Item 9A. Controls and Procedures
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Disclosure controls are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports
filed under the Exchange Act, such as this Report, is recorded, processed, summarized, and reported within the time period specified in the SECs rules and forms. Disclosure controls are also designed with the objective of ensuring that such
information is accumulated and communicated to our management, including the chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure. Our management evaluated, with the
participation of our current chief executive officer and chief financial officer (our Certifying Officers), the effectiveness of our disclosure controls and procedures as of December 31, 2020, pursuant to Rule 13a-15(b) under the Exchange Act. Based upon that evaluation, our Certifying Officers concluded that, as of December 31, 2020, our disclosure controls and procedures were effective.
We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and
procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect
the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide
absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can
be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
Managements
Report on Internal Control over Financial Reporting
This report does not include a report of managements assessment regarding
internal control over financial reporting or an attestation report of our independent registered public accounting firm on our internal control over financial reporting due to a transition period established by rules of the SEC for newly public
companies. Additionally, for as long as we remain an emerging growth company, we intend to take advantage of the exemption permitting us not to comply with the requirement that our independent registered public accounting firm provide an attestation
on the effectiveness of our internal control over financial reporting.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as such term is defined in Rules
13a-15(f) and 15d-15(f) of the Exchange Act) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our
internal control over financial reporting.
Background and Remediation of Material Weakness Technical Accounting Related to
Derivative Accounting
In connection with the preparation of the audited financial statements of Clover Health Investments, Corp. and
its consolidated subsidiaries as of prior to the consummation of the Business Combination for the year ended December 31, 2020, we identified a material weakness in our internal control over financial reporting, as described further below. A
material weakness is defined as a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will
not be prevented or detected on a timely basis.
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The material weakness related specifically to our application of the FASB Accounting
Standards Codification for derivatives (ASC 815) in the valuation of the embedded derivative features of the convertible securities of Clover Health Investments Corp. and its consolidated subsidiaries as of prior to the consummation of the Business
Combination at December 31, 2020, and the varying treatment of each tranche of such securities under ASC 815. The derivative liability in connection with the convertible securities should have been valued at $44.8 million but was instead valued at
$0. For the quarter and fiscal year ended December 31, 2020, the adjustment decreased the gain on derivatives by $44.8 million, with a corresponding increase to net loss for the same periods, in each case as compared to the amounts reflected in the
Companys press release announcing our financial results for the three months and year ended December 31, 2020 that we furnished in a Current Report on Form 8-K that was filed on March 1, 2020. Management has determined that the material
weakness has been remediated due to the fact that the embedded derivative was extinguished upon the consummation of the Business Combination on January 7, 2021.
Item 9B. Other Information.
None
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PART III
Item 10. Directors, Executive Officers and Corporate Governance
Executive Officers and Directors
The
following table provides information regarding our executive officers, key employees and directors as of March 30, 2021:
Name
Age
Position(s)
Executive Officers
Vivek Garipalli (1)
42
Chief Executive Officer and Director
Andrew Toy
42
President, Chief Technology Officer and Director
Joseph Wagner
47
Chief Financial Officer
Gia Lee
51
General Counsel and Corporate Secretary
Jamie L. Reynoso
52
Chief Operating Officer
Key Employees
Dr. Sophia Chang
60
Chief Clinical Informatics Officer
Dr. Kumar Dharmarajan
41
Chief Scientific Officer
Dr. Mark Spektor
51
Chief Medical Officer
Non-Employee
Directors
Chelsea Clinton (2)(3)
41
Director
William G. Robinson, Jr. (2)
56
Director
Lee A. Shapiro (1)(3)
65
Director
Nathaniel S. Turner (1)(2)
35
Director
(1)
Member of the audit committee.
(2)
Member of the compensation committee.
(3)
Member of the nominating and corporate governance committee.
Executive Officers
Vivek Garipalli. Vivek Garipalli has served as our Chief Executive Officer and as a member of our board of directors since the
Closing and previously held the same positions with Clover, which Mr. Garipalli co-founded, since July 2014. Previously, Mr. Garipalli also served as Clovers President from July
2014 to March 2019. Mr. Garipalli holds a B.B.A. in entrepreneurship from Emory University.
We believe that Mr. Garipalli is
qualified to serve as a member of our board of directors due to the perspective and experience he brings as Clovers co-founder and Chief Executive Officer and due to his extensive experience managing
healthcare companies.
Andrew Toy. Andrew Toy has served as our President, our Chief Technology Officer and as a member of
our board of directors since the Closing and previously held the same positions with Clover since March 2019, February 2018 and November 2018, respectively. Prior to joining Clover, Mr. Toy served as a Product Director at Google
LLC, a multinational technology company, from May 2014 to February 2018. Mr. Toy holds a B.S. and an M.S. in computer science from Stanford University.
We believe that Mr. Toy is qualified to serve as a member of our board of directors due to the perspective and experience he brings as
Clovers President and Chief Technology Officer and due to his extensive experience overseeing technology and analytics at other companies.
Joseph Wagner. Joseph Wagner has served as our Chief Financial Officer since the Closing and previously held the same position
with Clover since January 2020. Prior to joining Clover, Mr. Wagner served as a Regional Chief Financial Officer at UnitedHealth Group Incorporated, a healthcare organization, from February 2016 to
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December 2019. Mr. Wagner served as the Chief Financial Officer for Healthcare Interactive, a middleware healthcare company, from October 2014 to January 2016. Mr. Wagner holds a B.B.A.
in accountancy from the University of Notre Dame and is a certified public accountant (inactive).
Gia Lee. Gia Lee has
served as our General Counsel and our Secretary since the Closing and previously held the same positions with Clover since January 2020 and August 2020, respectively. Prior to joining Clover, Ms. Lee served as Deputy General
Counsel at the U.S. Department of Health and Human Services from June 2011 to January 2017. Ms. Lee also served as a professor at UCLA School of Law and as an Attorney-Advisor at the U.S. Department of Justices Office of Legal Counsel.
