(5) | The information in the table above is based solely on information contained in this shareholder’s Schedule 13G/A under the Exchange Act filed by such shareholder with the SEC. Onex Partners IV LP is the record holder of 15,874,408 ordinary shares; Onex Partners IV PV LP is the record holder of 784,783 ordinary shares; Onex Partners IV Select LP is the record holder of 109,890 ordinary shares; Onex Partners IV GP LP is the record holder of 453,991 ordinary shares; Onex Camelot Co-Invest LP is the record holder of 9,289,010 ordinary shares; Onex US Principals LP is the record holder of 584,939 ordinary shares; and Onex Partners Holdings LLC is the record holder of 14,820,116 ordinary shares. Mr. Gerald W. Schwartz beneficially owns all of the shares held by Onex Corporation and directly controls New PCo GP Inc. Mr. Schwartz may be deemed to share beneficial ownership of the shares beneficially owned by Onex Corporation and New PCo GP Inc. Onex Corporation may be deemed to beneficially own the ordinary shares held by each of Onex Partners IV LP, Onex Partners IV PV LP, Onex Camelot Co-Invest LP, Onex Partners IV GP LP and Onex Partners IV Select LP, through Onex Corporation’s ownership of all of the common stock of Onex Partners Canadian GP Inc., which owns all of the equity of (i) Onex Partners IV GP Limited, which is the general partner of Onex Partners IV GP LP, which is the general partner of each of Onex Partners IV LP, Onex Partners IV PV LP and Onex Camelot Co-Invest LP; and (ii) Onex Partners IV GP LLC, which is the general partner of Onex Partners IV Select LP. In addition, Onex Corporation may be deemed to beneficially own the ordinary shares held by (a) Onex Partners IV LP is the record holder of 15,874,408 ordinary shares; Onex Partners IV PV LP is the record holder of 784,783 ordinary shares; Onex Partners IV Select LP is the record holder of 109,890 ordinary shares; Onex Partners IV GP LP is the record holder of 453,991 ordinary shares; Onex Camelot Co-Invest LP is the record holder of 9,289,010 ordinary shares; Onex US Principals LP is the record holder of 584,939 ordinary shares; and Onex Partners Holdings LLC is the record holder of 14,820,116 ordinary shares. Mr. Gerald W. Schwartz beneficially owns all of the shares held by Onex Corporation and directly controls New PCo GP Inc. Mr. Schwartz may be deemed to share beneficial ownership of the shares beneficially owned by Onex Corporation and New PCo GP Inc. Onex Corporation may be deemed to beneficially own the ordinary shares held by each of Onex Partners IV LP, Onex Partners IV PV LP, Onex Camelot Co-Invest LP, Onex Partners IV GP LP and Onex Partners IV Select LP, through Onex Corporation’s ownership of all of the common stock of Onex Partners Canadian GP Inc., which owns all of the equity of (i) Onex Partners IV GP Limited, which is the general partner of Onex Partners IV GP LP, which is the general partner of each of Onex Partners IV LP, Onex Partners IV PV LP and Onex Camelot Co-Invest LP; and (ii) Onex Partners IV GP LLC, which is the general partner of Onex Partners IV Select LP. In addition, Onex Corporation may be deemed to beneficially own the ordinary shares held by (a) Onex
US Principals LP, through Onex Corporation’s ownership of all of the equity of Onex Private Equity Holdings LLC, which owns all of the equity of Onex American Holdings GP LLC, the general partner of Onex US Principals LP; and (b) Onex Partners Holdings LLC, through Onex Corporation’s ownership of all of the equity of Onex Private Equity Holdings LLC, which owns all of the equity of Onex American Holdings Subco LLC, which is the majority owner of Onex Partners Holdings LLC. New PCo A LP is the record holder of 938,247 ordinary shares. New PCo GP Inc., the general partner of New PCo A LP, is an independent entity that is controlled by Mr. Schwartz and as such may be deemed to beneficially own all of the common stock beneficially owned by New PCo GP Inc. Mr. Schwartz, the Chairman, President and Chief Executive Officer of Onex Corporation, owns shares representing a majority of the voting rights of the shares of Onex Corporation and as such may be deemed to beneficially own all of the common stock beneficially owned by Onex Corporation. Mr. Schwartz disclaims any such beneficial ownership. Mr. Schwartz has indirect voting and investment control of Onex Corporation. The business address of each of Onex US Principals LP, Onex American Holdings GP LLC, Onex Partners IV GP LP, Onex Partners IV GP LLC, Onex Private Equity Holdings LLC, Onex American Holdings Subco LLC and Onex Partners Holdings LLC is 165 W Center Street, Suite 401, Marion, Ohio 43302. The business address of each of Onex Partners IV LP, Onex Partners IV PV LP, Onex Camelot Co-Invest LP and Onex Partners IV Select LP is 712 Fifth Avenue, 40th Floor, New York, NY 10019. The business address of each of the other holder is 161 Bay Street, Toronto, A6, M5J2S1. (5)
The information in the table above is based solely on information contained in this shareholder’s Schedule 13D/A under the Exchange Act filed by such shareholder with the SEC. Selige Co-Investor Pooling Limited, Selige Co-Investor Pooling S.C.Sp, and Castik Capital S.a.r.l., have shared voting power and shared dispositive power over 38,089,963 ordinary shares. Selige Co-Investor Pooling Limited has its registered office at 22 Grenville Street, St. Helier, Jersey JE4 8PX, Channel Islands. Selige Co-Investor Pooling S.C.Sp has its registered office at 1 Route d’Esch, L-1470 Luxembourg. Castik Capital has its registered address at 1 Route d’Esch, L-1470 Luxembourg.
