UNITED STATES |
SECURITIES AND EXCHANGE COMMISSION |
WASHINGTON, D.C. 20549 |
Delaware | 001-37415 | 32-0454912 |
(State or other jurisdiction of incorporation or organization) | (Commission File Number) | (IRS Employer Identification No.) |
800 N. Glebe Road, Suite 500, Arlington, Virginia 22203 | ||
(Address of principal executive offices)(zip code) |
• | The acquisition of Valence, as well as future acquisitions, investments and alliances could pose numerous risks to the Company’s operations, including: |
◦ | difficulty integrating the purchased operations, products or technologies; |
◦ | substantial unanticipated integration costs, delays and challenges that may arise in integration; |
◦ | assimilation of the acquired businesses, which may divert significant management attention and financial resources from the Company’s other operations and could disrupt the Company’s ongoing business; |
◦ | the loss of key employees, particularly those of the acquired operations; |
◦ | difficulty retaining or developing the acquired business’ customers; |
◦ | adverse effects on the Company’s existing business relationships with customers, suppliers, other partners, standing with regulators; |
◦ | challenges related to the integration of businesses that operate in new geographic areas and new markets; |
◦ | failure to realize the potential cost savings or other financial benefits or the strategic benefits of the acquisitions; |
◦ | liabilities from the acquired businesses for infringement of intellectual property rights, data privacy violations or other claims and failure to obtain indemnification for such liabilities or claims. |
◦ | The Company may be unable to complete acquisitions or integrate the operations, products or personnel gained through the Valence acquisition or any other such transaction without a material adverse effect on the Company’s business, financial condition and results of operations. |
◦ | Transaction agreements may impose limitations on the Company’s ability, or as is the case in the Valence acquisition, the ability of the business to be acquired, to conduct business. |
◦ | Events outside the Company’s control, including operating changes or regulatory changes, could also adversely affect the Company’s ability to realize anticipated revenues, synergies, benefits and cost savings. |
◦ | Revenues of Valence after consummation of the acquisition may be less than expected. |
◦ | Any integration may be unpredictable, or subject to delays or changed circumstances, and the Company and any targets may not perform in accordance with the Company’s expectations. |
◦ | In addition, the market price for the Company’s Class A common stock could be affected, following the consummation of the Valence acquisition or any other transaction, by factors that have not historically affected the market price for the Company’s Class A common stock. |
• | the structural change in the market for health care in the United States; |
• | the Company’s ability to effectively manage its growth; |
• | the significant portion of revenue the Company derives from its largest partners; |
• | the Company’s ability to offer new and innovative products and services; |
• | the growth and success of the Company’s partners, which is difficult to predict and is subject to factors outside of the Company’s control, including premium pricing reductions and the ability to control and, if necessary, reduce health care costs; |
• | the Company’s ability to attract new partners; |
• | the Company’s ability to recover the significant upfront costs in its partner relationships; |
• | the Company’s ability to estimate the size of its target market; |
• | the Company’s ability to maintain and enhance its reputation and brand recognition; |
• | consolidation in the health care industry; |
• | competition which could limit the Company’s ability to maintain or expand market share within its industry; |
• | the Company’s ability to partner with providers due to exclusivity provisions in its contracts; |
• | uncertainty in the health care regulatory framework; |
• | restrictions and penalties as a result of privacy and data protection laws; |
• | adequate protection of the Company’s intellectual property; |
• | any alleged infringement, misappropriation or violation of third-party proprietary rights; |
• | the Company’s use of “open source” software; |
• | the Company’s ability to protect the confidentiality of its trade secrets, know-how and other proprietary information; |
• | the Company’s reliance on third parties; |
• | the Company’s ability to use, disclose, de-identify or license data and to integrate third-party technologies; |
• | data loss or corruption due to failures or errors in the Company’s systems and service disruptions at its data centers; |
• | breaches or failures of the Company’s security measures; |