Ms. Lee holds an A.B. in social studies and womens studies from Harvard University, an MPhil in social and political theory from the University of Cambridge and a J.D. from Harvard Law School.
Jamie L. Reynoso. Jamie L. Reynoso has served as our Chief Operating Officer since the Closing and previously held the same
position with Clover since July 2020. Prior to joining Clover, Ms. Reynoso served as the Chief Executive Officer and the Chief Operating Officer of Memorial Hermann Health Solutions, Inc., a provider of health insurance plans,
from April 2016 to December 2019. From November 2012 to April 2016, Ms. Reynoso served as the Regional Vice President of Payer Strategy and Operations at Catholic Health Initiatives, a nonprofit, faith-based health system. Ms. Reynoso
holds a B.B.A. from Texas A&M University-Kingsville.
Key Employees
Dr. Sophia Chang. Dr. Sophia Chang has served as our Chief Clinical Informatics Officer
since the Closing and previously held the same position with Clover since March 2017. Prior to joining Clover, Dr. Chang served as the Chief Clinical Innovation Officer at CareMore Health, a subsidiary of Anthem Inc., an
integrated health plan and care delivery system for Medicare and Medicaid patients, from February 2016 to February 2017. From May 2014 to January 2016, Dr. Chang served as the Vice President of Programs at California Health Care Foundation, an
independent, nonprofit organization that focuses on improving the healthcare system for the people of California. Dr. Chang holds a B.A. in political science from Amherst College, an M.P.H. from the University of California, Berkeley and an
M.D. from Columbia University College of Physicians and Surgeons.
Dr. Kumar Dharmarajan.
Dr. Kumar Dharmarajan has served as our Chief Scientific Officer since the Closing and previously held the same position with Clover since July 2017. Dr. Dharmarajan has served as an Assistant Professor at Yale
University School of Medicine and a member of the research faculty at Yales New Haven Hospital Center for Outcomes Research and Evaluation since July 2014. Dr. Dharmarajan holds an A.B. in social studies from Harvard University, an M.B.A.
in business administration and management from Columbia Business School and an M.D. from Columbia University College of Physicians and Surgeons.
Dr. Mark Spektor. Dr. Mark Spektor has served as our Chief Medical Officer since the
Closing and previously held the same position with Clover since January 2015. Prior to joining Clover, Dr. Spektor served as the Chief Clinical Integration Officer at CarePoint Health System, a preventive medicine, disease
management and healthcare education health system, from June 2014 to January 2015. Dr. Spektor holds a B.A. in political science and biology from Rutgers University, an M.B.A. in healthcare management from the University of Massachusetts,
Amherst and a D.O. from the University of Medicine and Dentistry of New Jersey.
Non-Employee Directors
Chelsea Clinton. Chelsea Clinton has served as a member of our board of directors since the Closing and previously held the same
position with Clover since February 2017. Since March 2013, Ms. Clinton has served as Vice Chair of the Clinton Foundation, where her work emphasizes improving global and domestic health, creating service opportunities and
empowering the next generation of leaders. Ms. Clinton has also served as an Adjunct Assistant Professor at Columbia Universitys Mailman School of Public Health since 2012. Ms. Clinton has served as a member of the board of directors
of the Clinton Health Access Initiative since September 2011.
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Ms. Clinton has served as a member of the boards of directors of IAC Holdings, Inc., a media and internet company, since September 2011, Expedia Group, Inc. (formerly Expedia, Inc.), an
online travel shopping company, since March 2017 and Nurx Inc., a telemedicine start-up company, since June 2018. In addition to her for-profit affiliations,
Ms. Clinton currently serves on the boards of directors of The School of American Ballet, The Africa Center, the Alliance for a Healthier Generation, the Weill Cornell Medical College and Columbia Universitys Mailman School of Public
Health, and as Co-Chair of the Advisory Board of the Of Many Institute at New York University. Ms. Clinton holds a B.A. in history from Stanford University, an MPhil and a DPhil in international relations
from Oxford University and an M.P.H. from Columbia Universitys Mailman School of Public Health.
We believe that Ms. Clinton is
qualified to serve as a member of our board of directors because of her extensive health background, her experience as a director of public companies and non-profit organizations and her knowledge of our
industry.
Lee A. Shapiro. Lee A. Shapiro has served as a member of our board of directors since the Closing.
Mr. Shapiro co-founded and has served as the Managing Partner at 7Wire Ventures, an early-stage healthcare venture fund, since June 2013. Mr. Shapiro previously served as Chief
Financial Officer of Livongo Health, Inc., a mobile health monitoring technology company, from December 2018 to November 2020. Mr. Shapiro served as a director from August 2013 until April 2019. Mr. Shapiro joined Allscripts Healthcare
Solutions, Inc., a provider of electronic prescribing, practice management and electronic health record technology, in April 2000 and served as President from April 2002 to December 2012. He previously served as a director of Tivity Health, Inc., a
provider of fitness and health improvement programs, from May 2015 to May 2020 and a director of Medidata Solutions, Inc., a global provider of cloud-based solutions for life sciences, from June 2011 to October 2019. He also serves as a director of
some of the 7Wire Ventures portfolio companies. He serves on the National Board of the American Heart Association and the advisory board of the Gastro-Intestinal Research Foundation. Mr. Shapiro holds a B.S. in accountancy from the University
of Illinois Urbana-Champaign and a J.D. from The University of Chicago Law School.
We believe that Mr. Shapiro is qualified to serve
as a member of our board of directors because of his extensive finance background, including service as a chief financial officer of a public company, his experience as a director of a public company, and his knowledge of our industry.
Nathaniel S. Turner. Nathaniel S. Turner has served as a member of our board of directors since the Closing and previously held
the same position with Clover since April 2015. Mr. Turner co-founded and has served as the Chief Executive Officer of Flatiron Health, Inc., a cancer research and data collection software
company, since June 2012. From June 2010 to June 2012, Mr. Turner served as a Product Manager at Google Inc. Mr. Turner holds a B.S. in economics from the Wharton School of the University of Pennsylvania.
