Item 9A. Controls and Procedures
Item 9A. Controls and Procedures
Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, have evaluated the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of December 31, 2021. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, due to the material weaknesses in our internal control over financial reporting described below, our disclosure controls and procedures were not effective at the reasonable assurance level as of December 31, 2021.
Notwithstanding the material weaknesses, management has concluded that our audited financial statements included in this Annual Report on Form 10-K are fairly stated in all material respects in accordance with U.S. GAAP for each of the periods presented herein.
Management’s Report on Internal Control Over Financial Reporting
The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. The Company's internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S generally accepted accounting principles. The Company's internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company's assets that could have a material effect on the financial statements.
Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Clarivate's management assessed the effectiveness of Clarivate's internal control over financial reporting as of December 31, 2021 using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") in Internal Control — Integrated Framework (2013).
A material weakness is 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 the Company's annual or interim financial statements will not be prevented or detected on a timely basis.
Clarivate's management identified material weaknesses in our internal control over financial reporting related to: (1) the lack of an effectively designed control over the communication of modifications to pre-existing compensation agreements in an acquisition transaction between the legal function and the accounting function to ensure the accounting impact of the modifications could be evaluated, and (2) the lack of an effectively designed control with a sufficient level of precision to allow for an appropriate review of the tax balances associated with the opening balance sheet of acquired entities.
The material weakness related to the communication of modifications to pre-existing compensation agreements in an acquisition transaction resulted in the restatement of the Company’s consolidated financial statements for the year ended December 31, 2020, the quarter ended December 31, 2020, and each of the quarters of 2021 related to restricted cash, prepaid expenses, goodwill, accrued expenses, other current liabilities, other non-current liabilities, treasury shares, and accumulated other comprehensive income (loss) and accumulated deficit. The material weakness related to the review of the
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tax balances associated with the opening balance sheet of acquired entities resulted in immaterial adjustments of the Company’s consolidated financial statements for the year ended December 31, 2020 and each of the quarters of 2020 and 2021 related to goodwill, deferred income tax asset, and deferred income tax liability. Additionally, these material weaknesses could result in misstatements of the aforementioned account balances or disclosures that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected. Because of these material weaknesses, management concluded that the Company did not maintain effective internal control over financial reporting as of December 31, 2021.
In the year ended December 31, 2021, the Company acquired ProQuest in a purchase business combination. Management excluded ProQuest from our assessment of the effectiveness of the Company's internal control over financial reporting as of December 31, 2021. ProQuest represented 2% of the Company's total assets and 4% of the Company's total revenues as of and for the year ended December 31, 2021.
The effectiveness of the Company’s internal control over financial reporting as of December 31, 2021 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears under "Item 8. Financial Statements and Supplementary Data".
Remediation Plan
Our remediation plan related to the first identified material weakness includes management designing a control to identify and communicate the inventory of pre-existing compensation agreements in an acquisition transaction to the accounting department through the transaction close date to ensure the inventory includes the current version of the agreements. Our remediation plan will also include bring down procedures each quarter through the measurement period. Our remediation plan related to the second identified material weakness includes management designing an enhanced control to operate periodically during the measurement period to allow for an appropriate review of the tax balances associated with the opening balance sheet of acquired entities.
Changes in Internal Control Over Financial Reporting
During the fourth quarter of 2021, there were no changes in Clarivate’s internal control over financial reporting that materially affected, or is reasonably likely to materially affect, internal control over financial reporting.
Item 9B. Other Information
Iran Threat Reduction And Syria Human Rights Act Disclosure
Pursuant to Section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012, which amended the Securities Exchange Act of 1934, an issuer is required to disclose in its annual or quarterly reports, as applicable, whether, during the reporting period, it or any of its affiliates knowingly engaged in certain activities, transactions or dealings relating to Iran or with individuals or entities designated pursuant to certain Executive Orders. Disclosure is generally required even where the activities, transactions or dealings were conducted in compliance with applicable laws and regulations.
During the reporting period, the Company sold access to information and informational materials, which are generally exempt from U.S. economic sanctions, to 3 entities that are part of, or may be owned or controlled by, the Government of Iran. We were advised by counsel that these transactions were permissible under U.S. sanctions pursuant to certain statutory and regulatory exemptions for the exportation of information and informational materials. The Company terminated this activity in October 2019 and does not intend to resume it.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
None.
PART III
Item 10. Directors, Executive Officers and Corporate Governance
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We incorporate by reference the information responsive to this Item appearing in our definitive Proxy Statement on Schedule 14A for our 2022 Annual General Meeting of Shareholders (“Proxy Statement”), which will be filed no later than 120 days after December 31, 2021.
