the Prior LLC Agreement into the number of Series B Membership Interests set forth opposite such Member’s name under the column “Series B Membership Interests” on Exhibit A. After the Effective Time, for each Series B Membership Interest the Company issues to a Member, HII shall issue one Class B Share to such Member.

(d) Members. The Managing Member and the Persons listed on Exhibit A are the sole Members of the Company as of the date hereof. Exhibit A may be amended by the Company from time to time in accordance with Section 4.01.

(e) Certificates; Legends. Membership Interests shall be issued in uncertificated form; provided that, at the request of any Member, the Managing Member shall cause the Company to issue one or more certificates to any such Member holding Series B Membership Interests representing in the aggregate the Series B Membership Interests held by such Member. If any Series B Membership Interest certificate is issued, then such certificate shall bear a legend substantially in the following form:

THIS CERTIFICATE EVIDENCES SERIES B MEMBERSHIP INTERESTS REPRESENTING A MEMBERSHIP INTEREST IN HEALTH PLAN INTERMEDIARIES HOLDINGS, LLC AND IS A SECURITY WITHIN THE MEANING OF ARTICLE 8 OF THE UNIFORM COMMERCIAL CODE. THE MEMBERSHIP INTEREST IN HEALTH PLAN INTERMEDIARIES HOLDINGS, LLC REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED, OR ANY NON-U.S. OR STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN COMPLIANCE THEREWITH. THE MEMBERSHIP INTEREST IN HEALTH PLAN INTERMEDIARIES HOLDINGS, LLC REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO RESTRICTIONS ON TRANSFER SET

 

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FORTH IN THE THIRD AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT OF HEALTH PLAN INTERMEDIARIES HOLDINGS, LLC, DATED AS OF FEBRUARY 13, 2013, AS THE SAME MAY BE AMENDED FROM TIME TO TIME.

Section 3.02. Authorization and Issuance of Additional Membership Interests.

(a) The Managing Member shall have the right to cause the Company to issue and/or create and issue at any time after the date hereof, and for such amount and form of consideration as the Managing Member may determine, additional Membership Interests (of Series A Membership Interests, Series B Membership Interests or new classes) or other Equity Securities of the Company (including creating classes or series thereof having such powers, designations, preferences and rights as may be determined by the Managing Member), subject to Section 14.09. The Managing Member shall have the power to make such amendments to this Agreement in order to provide for such powers, designations, preferences and rights as the Managing Member in its discretion deems necessary or appropriate to give effect to such additional authorization or issuance in accordance with the provisions of this Section 3.02(a), subject to Section 14.09.

(b) At any time HII issues one or more Class A Shares (other than an issuance of the type covered by Section 3.02(d) or an issuance of Optional Securities), HII shall promptly contribute to the Company all the net proceeds (if any) received by HII with respect to such Class A Share or Class A Shares. Upon the contribution by HII to the Company of all of such net proceeds so received by HII, the Managing Member shall cause the Company to issue a number of Series A Membership Interests determined based upon the Exchange Rate then in effect, registered in the name of HII.

(c) At any time HII issues one or more shares of capital stock of HII (other than Class A Shares or Class B Shares), HII shall contribute all (but not less than all) the net proceeds (if any) received by HII with respect to such share or shares of capital stock to the Company. After HII contributes to the Company all (but not less than all) such net proceeds so received by HII, then, subject to the provisions of Section 3.02(a) and Section 14.09, the Managing Member shall cause the Company to issue a corresponding number of Membership Interests or other Equity Securities of the Company (other than Series A Membership Interests or Series B Membership Interests) (such corresponding number of Membership Interests to be determined in good faith by the Managing Member, taking into account the powers, designations, preferences and rights of such capital stock) registered in the name of HII.

(d) At any time HII issues one or more Class A Shares in connection with an equity incentive program, whether such share or shares are issued upon exercise (including cashless exercise) of an option, settlement of a restricted stock unit, as restricted stock or otherwise, the Managing Member shall cause the Company to issue a corresponding number of Series A Membership Interests, registered in the name of HII (determined based upon the Exchange Rate then in effect); provided that HII shall be required to contribute all (but not less than all) the net

 

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proceeds (if any) received by HII from or otherwise in connection with such issuance of one or more Class A Shares, including the exercise price of any option exercised, to the Company. If any such Class A Shares so issued by HII in connection with an equity incentive program are subject to vesting or forfeiture provisions, then the Series A Membership Interests that are issued by the Company to HII in connection therewith in accordance with the preceding provisions of this Section 3.02(d) shall be subject to vesting or forfeiture on the same basis; if any of such Class A Shares vest or are forfeited, then a corresponding number of the Series A Membership Interests (determined based upon the Exchange Rate then in effect) issued by the Company in accordance with the preceding provisions of this Section 3.02(d) shall automatically vest or be forfeited. Any cash or property held by either HII or the Company or on either’s behalf in respect of dividends paid on restricted Class A Shares that fail to vest shall be returned to the Company upon the forfeiture of such restricted Class A Shares.

(e) For purposes of this Section 3.02, “net proceeds” means gross proceeds to HII from the issuance of Class A Shares or other securities less all bona fide out-of-pocket expenses of HII, the Company and their respective Subsidiaries in connection with such issuance.

Section 3.03. Repurchase or Redemption of Class A Shares. If, at any time, any Class A Shares are repurchased or redeemed (whether by exercise of a put or call, automatically or by means of another arrangement) by HII for cash, then the Managing Member shall cause the Company, immediately prior to such repurchase or redemption of Class A Shares, to redeem a corresponding number of Series A Membership Interests held by HII (determined based upon the Exchange Rate then in effect), at an aggregate redemption price equal to the aggregate purchase or redemption price of the Class A Share or Class A Shares being repurchased or redeemed by HII (plus any expenses related thereto) and upon such other terms as are the same for the Class A Share or Class A Shares being repurchased or redeemed by HII.

Section 3.04. Changes in Common Stock. Any subdivision (by stock split, stock dividend, reclassification, recapitalization or otherwise) or combination (by reverse stock split, reclassification, recapitalization or otherwise) of Class A Shares shall be accompanied by an identical subdivision or combination, as applicable, of the Series A Membership Interests.

ARTICLE 4

MEMBERS

Section 4.01. Names and Addresses. The names and addresses of the Members are set forth on Exhibit A attached hereto and made a part hereof. The Managing Member shall cause Exhibit A to be amended from time to time to reflect the admission of any additional Member, the withdrawal or termination of any Member, receipt by the Company of notice of any change of address of a Member or the occurrence of any other event requiring amendment of Exhibit A.

 

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Section 4.02. No Liability for Status as Member. The debts, obligations and liabilities of the Company, whether arising in contract, tort or otherwise, shall be solely the debts, obligations and liabilities of the Company; and no Member shall have any personal liability whatsoever solely by reason of its status as a Member, whether to the Company or to any creditor of the Company, for the debts, obligations or liabilities of the Company or for any of its losses beyond the amount of such Member’s personal obligation to pay its Capital Contribution to the Company, and as otherwise set forth in the Delaware LLC Act or under Applicable Law. Except as otherwise expressly provided in the Delaware LLC Act, the liability of each Member for Capital Contributions shall be limited to the amount of Capital Contributions required to be made by such Member in accordance with the provisions of this Agreement, but only when and to the extent the same shall become due pursuant to the provisions of this Agreement. In no event shall any Member enter into any agreement or instrument that would create or purport to create personal liability on the part of any other Member for any debts, obligations or liabilities of the Company without the prior written consent of such other Member. It is acknowledged and agreed that no Member is obligated to pay or make any future Capital Contribution to the Company.

Section 4.03. No Restrictions of Business Pursuits of Member. This Agreement shall not preclude or limit in any respect the right of any Member to engage in or possess any interest in other business ventures of any kind, nature or description.

Section 4.04. Transactions Between Members and the Company. Except as otherwise provided by Applicable Law, a Member may, but shall not be obligated to, lend money to the Company, act as a surety or guarantor for the Company, or transact other business with the Company, and has the same rights and obligations when transacting business with the Company as a person or entity who is not a Member, provided such transactions shall be entered into on terms and conditions customary in arm’s length transactions between unrelated parties.

Section 4.05. Meeting of Members. Any action permitted or required to be taken by the Members pursuant to this Agreement may be considered at a meeting of such Members held not less than ten days after notification thereof shall have been given by the Managing Member to all Members. Such notification may be given by the Managing Member, in its discretion, at any time. Any such notification shall state briefly the purpose, time and place of the meeting. All such meetings shall be held within or outside the State of Delaware at such reasonable place as the Managing Member shall designate and during normal business hours, and may be held by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other. The Members may vote at any such meeting in person or by proxy. Participation in such a meeting shall constitute presence in person at such meeting. No notice of the time, place or purpose of any meeting need be given to any Member who, either before or after the time of such meeting, waives such notice in writing. At any meeting of the Members, the Managing Member, whether present in person or by proxy, shall, except as otherwise provided by law or by this Agreement, constitute a quorum. Whenever any Company action is to be taken by vote of the Members at a meeting, it shall be authorized

 

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upon receiving the affirmative vote of the Managing Member. For the avoidance of doubt, Members owning Series B Membership Interests shall not be entitled, with respect to such Series B Membership Interests, to vote on or approve or consent to any action permitted or required to be taken or any determination required to be made by the Company or the Members, including the right to vote on or approve or consent to any merger or consolidation involving the Company, or any amendment to this Agreement, other than pursuant to Section 14.09.

Section 4.06. Action by Members Without Meeting. Any action permitted or required to be taken by the Members pursuant to this Agreement may be effected at a meeting of the Members or by consent in writing or by electronic transmission of the Managing Member, with the same effect as if taken at a meeting of the Members.

Section 4.07. Limited Rights of Members. Other than as provided in this Article 4 and Article 10 (and Article 7 in the case of the Managing Member), no Member, in such Person’s capacity as a Member, shall have the power or authority to act for or on behalf of, or to bind, the Company, or to vote at any meeting of the Members.

ARTICLE 5

DISTRIBUTIONS

Section 5.01. Distributions. To the extent permitted by Applicable Law and hereunder, distributions to Members may be declared by the Managing Member out of funds legally available therefor in such amounts and on such terms (including the payment dates of such distributions) as the Managing Member shall determine using such record date as the Managing Member may designate; such distribution shall be made to the Members as of the close of business on such record date on a pro rata basis in accordance with each Member’s Percentage Interest as of the close of business on such record date; provided, however, that the Managing Member shall have the obligation to make distributions as set forth in Sections 5.02 and 10.01; and provided further that, notwithstanding any other provision herein to the contrary, no distributions shall be made to any Member to the extent such distribution would render the Company insolvent. For purposes of the foregoing sentence, insolvency means the inability of the Company to meet its payment obligations when due. Promptly following the designation of a record date and the declaration of a distribution pursuant to this Section 5.01, the Managing Member shall give notice to each Member of the record date, the amount and the terms of the distribution and the payment date thereof. In furtherance of the foregoing, it is intended that the Managing Member shall, to the extent permitted by Applicable Law and hereunder, have the right in its sole discretion to make distributions to the Members pursuant to this Section 6.01 in such amounts as shall enable HII to meet its obligations pursuant to the Tax Receivable Agreement.

Section 5.02. Distributions for Payment of Income Tax. On or about each date (a “Tax Distribution Date”) that is five (5) Business Days prior to the date on which estimated U.S.

 

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federal income tax payments are required to be made by calendar year individual taxpayers and each due date for the U.S. federal income tax return of an individual calendar year taxpayer (without regard to extensions), the Company shall make a distribution to each Member of cash in an amount equal to such Member’s Assumed Tax Liability, if any, for such taxable period (the “Tax Distributions”). Distributions pursuant to this Section 5.02 shall be treated as an advance distribution under Section 5.01 and shall be offset against future distributions that such holder of Membership Interests would otherwise be entitled to receive pursuant to Section 5.01. The calculation of Assumed Tax Liability shall take into account the carryforward of prior losses and the character of the items allocated (e.g., capital or ordinary) and shall treat each distribution made pursuant to this Section 5.02 as a payment of taxes or estimated taxes. If on a Tax Distribution Date there are not sufficient funds on hand to distribute to each Member the full amount of such Member’s Assumed Tax Liability, distributions pursuant to this Section 5.02 shall be made to the Members to the extent of the available funds in proportion to each Member’s Assumed Tax Liability and the Company shall make future distributions as soon as funds become available to pay the remaining portion of such Member’s Assumed Tax Liability. To the extent that, on any Tax Distribution Date, a Member would otherwise be entitled to receive less than its Percentage Interest of the aggregate Tax Distributions to be paid on such date, the Tax Distributions to such Member shall be increased to ensure that all distributions made pursuant to this Section 5.02 shall be made on a pro rata basis in accordance with Percentage Interests. In the event of any audit adjustment by a taxing authority that affects the calculation of any Member’s Tax Distribution for any taxable year, or in the event the Company files an amended return which has such effect, each Member’s Tax Distribution with respect to such year shall be recalculated by giving effect to such audit adjustment or changes reflected in such amended return, as applicable (and by including therein an additional amount that, when distributed to the Members pursuant to this sentence, will be sufficient to satisfy the obligation of any Member or former Member in connection therewith for interest or penalties), and (x) any shortfall in the amount of Tax Distributions the Members and former Members received for the relevant taxable years based on such recalculated Tax Distribution amount shall promptly be distributed to such Members and successors of former Members, except to the extent that Distributions were made to such Members and former Members pursuant to Section 5.01 in the relevant taxable years and (y) any excess in the amount of Tax Distributions the Members received for the relevant taxable years based on such recalculated Tax Distribution shall be applied against, and reduce the amount of, subsequent Tax Distributions due to such Member or successor Member.

Section 5.03. Limitations on Distributions. Notwithstanding anything to the contrary contained in this Agreement, distributions to Members shall be subject to the restrictions contained in §18-607 of the Delaware LLC Act.

Section 5.04. Withholding.

(a) Authority to Withhold; Treatment of Withheld Amounts. Each Member hereby authorizes the Company and the Managing Member on behalf of the Company to withhold and

 

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to pay over, or otherwise to pay, any withholding or other taxes payable by the Company (pursuant to any provision of United States federal, state or local or foreign law) with respect to such Member or as a result of such Member’s participation in the Company; and if and to the extent that the Company shall be required to withhold or pay any such withholding or other taxes, such Member shall be deemed for all purposes of this Agreement to have received a payment from the Company as of the time such withholding or other tax is paid, which payment shall be deemed to be a distribution with respect to such Member’s Membership Interest in the Company.

(b) Indemnification. Each Member shall, to the fullest extent permitted by Applicable Law, indemnify and hold harmless the Managing Member and each other Person (other than the Company) who is or who is deemed to be the responsible withholding agent for United States federal, state or local or foreign income tax purposes against all claims, liabilities and expenses of whatever nature (other than any claims, liabilities and expenses in the nature of penalties and accrued interest thereon that result from such Managing Member’s or such other Person’s gross negligence, willful misconduct or fraud) relating to the Company’s, the Managing Member’s or such other Person’s obligation to withhold and to pay over, or otherwise to pay, any withholding or other taxes payable by the Company or any of its Affiliates with respect to such Member or as a result of such Member’s participation in the Company.

(c) Refunds. In the event that the Company receives a refund of taxes previously withheld, the economic benefit of such refund shall be apportioned among the Members in a manner reasonably determined by the Managing Member to offset the prior operation of this Section 5.04 in respect of such withheld taxes.

ARTICLE 6

ALLOCATIONS AND TAX MATTERS

Section 6.01. Capital Accounts and Adjusted Capital Accounts.

(a) Establishment of Capital Accounts. There shall be established and maintained for each Member on the books of the Company a capital account (a “Capital Account”). Each Member’s Capital Account (a) shall be increased by (i) the amount of money contributed by such Member to the Company, (ii) the Book Value of property contributed by that Member to the Company (net of liabilities secured by the contributed property that the Company is considered to assume or take subject to under Section 752 of the Code) and (iii) allocations to such Member of Net Profits and any other items of income or gain allocated to such Member, and (b) shall be decreased by (i) the amount of money distributed to such Member by the Company, (ii) the Book Value of property distributed to such Member by the Company (net of liabilities secured by the distributed property that such Member is considered to assume or take subject to under Section 752 of the Code), and (iii) allocations to such Member of Net Losses and any other items of loss or deduction allocated to such Member. The Capital Accounts shall also be increased or decreased to reflect a revaluation of Company property pursuant to paragraph (b) of the

 

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definition of Book Value. On the transfer of all or part of a Member’s Membership Interests, the Capital Account of the transferor that is attributable to the transferred Membership Interests shall carryover to the Permitted Transferee Member in accordance with the provisions of Treas. Reg. §1.704-1(b)(2)(iv)(1). A Member that has more than one class of Membership Interests shall have a single Capital Account that reflects all such Membership Interests.

(b) Negative Balances; Interest. None of the Members shall have any obligation to the Company or to any other Member to restore any negative balance in its Capital Account. No interest shall be paid by the Company on any Capital Contributions.

(c) No Withdrawal. No Person shall be entitled to withdraw any part of such Person’s Capital Contributions or Capital Account or to receive any distribution from the Company, except as expressly provided herein.

Section 6.02. Additional Capital Contributions. No Member shall be required to make any additional Capital Contributions to the Company or lend any funds to the Company, although any Member may agree with the Managing Member and become obligated to do so.

Section 6.03. Allocations of Net Profits and Net Losses. Subject to Section 6.04, Net Profits or Net Losses for any Fiscal Year or other period shall be allocated to the Members in proportion to their respective Percentage Interests.

Section 6.04. Special Allocations.

(a) Notwithstanding any other provision of this Agreement, the following allocations shall be made for each Fiscal Year or other period:

(i) Notwithstanding any other provision of this Section 6.04, if there is a net decrease in Company Minimum Gain during any taxable period, each Member shall be allocated items of Company income and gain for such period (and, if necessary, subsequent periods) in the manner and amounts provided in Treas. Reg. §1.704-2(f), (g)(2) and (j). For purposes of this Section 6.04, each Member’s Capital Account shall be determined and the allocation of income or gain required hereunder shall be effected, prior to the application of any other allocations pursuant to this Article 6 with respect to such taxable period. This Section 6.04(a)(i) is intended to comply with the partnership minimum gain chargeback requirement in Treas. Reg. §1.704-2(f) and shall be interpreted consistently therewith.

(ii) Notwithstanding the other provisions of this Section 6.04 (other than 6.04(a)(i) above), if there is a net decrease in Member Nonrecourse Debt Minimum Gain during any taxable period, any Member with a share of Member Nonrecourse Debt Minimum Gain at the beginning of such taxable period shall be allocated items of Company income and gain for such period (and, if necessary, subsequent periods) in the manner and amounts provided in Treas. Reg. §1.704-2(i)(4) and (j)(2). For purposes of

 

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this Section 6.04, each Member’s Adjusted Capital Account balance shall be determined, and the allocation of income and gain required hereunder shall be effected, prior to the application of any other allocations pursuant to this Section 6.04(a), other than Section 6.04(a)(i) above, with respect to such taxable period. This Section 6.04(a)(ii) is intended to comply with the Member nonrecourse debt minimum gain chargeback requirement in Treas. Reg. §1.704-2(i)(4) and shall be interpreted consistently therewith.

(iii) Except as provided in Sections 6.04(a)(i) and 6.04(a)(ii) above, in the event any Member unexpectedly receives any adjustments, allocations or distributions described in Treas. Reg. §1.704-1(b)(2)(ii)(d)(4), (5) or (6), items of Company income and gain shall be specially allocated to such Member in an amount and manner sufficient to eliminate, to the extent required by such Treasury Regulations, the deficit balance, if any, in its Adjusted Capital Account created by such adjustments, allocations or distributions as quickly as possible unless such deficit balance is otherwise eliminated pursuant to Sections 6.04(a)(i) and 6.04(a)(ii).

(iv) In the event any Member has a deficit balance in its Adjusted Capital Account at the end of any taxable period, such Member shall be specially allocated items of Company gross income and gain in the amount of such excess as quickly as possible; provided, however, that an allocation pursuant to this Section 6.04(a)(iv) shall be made only if and to the extent that such Member would have a deficit balance in its Adjusted Capital Account after all other allocations provided in this Section 6.04(a) have been tentatively made as if this Section 6.04(a)(iv) were not in this Agreement.

(v) Nonrecourse Deductions for any taxable period shall be allocated to the Members in accordance with their Percentage Interests.

(vi) Member Nonrecourse Deductions for any taxable period shall be allocated 100% to the Member that bears the Economic Risk of Loss with respect to the Member Nonrecourse Debt to which such Member Nonrecourse Deductions are attributable in accordance with Treas. Reg. §1.704-2(i) or Treas. Reg. §1.704-2(k). If more than one Member bears the Economic Risk of Loss with respect to a Member Nonrecourse Debt, Member Nonrecourse Deductions attributable thereto shall be allocated between or among such Members in accordance with the ratios in which they share such Economic Risk of Loss.

(b) Curative Allocation. The allocations set forth in Section 6.04(a) (the “Regulatory Allocations) are intended to comply with certain requirements of the Treasury Regulations. It is the intent of the Members that, to the extent possible, all Regulatory Allocations shall be offset either with other Regulatory Allocations or with special allocations of other items of Company income, gain, loss, or deduction pursuant to this Section 6.04(b). Therefore, notwithstanding any other provision of this Article 6 (other than the Regulatory Allocations), but subject to the Code and the Treasury Regulations, the Managing Member shall make such offsetting special

 

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allocations of Company income, gain, loss, or deduction in whatever manner it determines appropriate so that, after such offsetting allocations are made, each Member’s Capital Account balance is, to the extent possible, equal to the Capital Account balance such Member would have had if the Regulatory Allocations were not part of the Agreement. In exercising its discretion under this Section 6.04(b), the Managing Member shall take into account future Regulatory Allocations that, although not yet made, are likely to offset other Regulatory Allocations previously made.

(c) Notwithstanding any other provisions of this Section 6.04, if, following the application of Sections 6.04(a) and 6.04(b), the Managing Member determines in its sole discretion that the allocation provisions in Sections 6.04(a) and 6.04(b) do not reflect the economic arrangements among the Members, then Net Profits and Net Losses shall, following the application of Sections 6.04(a) and 6.04(b), be allocated in the sole discretion of the Managing Member in a manner that the Managing Member concludes reflects the economic arrangements of the Members.

Section 6.05. Allocation for Income Tax Purposes.

(a) Except as provided in Section 6.05(b), 6.05(c) and 6.05(d), each item of income, gain, loss and deduction of the Company for U.S. federal income tax purposes shall be allocated among the Members in the same manner as such items are allocated for book purposes under Sections 6.03 and 6.04.

(b) The Members recognize that there may be a difference between the Book Value of a Company asset and the asset’s adjusted tax basis at the time of the property’s contribution or revaluation pursuant to this Agreement. In such a case, all items of tax depreciation, cost recovery, amortization, and gain or loss with respect to such asset shall be allocated among the Members to take into account the disparities between the Book Values and the adjusted tax basis with respect to such properties in accordance with the provisions of Sections 704(b) and 704(c) of the Code and the Treasury Regulations under those sections using the “traditional method” set forth in Treas. Reg. §1.704-3(b); provided, however, that any tax items not required to be allocated under Sections 704(b) or 704(c) of the Code shall be allocated in the same manner as such gain or loss would be allocated for book purposes under Sections 6.03 and 6.04. Items allocated under this Section 6.05(b) shall neither be credited nor charged to the Members’ Capital Accounts.

(c) All items of income, gain, loss, deduction and credit allocated to the Members in accordance with the provisions hereof and basis allocations recognized by the Company for federal income tax purposes shall be determined without regard to any election under Section 754 of the Code that may be made by the Company; provided, however, such allocations, once made, shall be adjusted as necessary or appropriate to take into account the adjustments permitted by Sections 734 and 743 of the Code.

 

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(d) If any deductions for depreciation, cost recovery or depletion are recaptured as ordinary income upon the sale or other disposition of Company properties, the ordinary income character of the gain from such sale or disposition shall be allocated among the Members in the same ratio as the deductions giving rise to such ordinary income character were allocated.

Section 6.06. Other Allocation Rules. All items of income, gain, loss, deduction and credit allocable to Membership Interests that have been transferred shall be allocated between the transferor and the transferee based on the portion of the calendar year during which each was recognized as the owner of such Membership Interests, without regard to the results of Company operations during any particular portion of that calendar year and without regard to whether cash distributions were made to the transferor or the transferee during that calendar year; provided, however, that this allocation must be made in accordance with a method permissible under Section 706 of the Code and the regulations thereunder.

Section 6.07. Regulatory Compliance. The foregoing provisions are intended to comply with Treas. Reg. § 1.704-1(b), and shall be interpreted and applied as provided in such Treasury Regulations. If the Managing Member shall determine that the manner in which the Capital Accounts or Adjusted Capital Accounts, or any increases or decreases thereto, are computed, or the manner in which any allocations are made under Sections 6.03 and 6.04, should be adjusted in order to comply with Sections 704(b) and 704(c) of the Code and Treasury Regulations thereunder, the Managing Member shall make such modifications, provided that the Managing Member shall not modify the manner of making distributions pursuant to this Agreement.

Section 6.08. Certain Costs And Expenses. The Company shall (a) pay, or cause to be paid, all costs, fees, operating expenses and other expenses of the Company (including the costs, fees and expenses of attorneys, accountants or other professionals and the compensation of all personnel providing services to the Company) incurred in pursuing and conducting, or otherwise related to, the business of the Company, and (b) in the sole discretion of the Managing Member, reimburse the Managing Member for any out-of-pocket costs, fees and expenses incurred by it in connection therewith. To the extent that the Managing Member reasonably determines in good faith that its expenses are related to the business conducted by the Company and/or its subsidiaries (including any good faith allocation of a portion of expenses that so relate to the business of the Company and/or its subsidiaries and that also relate to other businesses or activities of the Managing Member), then the Managing Member may cause the Company to pay or bear all such expenses of the Managing Member, including, costs of securities offerings not borne directly by Members, compensation and meeting costs of its board of directors, cost of periodic reports to its stockholders, litigation costs and damages arising from litigation, accounting and legal costs and franchise taxes (which are not based on, or measured by, income) provided that the Company shall not pay or bear any income tax obligations of the Managing Member; provided further that the payment of Tax Distributions to the Managing Member shall not be prevented by the foregoing. Payments under this Section 6.08 are intended to constitute reasonable compensation for past or present services and are not “distributions” within the meaning of §18-607 of the Delaware LLC Act.

 

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ARTICLE 7

MANAGEMENT AND CONTROL OF BUSINESS

Section 7.01. Management. (a) The Members shall possess all rights and powers as provided in the Delaware LLC Act and otherwise by Applicable Law. Except as otherwise expressly provided for herein and subject to the other provisions of this Agreement, the Members hereby consent to the exercise by the Managing Member of all such powers and rights conferred on them by the Delaware LLC Act with respect to the management and control of the Company.

(b) Other than with respect to the actions described in Section 10.01(a), the Managing Member shall have the power and authority to delegate to one or more other Persons the Managing Member’s rights and powers to manage and control the business and affairs of the Company, including to delegate to agents and employees of a Member or the Company (including any officers thereof), and to delegate by a management agreement or another agreement with, or otherwise to, other Persons. The Managing Member may authorize any Person (including any Member or officer of the Company) to enter into and perform any document on behalf of the Company.

(c) The Managing Member shall have the power and authority to effectuate the sale, lease, transfer, exchange or other disposition of any, all or substantially all of the assets of the Company (including the exercise or grant of any conversion, option, privilege or subscription right or any other right available in connection with any assets at any time held by the Company) or the merger, consolidation, reorganization or other combination of the Company with or into another entity.

Section 7.02. Certain Covenants. The Managing Member shall not, without the prior written consent of the Majority Holders, cause the merger of the Company with or into HII or any other Subsidiary thereof.

Section 7.03. Investment Company Act. The Managing Member shall use its best efforts to insure that the Company shall not be subject to registration as an investment company pursuant to the Investment Company Act.

ARTICLE 8

OFFICERS

Section 8.01. Officers. The officers of the Company shall be a Chief Executive Officer, a Treasurer and a Secretary, and unless determined otherwise by the Managing Member or the Chief Executive Officer, each other officer of HII shall also be an officer of the Company, with the same title. All officers shall be appointed by the Managing Member (or by the Chief Executive Officer to the extent the Managing Member delegates such authority to the Chief Executive Officer) and shall hold office until their successors are appointed by the Managing

 

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Member (or by the Chief Executive Officer to the extent the Managing Member delegates such authority to the Chief Executive Officer). Two or more offices may be held by the same individual. The officers of the Company may be removed by the Managing Member (or by the Chief Executive Officer to the extent the Managing Member delegates such authority to the Chief Executive Officer) at any time for any reason or no reason.

Section 8.02. Other Officers and Agents. The Managing Member may appoint such other officers and agents as it may deem necessary or advisable, who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Managing Member.

Section 8.03. Chief Executive Officer. The Chief Executive Officer shall be the chief executive officer of the Company and shall have the general powers and duties of supervision and management usually vested in the office of a chief executive officer of a company. He or she shall preside at all meetings of Members if present thereat. Except as the Managing Member shall authorize the execution thereof in some other manner, he or she shall execute bonds, mortgages and other contracts on behalf of the Company.

Section 8.04. Treasurer. The Treasurer shall have the custody of Company funds and securities and shall keep full and accurate account of receipts and disbursements in a book belonging to the Company. He or she shall deposit all moneys and other valuables in the name and to the credit of the Company in such depositaries as may be designated by the Managing Member or the Chief Executive Officer. The Treasurer shall disburse the funds of the Company as may be ordered by the Managing Member or the Chief Executive Officer, taking proper vouchers for such disbursements. He or she shall render to the Managing Member and the Chief Executive Officer whenever either of them may request it, an account of all his or her transactions as Treasurer and of the financial condition of the Company. If required by the Managing Member, the Treasurer shall give the Company a bond for the faithful discharge of his or her duties in such amount and with such surety as the Managing Member shall prescribe.

Section 8.05. Secretary. The Secretary shall give, or cause to be given, notice of all meetings of Members and all other notices required by Applicable Law or by this Agreement, and in case of his or her absence or refusal or neglect so to do, any such notice may be given by any person thereunto directed by the Chief Executive Officer, or by the Managing Member. He or she shall record all the proceedings of the meetings of the Company in a book to be kept for that purpose, and shall perform such other duties as may be assigned to him or her by the Managing Member or by the Chief Executive Officer.

Section 8.06. Other Officers. Other officers, if any, shall have such powers and shall perform such duties as shall be assigned to them, respectively, by the Managing Member or by the Chief Executive Officer.

 

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ARTICLE 9

TRANSFERS OF INTERESTS; ADMITTANCE OF NEW MEMBERS

Section 9.01. Transfer of Membership Interests. Other than as provided for below in this Section 9.01 or in Section 9.02, no Member may sell, assign, transfer, grant a participation in, pledge, hypothecate, encumber or otherwise dispose of (such transaction being herein collectively called a “Transfer”) all or any portion of its Membership Interest except with the written consent of the Managing Member, which may be granted or withheld in its sole discretion. Without the consent of the Managing Member (but otherwise in compliance with Sections 9.01 and 9.02), a Member may, at any time, (a) Transfer any portion of such Member’s Membership Interest pursuant to the Exchange Agreement, and (b) Transfer any portion of such Member’s Membership Interest to a Permitted Transferee of such Member. Any Transfer of Series B Membership Interests to a Permitted Transferee of such Member must be accompanied by the transfer of an equal number of corresponding Class B Shares to such Permitted Transferee. Any purported Transfer of all or a portion of a Member’s Membership Interest not complying with this Section 9.01 shall be void ab initio and shall not create any obligation on the part of the Company or the other Members to recognize that purported Transfer or to recognize the Person to which the Transfer purportedly was made as a Member. A Person acquiring a Member’s Membership Interest pursuant to this Section 9.01 shall not be admitted as a substituted or additional Member except in accordance with the requirements of Section 9.03, but such Person shall, to the extent of the Membership Interest transferred to it, be entitled to such Member’s (i) share of distributions, (ii) share of profits and losses, including Net Profits and Net Losses, and (iii) Capital Account in accordance with Section 6.01(a). Notwithstanding anything in this Section 9.01 or elsewhere in this Agreement to the contrary, if a Member Transfers all or any portion of its Membership Interest after the designation of a record date and declaration of a distribution pursuant to Section 5.01 and before the payment date of such distribution, the transferring Member (and not the Person acquiring all or any portion of its Membership Interest) shall be entitled to receive such distribution in respect of such transferred Membership Interest.

Section 9.02. Transfer of HII’s Interest. HII may not Transfer all or any portion of its Membership Interest held in the form of Series A Membership Interests at any time.

Section 9.03. Recognition of Transfer; Substituted and Additional Members. (a) No direct or indirect Transfer of all or any portion of a Member’s Membership Interest may be made, and no purchaser, assignee, transferee or other recipient of all or any part of such Membership Interest shall be admitted to the Company as a substituted or additional Member hereunder, unless:

(i) the provisions of Section 9.01 or Section 9.02, as applicable, shall have been complied with;

(ii) in the case of a proposed substituted or additional Member (other than a Permitted Transferee described in clauses (i) through (v) of the definition thereof) that is

 

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(i) a competitor or potential competitor of HII, the Company or their Subsidiaries, (ii) a Person with whom the HII, the Company or their Subsidiaries has had or is expected to have a material commercial or financial relationship or (iii) likely to subject HII, the Company or their Subsidiaries to any material legal or regulatory requirement or obligation, or materially increase the burden thereof, in each case as determined by the Managing Member in its sole discretion, the admission of the purchaser, assignee, transferee or other recipient as a substituted or additional Member shall have been approved by the Managing Member;

(iii) the Managing Member shall have been furnished with the documents effecting such Transfer, in form and substance reasonably satisfactory to the Managing Member, executed and acknowledged by both the seller, assignor or transferor and the purchaser, assignee, transferee or other recipient, and the Managing Member shall have executed (and the Managing Member hereby agrees to execute) any other documents on behalf of itself and the Members required to effect the Transfer;

(iv) the provisions of Section 9.03(b) shall have been complied with;

(v) the Managing Member shall be reasonably satisfied that such Transfer will not (A) result in a violation of the Securities Act or any other Applicable Law; or (B) cause an assignment under the Investment Company Act;

(vi) such Transfer would not cause the Company to lose its status as a partnership for federal income tax purposes and, without limiting the generality of the foregoing, such Transfer shall not be effected on or through an “established securities market” or a “secondary market or the substantial equivalent thereof,” as such terms are used in Section 1.7704-1 of the Treasury Regulations;

(vii) the Managing Member shall have received the opinion of counsel, if any, required by Section 9.03(c) in connection with such Transfer; and

(viii) all necessary instruments reflecting such Transfer and/or admission shall have been filed in each jurisdiction in which such filing is necessary in order to qualify the Company to conduct business or to preserve the limited liability of the Members.

(b) Each substituted Member and additional Member shall be bound by all of the provisions of this Agreement. Each substituted Member and additional Member, as a condition to its admission as a Member, shall execute and acknowledge such instruments (including a counterpart of this Agreement or a joinder agreement in customary form), in form and substance reasonably satisfactory to the Managing Member, as the Managing Member reasonably deems necessary or desirable to effectuate such admission and to confirm the agreement of such substituted or additional Member to be bound by all the terms and provisions of this Agreement with respect to the Membership Interest acquired by such substituted or additional Member. The

 

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admission of a substituted or additional Member shall not require the consent of any Member other than the Managing Member (if and to the extent such consent of the Managing Member is expressly required by this Article 9). As promptly as practicable after the admission of a substituted or additional Member, the books and records of the Company and Exhibit A shall be changed to reflect such admission.

(c) As a further condition to any Transfer of all or any part of a Member’s Membership Interest, the Managing Member may, in its discretion, require a written opinion of counsel to the transferring Member reasonably satisfactory to the Managing Member, obtained at the sole expense of the transferring Member, reasonably satisfactory in form and substance to the Managing Member, as to such matters as are customary and appropriate in transactions of this type, including, without limitation (or, in the case of any Transfer made to a Permitted Transferee, limited to an opinion) to the effect that such Transfer will not result in a violation of the registration or other requirements of the Securities Act or any other federal or state securities laws. No such opinion, however, shall be required in connection with a Transfer made pursuant to the Exchange Agreement.

