Notwithstanding anything to the contrary set forth in any of our previous or future filings under the Securities Act of 1933, as amended, (the “Securities Act”) or the Securities Exchange Act of 1934 (the “Exchange Act”), that might incorporate this proxy statement or future filing with the SEC, in whole or in part, the following report shall not be deemed incorporated by reference into any such filing.
The Audit Committee operates pursuant to a charter which is reviewed annually by the Audit Committee. Our management is responsible for the preparation, presentation and integrity of our financial statements, the application of accounting and financial reporting principles and our internal controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations. The independent registered public accounting firm is responsible for auditing our financial statements, and expressing an opinion as to their conformity with accounting principles generally accepted in the United States.States and auditing management’s assessment of the effectiveness of internal control over financial reporting.
The undersigned members of the Audit Committee of the Board of Directors of Evolent Health, Inc. submit this report in connection with the committee’s review of the financial reports for the fiscal year ended December 31, 2016,2018 as follows:
Based on the review and discussions referred to above, the Audit Committee recommended to the Board that the audited financial statements of Evolent Health, Inc. and Evolent Health LLC be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016,2018, for filing with the SEC.
CORPORATE GOVERNANCE AND BOARD STRUCTURE
Board of Directors Meetings and Committees
The Board met eight11 times during 2016.2018. Each incumbent member of the Board attended 75% or more of the meetings of the Board and of the committees on which he or she served that were held during the period for which he or she was a director or committee member, respectively. We do not have a policy on director attendance at our Annual Meeting. None of our directors other than Mr. Williams attended our 20162018 annual meeting of stockholders.
Standing committees of our Board include the Audit Committee, the Compensation Committee, the Nominating and Governance Committee and the Compliance and Regulatory Affairs Committee. The principal functions of each of these committees are briefly described below. The Company’s Audit Committee, Compensation Committee and Nominating and Governance Committee are fully independent under the applicable NYSE listing standards and rules of the SEC. The current charters for each of the Audit Committee, Compensation Committee, Nominating and Governance Committee and Compliance and Regulatory Affairs Committee are available on our website at www.evolenthealth.com.
Loss |
| | | | |
| | | Nominating and | Compliance and |
Director | Audit | Compensation | Corporate Governance | Regulatory Affairs |
Frank Williams | | | | |
Seth Blackley | | | | |
Michael D’Amato | | x | | |
M. Bridget Duffy, MD | | | x | x |
David M. Farner | | | | |
Bruce Felt | x* | | | |
Matthew Hobart | | x* | x* | |
Diane Holder | | | | x* |
Norman Payson, MD** | | | | x |
Kenneth Samet | x | | x | |
Cheryl Scott | x | x | | |
Number of Meetings | 4 | 4 | 2 | 3 |
x = Current Committee Member
* = Chair
** = Dr. Payson will not stand for reelection following the expiration of Controlled Company Status
Until October 3, 2016,his term at the Company was a controlled company under the NYSE corporate governance standards. Under the NYSE standards, a controlled company may elect not to comply with certain NYSE corporate governance standards, including: (1) the requirement that a majority of the board of directors consist of independent directors, (2) the requirement that the Company have a nominating/corporate governance committee that is composed of entirely independent directors, and (3) the requirement that the Company have a compensation committee that is composed of entirely independent directors. While it was a controlled company, the Company elected to utilize these exemptions. The Company is in a transition period and does not yet have a majority independent board. The Company intends to meet the majority independence requirement by the one-year anniversary of its loss of controlled company status. The Company’s Audit Committee, Compensation Committee and Nominating and Governance Committee are fully independent under the applicable NYSE listing standards and rules of the SEC.Annual Meeting
Audit Committee
Our Audit Committee currently consists of Bruce Felt (Chair), Cheryl Scott and Kenneth Samet. In 2016,2018, the Audit Committee met four times. The Audit Committee, among other things:
Oversees the quality and integrity of our financial statements and accounting practices;
Selects and appoints an independent registered public accounting firm, such appointment to be ratified by stockholders at our Annual Meeting;
Pre-approves all services to be provided to us by our independent registered public accounting firm;
Reviews and evaluates the qualification, performance, fees and independence of our registered public accounting firm;
Reviews with our independent registered public accounting firm and our management the plan and scope of the accounting firm’s proposed annual financial audit and quarterly review, including the procedures to be utilized;
Reviews with our independent registered public accounting firm and our management the accounting firm’s significant findings and recommendations upon the completion of the annual financial audit and quarterly reviews;
Oversees our internal audit function;
Reviews our annual and interim financial statements, the report of our independent registered public accounting firm on our annual financial statements, Management’s Report on Internal Control over Financial Reporting and the disclosures under Management’s Discussion and Analysis of Financial Condition and Results of Operations in our periodic reports and other filings with the SEC;
Meets with our independent registered public accounting firm and our management regarding our internal controls, critical accounting policies and practices and other matters;
Discusses earnings releases and reports to rating agencies with our management;
Assists our board in the oversight of our financial structure, financial condition and capital strategy;
Administers our policy governing related party transactions; and
Oversees our compliance program, response to regulatory actions involving financial, accounting and internal control matters, internal controls and risk assessment policies.
The Board has determined that Bruce Felt qualifies as an “audit committee financial expert,”expert”, as such term is defined in the rules of the SEC, and that Bruce Felt, Cheryl Scott and Kenneth Samet meet the standards of independence
required by SEC rules and NYSE listing standards applicable to members of audit committees; the Company’s Audit Committee is fully independent.
Compensation Committee
From January 1, 2016, through September 21, 2016, ourThe Compensation Committee consistedcurrently consists ofMichael D’Amato, Matthew Hobart (Chair) and Diane Holder. Under the NYSE Rules, upon ceasing to qualify as a controlled company, a company’s compensation committee must include at least one independent director, and within 90 days of ceasing to qualify as a controlled company, a company’s compensation committee must be comprised of a majority of independent directors. A company’s compensation committee must be fully independent by the one-year anniversary of its loss of controlled company status. In connection with this requirement, effective as of September 21, 2016, Diane Holder resigned from our Compensation Committee and was replaced by Cheryl Scott, and effective as of December 14, 2016, Michael D’Amato resigned from our Compensation Committee and was replaced by Bruce Felt. The Board has determined that each of Bruce Felt, Matthew Hobart and Cheryl Scott meet the standards of independence required by SEC rules and NYSE listing standards applicable to members of compensation committees; the Company’s Compensation Committee is fully independent.
Scott. The Compensation Committee met four times in 2016.2018. The Compensation Committee, among other things:
Sets and reviewreviews our general policy regarding executive compensation;
Determines the compensation (including salary, bonus, equity-based grants and any other long-term cash compensation) of our chief executive officer and our other senior executives;
Oversees our disclosure regarding executive compensation;
Administers our executive bonus and equity-based incentive plans;
Reviews and makes recommendations to our board with respect to non-employee director compensation; and
Assesses the independence of compensation consultants, legal counsel and other advisors to the Compensation Committee and hires, approves the fees and oversees the work of, and terminates the services of such advisors.
Except as prohibited by law, applicable regulations of the NYSE, our Chartercharter or our second amended and restated by-laws, the compensation committee may delegate its responsibilities to subcommittees or individuals.
The Board has determined that all members of the Compensation Committee meet the standards of independence required by SEC rules and NYSE listing standards applicable to service on compensation committees; the Company’s Compensation Committee is fully independent.
Compensation Consultant
The Compensation Committee has the authority under its charter to retain outside consultants or advisors, as it deems necessary or advisable. In accordance with this authority, the Compensation Committee has directly engaged Exequity LLP (“Exequity”) as its independent compensation consultant to provide it with objective and expert analyses, advice and information with respect to executive compensation. All executive compensation services provided by Exequity were directed or approved by the Compensation Committee, and Exequity reports directly to the Compensation Committee on this assignment. Exequity attended a portion of each of the Compensation Committee meetings during 2016.2018. The Compensation Committee has concluded that no conflict of interest exists with Exequity with respect to the services it provided to the Compensation Committee during 2016.2018. Exequity did not provide any services to the Company or its management other than services to the CompensationCompensation Committee, and we do not currently expect Exequity to provide other services to the Company while serving as the Compensation Committee’s consultant.
In addition to Exequity, members of our human resources, legal and finance departments support the Compensation Committee in its work management by providing data, analysis and recommendations regarding the Company’s executive and director compensation practices and policies and individual pay recommendations.
Compensation Committee Interlocks and Insider Participation
Michael D’Amato, Bruce Felt, Matthew Hobart Diane Holder and Cheryl Scott served on our Compensation Committee during 2016.2018. None of the members of our Compensation Committee has at any time been an officer or employee of the Company. As described above, Matthew Hobart is a Partnerpartner with TPG and Diane Holder is an Executive Vice President of UPMC, President of the UPMC Insurance Services Division and President and CEO of UPMC Heath Plan.TPG. Michael D’Amato and Matthew Hobart and Diane Holder were appointed to our Board by The Advisory Board TPG and UPMC,TPG, respectively, pursuant to the provisions of our stockholders agreement as described above. Certain transactions involving these parties are described under the heading “Certain Relationships andand Related Party Transactions.”Transactions”. During 2016,2018, none of our executive officers served as a member of the board of directors or a compensation committee of any entity for which a member of our Board or Compensation Committee served as an executive officer.
Nominating and Governance Committee
From January 1, 2016, through December 14, 2016, ourThe Nominating and Governance Committee consistedcurrently consists of Michael D’Amato, David Farner, Bruce Felt, Matthew Hobart Diane Holder, Michael Kirshbaum, Norman Payson, MD,(Chair), Kenneth Samet Cheryl Scott and Frank Williams. Under the NYSE Rules, upon ceasing to qualify as a controlled company, a company’s nominating and corporate governance committee must include at least one independent director, and within 90 days of ceasing to qualify as a controlled company, a company’s nominating and corporate governance committee must be comprised of a majority of independent directors. A company’s nominating and corporate governance committee must be fully independent by the one-year anniversary of its loss of controlled company status. As a result, effective as of December 14, 2016, Michael D’Amato, David Farner, Bruce Felt, Diane Holder, Michael Kirshbaum, Norman Payson, MD, and Frank Williams resigned from our Nominating and Governance Committee.Bridget Duffy, MD. The Board has determined that Matthew Hobart, Kenneth Samet and Cheryl ScottBridget Duffy, MD meet the standards of independence required by SEC rules and NYSE listing standards; the Company’s Nominating and Governance Committee is fully independent.
The Nominating and Governance Committee met two times in 2016.2018. The Nominating and Governance Committee, among other things:
Oversees our corporate governance practices;
Evaluates the composition, size and governance of our Board and its committees and makes recommendations regarding the appointment of directors to our committees;
Considers stockholder nominees for election to our Board;
Evaluates and recommends candidates for election to our Board;
Leads the self-evaluation process of our Board;
Reviews our corporate governance guidelines and provides recommendations to the board regarding possible changes; and
Oversees and monitors general governance matters, including communications with stockholders and regulatory developments relating to corporate governance.
Compliance and Regulatory Affairs Committee
Our Compliance and Regulatory Affairs Committee currently consists of Diane Holder (Chair), Michael KirshbaumNorman Payson, MD and Norman Payson,Bridget Duffy, MD. The Compliance and Regulatory Affairs Committee met three times in 2016.2018. The Compliance and Regulatory Affairs committee, among other things:
Assists our Board in carrying out its responsibilities relating to regulatory compliance and ethics;
Oversees our compliance program;
Reviews and recommends for approval our code of business conduct and ethics;
Oversees our response to regulatory actions, and privacy and security issues; and
Reviews the processes and procedures for reporting concerns by our partners, our employees and our vendors.
GOVERNANCE OF THE COMPANY
We are committed to operating our business under strong and accountable corporate governance practices. Our committee charters, code of business conduct and ethics and corporate governance guidelines are available on our website at www.evolenthealth.com. Any stockholder also may request them in print, without charge, by contacting our Secretary at Evolent Health, Inc., 800 N. Glebe Road, Suite 500, Arlington, VA 22203.