Code of Ethics
Clarivate has adopted a Code of Ethics that applies to all of its employees, officers, and directors. This includes Clarivate’s principal executive officer, principal financial officer, and principal accounting officer or controller, or persons performing similar functions. The full text of Clarivate’s Code of Ethics is posted on its website at ir.clarivate.com/governance/governance-documents/default.aspx. Clarivate intends to disclose on its website any future amendments of the Code of Ethics or waivers that exempt any principal executive officer, principal financial officer, principal accounting officer or controller, persons performing similar functions, or Clarivate’s directors from provisions in the Code of Ethics.
Statement of Significant Differences Between our Corporate Governance Practices and NYSE Corporate Governance Standards for U.S. Issuers
Pursuant to exceptions for foreign private issuers, we are not required to comply with certain of the corporate governance practices followed by U.S. companies under NYSE listing standards. However, Section 303A.11 of the NYSE Listed Company Manual requires that we state any significant differences between our corporate governance practices and the practices required by the NYSE. In this regard, if we believe that circumstances warrant, we may elect to comply with provisions of Companies (Jersey) Law 1991 in lieu of the NYSE shareholder approval requirements applicable to certain dilutive events, such as the establishment or material amendment of certain equity-based compensation plans. In addition, our compensation committee and nominating and corporate governance committee are not subject to annual performance evaluations.
Item 11. Executive Compensation
We incorporate by reference the information responsive to this Item appearing in our Proxy Statement, which will be filed no later than 120 days after December 31, 2021.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
We incorporate by reference the information responsive to this Item appearing in our Proxy Statement, which will be filed no later than 120 days after December 31, 2021.
Item 13. Certain Relationships and Related Transactions, and Director Independence
We incorporate by reference the information responsive to this Item appearing in our Proxy Statement, which will be filed no later than 120 days after December 31, 2021.
Item 14. Principal Accounting Fees and Services
We incorporate by reference the information responsive to this Item appearing in our Proxy Statement, which will be filed no later than 120 days after December 31, 2021.
PART IV
Item 15. Exhibits and Financial Statement Schedules
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EXHIBIT INDEX
2.1 ProQuest Transaction Agreement (incorporated by reference to Exhibit 2.1 to Clarivate's Form 8-K filed May 17, 2021)
2.2 Amendment to ProQuest Transaction Agreement (incorporated by reference to Exhibit 2.1 to Clarivate’s Form 8-K filed July 29, 2021)
2.3 Amendment No. 2 to ProQuest Transaction Agreement (incorporated by reference to Exhibit 2.1 to Clarivate's Form 8-K filed December 1, 2021)
3.1 Amended and Restated Memorandum and Articles of Association (incorporated by reference to Exhibit 3.1 to Clarivate’s Form 8-K filed May 12, 2021)
3.2 Statement of Rights of the 5.25% Series A Mandatory Convertible Preferred Shares of Clarivate Plc, effective June 14, 2021 (incorporated by reference to Exhibit 3.1 to Clarivate’s Form 8-K filed June 14, 2021)
3.3 Form of Certificate of the 5.25% Series A Mandatory Convertible Preferred Shares (included as Exhibit A to Exhibit 3.2 hereto)
4.1* Description of Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934
4.2 Warrant Agreement between Continental Stock Transfer & Trust Company and Churchill Capital Corp (incorporated by reference to Exhibit 4.4 to Churchill Capital Corp’s Form 8-K, filed on September 12, 2018)
4.3 Indenture dated as of October 31, 2019 among Camelot Finance S.A., as Issuer, the guarantors party thereto and Wilmington Trust, National Association, as trustee governing the 4.50% Senior Secured Notes due 2026 (incorporated by reference to Exhibit 4.1 to Clarivate’s Form 6-K, filed on November 5, 2019)
4.4 Form of 4.50% Senior Secured Note due 2026 (included as Exhibit A to Exhibit 4.3 hereto)
4.5 First Supplemental Indenture, dated as of May 15, 2020, to the indenture dated as of October 31, 2019 among Camelot Finance S.A., as Issuer, the guarantors party thereto and Wilmington Trust, National Association, as trustee governing the 4.50% Senior Secured Notes due 2026 (incorporated by reference to Exhibit 4.1 to Clarivate's From 10-Q, filed on May 10, 2021)
4.6 Second Supplemental Indenture, dated as of March 30, 2021, to the indenture dated as of October 31, 2019 among Camelot Finance S.A., as Issuer, the guarantors party thereto and Wilmington Trust, National Association, as trustee governing the 4.50% Senior Secured Notes due 2026 (incorporated by reference to Exhibit 4.2 to Clarivate's From 10-Q, filed on May 10, 2021)