(6)
The information in the table above is based solely on information contained in this shareholder’s Schedule 13G under the Exchange Act filed by such shareholder with the SEC. The address of Generation Investment Management LLP is 20 Air Street, 7th floor, London, United Kingdom W1B 5AN.
(7)
The information in the table above is based solely on information contained in the Schedule 13G/A under the Exchange Act jointly filed by Select Equity Group, L.P. (“Select L.P.”) and George S. Loening, who is the majority owner of Select L.P. Select L.P. and Mr. Loening have shared voting and dispositive power over 35,932,673 ordinary shares. The address of Select L.P. and Mr. Loening is 380 Lafayette Street, 6th Floor, New York, NY 10003.
(8)
Includes (i) 4,349,234 ordinary shares directly held by Mr. Stead; (ii) 1,000,000 ordinary shares held by JMJS Group-II, LP, an affiliate of Mr. Stead; (iii) 1,000,000 ordinary shares held by Mr. Stead issuable upon the exercise of vested stock options; and (iv) 6,965,000 ordinary shares issuable upon the exercise of warrants held by Mr. Stead.
(9)
Includes 5,941 ordinary shares issuable upon settlement of RSUs held by Ms. Alberola that will vest within 60 days of March 7, 2022.
(10)
Includes (i) 5,941 ordinary shares issuable upon settlement of RSUs held by Mr. Angelakis that will vest within 60 days of March 7, 2022; (ii) 2,145,316 ordinary shares held by A-PQ Holdings, LLC; and (iii) 10,114,531 ordinary shares indirectly held by A-PQ Holdings through ProQuest Holdings LLC. Mr. Angelakis directly or indirectly controls a majority of the voting power of Atairos Partners GP, Inc. Atairos Partners GP. Inc.is the general partner of Atairos Partners, L.P., which is the sole voting shareholder of Atairos Group, Inc. Atairos Group, Inc. is the sole member of A-PQ Holdings. Mr. Angelakis disclaims beneficial ownership of the reported securities held directly and indirectly by A-PQ Holdings except to the extent of his pecuniary interest therein.
(11)
Includes (i) 2,797,392 ordinary shares directly held by Ms. von Blucher; (ii) 5,941 ordinary shares issuable upon settlement of RSUs held by Ms. von Blucher; and (iii) 274,000 ordinary shares issuable upon the exercise of warrants held by Ms. von Blucher.
(12)
Includes 62,169 ordinary shares directly held by Ms. Okun Bomba; and (ii) 5,941 ordinary shares issuable upon settlement of RSUs held by Ms. Okun Bomba that will vest within 60 days of March 7, 2022.
(13)
Mr. Cortas may be deemed to be the indirect beneficial owner of 116,666,507 ordinary shares held by Leonard Green & Partners, L.P. See Footnote 2 of this table. Mr. Cortas disclaims beneficial ownership of the ordinary shares reported herein except to the extent of his pecuniary interest therein and the information reported in this table shall not be deemed an admission that he is the beneficial owner of such securities for purposes of Section 16 or for any other purpose.
(14)
Includes (i) 8,333 ordinary shares directly held by Mr. Iyer; (ii) 5,941 ordinary shares issuable upon settlement of RSUs held by Mr. Iyer that will vest within 60 days of March 7, 2022; (iii) 258,279 ordinary shares held indirectly by the Iyer Family Trust dated 1/25/2001 (the “Iyer Family Trust”); and (iv) 274,000 ordinary shares issuable upon the exercise of warrants held by the Iyer Family Trust. Mr. Iyer, as trustee, has voting and investment power over the shares held by the Iyer Family Trust.
(15)
Includes (i) 32,496 ordinary shares directly held by Mr. Neral; and (ii) 5,941 ordinary shares issuable upon settlement of RSUs held by Mr. Neral that will vest within 60 days of March 7, 2022. Mr. Neral is not standing for reelection at the Annual General Meeting.