• | the Company’s reliance on Internet infrastructure, bandwidth providers, data center providers, other third parties and the Company’s own systems for providing services to its users; |
• | the Company’s dependency on key personnel, and its ability to attract, hire, integrate and retain key personnel; |
• | risks related to future acquisition opportunities; |
• | the risk of potential future goodwill impairment on the Company’s results of operations; |
• | the Company’s future indebtedness and its ability to obtain additional financing; |
• | the Company’s ability to achieve profitability in the future; |
• | the requirements of being a public company; |
• | the Company’s adjusted results may not be representative of its future performance; |
• | the risk of potential future litigation; |
• | the Company’s ability to remediate the material weakness in its internal control over financial reporting; |
• | the Company’s holding company structure and dependence on distributions from Evolent Health LLC; |
• | the Company’s obligations to make payments to certain of its pre-IPO investors for certain tax benefits it may claim in the future; |
• | the Company’s ability to utilize benefits under the tax receivables agreement; |
• | the Company’s ability to realize all or a portion of the tax benefits that it currently expects to result from future exchanges of Class B common units of Evolent Health LLC for its Class A common stock, and to utilize certain tax attributes of Evolent Health Holdings and an affiliate of TPG; |
• | distributions that Evolent Health LLC will be required to make to the Company and to the other members of Evolent Health LLC; |
• | the Company’s obligations to make payments under the tax receivables agreement that may be accelerated or may exceed the tax benefits it realizes; |
• | different interests among the Company’s pre-IPO investors, or between the Company and its pre-IPO investors; |
• | the terms of agreements between the Company and certain of its pre-IPO investors; |
• | the Company’s exemption from certain corporate governance requirements due to its previous status as a “controlled company” within the meaning of the New York Stock Exchange rules; |
• | the potential volatility of the Company’s Class A common stock price; |
• | the potential decline of the Company’s Class A common stock price if a substantial number of shares become available for sale or if a large number of Class B common units is exchanged for shares of Class A common stock; |
• | provisions in the Company’s amended and restated certificate of incorporation and amended and restated by-laws and provisions of Delaware law that discourage or prevent strategic transactions, including a takeover of the Company; |
• | the ability of certain of the Company’s investors to compete with the Company without restrictions; |
• | provisions in the Company’s certificate of incorporation which could limit the Company’s stockholders’ ability to obtain a favorable judicial forum for disputes with the Company or its directors, officers or employees; |
• | the Company’s intention not to pay cash dividends on its Class A common stock; and |
• | the Company’s status as an “emerging growth company.” |
Exhibit | ||
Number | Description of Exhibit | |
2.1* | Agreement and Plan of Merger, dated July 12, 2016, by and among Evolent Health, Inc., Electra Merger Sub, LLC, Valence Health, Inc. and North Bridge Growth Management Company LLC and Philip Kamp, in their capacity as the Securityholders’ Representative. Previously filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on July 14, 2016 and incorporated herein by reference. | |
2.2* | First Amendment to Agreement and Plan of Merger, dated October 3, 2016, by and among Evolent Health, Inc., Electra Merger Sub, LLC, Valence Health, Inc. and North Bridge Growth Management Company LLC and Philip Kamp, in their capacity as the Securityholders’ Representative. | |
99.1 | Press Release of Evolent Health, Inc., dated October 3, 2016. | |
EVOLENT HEALTH, INC. | ||
By: | /s/ Jonathan Weinberg | |
Name: | Jonathan Weinberg | |
Title: | General Counsel and Secretary | |
(Duly Authorized Officer) |
Exhibit | ||
Number | Description of Exhibit | |
2.1* | Agreement and Plan of Merger, dated July 12, 2016, by and among Evolent Health, Inc., Electra Merger Sub, LLC, Valence Health, Inc. and North Bridge Growth Management Company LLC and Philip Kamp, in their capacity as the Securityholders’ Representative. Previously filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on July 14, 2016 and incorporated herein by reference. | |
2.2* | First Amendment to Agreement and Plan of Merger, dated October 3, 2016, by and among Evolent Health, Inc., Electra Merger Sub, LLC, Valence Health, Inc. and North Bridge Growth Management Company LLC and Philip Kamp, in their capacity as the Securityholders’ Representative. | |