Section 9.04. Expense of Transfer; Indemnification. All reasonable costs and expenses incurred by the Managing Member and the Company in connection with any Transfer of a Member’s Membership Interest, including any filing and recording costs and the reasonable fees and disbursements of counsel for the Company, shall be paid by the transferring Member. In addition, the transferring Member hereby indemnifies the Managing Member and the Company against any losses, claims, damages or liabilities to which the Managing Member, the Company, or any of their Affiliates may become subject arising out of or based upon any false representation or warranty made by, or breach or failure to comply with any covenant or agreement of, such transferring Member or such transferee in connection with such Transfer.

Section 9.05. Exchange Agreement. In connection with any Transfer of any portion of a Member’s Membership Interest pursuant to the Exchange Agreement, the Managing Member shall cause the Company to take any action as may be required under the Exchange Agreement or requested by any party thereto to effect such Transfer promptly.

Section 9.06. Recapitalization. Upon any Transfer to HII of any Series B Membership Interests from HPI, HPIS or their successors and assigns in connection with an exercise by the IPO Underwriters of their over-allotment option to purchase Optional Securities pursuant to Section 3 of the IPO Underwriting Agreement, such Series B Membership Interests shall immediately be recapitalized into Series A Membership Interests.

ARTICLE 10

DISSOLUTION AND TERMINATION

Section 10.01. Dissolution.

 

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(a) The Company shall be dissolved and its affairs wound up upon the occurrence of any of the following events:

(i) an election by the Managing Member to dissolve, wind up or liquidate the Company;

(ii) the sale, disposition or transfer of all or substantially all of the assets of the Company;

(iii) the entry of a decree of dissolution of the Company under §18-802 of the Delaware LLC Act; or

(iv) at any time there are no members of the Company, unless the Company is continued in accordance with the Delaware LLC Act.

(b) In the event of a dissolution pursuant to Section 10.01(a), the relative economic rights of each class of Membership Interests immediately prior to such dissolution shall be preserved to the greatest extent practicable with respect to distributions made to Members pursuant to Section 10.01(f) in connection with such dissolution, taking into consideration tax and other legal constraints that may adversely affect one or more parties to such dissolution and subject to compliance with Applicable Laws.

(c) Dissolution of the Company shall be effective on the day on which the event occurs giving rise to the dissolution, but the Company will not terminate until the assets of the Company have been distributed as provided in this Section 10.01 and any filings required by the Delaware LLC Act have been made.

(d) Upon dissolution, the Company shall be liquidated and wound up in an orderly manner in accordance with the provisions of this Section 10.01. The Managing Member or a Person selected by the Managing Member to act as liquidating trustee, shall wind up the affairs of the Company pursuant to this Agreement. The Managing Member or liquidating trustee, as applicable, is authorized, subject to the Delaware LLC Act, to sell, exchange or otherwise dispose of the assets of the Company, or to distribute Company assets in kind, as the Managing Member or liquidating trustee shall determine to be in the best interests of the Members. The reasonable out-of-pocket expenses incurred by the Managing Member or liquidating trustee in connection with winding up the Company (including legal and accounting fees and expenses), all other liabilities or losses of the Company or the Managing Member or liquidating trustee incurred in accordance with the terms of this Agreement, and reasonable compensation for the services of the liquidating trustee shall be borne by the Company. Except as otherwise required by law and except in connection with any gross negligence or willful misconduct of the Managing Member or liquidating trustee, the Managing Member or liquidating trustee shall not be liable to any Member or the Company for any loss attributable to any act or omission of the Managing Member or liquidating trustee taken in good faith in connection with the winding up

 

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of the Company and the distribution of Company assets. The Managing Member or liquidating trustee may consult with counsel and accountants with respect to winding up the Company and distributing its assets and shall be justified in acting or omitting to act in accordance with the advice or opinion of such counsel or accountants, provided that the Managing Member or liquidating trustee shall have used reasonable care in selecting such counsel or accountants.

(e) Upon dissolution of the Company, the expenses of liquidation (including compensation for the services of the liquidating trustee and legal and accounting fees and expenses) and the Company’s liabilities and obligations to creditors shall be paid, or reasonable provisions shall be made for payment thereof, in accordance with Applicable Law, from cash on hand or from the liquidation of Company properties.

(f) A reasonable time shall be allowed for the orderly winding up of the business and affairs of the Company and the liquidation of its assets pursuant to this Section 10.01 to minimize any losses otherwise attendant upon such winding up. Notwithstanding the generality of the foregoing, within 180 calendar days after the effective date of dissolution of the Company, the assets of the Company shall be distributed in the following manner and order: (i) all debts and obligations of the Company, if any, shall first be paid, discharged or provided for by adequate reserves; and (ii) the balance shall be distributed to the Members in accordance with Section 5.01.

(g) The Managing Member or liquidating trustee shall not be personally liable for the return of Capital Contributions or any portion thereof to the Members (it being understood and agreed that any such return shall be made solely from Company assets).

Section 10.02. Termination. The Company shall terminate when all of the assets of the Company, after payment or reasonable provision for the payment of all debts, liabilities and obligations of the Company, shall have been distributed in the manner provided for in this Article 10 and the Certificate shall have been canceled in the manner required by the Delaware LLC Act.

ARTICLE 11

EXCULPATION AND INDEMNIFICATION

Section 11.01. Exculpation. To the fullest extent permitted by Applicable Law, and except as otherwise expressly provided herein, no Indemnitee shall be liable to the Company or any other Indemnitee for any Losses, which at any time may be imposed on, incurred by, or asserted against, the Company or any other Indemnitee as a result of or arising out of the activities of the Indemnitee on behalf of the Company to the extent within the scope of the authority reasonably believed by such Indemnitee to be conferred on such Indemnitee, except to the extent such Losses arise out of (i) the Indemnitee’s failure to act in good faith and in a manner such Indemnitee believed to be in, or not opposed to, the best interests of the Company,

 

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and, with respect to any criminal proceeding, the Indemnitee’s not having any reasonable cause to believe such conduct was unlawful, (ii) the Indemnitee’s material breach of this Agreement or any other Transaction Document, or (iii) the Indemnitee’s gross negligence or willful misconduct.

Section 11.02. Indemnification. To the fullest extent permitted by Applicable Law, each of (a) the Members, the Managing Member and their respective Affiliates, (b) the stockholders, members, managers, directors, officers, partners, employees and agents of the Members and the Managing Member and their respective Affiliates, and (c) the officers of the Company (each, an “Indemnitee”) shall be indemnified and held harmless by the Company from and against any and all losses, claims, damages, liabilities, expenses (including legal fees and expenses), judgments, fines, settlements and other amounts arising from any and all claims, demands, actions, suits or proceedings, civil, criminal, administrative or investigative (collectively, “Losses”), which at any time may be imposed on, incurred by, or asserted against, the Indemnitee as a result of or arising out of this Agreement, the Company, its assets, business or affairs or the activities of the Indemnitee on behalf of the Company to the extent within the scope of the authority reasonably believed to be conferred on such Indemnitee; provided, however, that the Indemnitee shall not be entitled to indemnification for any Losses to the extent such Losses arise out of (i) the Indemnitee’s failure to act in good faith and in a manner such Indemnitee believed to be in, or not opposed to, the best interests of the Company, and, with respect to any criminal proceeding, the Indemnitee’s not having any reasonable cause to believe such conduct was unlawful, (ii) the Indemnitee’s material breach of this Agreement or any other Transaction Document, or (iii) the Indemnitee’s gross negligence or willful misconduct. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere, or its equivalent, shall not, of itself, create a presumption that the Indemnitee acted in a manner specified in clause (i), (ii) or (iii) above. Any indemnification pursuant to this Article 11 shall be made only out of the assets of the Company and no Member shall have any personal liability on account thereof.

Section 11.03. Expenses. Expenses (including reasonable legal fees and expenses) incurred by an Indemnitee in defending any claim, demand, action, suit or proceeding described in Section 11.02 shall, from time to time, be advanced by the Company prior to the final disposition of such claim, demand, action, suit or proceeding, upon receipt by the Company of an undertaking by or on behalf of the Indemnitee to repay such amount if it shall be determined that the Indemnitee is not entitled to be indemnified as provided in this Article 11.

Section 11.04. Non-Exclusivity. The indemnification and advancement of expenses set forth in this Article 11 shall not be exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any statute, the Delaware LLC Act, this Agreement, any other agreement, a policy of insurance or otherwise. The indemnification and advancement of expenses set forth in this Article 11 shall continue as to an Indemnitee who has ceased to be a named Indemnitee and shall inure to the benefit of the heirs, executors, administrators, successors and permitted assigns of such a Person.

 

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Section 11.05. Insurance. The Company may purchase and maintain insurance on behalf of the Indemnitees against any liability asserted against them and incurred by them in such capacity, or arising out of their status as Indemnitees, whether or not the Company would have the power to indemnify them against such liability under this Article 11.

ARTICLE 12

ACCOUNTING AND RECORDS; TAX MATTERS

Section 12.01. Accounting and Records. The books and records of the Company shall be made and maintained, and the financial position and the results of its operations recorded, at the expense of the Company, in accordance with such method of accounting as is determined by the Managing Member. The books and records of the Company shall reflect all Company transactions and shall be made and maintained in a manner that is appropriate and adequate for the Company’s business.

Section 12.02. Tax Returns. The Company shall prepare and timely file all U.S. federal, state and local and foreign tax returns required to be filed by the Company. Unless otherwise agreed by the Managing Member, any income tax return of the Company shall be prepared by an independent public accounting firm of recognized national standing selected by the Managing Member. Each Member shall furnish to the Company all pertinent information in its possession relating to the Company’s operations that is necessary to enable the Company’s tax returns to be timely prepared and filed. The Company shall deliver to each Member as soon as practicable, but in any event within 180 days, after the end of the applicable Fiscal Year, a Schedule K-1 together with such additional information as may be required by the Members in order to file their individual returns reflecting the Company’s operations. The Company shall bear the costs of the preparation and filing of its tax returns.

Section 12.03. Tax Partnership. Neither the Company nor any Member shall make an election for the Company to be excluded from the application of the provisions of subchapter K of chapter 1 of subtitle A of the Code or any similar provisions of applicable state law or to be classified as other than a partnership pursuant to Treas. Reg. §301.7701-3.

Section 12.04. Tax Elections. The Managing Member shall, on behalf of the Company, make the following elections on the appropriate forms or tax returns:

(a) to adopt the calendar year as the Company’s taxable year or Fiscal Year, if permitted under the Code;

(b) to adopt the accrual method of accounting and to keep the Company’s books and records on the U.S. federal income tax method;

 

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(c) to elect to amortize the organizational expenses of the Company as permitted by Section 709(b) of the Code;

(d) as required by the Tax Receivable Agreement, to make an election under Section 754 of the Code with respect to the Company (and to cause each Subsidiary Partnership to make such an election under Section 754 of the Code), which elections shall be in effect for each Fiscal Year in which any Member Transfers Series B Membership Interests pursuant to the Exchange Agreement; and

(e) any other election the Managing may deem appropriate and in the best interests of the Members.

Section 12.05. Tax Matters Member.

(a) The Managing Member shall be the “tax matters partner” of the Company as defined in Section 6231(a)(7) of the Code (the “Tax Matters Member”). The Tax Matters Member shall take such action as may be necessary to cause to the extent possible each other Member to become a notice partner within the meaning of Section 6231 (a)(8) of the Code. The Tax Matters Member shall inform each other Member of all significant matters that may come to its attention in its capacity as Tax Matters Member by giving notice thereof on or before the fifth day after becoming aware thereof and, within that time, shall forward to each other Member copies of all significant written communications it may receive in that capacity.

(b) Any cost or expense incurred by the Tax Matters Member in connection with its duties, including the preparation for or pursuance of administrative or judicial proceedings, shall be paid by the Company.

(c) Any Member that enters into a settlement agreement with respect to any partnership item (within the meaning of Section 6231(a)(3) of the Code) shall notify the other Members of such settlement agreement and its terms within 90 days from the date of the settlement.

(d) No Member shall file a request pursuant to Section 6227 of the Code for an administrative adjustment of partnership items for any taxable year without first notifying the other Members. If the Managing Member consents to the requested adjustment, the Tax Matters Member shall file the request for the administrative adjustment on behalf of the Members. If such consent is not obtained within 30 days from such notice, or within the period required to timely file the request for administrative adjustment, if shorter, any Member, including the Tax Matters Member, may file a request for administrative adjustment on its own behalf. Any Member intending to file a petition under Sections 6226 or 6228 of the Code or other Section of the Code with respect to any item involving the Company shall notify the other Members of such intention and the nature of the contemplated proceeding. In the case where the Tax Matters Member is the Member intending to file such petition on behalf of the Company, such notice

 

32


shall be given within a reasonable period of time to allow the other Members to participate in the choosing of the forum in which such petition will be filed.

(e) If any Member intends to file a notice of inconsistent treatment under Section 6222(b) of the Code, such Member shall give reasonable notice under the circumstances to the other Members of such intent and the manner in which the Member’s intended treatment of an item is (or may be) inconsistent with treatment of that item by the other Members.

ARTICLE 13

ARBITRATION

The Members shall attempt in good faith to resolve all claims, disputes and other disagreements arising hereunder or under the Exchange Agreement (each, a “Dispute”) by negotiation. If a Dispute cannot be resolved in such manner, such Dispute shall, at the request of any party, after providing written notice to the other parties to the Dispute, be submitted to arbitration in The City of New York in accordance with the Commercial Arbitration Rules of the American Arbitration Association then in effect. The proceeding shall be confidential. The party initially asserting the Dispute (the “Initiating Party”) shall notify the other party (the “Responding Party”) of the name and address of the arbitrator chosen by the Initiating Party and shall specifically describe the Dispute in issue to be submitted to arbitration. Within 30 days of receipt of such notification, the Responding Party shall notify the Initiating Party of its answer to the Dispute, any counterclaim which it wishes to assert in the arbitration and the name and address of the arbitrator chosen by the Responding Party. If the Responding Party does not appoint an arbitrator during such 30-day period, appointment of the second arbitrator shall be made by the American Arbitration Association upon request of the Initiating Party. The two arbitrators so chosen or appointed shall choose a third arbitrator, who shall serve as president of the panel of arbitrators (the “Panel”) thus composed. If the two arbitrators so chosen or appointed fail to agree upon the choice of a third arbitrator within 30 days from the appointment of the second arbitrator, the third arbitrator will be appointed by the American Arbitration Association upon the request of the arbitrators or either of the parties. In all cases, the arbitrators must be persons who are knowledgeable about, and have recognized ability and experience in dealing with, the subject matter of the Dispute. The arbitrators will act by majority decision. Any decision of the arbitrators shall (a) be rendered in writing and shall bear the signatures of at least two arbitrators, and (b) identify the members of the Panel. Absent fraud or manifest error, any such decision of the Panel shall be final, conclusive and binding on the parties to the arbitration and enforceable by a court of competent jurisdiction. The expenses of the arbitration shall be borne equally by the parties to the arbitration; provided, however, that each party shall pay for and bear the costs of its own experts, evidence and legal counsel, unless the arbitrator rules otherwise in the arbitration. The parties shall complete all discovery within 30 days after the Panel is composed, shall complete the presentation of evidence to the Panel within 15 days after the completion of discovery, and a final decision with respect to the matter submitted to arbitration shall be rendered within 15 days after the completion of presentation of evidence.

 

33


The parties shall cause to be kept a record of the proceedings of any matter submitted to arbitration hereunder.

ARTICLE 14

MISCELLANEOUS PROVISIONS

Section 14.01. Entire Agreement. This Agreement and the other Transaction Documents constitute the entire agreement and understanding by the Members and the Company with respect to the subject matter hereof and supersede any prior agreement or understanding by the Members with respect to such subject matter.

Section 14.02. Binding on Successors. This Agreement shall be binding upon and inure solely to the benefit of each party hereto and their respective successors and permitted assigns, and nothing in this Agreement, express or implied, is intended to or shall confer upon any other Person any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.

Section 14.03. Managing Member’s Business. HII, as the sole Managing Member of the Company, hereby agrees that it (a) will not conduct any business other than the management and ownership of the Company and its Subsidiaries and (b) shall not own any other assets (other than on a temporary basis). Notwithstanding the foregoing, HII may take such actions and own such assets as are necessary or appropriate to comply with Applicable Law, including compliance with its responsibilities as a public company under the U.S. federal securities laws, incur indebtedness and take any other action or own any other asset that the board of directors of HII determines in good faith is in the best interest of the Company.

Section 14.04. Debt or Equity Financing. HII shall not dividend or distribute to its stockholders all or any portion of the proceeds of any debt or equity financing (including a financing involving any equity-linked securities); provided, however, that HII may use the proceeds of a financing involving solely the issuance of common stock of HII to repurchase other common stock held by a stockholder of HII as long as such repurchase is done at a price that does not exceed the gross price per share of common stock issued in such financing.

Section 14.05. Governing Law. This Agreement and the rights of the parties hereunder will be governed by, construed and enforced in accordance with the laws of the State of Delaware without regard to conflicts of law principles thereof.

Section 14.06. Headings. All headings herein are inserted only for convenience and ease of reference and are not to be considered in the construction or interpretation of any provision of this Agreement.

 

34


Section 14.07. Severability. If any provision of this Agreement, or the application of such provision to any Person or circumstance, shall be held illegal, invalid or unenforceable, the remainder of this Agreement or the application of such provision to other persons or circumstances shall not be affected thereby.

Section 14.08. Notices. All notices, requests, consents and other communications hereunder (each, a “Notice”) to the Company or any Member shall be in writing and shall be delivered in person or sent by facsimile (provided a copy is thereafter promptly delivered as provided in this Section 14.08) or nationally recognized overnight courier, addressed to such Member at the address or facsimile number set forth in Exhibit A hereto, or below with respect to the Company, or such other address or facsimile number as may hereafter be designated in writing by such party to the other parties:

If to the Company, to:

Health Plan Intermediaries Holdings, LLC

15438 N. Florida Avenue, Suite 201

Tampa, Florida, 33613

Facsimile No.: (877) 376-5832

Attention: General Counsel

with a copy (which shall not constitute notice to the Company) to:

Davis Polk & Wardwell LLP

450 Lexington Avenue

New York, NY 10017

Telephone: (212) 450-4125

Facsimile: (212) 701-5125

Attention: Deanna Kirkpatrick

Each Notice shall be deemed received on the date sent to the recipient thereof in accordance with this Section 14.08, if sent prior to 5:00 p.m. in the place of receipt and such day is a Business Day; otherwise, such Notice shall be deemed not to have been received until the next succeeding Business Day.

Section 14.09. Amendments. This Agreement may be amended (including, for purposes of this Section 14.09, any amendment effected directly or indirectly by way of a merger or consolidation of the Company) or waived, in whole or in part, by the Managing Member; provided, however, that (i) to the extent any amendment or waiver, including any amendment or waiver of the Exhibits attached hereto, would disproportionately and adversely affect the rights of any Member holding Series B Membership Interests compared with the rights of any other Member holding Series B Membership Interests, such amendment or waiver may only be made by the Managing Member upon the prior written consent of such disproportionately and

 

35


adversely affected Member, (ii) to the extent any amendment or waiver, including any amendment or waiver of the Exhibits attached hereto, would disproportionately and adversely affect the rights of holders of Series B Membership Interests compared with the rights of holders of Series A Membership Interests or any other series or class of Membership Interest, such amendment or waiver may only be made by the Managing Member upon the prior written consent of the Majority Holders, and (iii) the following provisions may not be amended by the Managing Member in any manner adverse to a Member holding Series B Membership Interests without the prior written consent of the Majority Holders: Section 5.01, Section 5.02, Article 6, Section 7.02, Section 9.03(a)(vi), Section 12.02, Section 12.03, Section 12.04(d) and Section 14.04.

Section 14.10. Consent to Jurisdiction. Subject to Article 13, the parties hereto agree that any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby shall be brought and maintained exclusively in the United States District Court for the Southern District of New York or the Supreme Court of the State of New York located in the County of New York. Each of the parties irrevocably consents to submit to the personal jurisdiction of such courts (and of the appropriate appellate courts therefrom) in any such suit, action or proceeding. Process in any such suit, action or proceeding in such courts may be served, and shall be effective, on any party anywhere in the world, whether within or without the jurisdiction of any such court, by any of the methods specified for the giving of Notices pursuant to Section 14.08. Each of the parties irrevocably waives, to the fullest extent permitted by law, any objection or defense that it may now or hereafter have based on venue, inconvenience of forum, the lack of personal jurisdiction and the adequacy of service of process (as long as the party was provided Notice in accordance with the methods specified in Section 14.08) in any suit, action or proceeding brought in such courts.

Section 14.11. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT.

[Signature pages follow]

 

36


IN WITNESS WHEREOF, HII, the Company and the Members named below have duly executed this Agreement as of the date first written above.

 

HEALTH PLAN INTERMEDIARIES HOLDINGS, LLC

By:   /s/ Michael W. Kosloske
  Name:   Michael W. Kosloske
  Title:   Chief Executive Officer

 

HEALTH PLAN INTERMEDIARIES, LLC
By:   /s/ Michael W. Kosloske
  Name:   Michael W. Kosloske
  Title:   Chief Executive Officer

 

HEALTH PLAN INTERMEDIARIES SUB, LLC
By:   Health Plan Intermediaries, LLC, its sole member
By:   /s/ Michael W. Kosloske
  Name:   Michael W. Kosloske
  Title:   Chief Executive Officer

 

HEALTH INSURANCE INNOVATIONS, INC.
By:   /s/ Michael W. Kosloske
  Name:   Michael W. Kosloske
  Title:   Chief Executive Officer


Exhibit A

 

Name and Address of Member

   Number of
Series A
Membership
Interests
     Number of
Series B
Membership
Interests
     Percentage
Interest
 

Health Insurance Innovations, Inc.

15438 N. Florida Avenue, Suite 201

Tampa, Florida, 33613

     5,066,667         0         36.9

Health Plan Intermediaries Sub, Inc.

15438 N. Florida Avenue, Suite 201

Tampa, Florida, 33613

     0         86,667         0.6

Health Plan Intermediaries, Inc.

15438 N. Florida Avenue, Suite 201

Tampa, Florida, 33613

     0         8,580,000         62.5

Total

     5,066,667         8,666,667         100
Tax Receivable Agreement

Exhibit 10.2

Execution Version

 

 

TAX RECEIVABLE AGREEMENT

among

HEALTH INSURANCE INNOVATIONS, INC.

HEALTH PLAN INTERMEDIARIES HOLDINGS, LLC

and

SERIES B MEMBERS OF HEALTH PLAN INTERMEDIARIES HOLDINGS, LLC

Dated as of February 13, 2013

 

 


TABLE OF CONTENTS

 

 

 

         PAGE  
  ARTICLE 1   
  DEFINITIONS   
Section 1.01.  

Definitions

     2   
Section 1.02.  

Other Definitional and Interpretative Provisions

     10   
  ARTICLE 2   
  DETERMINATION OF CUMULATIVE REALIZED TAX BENEFIT   
Section 2.01.  

Exchange Basis Schedule

     10   
Section 2.02.  

Tax Benefit Schedule

     11   
Section 2.03.  

Procedures, Amendments

     11   
  ARTICLE 3   
  TAX BENEFIT PAYMENTS   
Section 3.01.  

Payments.

     12   
Section 3.02.  

No Duplicative Payments

     13   
Section 3.03.  

Pro Rata Payments

     14   
  ARTICLE 4   
  TERMINATION   
Section 4.01.  

Early Termination and Breach of Agreement

     14   
Section 4.02.  

Early Termination Notice

     15   
Section 4.03.  

Payment upon Early Termination

     16   
  ARTICLE 5   
  SUBORDINATION AND LATE PAYMENTS   
Section 5.01.  

Subordination

     16   
Section 5.02.  

Late Payments by HII

     17   
  ARTICLE 6   
  NO DISPUTES; CONSISTENCY; COOPERATION   
Section 6.01.  

Series B Member Participation in HII’s and the Company’s Tax Matters

     17   
Section 6.02.  

Consistency

     18   
Section 6.03.  

Cooperation

     18   
Section 6.04.  

Section 754 Elections

     18   

 

i


  ARTICLE 7   
  MISCELLANEOUS   
Section 7.01.  

Notices

     18   
Section 7.02.  

Counterparts

     19   
Section 7.03.  

Entire Agreement; No Third Party Beneficiaries

     19   
Section 7.04.  

Governing Law

     20   
Section 7.05.  

Severability

     20   
Section 7.06.  

Successors; Assignment; Amendments; Waivers

     20   
Section 7.07.  

Titles and Subtitles

     21   
Section 7.08.  

Resolution of Disputes

     21   
Section 7.09.  

Reconciliation

     22   
Section 7.10.  

Withholding

     23   
Section 7.11.  

Admission of HII into a Consolidated Group; Transfers of Corporate Assets

     23   
Section 7.12.  

Confidentiality

     24   
Section 7.13.  

LLC Agreement

     24   
Section 7.14.  

Change in Tax Law

     24   
Section 7.15.  

WAIVER OF JURY TRIAL

     25   

 

ii


TAX RECEIVABLE AGREEMENT

among

HEALTH INSURANCE INNOVATIONS, INC.

HEALTH PLAN INTERMEDIARIES HOLDINGS, LLC

and

SERIES B MEMBERS OF HEALTH PLAN INTERMEDIARIES HOLDINGS, LLC

TAX RECEIVABLE AGREEMENT, dated as of February 13, 2013 (this “Agreement”), among Health Insurance Innovations, Inc., a Delaware corporation (“HII”), Health Plan Intermediaries Holdings, LLC, a Delaware limited liability company (the “Company”) and each of the undersigned parties hereto identified as “Series B Members.” Capitalized terms used but not otherwise defined are defined in or by reference to Section 1.01.

W I T N E S S E T H:

WHEREAS, the Series B Members hold Series B membership interests (“Series B Membership Interests”) in the Company, which is treated as a partnership for United States federal income tax purposes;

WHEREAS, HII is the managing member of, and holds and will hold Series A membership interests (“Series A Membership Interests”) in, the Company;

WHEREAS, the Series B Membership Interests (together with the Class B Shares) are exchangeable for HII’s class A common stock, par value $0.001 per share (“Class A Shares”);

WHEREAS, Health Plan Intermediaries, LLC may sell certain of the Class B Membership Interests (together with Class B Shares) to HII in exchange for cash raised by HII in the IPO (the “IPO Sale”);

WHEREAS, the Company and each of its direct and indirect subsidiaries that is treated as a partnership for United States federal income tax purposes has or will have in effect a Section 754 Election, for each Taxable Year in which an exchange of Series B Membership Interests (together with Class B Shares) for Class A Shares occurs, which election is intended to result in an adjustment to the Tax basis of the assets owned by the Company and such subsidiaries (solely to the extent allocated to HII) at the time (each such time, an “Exchange Date”) of an exchange of Series B Membership Interests (together with the Class B Shares) for

 

1


Class A Shares or any other deemed or actual acquisition of Series B Membership Interests by HII for cash or otherwise, including the IPO Sale, if applicable, (each such exchange or acquisition, an “Exchange”) by reason of such Exchange and the payments under this Agreement;

WHEREAS, the income, gain, loss, expense and other Tax items of HII, as a member of the Company (and in respect of each of the Company’s direct and indirect subsidiaries treated as a disregarded entity or a partnership for U.S. federal income tax purposes) may be affected by the Basis Adjustment, and the income, gain, loss, expense and other Tax items of HII may be affected by the Imputed Interest; and

WHEREAS, the parties to this Agreement desire to make certain arrangements with respect to the effect of the Basis Adjustment and the Imputed Interest on the actual liability for Taxes of HII;

NOW, THEREFORE, the parties hereto hereby agree as follows:

ARTICLE 1

DEFINITIONS

Section 1.01. Definitions. As used in this Agreement, the following terms have the following meanings:

Advisory Firm” means Ernst and Young or any other law or accounting firm that is a nationally recognized as being expert in Tax matters and that is appointed by the Board.

Affiliate” means, with respect to any Person, any other Person that directly or indirectly, through one or more intermediaries, Controls, is Controlled by, or is under common Control with, such first Person.

Agreed Rate” means LIBOR.

Agreement” is defined in the preamble.

Amended Schedule” is defined in Section 2.03(b) of this Agreement.

Applicable Law” means, to the extent applicable to HII, the Company or their activities or any Series B Member, as applicable: (a) all U.S. federal and state statutes and laws and all statutes and laws of foreign countries; (b) all rules and regulations (including interpretations thereof) of all regulatory agencies, organizations and bodies; and (c) all rules and regulations (including interpretations thereof) of all self-regulatory agencies, organizations and bodies now or hereafter in effect.

 

2


Applicable Series B Member” means in respect of that portion of any Tax Benefit Payment that relates to an Exchange or a deemed Exchange pursuant to clause (5) of the definition of “Valuation Assumptions,” the Exchanging Series B Member or Series B Member deemed to Exchange, as applicable.

Basis Adjustment” means the adjustment to the Tax basis of an Exchange Asset as a result of (x) an Exchange or (y) the payments made pursuant to this Agreement, in each case, under, or under the principles of, Sections 732(b) and 1012 of the Code (in situations where, as a result of one or more Exchanges, the Company becomes an entity that is disregarded as separate from its owner for U.S. federal income tax purposes), or Sections 743(b) and 754 of the Code (including in situations where, following an Exchange, the Company remains in existence as an entity for U.S. federal income tax purposes) and, in each case, comparable sections of state and local tax laws. Notwithstanding any other provision of this Agreement, the amount of any Basis Adjustment (a “Basis Adjustment Amount”) resulting from an Exchange of one or more Series B Membership Interests (together with the Class B Shares) shall be determined without regard to any Pre-Exchange Transfer of such Series B Membership Interests (together with the Class B Shares) and as if any such Pre-Exchange Transfer had not occurred. For the avoidance of doubt, payments under this Agreement shall not be treated as resulting in a Basis Adjustment to the extent such payments are treated as Imputed Interest.

A “Beneficial Owner” means, with respect to a security, any Person who directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares: (i) voting power, which includes the power to vote, or to direct the voting of, such security and/or (ii) investment power, which includes the power to dispose of, or to direct the disposition of, such security. The terms “Beneficially Own” and “Beneficial Ownership” shall have correlative meanings.

Board” means the board of directors of HII.

Business Day” means any day except a Saturday, Sunday or other day on which commercial banks in Tampa, Florida or New York City, New York are authorized by law to close.

Change in Tax Law” is defined in Section 7.14 of this Agreement.

Change of Control” means the occurrence of any of the following events:

 

  (i)

any Person, or any group of Persons acting together that would constitute a “group” for purposes of Section 13(d) of the Securities and Exchange Act of 1934 or any successor provisions thereto, becomes the Beneficial Owner, directly or indirectly, of securities of HII representing more than fifty

 

3


  percent (50%) of the combined voting power of HII’s then-outstanding voting securities; or

 

  (ii) the following people cease for any reason to constitute a majority of the number of directors of HII then serving: people who, on the date of the consummation of the IPO, constitute the Board and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to a consent solicitation, relating to an election of directors of HII) whose appointment or election by the Board or nomination for election by HII’s stockholders was approved or recommended by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors on the date of the consummation of the IPO or whose appointment, election or nomination for election was previously so approved or recommended by the directors referred to in this clause (ii); or

 

  (iii) there is consummated a merger or consolidation of HII with any other corporation or other entity, and, immediately after the consummation of such merger or consolidation, either (x) members of the Board immediately prior to the merger or consolidation do not constitute at least a majority of the board of directors of the company surviving the merger or, if the surviving company is a subsidiary, the ultimate parent thereof, or (y) all of the Persons who were the respective Beneficial Owners of the voting securities of HII immediately prior to such merger or consolidation do not Beneficially Own, directly or indirectly, more than 50% of the combined voting power of the then-outstanding voting securities of the Person resulting from such merger or consolidation; or

 

  (iv) the stockholders of HII approve a plan of complete liquidation or dissolution of HII or there is consummated an agreement or series of related agreements for the sale or other disposition, directly, or indirectly, by HII of all or substantially all of HII’s assets, other than such sale or other disposition by HII of all or substantially all of HII’s assets to an entity, at least fifty percent (50%) of the combined voting power of which is owned by stockholders of HII in substantially the same proportions as their voting power of HII immediately prior to such sale.

Notwithstanding the foregoing, except with respect to clause (ii) and clause (iii)(x) above, a “Change of Control” shall not be deemed to have occurred by virtue of the consummation of any transaction or series of integrated transactions immediately following which the record holders of the shares of capital stock of HII immediately prior to such transaction or series of transactions continue to

 

4


have substantially the same proportionate voting power in an entity which owns all or substantially all of the assets of HII immediately following such transaction or series of transactions.

Change Notice” is defined in Section 6.01(b) of this Agreement.

Class A Shares” is defined in the recitals.

Class B Shares” means HII’s class B common stock, par value $0.001 per share.

Code” means the Internal Revenue Code of 1986, as amended.

Control” means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise.

Corporation Return” means the U.S. federal and/or state and/or local Tax Return, as applicable, of HII filed with respect to Taxes for any Taxable Year.

Cumulative Net Realized Tax Benefit” for a Taxable Year means the cumulative amount (but not less than zero) of Realized Tax Benefits for all Taxable Years of HII, up to and including such Taxable Year, net of the cumulative amount of Realized Tax Detriments for the same period. The Realized Tax Benefit and Realized Tax Detriment for each Taxable Year shall be determined based on the most recent Tax Benefit Schedule or Amended Schedule, if any, in existence at the time of such determination.

Default Rate” means LIBOR plus 300 basis points.

Determination” shall have the meaning ascribed to such term in Section 1313(a) of the Code or similar provision of state and local Tax law, as applicable, or any other event (including the execution of an IRS Form 870-AD or similar state or local form) that finally and conclusively establishes the amount of any liability for Tax.

Dispute” is defined in Section 7.08(a) of this Agreement.

Early Termination Date” means the date of an Early Termination Notice for purposes of determining the Early Termination Payment.

Early Termination Notice” is defined in Section 4.02 of this Agreement.

Early Termination Schedule” is defined in Section 4.02 of this Agreement.

Early Termination Payment” is defined in Section 4.03(b) of this Agreement.

 

5


Early Termination Rate” means LIBOR.

“Excess Payment” is defined in Section 3.01(c) of this Agreement.

Exchange” is defined in the recitals; “Exchanged” and “Exchanging” shall have correlative meanings.

Exchange Asset” means each asset that is held by the Company, or by any of its direct or indirect subsidiaries treated as a partnership or disregarded entity for purposes of the applicable Tax, at the time of an Exchange.

Exchange Basis Schedule” is defined in Section 2.01 of this Agreement.

Exchange Date” is defined in the recitals.

Exchange Payment” is defined in Section 5.01 of this Agreement.

Expert” is defined in Section 7.09 of this Agreement.

HII” is defined in the preamble.

Hypothetical Tax Liability” means, with respect to any Taxable Year, the liability for income Taxes of HII or any consolidated group of which HII is a member (or, without duplication, the Company, but only with respect to HII’s pro rata share of the Company’s income Tax liability for such Taxable Year determined using the same methods, elections, conventions and similar practices used on the Corporation Return for such Taxable Year) as would be shown on its Tax Return (including any consolidated return in which HII joins) but determined (i) using the Non-Stepped Up Tax Basis of the Exchange Assets as reflected on the Exchange Basis Schedule, including amendments thereto, for the Taxable Year instead of the Tax basis of the Exchange Assets reflecting the Basis Adjustments and (ii) excluding any deduction attributable to Imputed Interest for the Taxable Year. Hypothetical Tax Liability shall be determined without taking into account the carryover or carryback of any Tax item (or portions thereof) that is attributable to any Basis Adjustment or to the Imputed Interest.

Imputed Interest” shall mean any interest imputed under Section 1272, Section 1274 or Section 483 or other provision of the Code and any similar provision of state and local Tax law applicable with respect to HII’s payment obligations under this Agreement.

Interest Amount” is defined in Section 3.01(b) of this Agreement.

IPO” means the initial public offering of Class A Shares by HII.

IPO Sale” is defined in the recitals.

IRS” means the U.S. Internal Revenue Service.

 

6


LIBOR” means for each month (or portion thereof) during any period, an interest rate per annum equal to the rate per annum reported, on the date two calendar days prior to the first day of such month, on Reuters Screen LIBOR01 Page (or if such screen shall cease to be publicly available, as reported by any other publicly available source of such market rate) for London interbank offered rates for United States dollar deposits for such month (or portion thereof).