Code of Business Conduct and Ethics
Our Board has adopted a code of business conduct and ethics that applies to all of our directors, officers and other employees, including our principal executive officer, principal financial officer and principal accounting officer. Any waiver of the code for directors or executive officers and any amendment of the code may be made only by our Board. We intend to make disclosures of such waivers or amendments required by SEC rules and NYSE listing standards, if any, through publication on our website, www.evolenthealth.com.
Corporate Governance Guidelines
Our Board has adopted corporate governance guidelines that serve as a flexible framework within which our Board and its committees operate. These guidelines cover a number of areas, including the size and composition of the Board, Board membership criteria and director qualifications, director responsibilities, Board agenda, roles of the Chairman of the Board, Chief Executive Officer and presiding director, meetings of independent directors, committee composition, Board member access to management and independent advisors, director communications with third parties, director compensation, director orientation and continuing education, evaluation of senior management and management succession planning.
Board Leadership Structure
Our Board leadership structure consists of a Chairman of the Board who is also our CEO.
Chief Executive Officer (“CEO”).
Periodically, our Nominating and Governance Committee assesses these roles and the Board leadership structure to ensure the interests of the Company and its stockholders are best served.
Both the Chairman and CEO positions are currently held by Mr. Williams. We also have a Presiding Director selected by the Board in the manner it determines to be in the best interests of the Company’s stockholders. Mr. Felt currently serves as the Presiding Director.
The duties of the Presiding Director include:
Presiding at meetings of the Board at which the Chairman is not present;
Collaborating with the Nominating and Governance Committee and the Compensation Committee to organize and communicate performance evaluations of the Chairman/CEO;
Serving as liaison between the chairman and the independent directors;
Approving information, meeting agendas and meeting schedules sent to the Board;
Calling meetings of the independent directors, as appropriate; and
If requested by major stockholders, ensuring that he or she is available for consultation and direct communication, as appropriate.
Our Board has determined that its current structure, with combined Chairman and CEO roles and a Presiding Director is in the best interests of the Company and its stockholders at this time. A number of factors support the leadership structure chosen by the Board, including, among others:
Mr. Williams has extensive knowledge of all aspects of the Company and its business and risks, its industry and its customers;
Mr. Williams is intimately involved in the day-to-day operations of the Company and is best positioned to elevate the most critical business issues for consideration by the Board;
The Board believes having Mr. Williams serve in both capacities allows him to more effectively execute the Company’s strategic initiatives and business plans and confront its challenges;
A combined Chairman and CEO structure provides the Company with decisive and effective leadership with clearer accountability to our stockholders and customers;
This structure allows one person to speak for and lead the company and the Board;
The combined role is both counterbalanced and enhanced by the effective oversight and independence of our Board, and the independent leadership provided by our Presiding Director; and
In our view, splitting the roles would potentially make our management and governance processes less effective through undesirable duplication of work and possibly lead to a blurring of clear lines of accountability and responsibility.
Board’s Role in Risk Oversight
Our Board plays an active role in overseeing management of our risks. The committees of our Board assist our full Board in risk oversight by addressing specific matters within the purview of each committee. Our Audit Committee focuses on financial compliance (i.e., accounting and financial reporting), as well as internal controls and any audit steps taken in light of material control deficiencies. Our Audit Committee discusses our major financial and other risk exposures and the steps that management has taken to monitor and control such exposures, including the Company’s risk assessment and risk management policies. Our Compensation Committee focuses primarily on risks relating to executive compensation plans and policies. Our Nominating and Governance Committee focuses on reputational and corporate governance risks relating to our company including the independence of our Board. Our Compliance and Regulatory Affairs Committee focuses on our regulatory compliance and corporate ethics. While each of these committees is responsible for evaluating certain risks and overseeing the management of such risks, our full Board remains regularly informed regarding such risks through committee reports and otherwise. In addition, our Board and these committees receive regular reports from our Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, General Counsel and other members of senior management regarding areas of significant risk to us, including operational, strategic, legal and regulatory, financial and reputational risks. We believe the leadership structure of our Board supports and promotes effective risk management and oversight.
Director Independence
Our corporate governance guidelines provide that our Board shall consist of such number of directors who are independent as is required and determined in accordance with applicable laws and regulations and requirements of the NYSE and SEC rules. The Board has determined affirmatively, based upon its review of all relevant facts and circumstances and after considering all applicable relationships of which the Board had knowledge, between or among the directors and the Company or our management (some of such relationships are described in the section of this proxy statement entitled “Certain Relationships and Related Party Transactions”), that each of the following directors and director nominees has no direct or indirect material relationship with us and is independent under the listing standards of the NYSE and SEC rules: Michael D’Amato, Bruce Felt, Matthew Hobart, Kenneth Samet and
Samet, Cheryl Scott.Scott and Bridget Duffy, MD. In determining the independence of Mr. Hobart, who is a Partnerpartner with TPG, our Board considered TPG’s prior investment in the Company and related agreements, but did not view the relationship as materially impacting its independence determination. In determining the independence of Mr. Samet, who is the Chief Executive Officer of MedStar Health, Inc., one of our partners, our Board considered the relationship arising through the ordinary course of business between us and MedStar Health, Inc., but did not view the relationship as materially impacting its independence determination. OurOur corporate governance guidelines provide that the independent directors should hold an executive session at least once a year.
Communications with the Board
Stockholders and other interested parties who wish to communicate with our Board, our Presiding Director Bruce Felt, our independent or non-management directors as a group, any of the committees or any of the individual non-employee directors may do so by sending a letter to the intended recipient, in the care of our Secretary, at Evolent Health, Inc., 800 N. Glebe Road, Suite 500, Arlington, VA 22203. Such correspondence will be relayed to the appropriate director or directors as appropriate. Stockholders may communicate with Mr. Williams and Mr. Blackley, the Board’s sole employee-director,employee-directors, by sending a letter addressed to himthe intended recipient at Evolent Health, Inc., 800 N. Glebe Road, Suite 500, Arlington, VA 22203.
Identification of Director Candidates
On an annual basis, our Board conducts a formal board self-evaluation led by our Nominating and Governance Committee to determine targeted focus areas. Our Board continually assesses and evaluates its composition, taking into account, among other things, the experience, skills, background and diversity of its members. The Nominating and Governance Committee evaluates director candidates in accordance with the director membership criteria described in our corporate governance guidelines and our policy statement regarding director nominations. In addition to satisfying relevant independence standards and the requirements of Section 8 of the Clayton Act, the following are the minimum qualifications that candidates for the Board must possess:
Minimum of 21 years of age at the time they commence their term and will not be eligible for nomination or re-nomination to the Board if they are older than age 75;
Demonstrated reputation for integrity, judgment, acumen, and high professional and personal ethics;
Financial literacy and significant experience at the policy-making level in business, government or the non-profit sector;
Time and ability to make a constructive contribution to the Board, and a clear commitment to fulfilling fiduciary duties and serving the interests of all the Company’s stockholders; and
An expectation of regularly attending meetings, staying informed about the Company and its businesses, participating in the discussions of the Board and its committees, complying with applicable Company policies, and taking an interest in the Company’s businesses and providing advice and counsel to the Chairman and Chief Executive Officer.
The Nominating and Governance Committee reviews a candidate’s qualifications to serve as a member of our Board based on the skills and characteristics of the individual as well as the overall composition of our Board in light of the Company’s current and expected structure and business needs, regulatory requirements, the diversity of viewpoints represented on the Board and committee membership requirements. The Nominating and Governance Committee evaluates a candidate’s professional skills and background, experience at the policy-making level in the business, government or non-profit sectors or as a director of a widely-held public corporation, financial literacy, age, independence and past performance (in the case of incumbent candidates), along with qualities
expected of all directors, including integrity, judgment, acumen, high professional and personal ethics, familiarity with our business and the time and ability to make a constructive contribution to our Board. The Nominating and Governance Committee believes it would be desirable for new candidates to contribute to the variety of viewpoints on the Board, which may be enhanced by a mix of different professional and personal backgrounds and experiences. The Nominating and Governance Committee will consider director candidates recommended by stockholders. The Nominating and Governance Committee considers and reviews all candidates in the same manner regardless of the source of the recommendation. Our second amended and restated by-laws provide that any stockholder of record entitled to vote for the election of directors at the applicable meeting of stockholders may nominate persons for election to our
Board, if such stockholder complies with the applicable notice procedures, which are discussed on page 37 ofunder the heading “Other matters - Stockholder Proposals” in this proxy statement.
Director/Nominee Skills Matrix
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| | | | | | |
| | Finance/ | | CEO/ | | Corporate |
Director/Nominee | Healthcare | Former CFO | Consulting | Former CEO | Technology | Governance |
Frank Williams | x | | x | x | | |
Seth Blackley | x | x | x | | | |
Michael D’Amato | x | x | x | | | |
M. Bridget Duffy, MD | x | | x | x | | x |
David M. Farner | x | x | | | | |
Bruce Felt | | x | | | x | |
Matthew Hobart | x | x | | | | x |
Diane Holder | x | | | x | | |
Norman Payson, MD* | x | | x | x | | |
Kenneth Samet | x | | | x | | x |
Cheryl Scott | x | | | x | | x |
*Dr. Payson will not stand for reelection following the expiration of his term at the Annual Meeting
Executive Sessions of Non-Management Directors
Our corporate governance guidelines provide that the independent directors serving on the Board should hold an executive session at least once a year. In accordance with such guideline, the Board regularly schedules executive sessions. The executive sessions are chaired by our Presiding Director and facilitate candid discussion of the independent directors’ viewpoints regarding the performance of management and the Company.
Anti-HedgingCorporate Governance Policies Related to Compensation and Anti-Pledging PolicyEquity
Please refer to “Compensation Discussion and Analysis-Corporate Governance Policies” beginning on page 24 of this proxy statement for discussion of our policies with respect to prohibiting derivative trading, hedging and pledging and the tax deductibility of compensation.
NoneCOMPENSATION DISCUSSION AND ANALYSIS
Executive Summary
Named Executive Officers (“NEOs”)
This Compensation Discussion and Analysis describes the compensation of our NEOs named in the Summary Compensation Table for 2018:
|
| | |
Name | | Position |
Frank Williams | | Chairman of the Board and CEO |
Seth Blackley | | President |
Nicholas McGrane | | Chief Financial Officer |
Thomas Peterson | | Chief Operating Officer |
Jonathan Weinberg | | General Counsel |
2018 Highlights
Below are highlights of our financial performance in 2018, including revenue and Adjusted EBITDA , which were the performance metrics used for the Company’s 2018 Annual Executive Bonus Plan (the “2018 Bonus Plan”):(1)
Revenue of $627.1 million, an increase of 44.2% compared to 2017; Adjusted Revenue of $632.4 million, an increase of 44.9% compared to 2017
Net income (loss) attributable to Evolent Health, Inc. of $(52.7) million; Adjusted EBITDA of $23.2 million
(1) See Appendix A to this proxy statement, entitled “Use of Non-GAAP Financial Metrics”, for the definitions of Adjusted Revenue and Adjusted EBITDA, and reconciliations to revenue and net income (loss) attributable to Evolent Health, Inc.
Year in Review
We achieved a number of important operational and clinical milestones in 2018 and met our financial objectives on both the top and bottom line while advancing our position as a leading partner for providers in their movement to value-based care. The successes of 2018 include:
Won and launched our first Medicaid plan;
Managed our first fully-owned health plan to a successful and profitable first year;
Addition of approximately 800,000 lives on platform;
Expanded our capabilities with the addition of specialty care management through our acquisition of New Century Health; and
Improved our cost structure via automation and build-out of our Indian subsidiary.
Corporate Governance “Best Practices”
Below is a summary of best practices that we have implemented with respect to the compensation of our NEOs because we believe they support our compensation philosophy and are in the best interests of our Company and our stockholders.
Our compensation is aligned with a pay-for-performance philosophy where a substantial portion of executive officer compensation is at-risk and tied to objective performance objectives.