99.1 | Press Release of Evolent Health, Inc., dated October 3, 2016. | |
1. | Definitions. Unless otherwise defined in this Amendment, all capitalized terms have the meanings set forth in the Merger Agreement. |
2. | Amendment to Merger Agreement. The Merger Agreement is hereby amended as follows: |
(a) | Section 2.6(a) and Section 2.6(c) of the Merger Agreement are hereby amended and restated in their entirety as follows: |
3. | Waterfall. Valence Parent represents and warrants that attached hereto as Exhibit A is a true, complete and correct copy of the Waterfall. |
4. | Agreement and Acknowledgment. For avoidance of doubt and consistent with the terms of the Charter Amendment, the Charter, the Merger Agreement and this Amendment (collectively, the “Operative Documents”), each of the parties hereto agrees and acknowledges that in the event that any shares of Evolent Common Stock (whether as a result of the release of the Escrow Consideration or the payment of the Earnout Amount) would otherwise be issued to any Equityholder pursuant to the terms of the Merger Agreement, as amended, but for the fact that such Equityholder is an Unaccredited Stockholder, then such shares shall not be issued to such Equityholder and instead such Equityholder shall be entitled to a cash payment in lieu of such shares consistent with the terms of the Operative Documents. The parties agree to take such actions as may be necessary to convert such shares into such cash payment. |
5. | Merger Agreement Confirmed. Unless specifically altered by this Amendment, the Merger Agreement remains unchanged and shall continue in full force and effect. The Evolent Entities hereby (a) waive the obligation set forth in Section 1.6(a)(ii) with respect to each contract set forth on Schedule 9.2(i) of the Disclosure Schedule and (b) consent to the assignment of the Third Party Administrator Services Master Agreement, dated as of March 1, 2013 by and between Valence Health, Inc. and Maine Community Health Options from Valence Parent to CHS as of prior to the Closing. |
6. | Counterparts. This Amendment may be executed in counterparts, each of which shall be deemed an original, but all of which together shall be deemed to be one and the same agreement. A signed copy of this Amendment delivered by facsimile, e-mail or other means of electronic transmission shall be deemed to have the same legal effect as delivery of an original signed copy of this Amendment. |
• | The acquisition of Valence Health, as well as future acquisitions, investments and alliances could pose numerous risks to our operations, including: |
◦ | difficulty integrating the purchased operations, products or technologies; |
◦ | substantial unanticipated integration costs, delays and challenges that may arise in integration; |
◦ | assimilation of the acquired businesses, which may divert significant management attention and financial resources from our other operations and could disrupt our ongoing business; |
◦ | the loss of key employees, particularly those of the acquired operations; |
◦ | difficulty retaining or developing the acquired business’ customers; |
◦ | adverse effects on our existing business relationships with customers, suppliers, other partners, standing with regulators; |
◦ | challenges related to the integration of businesses that operate in new geographic areas and new markets; |
◦ | failure to realize the potential cost savings or other financial benefits or the strategic benefits of the acquisitions; |
◦ | liabilities from the acquired businesses for infringement of intellectual property rights, data privacy violations or other claims and failure to obtain indemnification for such liabilities or claims. |
◦ | We may be unable to complete acquisitions or integrate the operations, products or personnel gained through the Valence Health acquisition or any other such transaction without a material adverse effect on our business, financial condition and results of operations. |
◦ | Transaction agreements may impose limitations on our ability, or as is the case in the Valence Health acquisition, the ability of the business to be acquired, to conduct business. |
◦ | Events outside our control, including operating changes or regulatory changes, could also adversely affect our ability to realize anticipated revenues, synergies, benefits and cost savings. |
◦ | Revenues of Valence Health after consummation of the acquisition may be less than expected. |
◦ | Any integration may be unpredictable, or subject to delays or changed circumstances, and we and any targets may not perform in accordance with our expectations. |
◦ | In addition, the market price for our Class A common stock could be affected, following the consummation of the Valence Health acquisition or any other transaction, by factors that have not historically affected the market price for our Class A common stock. |