LLC Agreement” means the Limited Liability Company Agreement of the Company dated as of February 13, 2013, as amended.

Market Value” means, with respect to the Class A Shares, on any given date: (i) if the Class A Shares are listed for trading on the NASDAQ Global Market, the closing sale price per share of the Class A Shares on the NASDAQ Global Market on that date (or, if no closing sale price is reported, the last reported sale price), (ii) if the Class A Shares are not listed for trading on the NASDAQ Global Market, the closing sale price (or, if no closing sale price is reported, the last reported sale price) as reported on that date in composite transactions for the principal national securities exchange registered pursuant to Section 6(g) of the Exchange Act, on which the Class A Shares are listed, (iii) if the Class A Shares are not so listed on a national securities exchange, the last quoted bid price for the Class A Shares on that date in the over-the-counter market as reported by OTC Markets Group or a similar organization, or (iv) if the Class A Shares are not so quoted by OTC Markets Group or a similar organization such value as the Board, in its sole discretion, shall determine in good faith.

Net Tax Benefit” is defined in Section 3.01(b).

Non-Stepped Up Tax Basis” means, with respect to any asset at any time, the Tax basis that such asset would have had at such time if no Basis Adjustments had been made with respect to such asset.

Notice” is defined in Section 7.01.

Objection Notice” is defined in Section 2.03(a).

Payment Limitation” is defined in Section 3.03.

Person” means any individual, corporation, firm, partnership, joint venture, limited liability company, estate, trust, business association, organization, governmental entity or other entity.

Pre-Exchange Transfer” means any transfer (including upon the death of a Series B Member) of one or more Series B Membership Interests (together with the Class B Shares) (i) that occurs prior to an Exchange of such Series B Membership Interests (together with the Class B Shares), and (ii) to which Section 743(b) of the Code applies.

 

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Realized Tax Benefit” means, for a Taxable Year, the excess, if any, of the Hypothetical Tax Liability over the actual liability for income Taxes of HII (or, without duplication, the Company, but only with respect to HII’s pro rata share of the Company’s income Tax liability for such Taxable Year determined using the same methods, elections, conventions and similar practices used on the Corporation Return for such Taxable Year). If the actual liability for such Taxes for the Taxable Year is adjusted as a result of an audit by a Taxing Authority of such Taxable Year or any other Taxable Year, such adjustment shall not be included in determining the Realized Tax Benefit unless and until there has been a Determination.

Realized Tax Detriment” means, for a Taxable Year, the excess, if any, of the actual liability for income Taxes of HII (or, without duplication, the Company, but only with respect to HII’s pro rata share of the Company’s income Tax liability for such Taxable Year determined using the same methods, elections, conventions and similar practices used on the Corporation Return for such Taxable Year) over the Hypothetical Tax Liability for such Taxable Year. If the actual liability for such Taxes for the Taxable Year is adjusted as a result of an audit by a Taxing Authority of such Taxable Year or any other Taxable Year, such adjustment shall not be included in determining the Realized Tax Detriment unless and until there has been a Determination.

Reconciliation Dispute” is defined in Section 7.09 of this Agreement.

Reconciliation Procedures” shall mean those procedures set forth in Section 7.09 of this Agreement.

Schedule” means any of (i) an Exchange Basis Schedule, (ii) a Tax Benefit Schedule or (iii) an Early Termination Schedule.

Section 754 Election” means an election under Section 754 of the Code and any comparable election under applicable state or local income tax laws.

Senior Obligations” is defined in Section 5.01 of this Agreement.

Series A Membership Interests” is defined in the recitals.

Series B Members” means the parties hereto, other than HII and the Company and each other Person who from time to time executes a Joinder Agreement in the form attached hereto as Exhibit A.

Series B Member Representative” means Health Plan Intermediaries, LLC.

Series B Membership Interests” is defined in the recitals.

“Shortfall” is defined in Section 3.01(c) of this Agreement.

 

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Subsidiaries” means, with respect to any Person, as of any date of determination, any other Person as to which such Person, owns, directly or indirectly, or otherwise controls more than 50% of the voting power or other similar interests (including the general partner interests or managing member or similar interests) of such Person.

Tax Benefit Payment” is defined in Section 3.01(b) of this Agreement.

Tax Benefit Schedule” is defined in Section 2.02 of this Agreement.

Tax Return” means any return, declaration, report or similar statement filed or required to be filed with respect to Taxes (including any attached schedules), including, without limitation, any information return, claim for refund, amended return and declaration of estimated Tax.

Taxable Year” means a taxable year of HII as defined in Section 441(b) of the Code or comparable section of state or local Tax law, as applicable (and, therefore, may include a period of less than 12 months for which a Corporation Return is prepared) in which there is a Basis Adjustment or increased depreciation, amortization or interest deductions attributable to an Exchange.

Taxes” means any and all U.S. federal, state and local taxes, assessments or similar charges that are based on or measured with respect to net income or profits and any interest related to such taxes.

Taxing Authority” shall mean any domestic, federal, national, state, county or municipal or other local government, any subdivision, agency, commission or authority thereof, or any quasi-governmental body exercising any taxing authority or any other authority exercising Tax regulatory authority.

Treasury Regulations” means the final, temporary and proposed regulations under the Code promulgated from time to time (including corresponding provisions and succeeding provisions) as in effect for the relevant taxable period.

Valuation Assumptions” shall mean, as of an Early Termination Date, the assumptions that (1) in each Taxable Year ending on or after such Early Termination Date, HII will have sufficient taxable income to utilize fully the deductions arising from the Basis Adjustments and the Imputed Interest, (2) the U.S. federal income Tax rates and state and local income Tax rates that will be in effect for each such Taxable Year will be those specified for each such Taxable Year by the Code and other applicable laws as in effect on the Early Termination Date, (3) any loss carryovers attributable to any Basis Adjustment or Imputed Interest and available as of the date of the Early Termination Schedule will be utilized by HII on a pro rata basis from the date of the Early Termination Schedule through the date that is the scheduled expiration date of such loss carryovers, (4) any non-amortizable assets will be disposed of on the fifteenth

 

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anniversary of the earlier of (x) the Basis Adjustment and (y) the Early Termination Date and (5) if, at the Early Termination Date, there are Series B Membership Interests that have not been Exchanged, then each such Series B Membership Interest shall be deemed to be Exchanged for the Market Value of the Class A Shares and the amount of the cash payment to which the Applicable Series B Member would be entitled under this Agreement if the Exchange occurred on the Early Termination Date.

Section 1.02. Other Definitional and Interpretative Provisions. The words “hereof,” “herein” and “hereunder” and words of like import used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. References to Articles, Sections and Exhibits are to Articles, Sections and Exhibits of this Agreement unless otherwise specified. Any capitalized term used in any Exhibit but not otherwise defined therein has the meaning ascribed to such term in this Agreement. Any singular term in this Agreement shall be deemed to include the plural, and any plural term the singular. Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation,” whether or not they are in fact followed by those words or words of like import. “Writing,” “written” and comparable terms refer to printing, typing and other means of reproducing words (including electronic media) in a visible form. References to any agreement or contract are to that agreement or contract as amended, modified or supplemented from time to time in accordance with the terms thereof. References to any Person include the successors and permitted assigns of that Person. References from or through any date mean, unless otherwise specified, from and including or through and including, respectively. References to “law,” “laws” or to a particular statute or law shall be deemed also to include any and all Applicable Laws.

ARTICLE 2

DETERMINATION OF CUMULATIVE REALIZED TAX BENEFIT

Section 2.01. Exchange Basis Schedule. Within 60 calendar days after the filing of the U.S. federal income Corporation Return for each Taxable Year, HII shall deliver to the Series B Member Representative a schedule (the “Exchange Basis Schedule”) that shows in reasonable detail (i) the Non-Stepped Up Tax Basis of the Exchange Assets as of each applicable Exchange Date, (ii) the Basis Adjustment Amount with respect to the Exchanges effected in such Taxable Year, calculated in the aggregate, (iii) the period or periods, if any, over which the Exchange Assets are amortizable and/or depreciable and (iv) the period or periods, if any, over which each Basis Adjustment Amount is amortizable and/or depreciable (which, for non-amortizable assets, shall be based on the Valuation Assumptions).

 

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Section 2.02. Tax Benefit Schedule. (a) Within 60 calendar days after the filing of the U.S. federal income Corporation Return for any Taxable Year in which there is a Realized Tax Benefit or Realized Tax Detriment, HII shall provide to the Series B Member Representative a schedule showing, in reasonable detail, the calculation of the Realized Tax Benefit or Realized Tax Detriment for such Taxable Year (a “Tax Benefit Schedule”). On no more than a quarterly basis, HII agrees to confirm, at the request of the Series B Member Representative, the Market Value of the applicable Class A Shares with respect to any Exchanges in the prior calendar quarter. The Tax Benefit Schedule will become final as provided in Section 2.03(a) and may be amended as provided in Section 2.03(b) (subject to the procedures set forth in Section 2.03(b)).

(b) Applicable Principles. Subject to Section 3.03, the Realized Tax Benefit or Realized Tax Detriment for each Taxable Year is intended to measure the decrease or increase in the actual liability for Taxes of HII for such Taxable Year attributable to the Basis Adjustments and Imputed Interest. The actual liability for Taxes will take into account the deduction of the portion of the Tax Benefit Payment that must be accounted for as interest under the Code based upon the characterization of Tax Benefit Payments as additional consideration payable by HII for the Series B Membership Interests and Class B Shares acquired in an Exchange. Carryovers or carrybacks of any Tax item attributable to the Basis Adjustments and the Imputed Interest shall be considered to be subject to the rules of the Code and the Treasury Regulations or the appropriate provisions of U.S. state and local income and franchise tax law, as applicable, governing the use, limitation and expiration of carryovers or carrybacks of the relevant type. If a carryover or carryback of any Tax item includes a portion that is attributable to the Basis Adjustment or the Imputed Interest and another portion that is not, such portions shall be considered to be used in accordance with the “with and without” methodology. All Tax Benefit Payments (other than amounts accounted for as interest under the Code) will (A) be treated as subsequent upward purchase price adjustments that give rise to further Basis Adjustments to Exchange Assets for HII and (B) have the effect of creating additional Basis Adjustments to Exchange Assets for HII in the year of payment, and, as a result, such additional Basis Adjustments will be incorporated into the current year calculation and into future year calculations, as appropriate.

Section 2.03. Procedures, Amendments.

(a) Procedures. Each time HII delivers to the Series B Member Representative an applicable Schedule under this Agreement, including any Amended Schedule, but excluding any Early Termination Schedule or amended Early Termination Schedule, HII also shall (x) deliver to the Series B Member Representative the Corporation Return, along with schedules and work papers, as determined by HII or requested by the Series B Member Representative, providing reasonable detail regarding the preparation of such Schedule and (y) allow the Series B Member Representative reasonable access to the appropriate representatives of HII and the Advisory Firm in connection with a review of such

 

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Schedule. Each party shall bear its own expenses associated with such review and investigation. The applicable Schedule shall become final and binding on all parties unless the Applicable Series B Member, within 30 calendar days after an Exchange Basis Schedule or amendment thereto or a Tax Benefit Schedule or amendment thereto was provided to the Series B Member Representative, provides HII with notice of a material objection to such Schedule (“Objection Notice”) made in good faith. If HII and the Applicable Series B Member are unable to resolve the issues raised in such notice within 30 calendar days of receipt by HII of an Objection Notice with respect to such Exchange Basis Schedule or Tax Benefit Schedule, HII and the Series B Member Representative shall employ the reconciliation procedures as provided for in Section 7.09 of this Agreement (the “Reconciliation Procedures”); provided that, to the extent that the matter at issue affects an Applicable Series B Member but not the Series B Member Representative, the Reconciliation Procedures shall be employed, mutatis mutandis, by HII and the relevant Applicable Series B Member.

(b) Amended Schedule. The applicable Schedule for any Taxable Year shall be amended from time to time by HII (i) in connection with a Determination affecting such Schedule, (ii) to correct material inaccuracies in the Schedule identified as a result of the receipt of additional factual information that was not previously taken into account, (iii) to comply with the Expert’s determination under the Reconciliation Procedures, (iv) to reflect a material change (relative to the amounts in the original Tax Benefit Schedule) in the Realized Tax Benefit or Realized Tax Detriment for such Taxable Year attributable to a carryback or carryforward of a loss or other Tax item to such Taxable Year, (v) to reflect a material change (relative to the amounts in the original Tax Benefit Schedule) in the Realized Tax Benefit or Realized Tax Detriment for such Taxable Year attributable to an amended Tax Return filed for such Taxable Year, or (vi) to adjust the Exchange Basis Schedule to take into account payments made pursuant to this Agreement (any such Schedule, an “Amended Schedule”).

ARTICLE 3

TAX BENEFIT PAYMENTS

Section 3.01. Payments.

(a) Payments. Within five (5) Business Days of a Tax Benefit Schedule that was delivered to Series B Member Representative becoming final in accordance with Section 2.03(a), HII shall pay to the Applicable Series B Members the applicable Tax Benefit Payment determined pursuant to Section 3.01(b). Each such Tax Benefit Payment shall be made by wire transfer of immediately available funds to the bank accounts of the Applicable Series B Members previously designated by each such Series B Member to HII; provided that no Tax Benefit Payment shall be made in respect of estimated Tax payments, including, without limitation, estimated U.S. federal income Tax payments.

 

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(b) A “Tax Benefit Payment” means an amount, not less than zero, equal to the Net Tax Benefit and the Interest Amount. For the avoidance of doubt, for Tax purposes, the Interest Amount shall not be treated as interest but instead shall be treated as additional consideration of Series B Membership Interests (together with Class B Shares) in Exchanges. The “Net Tax Benefit” for a Taxable Year shall be an amount equal to the excess, if any, of 85% of the Cumulative Net Realized Tax Benefit as of the end of such Taxable Year over the total amount of Tax Benefit Payments with respect to Net Tax Benefits previously made under this Section 3.01; provided, however, that no Series B Member shall be required to return any portion of any previously received Tax Benefit Payment under any circumstances. The “Interest Amount” for a Taxable Year shall equal the interest on the Net Tax Benefit for such Taxable Year calculated at the Agreed Rate from the due date (without extensions) for the filing of the Corporation Return with respect to Taxes for such Taxable Year until the date of payment. The Net Tax Benefit shall be determined separately with respect to each separate Exchange on an individual basis by reference to the amount realized by the applicable Exchanging Series B Member on the Exchange of a Series B Membership Interest (and a corresponding Class B Share) and the resulting Basis Adjustments to HII (as determined pursuant to Section 2.02(b)).

(c) Increase or Decrease in Future Payments. (i) Within five (5) Business Days after the delivery of an Amended Schedule to the Series B Member Representative for any Taxable Year, the Company shall pay to the Series B Members an amount equal to the excess, if any, of (x) the amount such Series B Member is entitled to receive under this Agreement in respect of the relevant Taxable Year (based on such Amended Schedule) over (y) the cumulative amount such Series B Member actually received in respect of such Taxable Year pursuant to this Agreement.

(ii) In the event that an Amended Schedule reflects a decrease in the Realized Tax Benefit for such year (including, without limitation, by reason of net operating loss carryovers or carrybacks) and payments have previously been made based on the higher Realized Tax Benefit reflected in any prior Schedule (either such excess, an “Excess Payment”), future payments, if any, to be made under this Section 3.01 shall be reduced by the amount of the Excess Payment until such Excess Payment has effectively been repaid. For the avoidance of doubt, if future payments are insufficient to repay any Excess Payment (a “Shortfall”), the Series B Members shall have no obligation to repay to the Company or any other Person any such Shortfall.

Section 3.02. No Duplicative Payments. It is intended that the provisions of this Agreement will not result in duplicative payment of any amount (including interest) required under this Agreement. It is also intended that the provisions of this Agreement, subject to Article 4 and Section 7.14, will result in 85% of HII’s Cumulative Net Realized Tax Benefit being paid to the Series B Members

 

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pursuant to this Agreement. The provisions of this Agreement shall be construed in the appropriate manner to ensure such intentions are realized.

Section 3.03. Pro Rata Payments. Notwithstanding anything in Section 3.01 to the contrary, to the extent that (i) HII’s aggregate Tax benefit with respect to any Basis Adjustment or Imputed Interest is limited in a particular Taxable Year because HII does not have sufficient Taxable income or (ii) HII has insufficient funds to make a payment hereunder as a result of (x) applicable limitations imposed by credit agreements or similar arrangements in respect of indebtedness for borrowed money to which the Company is a party (including, without limitation, limitations on the ability of the Company and its direct and indirect Subsidiaries to make distributions or payments to HII), (y) a determination by the Board in good faith that making such payments would result in a default under any such credit agreement or similar arrangement or (z) a determination by the Board in good faith that (A) such payments could be set aside as fraudulent transfers or conveyances or similar actions under fraudulent transfer laws or (B) such payments could cause HII to be undercapitalized (each of (x), (y) and (z), a “Payment Limitation”), the limitation on the Tax benefit or the Tax Benefit Payments that may be made, as the case may be, shall be taken into account or made for the Applicable Series B Members in the same proportion as Tax Benefit Payments would have been made absent the limitations in clauses (i) and (ii) of this paragraph, as applicable.

ARTICLE 4

TERMINATION

Section 4.01. Early Termination, Change of Control and Breach of Agreement.

(a) HII may terminate this Agreement with respect to all of the Series B Membership Interests held (or previously Exchanged) by all Series B Members at any time by paying to the Series B Members the Early Termination Payment; provided, however, that this Agreement shall terminate only upon the receipt of the Early Termination Payment by all Series B Members, and provided, further, that HII may withdraw any Early Termination Notice prior to the time at which any Early Termination Payment has been paid. Upon payment of the Early Termination Payment by HII, neither the Series B Members nor HII shall have any further payment obligations under this Agreement, other than for any (x) Tax Benefit Payment agreed to by HII and the Applicable Series B Member, acting in good faith, to be due and payable but unpaid as of the Early Termination Notice and (y) Tax Benefit Payment due for the Taxable Year ending with or including the date of the Early Termination Notice (except to the extent that the amount described in this clause (y) is included in the Early Termination Payment). If an Exchange occurs after HII makes the Early Termination Payments with respect to all Series B Members, HII shall have no obligations under this Agreement with

 

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respect to such Exchange, and its only obligation under this Agreement in such case shall be its obligations under Section 4.03(a).

(b) Upon a Change of Control or if HII breaches any of its material obligations under this Agreement, then all of HII’s obligations hereunder shall be accelerated and calculated as if an Early Termination Notice had been delivered on the date of such Change of Control or breach and such obligations shall include, but shall not be limited to, (1) the Early Termination Payment calculated as if an Early Termination Notice had been delivered on the date of such acceleration, (2) any Tax Benefit Payment agreed to by HII and any Applicable Series B Member, acting in good faith, to be due and payable but unpaid as of the date of such acceleration and (3) any Tax Benefit Payment due for the Taxable Year ending with or including the date of such acceleration (except to the extent that the amount described in this clause (3) is included in the amount described in clause (1)). Notwithstanding the foregoing, in the event that HII breaches this Agreement, the Series B Members shall be entitled to elect to receive the amounts set forth in clauses (1), (2) and (3) above or to seek specific performance of the terms hereof. The parties agree that the failure to make any payment due pursuant to this Agreement within three months of the date such payment is due shall be deemed to be a breach of a material obligation under this Agreement for all purposes of this Agreement; provided that it will not be considered to be a breach of a material obligation under this Agreement to make a payment due pursuant to this Agreement within three months of the date such payment is due; provided further that HII shall be deemed not to be in breach of a material obligation by reason of the failure to make a payment under this Agreement until the later of (x) three months after the date such payment was originally due and (y) the thirtieth (30th) calendar day after HII received a written notice from the Series B Member Representative or the party that is entitled to receive such payment specifying the amount due. Notwithstanding anything in this Agreement to the contrary, it shall not be a breach of this Agreement if HII fails to make any Tax Benefit Payment when due because, and to the extent, of a Payment Limitation (but only for so long as such Payment Limitation continues); provided that the interest provisions of Section 5.02 shall apply to any such late payment (but the Default Rate shall be replaced by the Agreed Rate).

(c) HII, the Company and each of the Series B Members hereby acknowledge and agree that, as of the date of this Agreement and as of the date of each Exchange, the aggregate value of the Tax Benefit Payments cannot reasonably be ascertained for U.S. federal income Tax or other applicable Tax purposes.

Section 4.02. Early Termination Notice. If HII exercises its right of early termination under Section 4.01, HII shall deliver to the Series B Member Representative notice of such intention to exercise such right (“Early Termination Notice”) and a schedule (the “Early Termination Schedule”) specifying HII’s intention to exercise such right and showing in reasonable detail the calculation of the Early Termination Payment, and the Series B Member

 

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Representative shall promptly provide such notice and schedule to each Series B Member. At the time HII delivers the Early Termination Notice to the Series B Member Representative, HII shall (a) deliver to the Series B Member Representative schedules and work papers, as determined by HII or requested by the Series B Member Representative, providing reasonable detail regarding the calculation of the Early Termination Payment and (b) allow the Series B Member Representative reasonable access to the appropriate representatives of HII and the Advisory Firm in connection with its review of such calculation. Each party shall bear its own expenses associated with such review. The Early Termination Payment shall become final and binding on the parties unless the Series B Member Representative provides HII with notice of a material objection to the calculation of the Early Termination Payment made in good faith within 30 calendar days after the Early Termination Schedule was provided to the Series B Member Representative (or such shorter period as may be mutually agreed in writing by the parties). If the Series B Member Representative provides HII with written notice of its objection to the calculation of the Early Termination Payment, and the Series B Member Representative and HII, for any reason, cannot agree upon the amount of the Early Termination Payment within 30 calendar days following HII’s receipt of the Series B Member Representative’s objection, HII and the Series B Member Representative shall employ the Reconciliation Procedures as described in Section 7.09 of this Agreement.

Section 4.03. Payment upon Early Termination.

(a) Within five (5) Business Days after the Early Termination Schedule has become final and binding, HII shall pay to each Applicable Series B Member an amount equal to the Early Termination Payment. Such payment shall be made by wire transfer of immediately available funds to the bank account designated by the Applicable Series B Member.

(b) The “Early Termination Payment” as of the date of the delivery of an Early Termination Schedule shall equal, with respect to the Applicable Series B Member, the present value, discounted at the Early Termination Rate as of such date, of all Tax Benefit Payments that would be required to be paid by HII to the Applicable Series B Member beginning from the Early Termination Date and assuming that the Valuation Assumptions are applied.

ARTICLE 5

SUBORDINATION AND LATE PAYMENTS

Section 5.01. Subordination. Notwithstanding any other provision of this Agreement to the contrary, any Tax Benefit Payment or Early Termination Payment required to be made by HII to the Series B Members under this Agreement (an “Exchange

 

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Payment”) shall rank subordinate and junior in right of payment to any principal, interest or other amounts due and payable in respect of all obligations in respect of indebtedness of HII (“Senior Obligations”) and shall rank pari passu with all current or future unsecured obligations of HII that are not Senior Obligations.

Section 5.02. Late Payments by HII. Except as otherwise noted in this Agreement, the amount of all or any portion of any Exchange Payment not made to any Series B Member when due (without regard to Section 5.01) under the terms of this Agreement shall be payable together with interest thereon, computed at the Default Rate and commencing from the date on which such Exchange Payment was due and payable.

ARTICLE 6

NO DISPUTES; CONSISTENCY; COOPERATION

Section 6.01. Series B Member Participation in HII’s and the Company’s Tax Matters. (a) Except as otherwise provided herein, HII shall have full responsibility for, and sole discretion over, all Tax matters concerning HII and the Company, including without limitation the preparation, filing or amending of any Tax Return and defending, contesting or settling any issue pertaining to Taxes. Notwithstanding the foregoing, HII shall notify the Series B Member Representative of, and keep the Series B Member Representative reasonably informed with respect to, the portion of any audit of HII and the Company by a Taxing Authority the outcome of which is reasonably expected to affect any Series B Member’s rights and obligations under this Agreement, and shall provide to the Series B Member Representative reasonable opportunity to provide information and other input to HII, the Company, and their respective advisors concerning the conduct of any such portion of such audit; Series B Members shall have the right to attend in person or by telephone (but not participate in) any audit of HII or the Company the outcome of which could reasonably be expected to affect the amount of net payments that the Series B Members are expected to receive under this Agreement; provided, however, that HII and the Company shall not be required to take any action that is inconsistent with any provision of the LLC Agreement. HII shall not settle or fail to contest any issue pertaining to taxes that is reasonably expected to affect the Series B Members’ rights and obligations under this Agreement without the consent of the Series B Member Representative, such consent not to be unreasonably withheld or delayed.

(b) If HII, the Company, or any of their respective Subsidiaries receives a 30-day letter, a final audit report, a statutory notice of deficiency or similar written notice from any Taxing Authority with respect to the Tax treatment of any Exchange (a “Change Notice”), which, if sustained, would result in (i) a reduction in the amount of Realized Tax Benefit with respect to a Taxable Year preceding the taxable year in which the Change Notice is received or (ii) a reduction in the amount

 

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of Tax Benefit Payments HII will be required to pay to the Series B Members with respect to Taxable Years after and including the taxable year in which the Change Notice is received, HII shall deliver prompt written notice of such Change Notice to the Series B Member Representative.

Section 6.02. Consistency. (i) Except upon the written advice of an Advisory Firm to HII, HII and the Series B Members agree to report and cause to be reported for all purposes, including U.S. federal, state and local Tax purposes and financial reporting purposes, all Tax-related items (including without limitation items arising from the Basis Adjustments and each Tax Benefit Payment) in a manner consistent with that specified by HII in any Schedule provided by or on behalf of HII under this Agreement. Any Dispute concerning such advice shall be subject to Section 7.09; provided, however, that only the Series B Member Representative shall have the right to object to such advice pursuant to this Section 6.02.

(ii) In the event that an Advisory Firm is replaced by HII, such replacement Advisory Firm shall be required to perform its services under this Agreement using procedures and methodologies consistent with those used by the previous Advisory Firm, unless (a) otherwise required by law or (b) HII and the Series B Member Representative agree to the use of other procedures and methodologies.

Section 6.03. Cooperation. The Series B Members shall (a) furnish to HII in a timely manner such information, documents and other materials as HII may reasonably request for purposes of making any determination or computation necessary or appropriate under this Agreement, preparing any Tax Return or contesting or defending any audit, examination or controversy with any Taxing Authority, (b) make themselves available to HII and its representatives to provide explanations of documents and materials and such other information as HII or its representatives may reasonably request in connection with any of the matters described in clause (a) above, and (c) reasonably cooperate in connection with any such matter described in clause (a) above. HII shall reimburse the applicable Series B Member for any reasonable third-party costs and expenses incurred pursuant to this Section 6.03.

Section 6.04. Section 754 Elections. If at any point the Company or any of its direct or indirect Subsidiaries that is a partnership for U.S. federal income tax purposes does not have a Section 754 Election in effect, HII shall cause the Company or such Subsidiary, as applicable, to make a Section 754 Election at the time that the Company or such Subsidiary, as applicable, files its next U.S. federal income Tax Return.

ARTICLE 7

MISCELLANEOUS

Section 7.01. Notices. All notices, requests, consents and other communications hereunder (each, a “Notice”) to any party shall be in writing and

 

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shall be delivered in person or sent by facsimile (provided a copy is thereafter promptly delivered as provided in this Section 7.01) or nationally recognized overnight courier, addressed to such party at the address or facsimile number set forth in Exhibit B hereto, or below with respect to HII, or such other address or facsimile number as may hereafter be designated in writing by such party to the other parties:

If to HII, to:

15438 N. Florida Avenue, Suite 201

Tampa, Florida, 33613

Tel: (877) 376-5831

Facsimile No.: (877) 376-5832

Attention: Michael W. Kosloske

with a copy (which shall not constitute notice to HII) to:

Davis Polk & Wardwell LLP

450 Lexington Avenue

New York, NY 10017

Telephone: 212-450-4125

Facsimile: 212-701-5125

Attention: Neil J. Barr

Each Notice shall be deemed received on the date sent to the recipient thereof in accordance with this Section 7.01, if sent prior to 5:00 p.m. in the place of receipt and such day is a Business Day; otherwise, such Notice shall be deemed not to have been received until the next succeeding Business Day.

Section 7.02. Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties, it being understood that all parties need not sign the same counterpart. Delivery of an executed signature page to this Agreement by facsimile transmission shall be as effective as delivery of a manually signed counterpart of this Agreement.

Section 7.03. Entire Agreement; No Third Party Beneficiaries. This Agreement constitutes the entire agreement and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof. This Agreement shall be binding upon and inure solely to the benefit of each party hereto and their respective successors and permitted assigns, and nothing in this Agreement, express or implied, is intended to or shall confer upon any other Person any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.

 

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Section 7.04. Governing Law. This Agreement shall be governed by, and construed in accordance with, the law of the State of New York, without regard to the conflicts of laws principles thereof.

Section 7.05. Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any law or public policy, all other terms and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby are consummated as originally contemplated to the greatest extent possible.

Section 7.06. Successors; Assignment; Amendments; Waivers. No Series B Member may assign this Agreement to any person without the prior written consent of HII; provided, however, that (i) to the extent Series B Membership Interests are effectively transferred in accordance with the terms of the LLC Agreement, the transferring Series B Member may assign to the transferee of such Series B Membership Interests the transferring Series B Member’s rights under this Agreement with respect to such transferred Series B Membership Interests and (ii) a Series B Member shall be entitled to assign its rights under this Agreement to (x) a direct or indirect beneficial owner or Affiliate of such Series B Member, or trust or other Person established for the benefit of one or more direct or indirect beneficial owners or Affiliates of such Series B Member, in connection with a liquidation, dissolution, winding up or other termination of such Series B Member or (y) any other then-current Series B Member, and, in either case (i) or (ii), such transferee shall have executed and delivered, or, in connection with such transfer, execute and deliver, a joinder to this Agreement in the form attached hereto as Exhibit A (or such other joinder in form and substance reasonably satisfactory to HII), agreeing to become a “Series B Member” for all purposes of this Agreement, except as otherwise provided in such joinder.

No provision of this Agreement may be amended unless such amendment is approved in writing by each of HII and the Company and by Series B Members who would be entitled to receive at least two-thirds (2/3) of the Early Termination Payments payable to all Series B Members hereunder if HII had exercised its right of early termination on the date of the most recent Exchange prior to such amendment (excluding, for purposes of this sentence, all payments made to any Series B Member pursuant to this Agreement since the date of such most recent Exchange); provided, however, that no such amendment shall be effective if such amendment would have a disproportionate effect on the payments certain Series B Members will or may receive under this Agreement unless all such Series B Members disproportionately affected consent in writing to such amendment. No

 

20


provision of this Agreement may be waived unless such waiver is in writing and signed by the party against whom the waiver is to be effective.

Except as otherwise specifically provided herein, all of the terms and provisions of this Agreement shall be binding upon, shall inure to the benefit of and shall be enforceable by the parties hereto and their respective successors, assigns, heirs, executors, administrators and legal representatives. HII shall require and cause any direct or indirect successor (whether by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of HII, by written agreement, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that HII would be required to perform if no such succession had taken place.

Section 7.07. Titles and Subtitles. The titles of the articles, sections and subsections of this Agreement are for convenience of reference only and are not to be considered in construing this Agreement.

Section 7.08. Resolution of Disputes. (a) Any and all disputes that are not governed by Section 7.09, including but not limited to any ancillary claims of any party, arising out of, relating to or in connection with the validity, negotiation, execution, interpretation, performance or non-performance of this Agreement (including the validity, scope and enforceability of this arbitration provision) (each a “Dispute”) shall be finally settled by arbitration conducted by a single arbitrator in New York in accordance with the Commercial Arbitration Rules of the American Arbitration Association then in effect (except as may be modified by mutual agreement of HII, the Company and each of the affected Series B Members). If the parties to the Dispute fail to agree on the selection of an arbitrator within thirty (30) calendar days of the receipt of the request for arbitration, the American Arbitration Association shall make the appointment. The arbitrator shall be a lawyer admitted to the practice of law in the State of New York and shall conduct the proceedings in the English language. Performance under this Agreement shall continue if reasonably possible during any arbitration proceedings. In addition to monetary damages, the arbitrator shall be empowered to award equitable relief, including, but not limited to an injunction and specific performance of any obligation under this Agreement. The arbitrator is not empowered to award damages in excess of compensatory damages, and each party hereby irrevocably waives any right to recover punitive, consequential, exemplary or similar damages with respect to any Dispute. The award shall be final and binding upon the parties as from the date rendered, and shall be the sole and exclusive remedy between the parties regarding any claims, counterclaims, issues, or accounting presented to the arbitral tribunal. Judgment upon any award may be entered and enforced in any court having jurisdiction over a party or any of its assets.

(b) Notwithstanding the provisions of paragraph (a), HII may bring an action or special proceeding in any court of competent jurisdiction for the purpose of compelling a party to arbitrate, seeking temporary or preliminary relief in aid

 

21


of an arbitration hereunder, and/or enforcing an arbitration award and, for the purposes of this paragraph (b), each Series B Member (i) expressly consents to the application of paragraph (c) of this Section 7.08 to any such action or proceeding and (ii) agrees that proof shall not be required that monetary damages for breach of the provisions of this Agreement would be difficult to calculate and that remedies at law would be inadequate.

(c) (i) EACH PARTY HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF COURTS LOCATED IN NEW YORK, NEW YORK FOR THE PURPOSE OF ANY JUDICIAL PROCEEDING BROUGHT IN ACCORDANCE WITH THE PROVISIONS OF PARAGRAPH (B) OF THIS SECTION 7.08, OR ANY JUDICIAL PROCEEDING ANCILLARY TO AN ARBITRATION OR CONTEMPLATED ARBITRATION ARISING OUT OF OR RELATING TO OR CONCERNING THIS AGREEMENT. Such ancillary judicial proceedings include any suit, action or proceeding to compel arbitration, to obtain temporary or preliminary judicial relief in aid of arbitration, or to confirm an arbitration award. The parties acknowledge that the forums designated by this paragraph (c) have a reasonable relation to this Agreement, and to the parties’ relationship with one another; and (ii) the parties hereby waive, to the fullest extent permitted by applicable law, any objection which they now or hereafter may have to personal jurisdiction or to the laying of venue of any such ancillary suit, action or proceeding brought in any court referred to in paragraph (c)(i) of this Section 7.08 and such parties agree not to plead or claim otherwise.

Section 7.09. Reconciliation. In the event that HII and the Series B Member Representative are unable to resolve a disagreement with respect to a matter governed by Section 2.03, Section 4.02, or Section 6.02 within the relevant period designated in this Agreement (“Reconciliation Dispute”), the Reconciliation Dispute shall be submitted for determination to a nationally recognized expert (the “Expert”) in the particular area of disagreement mutually acceptable to both parties. The Expert shall be a partner in a nationally recognized accounting firm or a law firm (other than the Advisory Firm), and the Expert shall not, and the firm that employs the Expert shall not, unless otherwise agreed by HII and the Series B Member Representative, have any material relationship with either HII or the Series B Member Representative. If the parties are unable to agree on an Expert within thirty (30) calendar days of receipt by the respondent(s) of written notice of a Reconciliation Dispute, the Expert shall be appointed by the American Arbitration Association. The Expert shall resolve any matter relating to the Exchange Basis Schedule or an amendment thereto or the Early Termination Schedule or an amendment thereto within thirty (30) calendar days and shall resolve any matter relating to a Tax Benefit Schedule or an amendment thereto within fifteen (15) calendar days or as soon thereafter as is reasonably practicable, in each case, after the matter has been submitted to the Expert for resolution. Notwithstanding the preceding sentence, if the matter is not resolved before any payment that is the subject of a disagreement would be due (in the absence of such disagreement) or any Tax Return reflecting the subject of

 

22


a disagreement is due, the undisputed amount shall be paid on such date and such Tax Return may be filed as prepared by HII, subject to adjustment or amendment upon resolution. In the event that this reconciliation provision is utilized, the fees of the Expert shall be paid in proportion to the manner in which the dispute is resolved, such that, for example, if the entire dispute is resolved in favor of HII, the Series B Member Representative shall pay all of the fees, or if the items in dispute are resolved 50% in favor of HII and 50% in favor of the applicable Series B Member, each of HII and the Series B Member Representative shall pay 50% of the fees of the Expert. Any dispute as to whether a dispute is a Reconciliation Dispute within the meaning of this Section 7.09 shall be decided by the Expert. The Expert shall finally determine any Reconciliation Dispute and the determinations of the Expert pursuant to this Section 7.09 shall be (i) final and may be enforced as if it were the award of an arbitrator issued under and pursuant to the rules of the American Arbitration Association and (ii) binding on HII and the Series B Member Representative and may be entered and enforced in any court having competent jurisdiction.