(16)
Includes (i) 3,976 ordinary shares directly held by Mr. Roedel; (ii) 39,395 ordinary shares indirectly held by the Richard W. Roedel Trust; (iii) 4,090 ordinary shares held by Mr. Roedel’s Profit Sharing Plan; and (iv) 5,941 ordinary shares issuable upon settlement of RSUs held by Mr. Roedel that will vest within 60 days of March 7, 2022.
(17)
Includes (i) 3,070 ordinary shares issuable upon settlement of RSUs held by Mr. Snyder that will vest within 60 days of March 7, 2022; (ii) 8,821,984 shares held by Cambridge Information Group Inc. (“CIG”); (ii) 10,489,466 shares held by Cambridge Information Group II LLC; (iii) 5,964,601 shares held by Cambridge Information Group III LLC; and (iv) 3,417 shares held by CSA GP Corporation. Mr. Snyder is the Chief Executive Officer of and a shareholder in CIG, which acts as a manager of Cambridge Information Group II LLC and Cambridge Information group III LLC (collectively with CIG and CSA GP Corporation, the “CIG Entities”). CSA GP Corporation is a wholly owned subsidiary of CIG. Mr. Snyder disclaims beneficial ownership of the reported securities held by the CIG Entities except to the extent of his pecuniary interest therein.
(18)
Includes (i) 1,173 ordinary shares directly held by Ms. White; and (ii) 5,941 ordinary shares issuable upon settlement of RSUs held by Ms. White that will vest within 60 days of March 7, 2022.
(19)
Includes (i) 8,958 ordinary shares directly held by Mr. Ahmed; and (ii) 5,216 ordinary shares issuable upon settlement of RSUs held by Mr. Ahmed that will vest within 60 days of March 7, 2022.
(20)
Includes 70,559 ordinary shares directly held by Mr. Collins.
(21)
Includes 849,724 ordinary shares directly held by Mr. Samson.
(22)
Includes (i) 8,117,866 ordinary shares directly held; (ii) 155,507,586 ordinary shares indirectly held; (iii) 1,000,000 ordinary shares issuable upon the exercise of vested stock options; and (iv) 7,513,000 ordinary shares issuable upon the exercise of warrants; and (v) 52,943 ordinary shares issuable upon the settlement of RSUs that will vest within 60 days of March 7, 2022.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING REQUIREMENTS
Section 16(a) of the Exchange Act requires our executive officers and directors, and persons who own more than 10 percent of a registered class of our equity securities, to file reports of ownership on Forms 3, 4, and 5 with the SEC. Based solely on our review of the copies of such forms we have received and written representations from certain reporting persons that they filed all required reports, we believe that, during the last fiscal year, all filings required under Section 16(a) applicable to the Company’s officers, directors, and 10 percent stockholders were timely.
REPORT OF THE AUDIT COMMITTEE
The following report of the Audit Committee does not constitute “soliciting material” and shall not be deemed filed or incorporated by reference into any other filing by Clarivate under the Securities Act of 1933, as amended (the “Securities Act”) or the Exchange Act.
The Audit Committee provides assistance to the Board in fulfilling its legal and fiduciary obligations in matters involving the Company’s accounting, auditing, financial reporting, internal control, and legal compliance functions. It does so by approving the services performed by PwC, the Company’s independent registered public accountants, and reviewing their reports regarding the Company’s accounting practices and systems of internal accounting controls. The Committee also oversees the performance of the Company’s internal audit function, which is managed by the Chief Audit Executive.
The Committee’s responsibilities are stated in a written charter adopted by the Board.
The Company’s management is responsible for preparing the Company’s financial statements and PwC is responsible for auditing those financial statements. The Audit Committee is responsible for overseeing the conduct of these activities by the Company’s management and PwC.
To fulfill its responsibility, the Audit Committee has met regularly and held discussions with management, with the Company’s internal auditors, and with PwC. Management represented to the Audit Committee that the Company’s consolidated financial statements for fiscal year 2021 were prepared in accordance with generally accepted accounting principles and the Audit Committee has reviewed and discussed the consolidated financial statements with management and PwC.
The Audit Committee has also discussed and confirmed with PwC its independence from the Company and has received from PwC all written disclosures and correspondence required by the Public Company Accounting Oversight Board. In addition, the Audit Committee has evaluated the non-audit services provided by PwC to the Company and has concluded that these do not impair PwC’s independence.
The Audit Committee has discussed with internal accountants, internal auditors, and PwC, with and without management present, its evaluations of the Company’s internal control over financial reporting, and the overall quality of the Company’s financial reporting.