The Compensation Committee engages an independent compensation consultant.
We prohibit all executives and directors from hedging and pledging our securities, subject to limited exceptions.
We do not typically provide our NEOs with any perquisites not generally available to our other associates.
Since our initial public offering, we only grant equity awards with “double-trigger” vesting.
Our executive officers do not have employment agreements and are not guaranteed salary increases or bonuses.
Our Board and the Compensation Committee greatly value the benefits of maintaining a dialogue with our stockholders to understand their views on our executive compensation program and practices. The Compensation Committee intends to consider the outcome of say-on-pay votes and is devoted to consistently reviewing and enhancing our compensation programs.
Our 2018 Executive Compensation Program and Practices
The Compensation Committee believes that our executive compensation program is appropriately designed to advance stockholder interests through effective performance-based incentives with retention features. The primary components and associated purposes of our compensation program are as follows:
Base Salary - Ongoing cash compensation based on the executive officer’s role and responsibilities, individual job performance and experience. We use base salary to provide the security of a competitive fixed cash payment for services rendered.
Annual Cash Incentives - Annual incentive with target award amounts for each executive officer. Actual cash payouts are linked to achievement of pre-established annual Company goals and individual performance. We use annual cash incentives to motivate exceptional annual performance and support our objectives by tying any award to performance against corporate and individual objectives.
Long-Term Equity Compensation - Restricted stock unit (“RSU”) and stock option awards that generally vest 25% annually over four years. We use RSUs and stock options to retain executives and align their interests with those of our long-term stockholders by motivating them to build stockholder value over the life of the grants and beyond.
Other Benefits - Provide other benefits that are competitive and consistent with the market. We offer general health and welfare benefits. We have not entered into any agreements with our executives that provide cash severance in the event of involuntary termination. Retirement benefits are generally limited to participation in a tax-qualified 401(k) plan, which includes a Company match.
Under our executive compensation program, performance-based incentive compensation comprises a substantial portion of target compensation, and our executive officers have a larger percentage of compensation at-risk than is fixed relative to total compensation. The Compensation Committee considers each component of compensation collectively with other components when establishing the various forms, components, and levels of compensation for our executive officers. In determining the appropriate mix of compensation elements for each executive officer, our compensation program seeks to provide a balance between the various components by rewarding performance through annual performance-based cash incentive compensation that encourages achieving and exceeding annual goals designed to advance our long-term growth strategy and also through long-term equity incentive compensation to align our executive officers’ interests with those of our stockholders.
Objectives of our Executive Compensation Program
Our compensation philosophy for executive officers aims to provide incentives to achieve both short- and long-term business objectives, align the interests of our executive officers and stockholders, and ensure that we can hire and retain talented individuals in a competitive marketplace.
Key objectives of our executive compensation program are as follows:
Attract and retain highly qualified and productive executives.
Motivate executives to enhance our overall performance and profitability through the successful execution of the Company’s short- and long-term business strategies.
Align the long-term interests of our executives have engagedand stockholders through the ownership of Company stock by executives and by rewarding stockholder value creation.
Reflect our pay-for-performance philosophy.
Ensure that compensation opportunities are competitive.
Role of the Compensation Committee and the CEO
The Board has delegated to the Compensation Committee the responsibility of overseeing the administration of the Company’s compensation plans and the preparation of all reports and documents required by the rules and regulations of the SEC. The Compensation Committee annually reviews and approves the corporate goals and objectives upon which the executive compensation program is based. The Compensation Committee evaluates the CEO’s performance in any hedging transactionslight of these goals and objectives. Furthermore, the Compensation Committee reviews and makes recommendations to the Board with respect to any incentive compensation plans, including equity-based plans, to be adopted or submitted to the Company’s stockholders for approval.
The Compensation Committee meets at least quarterly throughout the year and may meet more often, as required to address ongoing events. In 2018, the Compensation Committee met four times. Meeting agendas are determined by the Chair of the Compensation Committee with the assistance of our CEO. Our CEO attended all four Compensation Committee meetings, and representatives from the Compensation Committee’s independent compensation consultant, Exequity, attended all four meetings of the Compensation Committee. At the Compensation Committee meetings, our CEO made recommendations to the Compensation Committee regarding the annual base salary, annual cash incentive compensation, and equity compensation of our NEOs (other than our CEO).
Compensation Setting Process
The Compensation Committee makes compensation determinations for our CEO after consideration of individual and Company performance for the year, along with an examination of external market data of our industry peer group, based on the surveys described below under “Use of Peer Companies”.
The Compensation Committee makes compensation determinations for our NEOs (other than our CEO) based on recommendations made by our CEO, taking into account each NEO’s individual performance (with an assessment of the individual’s accomplishments provided by our CEO) and Company performance, along with an examination of external market data, based on the surveys described below under “Use of Peer Companies”.
Use of Peer Companies
To begin the compensation review process relating to 2018, the Compensation Committee reviewed the Company’s peer group to determine if revisions were needed based on changes affecting either
the Company or any of the peer group companies. Our process focused on reviewing companies within related industries to develop a peer group that balances industry focus and revenue size, among other considerations. The listing of potential peers included companies identified as our peers by Institutional Shareholder Services and was further defined based on business scope and the competitive market for talent.
Based on key metrics for the current peer group and guidance from Exequity, the Compensation Committee determined to keep the peer group intact for 2018. All of the peer companies are publicly traded and demonstrate appropriate revenue size and industry focus or a level of complexity and business model similar to that of ours. At the time of the review, our market capitalization approximated the peer group 43rd percentile, and our revenues approximated the peer group 33rd percentile. The peer group consists of the following companies:
|
| |
The Advisory Board Company(1) | Inovalon Holdings, Inc. |
athenahealth, Inc. | Medidata Solutions, Inc. |
Benefitfocus, Inc. | National Research Corporation |
Castlight Health, Inc. | Navigant Consulting, Inc. |
HealthEquity, Inc. | Premier, Inc. |
HealthStream, Inc. | Quality Systems, Inc. |
HMS Holdings Corp. | Tivity Health, Inc. |
Huron Consulting Group Inc. | Veeva Systems Inc. |
(1) The Advisory Board was acquired by OptumInsight, Inc., a division of UnitedHealth Group Incorporated, in November 2017. The Advisory Board filed a proxy on November 9, 2017 and the Compensation Committee determined that The Advisory Board could remain a viable peer for 2018 review.
Compensation data from public filings of companies in our peer group and from published surveys formed the basis of the competitive benchmarking analysis and pay mix comparison. The data provided a useful reference point in the Compensation Committee’s efforts to align target total executive compensation at the median of our peers, which would afford our NEOs the opportunity to earn above-target level of compensation for exceptional performance that could be expected to increase value for stockholders, while providing that they would earn less than targeted compensation if the Company’s performance failed to meet expectations.
In determining the structure of our executive compensation program, as well as the individual pay levels of our executive officers, the Compensation Committee reviewed competitive market data provided by Exequity, which compared the various elements of compensation provided to our executive officers, relative to compensation paid to individuals holding similar positions at companies in our executive compensation peer group. Exequity worked with management to assess the data and review our compensation practices.
Elements of our Compensation Program
Base Salary
The Compensation Committee reviews executive officer base salaries each year (or otherwise at the time of a new hire or promotion) and makes any adjustments it deems necessary. In setting base salaries, the Compensation Committee considers changes in responsibilities, individual performance, tenure in position, internal pay equity, Company performance, market data for individuals in similar positions and advice from our independent compensation consultant. The Compensation Committee
gives no specific weighting to any one factor in setting the level of base salary and the process ultimately relies on the subjective exercise of the Compensation Committee’s judgment. As part of the annual review process, base salaries for Messrs. Williams, Blackley, McGrane and Peterson remained the same as compared to 2017 because the Compensation Committee determined that market conditions did not warrant any other adjustments while Mr. Weinberg’s salary was increased in July 2018 to bring him more in line with the market median as reflected in the table below.
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| | | | | | | | | | |
Name | 2017 Base Salary | 2018 Base Salary | $ Increase | Rationale |
Frank Williams | $ | 600,000 |
| $ | 600,000 |
| $ | — |
| Market conditions did not warrant increase |
Seth Blackley | $ | 400,000 |
| $ | 400,000 |
| $ | — |
| Market conditions did not warrant increase |
Nicholas McGrane | $ | 375,000 |
| $ | 375,000 |
| $ | — |
| Market conditions did not warrant increase |
Thomas Peterson | $ | 375,000 |
| $ | 375,000 |
| $ | — |
| Market conditions did not warrant increase |
Jonathan Weinberg | $ | 300,000 |
| $ | 350,000 |
| $ | 50,000 |
| Increased in July 2018 to bring more in line with market median |
Annual Cash Incentive Plan
We use our annual bonus program to encourage the achievement of specified strategic and operational objectives. Each of our NEOs was awarded a cash incentive opportunity pursuant to the 2018 Bonus Plan, with the opportunity to earn a cash bonus based on satisfaction of pre-established quantitative and qualitative performance metrics, as well as achievement of individual goals. The 2018 Bonus Plan is funded based on the Company’s achievement of Company performance goals. Payments under the 2018 Bonus Plan to our NEOs are then determined by our Compensation Committee based, in the case of our NEOs other than Mr. Williams, on recommendations made by Mr. Williams, considering the executive’s performance as rated on a five-point scale against predetermined individual performance goals. The Board selected the following individual performance goals for our NEOs and the Company performance goals for the 2018 Bonus Plan: (i) operational standardization and solution expansion; (ii) clinical and financial performance of our partners; (iii) financial metrics (revenue of $610 million to $630 million and Adjusted EBITDA of $22 million to $27 million); (iv) growth through new bookings and expanded partnerships; and (v) optimal and high-performing organization, measured by engagement, talent depth and retention. Each of our NEOs met or exceeded all the corporate goals under the 2018 Bonus Plan. The Committee retains discretion to adjust any payouts based on an assessment of the NEOs’ cumulative performance against their objectives.
Each of our NEOs’ baseline bonus opportunities, which corresponds to three out of five points, or a rating of “meets expectations,” target bonus opportunities, which corresponds to four out of five points, or a rating of “exceeds expectations” and maximum bonus opportunities, which corresponds to five out of five points, or a rating of “exceptional performance,” under the 2018 Bonus Plan are as follows:
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| | | | | | | | | | | | |
Name | | Baseline | | Target | | Maximum |
Frank Williams | | $ | 300,000 |
| | $ | 600,000 |
| | $ | 900,000 |
|
Seth Blackley | | $ | 200,000 |
| | $ | 400,000 |
| | $ | 600,000 |
|
Nicholas McGrane | | $ | 131,250 |
| | $ | 215,625 |
| | $ | 300,000 |
|
Thomas Peterson | | $ | 131,250 |
| | $ | 215,625 |
| | $ | 300,000 |
|
Jonathan Weinberg | | $ | 122,500 |
| | $ | 201,250 |
| | $ | 280,000 |
|
2018 Bonus Plan Payout Results
Our CEO, Mr. Williams, reviewed with the Compensation Committee the performance and impact as compared to the pre-established individual goals for our NEOs (which are described below in “Personal Leadership Assessment”) other than Mr. Williams. The review included a personal leadership assessment, which considered achievement by each officer against pre-determined goals, changes in responsibility levels, and input obtained from other members of the Company’s senior management. With respect to the annual compensation for the Company’s CEO, the Compensation Committee reviewed the quantitative and qualitative goals for the Company and considered information relating to Mr. Williams’ individual performance from other members of the Company’s senior management. Information about the factors considered when determining award payouts is presented below.