Section 7.10. Withholding. HII shall be entitled to deduct and withhold from any payment payable pursuant to this Agreement such amounts as HII is required to deduct and withhold with respect to the making of such payment under the Code or any provision of state, local or foreign Tax law. To the extent that amounts are so withheld and paid over to the appropriate Taxing Authority by HII, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the applicable Series B Member.

Section 7.11. Admission of HII into a Consolidated Group; Transfers of Corporate Assets. (a) If HII becomes a member of an affiliated or consolidated group of corporations that files a consolidated income Tax Return pursuant to Section 1501 et seq. of the Code or any corresponding provisions of state, local or foreign law, then: (i) the provisions of this Agreement shall be applied with respect to the group as a whole; and (ii) Tax Benefit Payments, Early Termination Payments and other applicable items hereunder shall be computed with reference to the consolidated taxable income of the group as a whole.

(b) If any entity that is obligated to make an Exchange Payment hereunder transfers one or more assets to a corporation with which such entity does not file a consolidated Tax Return pursuant to Section 1501 of the Code, such entity, for purposes of calculating the amount of any Exchange Payment (e.g., calculating the gross income of the entity and determining the Realized Tax Benefit of such entity) due hereunder, shall be treated as having disposed of such asset in a fully taxable transaction on the date of such contribution. The consideration deemed to be received by such entity shall be equal to the fair market value of the contributed asset, plus (i) the amount of debt to which such asset is subject, in the case of a contribution of an encumbered asset or (ii) the amount of debt allocated to such asset, in the case of a contribution of a partnership interest.

 

23


Section 7.12. Confidentiality. Each Series B Member acknowledges and agrees that the information of HII and of its Affiliates is confidential and, except in the course of performing any duties as necessary for HII and its Affiliates, as required by law or legal process or to enforce the terms of this Agreement, such person shall keep and retain in the strictest confidence and not disclose to any Person any confidential matters, acquired pursuant to this Agreement, of HII and its Affiliates and successors, concerning the Company and its Affiliates and successors or the other Series B Members, learned by the Series B Member heretofore or hereafter. This Section 7.12 shall not apply to (i) any information that has been made publicly available by HII or any of its Subsidiaries, becomes public knowledge (except as a result of an act of such Series B Member in violation of this Agreement) or is generally known to the business community and (ii) the disclosure of information to the extent necessary for a Series B Member to prepare and file his or her Tax Returns, to respond to any inquiries regarding the sale from any Taxing authority or to prosecute or defend any action, proceeding or audit by any Taxing authority with respect to such returns. Notwithstanding anything to the contrary herein, each Series B Member (and each employee, representative or other agent of such Series B Member or assignee, as applicable) may disclose to any and all Persons, without limitation of any kind, the Tax treatment and Tax structure of HII, the Company, the Series B Members and their Affiliates, and any of their transactions, and all materials of any kind (including opinions or other Tax analyses) that are provided to the Series B Members relating to such Tax treatment and Tax structure.

If a Series B Member commits a breach, or threatens to commit a breach, of any of the provisions of this Section 7.12, HII shall have the right and remedy to have the provisions of this Section 7.12 specifically enforced by injunctive relief or otherwise by any court of competent jurisdiction without the need to post any bond or other security, it being acknowledged and agreed that any such breach or threatened breach shall cause irreparable injury to HII or any of its Subsidiaries or the other Series B Members and the accounts and funds managed by HII and that money damages alone shall not provide an adequate remedy to such Persons. Such rights and remedies shall be in addition to, and not in lieu of, any other rights and remedies available at law or in equity.

Section 7.13. LLC Agreement. This Agreement shall be treated as part of the partnership agreement of the Company as described in Section 761(c) of the Code and Sections 1.704-1(b)(2)(ii)(h) and 1.761-1(c) of the Treasury Regulations.

Section 7.14. Change in Tax Law. Notwithstanding anything herein to the contrary, if, in connection with an actual or proposed change in law, the Series B Member Representative reasonably believes that the existence of this Agreement could cause income (other than income arising from receipt of a payment under this Agreement) recognized by any Applicable Series B Member or any member affiliated with an Applicable Series B Member (or direct or indirect equity holders in such member) upon the IPO or any Exchange to be

 

24


treated as ordinary income rather than capital gain (or otherwise taxed at ordinary income rates) for U.S. federal income Tax purposes or would have other material adverse Tax consequences to an Applicable Series B Member or any direct or indirect owner of an Applicable Series B Member (a “Change in Tax Law”), then (i) at the election of the Applicable Series B Member and to the extent specified by the Applicable Series B Member, this Agreement shall not apply with respect to an Exchange by the Applicable Series B Member occurring after a date specified by the Applicable Series B Member, (ii) at the election of the Applicable Series B Member, this Agreement shall otherwise be amended in a manner determined by HII and the Series B Member Representative, acting jointly, provided that such amendment shall not result in an increase in payments under this Agreement at any time as compared to the amounts and times of payments that would have been due in the absence of such amendment or (iii) at the election of the Series B Members, acting unanimously, this Agreement shall cease to have further effect. For the avoidance of doubt, any election pursuant to this Section 7.14 shall not be considered a breach of this Agreement and shall not trigger an Early Termination Payment under Section 4.01.

Section 7.15. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT.

[Signature pages follow]

 

25


IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized representatives as of the day and year first above written.

 

Health Insurance Innovations, Inc.
By:   /s/ Michael W. Kosloske
  Name:   Michael W. Kosloske
  Title:   Chief Executive Officer


Health Plan Intermediaries Holdings, LLC
By:   /s/ Michael W. Kosloske
  Name:   Michael W. Kosloske
  Title:   Chief Executive Officer


Health Plan Intermediaries, LLC
By:   /s/ Michael W. Kosloske
  Name:   Michael W. Kosloske
  Title:   Chief Executive Officer


Health Plan Intermediaries Sub, LLC
By:   /s/ Michael W. Kosloske
  Name:   Michael W. Kosloske
  Title:   Chief Executive Officer


Exhibit A

JOINDER

This JOINDER to the Tax Receivable Agreement (as amended, the “Tax Receivable Agreement”) dated as of February 13, 2013, among Health Insurance Innovations, Inc., a Delaware corporation (“HII”), Health Insurance Intermediaries Holdings, LLC, a Delaware limited liability company, (the “Company”) and each of the undersigned parties thereto identified as “Series B Members” constitutes the agreement and undertaking of             (the “Permitted Transferee”) in favor of and for the benefit of HII, the Company and the other parties to the Tax Receivable Agreement.

WHEREAS, on             , 20    , the Permitted Transferee acquired (the “Acquisition”) Series B Membership Interests in the Company and the corresponding Class B Shares of HII (collectively, the “Interests” and, together with all other Interests hereinafter acquired by the Permitted Transferee from             (the “Transferor”) and its Permitted Transferees, the “Acquired Interests”) from the Transferor; and

WHEREAS, the Transferor, in connection with the Acquisition, has required Permitted Transferee to execute and deliver this Joinder pursuant to Section 7.06 of the Tax Receivable Agreement.

NOW, THEREFORE, in consideration of the foregoing and the agreements contained herein, the Permitted Transferee hereby agrees as follows:

Section 1.1. Definitions. Capitalized words used but not defined in this Joinder are used as defined in the Tax Receivable Agreement.

Section 1.2. Joinder. The Permitted Transferee hereby acknowledges and agrees to become a “Series B Member” for all purposes of the Tax Receivable Agreement, including but not limited to, being bound by Section 7.12, Section 2.03, Section 4.02, Section 6.01, and Section 6.02 of the Tax Receivable Agreement, with respect to the Acquired Interests, and any other Interests the Permitted Transferee acquires hereafter.

Section 1.3. Notice. All notices, requests, consents and other communications hereunder to the Permitted Transferee shall be deemed to be sufficient if contained in a written instrument delivered in person or sent by facsimile (provided a copy is thereafter promptly delivered as provided in this Section 1.3) or nationally recognized overnight courier, addressed to the Permitted Transferee at the address or facsimile number set forth below or such other address or facsimile number as may hereafter be designated in writing by Permitted Transferee.

 

A-1


Section 1.4. Governing Law. This Joinder shall be governed by, and construed in accordance with, the law of the State of New York, without regard to the conflicts of laws principles thereof.

IN WITNESS WHEREOF, this Joinder has been duly executed and delivered by the Permitted Transferee as of the date first above written.

 

[NAME]
By:    
  Name:
  Title:

Address for Notices:

Facsimile No.

 

A-2


Exhibit B

 

Name and Address of Series B Member

   Immediately Following IPO  
   Number of
Series B
Membership
Interests
Owned
     Number of
Class B
Shares
Owned
 

Health Plan Intermediaries, LLC

15438 N. Florida Avenue, Suite 201

Tampa, Florida, 33613

Facsimile: (877) 376-5832

     8,580,000         8,580,000   

Health Plan Intermediaries Sub, LLC

15438 N. Florida Avenue, Suite 201

Tampa, Florida, 33613

Facsimile: (877) 376-5832

     86,667         86,667   

 

B-1

Exchange Agreement

Exhibit 10.3

Execution Version

 

 

EXCHANGE AGREEMENT

among

HEALTH INSURANCE INNOVATIONS, INC.

HEALTH PLAN INTERMEDIARIES HOLDINGS, LLC

and

THE SERIES B MEMBERS OF HEALTH PLAN INTERMEDIARIES HOLDINGS, LLC

Dated as of February 13, 2013

 

 


TABLE OF CONTENTS

 

  ARTICLE 1   
  DEFINED TERMS   
Section 1.01.   Definitions      2   
Section 1.02.   Other Definitional and Interpretative Provisions      4   
  ARTICLE 2   
  EXCHANGE   
Section 2.01.   Exchanges      4   
Section 2.02.   Adjustment      8   
Section 2.03.   Expiration      9   
Section 2.04.   Reservation of Class A Shares; Listing      10   
Section 2.05.   Recapitalization      10   
  ARTICLE 3   
  TRANSFER RESTRICTIONS   
Section 3.01.   General Restrictions on Transfer      10   
Section 3.02.   Legends      11   
Section 3.03.   Permitted Transferees      11   
  ARTICLE 4   
  OTHER AGREEMENTS; MISCELLANEOUS   
Section 4.01.   Expenses      11   
Section 4.02.   Notices      12   
Section 4.03.   Permitted Transferees      12   
Section 4.04.   Severability      13   
Section 4.05.   Counterparts      13   
Section 4.06.   Entire Agreement; No Third Party Beneficiaries      13   
Section 4.07.   Further Assurances      13   
Section 4.08.   Dispute Resolution      13   
Section 4.09.   Governing Law      13   
Section 4.10.   Consent to Jurisdiction      14   
Section 4.11.   WAIVER OF JURY TRIAL      14   
Section 4.12.   Amendments; Waivers      14   
Section 4.13.   Assignment      14   
Section 4.14.   Tax Treatment      14   
Section 4.15.   Effective Date      15   

 

i


EXCHANGE AGREEMENT

among

HEALTH INSURANCE INNOVATIONS, INC.

HEALTH PLAN INTERMEDIARIES HOLDINGS, LLC

and

THE SERIES B MEMBERS OF HEALTH PLAN INTERMEDIARIES HOLDINGS, LLC

EXCHANGE AGREEMENT, dated as of February 13, 2013 (this “Agreement”), among Health Insurance Innovations, Inc., a Delaware corporation (“HII”), Health Plan Intermediaries Holdings, LLC, a Delaware limited liability company (the “Company”) and the holders from time to time of Series B Membership Interests in the Company listed on Exhibit A hereto (collectively, the “Series B Members”). Capitalized terms used but not simultaneously defined are defined in or by reference to Section 1.01.

W I T N E S S E T H:

WHEREAS, in connection with the closing of its initial public offering of Class A Shares (the “IPO”), HII intends to consummate the transactions described in the Registration Statement on Form S-1 originally filed with the Commission on December 20, 2012, as amended (Registration No. 333-185596);

WHEREAS, immediately prior to the closing of the IPO, the existing ownership interests in the Company of the Series B Members, represented by limited liability company interests, will be converted into Series B Membership Interests in the Company, and the existing shares of common stock of HII of the Series B Members will be converted into Class B Shares of HII, and each of the Series B Members will own the number of Series B Membership Interests and Class B Shares set forth opposite its name on Exhibit A hereto;

WHEREAS, the parties hereto desire to provide for the possible future exchange following the IPO of Series B Membership Interests of the Company (concurrently with the corresponding number of Class B Shares of HII), for Class A Shares of HII, on the terms and subject to the conditions set forth herein;

WHEREAS, HII shall have no obligation to acquire from a Series B Member any Series B Membership Interests and Class B Shares unless such Series B Member exercises its Exchange Right with respect to such Series B Membership Interests and Class B Shares in accordance herewith; and

WHEREAS, the parties intend that an Exchange consummated hereunder be treated for U.S. federal income tax purposes, to the extent permitted by law, as a taxable sale of Series B Membership Interests and Class B Shares;


NOW, THEREFORE, in consideration of the mutual covenants and undertakings contained herein and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

ARTICLE 1

DEFINED TERMS

Section 1.01. Definitions. As used in this Agreement, the following terms have the following meanings:

Agreement” is defined in the preamble.

Business Combination Transaction” is defined in the Amended and Restated Certificate of Incorporation of HII.

Business Day” means any day except a Saturday, Sunday, or other day on which commercial banks in Tampa, Florida or New York, New York are authorized by law to close.

Class A Shares” means shares of Class A common stock, par value $0.001 per share, of HII.

Class B Shares” means shares of Class B common stock, par value $0.001 per share, of HII.

Closing” means the closing of an Exchange pursuant to Section 2.01.

Code” means the Internal Revenue Code of 1986, as amended.

Commission” means the U.S. Securities and Exchange Commission or any successor thereto.

Company” is defined in the preamble.

Exchange,” when used as a noun, means an exchange by a Series B Member of one or more Series B Membership Interests, concurrently with the corresponding number of Class B Shares, for Class A Shares pursuant to Section 2.01 of this Agreement. “Exchange,” when used as a verb, and “Exchanging,” when used as an adjective, shall have correlative meanings.

Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended.

Exchange Rate” means the number of Class A Shares for which a Series B Membership Interest (together with the corresponding number of Class B Shares, subject to adjustment as provided in Section 2.02(b)) is entitled to be Exchanged, as provided in Section 2.02(a).

 

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Exchange Request” means a written notice to HII, delivered at least 20 days in advance of any Exchange, setting forth the number of Series B Membership Interests (and the corresponding number of Class B Shares) to be Exchanged for Class A Shares, as described in Section 2.01(a).

Exchange Right” means the right of a Series B Member to exchange from time to time one or more Series B Membership Interests (together with the corresponding Class B Shares, subject to adjustment based on the Share Exchange Rate then in effect) for Class A Shares pursuant to Section 2.01.

Fiscal Quarter” means each fiscal quarter ending on the last day of each of March, June, September and December of any Fiscal Year.

Fiscal Year” means a period commencing January 1 and ending December 31 of each year.

Governmental Entity” means any court, administrative agency, regulatory body, commission, or other governmental authority, board, bureau, or instrumentality, domestic or foreign, and any subdivision thereof.

HII” is defined in the preamble.

IPO” is defined in the recitals.

Liens” means any and all liens, charges, security interests, options, claims, mortgages, pledges, proxies, voting trusts or agreements, obligations, understandings or arrangements, or other restrictions on title or transfer of any nature whatsoever.

LLC Agreement” means the Third Amended and Restated Limited Liability Company Agreement of the Company dated as of February 13, 2013, as such agreement may be amended from time to time.

Notice” is defined in Section 4.02.

Permitted Transferee” is defined in the LLC Agreement.

Person” means any natural person, corporation, limited partnership, general partnership, limited liability company, joint stock company, joint venture, association, company, estate, trust, bank trust company, land trust, business trust, or other organization, whether or not a legal entity, custodian, trustee-executor, administrator, nominee, or entity in a representative capacity, and any government or agency or political subdivision thereof.

Registration Rights Agreement” means the Registration Rights Agreement dated as of February 13, 2013 among HII and the other parties thereto.

Restricted Class A Shares” is defined in Section 3.01.

 

3


Securities Act” means the U.S. Securities Act of 1933, as amended.

Secretary” is defined in Section 2.01(d)(i).

Series B Membership Interests” is defined in the LLC Agreement.

Series B Members” is defined in the preamble.

Share Exchange Rate” means the number of Class B Shares that must be tendered along with a Series B Membership Interest in an Exchange, as provided in Section 2.02(b).

Section 1.02. Other Definitional and Interpretative Provisions. The words “hereof,” “herein” and “hereunder” and words of like import used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. The headings and captions herein are included for convenience of reference only and shall be ignored in the construction or interpretation hereof. References to Articles, Sections and Exhibits are to Articles, Sections and Exhibits of this Agreement unless otherwise specified. Any capitalized term used in any Exhibit and not otherwise defined therein has the meaning ascribed to such term in this Agreement. Any singular term in this Agreement shall be deemed to include the plural, and any plural term the singular. Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation,” whether or not they are in fact followed by those words or words of like import. “Writing,” “written” and comparable terms refer to printing, typing and other means of reproducing words (including electronic media) in a visible form. References to any agreement or contract are to that agreement or contract as amended, restated, modified or supplemented from time to time in accordance with the terms thereof. References to any Person include the successors and permitted assigns of that Person. References from or through any date mean, unless otherwise specified, from and including or through and including, respectively.

ARTICLE 2

EXCHANGE

Section 2.01. Exchanges. (a) Permissible Exchanges. (i) Upon the terms and subject to the conditions of this Article 2, each Series B Member may, at any time and from time to time, elect to Exchange in one or more Exchanges up to one hundred percent (100%) of the Series B Member’s Series B Membership Interests, together with a corresponding number of Class B Shares, by delivering an Exchange Request to HII.

(ii) Upon delivery to HII, no Exchange Request may be revoked less than five Business Days prior to the scheduled Closing of the applicable Exchange (and HII shall have received notice of such revocation no later than such fifth Business Day) unless the Series B Member that has delivered such Exchange Request reimburses all out-of-pocket costs incurred by HII or the Company with respect to such requested Exchange; provided, however, that a Series B Member that has delivered an Exchange Request shall be entitled without reimbursing

 

4


such costs either (x) to revoke such Exchange Request at any time prior to the Closing of the applicable Exchange or (y) to delay the Closing of the requested Exchange pursuant to this Section 2.01(a)(ii), in each case, after the occurrence of one or more of the following events (the date of such Closing to be determined pursuant to Section 2.01(b)(i)): (A) any registration statement pursuant to which the Class A Shares were to be registered for such Series B Member at or immediately following the Closing shall have ceased to be effective pursuant to any action or inaction by the Commission; (B) HII shall have failed to cause any related prospectus to be supplemented by any required prospectus supplement necessary to effect such sale; (C) HII shall have exercised its right to defer, delay or suspend the filing or effectiveness of a registration statement (whether pursuant to the Registration Rights Agreement or otherwise), and such deferral, delay or suspension shall affect the ability of such Series B Member to have its Class A Shares registered at or immediately following the Closing; (D) HII shall have disclosed to such Series B Member any material non-public information concerning HII, the receipt of which results in such Series B Member being prohibited or restricted from selling Class A Shares at or immediately following the Closing without disclosure of such information (and HII does not permit disclosure); (E) any stop order relating to the registration statement pursuant to which the Class A Shares were to be registered by such Series B Member at or immediately following the Closing shall have been issued by the Commission; (F) the Closing, or the closing of the registered offering or the effectiveness of any registration, shall have been delayed due to any facts or circumstances; (G) there shall have occurred a material disruption in the securities markets generally or in the market or markets in which the Class A Shares are then traded; (H) there shall be in effect an injunction, a restraining order or a decree of any nature of any Governmental Entity that restrains or prohibits the Exchange of Series B Membership Interests (together with the corresponding number of Class B Shares) for Class A Shares or the registration or sale of any Class A Shares pursuant to a registration statement; or (I) HII shall have failed to comply in all material respects with its obligations under the Registration Rights Agreement, and such failure shall have affected the ability of such Series B Member to consummate the registration or sale of Class A Shares in a manner not expressly contemplated in clauses (A) through (H) above; provided further, however, that in no event shall the Series B Member who is seeking to delay such Closing or revoke such Exchange Request and relying on any of the matters contemplated in clauses (A) through (I) above have controlled or intentionally influenced any facts, circumstances, or Persons in connection therewith (except in the good faith performance of his or her duties as an officer or director of HII) in order to provide such Series B Member with a basis for such delay or revocation.

(iii) Each Exchange Request shall set forth the number of Series B Membership Interests (together with the corresponding number of Class B Shares, which shall be determined pursuant to the Share Exchange Rate) such Series B Member wishes to Exchange for Class A Shares at the applicable Closing. If any Exchange Request is made in connection with a contemplated underwritten offering of Class A Shares and such underwritten offering includes any option being granted to the underwriters or any other Person to acquire an additional number of Class A Shares in connection with such offering, then (A) each Exchange Request related to Series B Membership Interests to be Exchanged for Class A Shares that will be included in such underwritten offering shall also specify the maximum number of additional Series B

 

5


Membership Interests that the Series B Member desires to have Exchanged in the event that such option is exercised (it being understood that (x) the party exercising such option may have the right to do so in part, in which case the additional Series B Membership Interests Exchanged in connection with such offering will be limited to the amount necessary to fulfill the delivery obligation with respect to the Class A Shares that are actually to be acquired upon exercise of such option, and (y) the allocation of Class A Shares to be acquired pursuant to an exercise of any such option among the Persons participating in such offering may not be known at the time of the delivery of the original Exchange Request, in which case the maximum number of additional Series B Membership Interests to potentially be Exchanged will be communicated to HII pursuant to a supplement to the Exchange Request delivered promptly following the time at which such determination is made, which supplement to the Exchange Request need not be delivered 20 days in advance of the applicable Exchange) and (B) the Closing of the Exchange of any additional Series B Membership Interests to fulfill a Series B Member’s delivery obligation with respect to the Class A Shares that are to be acquired upon exercise of any such option will occur immediately prior to the time that delivery of the Class A Shares is to be made.

(iv) Each Series B Member shall represent in the Exchange Request that such Series B Member owns the Series B Membership Interests and Class B Shares to be delivered at the applicable Closing pursuant to Section 2.01(d)(i) and Section 2.01(d)(ii), free and clear of all Liens, except as set forth therein and other than transfer restrictions imposed by or under applicable securities laws and this Agreement and the LLC Agreement, and, if there are any Liens identified in the Exchange Request, such Series B Member shall covenant that such Series B Member will deliver at the applicable Closing evidence reasonably satisfactory to HII that all such Liens (other than transfer restrictions imposed by or under applicable securities laws and this Agreement and the LLC Agreement) have been released.

(v) No Exchange shall be permitted (and, if attempted, shall be void ab initio) if, in the good faith determination of the Company, such Exchange would pose a material risk that the Company would be a “publicly traded partnership” as defined in Section 7704 of the Code.

(vi) Each Exchange pursuant to this Section 2.01(a) shall be at the Exchange Rate and Share Exchange Rate in effect at the applicable Closing.

(b) Closing. (i) If an Exchange Request has been delivered pursuant to Section 2.01(a)(i), then (subject to Section 2.01(c)) the Closing of such Exchange shall occur on the date that is the later of (x) the fifth Business Day following the last Business Day of the Fiscal Quarter during which such Exchange Request has been delivered and (y) the fifth Business Day following the date on which the conditions giving rise to any delay pursuant to Section 2.01(a)(ii) cease to exist. Subject to the immediately preceding sentence, parties shall effect the Closing at such time, at such place, and in such manner, as HII shall reasonably specify.

(ii) If HII enters into an agreement to consummate a Business Combination Transaction, HII shall give each Series B Member at least 20 Business Days’ notice of

 

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the closing thereof, if practicable, and HII shall cause such agreement to provide that, at the request of a Series B Member, such Series B Member shall be entitled to Exchange its Series B Membership Interests (together with a corresponding number of Class B Shares) for Class A Shares immediately prior to the closing of the Business Combination Transaction in order for such Series B Member to be able to receive the amount and type of consideration payable pursuant to such Business Combination Transaction to holders of Class A Shares, and such agreement shall provide that such Series B Member shall be entitled to revoke such request on up to two Business Days’ notice to HII prior to the closing thereof. If any Person commences a tender offer or exchange offer for any of the outstanding shares of HII’s stock, HII shall use reasonable efforts to cause such Person to provide that the terms of such offer shall entitle such Series B Member, at the request of such Series B Member, to Exchange its Series B Membership Interests (together with a corresponding number of Class B Shares) for Class A Shares immediately prior to the consummation of such tender offer or exchange offer in order for such Series B Member to participate in such tender offer or exchange offer, and to permit such Series B Member to revoke such request on up to two Business Days’ notice to such Person prior to the closing thereof. The Closing for any Exchange occurring pursuant to this Section 2.01(b)(ii) shall occur immediately prior to, but remain subject to the consummation immediately after of, the Business Combination Transaction, tender offer or exchange offer, as applicable, and such Exchange shall be reversed immediately if such Business Combination Transaction, tender offer or exchange offer, as applicable, shall fail to be consummated after such Exchange.

(iii) Upon the occurrence of a Closing, (A) all rights of the Exchanging Series B Member as holder of the Series B Membership Interests (and corresponding number of Class B Shares) being Exchanged shall terminate, (B) the Class B Shares delivered at the Closing shall be automatically cancelled on the books and records of HII and shall no longer be deemed to be issued and outstanding capital stock of HII, (C) the Series B Membership Interests delivered at the Closing shall automatically be cancelled on the books and records of the Company and shall no longer be deemed to be issued and outstanding membership interests of the Company, and (D) such Exchanging Series B Member shall be treated for all purposes as the holder of the Class A Shares delivered at the Closing.

(c) Closing Conditions. (i) The obligation of any of the parties to consummate an Exchange pursuant to this Section 2.01 shall be subject to the condition that there shall be no injunction, restraining order or decree of any nature of any Governmental Entity that is then in effect that restrains or prohibits the Exchange of Series B Membership Interests (together with the corresponding number of Class B Shares) for Class A Shares.

(ii) The obligation of HII to consummate an Exchange pursuant to this Section 2.01 shall be subject to (A) the delivery by the Exchanging Series B Member of the items specified in clauses (i), (ii) and (iii) of Section 2.01(d) and (B) the good faith determination by HII that such Exchange would not violate any contract, commitment, agreement, instrument, arrangement, understanding, obligation, or undertaking to which HII is subject.

 

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(d) Closing Deliveries. At or prior to each Closing, with respect to each Series B Member that requests the Exchange contemplated for such Closing:

(i) to the extent that such Series B Member’s Series B Membership Interests are certificated, such Series B Member shall deliver to HII one or more certificates representing the number of Series B Membership Interests specified in the applicable Exchange Request (or an affidavit of loss in lieu thereof in customary form, but without any requirement to post a bond or furnish any other security), accompanied by security transfer powers, in form reasonably satisfactory to the corporate secretary of HII (the “Secretary”), duly executed in blank by such Series B Member or such Series B Member’s duly authorized attorney, to be Exchanged for Class A Shares based on the Exchange Rate in effect at the applicable Closing;

(ii) to the extent such Series B Member’s Class B Shares are certificated, such Series B Member shall deliver to HII one or more certificates representing a number of Class B Shares as determined pursuant to the Share Exchange Rate in effect at the applicable Closing (or an affidavit of loss in lieu thereof in customary form, but without any requirement to post a bond or furnish any other security), accompanied by security transfer powers, in form reasonably satisfactory to the Secretary, duly executed in blank by such Series B Member or such Series B Member’s duly authorized attorney;

(iii) such Series B Member shall represent in writing, and at HII’s request deliver confirmatory evidence reasonably satisfactory to HII, that no Liens exist on the Series B Membership Interests and Class B Shares delivered pursuant to Sections 2.01(d)(i) and 2.01(d)(ii) (other than transfer restrictions imposed by or under applicable securities laws, the LLC Agreement and this Agreement), or that such Liens have been released;

(iv) if such Series B Member delivers to HII, pursuant to Section 2.01(d)(i) or 2.01(d)(ii), a certificate representing a number of Series B Membership Interests or Class B Shares that is greater than the number of Series B Membership Interests or Class B Shares specified in the applicable Exchange Request, HII will deliver (or cause the Company to deliver) to such Series B Member certificates representing the excess Series B Membership Interests or Class B Shares, as applicable; and

(v) HII shall deliver or cause to be delivered to such Series B Member at the then-acting registrar and transfer agent of the Class A Shares or, if there is no then-acting registrar and transfer agent of the Class A Shares, at the principal executive offices of HII, the number of Class A Shares that such Series B Member is entitled to receive for Series B Membership Interests (together with the corresponding number of Class B Shares) in the Exchange.

Section 2.02. Adjustment. (a) On the date hereof, the Exchange Rate shall be 1 for 1. The Exchange Rate shall be adjusted accordingly if there is: (i) any subdivision (by any unit split, unit distribution, reclassification, reorganization, recapitalization or otherwise) or combination

 

8


(by reverse unit split, reclassification, reorganization, recapitalization or otherwise) of the Series B Membership Interests that is not accompanied by an identical subdivision or combination of the Class A Shares; or (ii) any subdivision (by any stock split, stock dividend or distribution, reclassification, reorganization, recapitalization or otherwise) or combination (by reverse stock split, reclassification, reorganization, recapitalization or otherwise) of the Class A Shares that is not accompanied by an identical subdivision or combination of the Series B Membership Interests. If there is any reclassification, reorganization, recapitalization or other similar transaction in which the Class A Shares are converted or changed into another security, securities or other property, then upon any subsequent Exchange, an Exchanging Series B Member shall be entitled to receive the amount of such security, securities or other property that such Exchanging Series B Member would have received if such Exchange had occurred immediately prior to the effective date of such reclassification, reorganization, recapitalization or other similar transaction, taking into account any adjustment as a result of any subdivision (by any split, distribution or dividend, reclassification, reorganization, recapitalization or otherwise) or combination (by reverse split, reclassification, recapitalization or otherwise) of such security, securities or other property that occurs after the effective time of such reclassification, reorganization, recapitalization or other similar transaction. For the avoidance of doubt, if there is any reclassification, reorganization, recapitalization or other similar transaction in which the Class A Shares are converted or changed into another security, securities or other property, this Section 2.02(a) shall continue to be applicable, mutatis mutandis, with respect to such security or other property.

(b) On the date hereof, the Share Exchange Rate shall be 1 for 1. The Share Exchange Rate shall be adjusted accordingly if there is: (i) any subdivision (by any unit split, unit distribution, reclassification, reorganization, recapitalization or otherwise) or combination (by reverse unit split, reclassification, reorganization, recapitalization or otherwise) of the Series B Membership Interests that is not accompanied by an identical subdivision or combination of the Class B Shares; or (ii) any subdivision (by any stock split, stock dividend or distribution, reclassification, reorganization, recapitalization or otherwise) or combination (by reverse stock split, reclassification, reorganization, recapitalization or otherwise) of the Class B Shares that is not accompanied by an identical subdivision or combination of the Series B Membership Interests. If there is any reclassification, reorganization, recapitalization or other similar transaction in which the Class B Shares are converted or changed into another security, securities or other property, then upon any subsequent Exchange, an Exchanging Series B Member shall be required to tender such securities or other property. For the avoidance of doubt, if there is any reclassification, reorganization, recapitalization or other similar transaction in which the Class B Shares are converted or changed into another security, securities or other property, this Section 2.02(b) shall continue to be applicable, mutatis mutandis, with respect to such security or other property.

Section 2.03. Expiration. In the event that the Company is dissolved, liquidated or wound up pursuant to the LLC Agreement or otherwise, any Exchange Right shall expire upon final distribution of the assets of the Company pursuant to the terms and conditions of the LLC Agreement.

 

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Section 2.04. Reservation of Class A Shares; Listing. HII shall at all times reserve and keep available out of its authorized but unissued Class A Shares, solely for the purpose of issuance upon an Exchange, such number of Class A Shares as shall be issuable upon any such Exchange; provided that nothing contained herein shall be construed to preclude HII from satisfying its obligations in respect of any such Exchange by delivery of purchased Class A Shares (which may or may not be held in the treasury of HII). HII shall deliver Class A Shares that have been registered under the Securities Act with respect to any Exchange to the extent a registration statement is effective and available for such shares. If any Class A Shares require registration with or approval of any Governmental Entity under any federal or state law before such Class A Shares may be issued upon an Exchange, HII shall cause such Class A Shares to be duly registered or approved, as the case may be. HII shall use its commercially reasonable efforts to list the Class A Shares required to be delivered upon any such Exchange prior to such delivery upon each national securities exchange upon which the outstanding Class A Shares are listed at the time of such Exchange (it being understood that any such shares may be subject to transfer restrictions under applicable securities laws). HII covenants that all Class A Shares issued upon an Exchange will, upon issuance, be validly issued, fully paid and non-assessable.

Section 2.05. Recapitalization. This Agreement shall apply to the Series B Membership Interests held by the Series B Members and their Permitted Transferees as of the date hereof, as well as any Series B Membership Interests hereafter acquired by a Series B Member and its Permitted Transferees. This Agreement shall apply to, mutatis mutandis, and all references to “Series B Membership Interests” shall be deemed to include, any security, securities or other property of the Company that may be issued in respect of, in exchange for or in substitution of Series B Membership Interests, by reason of any distribution or dividend, split, reverse split, combination, reclassification, reorganization, recapitalization, merger, exchange (other than an Exchange) or other transaction.

ARTICLE 3

TRANSFER RESTRICTIONS

Section 3.01. General Restrictions on Transfer. (a) Each Series B Member understands and agrees that the Class A Shares received by such Series B Member in any Exchange (any such Class A Shares, “Restricted Class A Shares”) may not be transferred except as permitted by Section 3.02(b) or 3.03.

(b) Without limitation of Section 3.01(a), each Series B Member understands and agrees that, until registered under the Securities Act, the Restricted Class A Shares are restricted securities under the Securities Act and the rules and regulations promulgated thereunder. Each Series B Member agrees that it shall not Transfer any Restricted Class A Shares (or solicit any offers in respect of any Transfer of any Restricted Class A Shares), except in compliance with the Securities Act, any other applicable securities or “blue sky” laws, and the terms and conditions of this Agreement.

 

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(c) Any attempt to transfer any Restricted Class A Shares not in compliance with this Agreement shall be void ab initio, and HII shall not, and shall cause any transfer agent not to, give any effect in HII’s stock records to such attempted transfer.

Section 3.02. Legends. (a) In addition to any other legend that may be required, subject to Section 3.02(b), each certificate for Restricted Class A Shares issued to a Series B Member (or any of such Series B Member’s Permitted Transferees) shall bear a legend in substantially the following form:

THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED, OR ANY NON-U.S. OR STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN COMPLIANCE THEREWITH. THIS SECURITY IS ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER AS SET FORTH IN THE EXCHANGE AGREEMENT DATED AS OF FEBRUARY 13, 2013 AS THE SAME MAY BE AMENDED FROM TIME TO TIME IN ACCORDANCE WITH THE TERMS THEREOF, COPIES OF WHICH MAY BE OBTAINED UPON REQUEST FROM THE CORPORATE SECRETARY OF HEALTH INSURANCE INNOVATIONS, INC. OR ANY SUCCESSOR THERETO.

(b) If any Restricted Class A Share is eligible to be sold pursuant to Rule 144(b)(1) under the Securities Act (or any successor provision), upon the written request of the holder thereof, accompanied (if HII shall so request) by an opinion of counsel reasonably acceptable to HII, HII shall issue to such holder a new certificate evidencing such Restricted Class A Share without the first sentence of the legend required by Section 3.02(a) endorsed thereon. If any Restricted Class A Share ceases to be subject to any and all restrictions on transfer set forth in this Article 3, then HII, upon the written request of the holder thereof, shall issue to such holder a new certificate evidencing such Restricted Class A Share without the second sentence of the legend required by Section 3.02(a) endorsed thereon.