Based on the reviews and discussions described above, the Audit Committee approved the audited consolidated financial statements for fiscal year 2021 and recommended to the Board their inclusion in the Annual Report on Form 10-K for the year ended December 31, 2021.
Respectfully submitted on April 7, 2022, by the members of the Audit Committee of the Board:
Charles J. Neral, Chairperson
Valeria Alberola
Balakrishnan S. Iyer
Richard W. Roedel
REPORT OF THE HUMAN RESOURCES AND COMPENSATION COMMITTEE
The following report of the Human Resources and Compensation Committee does not constitute “soliciting material” and shall not be deemed filed or incorporated by reference into any other filing by Clarivate under the Securities Act or the Exchange Act.
The Human Resources and Compensation Committee of the Board has reviewed and discussed with management of the Company the Compensation Discussion and Analysis. Based on this review and discussion, the Human Resources and Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 and this Proxy Statement.
Respectfully submitted on April 7, 2022, by the members of the Human Resources and Compensation Committee of the Board:
Jane Okun Bomba, Chairperson
Sheryl von Blucher
Usama N. Cortas
Roxane White
COMPENSATION DISCUSSION AND ANALYSIS
This Compensation Discussion and Analysis (“CD&A”) details the objectives and elements of the Clarivate executive compensation program, describes the related processes of our Human Resources and Compensation Committee (“HRCC”) in determining compensation provided to our Named Executive Officers (“NEOs”), and discusses the compensation that they earned.
Executive Summary
Who We Are
Clarivate™ is a global leader in providing solutions to accelerate the lifecycle of innovation. We help customers solve some of the world’s most complex problems by providing actionable information and insights that reduce the time from new ideas to life-changing inventions.
Today’s organizations face unprecedented uncertainty fueled by a global pandemic, economic turmoil, societal disruption and rapidly advancing technologies. As a result, competitive landscapes shift constantly and opportunities can appear in unexpected places. At the heart of every successful growth strategy is the drive and discipline to innovate and transform. Every product or service consumed has been imagined, created and improved in a continuous, connected lifecycle of innovation: discover, protect, commercialize. We operate at the heart of this lifecycle, accelerating innovation by delivering critical information, expansive, expertly curated content, cutting-edge data science, workflow solutions and independent expertise for customers across Academia & Government, Life Sciences & Healthcare, Professional Services and Consumer Goods, Manufacturing & Technology. Our unique view of innovation provides the actionable, independent information and insights our customers need to discover, protect and commercialize their inventions using our trusted subscription and technology-based solutions coupled with deep domain expertise.
In 2021, we reorganized the Company to make it easier for our customers and partners to engage with us to ensure we can serve them through the lens of their own industry and challenges.
Our customers:
Academia & Government: To help them drive institutional performance and accelerate real-world research outcomes.
Life Sciences & Healthcare: To support them to advance innovation and accelerate patient outcomes.
Professional Services: To assist professional services companies and law firms to maximize their growth potential.
Consumer, Manufacturing & Technology: To inform their investment decisions and strategic decision making.
Customers in these markets include corporations, government agencies, universities, researchers, law firms and other professional services organizations around the world, who depend on our high-value, curated information, analytics and services to discover, protect and commercialize their inventions. Our industry-leading solutions include Cortellis, CompuMark, CPA Global, Derwent, DRG, MarkMonoitor, ProQuest and the Web of Science.
We are focused on maintaining a culture of superior engagement and accountability with the customers we serve.
Expansive, expertly curated industry intelligence.
Our solutions are built on a foundation of deep domain expertise and connect over 100 years of research and the broadest and deepest sources of intelligence. Our content is rigorously maintained and manually curated to ensure the most accurate, complete and searchable data possible. The result is a unique collection of industry intelligence that is unmatched in quality, quantity and usability.
Advanced data science capabilities.
Our team of highly skilled and experienced data scientists use the latest technology to build advanced machine-learning models based on our industry leading content and data. This gives us the unique ability to reveal connections across the innovation lifecycle and solve our customers’ problems.
At the conclusion of 2021, we served over 50,000 customers in more than 180 countries, including the top 30 pharmaceutical companies by revenues. Our 10 largest customers represented only 9% of revenues for the year ended December 31, 2021.
How We Operate
The tenets of our corporate culture are fundamental to every decision we make, including acquisitions. We have constructed a strong operating philosophy and an overarching ethos that are critical to our future success. All of these elements are built on the foundation of a clear purpose, vision, mission and values to support our vibrant, engaged workforce who is guided by these tenants in everything they do.
Our core values are cultural cornerstones and deeply ingrained principles that guide our actions — internally and externally; they inform all employee-related processes such as hiring, performance, promotions and rewards.