4.7 Third Supplemental Indenture dated as of December 1, 2021, to the indenture dated as of October 31, 2019 among Camelot Finance S.A., as Issuer, the guarantors party thereto and Wilmington Trust, National Association, as trustee and collateral agent, governing the Issuer's 4.50% Senior Secured Notes due 2026 (incorporated by reference to Exhibit 4.1 to Clarivate's Form 8-K, filed on December 1, 2021)
4.8 Indenture, dated August 19, 2021, between Clarivate Science Holdings Corporation, as Issuer, and Wilmington Trust, National Association, as trustee and collateral agent, relating to the Issuer’s 3.875% senior secured notes due 2028 (incorporated by reference to Exhibit 4.1 to Clarivate's Form 8-K filed August 19, 2021)
4.9 Form of 3.875% senior secured note due 2028 (included as Exhibit A to Exhibit 4.8 hereto)
4.1 First Supplemental Indenture dated as of December 1, 2021, to the indenture dated as of August 19, 2021 among Clarivate Science Holdings Corporation, as Issuer, the guarantors party thereto and Wilmington Trust, National Association, as trustee and collateral agent, governing the Issuer's 3.875% Senior Secured Notes due 2028 (incorporated by reference to Exhibit 4.2 to Clarivate's Form 8-K, filed on December 1, 2021)
4.11 Indenture, dated August 19, 2021, between Clarivate Science Holdings Corporation, as Issuer, and Wilmington Trust, National Association, as trustee, relating to the Issuer’s 4.875% senior notes due 2029 (incorporated by reference to Exhibit 4.2 to Clarivate's Form 8-K filed August 19, 2021)
4.12 Form of 4.875% senior note due 2029 (included as Exhibit A to Exhibit 4.11 hereto)
4.13 First Supplemental Indenture dated as of December 1, 2021, to the indenture dated as of August 19, 2021 among Clarivate Science Holdings Corporation, as Issuer, the guarantors party thereto and Wilmington Trust, National Association, as trustee, governing the Issuer's 4.875% Senior Notes due 2029 (incorporated by reference to Exhibit 4.3 to Clarivate's Form 8-K, filed on December 1, 2021)
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10.1 Form of Director and Officer Indemnification Agreement (incorporated by reference to Exhibit 10.4 to Amendment No. 2 to Clarivate’s Registration Statement on Form F-4, filed on April 15, 2019)
10.2 Investor Rights Agreement dated as of October 1, 2020 (incorporated by reference to Exhibit 10.1 to Clarivate's Form 8-K filed October 1, 2020)
10.3 Registration Rights Agreement dated as of October 1, 2020 (incorporated by reference to Exhibit 10.2 to Clarivate's Form 8-K filed October 1, 2020)
10.4 Amendment No. 1 to the Registration Rights Agreement dated as of December 1, 2021 (incorporated by reference to Exhibit 10.1 to Clarivate’s Form 8-K, filed December 1, 2021)
10.5 Director Nomination Agreement dated as of December 1, 2021 (incorporated by reference to Exhibit 10.2 to Clarivate's Form 8-K, filed December 1, 2021)
10.6 Capri Transaction Agreement (incorporated by reference to Exhibit 10.2 to Clarivate’s Form 8-K, filed May 17, 2021)
10.5 Director Acknowledgement Letter (Stead) (incorporated by reference to Exhibit 10.12 to Clarivate’s Registration Statement on Form F-4, filed on February 27, 2019)
10.6 Director Acknowledgement Letter (von Blucher) (incorporated by reference to Exhibit 10.13 to Clarivate’s Registration Statement on Form F-4, filed on February 27, 2019)
10.7 Credit Agreement dated as of October 31, 2019 among Camelot UK Holdco Limited, Camelot UK Bidco Limited, the US Borrowers party thereto, Camelot Finance S.A., certain Restricted Subsidiaries from time to time designated thereunder as Additional Revolving Borrowers, the Subsidiary Guarantors from time to time party thereto, the several banks, financial institutions, institutional lenders and other entities from time to time party thereto as lenders, the Issuing Lenders from time to time party thereto and Bank of America, N.A., as administrative agent (incorporated by reference to Exhibit 10.1 to Clarivate’s Form 6-K, filed on November 5, 2019)
10.8 Incremental Facility Amendment, dated February 28, 2020, by and among Camelot UK Holdco Limited, Camelot UK Bidco Limited, Camelot Finance S.A., the other borrowers party thereto, the other subsidiaries of the Company party thereto, Bank of America, N.A., as administrative agent, and Citibank, N.A., as lender
10.9 Amendment to Credit Agreement dated October 1, 2020 (incorporated by reference to Exhibit 10.4 to Clarivate's Form 8-K filed October 1, 2020)
10.10 Amendment to the Credit Agreement dated as of November 30, 2021 to Credit Agreement dated as of October 31, 2019 (incorporated by reference to Exhibit 10.3 to Clarivate's Form 8-K, filed on December 1, 2021)
10.11+ Clarivate Analytics Plc 2019 Incentive Award Plan - Amended and Restated as of May 11, 2020