Section 3.03. Permitted Transferees. Subject to this Article 3, each Series B Member acquiring Restricted Class A Shares may at any time transfer any or all of its Restricted Class A Shares to one or more of its Permitted Transferees or to any other Person in a transaction not in contravention of, and in accordance with, the LLC Agreement, so long as (a) such transferee shall have agreed in writing to be bound by the terms of this Agreement as provided in Section 4.03 and (b) the transfer to such transferee is in compliance with the Securities Act and any other applicable securities or “blue sky” laws.

ARTICLE 4

OTHER AGREEMENTS; MISCELLANEOUS

Section 4.01. Expenses. Each party hereto shall bear its own expenses in connection with the consummation of any of the transactions contemplated hereby, whether or not any such

 

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transaction is ultimately consummated, except that HII shall bear any transfer taxes, stamp taxes or duties, or other similar taxes in connection with, or arising by reason of, any Exchange and HII shall promptly cooperate in all filings required to be made under the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended, in connection with any Exchange (but HII shall not be obligated to bear, and shall be reimbursed by the applicable Series B Member for, the expenses of any such filing or of any information request from any Governmental Entity relating thereto); provided, however, that if any certificate is to be issued pursuant to Section 2.01(d)(v) in a name other than that of the Series B Member that requested the Exchange, then the Person or Persons requesting the issuance thereof shall pay to HII the amount of any transfer taxes, stamp taxes or duties, or other similar taxes in connection with, or arising by reason of, such Exchange or shall establish to the reasonable satisfaction of HII that such tax has been paid or is not payable.

Section 4.02. Notices. All notices, requests, consents and other communications hereunder (each, a “Notice”) to any party shall be in writing and shall be delivered in person or sent by facsimile (provided a copy is thereafter promptly delivered as provided in this Section 4.02) or nationally recognized overnight courier, addressed to such party at the address or facsimile number set forth in Exhibit A hereto, or below with respect to HII, or such other address or facsimile number as may hereafter be designated in writing by such party to the other parties:

If to HII, to:

15438 N. Florida Avenue, Suite 201

Tampa, Florida, 33613

Telephone: (877) 376-5831

Facsimile: (877) 376-5832

Attention: Michael W. Kosloske

with a copy (which shall not constitute notice to HII) to:

Davis Polk & Wardwell LLP

450 Lexington Avenue

New York, NY 10017

Telephone: (212) 450-4135

Facsimile: (212) 701-5135

Attention: Deanna Kirkpatrick

Each Notice shall be deemed received on the date sent to the recipient thereof in accordance with this Section 4.02, if sent prior to 5:00 p.m. in the place of receipt and such day is a Business Day; otherwise, such Notice shall be deemed not to have been received until the next succeeding Business Day.

Section 4.03. Permitted Transferees. To the extent that a Series B Member (or an applicable Permitted Transferee of such Series B Member) validly transfers after the date hereof

 

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any or all of its Series B Membership Interests and corresponding Class B Shares to a Permitted Transferee of such Person or to any other Person in a transaction not in contravention of, and in accordance with, the LLC Agreement, then the transferee thereof shall have the right to execute and deliver a joinder to this Agreement, in form and substance reasonably satisfactory to HII. Upon execution of any such joinder, such transferee shall, with respect to such transferred Series B Membership Interests and Class B Shares, be entitled to all of the rights and bound by each of the obligations applicable to the relevant transferor hereunder; provided that the transferor shall remain entitled to all of the rights and bound by each of the obligations with respect to Series B Membership Interests and Class B Shares that were not so transferred.

Section 4.04. Severability. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof. If any provision of this Agreement, or the application thereof to any Person or entity or any circumstance, is found to be invalid or unenforceable in any jurisdiction, (a) a suitable and equitable provision shall be substituted therefor in order to carry out, so far as may be valid and enforceable, the intent and purpose of such invalid or unenforceable provision and (b) the remainder of this Agreement and the application of such provision to other Persons or circumstances shall not be affected by such invalidity or unenforceability, nor shall such invalidity or unenforceability affect the validity or enforceability of such provision, or the application thereof, in any other jurisdiction.

Section 4.05. Counterparts. This Agreement may be executed (including by facsimile transmission with counterpart pages) in one or more counterparts, each of which shall be deemed an original and all of which shall, taken together, be considered one and the same agreement, it being understood that both parties need not sign the same counterpart.

Section 4.06. Entire Agreement; No Third Party Beneficiaries. This Agreement (a) constitutes the entire agreement and supersedes all other prior agreements, both written and oral, among the parties with respect to the subject matter hereof and (b) is not intended to confer upon any Person, other than the parties hereto and their Permitted Transferees, any rights or remedies hereunder.

Section 4.07. Further Assurances. Each party hereto shall execute, deliver, acknowledge and file such other documents and take such further actions as may be reasonably requested from time to time by any other party hereto to give effect to and carry out the transactions contemplated herein.

Section 4.08. Dispute Resolution. The provisions of Article 13 of the LLC Agreement are hereby incorporated herein in their entirety.

Section 4.09. Governing Law. This Agreement and the rights of the parties hereunder will be governed by, construed and enforced in accordance with the laws of the State of New York without regard to conflicts of law principles thereof.

 

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Section 4.10. Consent to Jurisdiction. The parties hereto agree that any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby shall be brought and maintained exclusively in the United States District Court for the Southern District of New York or the Supreme Court of the State of New York located in the County of New York. Each of the parties irrevocably consents to submit to the personal jurisdiction of such courts (and of the appropriate appellate courts therefrom) in any such suit, action or proceeding. Process in any such suit, action or proceeding in such courts may be served, and shall be effective, on any party anywhere in the world, whether within or without the jurisdiction of any such court, by any of the methods specified for the giving of Notices pursuant to Section 4.02. Each of the parties irrevocably waives, to the fullest extent permitted by law, any objection or defense that it may now or hereafter have based on venue, inconvenience of forum, the lack of personal jurisdiction and the adequacy of service of process (as long as the party was provided Notice in accordance with the methods specified in Section 4.02) in any suit, action or proceeding brought in such courts.

Section 4.11. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT.

Section 4.12. Amendments; Waivers. (a) No provision of this Agreement may be amended or waived unless such amendment or waiver is approved in writing by HII, the Company and Series B Members holding at least sixty-six and two-thirds percent (66-2/3%) of the outstanding Series B Membership Interests.

(b) No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law.

Section 4.13. Assignment. Except as contemplated by Section 4.03 and except that the rights to have a legend removed from a certificate representing Restricted Class A Shares in accordance with Section 3.02(b) shall be deemed automatically assigned in connection with any transfer not prohibited hereunder, neither this Agreement nor any of the rights or obligations hereunder shall be assigned by any of the parties hereto without the prior written consent of the other parties. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of and be enforceable by the parties and their respective successors, assigns and Permitted Transferees.

Section 4.14. Tax Treatment. The parties to this Agreement intend that this Agreement shall be treated as part of the partnership agreement of the Company pursuant to Section 761(c) of the Code and Sections 1.704-1(b)(2)(ii)(h) and 1.761-1(c) of the Treasury Regulations

 

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promulgated thereunder. Except as otherwise required by applicable law: (a) the parties shall report an Exchange consummated hereunder as a taxable sale of Series B Membership Interests by a Series B Member to HII (in conjunction with an associated cancellation of Class B Shares); and (b) no party shall take a contrary position on any income tax return, amendment thereof or communication with a taxing authority.

Section 4.15. Effective Date. This Agreement shall become effective upon the IPO and shall be of no force and effect prior to the IPO.

[Signature pages follow]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized representatives as of the day and year first above written.

 

HEALTH INSURANCE INNOVATIONS, INC.
By:   /s/ Michael W. Kosloske
  Name:   Michael W. Kosloske
  Title:   Chief Executive Officer

HEALTH PLAN INTERMEDIARIES HOLDINGS, LLC

By:   /s/ Michael W. Kosloske
  Name:   Michael W. Kosloske
  Title:   Chief Executive Officer


HEALTH PLAN INTERMEDIARIES, LLC
By:   /s/ Michael W. Kosloske
  Name:   Michael W. Kosloske
  Title:   Chief Executive Officer
HEALTH PLAN INTERMEDIARIES SUB, LLC
By:   /s/ Michael W. Kosloske
  Name:   Michael W. Kosloske
  Title:   Chief Executive Officer


Exhibit A

 

Name and Address of Series B Member

   Immediately Following IPO  
   Number of
Series B
Membership
Interests
Owned
     Number of
Class B
Shares
Owned
 

Health Plan Intermediaries, LLC

15438 N. Florida Avenue, Suite 201

Tampa, Florida, 33613

Facsimile: (877) 376-5832

     8,580,000         8,580,000   

Health Plan Intermediaries Sub, LLC

15438 N. Florida Avenue, Suite 201

Tampa, Florida, 33613

Facsimile: (877) 376-5832

     86,667         86,667   
Long Term Incentive Plan

Exhibit 10.4

HEALTH INSURANCE INNOVATIONS, INC.

LONG TERM INCENTIVE PLAN

Section 1. Purpose. The purpose of the Health Insurance Innovations, Inc. Long Term Incentive Plan (the “Plan”) is to motivate and reward those executives and other individuals who are expected to contribute significantly to the success of Health Insurance Innovations, Inc. (the “Company”) and its Affiliates to perform at the highest level and to further the best interests of the Company and its shareholders. Capitalized terms used herein shall have the respective meanings set forth in Section 19.

Section 2. Eligibility.

(a) Any employee, Non-Employee Director, consultant or other advisor of, or any other individual who provides services to, the Company or any Affiliate shall be eligible to be selected to receive an Award under the Plan.

(b) Holders of equity compensation awards granted by a company acquired by the Company (or whose business is acquired by the Company) or with which the Company combines are eligible for grants of Replacement Awards under the Plan.

Section 3. Administration.

(a) The Plan shall be administered by the Committee. The Committee shall be appointed by the Board and shall consist of not less than three directors of the Board. To the extent necessary to comply with applicable regulatory regimes, any action by the Committee shall require the approval of Committee members who are (i) independent, within the meaning of and to the extent required by applicable rulings and interpretations of the principal stock market or exchange on which the Shares are quoted or traded; (ii) each a non-employee director within the meaning of Rule 16b-3 under the Exchange Act; and (iii) each an outside director within the meaning of Section 162(m) of the Code. The Board may designate one or more directors as a subcommittee who may act for the Committee if necessary to satisfy the requirements of this Section. To the extent permitted by applicable law, the Committee may delegate to one or more officers of the Company the authority to grant Awards, except that such delegation shall not be applicable to any Award for a person then covered by Section 16 of the Exchange Act or for a Non-Employee Director. The Committee may issue rules and regulations for administration of the Plan. It shall meet at such times and places as it may determine. For the purposes of this Section 3(a), “officer” means an executive of the Company who is elected to his or her position by the Board.


(b) Subject to the terms of the Plan and applicable law, the Committee (or its delegate) shall have full power and authority to: (i) designate Participants; (ii) determine the type or types of Awards (including Replacement Awards) to be granted to each Participant under the Plan; (iii) determine the number of Shares to be covered by (or with respect to which payments, rights or other matters are to be calculated in connection with) Awards; (iv) determine the terms and conditions of any Award; (v) determine whether, to what extent and under what circumstances Awards may be settled or exercised in cash, Shares, other Awards, other property, net settlement or any combination thereof, or canceled, forfeited or suspended, and the method or methods by which Awards may be settled, exercised, canceled, forfeited or suspended; (vi) determine whether, to what extent and under what circumstances cash, Shares, other Awards, other property and other amounts payable with respect to an Award under the Plan shall be deferred either automatically or at the election of the holder thereof or of the Committee; (vii) interpret and administer the Plan and any instrument or agreement relating to, or Award made under, the Plan; (viii) establish, amend, suspend or waive such rules and regulations and appoint such agents as it shall deem appropriate for the proper administration of the Plan; and (ix) make any other determination and take any other action that the Committee deems necessary or desirable for the administration of the Plan.

(c) All decisions of the Committee shall be final, conclusive and binding upon all parties, including the Company, its shareholders and Participants and any Beneficiaries thereof.

Section 4. Shares Available for Awards.

(a) Subject to adjustment as provided in Section 4(b), (i) the maximum number of Shares available for issuance under the Plan shall not exceed 1,250,000 Shares and (ii) no Participant may receive under the Plan in any calendar year (A) Options and SARs that relate to more than 200,000 Shares or (B) if and to the extent that any such Awards are intended to constitute Section 162(m) Compensation and denominated in Shares, Restricted Stock, RSUs, Performance Awards or Other Stock-Based Awards that relate to more than 525,000 Shares. Shares underlying Replacement Awards and Shares remaining available for grant under a plan of an acquired company or of a company with which the Company combines, appropriately adjusted to reflect the acquisition or combination transaction, shall not reduce the number of Shares remaining available for grant hereunder. The maximum number of Shares available for issuance under Incentive Stock Options shall be 600,000 and shall not be increased by operation of Section 4(b).

(b) Any Shares subject to an Award (other than a Replacement Award and any Award granted out of the authorized shares of an acquired plan), that expires, is canceled, forfeited or otherwise terminates without the delivery of such Shares, including (i) the number of Shares surrendered or withheld in

 

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payment of any grant, acquisition, exercise or hurdle price of such Award or award or taxes related to such Award or award and (ii) any Shares subject to such Award or award to the extent that Award or award is settled without the issuance of Shares, shall again be, or shall become, available for issuance under the Plan

(c) In the event that, as a result of any dividend or other distribution (whether in the form of cash, Shares or other securities), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase or exchange of Shares or other securities of the Company, issuance of warrants or other rights to acquire Shares or other securities of the Company, issuance of Shares pursuant to the anti-dilution provisions of securities of the Company, or other similar corporate transaction or event affecting the Shares, an adjustment is necessary in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan, then the Committee, in its discretion, shall adjust equitably any or all of:

(i) the number and type of Shares (or other securities) which thereafter may be made the subject of Awards, including the aggregate and individual limits specified in Section 4(a);

(ii) the number and type of Shares (or other securities) subject to outstanding Awards; and

(iii) the grant, acquisition, exercise or hurdle price with respect to any Award or, if deemed appropriate, make provision for a cash payment to the holder of an outstanding Award;

provided, however, that the number of Shares subject to any Award denominated in Shares shall always be a whole number.

(d) Any Shares delivered pursuant to an Award may consist, in whole or in part, of authorized and unissued Shares or Shares acquired by the Company.

Section 5. Options. The Committee is authorized to grant Options to Participants with the following terms and conditions and with such additional terms and conditions, in either case not inconsistent with the provisions of the Plan, as the Committee shall determine.

(a) The exercise price per Share under an Option shall be determined by the Committee; provided, however, that, except to the extent provided in Section 4(c) or in the case of Replacement Awards, such exercise price shall not be less than the Fair Market Value of a Share on the date of grant of such Option. The Committee shall not lower the exercise price of an outstanding Option except to the extent permitted in Section 4(c) or as provided in Section 12(b).

 

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(b) The term of each Option shall be fixed by the Committee but shall not exceed 10 years from the date of grant of such Option.

(c) The Committee shall determine at the time of grant the time or times at which an Option may be exercised in whole or in part.

(d) The Committee shall determine the method or methods by which, and the form or forms, including cash, Shares, other Awards, other property, net settlement or any combination thereof, having a Fair Market Value on the exercise date equal to the relevant exercise price, in which payment of the exercise price with respect thereto may be made or deemed to have been made.

(e) The terms of any Incentive Stock Option granted under the Plan shall comply in all respects with the provisions of Section 422 of the Code.

Section 6. Stock Appreciation Rights. The Committee is authorized to grant SARs to Participants with the following terms and conditions and with such additional terms and conditions, in either case not inconsistent with the provisions of the Plan, as the Committee shall determine.

(a) SARs may be granted under the Plan to Participants either alone (“freestanding”) or in addition to other Awards granted under the Plan (“tandem”) and may, but need not, relate to a specific Option granted under Section 5.

(b) The exercise or hurdle price per Share under a SAR shall be determined by the Committee; provided, however, that, except to the extent provided in Section 4(c) or in the case of Replacement Awards, such exercise or hurdle price shall not be less than the Fair Market Value of a Share on the date of grant of such SAR (or if granted in connection with an Option, on the grant date of such Option). The Committee shall not lower the exercise or hurdle price of an outstanding SAR except to the extent permitted in Section 4(c) or as provided in Section 12(b).

(c) The term of each SAR shall be fixed by the Committee but shall not exceed 10 years from the date of grant of such SAR.

(d) The Committee shall determine at the time of grant the time or times at which a SAR may be exercised or settled in whole or in part.

(e) The Committee shall determine the method or methods by which, and the form or forms, including cash, Shares, other Awards, other property, net settlement or any combination thereof, in which payment of the amount owing upon exercise or settlement of an SAR may be made.

Section 7. Restricted Stock and RSUs. The Committee is authorized to grant Awards of Restricted Stock and RSUs to Participants with the following

 

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terms and conditions and with such additional terms and conditions, in either case not inconsistent with the provisions of the Plan, as the Committee shall determine.

(a) Shares of Restricted Stock and RSUs shall be subject to such restrictions as the Committee may impose; provided, however, shares of Restricted Stock issued hereunder shall have voting rights. If the Restricted Stock Award relates to Shares on which dividends are declared during the period that the Award is outstanding, such dividends shall be paid to the Participant at the time that the portion of the Award to which dividends or other distributions relate vests and becomes non-forfeitable. Unless otherwise elected by the Participant, the Award shall be paid out no later than March 15th of the year following the date of vesting.

(b) Any share of Restricted Stock granted under the Plan may be evidenced in such manner as the Committee may deem appropriate, including book-entry registration or issuance of a stock certificate or certificates. In the event any stock certificate is issued in respect of shares of Restricted Stock granted under the Plan, such certificate shall be registered in the name of the Participant and shall bear an appropriate legend referring to the terms, conditions and restrictions applicable to such Restricted Stock.

(c) If and to the extent that the Committee intends that an Award granted under this Section 7 shall constitute or give rise to Section 162(m) Compensation, such Award may be structured in accordance with the requirements of Section 8, including the performance criteria and the Award limitation set forth therein, and any such Award shall be considered a Performance Award for purposes of the Plan.

(d) The Committee may provide in an Award Document that an Award of Restricted Stock is conditioned upon the Participant making or refraining from making an election with respect to the Award under Section 83(b) of the Code. If a Participant makes an election pursuant to Section 83(b) of the Code with respect to an Award of Restricted Stock, the Participant shall be required to file promptly a copy of such election with the Company.

(e) The Committee may determine the form or forms (including cash, Shares, other Awards, other property or any combination thereof) in which payment of the amount owing upon settlement of any RSU Award may be made.

Section 8. Performance Awards. The Committee is authorized to grant Performance Awards to Participants with the following terms and conditions and with such additional terms and conditions, in either case not inconsistent with the provisions of the Plan, as the Committee shall determine.

(a) Performance Awards may be denominated as a cash amount, a number of Shares or a combination thereof and are Awards which may be earned

 

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upon achievement or satisfaction of performance conditions specified by the Committee. In addition, the Committee may specify that any other Award shall constitute a Performance Award by conditioning the right of a Participant to exercise the Award or have it settled, and the timing thereof, upon achievement or satisfaction of such performance conditions as may be specified by the Committee. The Committee may use such business criteria and other measures of performance as it may deem appropriate in establishing any performance conditions. Subject to the terms of the Plan, the performance goals to be achieved during any Performance Period, the length of any Performance Period, the amount of any Performance Award granted and the amount of any payment or transfer to be made pursuant to any Performance Award shall be determined by the Committee. If the Performance Award relates to Shares on which dividends are declared during the Performance Period, the Performance Award shall not provide for the payment of such dividend (or dividend equivalent) to the Participant prior to the time at which such Performance Award, or the applicable portion thereof, is earned.

(b) Every Performance Award shall, if the Committee intends that such Award should constitute Section 162(m) Compensation, include a pre-established formula, such that payment, retention or vesting of the Award is subject to the achievement during a Performance Period or Performance Periods, as determined by the Committee, of a level or levels of, or increases in, in each case as determined by the Committee, one or more of the following performance measures with respect to the Company or any Subsidiary or business unit thereof: overhead costs, general and administration expense, market price of a Share, market price appreciation of Share value, cash flow, reserve value, net asset value, firm value, economic value added, earnings, earnings per Share, total shareholder return, net income, operating income, cash from operations, increases in hospital indemnity plans in force, improvements in capital structure, revenue growth, margin, pre-tax income, EBIT (earnings before interest and taxes), EBITDA (earnings before interest, taxes, depreciation and amortization), net capital employed, return on assets, stockholder return, reserve replacement, return on equity, return on capital, production, assets, asset turnover, inventory turnover, unit volume, sales, sales growth, capacity utilization, market share, increase in customer base, environmental health and safety, diversity, quality, or strategic business criteria. Performance criteria may be measured on an absolute (e.g., plan or budget) or relative basis. Relative performance may be measured against a group of peer companies, a financial market index or other acceptable objective and quantifiable indices. Except in the case of an award intended to qualify as Section 162(m) Compensation, if the Committee determines that a change in the business, operations, corporate structure or capital structure of the Company, or the manner in which the Company conducts its business, or other events or circumstances render the performance objectives unsuitable, the Committee may modify the performance objectives or the related minimum acceptable level of achievement, in whole or in part, as the Committee deems appropriate and

 

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equitable. Performance measures may vary from Performance Award to Performance Award, and from Participant to Participant, and may be established on a stand-alone basis, in tandem or in the alternative. The performance goals for the Performance Period must be established, in writing, no later than the lesser of either ninety (90) or the number of days equal to 25 percent of the Performance Period after the commencement of the Performance Period. Except as otherwise permitted by Section 162(m) of the Code, the minimum level at which a Participant will earn any performance-based compensation, the level at which a Participant will earn the maximum performance-based compensation and the interpolation guidelines for calculating payments within that range must be established by the Committee, in writing, no later than the lesser of either ninety (90) days or the number of days equal to 25 percent of the Performance Period after the commencement of the Performance Period. The Committee shall have the power to impose such other restrictions on Awards subject to this Section 8(b) as it may deem necessary or appropriate to ensure that such Awards satisfy all requirements for Section 162(m) Compensation. The maximum amount of any Performance Award denominated in cash that is intended to constitute Section 162(m) Compensation that may be earned in any calendar year shall not exceed $2,000,000.

(c) Settlement of Performance Awards; Committee Certification; Other Terms. Settlement of Performance Awards shall be in cash, Shares, other Awards, other property, net settlement or any combination thereof, in the discretion of the Committee. Performance Awards will be settled only after the end of the relevant Performance Period. The Committee may, in its discretion, increase or reduce the amount of a settlement otherwise to be made in connection with a Performance Award but may not exercise discretion to increase any amount payable to a Covered Employee in respect of a Performance Award intended to qualify as Section 162(m) Compensation. As soon as reasonably practicable after the end of each Performance Period, and prior to the payment of any Section 162(m) Compensation to a Participant, the Committee shall certify, in writing, that the performance goals for such Performance Period were satisfied. Any settlement that changes the form of payment from that originally specified shall be implemented in a manner such that the Performance Award and other related Awards do not, solely for that reason, fail to qualify as Section 162(m) Compensation.

Section 9. Other Share-Based Awards. The Committee is authorized, subject to limitations under applicable law, to grant to Participants such other Awards that may be denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to, Shares or factors that may influence the value of Shares, including convertible or exchangeable debt securities, other rights convertible or exchangeable into Shares, acquisition rights for Shares, Awards with value and payment contingent upon performance of the Company or business units thereof or any other factors designated by the

 

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Committee. The Committee shall determine the terms and conditions of such Awards. Shares delivered pursuant to an Award in the nature of an acquisition right granted under this Section 9 shall be acquired for such consideration, paid for at such times, by such methods and in such forms, including cash, Shares, other Awards, other property or any combination thereof, as the Committee shall determine; provided that the acquisition price therefor shall not be less than the Fair Market Value of such Shares on the date of grant of such right.

Section 10. Effect of Termination of Service or a Change in Control on Awards.

(a) The Committee may provide, by rule or regulation or in any Award Document, or may determine in any individual case, the circumstances in which, and the extent to which, an Award may be exercised, settled, vested, paid or forfeited in the event of a Participant’s Termination of Service prior to the end of a Performance Period or the vesting, exercise or settlement of such Award.

(b) In the event that a Participant’s employment or service is terminated by the Company other than for Cause or, to the extent provided in the Participant’s employment agreement, if any, the Participant terminates employment for Good Reason, in either case during the 24-month period beginning on the date of a Change in Control, (i) Options and Stock Appreciation Rights granted to such Participant which are not yet exercisable shall become fully exercisable; (ii) any restrictions applicable to any RSUs or Restricted Stock awarded to such Participant shall lapse; and (iii) any restrictions applicable to Performance Awards shall lapse and such performance Awards shall be deemed to have been satisfied at target.

Section 11. General Provisions Applicable to Awards.

(a) Awards shall be granted for no cash consideration or for such minimal cash consideration as may be required by applicable law.

(b) Awards may, in the discretion of the Committee, be granted either alone or in addition to or in tandem with any other Award or any award granted under any other plan of the Company. Awards granted in addition to or in tandem with other Awards, or in addition to or in tandem with awards granted under any other plan of the Company, may be granted either at the same time as or at a different time from the grant of such other Awards or awards.

(c) Subject to the terms of the Plan, payments or transfers to be made by the Company upon the grant, exercise or settlement of an Award may be made in the form of cash, Shares, other Awards, other property, net settlement or any combination thereof, as determined by the Committee in its discretion, and may be made in a single payment or transfer, in installments or on a deferred basis, in each case in accordance with rules and procedures established by the Committee.

 

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Such rules and procedures may include provisions for the payment or crediting of reasonable interest on installment or deferred payments or the grant or crediting of dividend equivalents in respect of installment or deferred payments.

(d) Except as may be permitted by the Committee or as specifically provided in an Award Document, (i) no Award and no right under any Award shall be assignable, alienable, saleable or transferable by a Participant otherwise than by will or pursuant to Section 11(d) and (ii) during a Participant’s lifetime, each Award, and each right under any Award, shall be exercisable only by the Participant or, if permissible under applicable law, by the Participant’s guardian or legal representative; provided, however, that the Committee shall not permit, and an Award Document shall not provide for, any Award to be transferred or transferable to a third party for value or consideration without the approval of the Company’s shareholders. The provisions of this Section 11(d) shall not apply to any Award that has been fully exercised or settled, as the case may be, and shall not preclude forfeiture of an Award in accordance with the terms thereof.

(e) A Participant may designate a Beneficiary or change a previous Beneficiary designation at such times prescribed by the Committee by using forms and following procedures approved or accepted by the Committee for that purpose.

(f) All certificates for Shares and/or other securities delivered under the Plan pursuant to any Award or the exercise thereof shall be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the Plan or the rules, regulations and other requirements of the Securities and Exchange Commission, any stock market or exchange upon which such Shares or other securities are then quoted, traded or listed, and any applicable securities laws, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions.

(g) The Committee may specify in an Award Document that the Participant’s rights, payments and benefits with respect to an Award shall be subject to reduction, cancellation, forfeiture or recoupment upon the occurrence of certain specified events, in addition to any otherwise applicable vesting or performance conditions of an Award. Such events may include a Termination of Service with or without Cause (and, in the case of any Cause that is resulting from an indictment or other non-final determination, the Committee may provide for such Award to be held in escrow or abeyance until a final resolution of the matters related to such event occurs, at which time the Award shall either be reduced, cancelled or forfeited (as provided in such Award Document) or remain in effect, depending on the outcome), violation of material policies, breach of noncompetition, confidentiality or other restrictive covenants that may apply to the Participant, or other conduct by the Participant that is detrimental to the business or reputation of the Company and/or its Affiliates.

 

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(h) If the Company is required to prepare an accounting restatement due to the material noncompliance of the Company, as a result of misconduct, with any financial reporting requirement under the securities laws, and if the Participant knowingly or grossly negligently engaged in the misconduct, or knowingly or grossly negligently failed to prevent the misconduct, or if the Participant is one of the individuals subject to automatic forfeiture under Section 304 of the United States Sarbanes-Oxley Act of 2002 (and not otherwise exempted), the Participant shall reimburse the Company the amount of any payment in settlement of any Award earned or accrued during the twelve-month period following the first public issuance or filing with the United States Securities and Exchange Commission (whichever first occurred) of the financial document not in compliance with such financial reporting requirement. Rights, payments and benefits under any Award shall be subject to repayment to or recoupment (clawback) by the Company in accordance with such policies and procedures as the Committee or Board may adopt from time to time, including policies and procedures to implement applicable law (including, but not limited to, Section 954 of the Dodd-Frank Act), stock market or exchange rules and regulations or accounting or tax rules and regulations.

Section 12. Amendments and Termination.

(a) Except to the extent prohibited by applicable law and unless otherwise expressly provided in an Award Document or in the Plan, the Board may amend, alter, suspend, discontinue or terminate the Plan or any portion thereof at any time; provided, however, that no such amendment, alteration, suspension, discontinuation or termination shall be made without (i) shareholder approval, if such approval is required by applicable law or the rules of the stock market or exchange, if any, on which the Shares are principally quoted or traded or (ii) the consent of the affected Participant, if such action would materially adversely affect the rights of such Participant under any outstanding Award, except to the extent any such amendment, alteration, suspension, discontinuance or termination is made to cause the Plan to comply with applicable law, stock market or exchange rules and regulations or accounting or tax rules and regulations. Notwithstanding anything to the contrary in the Plan, the Committee may amend the Plan in such manner as may be necessary to enable the Plan to achieve its stated purposes in any jurisdiction in a tax-efficient manner and in compliance with local laws, rules and regulations.

(b) The Committee may waive any conditions or rights under, amend any terms of, or amend, alter, suspend, discontinue or terminate any Award theretofore granted, prospectively or retroactively, without the consent of any relevant Participant or holder or Beneficiary of an Award; provided, however, that no such action shall materially adversely affect the rights of any affected Participant or holder or Beneficiary under any Award theretofore granted under the Plan, except to the extent any such action is made to cause the Plan to comply

 

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with applicable law, stock market or exchange rules and regulations or accounting or tax rules and regulations; provided further that, except as provided in Section 4(c), the Committee shall not without the approval of the Company’s shareholders (a) lower the exercise price per Share of an Option or SAR after it is granted or take any other action that would be treated as a repricing of such Award under the rules of the principal stock market or exchange on which the Company’s Shares are quoted or traded, or (b) cancel an Option or SAR when the exercise price per Share exceeds the Fair Market Value in exchange for cash or another Award (other than in connection with a Change in Control); and provided further, that the Committee’s authority under this Section 12(b) is limited by the provisions of Section 11(d) and, in the case of Awards subject to Section 8(b), as provided in Section 8(b).

(c) Except as provided in Section 8(b), the Committee shall be authorized to make adjustments in the terms and conditions of, and the criteria included in, Awards in recognition of events (including the events described in Section 4(b)) affecting the Company, or the financial statements of the Company, or of changes in applicable law, stock market or exchange rules and regulations or accounting or tax rules and regulations, whenever the Committee determines that such adjustments are appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan.

(d) The Committee may correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Award in the manner and to the extent it shall deem desirable to carry the Plan into effect.

Section 13. Miscellaneous.

(a) No employee, Participant or other person shall have any claim to be granted any Award under the Plan, and there is no obligation for uniformity of treatment of employees, Participants or holders or Beneficiaries of Awards under the Plan. The terms and conditions of Awards need not be the same with respect to each recipient. Any Award granted under the Plan shall be a one-time Award that does not constitute a promise of future grants. The Company, in its sole discretion, maintains the right to make available future grants under the Plan.

(b) The grant of an Award shall not be construed as giving a Participant the right to be retained in the employ of, or to continue to provide services to, the Company or any Affiliate. Further, the Company or the applicable Affiliate may at any time dismiss a Participant, free from any liability, or any claim under the Plan, unless otherwise expressly provided in the Plan or in any Award Document or in any other agreement binding the parties. The receipt of any Award under the Plan is not intended to confer any rights on the receiving Participant except as set forth in the applicable Award Document.

 

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(c) Nothing contained in the Plan shall prevent the Company from adopting or continuing in effect other or additional compensation arrangements, and such arrangements may be either generally applicable or applicable only in specific cases.

(d) The Company shall be authorized to withhold from any Award granted or any payment due or transfer made under any Award or under the Plan or from any compensation or other amount owing to a Participant the amount (in cash, Shares, other Awards, other property, net settlement or any combination thereof) of applicable withholding taxes due in respect of an Award, its exercise or settlement or any payment or transfer under such Award or under the Plan and to take such other action (including providing for elective payment of such amounts in cash or Shares by the Participant) as may be necessary in the opinion of the Company to satisfy all obligations for the payment of such taxes.

(e) If any provision of the Plan or any Award Document is or becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction, or as to any person or Award, or would disqualify the Plan or any Award under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to applicable laws, or if it cannot be so construed or deemed amended without, in the determination of the Committee, materially altering the intent of the Plan or the Award Document, such provision shall be stricken as to such jurisdiction, person or Award, and the remainder of the Plan and any such Award Document shall remain in full force and effect.

(f) Neither the Plan nor any Award shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company and a Participant or any other person. To the extent that any person acquires a right to receive payments from the Company pursuant to an Award, such right shall be no greater than the right of any unsecured general creditor of the Company.

(g) No fractional Shares shall be issued or delivered pursuant to the Plan or any Award, and the Committee shall determine whether cash or other securities shall be paid or transferred in lieu of any fractional Shares, or whether such fractional Shares or any rights thereto shall be canceled, terminated or otherwise eliminated.

(h) Awards may be granted to Participants who are non-United States nationals or employed or providing services outside the United States, or both, on such terms and conditions different from those applicable to Awards to Participants who are employed or providing services in the United States as may, in the judgment of the Committee, be necessary or desirable to recognize differences in local law, tax policy or custom. The Committee also may impose conditions on the exercise or vesting of Awards in order to minimize the

 

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Company’s obligation with respect to tax equalization for Participants on assignments outside their home country.

(i) The Company shall take responsibility for the information set out in the Plan.

Section 14. Effective Date of the Plan. The Plan shall be effective as of the Effective Date.

Section 15. Term of the Plan. No Award shall be granted under the Plan after the earliest to occur of (i) the ten-year anniversary of the Effective Date, (ii) the maximum number of Shares available for issuance under the Plan have been issued or (iii) the Board terminates the Plan in accordance with Section 12(a). However, unless otherwise expressly provided in the Plan or in an applicable Award Document, any Award theretofore granted may extend beyond such date, and the authority of the Committee to amend, alter, adjust, suspend, discontinue or terminate any such Award, or to waive any conditions or rights under any such Award, and the authority of the Board to amend the Plan, shall extend beyond such date.

Section 16. Section 409A of the Code. With respect to Awards subject to Section 409A of the Code, the Plan is intended to comply with the requirements of Section 409A of the Code, and the provisions of the Plan and any Award Document shall be interpreted in a manner that satisfies the requirements of Section 409A of the Code, and the Plan shall be operated accordingly. If any provision of the Plan or any term or condition of any Award would otherwise frustrate or conflict with this intent, the provision, term or condition will be interpreted and deemed amended so as to avoid this conflict. If an amount payable under an Award as a result of the Participant’s Termination of Service (other than due to death) occurring while the Participant is a “specified employee” under Section 409A of the Code constitutes a deferral of compensation subject to Section 409A of the Code, then payment of such amount shall not occur until six months and one day after the date of the Participant’s Termination of Service, except as permitted under Section 409A of the Code. Notwithstanding the foregoing, the tax treatment of the benefits provided under the Plan or any Award Document is not warranted or guaranteed.

Section 17. Data Protection. By participating in the Plan, the Participant consents to the holding and processing of personal information provided by the Participant to the Company or any Affiliate, trustee or third party service provider, for all purposes relating to the operation of the Plan. These include, but are not limited to:

(i) administering and maintaining Participant records;

(ii) providing information to the Company, Affiliates, trustees of any

 

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employee benefit trust, registrars, brokers or third party administrators of the Plan;

(iii) providing information to future purchasers or merger partners of the Company or any Affiliate, or the business in which the Participant works; and

(iv) transferring information about the Participant to any country or territory that may not provide the same protection for the information as the Participant’s home country.

Section 18. Governing Law. The Plan and each Award Document shall be governed by the laws of the state of Florida, without application of the conflicts of law principles thereof.