Shareholder Engagement
Strong engagement with our shareholders is critically important to us, so we design our disclosures to be as open and transparent as possible in order to facilitate these important discussions which provide us with valuable input and feedback. In 2021, we proactively discussed with our shareholders both our executive compensation and corporate governance practices. We also periodically reach out to our shareholders to discuss compensation and governance and we will consider the input we receive as we continue to refine our executive compensation program.
Sustainability and Environment/Social/Governance (“ESG”)
At Clarivate, sustainability is not something we do, it is in everything we do. Our Vision is to improve the way the world creates, protects, and advances innovation and together with our colleagues and customers address challenges and opportunities laid out in the 2030 UN Sustainable Development Goals (SDGs). It is our aspiration to be a recognized leader and listed on the Dow Jones Sustainability Index.
Global Leadership Commitments
•
United Nations Global Compact
•
United Nations Women’s Empowerment Principles (WEPs)
•
CEO Action on Diversity & Inclusion
•
U.K. Stonewall Trans Rights are Human Rights initiative
Our 2021 Achievements
We issued our inaugural sustainability report.
Environment
•
Published environmental metrics for 75%+ of our facilities and air travel emissions
•
Improved ability to capture, track, minimize and mitigate our carbon footprint and negative environmental impact
•
Evaluated ESG performance of over 100 suppliers representing nearly 27% of supplier spend
Social
•
Built our capabilities for robust people metrics management as we advance our Diversity, Equity, Inclusion and Belonging (DEIB) efforts
•
Participated in the Corporate Equality Index to establish a performance baseline and inform our DEIB strategy
•
Launched the Global Engagement Council to align and coordinate our nearly 80 global and local colleague engagement group efforts
•
Shared over 14,000 hours of time volunteering and helping in communities around the world advancing the Sustainable Development Goals (SDGs)
•
Joined the coalition of scientific publishing organizations and national laboratories, partnering on the transgender-inclusive name-change process for published papers
Governance
•
Became signatory to the United Nations Global Compact
•
Elevated accountability of Sustainability to the Board Nominating, Governance and Sustainability Committee
•
Published the Board diversity statement and updated the modern slavery statement
•
Achieved ISO (International Standards Organization) 27001
Our Approach
The Clarivate ESG strategy is shaped and informed through materiality mapping to address what is important to our stakeholders and our business:
•
Enterprise Risk Management — Importance to Business
•
Investors, customers, regulators and colleagues — Importance to Stakeholders
We leveraged our Enterprise Risk Assessment (ERA) process to identify wider sustainability issues for consideration across the Company. Upon completion of our ERA and identification of our top risks, we evaluated and synthesized material issues and mapped them to our 3 sustainability pillars. To do this, we analyzed reporting frameworks such as the Global Reporting Initiative (GRI) and the Sustainable Accounting Standards Board (SASB), the UN Sustainable Development Goals, customer expectations, regulatory requirements, ESG ratings, investor requests, and priorities, including Bloomberg ESG, MSCI and Sustainalytics.
Ethics and Integrity
Our Code of Conduct is the starting point for establishing our global leadership as a sustainable company. Throughout our global organization, it is the cornerstone of our compliance program and provides guidance on how we represent our brand in everything we say and do. It reflects our mission, vision, and values, especially when it comes to fostering trust, respect, integrity, and sustainability.
Strong Corporate Governance
Our Board of Directors serves an essential role as ESG issues move to the top of our corporate priorities. With growing awareness, attention, and action from investors, customers, and other stakeholders, our Board and its Committees provide oversight and guidance.
Diversity, Equity, Inclusion and Belonging
We believe that our colleagues are our most important competitive advantage; they bring diverse cultures, backgrounds, and experiences to the Company. They are a key driver of our innovation and success.
We are committed to strengthening progress across all five pillars of our DEIB strategy, to ensure that we are impacting SDG 5 (Gender equality), 8 (Decent work and economic growth) and 10 (Reduced inequalities). Our pillars are aligned to leadership and strategy, culture, workplace practices, business integration, and community impact.
As signatories to the CEO Action for Diversity and Inclusion, we are supporting two colleagues annually to represent Clarivate as Racial Equity Fellows. We are also signatories to the UN Women’s Empowerment Principles, and the UN Global Compact, and in 2021, we proudly joined the coalition of Scientific publishing organizations and national laboratories partnering on transgender-inclusive name-change process for published papers. Name changes allow researchers of all genders to own their academic work.
Data Security and Privacy
At Clarivate, we take cyber security very seriously and it is a top priority across our organization. We believe in staying proactive, informed, and committed to continually reviewing, testing, and strengthening our Information Security Risk Management program.
We have a robust data protection program with policies and procedures that reflect internationally accepted principles of transparency, accountability, and individual rights.