Evolent Health, Inc. Financial Performance
We value the link between performance and payout. In establishing the annual incentive program, the quantitative Company financial metrics against which our executives are measured included revenue and Adjusted EBITDA. The Compensation Committee utilized these quantitative Company performance metrics because it believes that they are key determinants of stockholder value and offer a comprehensive and clear measure of the Company’s performance.
|
| | | | |
Metric | | Target | | Actual |
Revenue | | $610M - $630M | | $627.1M |
Adjusted EBITDA | | $22M - $27M | | $23.2M |
Personal Leadership Assessment
The personal leadership assessment included 360-degree feedback to take into account what was accomplished and how it was accomplished. Each NEO is measured against goals in the areas of Compelling Solutions, Client Value, Growth and Organization. Individual goals relating to the decisions for 2018 compensation for each NEO included the following:
Compelling Solutions
Operational standardization driving effectiveness and efficiency.
Solution expansion through clinical innovation, high-output platform development, and M&A.
Client Value
Deliver on-target clinical, administrative and financial results.
Drive partner success, resulting in high satisfaction, retention and growth.
Growth
Set up 2019 topline through same store expansion and new partnerships.
Achieve 2018 operating budget, on track to become cashflow positive in 2019.
Organization
Build a high performing organization, with a focus on leadership, diversity and a differentiated employee experience.
After a thorough review of the Company’s overall performance during 2018, our Compensation Committee, in consultation with our CEO, made the decision to reduce the funding of the 2018 Bonus Plan. While the Company hit baseline targets for revenue and Adjusted EBITDA for 2018, our performance fell short of our stretch targets and did not meet our goals for setting up 2019. As a result of the reduced funding, the Compensation Committee, in its discretion, made the decision to not award annual cash bonuses to our NEOs under the 2018 Bonus Plan.
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| | | | | | | | | | | | |
Name | | Baseline | | Target | | Bonus Payout |
Frank Williams | | $ | 300,000 |
| | $ | 600,000 |
| | $ | — |
|
Seth Blackley | | $ | 200,000 |
| | $ | 400,000 |
| | $ | — |
|
Nicholas McGrane | | $ | 131,250 |
| | $ | 215,625 |
| | $ | — |
|
Thomas Peterson | | $ | 131,250 |
| | $ | 215,625 |
| | $ | — |
|
Jonathan Weinberg | | $ | 122,500 |
| | $ | 201,250 |
| | $ | — |
|
Long-Term Annual Equity Compensation
As part of our annual equity award grants, in January 2018, our Compensation Committee approved the grant of equity-based awards under the Evolent Health, Inc. 2015 Omnibus Incentive Compensation Plan (as amended, the “2015 Plan”) to certain of our employees, including our NEOs, in the form of time-based RSUs and stock options. For our NEOs, 2018 grant amounts were determined and noneestablished to deliver the total target compensation opportunity within an acceptable range of the peer group median for each respective position. The Compensation Committee considers its long-term equity compensation program to be a key component of the executive officer compensation program in order to motivate and reward executive officers over the long term and further align the interests of our executives with those of our stockholders.
Restricted Stock Units
On February 1, 2018, Messrs. Williams, Blackley, McGrane, Peterson and Weinberg each received a grant of time-based RSUs. The amount of RSUs granted was equal to 50% of the targeted grant date value, divided by the closing price of our common stock on the grant date of $13.95. The RSUs vest at a rate of 25% on each of the first four anniversaries of the grant date, subject to the individual’s continued employment through such date. The RSUs are fair value awards that fluctuate with the upward and downward movement of the Company’s stock price. These awards serve to align management’s interest with those of stockholders, while at the same time creating more stability by providing an incentive for holders of RSUs to remain with the Company even if our stock price declines after the grant date.
Stock Options
On February 1, 2018, Messrs. Williams, Blackley, McGrane, Peterson and Weinberg each received a grant of time-based stock options. The amount of options granted was equal to 50% of the targeted grant date value, divided by the Black-Scholes value of the options on the grant date. The stock options vest at a rate of 25% on each of the first four anniversaries of the grant date, subject to the individual’s continued employment through such date. The stock options provide the holder with a strong performance-based incentive, since the value of the stock option depends on an increase in our stock price from the grant date.
Grants of stock-based awards to our NEOs are generally made as part of the broad grant to other Company employees, which occurs annually, typically in the first quarter of the calendar year. The timing of annual grants generally is dictated by the timing of the completion of performance reviews
and the timing of decisions regarding other forms of direct compensation. We do not have engagedany program, plan, or practice to time such awards in coordination with the release of material non-public information. Stock-based awards are made under the terms of the Company’s 2015 Plan and, in the case of stock options, are granted with an exercise price equal to the closing price of our common stock on the grant date, as reported on the NYSE.
The Company calculates the fair value of the stock awards using the Black-Scholes model. The calculations were based on the grant date closing price of the Company’s common stock of $13.95, as reported on the NYSE.
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| | | | | | | | | | |
Name | | RSUs (#) | | Stock Options (#) | | Grant Date Value ($) |
Frank Williams | | 96,774 |
| | 227,273 |
| | $ | 2,700,000 |
|
Seth Blackley | | 86,022 |
| | 101,010 |
| | 1,800,000 |
|
Nicholas McGrane | | 22,401 |
| | 52,609 |
| | 625,000 |
|
Thomas Peterson | | 25,090 |
| | 58,923 |
| | 700,000 |
|
Jonathan Weinberg | | 10,753 |
| | 25,253 |
| | 300,000 |
|
For further information regarding our RSU and stock option awards, see the “Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table” and “Potential Payments Upon Termination or Change of Control”sections of this proxy statement.
Other Benefits
Our NEOs are entitled to employee benefits generally available to all full-time employees of the Company, including health and welfare benefits. In designing these offerings, the Company seeks to provide an overall level of benefits that is competitive with the level of benefits offered by similar companies in the markets in which it operates.
Severance Benefits
Consistent with our policy, we have not entered into any employment or severance agreements with any of our NEOs. As such, we do not have any agreements with any of our NEOs that provide cash payments upon a termination of employment or a change in control of the Company.
Historically, our outstanding equity awards contained “single trigger” and “double trigger” provisions. Awards granted pursuant to the Evolent Health Holdings, Inc. 2011 Equity Incentive Plan (the “2011 Plan”) contained “single trigger” provisions and would have vested upon a change of control of the Company. As of the date of this proxy statement, no “single trigger” awards granted to our NEOs remain unvested. Awards granted pursuant to the 2015 Plan contain “double trigger” provisions and only vest upon a qualifying termination of employment without cause or for good reason that occurs within 12 months following a change of control of the Company. If these provisions are triggered, they will cause certain of the outstanding stock options to become fully exercisable and RSUs to become fully vested, as described below in the “Potential Payments Upon Termination or Change of Control” section of this proxy statement.
Retirement Plans
The Company maintains a qualified defined contribution retirement plan (the “Evolent Health 401(k) Plan”) to allow employees to save for retirement in a tax-efficient manner. The plan is broadly available to eligible employees and does not discriminate in favor of the NEOs or other members of senior
management. All our NEOs are eligible to participate in the Evolent Health 401(k) Plan in the same manner as all U.S. employees. Participants are eligible for a 100% match on 4% of eligible pay, subject to IRS-qualified plan compensation limits and highly compensated threshold limits, and may not receive 401(k) benefits in excess of these limits. None of the NEOs participate in any pledging transactions with respect to our stock. defined benefit pension plans, non-qualified deferred compensation plans or supplemental retirement or executive savings plans.
Corporate Governance Policies
Prohibition on Derivative Trading, Hedging and Pledging
Under our policies, no director, officer or employee may buy or sell puts, calls, other derivative securities of the Company or any derivative securities that provide the economic equivalent of ownership of any of the Company’s securities at any time.
We also have an anti-pledging policy whereby no director, officer or employee may pledge Company securities, unless the pledge has been approved by the Audit Committee.
EXECUTIVE COMPENSATIONPolicy with Respect to Tax Deductibility of Compensation
WeAs part of its role, the Compensation Committee reviews and considers the deductibility of executive compensation under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”). Section 162(m), as in effect prior to 2018, provided that we may not deduct compensation of more than $1,000,000 paid in any year to the CEO or any of the three other most highly compensated officers (excluding the Chief Financial Officer), unless the compensation qualified as “performance-based compensation” under Section 162(m). In connection with granting incentive compensation to the NEOs, the Compensation Committee’s historical practice has been to consider the implications under Section 162(m) while retaining flexibility to design programs that it believes are an “emerging growth company” as definedin the best interests of the Company and its stockholders and consistent with the objectives of our executive compensation programs, including the flexibility to authorize payments that might not be deductible, including payments under the JOBS Act.2018 Bonus Plan. The Tax Cuts and Jobs Act, which was signed into law on December 22, 2017, eliminated the exception for “performance-based” compensation under Section 162(m) with respect to compensation paid in fiscal year 2018 and in future years. As such, we area result, compensation over $1,000,000 paid in fiscal 2018 by the Company to any NEO will be nondeductible under Section 162(m). Beginning in 2019, following a one year transition period from the closing of the Company’s acquisition of True Health New Mexico, Inc. in January 2018 as permitted to meet the disclosure requirements of Item 402 of Regulation S-K by providing the reduced disclosures applicable to “smaller reporting companies,” as such term is defined under the Securities Act,applicable regulations, the Company expects to be subject to Section 162(m)(6) of the Code. This section limits the deductibility of compensation of more than $500,000 paid in any year to any employee of a covered health insurance provider and weits affiliates.
Compensation Program Risk Assessment
As part of its oversight role, the Compensation Committee considers the impact of our compensation program, policies and practices (both at the executive and below-executive levels), on the Company’s overall risk profile. Specifically, the Compensation Committee, with assistance from our CEO, reviews the compensation plans, incentive plan design, incentive payouts and factors that may affect the likelihood of excessive risk taking to determine whether they present a significant risk to the Company. We believe that our pay program provides an effective balance in cash and equity mix and short- and longer-term performance periods, and also allows for the Compensation Committee’s discretion. The Company also maintains policies to mitigate compensation-related risk such as vesting periods on equity, insider-trading prohibitions, and independent Compensation Committee oversight. Based on this review, the Compensation Committee determined that the risks arising from the Company’s compensation policies and practices are not reasonably likely to have electeda material adverse effect on the Company.
COMPENSATION COMMITTEE REPORT
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis set forth above with management. Based on its review and discussion with management, the Compensation Committee recommended to comply with such reduced disclosure requirements.the Board that the Compensation Discussion and Analysis be included in this proxy statement.
Submitted by our Compensation Committee
Matthew Hobart, Chairman
Cheryl Scott
Michael D’Amato
ADDITIONAL EXECUTIVE COMPENSATION INFORMATION
Summary Compensation Table
The following table sets forth information concerning the compensation earned by our chief executive officer, our chief financial officer and our twothree other most highly compensated executive officers, who we refer to as our named executive officers,NEOs, during our fiscal years ended December 31, 2016,2018, December 31, 2017 and December 31, 2015, (other than for2016, except in the case of Mr. Wigginton,McGrane, who was not a named executive officer during fiscal year 2015).NEO in 2016, and Mr. Weinberg, who was not a NEO in 2017 or 2016.
