Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers
(b)(c)The Board of Directors (the “Board”) of Magellan Health, Inc. (the “Company”) has appointed Kenneth J. Fasola, 60, as Chief Executive Officer of the Company, and member of the Board, effective as of November 14, 2019. In connection with his appointment as Chief Executive Officer, on October 31, 2019, Mr. Fasola and the Company entered into an employment agreement described below. As previously disclosed, Barry M. Smith will step down as a member of the Board and Chief Executive Officer of the Company, effective as of November 14, 2019. We thank Mr. Smith for his many years of service to the Company and its shareholders.
Mr. Fasola currently serves as Chief Growth Officer, Ancillary and Individual, at UnitedHealthcare. Previously, Mr. Fasola served as Chairman, President and Chief Executive Officer of HealthMarkets, Inc., one of the largest health insurance agencies in the U.S. and a subsidiary of UnitedHealth Group, from October 2010 through April 2019. Prior to joining HealthMarkets, Mr. Fasola was responsible for Humana’s individual major medical, specialty and supplemental insurance operations. Prior to that, he was Chief Executive Officer for Secure Horizons, a division of UnitedHealth Group and the nation’s largest Medicare Advantage insurer. Additionally he served as chief executive officer of UnitedHealth Care’s Central region and as national sales officer and president of UnitedHeath Care lines of business. He holds a BS in Health Planning and Administration from Pennsylvania State University.
(e)
Employment Agreement with Mr. Fasola
On October 31, 2019, the Company entered into an employment agreement with Mr. Fasola (the “Employment Agreement”), effective as of November 14, 2019, for a one-year term, with automatic annual renewals, unless sooner terminated by either party. Mr. Fasola’s annual base salary will be $1,000,000, and his annual target bonus opportunity under the Company’s Incentive Compensation Plan is 100% of his base salary, with the ability to earn up to 200% based on achieving specified performance goals.
Mr. Fasola will receive a grant of restricted stock units (“RSUs”) with a value of $2,000,000 on the date of grant and performance-based restricted stock units (“PSUs”) with a value of $2,000,000 on the date of grant (collectively, the “Grant”), on the first business day of the month following the month of commencement of his employment. The Company will also grant Mr. Fasola a sign-on bonus equal to $750,000 (the “Sign-on Bonus”), payable within 30 days following the date of commencement of Mr. Fasola’s employment. If Mr. Fasola is terminated for “cause” or he resigns without “good reason” (each as defined in the agreement) prior to the first anniversary of the commencement of his employment, he must repay the entire Sign-on Bonus within 30 days following receipt of written notice from the Company. Beginning with calendar year 2020, Mr. Fasola will also be entitled to receive equity awards under the Company’s incentive plan on terms at least as favorable as other similarly situated senior level executives, and his annual target value for 2020 for his equity award shall be 400% of his base salary.
If the Company terminates Mr. Fasola’s employment without cause, or Mr. Fasola terminates his employment for good reason, then, subject to the execution of a release of claims in favor of the Company: (i) the Company will pay him an amount equal to 1.5 times the sum of his (x) base salary plus (y) target bonus, payable over a period of 18 months following termination, (ii) a pro-rated bonus for the year of termination based on actual performance, (iii) the Company will reimburse him for a portion of premiums for continued health plan coverage for 18 months, and (iv) the RSUs automatically vest in full upon termination and the PSUs will become vested and settle when they otherwise would have if the Executive had remained employed for the term of the PSUs. In addition, if Mr. Fasola’s employment is terminated by the Company without cause or if he resigns for good reason on or prior to and in connection with, or within two years after, a change in control of the Company (as defined in the agreement), then in addition to the severance described above and subject to the execution of a release of claims in favor of the Company the Company will pay him a lump sum payment equal to 1.5 times the sum of his (x) base salary plus (y) target bonus.
The foregoing description of the Employment Agreement is qualified in its entirety by reference to the complete text of the Employment Agreement, which is attached hereto as Exhibit 10.1 to this Current Report on Form 8-K.