Section 19. Definitions. As used in the Plan, the following terms shall have the meanings set forth below:

(a) Affiliate” means (i) any entity that, directly or indirectly, is controlled by the Company and (ii) any entity in which the Company, directly or indirectly, has a significant equity interest, in each case as determined by the Committee.

(b) Award” means any Option, SAR, Restricted Stock, RSU, Performance Award or Other Stock-Based Award granted under the Plan.

(c) Award Document” means any agreement, contract or other instrument or document, which may be in electronic format, evidencing any Award granted under the Plan, which may, but need not, be executed or acknowledged by a Participant.

(d) Beneficiary” means a person entitled to receive payments or other benefits or exercise rights that are available under the Plan in the event of the Participant’s death. If no such person is named by a Participant, or if no Beneficiary designated by the Participant is eligible to receive payments or other benefits or exercise rights that are available under the Plan at the Participant’s death, such Participant’s Beneficiary shall be such Participant’s estate.

(e) Board” means the board of directors of the Company.

(f) Cause” means, with respect to any Participant, “cause” as defined in such Participant’s Employment Agreement, if any, or if not so defined, except as otherwise provided in such Participant’s Award Document, such Participant’s:

(i) commission of a willful act of dishonesty in the course of Participant’s duties,

 

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(ii) conviction by a court of competent jurisdiction of, or plea of no contest to, a crime constituting a felony or conviction in respect of any act involving fraud, dishonesty or moral turpitude,

(iii) Participant’s performance under the influence of controlled substances (other than those taken pursuant to a medical doctor’s orders), or continued habitual intoxication, during working hours,

(iv) frequent or extended, and unjustifiable, absenteeism,

(v) Participant’s personal misconduct or refusal to perform duties and responsibilities or to carry out directives of the Company, which, if capable of being cured shall not have been cured, within 5 days after the Company shall have advised Participant in writing of its intention to terminate Participant’s employment, or

(vi) material non-compliance with the terms of any applicable Employment Agreement.

The occurrence of any such event that is susceptible to cure or remedy shall not constitute Cause if such Participant cures or remedies such event within 30 days after the Company provides notice to such Participant.

(g) Change in Control” means the occurrence of any one or more of the following events, except as otherwise provided in a Participant’s Award Document:

(i) a direct or indirect change in ownership or control of the Company effected through one transaction or a series of related transactions within a 12-month period, whereby any “person” (as defined in Section 3(a)(9) of the Exchange Act) or any two or more persons deemed to be one “person” (as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) (in each case a “Person”) other than the Company or an employee benefit plan maintained by the Company, directly or indirectly acquire or maintain “beneficial ownership” (within the meaning of Rule 13d-3 under the Exchange Act) of securities of the Company constituting more than 50% of the total combined voting power of the Company’s equity securities outstanding immediately after such acquisition;

(ii) at any time during a period of 12 consecutive months, individuals who at the beginning of such period constituted the Board cease for any reason to constitute a majority of members of the Board; provided, however, that any new member of the Board whose election or nomination for election was approved by a vote of at least a majority of the directors then still in office who either were directors at the beginning of such period or whose election or nomination for election was so

 

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approved, shall be considered as though such individual were a member of the Board at the beginning of the period, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board;

(iii) the consummation of a merger or consolidation of the Company or any of its subsidiaries with any other corporation or entity, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or being converted into voting securities of the surviving entity or, if applicable, the ultimate parent thereof) at least 50% of the combined voting power and total fair market value of the securities of the Company or such surviving entity or parent outstanding immediately after such merger or consolidation; or

(iv) the consummation of any sale, lease, exchange or other transfer to any Person (other than an Affiliate of the Company), in one transaction or a series of related transactions within a 12-month period, of all or substantially all of assets of the Company and its subsidiaries.

(h) Code” means the United States Internal Revenue Code of 1986, as amended from time to time, and the rules, regulations and guidance thereunder. Any reference to a provision in the Code shall include any successor provision thereto.

(i) Committee” means the Compensation and Human Resources Committee of the Board or such other committee as may be designated by the Board; provided that, with respect to any Award granted to any Non-Employee Director, the “Committee” means the Nominating and Corporate Governance Committee of the Board or such other committee as may be designated by the Board. If the Board does not designate the Committee, references herein to the “Committee” shall refer to the Board.

(j) Covered Employee” means an individual who is (i) either a “covered employee” or expected by the Committee to be a “covered employee,” in each case within the meaning of Section 162(m)(3) of the Code or (ii) expected by the Committee to be the recipient of compensation (other than Section 162(m) Compensation) in excess of $1,000,000 for the tax year of the Company with regard to which a deduction in respect of such individual’s Award would be claimed.

 

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(k) Disability” means, with respect to any Participant, “disability” as defined in such Participant’s Employment Agreement, if any, or if not so defined, except as otherwise provided in such Participant’s Award Document:

(i) a permanent and total disability that entitles the Participant to disability income payments under any long-term disability plan or policy provided by the Company under which the Participant is covered, as such plan or policy is then in effect; or

(ii) if such Participant is not covered under a long-term disability plan or policy provided by the Company at such time for whatever reason, then a “permanent and total disability” as defined in Section 22(e)(3) of the Code and, in this case, the existence of any such Disability will be certified by a physician acceptable to the Company.

(l) Effective Date” means the date on which the Plan is adopted by the Board and approved by the shareholders of the Company.

(m) Employment Agreement” means any employment, severance, consulting or similar agreement (including any offer letter) between the Company or any of its Affiliates and a Participant.

(n) Exchange Act” means the United States Securities Exchange Act of 1934, as amended from time to time, and the rules, regulations and guidance thereunder. Any reference to a provision in the Exchange Act shall include any successor provision thereto.

(o) Fair Market Value” means (i) with respect to a Share, the closing price of a Share on the date in question (or, if there is no reported sale on such date, on the last preceding date on which any reported sale occurred) on the principal stock market or exchange on which the Shares are quoted or traded, or if Shares are not so quoted or traded, the fair market value of a Share as determined by the Committee, and (ii) with respect to any property other than Shares, the fair market value of such property determined by such methods or procedures as shall be established from time to time by the Committee in compliance with Section 409A of the Code.

(p) Good Reason” means, with respect to any Participant, “good reason” as defined such Participant’s Employment Agreement, if any, or if not so defined, then such Participant shall have no Good Reason rights under the Plan or any Award granted hereunder.

(q) Incentive Stock Option” means an option representing the right to acquire Shares from the Company, granted in accordance with the provisions of Section 5, that meets the requirements of Section 422 of the Code.

 

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(r) Intrinsic Value” with respect to an Option or SAR Award means (i) the excess, if any, of the price or implied price per Share in a Change in Control or other event over the exercise or hurdle price of such Award multiplied by (ii) the number of Shares covered by such Award.

(s) Lock-Up Agreement” means any agreement between the Company or any of its Affiliates and a Participant that provides for restrictions on the transfer of Shares held by such Participant.

(t) Non-Employee Director” means a member of the Board who is not an employee of the Company or an Affiliate.

(u) Non-Qualified Stock Option” means an option representing the right to acquire Shares from the Company, granted in accordance with the provisions of Section 5, that is not an Incentive Stock Option.

(v) Option” means an Incentive Stock Option or a Non-Qualified Stock Option; provided, however, that any Option granted to a Non-Employee Director, consultant or other advisor shall be a Non-Qualified Stock Option.

(w) Other Stock-Based Award” means an Award granted in accordance with the provisions of Section 9.

(x) Participant” means the recipient of an Award granted under the Plan.

(y) Performance Award” means an Award granted in accordance with the provisions of Section 8.

(z) Performance Period” means the period established by the Committee at the time any Performance Award is granted or at any time thereafter during which any performance goals specified by the Committee with respect to such Award are measured.

(aa) Replacement Award” means an Award granted in assumption of, or in substitution for, an outstanding award previously granted by a company or business acquired by the Company or with which the Company, directly or indirectly, combines.

(bb) Restricted Stock” means any Share granted in accordance with the provisions of Section 7.

(cc) RSU” means a contractual right granted in accordance with the provisions of Section 7 that is denominated in Shares. Each RSU represents a right to receive the value of one Share. Awards of RSUs may include the right to receive dividend equivalents.

 

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(dd) SAR” means any right granted in accordance with the provisions of Section 6 to receive upon exercise by a Participant or settlement the excess of (i) the Fair Market Value of one Share on the date of exercise or settlement over (ii) the exercise or hurdle price of the right on the date of grant, or if granted in connection with an Option, on the date of grant of the Option.

(ee) Section 162(m) Compensation” means “qualified performance-based compensation” within the meaning of Section 162(m) of the Code.

(ff) Shares” means ordinary Class A shares of the Company.

(gg) Termination of Service” means,

(i) in the case of a Participant who is an employee of the Company or an Affiliate, cessation of the employment relationship such that the Participant is no longer an employee of the Company or Affiliate;

(ii) in the case of a Participant who is a Non-Employee Director, the date that the Participant ceases to be a member of the Board for any reason; or

(iii) in the case of a Participant who is a consultant or other advisor, the effective date of the cessation of the performance of services for the Company or an Affiliate;

provided, however, that in the case of an employee, the transfer of employment from the Company to an Affiliate, from an Affiliate to the Company, from one Affiliate to another Affiliate or, unless the Committee determines otherwise, the cessation of employee status but the continuation of the performance of services for the Company or an Affiliate as a member of the Board or a consultant or other advisor shall not be deemed a cessation of service that would constitute a Termination of Service; and provided further, that a Termination of Service will be deemed to occur for a Participant employed by an Affiliate when an Affiliate ceases to be an Affiliate, unless such Participant’s employment continues with the Company or another Affiliate.

 

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Restricted Stock Award Agreement

Exhibit 10.5

HEALTH INSURANCE INNOVATIONS, INC.

LONG TERM INCENTIVE PLAN

Restricted Stock Award Agreement

You have been granted Restricted Stock (this “Award”) on the following terms and subject to the provisions of Attachment A and the Long Term Incentive Plan (the “Plan”) of Health Insurance Innovations, Inc. (the “Company”). Unless defined in this Award agreement (including Attachment A, this “Agreement”), capitalized terms will have the meanings assigned to them in the Plan. In the event of a conflict among the provisions of the Plan, this Agreement and any descriptive materials provided to you, the provisions of the Plan will prevail.

 

Participant   Michael D. Hershberger
Number of Shares Underlying Award   400,000 Shares (to the extent not vested as of any applicable date, the “Restricted Shares”)
Grant Date   February 13, 2013

 

Vesting Schedule

(subject to Section 3 of Attachment A)

 

Vesting   Subject to Section 3 of Attachment A, 20% of the Restricted Shares shall vest and become non-forfeitable on the six-month anniversary of the Grant Date, with the balance vesting and becoming non-forfeitable in four equal tranches on the first day of October, 2013, 2014, 2015 and 2016.


Attachment A

Restricted Stock Award Agreement

Terms and Conditions

Grant to: Michael D. Hershberger

Section 1. Grant of Restricted Stock Award. Subject to the terms and conditions of the Plan and this Agreement, the Company hereby grants this Award to the Participant on the Grant Date on the terms set forth on the cover page of this Agreement, as more fully described in this Attachment A. This Award is granted under the Plan, which is incorporated herein by this reference and made a part of this Agreement.

Section 2. Issuance of Shares.

(a) The Restricted Shares shall be evidenced by entry into the register of members of the Company; provided, however, that the Committee may determine that the Restricted Shares shall be evidenced in such other manner as it deems appropriate, including the issuance of a share certificate or certificates. In the event that any share certificate is issued in respect of the Restricted Shares, such certificate shall (i) be registered in the name of the Participant, (ii) bear an appropriate legend referring to the terms, conditions and restrictions applicable to the Restricted Shares and (iii) be held in custody by the Company.

(b) Voting Rights. The Participant shall have voting rights with respect to the Restricted Shares.

(c) Dividends. All cash and other dividends and distributions, if any, that are paid with respect to the Restricted Shares shall be paid to the Participant at the time that the portion of this Award to which such dividends or other distributions relate vests and becomes nonforfeitable.

(d) Transferability. Unless and until the Restricted Shares become vested in accordance with this Agreement, the Restricted Shares shall not be assigned, sold, transferred or otherwise be subject to alienation by the Participant.

(e) Section 83(b) Election. If the Participant chooses, the Participant may make an election under Section 83(b) of the Code with respect to the Restricted Shares, which would cause the Participant currently to recognize income for U.S. federal income tax purposes in an amount equal to the excess (if any) of the Fair Market Value of the Restricted Shares (determined as of the Grant Date) over the amount, if any, that the Participant paid for the Restricted Shares, which excess will be subject to U.S. federal income tax. The form for making a Section 83(b) election is available from the Company at the address indicated in Section 4(a). The Participant acknowledges that (i) the Participant is solely responsible for the decision whether or not to make a Section 83(b) election,

 

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and the Company is not making any recommendation with respect thereto, (ii) it is the Participant’s sole responsibility to timely file the Section 83(b) election within 30 days after the Grant Date, if the Participant decides to make such election, and (iii) if the Participant does not make a valid and timely Section 83(b) election, the Participant will be required to recognize ordinary income at the time of vesting on any future appreciation on the Restricted Shares.

(f) Withholding Requirements. The Company may withhold any tax (or other governmental obligation) that becomes due with respect to the Restricted Shares (or any dividend or distribution thereon), and the Participant shall make arrangements satisfactory to the Company to enable the Company to satisfy all such withholding requirements. Notwithstanding the foregoing, the Committee, in its sole discretion, may permit the Participant to satisfy any such withholding requirement by transferring to the Company pursuant to such procedures as the Committee may require, effective as of the date on which such requirement arises, a number of vested Shares owned and designated by the Participant having an aggregate Fair Market Value as of such date that is equal to the minimum amount required to be withheld. If the Committee permits the Participant to satisfy any such withholding requirement pursuant to the preceding sentence, the Company shall remit to the Internal Revenue Service and appropriate state and local revenue agencies, for the credit of the Participant, an amount of cash withholding equal to the Fair Market Value of the Shares transferred to the Company as provided above.

Section 3. Accelerated Vesting and Forfeiture upon Termination of Service; Accelerated Vesting Generally.

(a) Death, Disability, without Cause or for Good Reason. In the event of the Participant’s Termination of Service at any time due to the Participant’s death or Disability, by the Company or any Affiliate without Cause or by the Participant’s Resignation for Good Reason, the Restricted Shares shall fully vest and become non-forfeitable on the date of any such termination. For purposes of this Agreement, Cause and Resignation for Good Reason shall have the respective meanings set forth in the Employment Agreement between the Participant and the Company.

(b) For Any Other Reason. In the event of the Participant’s Termination of Service at any time under circumstances not described in Section 3(a), the Restricted Shares shall be forfeited in their entirety without any payment to the Participant.

(c) Generally. In the event that Michael Kosloske ceases to be either the Chief Executive Officer of the Company or the Chairman of the Company’s board of directors, any unvested Restricted Shares shall fully vest and become non-forfeitable.

 

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(d) Effect of Vesting. Subject to the provisions of this Agreement, upon the vesting of any of the Restricted Shares, the restrictions under this Award with respect to such Shares shall lapse. Subject to any applicable Lock Up Agreement, such Shares shall be fully assignable, saleable and transferable by the Participant, and the Company shall deliver such Shares to the Participant by transfer to the Depository Trust Company for the benefit of the Participant or by delivery of a share certificate registered in the Participant’s name and such transfer shall be evidenced in the register of members of the Company.

Section 4. Miscellaneous Provisions.

(a) Notices. All notices, requests and other communications under this Agreement shall be in writing and shall be delivered in person (by courier or otherwise), mailed by certified or registered mail, return receipt requested, or sent by facsimile transmission, as follows:

if to the Company, to:

Health Insurance Innovations, Inc.

15438 N. Florida Avenue, Suite 201

Tampa, Florida, 33613

Attention: Michael W. Kosloske

Telecopy: (877) 376-5832

with a copy to (which shall not constitute notice hereunder):

Gary Raeckers

if to the Participant, to the address that the Participant most recently provided to the Company,

or to such other address or facsimile number as such party may hereafter specify for the purpose by notice to the other parties hereto. All such notices, requests and other communications shall be deemed received on the date of receipt by the recipient thereof if received prior to 5:00 p.m. on a business day in the place of receipt. Otherwise, any such notice, request or communication shall be deemed received on the next succeeding business day in the place of receipt.

(b) Entire Agreement. This Agreement, the Plan and any other agreements referred to herein and therein and any attachments referred to herein or therein, constitute the entire agreement and understanding between the parties in respect of the subject matter hereof and supersede all prior and contemporaneous arrangements, agreements and understandings, both oral and written, whether in term sheets, presentations or otherwise, between the parties with respect to the subject matter hereof.

(c) Amendment; Waiver. No amendment or modification of any provision of this Agreement shall be effective unless signed in writing by or on

 

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behalf of the Company and the Participant, except that the Committee may amend or modify this Agreement without the Participant’s consent in accordance with the provisions of the Plan or as otherwise set forth in this Agreement. No waiver of any breach or condition of this Agreement shall be deemed to be a waiver of any other or subsequent breach or condition whether of like or different nature. Any amendment or modification of or to any provision of this Agreement, or any waiver of any provision of this Agreement, shall be effective only in the specific instance and for the specific purpose for which made or given.

(d) Assignment. Neither this Agreement nor any right, remedy, obligation or liability arising hereunder or by reason hereof shall be assignable by the Participant.

(e) Successors and Assigns; No Third Party Beneficiaries. This Agreement shall inure to the benefit of and be binding upon the Company and the Participant and their respective heirs, successors, legal representatives and permitted assigns. Nothing in this Agreement, expressed or implied, is intended to confer on anyone other than the Company and the Participant, and their respective heirs, successors, legal representatives and permitted assigns, any rights, remedies, obligations or liabilities under or by reason of this Agreement.

(f) Counterparts. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.

(g) Plan. The Participant acknowledges and understands that material definitions and provisions concerning this Award and the Participant’s rights and obligations with respect thereto are set forth in the Plan. The Participant has read carefully, and understands, the provisions of the Plan.

(h) Governing Law. The Agreement shall be governed by the laws of the State of Florida, without application of the conflicts of law principles thereof.

(i) No Right to Continued Service. The granting of the Award evidenced hereby and this Agreement shall impose no obligation on the Company or any Affiliate to continue the service of the Participant and shall not lessen or affect the right that the Company or any Affiliate may have to terminate the service of such Participant.

(j) WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

 

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first written above.

 

HEALTH INSURANCE INNOVATIONS, INC.
By:  

/s/ Michael W. Kosloske

  Name:   Michael W. Kosloske
  Title:   Chairman, President and Chief Executive Officer
PARTICIPANT
 

/s/ Michael D. Hershberger

  Name:   Michael D. Hershberger
Employment Agreement

Exhibit 10.6

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this “Agreement”) is dated as of February 13, 2013, by and between Health Insurance, Innovations, Inc., a Delaware incorporated corporation (the “Company”), and Michael W. Kosloske (“Executive”).

Recitals

A. In connection with its Offering, as defined in Section 2, the Company intends to enter into this employment agreement with Executive, and Executive desires to be hired by the Company, upon the terms and conditions set forth herein, to become effective on the consummation of the Offering; and

C. The Company and Executive agree to protect the interests of the Company and Company’s customers and Confidential Information that may have been or that may be disclosed to Executive as set forth herein.

Agreement

NOW, THEREFORE, in consideration of the mutual promises made herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, agree as follows:

Section 1. Employment, Duties and Acceptance.

(a) The Company shall employ Executive during the Term (as defined below) as the Chief Executive Officer. Executive shall be responsible for carrying out the reasonable policies and directives of the Company’s board of managers, and will have such authority and such responsibilities as are consistent with the authority and responsibilities of a Chief Executive Officer in the health insurance products industry.

(b) Executive hereby accepts such employment and agrees to render Executive’s services to the Company on a full-time basis and to devote Executive’s full business time and attention to the business and affairs of the Company and any subsidiary or affiliate of the Company. Executive agrees that at all times during the term hereof, Executive will faithfully perform the duties assigned by the Company to the best of Executive’s ability. Executive further agrees to accept election and to serve during all or any part of the Term as an officer, director or representative of any subsidiary or affiliate of the Company, without any compensation therefor other than that specified in this Agreement. Executive shall report directly to the Company’s Board of Directors (the “Board”)


(c) The duties to be performed by Executive hereunder shall be performed primarily at the Company’s principal offices in Tampa, Florida subject to reasonable travel requirements on behalf of the Company. Executive shall be entitled to an annual vacation of 22 days in accordance with the Company’s policies and practices; provided that Executive shall schedule the timing and duration of Executive’s vacations in a reasonable manner taking into account the needs of the business of the Company.

(d) Executive acknowledges that from time to time the Company may promulgate workplace policies and rules. Executive agrees to fully comply with all such policies and rules, and understands that failure to do so may result in a disciplinary action up to and including immediate discharge for Cause.

Section 2. Term. As used herein, the “Term” means the period commencing as of the consummation date of an underwritten public offering of not less than 4,000,000 shares of Company common stock not later than June 1, 2013 (such date of consummation, the “Effective Date”, and such offering, the “Offering”), and ending on December 31, 2013. The Term shall be automatically extended for successive one-year periods unless Executive or the Company gives written notice of termination on or before the 30th day prior to the expiration of any Term of its desire not to renew the Term. Any such renewal shall be upon the terms and conditions set forth herein unless otherwise agreed between the Company and Executive. In the event that the Company gives written notice that it does not intend to renew the Term, following the end of the Term, the Executive shall be entitled to the Termination Benefit (as described in Section 4(b)(iii)). As a condition to the Company’s obligations, if any, to pay the Termination Benefit under this Section 2, Executive shall have executed, delivered and revoked a general release in the form attached hereto as Exhibit A. For the avoidance of doubt, this Agreement shall have no force or effect until the Effective Date.

Section 3. Compensation. Executive shall be entitled to the following compensation:

(a) The Company agrees to pay to Executive a salary in cash (the “Salary”), as compensation for the services to be performed by Executive, at the rate of $400,000 per calendar year, paid in accordance with the Company’s customary payroll procedures and subject to applicable withholding. During the Term, the Board shall have the right to increase, but not decrease, the Salary. Executive’s salary as in effect from time to time shall constitute the “Salary” for purposes of this Agreement.

(b) The Company shall reimburse Executive for all reasonable expenses incurred by Executive in the course of performing Executive’s duties under this Agreement that are consistent with the Company’s policies in effect from time to time with respect to travel, entertainment and other business expenses, subject to

 

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the Company’s requirements with respect to reporting and documentation of such expenses.

(c) Executive shall be eligible to participate in any equity incentive plan to be adopted in connection with the Offering, in accordance with its terms. Executive shall be eligible for an annual bonus and long term incentive awards as determined at the sole discretion of the Board.

(d) Executive shall be entitled to all rights and benefits for which Executive shall be eligible under any retirement, retirement savings, profit-sharing, pension or welfare benefit plan, life, disability, health, dental, hospitalization and other forms of insurance and all other so-called “fringe” benefits or perquisites (except for with respect to any plan that provides severance or other similar benefits), on the same terms that the Company provides to any other similarly situated senior Company executive (subject to all restrictions on participation that may apply under federal and state tax laws).

Section 4. Termination.

(a) Events of Termination. Executive’s employment with the Company shall terminate (the date of such termination being the “Termination Date”) immediately upon any of the following:

(i) Executive’s death (“Termination Upon Death”);

(ii) the effective date of a written notice sent to Executive stating the Company’s determination, made in good faith, that due to a mental or physical condition, Executive has been unable and failed to substantially render the services to be provided by Executive to the Company for a period of at least 180 days out of any consecutive 360 days (“Termination For Disability”);

(iii) the effective date of a written notice sent to Executive stating the Company’s determination, made in good faith, that it is terminating Executive’s employment for Cause (as defined below) (“Termination For Cause”);

(iv) the effective date of a notice sent to Executive stating that the Company is terminating Executive’s employment without Cause, which notice can be given by the Company at any time after the Effective Date at the Company’s sole discretion, for any reason or for no reason (“Termination Without Cause”);

(v) the effective date of a notice (other than a notice delivered pursuant to Section 4(a)(vi) of this Agreement) sent to the Company from Executive stating that Executive is electing to terminate Executive’s employment with the Company without Good Reason (“Resignation Without Good Reason”); or

(vi) the effective date of a written notice to Company stating Executive’s determination, made in good faith, that a Good Reason Event (as defined below) has occurred within 30 days preceding such notice and as a consequence Executive is electing to terminate Executive’s employment hereunder for Good Reason (“Resignation For Good Reason”); provided, however, that Executive will give the Company 30 days to cure such Good Reason Event, and if the Company fails to cure such Good Reason Event within 30 days after Executive gives written notice of resignation hereunder, then Executive may immediately terminate Executive’s employment with the Company, and such termination will be a Resignation For Good Reason hereunder; provided, further, that Executive’s termination shall be deemed a Termination For Cause if the Company has delivered to Executive written notice of any act or omission that, if not cured, would constitute Cause at any time preceding the notice provided by Executive hereunder.

 

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As used herein, the term “Cause” shall mean (i) commission of a willful act of dishonesty in the course of Executive’s duties hereunder, (ii) conviction by a court of competent jurisdiction of, or plea of no contest to, a crime constituting a felony or conviction in respect of, or plea of no contest to, any act involving fraud, dishonesty or moral turpitude, (iii) Executive’s performance under the influence of controlled substances (other than those taken pursuant to a medical doctor’s orders), or continued habitual intoxication, during working hours, (iv) frequent or extended, and unjustifiable, absenteeism, (v) Executive’s personal misconduct or refusal to perform duties and responsibilities or to carry out directives of the Company, which, if capable of being cured shall not have been cured, within 5 days after the Company shall have advised Executive in writing of its intention to terminate Executive’s employment, or (vi) material non-compliance with the terms of this Agreement.

As used herein, the term “Good Reason Event” shall mean (i) a material adverse change in the responsibilities or duties of Executive as set forth in this Agreement without Executive’s prior consent at a time when there are no circumstances pending that would permit the Board to terminate Executive for Cause, (ii) any reduction in the Salary or a material reduction in Executive’s benefits (other than (x) a reduction in Salary that is the result of an administrative or clerical error, and which is cured within 15 business days after the Company receives notice of such failure or (y) a reduction in Salary or benefits that are generally applicable to all members of the Company’s senior management) or (iii) a material breach by the Company of this Agreement that is not cured within 30 days following the Company’s receipt of written notice of such breach from Executive.

(b) Effect of Termination.

(i) Death or Disability. In the event of Termination Upon Death or Termination For Disability pursuant to Sections 4(a)(i) and 4(a)(ii) of this Agreement, Executive (or Executive’s legal representative) shall be entitled to receive in cash the following:

(A) an amount equal to any earned but unpaid Salary owing by the Company to Executive as of the Termination Date (the “Accrued Salary”), and

(B) to the extent set forth in any written management bonus plan, an amount equal to the pro rata portion, determined as of the Termination Date, of any bonus to which Executive would have been entitled had Executive been employed by the Company at the time such bonus would have otherwise been paid (the “Accrued Bonus”).

 

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Nothing contained herein shall be deemed to limit or abrogate any insurance or other similar benefits available to Executive.

(ii) Termination For Cause. In the event of a Termination For Cause pursuant to Section 4(a)(iii) of this Agreement, Executive shall be entitled to receive in cash an amount equal to any Accrued Salary.

(iii) Termination Without Cause and Resignation For Good Reason and Termination Upon Non-renewal. In the event of Termination Without Cause or Resignation For Good Reason pursuant to Sections 4(a)(iv) and 4(a)(vi) of this Agreement, Executive shall be entitled to receive in cash, subject to Section 4(c)(ii) of this Agreement:

(A) an amount equal to any Accrued Salary;

(B) an amount equal to any Accrued Bonus; and

(C) an amount equal to two times the sum of (x) the Executive’s annual Salary hereunder (at the rate then in effect) and (y) the greater of (i) Executive’s most recently earned annual bonus and (ii) the Executive’s average annual bonus earned in the three most recently completed calendar years, payable in equal monthly installments commencing on the Termination Date and ending 24 months after the Termination Date (the “Termination Benefit”).

(iv) Resignation Without Good Reason. In the event of Resignation Without Good Reason pursuant to Section 4(a)(v) of this Agreement, Executive shall be entitled to receive in cash an amount equal to any Accrued Salary.

(v) Upon Termination For Any Reason. In the event of any termination, Executive shall be entitled to receive:

(A) any unpaid reasonable, reimbursable business expenses incurred by Executive in the course of performing Executive’s duties under this Agreement that were incurred in a manner consistent with the Company’s policies in effect from time to time with respect to travel, entertainment and other business expenses, subject to the Company’s requirements with respect to incurring, reporting and documenting such expenses; and

(B) benefits under the Company’s benefit plans of general application as shall be determined under the provisions of those plans.

 

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(c) Additional Provisions.

(i) Any amounts to be paid pursuant to this Section 4 shall be paid in accordance with the Company’s existing payroll or bonus payment practices, as applicable.

(ii) As a condition to the Company’s obligations, if any, to make any Accrued Bonus and severance payments provided under this Section 4, Executive shall have executed, delivered and not revoked a general release in the form attached hereto as Exhibit A.

(iii) Notwithstanding any provision of this Agreement, the obligations and commitments under Section 5 of this Agreement shall survive and continue in full force and effect in accordance with their terms notwithstanding any termination of Executive’s employment for any reason or termination of this Agreement for any reason.

(iv) Notwithstanding anything in this Agreement to the contrary, the Company shall have no obligation to pay any amounts payable under Sections 4(b)(i)(B), 4(b)(iii)(B) or 4(b)(iii)(C) of this Agreement during such times as Executive is in breach of Section 5 of this Agreement, after the Company provides Executive with notice of such breach.

(v) Executive agrees that termination of Executive’s employment for any reason shall, with no further action by Executive required, constitute Executive’s resignation, as of the Termination Date and to the extent applicable, from all positions as an officer, director or representative of the Company and any subsidiary or affiliate of the Company.

Section 5. Noncompetition, Nonsolicitation And Confidentiality.

(a) Definitions.

 

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Company’s Business” means (i) developing and administering web-based individual health insurance plans and ancillary health insurance products, (ii) designing and structuring data-driven insurance products on behalf of the Company’s insurance carrier, (iii) marketing insurance products through the Company’s distribution networks, (iv) managing member relations through the Company’s technology platform, and (v) any other business or commercial activity conducted on or after the Effective Date, in each case as conducted by the Company or any subsidiary or affiliate of the Company.

Competitor” means any company, other entity or association or individual that directly or indirectly is engaged in the Company’s Business.

Confidential Information” means any confidential information with respect to the Company’s Business and/or the businesses of its clients or customers, including, but not limited to: the trade secrets of the Company; products or services; standard proposals; standard submissions, surveys and analyses; Commercial Lines Quality Assurance Manual; Claims Services Department Procedures and Quality Assurance Manual; Surety Quality Assurance Manual; policy forms; fees, costs and pricing structures; marketing information; advertising and pricing strategies; analyses; reports; computer software, including operating systems, applications and program listings; flow charts; manuals and documentation; data bases; all copyrightable works; the Company’s existing and prospective clients and customers, their addresses or other contact information and/or their confidential information; existing and prospective client and customer lists and other related data; expiration periods; policy numbers; coverage specifications; daily reports and related correspondence; premium renewal notices; and all similar and related information in whatever form. The term Confidential Information does not include, and there shall be no obligation hereunder with respect to, information that (i) is generally available to the public on the date of this Agreement, (ii) becomes generally available to the public other than as a result of a disclosure by Executive not otherwise permissible hereunder or (iii) Executive learns from other sources where, to Executive’s knowledge, such sources have not violated their confidentiality obligation to the Company or any other applicable obligation of confidentiality.

(b) Noncompetition. Executive covenants and agrees that during the period commencing on the Effective Date and ending two years following the Termination Date (the “Restricted Period”), Executive will not, directly or indirectly, own, manage, operate, control, render service to, or participate in the ownership, management, operation or control of any Competitor anywhere in the United States of America; provided, however, that Executive shall be entitled to own shares of stock of any corporation having a class of equity securities actively traded on a national securities exchange or on the Nasdaq Stock Market which represent, in the aggregate, not more than 1% of such corporation’s fully-diluted shares.

 

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(c) Nonsolicitation of Employees. Executive covenants and agrees that during the Restricted Period, Executive will not, directly or indirectly, employ or solicit, or receive or accept the performance of services by any then current officer, manager, employee or independent contractor of the Company or any subsidiary or affiliate of the Company, or in any way interfere with the relationship between the Company or any subsidiary or affiliate of the Company, on the one hand, and any such officer, manager, employee or independent contractor, on the other hand.

(d) Nonsolicitation of Customers and Vendors. Executive covenants and agrees that during the Restricted Period, Executive will not, directly or indirectly, induce, or attempt to induce, any customer, salesperson, distributor, supplier, vendor, manufacturer, representative, agent, jobber, licensee or other person transacting business with the Company or any subsidiary or affiliate of the Company (collectively the “Customers” and “Vendors”) to reduce or cease doing business with the Company or any such subsidiary or affiliate of the Company, or in any way to interfere with the relationship between any such Customer or Vendor, on the one hand, and the Company or any subsidiary or affiliate of the Company, on the other hand.

(e) Representations and Covenants by Executive. Executive represents and warrants that: (i) Executive’s execution, delivery and performance of this Agreement do not and will not conflict with, breach, violate or cause a default under any contract, agreement, instrument, order, judgment or decree to which Executive is a party or by which Executive is bound; (ii) Executive is not a party to or bound by any employment agreement, noncompete agreement or confidentiality agreement with any other person or entity (other than the Company) and Executive is not subject to any other agreement that would prevent Executive from performing Executive’s duties for the Company or otherwise complying with this Agreement; (iii) Executive is not subject to or in breach of any nondisclosure agreement, including any agreement concerning trade secrets or confidential information owned by any other party; and (iv) upon the execution and delivery of this Agreement by the Company, this Agreement shall be the valid and binding obligation of Executive, enforceable in accordance with its terms.

(f) Nondisclosure of Confidential Information. Executive hereby acknowledges and represents that Executive has consulted with independent legal counsel regarding Executive’s rights and obligations under this Agreement and that Executive fully understands the terms and conditions contained herein and Executive agrees that Executive will not, directly or indirectly: (i) use, disclose, reverse engineer or otherwise exploit for Executive’s own benefit or for the benefit of anyone other than the Company the Confidential Information except as authorized by the Company; (ii) during Executive’s employment with the Company, use, disclose, or reverse engineer (x) any confidential information or trade secrets of any former employer or third party, or (y) any works of authorship developed in whole or in part by Executive during any former employment or for any other party, unless authorized in writing by the former employer or third party;

 

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or (iii) upon Executive’s resignation or termination (x) retain Confidential Information, including any copies existing in any form (including electronic form), that are in Executive’s possession or control, or (y) destroy, delete or alter the Confidential Information without the Company’s consent. Notwithstanding the foregoing, Executive may use the Confidential Information in the course of performing Executive’s duties on behalf of the Company or any subsidiary or affiliate of the Company as described hereunder, provided that such use is made in good faith. Executive will immediately surrender possession of all Confidential Information to Company upon any suspension or termination of Executive’s employment with Company for any reason.

(g) Inventions and Patents. Executive acknowledges that all (i) inventions, innovations, improvements, developments, methods, designs, analysis, drawings, reports, processes, novel concepts and all similar or related information (whether or not patentable) that relate to the Company’s or any of its subsidiary’s or affiliate’s actual or anticipated businesses, (ii) research and development and (iii) existing or future products or services that are, to any extent, conceived, developed or made by Executive while employed by the Company or any subsidiary or affiliate of the Company (“Work Product”) belong to the Company or such subsidiary or affiliate. Executive shall promptly disclose such Work Product to the Board and perform all actions reasonably necessary or requested by the Board (whether during or after the Term) to establish and confirm such ownership (including, without limitation, executing assignments, consents, powers of attorney and other instruments).

(h) Miscellaneous.

(i) Executive acknowledges that (x) Executive’s position is a position of trust and responsibility with access to Confidential Information of the Company, (y) the Confidential Information, and the relationship between the Company and each of its employees, Customers and Vendors, are valuable assets of the Company and may not be converted to Executives own use and (z) the restrictions contained in this Section 5 are reasonable and necessary to protect the legitimate business interests of the Company and will not impair or infringe upon Executive’s right to work or earn a living after Executive’s employment with the Company ends.