• | the structural change in the market for health care in the United States; |
• | our ability to effectively manage our growth; |
• | the significant portion of revenue we derive from our largest partners; |
• | our ability to offer new and innovative products and services; |
• | the growth and success of our partners, which is difficult to predict and is subject to factors outside of our control, including premium pricing reductions and the ability to control and, if necessary, reduce health care costs; |
• | our ability to attract new partners; |
• | our ability to recover the significant upfront costs in our partner relationships; |
• | our ability to estimate the size of our target market; |
• | our ability to maintain and enhance our reputation and brand recognition; |
• | consolidation in the health care industry; |
• | competition which could limit our ability to maintain or expand market share within our industry; |
• | our ability to partner with providers due to exclusivity provisions in our contracts; |
• | uncertainty in the health care regulatory framework; |
• | restrictions and penalties as a result of privacy and data protection laws; |
• | adequate protection of our intellectual property; |
• | any alleged infringement, misappropriation or violation of third-party proprietary rights; |
• | our use of “open source” software; |
• | our ability to protect the confidentiality of our trade secrets, know-how and other proprietary information; |
• | our reliance on third parties; |
• | our ability to use, disclose, de-identify or license data and to integrate third-party technologies; |
• | data loss or corruption due to failures or errors in our systems and service disruptions at our data centers; |
• | breaches or failures of our security measures; |
• | our reliance on Internet infrastructure, bandwidth providers, data center providers, other third parties and our own systems for providing services to our users; |
• | our dependency on our key personnel, and our ability to attract, hire, integrate and retain key personnel; |
• | risks related to future acquisition opportunities; |
• | the risk of potential future goodwill impairment on our results of operations; |
• | our future indebtedness and our ability to obtain additional financing; |
• | our ability to achieve profitability in the future; |
• | the requirements of being a public company; |
• | our adjusted results may not be representative of our future performance; |
• | the risk of potential future litigation; |
• | our ability to remediate the material weakness in our internal control over financial reporting; |
• | our holding company structure and dependence on distributions from Evolent Health LLC; |
• | our obligations to make payments to certain of our pre-IPO investors for certain tax benefits we may claim in the future; |
• | our ability to utilize benefits under the tax receivables agreement; |
• | our ability to realize all or a portion of the tax benefits that we currently expect to result from future exchanges of Class B common units of Evolent Health LLC for our Class A common stock, and to utilize certain tax attributes of Evolent Health Holdings and an affiliate of TPG; |
• | distributions that Evolent Health LLC will be required to make to us and to the other members of Evolent Health LLC; |
• | our obligations to make payments under the tax receivables agreement that may be accelerated or may exceed the tax benefits we realize; |
• | different interests among our pre-IPO investors, or between us and our pre-IPO investors; |
• | the terms of agreements between us and certain of our pre-IPO investors; |
• | our exemption from certain corporate governance requirements due to our previous status as a “controlled company” within the meaning of the New York Stock Exchange rules; |
• | the potential volatility of our Class A common stock price; |
• | the potential decline of our Class A common stock price if a substantial number of shares become available for sale or if a large number of Class B common units is exchanged for shares of Class A common stock; |
• | provisions in our amended and restated certificate of incorporation and amended and restated by-laws and provisions of Delaware law that discourage or prevent strategic transactions, including a takeover of us; |
• | the ability of certain of our investors to compete with us without restrictions; |
• | provisions in our certificate of incorporation which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees; |
• | our intention not to pay cash dividends on our Class A common stock; and |
• | our status as an “emerging growth company.” |
Bob East | Robin Glass |
(443) 213-0500 | (571) 389-6005 |
Investor Relations | Media Relations |
InvestorRelations@evolenthealth.com | RGlass@evolenthealth.com |
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