We believe that Mr. Turner is qualified to serve as a member of our board of directors because of his extensive experience as an investor
in many technology, high-growth, healthcare companies, his experience as an executive at a healthcare company, and his knowledge of our industry.
William G. Robinson, Jr. William G. Robinson, Jr. has served as a member of our board of directors since March 25, 2021.
Mr. Robinson has served as the President of Broadgate Human Capital, LLC, a management consulting firm, since October 2018. Prior to Broadgate, Mr. Robinson served as the Executive Vice President and Chief Human Resources Officer for Sabre
Corporation, a travel technology company, from December 2013 to September 2017. Prior to Sabre, Mr. Robinson served as the Senior Vice President and Chief Human Resources Officer at Coventry Health Care, a diversified managed health care company
from 2012 to 2013. From 2010 to 2011, Mr. Robinson served as Senior Vice President for human resources at Outcomes Health Information Solutions, a healthcare analytics and information company specializing in the optimization and acquisition of
medical records. Prior to that, from 1990 to 2010, he worked for General Electric, where he held several human resources leadership roles in diverse industries including information technology, healthcare,
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energy, security and industrial. Mr. Robinson has served as a member of the board of directors of American Public Education, Inc. since June 2016 and Must Ministries since June 2019. He has also
served as a member of the board of trustees for the American Public University System since May 2020. Mr. Robinson holds a B.A. in communications from Wake Forest University and an M.A. in human resources from Bowie State University.
We believe that Mr. Robinson is qualified to serve as a member of our board of directors because of his extensive experience as an executive
officer in technology and healthcare companies, his experience as a director of a public company, and his knowledge of our industry.
Family Relationships
There are no family
relationships among any of our directors or executive officers.
Nominating and Corporate Governance Committee
Our nominating and corporate governance committee consists of Chelsea Clinton and Lee A. Shapiro, with Mr. Shapiro serving as chair of the
committee. The composition of our nominating and governance committee meets the requirements for independence under the current Nasdaq listing standards and SEC rules and regulations. Our nominating and corporate governance committee is responsible
for, among other things:
identifying, evaluating and recommending nominees to our board of directors and its committees;
conducting searches for appropriate directors;
evaluating the performance of our board of directors and of individual directors;
considering and making recommendations to our board of directors regarding the composition of the board and
its committees;
reviewing developments in our corporate governance practices;
evaluating the adequacy of our corporate governance practices and reporting; and
making recommendations to our board of directors concerning corporate governance matters.
Our nominating and corporate governance committee has a written charter approved by our board of directors. A copy of the charter is available
on the Investor Relations section of our website, which is located at https://investors.cloverhealth.com, by clicking on Governance Overview in the Governance section of our website.
Nomination to the Board of Directors
Candidates for nomination to our board of directors are selected by our board of directors based on the recommendation of our nominating and
corporate governance committee in accordance with its charter, our restated certificate of incorporation and restated bylaws, our Corporate Governance Guidelines and the criteria approved by our board of directors regarding director candidate
qualifications. In recommending candidates for nomination, our nominating and corporate governance committee considers candidates recommended by directors, officers, employees, stockholders and others, using the same criteria to evaluate all
candidates.
Our restated bylaws provide that stockholders may present nominations to be considered at an annual meeting by providing
timely notice to our Secretary at our principal executive office.
A stockholders notice to the Secretary must set forth the
information required by our restated bylaws. If a stockholder who has notified Clover Health of such stockholders intention to present a nomination for persons for election at an annual meeting does not appear to present such
stockholders proposal at such meeting, Clover Health does not need to present the nomination of persons for election for vote at such meeting.
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Audit Committee
Our audit committee consists of Vivek Garipalli, Lee A. Shapiro and Nathaniel S. Turner, with Mr. Shapiro serving as the
chair of the committee. The composition of our audit committee other than Vivek Garipalli meets the requirements for independence under the current Nasdaq listing standards and SEC rules and regulations. We intend to appoint one additional
independent director to our audit committee to replace Mr. Garipalli within one year following SCHs initial public offering pursuant to the Nasdaq phase-in provisions for transfers from other
markets. Each member of our audit committee is financially literate. In addition, our board of directors has determined that Mr. Shapiro is an audit committee financial expert within the meaning of Item 407(d) of Regulation S-K of the Securities Act. Our audit committee is responsible for, among other things:
selecting a firm to serve as the independent registered public accounting firm to audit our financial
statements;
helping to ensure the independence of the independent registered public accounting firm;
discussing the scope and results of the audit with the independent registered public accounting firm, and
reviewing, with management and the independent accountants, our interim and year-end operating results;
developing procedures for employees to anonymously submit concerns about questionable accounting or audit
matters; and
considering the adequacy of our internal accounting controls and audit procedures.
Our audit committee has a written charter approved by our board of directors. A copy of the charter is available on the Investor Relations
section of our website, which is located at https://investors.cloverhealth.com, by clicking on Governance Overview in the Governance section of our website.
Code of Ethics
Our board
of directors has adopted a code of ethics that applies to all of our executive officers, directors and employees, including our principal executive officer, principal financial officer, principal accounting officer or controller or persons
performing similar functions. The code of ethics is available on our website, www.investors.cloverhealth.com. In addition, we intend to make any legally required disclosures regarding amendments to, or waivers of, provisions of our code of ethics on
our website rather than by filing a Current Report on Form 8-K.
Delinquent Section 16
Reports
Section 16(a) of the Exchange Act requires our directors, executive officers and any persons who own more than 10% of our
common stock to file initial reports of ownership and reports of changes in ownership with the SEC. Based solely on our review of the copies of such forms filed with the SEC and written representations from the directors and executive officers, we
believe that all Section 16(a) filing requirements were timely met in the year ended December
31, 2020.