In addition, we have a team of dedicated privacy professionals led by our Chief Privacy Officer to be diligent guardians of our privacy policies and practices, helping us adhere to our guiding principles and stay ahead of evolving privacy and data protection laws.
Climate Change
We are implementing a comprehensive climate transition plan that includes reducing overall energy use, increasing use of renewables, and operating in sustainable certified spaces. Our goal is to become carbon neutral by 2024, including a commitment to set a science-based target.
Supply Chain Sustainability and Diversity
Gathering insights about our suppliers will inform our supplier choices. To do this, we are increasing the visibility of our supplier ESG performance using the EcoVadis platform with a goal to evaluate 35% of supplier spend.
Integrating ESG into Business Strategy
In addition to ensuring responsible business practices, we are integrating sustainability into our products and services to advance customer innovation, market growth and company brand; building a more sustainable world through our customer partnerships and impact.
More information regarding our 2021 achievements and 2022 goals can be found at: https://clarivate.com/sustainability-at-clarivate/.
Our Approach to Pay
Our Compensation Philosophy
Since transitioning from a privately held company to a public company in May 2019, we have continued to focus on aligning and simplifying our organization, instilling a strong sense of ownership and accountability and further positioning Clarivate for strong growth and profitability.
Our goal is to provide an executive compensation program that reinforces a pay for performance culture, serving the interests of our shareholders while supporting our mission, vision and values. We believe that attracting and retaining superior talent, enhancing diversity, equity and belonging throughout the Company, and rewarding performance are key to delivering long-term shareholder returns, and that a competitive compensation program is critical to that end. Therefore, we strive to provide a competitive compensation package to our executives that is heavily weighted toward performance-based pay elements that align the interests of our executives with those of Clarivate shareholders.
Objectives to Support Our Compensation Philosophy
In order to achieve the goals of our compensation and benefits program, we have adopted the following objectives and guidelines:
| | Compensation Philosophy and Objectives | | | | | Total Rewards Strategy Supports our Mission, Vision and Values | | | | The components of compensation encourage our colleagues to aim for greatness by pursuing top performance and challenging the status quo in the belief that human ingenuity can transform the world and improve our future. | | | | | Designed to Attract, Retain and Motivate Top Talent | | | | Total compensation should be competitive in order to attract qualified individuals, motivate performance and retain, develop and reward colleagues with the abilities and skills needed to foster long-term value creation. We also strive to achieve equity and balance through our compensation programming to support greater diversity across our workforce. | | | | | Programs Globally Consistent and Locally Competitive | | | | Total compensation should be globally consistent and locally competitive to attract and retain qualified talent in the markets in which we operate. | | | | | Incentives Aligned to Key Business Objectives Appropriate to Colleague Roles | | | | We aim to drive superior business and financial results by setting clear, measurable short- and long-term performance targets that support our business strategy and the creation of long-term shareholder value while also ensuring that our executives are not incentivized to take inappropriate risks. | | | | | Supports a Pay for Performance Culture | | | | Total compensation should be competitive and performance should be appropriately rewarded. We believe there should be an upside as well as a downside risk of payouts if our performance is above or below our goals. | | |
Determination of Executive Compensation
The Role of the Human Resources and Compensation Committee
The HRCC is composed of independent, non-employee members of the Board. Details of the Committee’s authority and responsibilities are specified in the Committee’s charter, which may be accessed on our website, www.clarivate.com.
With respect to CEO and executive officer compensation, the HRCC:
•
Reviews and approves the corporate goals and objectives as they relate to incentive compensation targets and payouts at various levels;
•
Evaluates the CEO’s performance in light of these goals and objectives;
•
Sets the CEO’s compensation based upon the evaluation of the CEO’s performance. Under its charter, the HRCC may set the CEO’s compensation either alone or, if directed by the Board, in conjunction with a majority of the independent directors on the Board;
•
Reviews and sets the compensation of the executive officers other than the CEO;
•
Reviews and approves the Company’s CD&A disclosure, as required by SEC rules, and provides a recommendation to the Board whether to include the CD&A disclosure in the Company’s Proxy Statement or Annual Report on Form 10-K; and
•
Recommends to the Board whether to approve the frequency with which the Company will conduct Say-on-Pay votes, taking into consideration the results of the most recent shareholder advisory vote on the frequency of Say-on-Pay votes.
Additionally, the HRCC responsibilities include:
•
Review and assessment of risks arising from the Company’s compensation policies and practices and whether such risks are reasonably likely to have a material adverse effect on the Company; and
•
Expanded oversight of Human Capital Management in the context of talent management and succession planning, colleague development, workplace culture, and Diversity/Equity/Inclusion/Belonging initiatives.