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | Non-Equity | | Nonqualified | | | | | | |
| | | | | | | | | | | | Incentive | | Deferred | | | | | | |
Name and | | | | | | | | Stock | | Option | | Plan | | Compensation | | All Other | | | Total | |
Principal Position | | Year | | Salary ($) | | Bonus ($) | | Awards ($)(1) | | Awards ($)(2) | Compensation ($) | Earnings ($) | Compensation ($)(3) | Compensation ($) |
Frank Williams (Chief | | 2016 | | $ | 500,000 |
| | $ | 600,000 |
| | $ | 500,000 |
| | $ | 1,250,000 |
| | $ | — |
| | $ | — |
| | $ | 10,600 |
| | | $ | 2,860,600 |
| |
Executive Officer)(4) | | 2015 | | 435,000 |
| | 400,000 |
| | — |
| | 1,913,350 |
| | — |
| | — |
| | 10,600 |
| | | 2,758,950 |
| |
Seth Blackley | | 2016 | | 325,000 |
| | 400,000 |
| | 325,000 |
| | 812,500 |
| | — |
| | — |
| | 10,600 |
| | | 1,873,100 |
| |
(President) | | 2015 | | 308,250 |
| | 339,000 |
| | — |
| | 1,125,500 |
| | — |
| | — |
| | 10,600 |
| | | 1,783,350 |
| |
Steve Wigginton (CEO, | | | | | | | | | | | | | | | | | | | | |
Valence Health) | | 2016 | | 355,000 |
| | 500,000 |
| | 65,000 |
| | 65,000 |
| | — |
| | — |
| | 10,600 |
| | | 995,600 |
| |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | Non-Equity | | Nonqualified | | | | | | |
| | | | | | | | | | | | Incentive | | Deferred | | | | | | |
Name and | | | | | | | | Stock | | Option | | Plan | | Compensation | | All Other | | | Total | |
Principal Position | | Year | | Salary ($) | | Bonus ($) | | Awards ($)(1) | | Awards ($)(2) | Compensation ($) | Earnings ($) | Compensation ($)(3) | Compensation ($) |
Frank Williams | | 2018 | | $ | 600,000 |
| | $ | — |
| | $ | 1,350,000 |
| | $ | 1,350,000 |
| | $ | — |
| | $ | — |
| | $ | 11,000 |
| | | $ | 3,311,000 |
| |
(CEO)(4) | | 2017 | | 600,000 |
| | 300,000 |
| | 1,125,000 |
| | 1,125,000 |
| | — |
| | — |
| | 10,800 |
| | | 3,160,800 |
| |
| | 2016 | | 500,000 |
| | 600,000 |
| | 500,000 |
| | 1,250,000 |
| | — |
| | — |
| | 10,600 |
| | | 2,860,600 |
| |
Seth Blackley | | 2018 | | 400,000 |
| | — |
| | 1,200,000 |
| | 600,000 |
| | — |
| | — |
| | 11,000 |
| | | 2,211,000 |
| |
(President)(4) | | 2017 | | 400,000 |
| | 200,000 |
| | 750,000 |
| | 750,000 |
| | — |
| | — |
| | 10,800 |
| | | 2,110,800 |
| |
| | 2016 | | 325,000 |
| | 400,000 |
| | 325,000 |
| | 812,500 |
| | — |
| | — |
| | 10,600 |
| | | 1,873,100 |
| |
Nicholas McGrane | | 2018 | | 375,000 |
| | — |
| | 312,500 |
| | 312,500 |
| | — |
| | — |
| | 7,700 |
| | | 1,007,700 |
| |
(CFO) | | 2017 | | 375,000 |
| | 131,250 |
| | 312,500 |
| | 312,500 |
| | — |
| | — |
| | 10,800 |
| | | 1,142,050 |
| |
| | | | | | | | | | | | | | | | | | | | |
Thomas Peterson | | 2018 | | 375,000 |
| | — |
| | 350,000 |
| | 350,000 |
| | — |
| | — |
| | 11,000 |
| | | 1,086,000 |
| |
(COO) | | 2017 | | 375,000 |
| | 131,250 |
| | 250,000 |
| | 250,000 |
| | — |
| | — |
| | 10,800 |
| | | 1,017,050 |
| |
| | 2016 | | 300,000 |
| | 135,000 |
| | 225,000 |
| | 225,000 |
| | — |
| | — |
| | 10,600 |
| | | 895,600 |
| |
Jonathan Weinberg | | 2018 | | 325,000 |
| | — |
| | 150,000 |
| | 150,000 |
| | — |
| | — |
| | 11,000 |
| | | 636,000 |
| |
(General Counsel) | | | | | | | | | | | | | | | | | | |
|
| |
| |
(1) | The amounts reported in this column represent the aggregate grant-date fair value of restricted stock units (“RSUs”)RSUs granted during 20152018, 2017 and 2016, as computed in accordance with Accounting Standards Codification 718 “Compensation-Stock Compensation” (“ASC 718”). For a further discussion of the assumptions used in the calculation of the grant-date fair values for the RSUs pursuant to ASC 718, please see Note 11 of Notes to Consolidated Financial Statements contained in our Annual Report on Form 10-K filed on March 3,for the fiscal years ended December 31, 2018 and 2017. For further discussion of RSUs granted in 2016,2018, see the section entitled “Long-Term Annual Equity Compensation - Restricted Stock Units” in the “Compensation Discussion & Analysis” section of this proxy statement and the discussion followingand the “Outstanding equity awards at fiscal year end” table.“Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table” section of this proxy statement. |
| |
(2) | The amounts reported in this column represent the aggregate grant-date fair value of the stock options granted during 20152018, 2017 and 2016, as computed in accordance with ASC 718. For a further discussion of the assumptions used in the calculation of the grant-date fair values for the stock options pursuant to ASC 718, please see Note 11 of Notes to Consolidated Financial Statements contained in our Annual Report on Form 10-K filed on March 3,for the fiscal years ended December 31, 2018 and 2017. For further discussion of stock options granted in 2016,2018, see the section entitled “Long-Term Annual Equity Compensation - Stock Options” in the “Compensation Discussion & Analysis” section of this proxy statement and the discussion followingand the “Outstanding equity awards at fiscal year end” table.“Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table” section of this proxy statement. |
| |
(3) | Amounts reported in this column represent a 401(k) matching contribution provided by the Company to each NEO. The 401(k) matching contributions are made to each participant in the |
named executive officer. The 401(k) matching contributions are made to each participant in the 401(k) in an amount up to 4% of the participant’s annual base salary, subject to certain limitations, and are fully vested when made. The amounts shown do not include life insurance premiums for coverage offered through programs available on a nondiscriminatory basis to all employees of the Company.
| |
(4) | Mr.Messrs. Williams and Blackley also servesserve as a directordirectors of the Company but did not receive any compensation for histheir role as a director in 2015 or 2016.director. |
Narrative disclosure to summary compensation tableGrants of Plan-Based Awards
The following table shows information with respect to each equity-based award granted to our NEOs during 2018.
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| | | | | | | | | | | | | | | | | | | | |
| | | | | | All other stock | | | All other option | | | | | |
| | | | | | awards: Number | | awards: Number of | | Exercise or base | | Grant date fair |
| | | | | | of shares of stock | | securities underlying | | price of option | | value of stock and |
Name | | Grant Date | | Approval Date | | or units (#) | | | options (#) | | | awards ($/share) | | option awards(1) |
Frank Williams | | 2/1/2018 | | 1/30/2018 | | — |
| | | 227,273 |
| | | $ | 13.95 |
| | $ | 1,350,000 |
|
| | 2/1/2018 | | 1/30/2018 | | 96,774 |
| | | — |
| | | — |
| | 1,350,000 |
|
| | | | | | | | | | | | | | |
Seth Blackley | | 2/1/2018 | | 1/30/2018 | | — |
| | | 101,010 |
| | | 13.95 |
| | 600,000 |
|
| | 2/1/2018 | | 1/30/2018 | | 86,022 |
| | | — |
| | | — |
| | 1,200,000 |
|
| | | | | | | | | | | | | | |
Nicholas McGrane | | 2/1/2018 | | 1/30/2018 | | — |
| | | 52,609 |
| | | 13.95 |
| | 312,500 |
|
| | 2/1/2018 | | 1/30/2018 | | 22,401 |
| | | — |
| | | — |
| | 312,500 |
|
| | | | | | | | | | | | | | |
Thomas Peterson | | 2/1/2018 | | 1/30/2018 | | — |
| | | 58,923 |
| | | 13.95 |
| | 350,000 |
|
| | 2/1/2018 | | 1/30/2018 | | 25,090 |
| | | — |
| | | — |
| | 350,000 |
|
| | | | | | | | | | | | | | |
Jonathan Weinberg | | 2/1/2018 | | 1/30/2018 | | — |
| | | 25,253 |
| | | 13.95 |
| | 150,000 |
|
| | 2/1/2018 | | 1/30/2018 | | 10,753 |
| | | — |
| | | — |
| | 150,000 |
|
(1) The amounts reported in this column represent the aggregate grant-date fair value of RSUs and stock options granted during 2018, as computed in accordance with ASC 718. For a further discussion of the assumptions used in the calculation of these amounts, please see Note 11 of Notes to Consolidated Financial Statements contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018.
Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table
The following describes material features of the compensation disclosed in the Summary Compensation Table. EachTable and the Grants of Plan-Based Awards table. Consistent with our policy, we have not entered into employment agreements with any of our named executive officers are paid an annual base salary as determined byNEOs. For further information on the material features of the 2018 Bonus Plan, see the section entitled “Annual Cash Incentive Plan” in the “Compensation CommitteeDiscussion & Analysis” section of our Board and are eligible to participate in our annual bonus plan, which is described in detail below. None of our named executive officers were party to an employment agreement during 2016.this proxy statement.
Evolent Health, Inc. 2016 BonusRestricted Stock Unit Awards and Stock Options Under the 2015 Plan and 2011 Plan
The Evolent Health, Inc. 2016 BonusIn connection with our initial public offering, on June 4, 2015, our Compensation Committee approved the grant of equity-based awards under the 2015 Plan to certain of our employees, including Messrs.
McGrane and Weinberg, in the form of RSUs and stock options. These awards generally vest 25% on each of the first four anniversaries of the grant date. None of Messrs. Williams, Blackley or Peterson received equity-based awards at the time of our initial public offering, because each of them had received stock options on February 1, 2015 under the 2011 Plan, which we refervested in two equal installments on February 1, 2018 and February 1, 2019.
As part of our annual equity award grants, in March 2016 and in February 2017 and 2018, our Compensation Committee approved the grant of equity-based awards under the 2015 Plan to as the 2016 Bonus Plan, is an annual incentive plan that providescertain of our employees, including our named executive officers, withNEOs, in the opportunityform of RSUs, time-based stock options and, only in March 2016, performance-based stock options. The RSUs and time-based stock options granted to earn a cash bonus basedour NEOs vest 25% on satisfactioneach of pre-established quantitativethe first four anniversaries of the grant date. The performance-based stock options granted to Messrs. Williams and qualitative performance metrics, as well asBlackley in March 2016 vest in two equal installments on March 1, 2019 and March 1, 2020. In addition to service-based vesting conditions, the performance-based stock options granted to Messrs. Williams and Blackley in March 2016 were subject to the achievement of individual goals. The 2016 Bonus Plan is funded based on the Company’s achievement of Company performance goals. Payments under the 2016 Bonus Plan to our named executive officers are then determined by our Board, in its discretion, based, in the case of Messrs. Blackley and Wigginton, on recommendations made by Mr. Williams, considering the executive’s performance as rated on a five-point scale against predetermined individual performance goals. The individual performance goals for our named executive officers and the Company performance goals under the 2016 Bonus Plan are based on: (i) high customer satisfaction levels; (ii) financial and clinical performance of our partners; (iii) financial metrics (GAAP revenue of $217.1 million and cash burn less than $27.0 million); (iv) new bookings (80% of 2017 forecasted revenue); and (v) optimal and high-performing organization, measured by engagement, talent depth and retention. We met or exceeded all the corporate goals under the 2016 Bonus Plan.