Item 11. Executive Compensation
As of December 31, 2020, the Company had four officers, Chamath Palihapitiya (Chairman and CEO), Ian Osborne (President), Steven Trieu
(CFO) and Simon Williams (General Counsel and Secretary), none of whom received any compensation for their service as officers of the Company. The Company had no other officers or employees. Concurrently with the completion of the Mergers, the
Companys officers resigned from their respective positions.
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We entered into an agreement with an affiliate of Sponsor, pursuant to which we accrued an
obligation to such affiliate a total of $10,000 per month for office space, administrative and related support services. Upon completion of the Business Combination, we ceased accruing these monthly fees.
We did not make any equity awards to any of our executive officers during the fiscal year ending December 31, 2020.
Until the completion of the Mergers, sponsors, officers and directors, or any of their respective affiliates, were reimbursed for any
reasonable out-of-pocket expenses incurred in connection with activities on our behalf such as identifying potential target businesses and performing due diligence on
suitable business combinations. Our audit committee reviewed on a quarterly basis all payments that were made to our sponsors, officers, directors or our or any of their affiliates. We are not party to any agreements with our officers and directors
that provide for benefits upon termination of employment. Other than as described above, none of our directors received compensation for their service on our board of directors for the fiscal year ending December 31, 2020.
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Item 12. Security Ownership of Certain Beneficial Owners
and Management and Related Stockholder Matters
Equity Compensation Plan Information
As of December 31, 2020, we had no compensation plans under which equity securities were authorized for issuance. In connection with the
Mergers, our shareholders approved the Clover Health Investments, Corp. 2020 Equity Incentive Plan, 2020 Employee Stock Purchase Plan and Management Incentive Plan.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information known to the Company regarding the beneficial ownership of the Companys common stock as of
January 7, 2021, by:
each person who is known by the Company to be the beneficial owner of more than five percent (5%) of the
outstanding shares of any class of the Companys common stock;
each named executive officer of the Company;
each director of the Company as of March 30, 2021; and
all executive officers and directors of the Company as of March 30, 2021, as a group.
Beneficial ownership is determined in accordance with the rules of the SEC and generally includes any shares over which a person exercises
sole or shared voting or investment power. Unless otherwise indicated below, to our knowledge, the persons and entities named in the table have sole voting and sole investment power with respect to all shares beneficially owned by them, subject to
community property laws where applicable. Shares of our Common Stock subject to stock options and warrants that are currently exercisable or exercisable within 60 days of January 7, 2021 and all shares of our Common Stock issuable pursuant to
restricted stock units that will vest within 60 days of January 7, 2021, are deemed to be outstanding and to be beneficially owned by the person holding the stock options, warrants or restricted stock units for the purpose of computing the
percentage ownership of that person, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.
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The percentage ownership of the Common Stock is based on 140,375,253 shares of Class A
Common Stock and 260,965,701 shares of Class B Common Stock outstanding as of January 7, 2021. Unless otherwise indicated, the address of each beneficial owner listed in the table below is c/o Clover Health Investments, Corp., 725 Cool
Springs Blvd, Suite 320, Franklin, Tennessee 37067.
Name and Address of Beneficial
Owner
Number of
Shares of
Class A
Common
Stock
% of
Class A
Common
Stock
Number of
Shares of
Class B
Common
Stock
% of
Class B
Common
Stock
% of
Total
Voting
Power**
5% Holders
SCH Sponsor III LLC (1)
20,500,000
14.3
%
*
ChaChaCha SPAC C LLC (2)
10,000,000
7.0
%
*
Entities affiliated with Chamath
Palihapitiya (3)
30,500,000
21.3
%
284,891
*
1.2
%
Entities affiliated with Ian
Osborne (4)
25,500,000
17.8
%
*
Entities affiliated with Vivek
Garipalli (5)
83,584,543
32.0
%
30.4
%
Greenoaks Capital and affiliated
entities (6)
96,331,338
36.9
%
35.0
%
Executive Officers and Directors
Vivek Garipalli (5)
83,584,543
32.0
%
30.4
%
Andrew Toy (7)
12,790,323
4.7
%
4.4
%
Chamath Palihapitiya (1)(2)(3)
30,500,000
21.3
%
284,891
*
1.2
%
Ian Osborne (1)(4)
25,500,000
17.8
%
*
Simon Williams
Steven Trieu
Chelsea Clinton (7)
685,690
*
*
William G. Robinson, Jr.
Lee Shapiro
*
*
Nat Turner (8)
2,565,954
1.0
%
*
All directors and executive officers as a group (9 individuals) (9)
101,931,019
36.8
%
35.0
%
*
Less than one percent.
**
Percentage of total voting power represents voting power with respect to all shares of Class A common
stock and Class B common stock, as a single class. Each share of Class B common stock is entitled to ten votes per share and each share of Class A common stock is entitled to one vote per share. For more information about the voting
rights of Common Stock, see the section below titled Description of Securities in this report.
(1)
Messrs. Palihapitiya and Osborne may be deemed to beneficially own shares held by SCH Sponsor III LLC by
virtue of their shared voting and investment control over SCH Sponsor III LLC. The address of SCH Sponsor III LLC is 317 University Ave, Suite 200, Palo Alto, CA 94301.
(2)
Mr. Palihapitiya beneficially owns shares held by ChaChaCha SPAC C LLC by virtue of his voting and
investment control over ChaChaCha SPAC C LLC. All shares held by ChaChaCha SPAC C LLC are subject to a pledge in favor of Credit Suisse AG, New York Branch as collateral with respect to a loan agreement. The address of ChaChaCha SPAC C LLC is 317
University Ave, Suite 200, Palo Alto, CA 94301.