(ii) Each of the foregoing obligations shall be enforceable independent of any other obligation, and the existence of any claim or cause of action that Executive may have against the Company, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of these obligations.

(iii) Executive acknowledges that monetary damages will not be an adequate remedy for the Company in the event of a breach of this Agreement and that it would be impossible for the Company to measure damages in the event of such a breach. Therefore, Executive agrees that,

 

9


in addition to other rights that the Company may have at law or equity, the Company is entitled, without posting bond, to an injunction preventing Executive from any breach of this Agreement.

(iv) In the event of a breach or violation by Executive during the Restricted Period of any restriction in Section 5(b), (b) or (d) of this Agreement, the Restricted Period shall be tolled until such breach or violation has been cured.

(v) The parties intend to provide the Company with the maximum protection possible with respect to its Customers and Vendors. The parties, however, do not intend to include a provision that contravenes the public policy of any state. Therefore, if any provision of this Section 5 is unlawful, against public policy or otherwise declared void, such provision shall not be deemed part of this Agreement, which otherwise shall remain in full force and effect. If, at the time of enforcement of this Agreement, a court or other tribunal holds that the duration, scope or area restriction stated herein is unreasonable under the circumstances then existing, the parties agree that the court should enforce the restrictions to the extent it deems reasonable.

(vi) Executive hereby agrees that prior to accepting employment with any other person or entity during the Term or during the Restricted Period following the Termination Date, Executive will provide such prospective employer with written notice of the existence of this Agreement and the provisions of this Section 5 of this Agreement, with a copy of such notice delivered simultaneously to the Company in accordance with Section 10 of this Agreement.

(vii) Notwithstanding any provision of this Agreement, the obligations and commitments of this Section 5 shall survive and continue in full force and effect in accordance with their terms notwithstanding any termination of Executive’s employment for any reason or termination of this Agreement for any reason.

Section 6. Withholding Taxes. Prior to making any payments required to be made pursuant to this Agreement, the Company may require that the Company be reimbursed in cash for any taxes required by any government to be withheld or otherwise deducted and paid by the Company in respect of such payment by the Company. In lieu thereof, the Company shall have the right to withhold the amount of such taxes from any sums due or to become due from it to Executive.

Section 7. Expenses. In the event of any legal action to enforce Executive’s or the Company’s rights under this Agreement, each party will be responsible for that party’s attorneys’ fees, expenses and disbursements.

 

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Section 8. Assignment. This Agreement is binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns. Executive shall not assign or transfer any rights or obligations hereunder. The Company shall have the right to assign or transfer any rights or obligations hereunder only to (a) a successor entity in the event of a merger, consolidation, or transfer or sale of all or substantially all the assets of the Company or (b) an affiliate of the Company. Any purported assignment, other than as provided above, shall be null and void.

Section 9. Indemnification. The Company shall indemnify Executive for any act or omission done or not done in performance of Executive’s duties hereunder in accordance with the Company’s by-laws to the extent provided for any other officer or member of the Board of the Company. The Company’s obligations under this Section 9 shall survive any termination of this Agreement or Executive’s employment hereunder.

Section 10. Notices. All notices, requests, consents and other communications required or permitted to be given hereunder, shall be in writing and shall be delivered personally or sent by prepaid telegram, telex, facsimile transmission, overnight courier or mailed, first class, postage prepaid by registered or certified mail, as follows:

 

If to the Company:  

Health Insurance Innovations, Inc.

15438 N. Florida Avenue, Suite 201

Tampa, Florida, 33613

Attention: Michael W. Kosloske

Telecopy: (877) 376-5832

  with a copy to (which shall not constitute notice hereunder): Gary Raekers
If to Executive:   To Executive’s address as reflected on the payroll records of the Company

or such other address as either party shall designate by notice in writing to the other in accordance herewith. Any such notice shall be deemed given when so delivered personally, by telex, facsimile transmission or telegram, or if sent by overnight courier, one day after delivery to such courier by the sender or if mailed, five days after deposit by the sender in the U.S. mails.

Section 11. Entire Agreement. This Agreement shall constitute the entire agreement between Executive and the Company concerning the subject matter hereof. This Agreement supersedes and preempts any prior employment agreement or other understandings, agreements or representations by or among the parties, written or oral, that may have related to the subject matter hereof. No provisions of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing, signed by Executive and an authorized officer of the Company.

 

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Section 12. Governing Law. This Agreement shall be subject to and governed by the laws of the State of Florida, without giving effect to the principles of conflicts of law under Florida law irrespective of the fact that the parties now or at any time may be residents of or engage in activities in a different state. Employee agrees that in the event of any dispute or claim arising under this Agreement, jurisdiction and venue shall be vested and proper, and Employee hereby consents to the jurisdiction of any court sitting in the State of Florida, including a federal district court.

Section 13. Full Settlement. Executive acknowledges and agrees that, subject to the payment by the Company of the benefits provided in this Agreement to Executive, in no event will the Company nor any subsidiary or affiliate thereof be liable to Executive for damages under any claim of breach of contract as a result of the termination of Executive’s employment. In the event of any such termination, the Company shall be liable only to provide to Executive, or Executive’s heirs or beneficiaries, the benefits specified in this Agreement.

Section 14. Strict Compliance. Executive’s or the Company’s failure to insist upon strict compliance with any provision of this Agreement or the failure to assert any right Executive or the Company may have hereunder shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement. The waiver, whether express or implied, by either party of a violation of any of the provisions of this Agreement shall not operate or be construed as a waiver of any subsequent violation of any such provision.

Section 15. Creditor Status. No benefit or promise hereunder shall be secured by any specific assets of the Company. Executive shall have only the rights of an unsecured general creditor of the Company in seeking satisfaction of such benefits or promises.

Section 16. Section 409A. This Agreement is intended to comply with the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (“Section 409A”), and shall be construed accordingly. Any payments or distributions to be made to Executive under this Agreement upon a separation from service of amounts classified as “nonqualified deferred compensation” for purposes of Section 409A, shall in no event be made or commence until six months after such separation from service if Executive is determined to be a specified Executive of a public company (all as determined under Section 409A). Each payment of nonqualified deferred compensation under this Agreement shall be treated as a separate payment for purposes of Section 409A. Any reimbursements made pursuant to this Agreement shall be paid as soon as practicable but no later than 90 days after Executive submits evidence of such expenses to the Company (which payment date shall in no event be later than the last day of the calendar incurred). The amount of such reimbursements paid and any in-kind benefits the year following the calendar year in which the expense was provided during any calendar year shall not affect the reimbursements paid or in-kind benefits provided in any other calendar year, and the right to any such

 

12


payments and benefits shall not be subject to liquidation or exchange for another payment or benefit.

Section 17. Cooperation. Executive agrees to provide assistance to and cooperate with the Company upon its reasonable request with respect to matters within the scope of Executive’s duties and responsibilities during the Restricted Period. During such Period, the Company shall, to the maximum extent coordinate or cause any such request with Executive’s other commitments and responsibilities to minimize the degree to which such request interferes with such commitments and responsibilities. The Company agrees that it will reimburse Executive for reasonable documented travel expenses (i.e., travel, meals and lodging) that Executive may incur in providing assistance to the Company hereunder.

Section 18. Non-disparagement. Executive agrees to not make any statements, written or oral, while employed by the Company and thereafter, which would be reasonably likely to disparage or damage the Company, its affiliates or the personal or professional reputation of any present or former employees, officers or members of the managing or directorial boards or committees of the Company or its affiliates. The Company agrees that it will instruct each of its officers and members of its managing board not to make any disparaging communication regarding Executive, and no director, officer or employee of the Company will be authorized on the Company’s behalf to make any such disparaging communications regarding Executive.

Section 19. Recoupment. If the Company is required to prepare an accounting restatement due to the material noncompliance of the Company, as a result of misconduct, with any financial reporting requirement under the securities laws, and if the Executive knowingly or grossly negligently engaged in the misconduct, or knowingly or grossly negligently failed to prevent the misconduct, or if the Executive is one of the individuals subject to automatic forfeiture under, Section 304 of the United States Sarbanes-Oxley Act of 2002 (and not otherwise exempted), the Executive shall reimburse the Company the amount of any payment in settlement of any earned or accrued during the twelve-month period following the first public issuance or filing with the United States Securities and Exchange Commission (whichever first occurred) of the financial document not in compliance with such financial reporting requirement. Such payments shall be subject to repayment to or recoupment (clawback) by the Company in accordance with such policies and procedures as the Committee or Board may adopt from time to time, including policies and procedures to implement applicable law (including. but not limited to Section 954 of the Dodd-Frank Act), stock market or exchange rules and regulations or accounting or tax rules and regulations.

Section 20. Survival. Any provision of this Agreement that is expressly or by implication intended to survive the termination of this Agreement shall survive or remain in effect after the termination of this Agreement.

 

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Section 21. Counterparts. This Agreement may be executed in two or more counterparts, anyone of which need not contain the signature of more than one party, but all such counterparts taken together shall constitute one and the same agreement.

 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first written above.

 

HEALTH INSURANCE INNOVATIONS, INC.
By:  

/s/ Michael W. Kosloske

  Name:   Michael W. Kosloske
  Title:   Chairman, President and Chief Executive Officer

 

EXECUTIVE

/s/ Michael W. Kosloske

Michael W. Kosloske

[SIGNATURE PAGE TO EMPLOYMENT AGREEMENT]


EXHIBIT A

FORM OF RELEASE

This RELEASE (“Release”) is granted effective as of the 13th day of February, 2013 by Michael W. Kosloske (the “Executive”) in favor of Health Insurance Innovations, Inc. (the “Company”) and the other Released Parties (as defined below). This is the Release referred to in the Employment Agreement, dated as of February 13, 2013, between the Company and the Executive (the “Employment Agreement”). The Executive gives this Release in consideration of the Company’s promises and covenants contained in the Employment Agreement, with respect to which this Release is an integral part.

1. Release of the Company. The Executive, for himself, his successors, assigns, attorneys, and all those entitled to assert his rights, now and forever hereby releases and discharges the Company and its respective officers, directors, stockholders, trustees, Executives, agents, parent corporations, subsidiaries, affiliates, estates, successors, assigns and attorneys (the “Released Parties”), from any and all claims, actions, causes of action, sums of money due, suits, debts, liens, covenants, contracts, obligations, costs, expenses, damages, judgments, agreements, promises, demands, claims for attorney’s fees and costs, or liabilities whatsoever, in law or in equity, which the Executive ever had or now has against the Released Parties, arising by reason of or in any way connected with or which may be traced either directly or indirectly to the employment relationship which existed between the Company or any of its parents, subsidiaries, affiliates, or predecessors and the Executive, or the termination of that relationship, that the Executive has, had or purports to have, from the beginning of time to the date of this Release, whether known or unknown, that now exists, no matter how remotely they may be related to the aforesaid employment relationship including but not limited to claims for employment discrimination under federal or state law, except as provided in Paragraph 2; claims arising under Title VII of the Civil Rights Act, 42 U.S.C. § 2000(e), et seq. or the Americans With Disabilities Act, 42 U.S.C. § 12101, et seq.; claims for statutory or common law wrongful discharge, including any claims arising under the Fair Labor Standards Act, 29 U.S.C. § 201, et seq.; claims for attorney’s fees, expenses and costs; claims for defamation; claims for wages or vacation pay; claims for benefits, including any claims arising under the Executive Retirement Income Security Act, 29 U.S.C. § 1001, et seq.; and provided, however, that nothing herein shall release the Company of its obligations to the Executive under the Employment Agreement or any other contractual obligations between the Company or its affiliates and the Executive, or any indemnification obligations to the Executive under the Company’s bylaws or operating agreement or federal, state or local law or otherwise.


2. Release of Claims Under Age Discrimination in Employment Act. Without limiting the generality of the foregoing, the Executive agrees that by executing this Release, he has released and waived any and all claims he has or may have as of the date of this Release for age discrimination under the Age Discrimination in Employment Act, 29 U.S.C. § 621, et seq. It is understood that the Executive has been advised to consult with an attorney prior to executing this Release; that he in fact has consulted a knowledgeable, competent attorney regarding this Release; that he may, before executing this Release, consider this Release for a period of 21 calendar days; and that the consideration he receives for this Release is in addition to amounts to which he was already entitled. It is further understood that this Release is not effective until seven calendar days after the execution of this Release and that the Executive may revoke this Release within seven calendar days from the date of execution hereof.

The Executive agrees that he has carefully read this Release and is signing it voluntarily. The Executive acknowledges that he has had 21 days from receipt of this Release to review it prior to signing or that, if the Executive is signing this Release prior to the expiration of such 21- day period, the Executive is waiving his right to review the Release for such full 21-day period prior to signing it. The Executive has the right to revoke this release within seven days following the date of its execution by him. However, if the Executive revokes this Release within such seven-day period, no severance benefit will be payable to him under the Employment Agreement and he shall return to the Company any such payment received prior to that date.

THE EXECUTIVE HAS CAREFULLY READ THIS RELEASE AND ACKNOWLEDGES THAT IT CONSTITUTES A GENERAL RELEASE OF ALL KNOWN AND UNKNOWN CLAIMS AGAINST THE COMPANY UNDER THE AGE DISCRIMINATION IN EMPLOYMENT ACT. THE EXECUTIVE ACKNOWLEDGES THAT HE HAS HAD A FULL OPPORTUNITY TO CONSULT WITH AN ATTORNEY OR OTHER ADVISOR OF HIS CHOOSING CONCERNING HIS EXECUTION OF THIS RELEASE AND THAT HE IS SIGNING THIS RELEASE VOLUNTARILY AND WITH THE FULL INTENT OF RELEASING THE COMPANY FROM ALL SUCH CLAIMS.

 

 

 

 
Name of Executive: Michael W. Kosloske
Date: February 13, 2013

 

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Employment Agreement

Exhibit 10.7

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this “Agreement”) is dated as of February 13, 2013, by and between Health Insurance, Innovations, Inc., a Delaware incorporated corporation (the “Company”), and Michael D. Hershberger (“Executive”).

Recitals

A. In connection with its Offering (the “Offering”), as defined in Section 2, the Company intends to enter into this employment agreement with Executive, and Executive desires to be hired by the Company, upon the terms and conditions set forth herein, to become effective on the consummation of the Offering; and

C. The Company and Executive agree to protect the interests of the Company and Company’s customers and Confidential Information that may have been or that may be disclosed to Executive as set forth herein.

Agreement

NOW, THEREFORE, in consideration of the mutual promises made herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, agree as follows:

Section 1. Employment, Duties and Acceptance.

(a) The Company shall employ Executive during the Term (as defined below) as Chief Financial Officer, Treasurer and Secretary. Executive shall have such authority and responsibilities as are consistent with the authority and responsibilities of a Chief Financial Officer, Treasurer and Secretary in the health insurance products industry.

(b) Executive hereby accepts such employment and agrees to render Executive’s services to the Company on a full-time basis and to devote Executive’s full business time and attention to the business and affairs of the Company and any subsidiary or affiliate of the Company. Executive agrees that at all times during the term hereof, Executive will faithfully perform the duties assigned by the Company to the best of Executive’s ability. Executive further agrees to accept election and to serve during all or any part of the Term as an officer, director or representative of any subsidiary or affiliate of the Company, without any compensation therefor other than that specified in this Agreement. Executive shall report directly to the Company’s Chief Executive Officer.

(c) The duties to be performed by Executive hereunder shall be performed primarily at the Company’s principal offices in Tampa, Florida subject to reasonable travel requirements on behalf of the Company. Executive shall be


entitled to an annual vacation of 22 days in accordance with the Company’s policies and practices; provided that Executive shall schedule the timing and duration of Executive’s vacations in a reasonable manner taking into account the needs of the business of the Company.

(d) Executive acknowledges that from time to time the Company may promulgate workplace policies and rules. Executive agrees to fully comply with all such policies and rules, and understands that failure to do so may result in a disciplinary action up to and including immediate discharge for Cause.

Section 2. Term. As used herein, the “Term” means the period commencing as of the consummation date of an underwritten initial public offering of not less than 4,00,000 shares of Company common stock not later than June 1, 2013 (such date of consummation, the “Effective Date”), and such offering, the “Offering”, and ending on December 31, 2013. The Term shall be automatically extended for successive one-year periods unless Executive or the Company gives written notice of termination on or before the 30th day prior to the expiration of any Term of its desire not to renew the Term. Any such renewal shall be upon the terms and conditions set forth herein unless otherwise agreed between the Company and Executive. In the event that the Company gives written notice that it does not intend to renew the Term, following the end of the Term, the Company shall pay to Executive an amount equal to one-twelfth of Executive’s annual Salary hereunder (at the rate then in effect) payable monthly in accordance with the Company’s existing payroll practices for the period commencing on the Termination Date and ending 12 months after the Termination Date. As a condition to the Company’s obligations, if any, to make severance payments under this Section 2, Executive shall have executed, delivered and revoked a general release in the form attached hereto as Exhibit A. For the avoidance of doubt, this Agreement shall have no force or effect until the Effective Date.

Section 3. Compensation. Executive shall be entitled to the following compensation:

(a) The Company agrees to pay to Executive a salary in cash (the “Salary”), as compensation for the services to be performed by Executive, at the rate of $200,000 per calendar year, paid in accordance with the Company’s customary payroll procedures and subject to customary withholding. During the Term, the Board shall have the right to increase, but not decrease, the Salary. Executive’s salary as in effect from time to time shall constitute the “Salary” for purposes of this Agreement.

(b) The Company shall reimburse Executive for all reasonable expenses incurred by Executive in the course of performing Executive’s duties under this Agreement that are consistent with the Company’s policies in effect from time to time with respect to travel, entertainment and other business expenses, subject to


the Company’s requirements with respect to reporting and documentation of such expenses.

(c) (i) The Company shall cause the grant to Executive under a compensatory equity incentive plan to be adopted by the Company prior to the Effective Date of restricted shares of the Company’s Class A Common Stock in an amount equal to 3% of the Company’s enterprise value as determined immediately following consummation of the Offering (the “Award”), vesting, as set forth below, subject in each case to Executive’s continued employment on the relevant vesting date:

 

Number of Shares

  

Vesting Date

20%   

Six-month anniversary of the Effective Date

20%   

October 1, 2013

20%   

October 1, 2014

20%   

October 1, 2015

20%   

October 1, 2016

(ii) Executive shall be eligible to participate in any equity incentive plan to be adopted in connection with the Offering, in accordance with its terms. Executive shall be eligible for an annual bonus and long term incentive awards as determined at the sole discretion of the Company’s board of directors (the “Board”).

(d) Executive shall be entitled to all rights and benefits for which Executive shall be eligible under any retirement, retirement savings, profit-sharing, pension or welfare benefit plan, life, disability, health, dental, hospitalization and other forms of insurance and all other so-called “fringe” benefits or perquisites (except for with respect to any plan that provides severance or other similar benefits), on the same terms that the Company provides to any other similarly situated senior Company executive (subject to all restrictions on participation that may apply under federal and state tax laws).

Section 4. Termination.

(a) Events of Termination. Executive’s employment with the Company shall terminate (the date of such termination being the “Termination Date”) immediately upon any of the following:

(i) Executive’s death (“Termination Upon Death”);

(ii) the effective date of a written notice sent to Executive stating the Company’s determination, made in good faith, that due to a mental or physical condition, Executive has been unable and failed to substantially render the services to be provided by Executive to the


Company for a period of at least 180 days out of any consecutive 360 days (“Termination For Disability”);

(iii) the effective date of a written notice sent to Executive stating the Company’s determination, made in good faith, that it is terminating Executive’s employment for Cause (as defined below) (“Termination For Cause”);

(iv) the effective date of a notice sent to Executive stating that the Company is terminating Executive’s employment without Cause, which notice can be given by the Company at any time after the Effective Date at the Company’s sole discretion, for any reason or for no reason (“Termination Without Cause”);

(v) the effective date of a notice (other than a notice delivered pursuant to Section 4(a)(vi) of this Agreement) sent to the Company from Executive stating that Executive is electing to terminate Executive’s employment with the Company without Good Reason (“Resignation Without Good Reason”); or

(vi) the effective date of a written notice to Company stating Executive’s determination, made in good faith, that a Good Reason Event (as defined below) has occurred within 30 days preceding such notice and as a consequence Executive is electing to terminate Executive’s employment hereunder for Good Reason (“Resignation For Good Reason”); provided, however, that Executive will give the Company 30 days to cure such Good Reason Event, and if the Company fails to cure such Good Reason Event within 30 days after Executive gives written notice of resignation hereunder, then Executive may immediately terminate Executive’s employment with the Company, and such termination will be a Resignation For Good Reason hereunder; provided, further, that Executive’s termination shall be deemed a Termination For Cause if the Company has delivered to Executive written notice of any act or omission that, if not cured, would constitute Cause at any time preceding the notice provided by Executive hereunder.

As used herein, the term “Cause” shall mean (i) commission of a willful act of dishonesty in the course of Executive’s duties hereunder, (ii) conviction by a court of competent jurisdiction of, or plea of no contest to, a crime constituting a felony or conviction in respect of, or plea of no contest to, any act involving fraud, dishonesty or moral turpitude, (iii) Executive’s performance under the influence of controlled substances (other than those taken pursuant to a medical doctor’s orders), or continued habitual intoxication, during working hours, (iv) frequent or extended, and unjustifiable, absenteeism, (v) Executive’s personal misconduct or refusal to perform duties and responsibilities or to carry out directives of the Company, which, if capable of being cured shall not have been cured, within 5 days after the Company shall have advised Executive in writing of its intention to


terminate Executive’s employment, (vi) serious neglect or misfeasance by Executive in performance of Executive’s duties that, in the reasonable judgment of the Board, has resulted in, or may reasonably be expected to have, an adverse effect on the business or reputation of the Company or any of its subsidiaries or affiliates, or (vii) material non-compliance with the terms of this Agreement.

As used herein, the term “Good Reason Event” shall mean (i) a material adverse change in the responsibilities or duties of Executive as set forth in this Agreement without Executive’s prior consent at a time when there are no circumstances pending that would permit the Board to terminate Executive for Cause, (ii) any reduction in the Salary or a material reduction in Executive’s benefits (other than (x) a reduction in Salary that is the result of an administrative or clerical error, and which is cured within 15 business days after the Company receives notice of such failure or (y) a reduction in Salary or benefits that are generally applicable to all members of the Company’s senior management) or (iii) a material breach by the Company of this Agreement that is not cured within 30 days following the Company’s receipt of written notice of such breach from Executive.

(b) Effect of Termination.

(i) Death or Disability. In the event of Termination Upon Death or Termination For Disability pursuant to Sections 4(a)(i) and 4(a)(ii) of this Agreement, Executive (or Executive’s legal representative) shall be entitled to receive in cash the following:

(A) an amount equal to any earned but unpaid Salary owing by the Company to Executive as of the Termination Date (the “Accrued Salary”).

(B) to the extent set forth in any written management bonus plan, an amount equal to the pro rata portion, determined as of the Termination Date, of any bonus to which Executive would have been entitled had Executive been employed by the Company at the time such bonus would have otherwise been paid (the “Accrued Bonus”).

(C) The shares of unvested Common Stock subject to the Award shall will become fully vested and non-forfeitable as of the Termination Date.

Nothing contained herein shall be deemed to limit or abrogate any insurance or other similar benefits available to Executive.

(ii) Termination For Cause. In the event of a Termination For Cause pursuant to Section 4(a)(iii) of this Agreement, Executive shall be entitled to receive in cash an amount equal to any Accrued Salary.


(iii) Termination Without Cause and Resignation For Good Reason. In the event of Termination Without Cause or Resignation For Good Reason pursuant to Sections 4(a)(iv) and 4(a)(vi) of this Agreement, Executive shall be entitled to receive in cash, subject to Section 4(c)(ii) of this Agreement:

(A) an amount equal to any Accrued Salary;

(B) an amount equal to any Accrued Bonus;

(C) an amount equal to one-twelfth of Executive’s annual Salary hereunder (at the rate then in effect) payable monthly for the period commencing on the Termination Date and ending 12 months after the Termination Date (collectively, the “Severance Payments”); and

(E) The shares of unvested Class A Common Stock subject to the Award shall become fully vested and non-forfeitable as of the Termination Date.

(iv) Resignation Without Good Reason. In the event of Resignation Without Good Reason pursuant to Section 4(a)(v) of this Agreement, Executive shall be entitled to receive in cash an amount equal to any Accrued Salary.

(v) Upon Termination For Any Reason. In the event of any termination, Executive shall be entitled to receive:

(A) any unpaid reasonable, reimbursable business expenses incurred by Executive in the course of performing Executive’s duties under this Agreement that were incurred in a manner consistent with the Company’s policies in effect from time to time with respect to travel, entertainment and other business expenses, subject to the Company’s requirements with respect to incurring, reporting and documenting such expenses; and

(B) benefits under the Company’s benefit plans of general application as shall be determined under the provisions of those plans.

(c) Additional Provisions.

(i) Any amounts to be paid pursuant to this Section 4 shall be paid in accordance with the Company’s existing payroll or bonus payment practices, as applicable.


(ii) As a condition to the Company’s obligations, if any, to make any Accrued Bonus and Severance Payments provided under this Section 4, Executive shall have executed, delivered and not revoked a general release in the form attached hereto as Exhibit A.

(iii) Notwithstanding any provision of this Agreement, the obligations and commitments under Section 5 of this Agreement shall survive and continue in full force and effect in accordance with their terms notwithstanding any termination of Executive’s employment for any reason or termination of this Agreement for any reason.

(iv) Notwithstanding anything in this Agreement to the contrary, the Company shall have no obligation to pay any amounts payable under Sections 4(b)(i)(A), 4(b)(iii)(B) or 4(b)(iii)(C) of this Agreement during such times as Executive is in breach of Section 5 of this Agreement, after the Company provides Executive with notice of such breach.

(v) Executive agrees that termination of Executive’s employment for any reason shall, with no further action by Executive required, constitute Executive’s resignation, as of the Termination Date and to the extent applicable, from all positions as an officer, director or representative of the Company and any subsidiary or affiliate of the Company.

(vi) Any unvested shares of Class A Common Stock subject to the Award shall become fully vested and non-forfeitable in the event that Michael Kosloske ceases to be either the Chief Executive Officer of the Company or the Chairman of the Company’s board of directors.

Section 5. Noncompetition, Nonsolicitation And Confidentiality.

(a) Definitions.

Company’s Business” means (i) developing and administering web-based individual health insurance plans and ancillary health insurance products, (ii) designing and structuring data-driven insurance products on behalf of the Company’s insurance carrier, (iii) marketing insurance products through the Company’s distribution networks, (iv) managing member relations through the Company’s technology platform, and (v) any other business or commercial activity conducted on or after the Effective Date, in each case as conducted by the Company or any subsidiary or affiliate of the Company.

Competitor” means any company, other entity or association or individual that directly or indirectly is engaged in the Company’s Business.

Confidential Information” means any confidential information with respect to the Company’s Business and/or the businesses of its clients or customers, including, but not limited to: the trade secrets of the Company;


products or services; standard proposals; standard submissions, surveys and analyses; Commercial Lines Quality Assurance Manual; Claims Services Department Procedures and Quality Assurance Manual; Surety Quality Assurance Manual; policy forms; fees, costs and pricing structures; marketing information; advertising and pricing strategies; analyses; reports; computer software, including operating systems, applications and program listings; flow charts; manuals and documentation; data bases; all copyrightable works; the Company’s existing and prospective clients and customers, their addresses or other contact information and/or their confidential information; existing and prospective client and customer lists and other related data; expiration periods; policy numbers; coverage specifications; daily reports and related correspondence; premium renewal notices; and all similar and related information in whatever form. The term Confidential Information does not include, and there shall be no obligation hereunder with respect to, information that (i) is generally available to the public on the date of this Agreement, (ii) becomes generally available to the public other than as a result of a disclosure by Executive not otherwise permissible hereunder or (iii) Executive learns from other sources where, to Executive’s knowledge, such sources have not violated their confidentiality obligation to the Company or any other applicable obligation of confidentiality.

(b) Noncompetition. Executive covenants and agrees that during the period commencing on the Effective Date and ending two years following the Termination Date (the “Restricted Period”), Executive will not, directly or indirectly, own, manage, operate, control, render service to, or participate in the ownership, management, operation or control of any Competitor anywhere in the United States of America; provided, however, that Executive shall be entitled to own shares of stock of any corporation having a class of equity securities actively traded on a national securities exchange or on the Nasdaq Stock Market which represent, in the aggregate, not more than 1% of such corporation’s fully-diluted shares.

(c) Nonsolicitation of Employees. Executive covenants and agrees that during the Restricted Period, Executive will not, directly or indirectly, employ or solicit, or receive or accept the performance of services by any then current officer, manager, employee or independent contractor of the Company or any subsidiary or affiliate of the Company, or in any way interfere with the relationship between the Company or any subsidiary or affiliate of the Company, on the one hand, and any such officer, manager, employee or independent contractor, on the other hand.

(d) Nonsolicitation of Customers and Vendors. Executive covenants and agrees that during the Restricted Period, Executive will not, directly or indirectly, induce, or attempt to induce, any customer, salesperson, distributor, supplier, vendor, manufacturer, representative, agent, jobber, licensee or other person transacting business with the Company or any subsidiary or affiliate of the Company (collectively the “Customers” and “Vendors”) to reduce or cease doing business with the Company or any such subsidiary or affiliate of the


Company, or in any way to interfere with the relationship between any such Customer or Vendor, on the one hand, and the Company or any subsidiary or affiliate of the Company, on the other hand.

(e) Representations and Covenants by Executive. Executive represents and warrants that: (i) Executive’s execution, delivery and performance of this Agreement do not and will not conflict with, breach, violate or cause a default under any contract, agreement, instrument, order, judgment or decree to which Executive is a party or by which Executive is bound; (ii) Executive is not a party to or bound by any employment agreement, noncompete agreement or confidentiality agreement with any other person or entity (other than the Company) and Executive is not subject to any other agreement that would prevent Executive from performing Executive’s duties for the Company or otherwise complying with this Agreement; (iii) Executive is not subject to or in breach of any nondisclosure agreement, including any agreement concerning trade secrets or confidential information owned by any other party; and (iv) upon the execution and delivery of this Agreement by the Company, this Agreement shall be the valid and binding obligation of Executive, enforceable in accordance with its terms.

(f) Nondisclosure of Confidential Information. Executive hereby acknowledges and represents that Executive has consulted with independent legal counsel regarding Executive’s rights and obligations under this Agreement and that Executive fully understands the terms and conditions contained herein and Executive agrees that Executive will not, directly or indirectly: (i) use, disclose, reverse engineer or otherwise exploit for Executive’s own benefit or for the benefit of anyone other than the Company the Confidential Information except as authorized by the Company; (ii) during Executive’s employment with the Company, use, disclose, or reverse engineer (x) any confidential information or trade secrets of any former employer or third party, or (y) any works of authorship developed in whole or in part by Executive during any former employment or for any other party, unless authorized in writing by the former employer or third party; or (iii) upon Executive’s resignation or termination (x) retain Confidential Information, including any copies existing in any form (including electronic form), that are in Executive’s possession or control, or (y) destroy, delete or alter the Confidential Information without the Company’s consent. Notwithstanding the foregoing, Executive may use the Confidential Information in the course of performing Executive’s duties on behalf of the Company or any subsidiary or affiliate of the Company as described hereunder, provided that such use is made in good faith. Executive will immediately surrender possession of all Confidential Information to Company upon any suspension or termination of Executive’s employment with Company for any reason.

(g) Inventions and Patents. Executive acknowledges that all (i) inventions, innovations, improvements, developments, methods, designs, analysis, drawings, reports, processes, novel concepts and all similar or related information (whether or not patentable) that relate to the Company’s or any of its subsidiary’s or affiliate’s actual or anticipated businesses, (ii) research and


development and (iii) existing or future products or services that are, to any extent, conceived, developed or made by Executive while employed by the Company or any subsidiary or affiliate of the Company (“Work Product”) belong to the Company or such subsidiary or affiliate. Executive shall promptly disclose such Work Product to the Board and perform all actions reasonably necessary or requested by the Board (whether during or after the Term) to establish and confirm such ownership (including, without limitation, executing assignments, consents, powers of attorney and other instruments).

(h) Miscellaneous.

(i) Executive acknowledges that (x) Executive’s position is a position of trust and responsibility with access to Confidential Information of the Company, (y) the Confidential Information, and the relationship between the Company and each of its employees, Customers and Vendors, are valuable assets of the Company and may not be converted to Executives own use and (z) the restrictions contained in this Section 5 are reasonable and necessary to protect the legitimate business interests of the Company and will not impair or infringe upon Executive’s right to work or earn a living after Executive’s employment with the Company ends.

(ii) Each of the foregoing obligations shall be enforceable independent of any other obligation, and the existence of any claim or cause of action that Executive may have against the Company, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of these obligations.

(iii) Executive acknowledges that monetary damages will not be an adequate remedy for the Company in the event of a breach of this Agreement and that it would be impossible for the Company to measure damages in the event of such a breach. Therefore, Executive agrees that, in addition to other rights that the Company may have at law or equity, the Company is entitled, without posting bond, to an injunction preventing Executive from any breach of this Agreement.

(iv) In the event of a breach or violation by Executive during the Restricted Period of any restriction in Section 5(b), (b) or (d) of this Agreement, the Restricted Period shall be tolled until such breach or violation has been cured.

(v) The parties intend to provide the Company with the maximum protection possible with respect to its Customers and Vendors. The parties, however, do not intend to include a provision that contravenes the public policy of any state. Therefore, if any provision of this Section 5 is unlawful, against public policy or otherwise declared void, such provision shall not be deemed part of this Agreement, which otherwise shall remain in full force and effect. If, at the time of enforcement of this


Agreement, a court or other tribunal holds that the duration, scope or area restriction stated herein is unreasonable under the circumstances then existing, the parties agree that the court should enforce the restrictions to the extent it deems reasonable.

(vi) Executive hereby agrees that prior to accepting employment with any other person or entity during the Term or during the Restricted Period following the Termination Date, Executive will provide such prospective employer with written notice of the existence of this Agreement and the provisions of this Section 5 of this Agreement, with a copy of such notice delivered simultaneously to the Company in accordance with Section 10 of this Agreement.

(vii) Notwithstanding any provision of this Agreement, the obligations and commitments of this Section 5 shall survive and continue in full force and effect in accordance with their terms notwithstanding any termination of Executive’s employment for any reason or termination of this Agreement for any reason.

Section 6. Withholding Taxes. Prior to making any payments required to be made pursuant to this Agreement, the Company may require that the Company be reimbursed in cash for any taxes required by any government to be withheld or otherwise deducted and paid by the Company in respect of such payment by the Company. In lieu thereof, the Company shall have the right to withhold the amount of such taxes from any sums due or to become due from it to Executive.

Section 7. Expenses. In the event of any legal action to enforce Executive’s or the Company’s rights under this Agreement, each party will be responsible for that party’s attorneys’ fees, expenses and disbursements.

Section 8. Assignment. This Agreement is binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns. Executive shall not assign or transfer any rights or obligations hereunder. The Company shall have the right to assign or transfer any rights or obligations hereunder only to (a) a successor entity in the event of a merger, consolidation, or transfer or sale of all or substantially all the assets of the Company or (b) an affiliate of the Company. Any purported assignment, other than as provided above, shall be null and void.

Section 9. Indemnification. The Company shall indemnify Executive for any act or omission done or not done in performance of Executive’s duties hereunder in accordance with the Company’s by-laws to the extent provided for any other officer or member of the Board of the Company. The Company’s obligations under this Section 9 shall survive any termination of this Agreement or Executive’s employment hereunder.


Section 10. Notices. All notices, requests, consents and other communications required or permitted to be given hereunder, shall be in writing and shall be delivered personally or sent by prepaid telegram, telex, facsimile transmission, overnight courier or mailed, first class, postage prepaid by registered or certified mail, as follows:

 

If to the Company:   

Health Insurance Innovations, Inc.

15438 N. Florida Avenue, Suite 201

Tampa, Florida, 33613

Attention: Michael Hershberger

Telecopy: (877) 376-5832

   with a copy to (which shall not constitute notice hereunder): Gary Raeckers
If to Executive:    To Executive’s address as reflected on the payroll records of the Company

or such other address as either party shall designate by notice in writing to the other in accordance herewith. Any such notice shall be deemed given when so delivered personally, by telex, facsimile transmission or telegram, or if sent by overnight courier, one day after delivery to such courier by the sender or if mailed, five days after deposit by the sender in the U.S. mails.