The HRCC works very closely with its independent compensation consultant and senior management to consider a variety of factors when making compensation decisions throughout the year, including:
•
Experience, responsibilities, and individual and overall Company performance;
•
Internal equity among executives;
•
Executive role in succession planning;
•
Competitive external market data and trends; and
•
Alignment with shareholders, customers and other colleagues.
As part of the responsibilities described in its charter, the HRCC sets objective business performance targets and the amounts payable at different levels of performance under each of our incentive plans. Goal setting is part of the Company’s overall business planning process. As part of this process, a range of performance scenarios is developed. Goals are then set at the threshold, target and maximum performance levels — driven by the strategic and operational plans approved by the Board. The HRCC also considers the probability of achievement of different levels of performance when setting goals.
The Role of the Independent Compensation Consultant
During 2021, the HRCC engaged Pay Governance as its independent compensation consultant to advise on executive compensation matters. Pay Governance specializes in executive compensation
and related governance matters. To ensure the HRCC receives independent and unbiased advice and analysis, the consultant is prohibited from providing any services to management, although the consultant interacts with management from time to time in order to best coordinate with and deliver services to the HRCC. The HRCC has sole authority with regard to the decision to retain and terminate the compensation consultant (including the authority to approve the consultant’s fees and other retention terms). The consultant maintains active engagement with the HRCC Chair and reports to the HRCC. The HRCC annually reviews the independence of the consultant’s work under rules adopted by the SEC and NYSE and has found no conflicts.
The independent compensation consultant performed duties requested by the HRCC including:
•
Providing recommendations on the composition of the peer group;
•
Analyzing executive and director compensation in comparison to the peer group;
•
Updating the HRCC on executive compensation and governance market trends;
•
Advising the HRCC on annual incentive and long-term equity plan designs; and
•
Reviewing disclosures related to executive compensation.
Pay Governance speaks with the chair of the HRCC, as well as with management, in preparing for HRCC meetings, regularly attends HRCC meetings and meets from time to time in executive sessions with the HRCC without the presence of management.
The Role of Management
At the HRCC’s request, management provides information, analyses and recommendations regarding our executive compensation program, as well as information regarding our achievement of performance metrics. Our CEO discusses with the HRCC his views on the performance and the compensation of the NEOs and CEO direct reports.
The Use of Peer Group Benchmarking and Market Data
Peer Group Benchmarking
The HRCC considers several factors in structuring our executive compensation program, determining pay components, and making compensation decisions. This includes an annual review and comparison of the compensation practices of select peer companies in our industry. These companies were chosen with guidance from our independent compensation consultant to be effective for fiscal year 2021. It was the HRCC’s intent to select companies that operate significant lines of business similar to Clarivate’s, are of comparable size in revenue and market capitalization, and compete with Clarivate for executive talent. This peer group was selected prior to the acquisitions and divestitures discussed below in our 2021 Business Highlights, which impacted the fundamental composition of the Company.
We established a peer group for benchmarking executive pay based on the following guiding principles:
•
Companies engaged in intelligence development, data analytics, digital delivery or cybersecurity and intellectual property protections;
•
Revenues between $500 million to $5.1 billion (approximately 0.3x-3.0x Clarivate);
•
Market capitalization between $2.8 billion to $57.0 billion (approximately 0.25x-5.0x Clarivate);
•
Business/talent competitors of Clarivate;
•
A group of between 10 to 25 companies so that results are statistically reliable, and the peer group is sustainable over time; and
•
Availability of sufficient pay data for companies identified as potential peers.
Based on this analysis, the following 18 companies were selected as our primary peer group for compensation benchmarking in 2021 (“Peer Group”):
| | Clarivate 2021 Peer Group for Compensation
| | | | | Cloudera | | | | FTI Consulting, Inc. | | | | Morningstar, Inc. | | | | | Dun & Bradstreet Holdings, Inc. | | | | Gartner, Inc. | | | | SCI Inc. | | | | | ExlService Holdings, Inc. | | | | ICF International, Inc. | | | | PRA Health Sciences, Inc. | | | | | FactSet Research Systems Inc. | | | | ICON Public Limited Company | | | | Proofpoint, Inc. | | | | | Fair Isaac Corporation | | | | IHS Markit Ltd. | | | | Teradata Corporation | | | | | Fire Eye, Inc. | | | | Informa plc | | | | Verisk Analytics, Inc. | | |
The Use of Market Comparison Data
The HRCC approves the salary, AIP target annual cash incentive and LTI equity compensation of the NEOs at levels that are competitive with compensation paid to persons holding the same or similar positions at members of the Peer Group using available market comparison data regarding these companies as a guide. In addition to Peer Group market data, the HRCC also considered Willis Towers Watson compensation survey data from similar industries and geographies in its competitive analysis of NEO compensation. The use of market comparison data, however, is just one of the tools the HRCC uses to determine executive compensation, and the HRCC retains the flexibility to establish target compensation at levels it deems appropriate for an individual or for a specific element of compensation based on performance, experience, and breadth of responsibilities.