(3)
Consists of (i) 20,500,000 shares of Class A common stock held by SCH Sponsor III LLC, (ii) 10,000,000
shares of Class A common stock held by ChaChaCha SPAC C LLC, and (iii) 284,891 shares of Class B common stock held by The Social + Capital Partnership III, L.P. for itself and as nominee for The Social + Capital Partnership Principals Fund
III, L.P. (Social Capital Partnership III). Mr. Palihapitiya may be deemed to beneficially own the shares held by Social Capital Partnership III by virtue of his shared voting and investment control over Social Capital Partnership
III. The address of Mr. Palihapitiya and each of these entities is 317 University Ave, Suite 200, Palo Alto, CA 94301.
(4)
Consists of (i) 20,500,000 shares of Class A common stock held by SCH Sponsor III LLC and (ii)
5,000,000 shares of Class A common stock held by Hedosophia Public Investments Limited. Mr. Osborne serves as a
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member of the board of directors of Hedosophia Public Investments Limited and as such, has shared voting and dispositive power with respect to the shares held by Hedosophia Public Investments
Limited and may be deemed to beneficially own the shares held by Hedosophia Public Investments Limited. The address of Mr. Osborne and SCH Sponsor III LLC is 317 University Ave, Suite 200, Palo Alto, CA 94301 and the address of Hedosophia
Public Investments Limited is Trafalgar Court, Les Banques, St Peter Fort, Guernsey G41 3QL.
(5)
Consists of (i) 5,645,934 shares of Class B common stock held by Caesar Ventures, LLC (Caesar
Ventures), (ii) 2,062,265 shares of Class B common stock held by Caesar Clover, LLC (Caesar Clover), (iii) 75,694,143 shares of Class B common stock held by NJ Healthcare Investments, LLC (NJ Healthcare), and
(iv) 182,201 shares of Class B common stock held by Titus Ventures, LLC (Titus Ventures). Mr. Garipalli serves as the sole manager of Caesar Ventures, Caesar Clover, NJ Healthcare and Titus Ventures, respectively. Therefore,
Mr. Garipalli may be deemed to share voting power and dispositive power over the shares held by these entities. The address of each of these entities is 11 Colts Gait Lane, Colts Neck, NJ 07722.
(6)
Consists of (i) 4,018,431 shares of Class B common stock held of record by an affiliate of Greenoaks
Capital Partners LLC (Greenoaks Capital), (ii) 3,085,306 shares of Class B common stock held of record by an affiliate of Greenoaks Capital, (iii) 8,678,540 shares of Class B common stock held of record by an affiliate of
Greenoaks Capital, (iv) 2,716,239 shares of Class B common stock held of record by an affiliate of Greenoaks Capital, (v) 12,036,311 shares of Class B common stock held of record by an affiliate of Greenoaks Capital, (vi) 26,058,782 shares
of Class B common stock held of record by an affiliate of Greenoaks Capital, (vii) 29,803,297 shares of Class B common stock held of record by an affiliate of Greenoaks Capital, and (viii) 9,934,432 shares of Class B common stock held
of record by an affiliate of Greenoaks Capital. Benjamin Peretz is a Managing Member of the general partner of each of the entities affiliated with Greenoaks Capital. Therefore, Mr. Peretz may be deemed to share voting power and dispositive
power over the shares held by these entities. The principal business address of each of these entities is 535 Pacific Avenue, 4th Floor, San Francisco, California 94133.
(7)
Consists of Class B common stock issuable upon the exercise of options exercisable within 60 days of
January 7, 2021.
(8)
Consists of 2,565,954 shares of Class B common stock held by Multiple Holdings, LLC. Nat Turner is a
partner in Multiple Holdings, LLC and may be deemed to share voting power and dispositive power over the shares held by Multiple Holdings, LLC. The address of Multiple Holdings, LLC is 139 Reade Street, apartment 5A, New York, NY 10013.
(9)
Includes 15,780,522 shares of Class B common stock issuable upon exercise of options exercisable within
60 days of January 7, 2021.
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Item 13. Certain Relationships,
Related Transactions and Director Independence
Founder Shares
In January 2020, the Sponsor purchased 17,250,000 SCH Class B ordinary shares for an aggregate purchase price of $25,000, or approximately
$0.001 per share (after a subsequent share capitalization on April 21, 2020) (the founder shares). In March 2020, the Sponsor transferred 100,000 founder shares to each of Dr. James Ryans and Jacqueline D. Reses (two of
SCHs independent directors) at their original per-share purchase price. On April 21, 2020, SCH effected a pro rata share capitalization resulting in an increase in the total number of founder shares
outstanding from 17,250,000 to 20,700,000 in order to maintain the ownership of founder shares at 20% of the issued and outstanding ordinary shares of SCH upon consummation of its initial public offering. The Sponsor received 3,450,000 founder
shares in the share capitalization as a result of SCHs independent directors waiving their right to receive shares in the share capitalization.
These founder shares are identical to the SCH Class A ordinary shares included in the units sold in SCHs initial public offering,
except that (i) only the holders of the founder shares have the right to vote on the election of directors prior to the initial business combination (as defined in SCHs organizational documents), (ii) the founder shares are subject to
certain transfer restrictions, (iii) the holders of the founder shares have agreed pursuant to a letter agreement to waive (x) their redemption rights with respect to the founder shares and public shares held by them in connection with the
completion of a business combination, (y) their redemption rights with respect to any founder shares and public shares held by them in connection with a shareholder vote to amend the SCHs organizational documents (A) to modify the
substance or timing of our obligation to allow redemption in connection with our initial business combination or to redeem 100% of our public shares if we do not complete our initial business combination by April 24, 2022 or (B) with
respect to any other provision relating to shareholders rights or pre-initial business combination activity and (z) their rights to liquidating distributions from the trust account with respect to
the founder shares if SCH fails to complete a business combination by April 24, 2022, (iv) the founder shares are automatically convertible into SCH Class A ordinary shares at the time of the initial business combination and (v) the
founder shares are entitled to registration rights.
In connection with the Mergers, upon the Domestication, 20,700,000 founder shares
automatically converted, on a one-for-one basis, into shares of our Class A common stock.