Each of our named executive officers’ baseline bonus opportunities,hurdles, which corresponds to three out of five points, or a rating of “meets expectations,” target bonus opportunities, which corresponds to four out of five points, or a rating of “exceeds expectations” and maximum bonus opportunities, which corresponds to five out of five points, or a rating of “exceptional performance,” under the 2016 Bonus Plan are as follows: Mr. Williams, $250,000 baseline bonus, $500,000 target bonus and $750,000 maximum bonus; Mr. Blackley, $162,500 baseline bonus, $325,000 target bonus and $487,500 maximum bonus; and Mr. Wigginton, $200,000 baseline bonus, $500,000 target bonus and $800,000 maximum bonus. Our Chief Executive Officer, Mr. Williams, reviewed with the Compensation Committee the performance and impact as comparedrequired that, prior to the pre-established individual goals for both Mr. Blackley and Mr. Wigginton. The Committee determined that eachexpiration date of Messrs. Blackley and Wigginton exceeded his individual goals, which is equivalent to four out of five points, or a rating of “exceeds expectations.” With respect to the annual compensation forstock options, the Company’s Chief Executive Officer, the Compensation Committee reviewed the quantitative and qualitative goals for the Company and considered information relating to his individual performance from other membersaverage closing price of the Company’s senior management. As a result,Class A common stock reach specified prices for at least 90-consecutive calendar days. One-third of the Compensation Committee determined that Mr. Williams exceeded his individual goals, which is equivalentstock options were earned when the 90-day average was equal to four outat least $13.35 per share, one-third of five points, or a ratingthe stock options were earned when the 90-day average was equal to at least $16.43 per share and the remaining one-third of “exceeds expectations.” Our Compensation Committee determined, in its discretion,the stock options were earned when the 90-day average was equal to at least $19.51 per share. Although the performance-based vesting conditions were satisfied as of December 31, 2016, the stock options remain subject to each NEO’s continued employment through the applicable vesting date. The award Messrs. Williams, Blackley and Wigginton $600,000, $400,000 and $500,000, respectively,agreements under the 2016 Bonus2015 Plan based oncontain restrictive covenants, including confidentiality, non-competition and non-solicitation obligations.
Generally, upon a termination of employment, the unvested portion of any RSUs and stock options granted under the 2015 Plan or 2011 Plan is forfeited. If any of our NEOs is terminated without cause or terminates his employment for good reason, in each executive’s overall strong performance during 2016, eachcase, within 12 months following a change of these amounts is includedcontrol of the Company, any unvested RSUs and stock options granted under the 2015 Plan will automatically vest at the time of such termination, as described below in the “Bonus” column“Potential Payments Upon Termination or Change of Control” section of this proxy statement. In addition, stock options granted under the 2011 Plan would have automatically vested in the event of a change of control of the Summary Compensation Table. All amounts earnedCompany, as described below in the “Potential Payments Upon Termination or Change of Control” section of this proxy statement. As of the date of this proxy statement, no awards to our NEOs under the 2016 Bonus2011 Plan were paid to participants in February 2017.remain unvested.
Outstanding equity awardsEquity Awards at fiscal year endFiscal Year-End
The following table summarizes the outstanding equity awards held by each of our named executive officersNEOs as of December 31, 2016:2018:
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Option Awards | | Stock Awards |
| | | | | | | | | | | | | | | | | | | Equity |
| | | | | | | | | | | | | | | | | | | Incentive |
| | | | | | | | | | | | | | | | | Equity | | Plan |
| | | | | | | | | | | | | | | | | Incentive | | Awards: |
| | | | | | | Equity | | | | | | | | | | Plan | | Market |
| | | | | | | Incentive | | | | | | | | | | Awards: | | or Payout |
| | | | | | | Plan | | | | | | | | | | Number of | | Value of |
| | | | | | | Awards: | | | | | | | | Market | | Unearned | | Unearned |
| | | Number of | | Number of | | Number of | | | | | | Number of | | Value of | | Shares, | | Shares, |
| | | Securities | | Securities | | Securities | | | | | | Shares or | | Shares of | | Units or | | Units or |
| | | Underlying | | Underlying | | Underlying | | | | | | Units of | | Units of | | Other | | Other |
| | | Unexercised | | Unexercised | | Unexercised | | Option | | Option | | Stock That | | Stock That | | Rights | | Rights |
| Grant | | Options (#) | | Options (#) | | Unearned | | Exercise | | Expiration | | Have Not | | Have Not | | that have | | that have |
Officer | Date | | Exercisable | | Unexercisable | Options (#) | | Price ($) | | Date | | Vested (#) (1) | Vested ($) (2) | Not Vested | | Not Vested |
Frank Williams (Chief | 4/1/2014 | | 552,420 |
| | 184,140 |
| (3) | — |
| | $ | 3.84 |
| | 4/1/2024 |
| | | | | | | | |
Executive Officer) | 2/1/2015 | | — |
| | 340,000 |
| (4) | — |
| | 6.87 |
| | 2/1/2025 |
| | | | | | | | |
| 3/1/2016 | | — |
| | 108,190 |
| (5) | — |
| | 10.27 |
| | 3/1/2026 |
| | | | | | | | |
| 3/1/2016 | | — |
| | 162,285 |
| (6) | — |
| | 10.27 |
| | 3/1/2026 |
| | | | | | | | |
| 3/1/2016 | | — |
| | — |
| | — |
| | — |
| | — |
| | 48,685 | | $ | 720,538 |
| | | | |
Seth Blackley | 4/1/2014 | | 368,280 |
| | 122,760 |
| (3) | — |
| | 3.84 |
| | 4/1/2024 |
| | | | | | | | |
(President) | 2/1/2015 | | — |
| | 200,000 |
| (4) | — |
| | 6.87 |
| | 2/1/2025 |
| | | | | | | | |
| 3/1/2016 | | — |
| | 70,324 |
| (5) | — |
| | 10.27 |
| | 3/1/2026 |
| | | | | | | | |
| 3/1/2016 | | — |
| | 105,485 |
| (6) | — |
| | 10.27 |
| | 3/1/2026 |
| | | | | | | | |
| 3/1/2016 | | — |
| | — |
| | — |
| | — |
| | — |
| | 31,646 | | 468,361 |
| | | | |
Steve Wigginton (CEO, | 4/1/2014 | | 335,760 |
| | 111,920 |
| (3) | — |
| | 3.84 |
| | 4/1/2024 |
| | | | | | | | |
Valence Health) | 6/4/2015 | | 8,284 |
| | 24,853 |
| (7) | — |
| | 17.00 |
| | 6/4/2025 |
| | | | | | | | |
| 6/4/2015 | | — |
| | — |
| | — |
| | — |
| | — |
| | 6,021 | | 89,126 |
| | | | |
| 3/1/2016 | | — |
| | 14,065 |
| (5) | — |
| | 10.27 |
| | 3/1/2026 |
| | | | | | | | |
| 3/1/2016 | | — |
| | — |
| | — |
| | — |
| | — |
| | 6,329 | | 93,669 |
| | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Option Awards | | Stock Awards |
| | | | | | | | | | | | | | | | | | | Equity |
| | | | | | | | | | | | | | | | | | | Incentive |
| | | | | | | | | | | | | | | | | Equity | | Plan |
| | | | | | | | | | | | | | | | | Incentive | | Awards: |
| | | | | | | Equity | | | | | | | | | | Plan | | Market |
| | | | | | | Incentive | | | | | | | | | | Awards: | | or Payout |
| | | | | | | Plan | | | | | | | | | | Number of | | Value of |
| | | | | | | Awards: | | | | | | | | Market | | Unearned | | Unearned |
| | | Number of | | Number of | | Number of | | | | | | Number of | | Value of | | Shares, | | Shares, |
| | | Securities | | Securities | | Securities | | | | | | Shares or | | Shares of | | Units or | | Units or |
| | | Underlying | | Underlying | | Underlying | | | | | | Units of | | Units of | | Other | | Other |
| | | Unexercised | | Unexercised | | Unexercised | | Option | | Option | | Stock That | | Stock That | | Rights | | Rights |
| Grant | | Options (#) | | Options (#) | | Unearned | | Exercise | | Expiration | | Have Not | | Have Not | | that have | | that have |
Officer | Date | | Exercisable | | Unexercisable | Options (#) | | Price ($) | | Date | | Vested (#) (1) | Vested ($) (2) | Not Vested | | Not Vested |
Frank Williams | 4/1/2014 | | 736,560 |
| | — |
| (3) | — |
| | $ | 3.84 |
| | 4/1/2024 |
| | — |
| | $ | — |
| | — |
| | $ | — |
|
| 2/1/2015 | | 170,000 |
| | 170,000 |
| (4) | — |
| | 6.87 |
| | 2/1/2025 |
| | — |
| | — |
| | — |
| | — |
|
| 3/1/2016 | | 54,095 |
| | 54,095 |
| (5) | — |
| | 10.27 |
| | 3/1/2026 |
| | — |
| | — |
| | — |
| | — |
|
| 3/1/2016 | | — |
| | 162,285 |
| (6) | — |
| | 10.27 |
| | 3/1/2026 |
| | — |
| | — |
| | — |
| | — |
|
| 3/1/2016 | | — |
| | — |
| | — |
| | — |
| | — |
| | 24,342 |
| | 485,623 |
| | — |
| | — |
|
| 2/1/2017 | | — |
| | 103,401 |
| (7) | — |
| | 18.25 |
| | 2/1/2027 |
| | — |
| | — |
| | — |
| | — |
|
| 2/1/2017 | | — |
| | — |
| | — |
| | — |
| | — |
| | 46,233 |
| | 922,348 |
| | — |
| | — |
|
| 2/1/2018 | | — |
| | 227,273 |
| (10) | — |
| | 13.95 |
| | 2/1/2028 |
| | — |
| | — |
| | — |
| | — |
|
| 2/1/2018 | | — |
| | — |
| | — |
| | — |
| | — |
| | 96,774 |
| | 1,930,641 |
| | — |
| | — |
|
Seth Blackley | 4/1/2014 | | 336,040 |
| | — |
| (3) | — |
| | 3.84 |
| | 4/1/2024 |
| | — |
| | — |
| | — |
| | — |
|
| 2/1/2015 | | 100,000 |
| | 100,000 |
| (4) | — |
| | 6.87 |
| | 2/1/2025 |
| | — |
| | — |
| | — |
| | — |
|
| 3/1/2016 | | 35,162 |
| | 35,162 |
| (5) | — |
| | 10.27 |
| | 3/1/2026 |
| | — |
| | — |
| | — |
| | — |
|
| 3/1/2016 | | — |
| | 105,485 |
| (6) | — |
| | 10.27 |
| | 3/1/2026 |
| | — |
| | — |
| | — |
| | — |
|
| 3/1/2016 | | — |
| | — |
| | — |
| | — |
| | — |
| | 15,822 |
| | 315,649 |
| | — |
| | — |
|
| 2/1/2017 | | 22,978 |
| | 68,934 |
| (7) | — |
| | 18.25 |
| | 2/1/2027 |
| | — |
| | — |
| | — |
| | — |
|
| 2/1/2017 | | — |
| | — |
| | — |
| | — |
| | — |
| | 30,822 |
| | 614,899 |
| | — |
| | — |
|
| 2/1/2018 | | — |
| | 101,010 |
| (10) | — |
| | 13.95 |
| | 2/1/2028 |
| | — |
| | — |
| | — |
| | — |
|
| 2/1/2018 | | — |
| | — |
| | — |
| | — |
| | — |
| | 86,022 |
| | 1,716,139 |
| | — |
| | — |
|
Nicholas McGrane | 10/22/2014 | | 209,618 |
| | — |
| (8) | — |
| | 3.84 |
| | 10/22/2024 |
| | — |
| | — |
| | — |
| | — |
|
| 6/4/2015 | | 12,655 |
| | 4,222 |
| (9) | — |
| | 17.00 |
| | 6/4/2025 |
| | — |
| | — |
| | — |
| | — |
|
| 6/4/2015 | | — |
| | — |
| | — |
| | — |
| | — |
| | 1,023 |
| | 20,409 |
| | — |
| | — |
|
| 3/1/2016 | | 14,335 |
| | 14,335 |
| (5) | — |
| | 10.27 |
| | 3/1/2026 |
| | — |
| | — |
| | — |
| | — |
|
| 3/1/2016 | | — |
| | — |
| | — |
| | — |
| | — |
| | 6,450 |
| | 128,678 |
| | — |
| | — |
|
| 2/1/2017 | | 9,574 |
| | 28,723 |
| (7) | — |
| | 18.25 |
| | 2/1/2027 |
| | — |
| | — |
| | — |
| | — |
|
| 2/1/2017 | | — |
| | — |
| | — |
| | — |
| | — |
| | 12,842 |
| | 256,198 |
| | — |
| | — |
|
| 2/1/2018 | | — |
| | 52,609 |
| (10) | — |
| | 13.95 |
| | 2/1/2028 |
| | — |
| | — |
| | — |
| | — |
|
| 2/1/2018 | | — |
| | — |
| | — |
| | — |
| | — |
| | 22,401 |
| | 446,900 |
| | — |
| | — |
|
Thomas Peterson | 4/1/2014 | | 108,274 |
| | — |
| (3) | — |
| | 3.84 |
| | 4/1/2024 |
| | — |
| | — |
| | — |
| | — |
|
| 2/1/2015 | | 50,000 |
| | 50,000 |
| (4) | — |
| | 6.87 |
| | 2/1/2025 |
| | — |
| | — |
| | — |
| | — |
|
| 3/1/2016 | | 24,343 |
| | 24,343 |
| (5) | — |
| | 10.27 |
| | 3/1/2026 |
| | — |
| | — |
| | — |
| | — |
|
| 3/1/2016 | | — |
| | — |
| | — |
| | — |