Section 11. Entire Agreement. This Agreement shall constitute the entire agreement between Executive and the Company concerning the subject matter hereof. This Agreement supersedes and preempts any prior employment agreement or other understandings, agreements or representations by or among the parties, written or oral, that may have related to the subject matter hereof. No provisions of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing, signed by Executive and an authorized officer of the Company.

Section 12. Governing Law. This Agreement shall be subject to and governed by the laws of the State of Florida, without giving effect to the principles of conflicts of law under Florida law irrespective of the fact that the parties now or at any time may be residents of or engage in activities in a different state. Employee agrees that in the event of any dispute or claim arising under this Agreement, jurisdiction and venue shall be vested and proper, and Employee hereby consents to the jurisdiction of any court sitting in the State of Florida, including a federal district court.

Section 13. Full Settlement. Executive acknowledges and agrees that, subject to the payment by the Company of the benefits provided in this Agreement to Executive, in no event will the Company nor any subsidiary or affiliate thereof be liable to Executive for damages under any claim of breach of contract as a result of the termination of Executive’s employment. In the event of


any such termination, the Company shall be liable only to provide to Executive, or Executive’s heirs or beneficiaries, the benefits specified in this Agreement.

Section 14. Strict Compliance. Executive’s or the Company’s failure to insist upon strict compliance with any provision of this Agreement or the failure to assert any right Executive or the Company may have hereunder shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement. The waiver, whether express or implied, by either party of a violation of any of the provisions of this Agreement shall not operate or be construed as a waiver of any subsequent violation of any such provision.

Section 15. Creditor Status. No benefit or promise hereunder shall be secured by any specific assets of the Company. Executive shall have only the rights of an unsecured general creditor of the Company in seeking satisfaction of such benefits or promises.

Section 16. Section 409A. This Agreement is intended to comply with the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (“Section 409A”), and shall be construed accordingly. Any payments or distributions to be made to Executive under this Agreement upon a separation from service of amounts classified as “nonqualified deferred compensation” for purposes of Section 409A, shall in no event be made or commence until six months after such separation from service if Executive is determined to be a specified Executive of a public company (all as determined under Section 409A). Each payment of nonqualified deferred compensation under this Agreement shall be treated as a separate payment for purposes of Section 409A. Any reimbursements made pursuant to this Agreement shall be paid as soon as practicable but no later than 90 days after Executive submits evidence of such expenses to the Company (which payment date shall in no event be later than the last day of the calendar incurred). The amount of such reimbursements paid and any in-kind benefits the year following the calendar year in which the expense was provided during any calendar year shall not affect the reimbursements paid or in-kind benefits provided in any other calendar year, and the right to any such payments and benefits shall not be subject to liquidation or exchange for another payment or benefit.

Section 17. Cooperation. Executive agrees to provide assistance to and cooperate with the Company upon its reasonable request with respect to matters within the scope of Executive’s duties and responsibilities during the Restricted Period. During such Period, the Company shall, to the maximum extent coordinate or cause any such request with Executive’s other commitments and responsibilities to minimize the degree to which such request interferes with such commitments and responsibilities. The Company agrees that it will reimburse Executive for reasonable documented travel expenses (i.e., travel, meals and lodging) that Executive may incur in providing assistance to the Company hereunder.


Section 18. Non-disparagement. Executive agrees to not make any statements, written or oral, while employed by the Company and thereafter, which would be reasonably likely to disparage or damage the Company, its affiliates or the personal or professional reputation of any present or former employees, officers or members of the managing or directorial boards or committees of the Company or its affiliates. The Company agrees that it will instruct each of its officers and members of its managing board not to make any disparaging communication regarding Executive, and no director, officer or employee of the Company will be authorized on the Company’s behalf to make any such disparaging communications regarding Executive.

Section 19. Recoupment. If the Company is required to prepare an accounting restatement due to the material noncompliance of the Company, as a result of misconduct, with any financial reporting requirement under the securities laws, and if the Executive knowingly or grossly negligently engaged in the misconduct, or knowingly or grossly negligently failed to prevent the misconduct, or if the Executive is one of the individuals subject to automatic forfeiture under, Section 304 of the United States Sarbanes-Oxley Act of 2002 (and not otherwise exempted), the Executive shall reimburse the Company the amount of any payment in settlement of any earned or accrued during the twelve-month period following the first public issuance or filing with the United States Securities and Exchange Commission (whichever first occurred) of the financial document not in compliance with such financial reporting requirement. Such payments shall be subject to repayment to or recoupment (clawback) by the Company in accordance with such policies and procedures as the Committee or Board may adopt from time to time, including policies and procedures to implement applicable law (including. but not limited to Section 954 of the Dodd-Frank Act), stock market or exchange rules and regulations or accounting or tax rules and regulations.

Section 20. Survival. Any provision of this Agreement that is expressly or by implication intended to survive the termination of this Agreement shall survive or remain in effect after the termination of this Agreement.

Section 21. Counterparts. This Agreement may be executed in two or more counterparts, anyone of which need not contain the signature of more than one party, but all such counterparts taken together shall constitute one and the same agreement.


IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first written above.

 

HEALTH INSURANCE INNOVATIONS, INC.
By:   

/s/ Michael W. Kosloske

  Name:   Michael W. Kosloske
  Title:   Chairman, President and Chief Executive Officer

 

EXECUTIVE

/s/ Michael D. Hershberger

Michael D. Hershberger

[SIGNATURE PAGE TO EMPLOYMENT AGREEMENT]


EXHIBIT A

FORM OF RELEASE

This RELEASE (“Release”) is granted effective as of the 13th day of February, 2013 by Michael D. Hershberger (the “Executive”) in favor of Health Insurance Innovations, Inc. (the “Company”) and the other Released Parties (as defined below). This is the Release referred to in the Employment Agreement, dated as of February 13, 2013, between the Company and the Executive (the “Employment Agreement”). The Executive gives this Release in consideration of the Company’s promises and covenants contained in the Employment Agreement, with respect to which this Release is an integral part.

1. Release of the Company. The Executive, for himself, his successors, assigns, attorneys, and all those entitled to assert his rights, now and forever hereby releases and discharges the Company and its respective officers, directors, stockholders, trustees, Executives, agents, parent corporations, subsidiaries, affiliates, estates, successors, assigns and attorneys (the “Released Parties”), from any and all claims, actions, causes of action, sums of money due, suits, debts, liens, covenants, contracts, obligations, costs, expenses, damages, judgments, agreements, promises, demands, claims for attorney’s fees and costs, or liabilities whatsoever, in law or in equity, which the Executive ever had or now has against the Released Parties, arising by reason of or in any way connected with or which may be traced either directly or indirectly to the employment relationship which existed between the Company or any of its parents, subsidiaries, affiliates, or predecessors and the Executive, or the termination of that relationship, that the Executive has, had or purports to have, from the beginning of time to the date of this Release, whether known or unknown, that now exists, no matter how remotely they may be related to the aforesaid employment relationship including but not limited to claims for employment discrimination under federal or state law, except as provided in Paragraph 2; claims arising under Title VII of the Civil Rights Act, 42 U.S.C. § 2000(e), et seq. or the Americans With Disabilities Act, 42 U.S.C. § 12101, et seq.; claims for statutory or common law wrongful discharge, including any claims arising under the Fair Labor Standards Act, 29 U.S.C. § 201, et seq.; claims for attorney’s fees, expenses and costs; claims for defamation; claims for wages or vacation pay; claims for benefits, including any claims arising under the Executive Retirement Income Security Act, 29 U.S.C. § 1001, et seq.; and provided, however, that nothing herein shall release the Company of its obligations to the Executive under the Employment Agreement or any other contractual obligations between the Company or its affiliates and the Executive, or any indemnification obligations to the Executive under the Company’s bylaws or operating agreement or federal, state or local law or otherwise.

2. Release of Claims Under Age Discrimination in Employment Act. Without limiting the generality of the foregoing, the Executive agrees that by


executing this Release, he has released and waived any and all claims he has or may have as of the date of this Release for age discrimination under the Age Discrimination in Employment Act, 29 U.S.C. § 621, et seq. It is understood that the Executive has been advised to consult with an attorney prior to executing this Release; that he in fact has consulted a knowledgeable, competent attorney regarding this Release; that he may, before executing this Release, consider this Release for a period of 21 calendar days; and that the consideration he receives for this Release is in addition to amounts to which he was already entitled. It is further understood that this Release is not effective until seven calendar days after the execution of this Release and that the Executive may revoke this Release within seven calendar days from the date of execution hereof.

The Executive agrees that he has carefully read this Release and is signing it voluntarily. The Executive acknowledges that he has had 21 days from receipt of this Release to review it prior to signing or that, if the Executive is signing this Release prior to the expiration of such 21- day period, the Executive is waiving his right to review the Release for such full 21-day period prior to signing it. The Executive has the right to revoke this release within seven days following the date of its execution by him. However, if the Executive revokes this Release within such seven-day period, no severance benefit will be payable to him under the Employment Agreement and he shall return to the Company any such payment received prior to that date.

THE EXECUTIVE HAS CAREFULLY READ THIS RELEASE AND ACKNOWLEDGES THAT IT CONSTITUTES A GENERAL RELEASE OF ALL KNOWN AND UNKNOWN CLAIMS AGAINST THE COMPANY UNDER THE AGE DISCRIMINATION IN EMPLOYMENT ACT. THE EXECUTIVE ACKNOWLEDGES THAT HE HAS HAD A FULL OPPORTUNITY TO CONSULT WITH AN ATTORNEY OR OTHER ADVISOR OF HIS CHOOSING CONCERNING HIS EXECUTION OF THIS RELEASE AND THAT HE IS SIGNING THIS RELEASE VOLUNTARILY AND WITH THE FULL INTENT OF RELEASING THE COMPANY FROM ALL SUCH CLAIMS.

 

 

Name of Executive: Michael D. Hershberger
Date: February 13, 2013

 

17

Employment Agreement

Exhibit 10.8

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this “Agreement”) is dated as of February 13, 2013, by and between Health Insurance, Innovations, Inc., a Delaware incorporated corporation (the “Company”), and Lori Kosloske (“Executive”).

Recitals

A. In connection with its Offering, as defined in Section 2, the Company intends to enter into this employment agreement with Executive, and Executive desires to be hired by the Company, upon the terms and conditions set forth herein, to become effective on the consummation of the Offering; and

C. The Company and Executive agree to protect the interests of the Company and Company’s customers and Confidential Information that may have been or that may be disclosed to Executive as set forth herein.

Agreement

NOW, THEREFORE, in consideration of the mutual promises made herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, agree as follows:

Section 1. Employment, Duties and Acceptance.

(a) The Company shall employ Executive during the Term (as defined below) as the Chief Compliance Officer. Executive shall be responsible for carrying out the reasonable policies and directives of the Company’s board of managers, and will have such authority and such responsibilities as are consistent with the authority and responsibilities of an executive in the health insurance products industry.

(b) Executive hereby accepts such employment and agrees to render Executive’s services to the Company on a full-time basis and to devote Executive’s full business time and attention to the business and affairs of the Company and any subsidiary or affiliate of the Company. Executive agrees that at all times during the term hereof, Executive will faithfully perform the duties assigned by the Company to the best of Executive’s ability. Executive further agrees to accept election and to serve during all or any part of the Term as an officer, director or representative of any subsidiary or affiliate of the Company, without any compensation therefor other than that specified in this Agreement. Executive shall report directly to the Company’s Chief Executive Officer.


(c) The duties to be performed by Executive hereunder shall be performed primarily at the Company’s principal offices in Tampa, Florida subject to reasonable travel requirements on behalf of the Company. Executive shall be entitled to an annual vacation of 22 days in accordance with the Company’s policies and practices; provided that Executive shall schedule the timing and duration of Executive’s vacations in a reasonable manner taking into account the needs of the business of the Company.

(d) Executive acknowledges that from time to time the Company may promulgate workplace policies and rules. Executive agrees to fully comply with all such policies and rules, and understands that failure to do so may result in a disciplinary action up to and including immediate discharge for Cause.

Section 2. Term. As used herein, the “Term” means the period commencing as of the consummation date of an underwritten public offering of not less than 4,000,000 shares of Company common stock not later than June 1, 2013 (such date of consummation, the “Effective Date”, and such offering, the “Offering”), and ending on December 31, 2013. The Term shall be automatically extended for successive one-year periods unless Executive or the Company gives written notice of termination on or before the 30th day prior to the expiration of any Term of its desire not to renew the Term. Any such renewal shall be upon the terms and conditions set forth herein unless otherwise agreed between the Company and Executive. In the event that the Company gives written notice that it does not intend to renew the Term, following the end of the Term, the Company shall pay to Executive an amount equal to one-twelfth of Executive’s annual Salary hereunder (at the rate then in effect) payable monthly in accordance with the Company’s existing payroll practices for the period commencing on the Termination Date and ending 12 months after the Termination Date. As a condition to the Company’s obligations, if any, to make severance payments under this Section 2, Executive shall have executed, delivered and revoked a general release in the form attached hereto as Exhibit A. For the avoidance of doubt, this Agreement shall have no force or effect until the Effective Date.

Section 3. Compensation. Executive shall be entitled to the following compensation:

(a) The Company agrees to pay to Executive a salary in cash (the “Salary”), as compensation for the services to be performed by Executive, at the rate of $173,325 per calendar year, paid in accordance with the Company’s customary payroll procedures and subject to applicable withholding. During the Term, the Board shall have the right to increase, but not decrease, the Salary. Executive’s salary as in effect from time to time shall constitute the “Salary” for purposes of this Agreement.

 

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(b) The Company shall reimburse Executive for all reasonable expenses incurred by Executive in the course of performing Executive’s duties under this Agreement that are consistent with the Company’s policies in effect from time to time with respect to travel, entertainment and other business expenses, subject to the Company’s requirements with respect to reporting and documentation of such expenses.

(c) Executive shall be eligible to participate in any equity incentive plan to be adopted in connection with the Offering, in accordance with its terms. Executive shall be eligible for an annual bonus and long term incentive awards as determined at the sole discretion of the Company’s board of directors (the “Board”) from time to time.

(d) Executive shall be entitled to all rights and benefits for which Executive shall be eligible under any retirement, retirement savings, profit-sharing, pension or welfare benefit plan, life, disability, health, dental, hospitalization and other forms of insurance and all other so-called “fringe” benefits or perquisites (except for with respect to any plan that provides severance or other similar benefits), on the same terms that the Company provides to any other similarly situated senior Company executive (subject to all restrictions on participation that may apply under federal and state tax laws).

Section 4. Termination.

(a) Events of Termination. Executive’s employment with the Company shall terminate (the date of such termination being the “Termination Date”) immediately upon any of the following:

(i) Executive’s death (“Termination Upon Death”);

(ii) the effective date of a written notice sent to Executive stating the Company’s determination, made in good faith, that due to a mental or physical condition, Executive has been unable and failed to substantially render the services to be provided by Executive to the Company for a period of at least 180 days out of any consecutive 360 days (“Termination For Disability”);

(iii) the effective date of a written notice sent to Executive stating the Company’s determination, made in good faith, that it is terminating Executive’s employment for Cause (as defined below) (“Termination For Cause”);

(iv) the effective date of a notice sent to Executive stating that the Company is terminating Executive’s employment without Cause, which notice can be given by the Company at any time after the Effective Date at the Company’s sole discretion, for any reason or for no reason (“Termination Without Cause”);

 

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(v) the effective date of a notice (other than a notice delivered pursuant to Section 4(a)(vi) of this Agreement) sent to the Company from Executive stating that Executive is electing to terminate Executive’s employment with the Company without Good Reason (“Resignation Without Good Reason”); or

(vi) the effective date of a written notice to Company stating Executive’s determination, made in good faith, that a Good Reason Event (as defined below) has occurred within 30 days preceding such notice and as a consequence Executive is electing to terminate Executive’s employment hereunder for Good Reason (“Resignation For Good Reason”); provided, however, that Executive will give the Company 30 days to cure such Good Reason Event, and if the Company fails to cure such Good Reason Event within 30 days after Executive gives written notice of resignation hereunder, then Executive may immediately terminate Executive’s employment with the Company, and such termination will be a Resignation For Good Reason hereunder; provided, further, that Executive’s termination shall be deemed a Termination For Cause if the Company has delivered to Executive written notice of any act or omission that, if not cured, would constitute Cause at any time preceding the notice provided by Executive hereunder.

As used herein, the term “Cause” shall mean (i) commission of a willful act of dishonesty in the course of Executive’s duties hereunder, (ii) conviction by a court of competent jurisdiction of, or plea of no contest to, a crime constituting a felony or conviction in respect of, or plea of no contest to, any act involving fraud, dishonesty or moral turpitude, (iii) Executive’s performance under the influence of controlled substances (other than those taken pursuant to a medical doctor’s orders), or continued habitual intoxication, during working hours, (iv) frequent or extended, and unjustifiable, absenteeism, (v) Executive’s personal misconduct or refusal to perform duties and responsibilities or to carry out directives of the Company, which, if capable of being cured shall not have been cured, within 5 days after the Company shall have advised Executive in writing of its intention to terminate Executive’s employment, or (vi) material non-compliance with the terms of this Agreement.

As used herein, the term “Good Reason Event” shall mean (i) a material adverse change in the responsibilities or duties of Executive as set forth in this Agreement without Executive’s prior consent at a time when there are no circumstances pending that would permit the Board to terminate Executive for Cause, (ii) any reduction in the Salary or a material reduction in Executive’s benefits (other than (x) a reduction in Salary that is the result of an administrative or clerical error, and which is cured within 15 business days after the Company receives notice of such failure or (y) a reduction in Salary or benefits that are generally applicable to all members of the Company’s senior management) or (iii) a material breach by the Company of this Agreement that is not cured within 30

 

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days following the Company’s receipt of written notice of such breach from Executive.

(b) Effect of Termination.

(i) Death or Disability. In the event of Termination Upon Death or Termination For Disability pursuant to Sections 4(a)(i) and 4(a)(ii) of this Agreement, Executive (or Executive’s legal representative) shall be entitled to receive in cash the following:

(A) an amount equal to any earned but unpaid Salary owing by the Company to Executive as of the Termination Date (the “Accrued Salary”), and

(B) to the extent set forth in any written management bonus plan, an amount equal to the pro rata portion, determined as of the Termination Date, of any bonus to which Executive would have been entitled had Executive been employed by the Company at the time such bonus would have otherwise been paid (the “Accrued Bonus”).

Nothing contained herein shall be deemed to limit or abrogate any insurance or other similar benefits available to Executive.

(ii) Termination For Cause. In the event of a Termination For Cause pursuant to Section 4(a)(iii) of this Agreement, Executive shall be entitled to receive in cash an amount equal to any Accrued Salary.

(iii) Termination Without Cause and Resignation For Good Reason. In the event of Termination Without Cause or Resignation For Good Reason pursuant to Sections 4(a)(iv) and 4(a)(vi) of this Agreement, Executive shall be entitled to receive in cash, subject to Section 4(c)(ii) of this Agreement:

(A) an amount equal to any Accrued Salary;

(B) an amount equal to any Accrued Bonus; and

(C) an amount equal to one-twelfth of Executive’s annual Salary hereunder (at the rate then in effect) payable monthly for the period commencing on the Termination Date and ending 12 months after the Termination Date.

(iv) Resignation Without Good Reason. In the event of Resignation Without Good Reason pursuant to Section 4(a)(v) of this Agreement, Executive shall be entitled to receive in cash an amount equal to any Accrued Salary.

 

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(v) Upon Termination For Any Reason. In the event of any termination, Executive shall be entitled to receive:

(A) any unpaid reasonable, reimbursable business expenses incurred by Executive in the course of performing Executive’s duties under this Agreement that were incurred in a manner consistent with the Company’s policies in effect from time to time with respect to travel, entertainment and other business expenses, subject to the Company’s requirements with respect to incurring, reporting and documenting such expenses; and

(B) benefits under the Company’s benefit plans of general application as shall be determined under the provisions of those plans.

(c) Additional Provisions.

(i) Any amounts to be paid pursuant to this Section 4 shall be paid in accordance with the Company’s existing payroll or bonus payment practices, as applicable.

(ii) As a condition to the Company’s obligations, if any, to make any Accrued Bonus and severance payments provided under this Section 4, Executive shall have executed, delivered and not revoked a general release in the form attached hereto as Exhibit A.

(iii) Notwithstanding any provision of this Agreement, the obligations and commitments under Section 5 of this Agreement shall survive and continue in full force and effect in accordance with their terms notwithstanding any termination of Executive’s employment for any reason or termination of this Agreement for any reason.

(iv) Notwithstanding anything in this Agreement to the contrary, the Company shall have no obligation to pay any amounts payable under Sections 4(b)(i)(B), 4(b)(iii)(B) or 4(b)(iii)(C) of this Agreement during such times as Executive is in breach of Section 5 of this Agreement, after the Company provides Executive with notice of such breach.

(v) Executive agrees that termination of Executive’s employment for any reason shall, with no further action by Executive required, constitute Executive’s resignation, as of the Termination Date and to the extent applicable, from all positions as an officer, director or representative of the Company and any subsidiary or affiliate of the Company.

 

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Section 5. Noncompetition, Nonsolicitation And Confidentiality.

(a) Definitions.

Company’s Business” means (i) developing and administering web-based individual health insurance plans and ancillary health insurance products, (ii) designing and structuring data-driven insurance products on behalf of the Company’s insurance carrier, (iii) marketing insurance products through the Company’s distribution networks, (iv) managing member relations through the Company’s technology platform, and (v) any other business or commercial activity conducted on or after the Effective Date, in each case as conducted by the Company or any subsidiary or affiliate of the Company.

Competitor” means any company, other entity or association or individual that directly or indirectly is engaged in the Company’s Business.

Confidential Information” means any confidential information with respect to the Company’s Business and/or the businesses of its clients or customers, including, but not limited to: the trade secrets of the Company; products or services; standard proposals; standard submissions, surveys and analyses; Commercial Lines Quality Assurance Manual; Claims Services Department Procedures and Quality Assurance Manual; Surety Quality Assurance Manual; policy forms; fees, costs and pricing structures; marketing information; advertising and pricing strategies; analyses; reports; computer software, including operating systems, applications and program listings; flow charts; manuals and documentation; data bases; all copyrightable works; the Company’s existing and prospective clients and customers, their addresses or other contact information and/or their confidential information; existing and prospective client and customer lists and other related data; expiration periods; policy numbers; coverage specifications; daily reports and related correspondence; premium renewal notices; and all similar and related information in whatever form. The term Confidential Information does not include, and there shall be no obligation hereunder with respect to, information that (i) is generally available to the public on the date of this Agreement, (ii) becomes generally available to the public other than as a result of a disclosure by Executive not otherwise permissible hereunder or (iii) Executive learns from other sources where, to Executive’s knowledge, such sources have not violated their confidentiality obligation to the Company or any other applicable obligation of confidentiality.

(b) Noncompetition. Executive covenants and agrees that during the period commencing on the Effective Date and ending two years following the Termination Date (the “Restricted Period”), Executive will not, directly or indirectly, own, manage, operate, control, render service to, or participate in the ownership, management, operation or control of any Competitor anywhere in the United States of America; provided, however, that Executive shall be entitled to own shares of stock of any corporation having a class of equity securities actively

 

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traded on a national securities exchange or on the Nasdaq Stock Market which represent, in the aggregate, not more than 1% of such corporation’s fully-diluted shares.

(c) Nonsolicitation of Employees. Executive covenants and agrees that during the Restricted Period, Executive will not, directly or indirectly, employ or solicit, or receive or accept the performance of services by any then current officer, manager, employee or independent contractor of the Company or any subsidiary or affiliate of the Company, or in any way interfere with the relationship between the Company or any subsidiary or affiliate of the Company, on the one hand, and any such officer, manager, employee or independent contractor, on the other hand.

(d) Nonsolicitation of Customers and Vendors. Executive covenants and agrees that during the Restricted Period, Executive will not, directly or indirectly, induce, or attempt to induce, any customer, salesperson, distributor, supplier, vendor, manufacturer, representative, agent, jobber, licensee or other person transacting business with the Company or any subsidiary or affiliate of the Company (collectively the “Customers” and “Vendors”) to reduce or cease doing business with the Company or any such subsidiary or affiliate of the Company, or in any way to interfere with the relationship between any such Customer or Vendor, on the one hand, and the Company or any subsidiary or affiliate of the Company, on the other hand.

(e) Representations and Covenants by Executive. Executive represents and warrants that: (i) Executive’s execution, delivery and performance of this Agreement do not and will not conflict with, breach, violate or cause a default under any contract, agreement, instrument, order, judgment or decree to which Executive is a party or by which Executive is bound; (ii) Executive is not a party to or bound by any employment agreement, noncompete agreement or confidentiality agreement with any other person or entity (other than the Company) and Executive is not subject to any other agreement that would prevent Executive from performing Executive’s duties for the Company or otherwise complying with this Agreement; (iii) Executive is not subject to or in breach of any nondisclosure agreement, including any agreement concerning trade secrets or confidential information owned by any other party; and (iv) upon the execution and delivery of this Agreement by the Company, this Agreement shall be the valid and binding obligation of Executive, enforceable in accordance with its terms.

(f) Nondisclosure of Confidential Information. Executive hereby acknowledges and represents that Executive has consulted with independent legal counsel regarding Executive’s rights and obligations under this Agreement and that Executive fully understands the terms and conditions contained herein and Executive agrees that Executive will not, directly or indirectly: (i) use, disclose, reverse engineer or otherwise exploit for Executive’s own benefit or for the benefit of anyone other than the Company the Confidential Information except as authorized by the Company; (ii) during Executive’s employment with the

 

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Company, use, disclose, or reverse engineer (x) any confidential information or trade secrets of any former employer or third party, or (y) any works of authorship developed in whole or in part by Executive during any former employment or for any other party, unless authorized in writing by the former employer or third party; or (iii) upon Executive’s resignation or termination (x) retain Confidential Information, including any copies existing in any form (including electronic form), that are in Executive’s possession or control, or (y) destroy, delete or alter the Confidential Information without the Company’s consent. Notwithstanding the foregoing, Executive may use the Confidential Information in the course of performing Executive’s duties on behalf of the Company or any subsidiary or affiliate of the Company as described hereunder, provided that such use is made in good faith. Executive will immediately surrender possession of all Confidential Information to Company upon any suspension or termination of Executive’s employment with Company for any reason.

(g) Inventions and Patents. Executive acknowledges that all (i) inventions, innovations, improvements, developments, methods, designs, analysis, drawings, reports, processes, novel concepts and all similar or related information (whether or not patentable) that relate to the Company’s or any of its subsidiary’s or affiliate’s actual or anticipated businesses, (ii) research and development and (iii) existing or future products or services that are, to any extent, conceived, developed or made by Executive while employed by the Company or any subsidiary or affiliate of the Company (“Work Product”) belong to the Company or such subsidiary or affiliate. Executive shall promptly disclose such Work Product to the Board and perform all actions reasonably necessary or requested by the Board (whether during or after the Term) to establish and confirm such ownership (including, without limitation, executing assignments, consents, powers of attorney and other instruments).

(h) Miscellaneous.

(i) Executive acknowledges that (x) Executive’s position is a position of trust and responsibility with access to Confidential Information of the Company, (y) the Confidential Information, and the relationship between the Company and each of its employees, Customers and Vendors, are valuable assets of the Company and may not be converted to Executives own use and (z) the restrictions contained in this Section 5 are reasonable and necessary to protect the legitimate business interests of the Company and will not impair or infringe upon Executive’s right to work or earn a living after Executive’s employment with the Company ends.

(ii) Each of the foregoing obligations shall be enforceable independent of any other obligation, and the existence of any claim or cause of action that Executive may have against the Company, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of these obligations.

 

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(iii) Executive acknowledges that monetary damages will not be an adequate remedy for the Company in the event of a breach of this Agreement and that it would be impossible for the Company to measure damages in the event of such a breach. Therefore, Executive agrees that, in addition to other rights that the Company may have at law or equity, the Company is entitled, without posting bond, to an injunction preventing Executive from any breach of this Agreement.

(iv) In the event of a breach or violation by Executive during the Restricted Period of any restriction in Section 5(b), (b) or (d) of this Agreement, the Restricted Period shall be tolled until such breach or violation has been cured.

(v) The parties intend to provide the Company with the maximum protection possible with respect to its Customers and Vendors. The parties, however, do not intend to include a provision that contravenes the public policy of any state. Therefore, if any provision of this Section 5 is unlawful, against public policy or otherwise declared void, such provision shall not be deemed part of this Agreement, which otherwise shall remain in full force and effect. If, at the time of enforcement of this Agreement, a court or other tribunal holds that the duration, scope or area restriction stated herein is unreasonable under the circumstances then existing, the parties agree that the court should enforce the restrictions to the extent it deems reasonable.

(vi) Executive hereby agrees that prior to accepting employment with any other person or entity during the Term or during the Restricted Period following the Termination Date, Executive will provide such prospective employer with written notice of the existence of this Agreement and the provisions of this Section 5 of this Agreement, with a copy of such notice delivered simultaneously to the Company in accordance with Section 10 of this Agreement.

(vii) Notwithstanding any provision of this Agreement, the obligations and commitments of this Section 5 shall survive and continue in full force and effect in accordance with their terms notwithstanding any termination of Executive’s employment for any reason or termination of this Agreement for any reason.

Section 6. Withholding Taxes. Prior to making any payments required to be made pursuant to this Agreement, the Company may require that the Company be reimbursed in cash for any taxes required by any government to be withheld or otherwise deducted and paid by the Company in respect of such payment by the Company. In lieu thereof, the Company shall have the right to withhold the amount of such taxes from any sums due or to become due from it to Executive.

 

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Section 7. Expenses. In the event of any legal action to enforce Executive’s or the Company’s rights under this Agreement, each party will be responsible for that party’s attorneys’ fees, expenses and disbursements.

Section 8. Assignment. This Agreement is binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns. Executive shall not assign or transfer any rights or obligations hereunder. The Company shall have the right to assign or transfer any rights or obligations hereunder only to (a) a successor entity in the event of a merger, consolidation, or transfer or sale of all or substantially all the assets of the Company or (b) an affiliate of the Company. Any purported assignment, other than as provided above, shall be null and void.

Section 9. Indemnification. The Company shall indemnify Executive for any act or omission done or not done in performance of Executive’s duties hereunder in accordance with the Company’s by-laws to the extent provided for any other officer or member of the Board of the Company. The Company’s obligations under this Section 9 shall survive any termination of this Agreement or Executive’s employment hereunder.

Section 10. Notices. All notices, requests, consents and other communications required or permitted to be given hereunder, shall be in writing and shall be delivered personally or sent by prepaid telegram, telex, facsimile transmission, overnight courier or mailed, first class, postage prepaid by registered or certified mail, as follows:

 

If to the Company:   

Health Insurance Innovations, Inc.

15438 N. Florida Avenue, Suite 201

Tampa, Florida, 33613

Attention: Lori Kosloske

Telecopy: (877) 376-5832

   with a copy to (which shall not constitute notice hereunder): Gary Raeckers
If to Executive:    To Executive’s address as reflected on the payroll records of the Company

or such other address as either party shall designate by notice in writing to the other in accordance herewith. Any such notice shall be deemed given when so delivered personally, by telex, facsimile transmission or telegram, or if sent by overnight courier, one day after delivery to such courier by the sender or if mailed, five days after deposit by the sender in the U.S. mails.

 

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Section 11. Entire Agreement. This Agreement shall constitute the entire agreement between Executive and the Company concerning the subject matter hereof. This Agreement supersedes and preempts any prior employment agreement or other understandings, agreements or representations by or among the parties, written or oral, that may have related to the subject matter hereof. No provisions of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing, signed by Executive and an authorized officer of the Company.

Section 12. Governing Law. This Agreement shall be subject to and governed by the laws of the State of Florida, without giving effect to the principles of conflicts of law under Florida law irrespective of the fact that the parties now or at any time may be residents of or engage in activities in a different state. Employee agrees that in the event of any dispute or claim arising under this Agreement, jurisdiction and venue shall be vested and proper, and Employee hereby consents to the jurisdiction of any court sitting in the State of Florida, including a federal district court.

Section 13. Full Settlement. Executive acknowledges and agrees that, subject to the payment by the Company of the benefits provided in this Agreement to Executive, in no event will the Company nor any subsidiary or affiliate thereof be liable to Executive for damages under any claim of breach of contract as a result of the termination of Executive’s employment. In the event of any such termination, the Company shall be liable only to provide to Executive, or Executive’s heirs or beneficiaries, the benefits specified in this Agreement.

Section 14. Strict Compliance. Executive’s or the Company’s failure to insist upon strict compliance with any provision of this Agreement or the failure to assert any right Executive or the Company may have hereunder shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement. The waiver, whether express or implied, by either party of a violation of any of the provisions of this Agreement shall not operate or be construed as a waiver of any subsequent violation of any such provision.

Section 15. Creditor Status. No benefit or promise hereunder shall be secured by any specific assets of the Company. Executive shall have only the rights of an unsecured general creditor of the Company in seeking satisfaction of such benefits or promises.

Section 16. Section 409A. This Agreement is intended to comply with the requirements of Section 409A of the Internal Revenue

 

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Code of 1986, as amended (“Section 409A”), and shall be construed accordingly. Any payments or distributions to be made to Executive under this Agreement upon a separation from service of amounts classified as “nonqualified deferred compensation” for purposes of Section 409A, shall in no event be made or commence until six months after such separation from service if Executive is determined to be a specified Executive of a public company (all as determined under Section 409A). Each payment of nonqualified deferred compensation under this Agreement shall be treated as a separate payment for purposes of Section 409A. Any reimbursements made pursuant to this Agreement shall be paid as soon as practicable but no later than 90 days after Executive submits evidence of such expenses to the Company (which payment date shall in no event be later than the last day of the calendar incurred). The amount of such reimbursements paid and any in-kind benefits the year following the calendar year in which the expense was provided during any calendar year shall not affect the reimbursements paid or in-kind benefits provided in any other calendar year, and the right to any such payments and benefits shall not be subject to liquidation or exchange for another payment or benefit.

Section 17. Cooperation. Executive agrees to provide assistance to and cooperate with the Company upon its reasonable request with respect to matters within the scope of Executive’s duties and responsibilities during the Restricted Period. During such Period, the Company shall, to the maximum extent coordinate or cause any such request with Executive’s other commitments and responsibilities to minimize the degree to which such request interferes with such commitments and responsibilities. The Company agrees that it will reimburse Executive for reasonable documented travel expenses (i.e., travel, meals and lodging) that Executive may incur in providing assistance to the Company hereunder.

Section 18. Non-disparagement. Executive agrees to not make any statements, written or oral, while employed by the Company and thereafter, which would be reasonably likely to disparage or damage the Company, its affiliates or the personal or professional reputation of any present or former employees, officers or members of the managing or directorial boards or committees of the Company or its affiliates. The Company agrees that it will instruct each of its officers and members of its managing board not to make any disparaging communication regarding Executive, and no director, officer or employee of the Company will be authorized on the Company’s behalf to make any such disparaging communications regarding Executive.

 

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Section 19. Recoupment. If the Company is required to prepare an accounting restatement due to the material noncompliance of the Company, as a result of misconduct, with any financial reporting requirement under the securities laws, and if the Executive knowingly or grossly negligently engaged in the misconduct, or knowingly or grossly negligently failed to prevent the misconduct, or if the Executive is one of the individuals subject to automatic forfeiture under, Section 304 of the United States Sarbanes-Oxley Act of 2002 (and not otherwise exempted), the Executive shall reimburse the Company the amount of any payment in settlement of any earned or accrued during the twelve-month period following the first public issuance or filing with the United States Securities and Exchange Commission (whichever first occurred) of the financial document not in compliance with such financial reporting requirement. Such payments shall be subject to repayment to or recoupment (clawback) by the Company in accordance with such policies and procedures as the Committee or Board may adopt from time to time, including policies and procedures to implement applicable law (including. but not limited to Section 954 of the Dodd-Frank Act), stock market or exchange rules and regulations or accounting or tax rules and regulations.

Section 20. Survival. Any provision of this Agreement that is expressly or by implication intended to survive the termination of this Agreement shall survive or remain in effect after the termination of this Agreement.

Section 21. Counterparts. This Agreement may be executed in two or more counterparts, anyone of which need not contain the signature of more than one party, but all such counterparts taken togethe