Private Placement Warrants
Simultaneously with the consummation of the initial public offering of SCH, the Sponsor purchased 10,933,333 private placement warrants to
purchase one SCH Class A ordinary share at an exercise price of $11.50 at a price of $1.50 per warrant, or $16.4 million in the aggregate, in a private placement. Each private placement warrant entitled the holder to purchase one SCH
Class A ordinary share for $11.50 per share. A portion of the proceeds from the sale of the private placement warrants was placed in the trust account of SCH. In connection with the Business Combination, upon the Domestication, each of the
10,933,333 private placement warrants automatically converted into a warrant to acquire one share of our Class A common stock.
The
private placement warrants are identical to the public warrants included in the units sold in the initial public offering of SCH except that so long as the private placement warrants are held by the Sponsor or its permitted transferees:
(i) they are not redeemable by us, (ii) (2) they (including the shares issuable upon exercise of these warrants) may not, subject to certain limited exceptions, be transferred, assigned or sold by the Sponsor until 30 days after the
Closing; (3) they may be exercised by the holders on a cashless basis; and (4) they (including the shares issuable upon exercise of these warrants) are entitled to registration rights.
Registration Rights
The holders of the founder shares, private placement warrants, and warrants that may be issued upon conversion of working capital loans, if any
(and any SCH Class A ordinary shares issuable upon the exercise of the private
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Index to Financial Statements
placement warrants or warrants issued upon conversion of the working capital loans and upon conversion of the founder shares) are entitled to registration rights pursuant to a registration rights
agreement signed April 21, 2020 requiring SCH to register such securities for resale (in the case of the founder shares, only after conversion to SCH Class A ordinary shares). The holders of these securities are entitled to make up to
three demands, excluding short form demands, that SCH register such securities. In addition, the holders have certain piggy-back registration rights with respect to registration statements filed subsequent to the completion of SCHs
initial business combination and rights to require SCH to register for resale such securities pursuant to Rule 415 under the Securities Act. SCH will bear the expenses incurred in connection with the filing of any such registration statements.
In connection with the Closing, we, the Sponsor, SCHs independent directors, certain stockholders of Clover, including entities
affiliated with Mr. Garipalli, our Chief Executive Officer, entities affiliated with Greenoaks Capital, a holder of more than 5% of our outstanding capital stock, and entities affiliated with our director, Nathaniel Turner, and the other
parties thereto entered into an Amended and Restated Registration Rights Agreement dated as of January 7, 2021 (the Registration Rights Agreement). Under the Registration Rights Agreement, we are obligated to file a registration
statement to register the resale of shares of our Class A common stock held by the parties thereto and the private placement warrants held by the Sponsor and shares of our Class A common stock issuable upon the exercise of the private
placement warrants. In addition, pursuant to the terms of the Registration Rights Agreement and subject to certain requirements and customary conditions, including with respect to the shares of our common stock held by the Sponsor and certain
stockholders of Clover immediately following the Closing (not including the PIPE shares issued in the PIPE Investment pursuant to the terms of the subscription agreements) (the Lock-up Shares),
including a lock-up of such shares in each case ending on the earlier of (i) the date that is 180 days after the Closing Date and (ii) (a) for 33.33% of the
Lock-up Shares held by each of the parties thereto (and their respective permitted transferees), the date which the last reported sale price of our common stock equals or exceeds $12.50 per share (subject to
adjustment) for any 20 trading days within any 30-trading day period commencing at least 31 days after the Closing Date and (b) for an additional 50% of the
Lock-up Shares held by each of the parties thereto (and their respective permitted transferees), the date which the last reported sale price of our common stock equals or exceeds $15.00 per share (subject to
adjustment) for any 20 trading days within any 30-trading day period commencing at least 31 days after the Closing Date. The lock-up set forth in the Registration Rights
Agreement supersedes the lock-up provisions set forth in Section 7 of that certain letter agreement, dated as of April 21, 2020, by and among SCH, the Sponsor and each of the other parties thereto
(the Insider Letter) which provisions in Section 7 of the Insider Letter shall be of no further force or effect as of the date of the Registration Rights Agreement. The Registration Rights Agreement will terminate on the earlier of
(i) the tenth anniversary of the date of the Registration Rights Agreement or (ii) with respect to any party thereto, on the date that such party no longer holds any registrable securities.
Subscription Agreements
Concurrently with the execution of the Merger Agreement, we entered into subscription agreements with the PIPE investors that are existing
directors, officers or equityholders of the Sponsor and its affiliates (together with their permitted transferees) (collectively, the Sponsor Related PIPE Investors), pursuant to which the Sponsor Related PIPE Investors have subscribed
for shares of our Class A common stock in connection with the PIPE Investment. Certain of the Sponsor Related PIPE Investors are expected to fund $152,000,000 of the PIPE Investment, for which they will receive 15,200,000 shares of our
Class A common stock. Specifically, (i) CHACHACHA SPAC C LLC, an entity affiliated with Chamath Palihapitiya (SCHs Chairman and Chief Executive Officer), subscribed for 10,000,000 shares of our Class A common stock,
(ii) Hedosophia Group Limited, an entity affiliated with Ian Osborne (SCHs President and director), subscribed for 5,000,000 shares of our Class A common stock and (iii) Jacqueline D. Reses subscribed for 200,000 shares of our
Class A common stock.
The PIPE Investment was consummated concurrently with the Closing.
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Index to Financial Statements
Related Party Note and Advances
The Sponsor advanced SCH an aggregate of $17,631 to cover expenses related to the initial public offering. The advances were noninterest
bearing and due on demand. Advances in the aggregate amount of $17,631 were repaid in February 2020.
On January 21, 2020, SCH issued
an unsecured promissory note to the Sponsor, pursuant to which SCH borrowed an aggregate principal amount of $300,000. The note was non-interest bearing and payable on the earlier of (i) June 30,
2020 and (ii) the completion of the initial public offering. The borrowings outstanding under the note in the amount of $300,000 were repaid upon the consummation of the initial public offering on April 24, 2020.