10.12+ Clarivate Analytics Plc 2019 Incentive Award Plan - Form of Restricted Stock Unit Agreement (incorporated by reference to Exhibit 10.17 to Clarivate's Form 10-K, filed on March 2, 2020)
10.13+ Clarivate Analytics Plc 2019 Incentive Award Plan - Form of Performance Share Unit Agreement (incorporated by reference to Exhibit 10.4 to Clarivate's Quarterly Report on Form 10-Q, filed on July 30, 2020)
10.14*+ Separation Agreement, dated December 10, 2021, by and between Clarivate Plc and Richard Hanks
10.15*+ Offer Letter, dated November 29, 2021, by and between Clarivate Plc and Jonathan Collins
10.16+ Offer Letter, dated October 4, 2021, by and between Clarivate Plc and Heather Matzke-Hamlin (incorporated by reference to Exhibit 10.1 to Clarivate’s Form 8-K filed October 5, 2021)
10.17+ Agreement by and between Clarivate Analytics and Mukhtar Ahmed, dated January 1, 2018 (incorporated by reference to Exhibit 10.6 to Clarivate's Quarterly Report on Form 10-Q, filed on July 30, 2020)
10.18+ Executive Agreement, entered into as of July 26, 2021 by and between Clarivate Plc. and Jeffrey Roy (incorporated by reference to Exhibit 10.3 to Clarivate's Quarterly Report on Form 10-Q, filed on July 29, 2021)
10.19+ Executive Agreement, entered into as of July 26, 2021 by and between Clarivate Plc. and Stephen Hartman (incorporated by reference to Exhibit 10.4 to Clarivate's Quarterly Report on Form 10-Q, filed on July 29, 2021)
10.20+ Executive Severance Plan of Clarivate Plc (incorporated by reference to Exhibit 10.5 to Clarivate's Quarterly Report on Form 10-Q, filed on July 29, 2021)
21.1* Subsidiaries of the Registrant
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23.1* Consent of PricewaterhouseCoopers LLP
24.1* Powers of Attorney (included on signature page to this annual report)
31* Certification of our Chief Executive Officer and our Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32* Certification of our Chief Executive Officer and our Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101* The following information from our Form 10-K for the fiscal year ended December 31, 2021, formatted in Inline eXtensible Business Reporting Language: (i) Consolidated Statement of Comprehensive Income, (ii) Consolidated Balance Sheet, (iii) Consolidated Statement of Changes in Equity, (iv) Consolidated Statement of Cash Flows, and (v) the Notes to the Consolidated Financial Statements.
104* The cover page from the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2021, formatted in Inline XBRL
* Filed herewith.
† Schedules and exhibits omitted pursuant to Item 601(a)(5) of Regulation S-K. Copies of any omitted schedule or exhibit will be furnished to the SEC upon request.
+ Compensatory plan or arrangement.
Item 16. Form 10-K Summary
Not applicable.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized in the City of London, United Kingdom on March 10, 2022.
CLARIVATE PLC
By: /s/ Jerre Stead
Name: Jerre Stead
Title: Executive Chairman and Chief Executive Officer
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Jerre Stead, Jonathan M. Collins and Jas Chahal, and each of them, individually, as the undersigned’s true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for the undersigned and in the undersigned’s name, place and stead in any and all capacities, in connection with this annual report, including to sign in the name and on behalf of the undersigned, this annual report and any and all amendments hereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto such attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or his substitute, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this annual report has been signed below by the following persons on March 10, 2022 on behalf of the registrant and in the capacities indicated.
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Name Title
/s/ Jerre Stead Executive Chairman and Chief Executive Officer
Jerre Stead (Principal Executive Officer)
/s/ Jonathan M. Collins Executive Vice President and Chief Financial Officer
Jonathan M. Collins (Principal Financial Officer)
/s/ Heather Matzke-Hamlin Acting Chief Accounting Officer
Heather Matzke-Hamlin (Acting Principal Accounting Officer)
/s/ Valeria Alberola Director
Valeria Alberola
/s/ Michael J. Angelakis Director
Michael J. Angelakis
/s/ Sheryl von Blucher Director
Sheryl von Blucher
/s/ Kosty Gilis Director
Kosty Gilis
/s/ Usama N Cortas Director
Usama N Cortas
/s/ Balakrishnan S. Iyer Director
Balakrishnan S. Iyer
/s/ Adam T. Levyn Director
Adam T. Levyn
/s/ Nicholas Macksey Director
Nicholas Macksey
/s/ Anthony Munk Director
Anthony Munk
/s/ Charles J. Neral Director
Charles J. Neral
/s/ Jane Okun Bomba Director
Jane Okun Bomba
/s/ Richard W. Roedel Director
Richard W. Roedel
/s/ Andrew M. Snyder Director
Andrew M. Snyder
/s/ Roxane White Director
Roxane White
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