| | — |
| | 10,954 |
| | 218,532 |
| | — |
| | — |
|
| 2/1/2017 | | 7,659 |
| | 22,978 |
| (7) | — |
| | 18.25 |
| | 2/1/2027 |
| | — |
| | — |
| | — |
| | — |
|
| 2/1/2017 | | — |
| | — |
| | — |
| | — |
| | — |
| | 10,274 |
| | 204,966 |
| | — |
| | — |
|
| 2/1/2018 | | — |
| | 58,923 |
| (10) | — |
| | 13.95 |
| | 2/1/2028 |
| | — |
| | — |
| | — |
| | — |
|
| 2/1/2018 | | — |
| | — |
| | — |
| | — |
| | — |
| | 25,090 |
| | 500,546 |
| | — |
| | — |
|
Jonathan Weinberg | 4/1/2014 | | 55,431 |
| | — |
| (3) | — |
| | 3.84 |
| | 4/1/2024 |
| | — |
| | — |
| | — |
| | — |
|
| 10/22/2014 | | 28,000 |
| | — |
| | — |
| | 3.84 |
| | 10/22/2024 |
| | — |
| | — |
| | — |
| | — |
|
| 6/4/2015 | | 12,665 |
| | 4,222 |
| (9) | — |
| | 17.00 |
| | 6/4/2025 |
| | — |
| | — |
| | — |
| | — |
|
| 6/4/2015 | | — |
| | — |
| | — |
| | — |
| | — |
| | 1,023 |
| | 20,409 |
| | — |
| | — |
|
| 3/1/2016 | | 3,516 |
| | 10,549 |
| (5) | — |
| | 10.27 |
| | 3/1/2026 |
| | — |
| | — |
| | — |
| | — |
|
| 3/1/2016 | | — |
| | — |
| | — |
| | — |
| | — |
| | 4,746 |
| | 94,683 |
| | — |
| | — |
|
| 2/1/2017 | | 3,064 |
| | 9,191 |
| (7) | — |
| | 18.25 |
| | 2/1/2027 |
| | — |
| | — |
| | — |
| | — |
|
| 2/1/2017 | | — |
| | — |
| | — |
| | — |
| | — |
| | 4,109 |
| | 81,975 |
| | — |
| | — |
|
| 2/1/2018 | | — |
| | 25,253 |
| (10) | — |
| | 13.95 |
| | 2/1/2028 |
| | — |
| | — |
| | — |
| | — |
|
| 2/1/2018 | | — |
| | — |
| | — |
| | — |
| | — |
| | 10,753 |
| | 214,522 |
| | — |
| | — |
|
| |
(1) | The terms of the RSU awards provide that 25% of each award vests on each of the first four anniversaries of the grant date, subject to the named executive officer’s continued employment through the applicable vesting date. |
| |
(2) | The values reported in this column are based on the closing price of the Company’s Class A common stock on the NYSE on December 30, 201631, 2018 ($14.80)19.95). |
| |
(3) | Stock options granted under the 2011 Plan on April 1, 2014 under the Evolent Health Holdings, Inc. 2011 Equity Incentive Plan (the “2011 Plan”) to (a) Messrs. Williams, Blackley and Blackley vestPeterson vested 25% on each of December 1, 2014, 2015, 2016 and 2017 and (b) Mr. Wigginton vestWeinberg vested 25% on each of OctoberFebruary 1, 2014, 2015, 2016, 2017, and 2017, in each case, subject to the named executive officer’s continued employment through the applicable vesting date.2018. |
| |
(4) | Stock options granted under the 2011 Plan on February 1, 2015 under the 2011 Plan to Messrs. Williams, Blackley and BlackleyPeterson vest in two equal installments on February 1, 2018, and February 1, 2019, subject to the named executive officer’s continued employment through the applicable vesting date. |
| |
(5) | Stock options granted under the Evolent Health, Inc. 2015 Omnibus Incentive Compensation Plan (the “2015 Plan”) to Messrs. Williams, Blackley and Wigginton on March 1, 2016 to each of our NEOs vest 25% on each of March 1, 2017, 2018, 2019 and 2020, subject to the named executive officer’s continued employment through the applicable vesting date. |
| |
(6) | Performance-based stock options granted under the 2015 Plan on March 1, 2016 to Messrs. Williams and Blackley on March 1, 2016, vest in two equal installments on March 1, 2019, and March 1, 2020, subject to achievement of the performance hurdles described in the narrative below, all of which were satisfied as of December 31, 2016,2017, and each named executive officer’s continued employment through the applicable vesting date. |
| |
(7) | Stock options granted under the 2015 Plan on February 1, 2017 to each of our NEOs vest 25% on each of February 1, 2018, 2019, 2020 and 2021, subject to the named executive officer’s continued employment through the applicable vesting date. |
| |
(8) | Stock options granted under the 2011 Plan on October 22, 2014 to (a) Mr. Weinberg vested 25% on each of November 1, 2015, 2016, 2017 and 2018 and (b) Mr. McGrane vested according to the following schedule, subject to Mr. WiggintonMcGrane’s continued employment through the applicable vesting date: 25% vested on November 1, 2015 and 6.25% vested every three months thereafter until November 1, 2018. |
| |
(9) | Stock options granted under the 2015 Plan on June 4, 2015 to Messrs. McGrane and Weinberg vest 25% on each of June 4, 2016, 2017, 2018 and 2019, subject to Mr. Wigginton’sthe named executive officer’s continued employment through the applicable vesting date. |
| |
(10) | Stock options granted under the 2015 Plan on February 1, 2018 to each of our NEOs vest 25% on each of February 1, 2019, 2020, 2021 and 2022, subject to the named executive officer’s continued employment through the applicable vesting date. |
2018 Option Exercises and Stock Vested
The following table shows a summary of any stock option exercises and the vesting of RSUs with respect to our NEOs in 2018.
|
| | | | | | | | | | | | | | |
| | Number of Shares | | Value Realized | | Number of Shares | | Value Realized |
Name | | Acquired on Exercise | | on Exercise(1) | | Acquired on Vesting | | on Vesting(2) |
Frank Williams | | — |
| | — |
| | 27,582 |
| | $ | 389,029 |
|
Seth Blackley | | 155,000 |
| | $ | 2,829,952 |
| | 18,186 |
| | 256,464 |
|
Nicholas McGrane | | — |
| | — |
| | 8,530 |
| | 127,335 |
|
Thomas Peterson | | 70,000 |
| | 1,656,494 |
| | 8,902 |
| | 126,100 |
|
Jonathan Weinberg | | 30,000 |
| | 591,844 |
| | 4,006 |
| | 63,660 |
|
(1) Calculated using the closing price of a share of our common stock on the exercise date, less the strike price of the option.
(2) Calculated using the closing price of a share of our common stock on the vesting date.
Potential Payments upon Termination or Change of Control
We do not have any agreements with any of our NEOs that provide payments upon termination or in conjunction with a change in control (except as described below). The following description and table showing the estimated dollar value of potential accelerated vesting that would be provided to our NEOs
(or, in the case of death, to their respective estates or beneficiaries) under the RSU and stock option award agreements following a termination of their employment, assumes, in accordance with the SEC regulations, all relevant events occurred on December 31, 2018.
Stock optionsOptions under the 2011 Equity Incentive Plan
In April 2014, prior to our initial public offering, we granted stock options under the Evolent Health Holdings, Inc. 2011 Equity Incentive Plan, which we refer to as the 2011 Plan, to our named executive officers. The options granted to (a) Messrs. Williams and Blackley generally vest in four equal installments on each of December 1, 2014, 2015, 2016 and 2017 and (b) Mr. Wigginton generally vest in four equal installments on each of October 1, 2014, 2015, 2016 and 2017. In February 2015, we granted stock options under the 2011 Plan to certain of our employees, including Messrs. Williams and Blackley, in lieu of granting equity-based awards to such employees in connection with the initial public offering. The stock options granted in February 2015 vest in two equal installments on each of February 1, 2018 and 2019.
Upon a termination of employment, the unvested portion of a stock option award granted under the 2011 Plan is forfeited. Following a termination of employment, the unexercised vested portion of the option award must be exercised within six months (or one year in the case of death or disability) of the date of termination, provided that if the holder is terminated for Cause (as defined below), all outstanding options will immediately terminate. In addition to potential acceleration in the event of a Change in Control (as defined below under the 2011 Plan), any unvested options will automatically vest upon a Sale of the Company (as defined below), except that, in. As of the event UPMC, The Advisory Board or TPG, eachdate of which we referthis proxy statement, no awards granted to as a significant securityholder, acquires a majority of our stock or voting power in such sale, only those options that would have vested onNEOs under the first vesting date following the sale will automatically accelerate vesting.2011 Plan remain unvested.
Under the stock option award agreements, “Cause” generally means: (1) the failure to perform material duties to the Company; (2) the misappropriation of a material business opportunity or of any Company funds or property; (3) the conviction of, indictment for, or entering a guilty plea or a plea no contest to a felony or any other crime involving dishonesty or theft of property; (4) the commission of one or more acts of sexual harassment in violation of applicable federal, state or local laws, as determined by the board; (5) use of illegal drugs or abuse of controlled substances or alcohol, which in the case of alcohol use, interferes with job responsibilities or which reflects negatively upon the integrity or reputation of the Company; and/or (6) a breach of the terms of any employment agreement, restrictive covenant agreement or other material agreement with the Company.
Under the 2011 Plan, “Change in Control” means the occurrence of any of the following events: (i) the acquisition, other than from the Company, by any individual, entity or group (other than the Company or any subsidiary or affiliate) of more than 50% of the combined voting power of then outstanding voting securities of the Company; (ii) reorganization, merger, consolidation or recapitalization of the Company, following which the Company’s stockholders hold 50% or less of the combined voting power of the surviving entity; (iii) a complete liquidation of the Company or all of substantially all of its assets; or (iv) during any consecutive 24-month period, a change in the composition of a majority of the board of directors, as constituted on the first day of such period, that was not supported by a majority of the incumbent board of directors. “Sale of the Company” means (a) a transaction in which a person other than the companyCompany or one of our affiliates acquires from two or more significant securityholders all of our shares of Class A common stock or all the equity interests in Evolent Health LLC or otherwise acquires a majority of our shares of Class A common stock or a majority of the voting power of Evolent Health LLC; or (b) a sale of all or substantially all of the assets of our companyCompany and our subsidiaries.
The stock option award agreements under the 2011 Plan contain restrictive covenants, including confidentiality, non-competitionRestricted Stock Unit Awards and non-solicitation obligations.
Restricted stock unit awards and stock optionsStock Options under the 2015 Plan
In connection with our initial public offering, on June 4, 2015, our Compensation Committee approved the grant of equity-based awards under the 2015 Plan to certain of our employees, including Mr. Wigginton, in the form of RSUs and stock options. These awards generally vest 25% on each of the first four anniversaries of the grant date. Neither Mr. Williams nor Mr. Blackley received equity-based awards at the time of our initial public offering.