On October 19, 2020, SCH issued an unsecured promissory note to the Sponsor (the Promissory Note), pursuant to which SCH may
borrow up to an aggregate principal amount of $2,500,000. The Promissory Note is non-interest bearing and payable on the earlier of (i) April 24, 2022 and (ii) the completion of the Business
Combination. On October 19, 2020, SCH borrowed $806,208 under the Promissory Note.
Administrative Services Agreement
SCH entered into an agreement whereby, commencing on April 21, 2020 through the earlier of the consummation of a business
combination or SCHs liquidation, SCH agreed to pay an affiliate of the Sponsor a monthly fee of $10,000 for office space and administrative and support services. For the three and nine months ended September 30, 2020, SCH incurred $30,000
and $50,000 of such fees. As of September 30, 2020, $50,000 is included in accrued expenses in the accompanying condensed balance sheets.
Financial Advisor Fees Related to Public Offering
In connection with SCHs initial public offering, the underwriters of SCHs initial public offering agreed to reimburse SCH for
amounts paid by SCH to Connaught (UK) Limited for financial advisory services in an amount equal to 10% of the discount paid to the underwriters, of which $1,440,000 was paid at the closing of SCHs initial public offering and up to $2,898,000
was paid at the time of the closing of SCHs initial business combination. Connaught (UK) Limited is an affiliate of SCH, the Sponsor and certain of SCHs directors and officers.
Related Person Transactions Policy
In connection with the Closing, our board of directors adopted a written related person transactions policy that our executive officers,
directors, nominees for election as a director, beneficial owners of more than 5% of our common stock and any members of the immediate family of and any entity affiliated with any of the foregoing persons are not permitted to enter into a material
related person transaction with us without the review and approval of our audit committee or a committee composed solely of independent directors in the event it is inappropriate for our audit committee to review such transaction due to a conflict
of interest. The policy provides that any request for us to enter into a transaction with an executive officer, director, nominee for election as a director, beneficial owner of more than 5% of our common stock or with any of their immediate family
members or affiliates, in which the amount involved exceeds $120,000 will be presented to our audit committee for review, consideration and approval. In approving or rejecting any such proposal, we expect that our audit committee will consider the
relevant facts and circumstances available and deemed relevant to the audit committee, including, but not limited to, whether the transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same
or similar circumstances and the extent of the related persons interest in the transaction.
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Index to Financial Statements
Although we have not had a written policy for the review and approval of transactions with
related persons, our board of directors has historically reviewed and approved any transaction where a director or officer had a financial interest, including all of the transactions described above. Prior to approving such a transaction, the
material facts as to a directors or officers relationship or interest as to the agreement or transaction were disclosed to our board of directors. Our board of directors would take this information into account when evaluating the
transaction and in determining whether such transaction was fair to our company and in the best interest of all of our stockholders.
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Index to Financial Statements
Item 14. Principal Accountant Fees and Services
The following is a summary of fees paid or to be paid to Marcum LLP, or Marcum, for services rendered.
Audit Fees . Audit fees consist of fees billed for professional services rendered for the audit of our
year-end financial statements and services that are normally provided by Marcum in connection with regulatory filings. The aggregate fees billed by Marcum for professional services rendered for the audit of
our annual financial statements, review of the financial information included in our Forms 10-Q for the respective periods and other required filings with the SEC for the year ended December 31, 2020 and
for the period from October 18, 2019 (inception) through December 31, 2019 totaled $113,750 and $37,500, respectively. The above amounts include interim procedures and audit fees, as well as attendance at audit committee meetings.
Audit-Related Fees. Audit-related services consist of fees billed for assurance and related services that are reasonably related to
performance of the audit or review of our financial statements and are not reported under Audit Fees. These services include attest services that are not required by statute or regulation and consultations concerning financial accounting
and reporting standards. We did not pay Marcum for consultations concerning financial accounting and reporting standards for the year ended December 31, 2020 and for the period from October 18, 2019 (inception) through December 31,
2019.
Tax Fees . We did not pay Marcum for tax planning and tax advice for the year ended December 31, 2020 and for the period
from October 18, 2019 (inception) through December 31, 2019.
All Other Fees . We did not pay Marcum for other services for
the year ended December 31, 2020 and for the period from October 18, 2019 (inception) through December 31, 2019.
Pre-Approval Policy
Our audit committee was formed upon the consummation of our Initial Public
Offering. As a result, the audit committee did not pre-approve all of the foregoing services, although any services rendered prior to the formation of our audit committee were approved by our board of
directors. Since the formation of our audit committee, and on a going-forward basis, the audit committee has and will continue to pre-approve all auditing services and permitted
non-audit services to be performed for us by our auditors, including the fees and terms thereof (subject to the de minimis exceptions for non-audit services described in
the Exchange Act which are approved by the audit committee prior to the completion of the audit).
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Index to Financial Statements
PART IV
Item 15. Exhibits and Financial Statement Schedules.
The following documents are filed as part of this report:
(1)
Financial Statements . The financial statements listed in the Index to Financial Statements under Part
II, Item 8 of this report.
(2)
Financial Statement Schedules . None.
(3)
Exhibits . The following exhibits are filed, furnished or incorporated by reference as part of this
report.
Incorporated by reference
Filed or
furnished
herewith
Exhibit
No.
Exhibit title
Form
File No.
Exhibit No.
Filing date
2.1
Agreement and Plan of Merger,
dated as of October 5, 2020, by and among the Registrant, Asclepius Merger Sub Inc. and Clover Health Investments, Corp.
8-K
001-39252
2.1
10/6/2020
2.1(a)
Amendment to the Agreement and Plan
of Merger, dated as of December 8, 2020
8-K
001-39252
2.1
12/10/2020
3.1
Amended and Restated Certificate of
Incorporation of the Registrant
8-K
001-39252
3.1
1/12/2021
3.2
Amended and Restated Bylaws of the
Registrant
8-K
001-39252
3.2
1/12/2021
4.1
Warrant Agreement, dated April 21,
2020, between the Company and Continental Stock Transfer & Trust Company, as warrant agent.
8-K
001-39252
4.1
4/24/2020
4.3
Description of Securities
X
4.5
Specimen Class
A Common Stock Certificate of the Registrant
S-4/A
333-249558
4.5
11/20/2020
4.6
Specimen Class
B Common Stock Certificate of the Registrant
S-4/A
333-249558
4.6
11/20/2020
10.1
Amended and Restated Registration
Rights Agreement, dated as of January 7, 2021, by and among the Registrant, SCH Sponsor III LLC, certain former stockholders of Clover Health Investments, Corp., Dr. James Ryans, Jacqueline D. Reses and the other parties thereto
8-K
001-39252
10.1
1/12/2021
10.2*
Form of Indemnification Agreement
8-K
001-39252
10.2
1/12/2021
10.3*
Amended and Restated 2014 Equity
Incentive Plan, and forms of agreement thereunder.
S-4
333-249558
10.15
10/20/2020
109
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Index to Financial Statements
Incorporated by reference
Filed or
furnished
herewith
Exhibit
No.
Exhibit title
Form
File No.
Exhibit No.
Filing date
10.4*
2020 Equity Incentive Plan and forms
of agreement thereunder.
8-K
001-39252
10.4
1/12/2021
10.5*
2020 Employee Stock Purchase Plan
8-K
001-39252
10.5
1/12/2021
10.6*
Management Incentive Plan
8-K
001-39252
10.6
1/12/2021
10.7*
Executive Incentive Bonus Plan
8-K
001-39252
10.7
1/12/2021
10.8*
Non-Employee
Director Compensation Policy
8-K
001-39252
10.8
1/12/2021
10.9*
Employment Agreement, dated as of
December 31, 2020, by and between the Registrant and Vivek Garipalli
8-K
001-39252
10.9
1/12/2021
10.10*
Employment Agreement, dated as of
December 31, 2020, by and between the Registrant and Andrew Toy
8-K
001-39252
10.10
1/12/2021
10.11*
Offer Letter, dated as of
December 20, 2018 by and between the Registrant and Gia Lee
8-K
001-39252
10.11
1/12/2021
10.12
Letter Agreement, dated as
of April 21, 2020, by and among the Registrant, SCH Sponsor III LLC and the Registrants officers and directors.
8-K
001-39252
10.1
4/24/2020
10.13
Administrative Services Agreement,
dated as of April 21, 2020, by and between the Registrant and Social Capital Holdings, Inc.
8-K
001-39252
10.4
4/24/2020
10.14*
Indemnity Agreement, dated
as of April 21, 2020, by and between the Registrant and Chamath Palihapitiya.
8-K
001-39252
10.6
4/24/2020
10.15*
Indemnity Agreement, dated
as of April 21, 2020, by and between the Registrant and Ian Osborne.
8-K
001-39252
10.7
4/24/2020
10.16*
Indemnity Agreement, dated
as of April 21, 2020, by and between the Registrant and Dr. James Ryans.
8-K
001-39252
10.8
4/24/2020
10.17*
Indemnity Agreement, dated
as of April 21, 2020, by and between the Registrant and Jacqueline D. Reses.
8-K
001-39252
10.9
4/24/2020
10.18*
Indemnity Agreement, dated
as of April 21, 2020, by and between the Registrant and Steven Trieu.
8-K
001-39252
10.10
4/24/2020
10.19*
Indemnity Agreement, dated
as of April 21, 2020, by and between the Registrant and Simon Williams.
8-K
001-39252
10.11
4/24/2020
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Index to Financial Statements
Incorporated by reference
Filed or
furnished
herewith
Exhibit
No.
Exhibit title
Form
File No.
Exhibit No.
Filing date
21.1
List of Subsidiaries
8-K
001-39252
21.1
1/12/2021
24.1
Power of Attorney (included on the signature page)
31.1
Certification of Principal Executive Officer pursuant to Rules 13a-14(a)
and 15(d)-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
X
31.2
Certification of Principal Financial Officer pursuant to Rules 13a-14(a)
and 15(d)-14(a) under the Securities Exchange Act of 1934, as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
X
32.1**
Certification of Principal Executive Officer pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
X
32.2**
Certification of Principal Financial Officer pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
X
101.INS
XBRL Instance Document
X
101.SCH
XBRL Taxonomy Extension Schema Document
101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
XBRL Taxonomy Extension Label Linkbase Document
101.PRE
XBRL Taxonomy Extension Presentation Linkbase Document
Schedules to this exhibit have been omitted in accordance with Regulation
S-K Item 601(b)(2). The registrant hereby agrees to furnish supplementally a copy of any omitted schedule to the SEC upon its request.
*
Indicates a management contract or compensatory plan or arrangement.
**
Furnished and not filed.
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Index to Financial Statements
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
CLOVER HEALTH INVESTMENTS, CORP.
By:
/s/ VIVEK GARIPALLI
Vivek Garipalli
Chief Executive Officer
Date: March 31, 2021
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Vivek Garipalli as his or her attorney-in-fact, with the power of substitution, for him or her in any and all capacities, to sign any amendments to this Annual Report on Form
10-K, and to file the same, with exhibits thereto and other documents in connection therewith with the Securities and Exchange Commission, hereby ratifying and confirming all that said attorney-in-fact, or his substitute, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/ S / VIVEK GARIPALLI
Vivek Garipalli
Chief Executive Officer and Chairman
of the Board (Principal Executive Officer)
March 31, 2021
/ S / ANDREW TOY
Andrew Toy
President
March 31, 2021
/ S / JOSEPH WAGNER
Joseph Wagner
Chief Financial Officer
(Principal Financial Officer and Principal Accounting Officer)
March 31, 2021
/ S / CHELSEA CLINTON
Chelsea Clinton
Director
March 31, 2021
/ S / LEE A. SHAPIRO
Lee A. Shapiro
Director
March 31, 2021
/ S / NATHANIEL TURNER
Nathaniel Turner
Director
March 31, 2021
/ S / WILLIAM G. ROBINSON, JR.
William G. Robinson, Jr.
Director
March 31, 2021
112
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.