As part of our annual equity award grants, in March 2016, our Compensation Committee approved the grant of equity-based awards under the 2015 Plan to certain of our employees, including our named executive officers, in the form of RSUs, time-based stock options and performance-based stock options. The RSUs and time-based stock
options granted to Messrs. Williams, Blackley and Wigginton vest 25% on each of the first four anniversaries of the grant date. The performance-based stock options granted to Messrs. Williams and Blackley vest in two equal installments on March 1, 2019 and March 1, 2020. In addition to service-based vesting conditions, the performance-based stock options granted to Messrs. Williams and Blackley in March 2016 were subject to the achievement of performance hurdles, which required that, prior to the expiration date of the stock options, the average closing price of the Company’s Class A common stock reach specified prices for at least 90-consecutive calendar days. One-third of the stock options were earned when the 90-day average was equal to at least $13.35 per share, one-third of the stock options were earned when the 90-day average was equal to at least $16.43 per share and the remaining one-third of the stock options were earned when the 90-day average was equal to at least $19.51 per share. The stock options remain subject to each named executive officer’s continued employment through the applicable vesting date.
Upon a termination of employment prior to a Change of Control (as defined below under the 2015 Plan) or more than 12 months following a Change of Control, the unvested portion of any RSU or stock option award granted under the 2015 Plan is forfeited. Following a termination of employment, the unexercised vested portion of a stock option must be exercised within three months (or one year in the case of death or disability) of the date of termination, provided that if the holder is terminated for Cause (as defined below), all outstanding options will immediately terminate. In the event of a Change of Control, (as defined below under the 2015 Plan), outstanding RSUs and stock options will remain outstanding and continue to vest in accordance with their terms. If any of our named executive officersNEOs is terminated without Cause or terminates his employment for Good Reason (as defined below), in each case, within 12 months following a Change of Control, the unvested portion of any stock option award and any unvested RSUs granted under the 2015 Plan will automatically vest at the time of such termination.
Under the 2015 Plan, “Change of Control” means any of the following events, generally: (i) during any period of 24 consecutive months, a change in the composition of a majority of the Board, as constituted on the first day of such period, that was not supported by a majority of the incumbent Board or made pursuant to the stockholders agreement with TPG, UPMC and The Advisory Board; (ii) consummation of certain mergers or consolidations of the Company or a sale or other disposition of all or substantially all of the Company’s assets to an unaffiliated entity, following which the Company’s stockholders hold 50% or less of the combined voting power of the surviving entity; (iii) stockholder approval of a complete liquidation or dissolution of the Company; and (iv) acquisition by any individual, entity or group of beneficial ownership of more than 50% of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors.
Under the 2015 Plan, “Cause” has the same meaning set forth in the 2011 Plan and, under the stock option and RSU award agreements of our named executive officers,NEOs, “Good Reason” generally means the occurrence of any of the following events: (a) a material reduction in annual base salary or target bonus opportunity; (b) assignment to duties inconsistent in any material respect with the executive’s position, authority or responsibilities with the Company, or any other action or omission by the Company which results in a material diminution of such position, authority or responsibilities; (c) a relocation of principal work location by more than 50 miles from such location as of immediately prior to the Change of Control; or (d) any material breach of the award agreement by the Company. Good Reason will not exist unless the executive provides the Company notice of the event giving rise to Good Reason within 60 days of the date the executive has knowledge of such event and informs the Company that it is required to cure such breach (if curable) within 90 days. If the Company does not cure the breach within such 90 days, the executive must terminate for Good Reason within three months following the end of such 90-day cure period.
The award agreementsfollowing table shows the potential payments that would be made by us to each of the NEOs, assuming all relevant events occurred on December 31, 2018 and based on the closing price of the Company’s Class A common stock on the NYSE on December 31, 2018 ($19.95).
|
| | | | | | | | | | |
| | | | Termination Without | | |
| | | | Cause or for Good | | |
| | | | Reason on or within | | |
| | | | 12 Months Following | | Change of Control |
Name | | Benefit | | a Change of Control(1) | | (no Termination)(2) |
Frank Williams | | Accelerated Equity Vesting | | $ | 9,196,191 |
| | $ | 2,223,600 |
|
Seth Blackley | | Accelerated Equity Vesting | | 6,039,397 |
| | 1,308,000 |
|
Nicholas McGrane | | Accelerated Equity Vesting | | 1,367,884 |
| | — |
|
Thomas Peterson | | Accelerated Equity Vesting | | 2,206,280 |
| | 654,000 |
|
Jonathan Weinberg | | Accelerated Equity Vesting | | 630,223 |
| | — |
|
(1)The amounts in this column represent the value of all outstanding unvested RSUs and stock options granted to each NEO, which would accelerate vesting and become exercisable, upon either a (i) Change of Control or (ii) a qualifying termination on or within 12 months following a Change of Control, as applicable, including both “single trigger” and “double trigger awards”.
(2) The amounts in this column represent the value of all outstanding unvested stock options granted under the 20152011 Plan contain restrictive covenants, including confidentiality, non-competitionfor each NEO, which would accelerate vesting and non-solicitation obligations.
Potential paymentsbecome exercisable upon termination or change in control
Except for the stock options and RSUs described above, we do not have agreements with our named executive officers that provide for payments upon termination, retirement or in connection with a change in controlSale of the Company. As of the date of this proxy statement, no awards to our NEOs under the 2011 Plan remain unvested.
DirectorPAY RATIO
As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(u) of Regulation S-K, we are providing the following information about the relationship of the annual total compensation of our employees (other than our CEO) and the annual total compensation of Frank Williams, our CEO.
As of December 31, 2018, which is the date we used to determine our employee population for purposes of identifying our median employee, we had 3,880 full-time and part-time employees, 3,522 of whom are located in the United States with the remaining 358 in Pune, India. We did not include independent contractors we retained during 2018.
In order to identify our median employee from our employee population, we compared the amount of salary and wages of our employees as reflected in our payroll records. We did not make any cost-of-living adjustments in identifying the median employee. We annualized salary and wages for permanent employees in our employee population that did not work the full year in 2018. Once we identified our median employee, we combined all of the elements of such employee’s compensation for 2018 in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K for determining total compensation in the Summary Compensation Table, except that the estimated value of health and welfare benefits under non-discriminatory benefit plans (estimated for the employee and such employee’s eligible dependents at $6,969) was also included in the calculation of the median employee’s total annual compensation for 2018 for purposes of this pay ratio disclosure, resulting in annual total compensation of $77,099.
The 2018 annual total compensation for our CEO, as reported in the Summary Compensation Table in this proxy statement, was $3,311,000. To maintain consistency between the annual total compensation of our CEO and the median employee, we added the estimated value of our CEO’s health and welfare benefits under non-discriminatory benefit plans (estimated for our CEO and our CEO’s eligible dependents at $20,563) to the amount reported in the Summary Compensation Table. This resulted in 2018 annual total compensation for our CEO for purposes of determining the pay ratio in the amount of $3,331,563. The 2018 median annual total compensation for all employees of our Company (other than our CEO), determined in accordance with the requirements for determining total compensation in the Summary Compensation Table (including the estimated value of health and welfare benefits), was $77,099. The ratio of our CEO’s annual total compensation to the median annual total compensation of all our employees (other than our CEO) for 2018 is 43.2 to 1. We believe this ratio represents a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K.
PROPOSAL 3: ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION FOR 2018
We are asking stockholders to approve an advisory resolution on the compensation of our NEOs as reported in this proxy statement, commonly referred to as the “say-on-pay” vote. Although the say-on-pay vote is advisory and therefore non-binding on us, the Board and the Compensation Committee will review and consider the voting results when making future decisions regarding our executive compensation program. As described above in the “Compensation Discussion and Analysis” section of this proxy statement, the Compensation Committee has structured our executive compensation program to achieve the following key objectives:
Attract and retain highly qualified and productive executives.
Motivate executives to enhance our overall performance and profitability through the successful execution of the Company’s short- and long-term business strategies, with an emphasis on the long-term.
Align the long-term interests of our executives and stockholders through ownership of Evolent Health, Inc.’s Class A common stock by executives and by rewarding stockholder value creation.
Reflect our pay-for-performance philosophy.
Ensure that compensation opportunities are competitive.
We encourage stockholders to read the “Compensation Discussion and Analysis” section of this proxy statement, which provides an overview of our executive compensation policies and procedures, how they operate and are designed to achieve our pay-for-performance objectives and how they were applied for 2018. The Summary Compensation Table and other related compensation tables and narrative provide detailed information on the compensation of our NEOs. The Compensation Committee and the Board believe that the policies and procedures articulated in the “Compensation Discussion and Analysis” section of this proxy statement are effective in achieving our goals and that the compensation of the NEOs reported in this proxy statement has contributed to our success.
In accordance with Section 14A of the Exchange Act and as a matter of good corporate governance, we are asking stockholders to approve the following advisory resolution at the Annual Meeting:
“RESOLVED, that the Company’s stockholders approve, on a non-binding advisory basis, the compensation of our NEOs as disclosed in the Compensation Discussion and Analysis, the Summary Compensation Table and the related compensation tables, notes and narrative in this proxy statement.”
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE APPROVAL OF THE COMPENSATION OF OUR NEOs FOR 2018 ON AN ADVISORY BASIS.
DIRECTOR COMPENSATION
The table below details the compensation of our directors during 2016.
Director Compensation Table2018.
| | | | | | | | | | Non-Equity | | Nonqualified | | | | | | | | | | | | Non-Equity | | Nonqualified | | | | |
| | Fees Earned | | | | | | Incentive | | Deferred | | All | | | | Fees Earned | | | | | | Incentive | | Deferred | | All | | |
| | or Paid in | | Stock | | Option | | Plan | | Compensation | | Other | | | | or Paid in | | Stock | | Option | | Plan | | Compensation | | Other | | |
Director(1) | | Cash ($) | | Awards(2)($) | | Awards ($) | | Compensation ($) | | Earnings ($) | | Compensation ($) | | Total ($) | | Cash ($) | | Awards(2)($) | | Awards ($) | | Compensation ($) | | Earnings ($) | | Compensation ($) | | Total ($) |
Michael D’Amato | | | $ | 50,000 |
| | $ | 125,000 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 175,000 |
|
M. Bridget Duffy, MD | | | 50,000 |
| | 125,000 |
| | — |
| | — |
| | — |
| | — |
| | 175,000 |
|
David Farner | | $ | 50,000 |
| | $ | 100,000 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 150,000 |
| | 50,000 |
| | 125,000 |
| | — |
| | — |
| | — |
| | — |
| | 175,000 |
|
Bruce Felt | | | 70,000 |
| | 125,000 |
| | — |
| | — |
| | — |
| | — |
| | 195,000 |
|
Matthew Hobart | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Diane Holder | | 70,000 |
| | 100,000 |
| | — |
| | — |
| | — |
| | — |
| | 170,000 |
| | 65,000 |
| | 125,000 |
| | — |
| | — |
| | — |
| | — |
| | 190,000 |
|
Michael Kirshbaum | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| |
Michael D’Amato(3) | | 62,500 |
| | 100,000 |
| | — |
| | — |
| | — |
| | — |
| | 162,500 |
| |
Norman Payson, MD | | 50,000 |
| | 100,000 |
| | — |
| | — |
| | — |
| | 200,000 |
| | 350,000 |
| | 50,000 |
| | 125,000 |
| | — |
| | — |
| | — |
| | 255,456 |
| | 430,456 |
|
Bruce Felt | | 70,000 |
| | 100,000 |
| | — |
| | — |
| | — |
| | — |
| | 170,000 |
| |
Kenneth Samet | | 50,000 |
| | 100,000 |
| | — |
| | — |
| | — |
| | — |
| | 150,000 |
| | 50,000 |
| | 125,000 |
| | — |
| | — |
| | — |
| | — |
| | 175,000 |
|
Cheryl Scott | | 50,000 |
| | 100,000 |
| | — |
| | — |
| | — |
| | — |
| | 150,000 |
| | 50,000 |
| | 125,000 |
| | — |
| | — |
| | — |
| | — |
| | 175,000 |
|
Robert Musslewhite(3) | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| |
The following table shows the aggregate number of outstanding equity awards held by each non-employee director at December 31, 2016.2018.