Good Governance Practices
We are committed to having policies in place to ensure effective oversight of our executive compensation program and strong corporate governance.
| | WHAT WE DO | | | | WHAT WE DON’T DO | | | | | ✓ | | | We have an HRCC that is fully composed of independent directors | | | | ✘ | | | We do not provide our CEO with an employment agreement | | | | | ✓ | | | The HRCC engages an independent compensation consultant | | | | ✘ | | | We do not permit our colleagues to engage in hedging transactions | | | | | ✓ | | | We have adopted share ownership guidelines for our executive officers and Board of Directors | | | | ✘ | | | We do not permit our colleagues to pledge Company securities to secure margin or other loans | | | | | ✓ | | | The majority of NEO pay is at risk and dependent upon performance | | | | ✘ | | | We do not reprice underwater stock options | | | | | ✓ | | | The mix of executive officer equity awards includes a performance-based element | | | | ✘ | | | We do not provide excise tax gross-up payments | | | | | ✓ | | | We engage with our shareholders to discuss executive compensation and corporate governance matters | | | | ✘ | | | We do not have an evergreen provision that automatically adds shares to our equity incentive plan | | | | | ✓ | | | We have a clawback policy that requires covered executives to reimburse performance-based compensation in specified circumstances | | | | ✘ | | | We do not provide excessive perquisites | | |
Elements of Compensation at a Glance — Mix of Fixed and Variable Performance-Based Compensation
Upon becoming a public company in May 2019, we began designing our executive compensation programs to create a performance-based culture that rewards colleagues for collective performance
and demonstration of our values and to align our colleagues’ interests with those of our public shareholders. In 2020, we implemented equity programs and an Annual Incentive Plan (“AIP”) to recognize and reward our colleagues for their achievements. In 2021, we further enhanced these programs to align with our business strategy and drive exceptional performance toward achievement of our goals and objectives.
Our executive compensation program is tailored to our strategic priorities and our current business outlook, while also designed to motivate and retain our senior management team. Multiple components, described below, are utilized to achieve these objectives, with a heavy emphasis on pay that is variable or at risk depending directly on performance against strategic corporate metrics. Additional detail on each compensation element is provided in the “2021 Executive Compensation Program in Detail” section.
| | Pay Element | | | | Fixed/Variable/
At-Risk
| | | | Payment Method | | | | Alignment to Business Objectives | | | | | Base Salary | | | | Fixed | | | | Cash | | | | Benchmark base salaries to ensure market competitiveness in the attraction and retention of key talent | | | | Provides a competitive fixed rate of pay relative to similar positions in the market | | | | | Retirement, Health and Welfare Benefits | | | | Benefits | | | | Market-aligned programs to facilitate strong productivity and provide support in times of personal need | | | | Health, welfare and retirement programs | | | | Limited perquisites | | | | | | | | | | | | | | | | | | | | | | Annual Incentive Plan | | | | At-Risk/Variable
| | | | Cash | | | | Rewards performance for achievement of rigorous and challenging short-term performance goals aligned with the Company’s annual operating plan | | | | Motivates executives to deliver on individual objectives supportive of broader business objectives | | | | Annual recognition of performance against pre-established targets | | | | | | | | | | | | | | | | | | Long Term Incentive Program | | | | PSUs and RSUs | | | | Rewards performance for achievement of rigorous long-term performance goals aligned with the interests of shareholders and the Company’s strategy | | | | Supports retention and mitigates excessive risk taking | | | | | | | |
2021 Business Highlights
Clarivate had an exciting year in 2021 and had measurable success in multiple areas. Some of our key accomplishments include:
•
Completing strategic acquisitions to support the expansion of our core business segments and provide us with growth potential:
•
Patient Connect in December 2021, a provider of patient engagement solutions that enable the measurement of clinical and commercial outcomes and inform the advancement of healthcare. Patient Connect is complementary to Clarivate’s science portfolio.
•
ProQuest and its subsidiaries in December 2021, a leading global software, data and analytics provider to academic, research and national institutions.
•
Bioinfogate in August 2021, a leading provider of analytics solutions in life sciences that is complementary to Clarivate’s science portfolio.
•
Realigning our commercial infrastructure to serve customers more efficiently, by establishing three global business centers, building a strategic sales organization and managing most customers through inside sales to free up field sales time and optimize cost-to-serve.
•
Delivering on cost savings and efficiency initiatives by optimizing resources and assets in response to our strategic acquisitions, rationalizing facilities and insourcing application development.
•
Enhancing productivity and work fulfillment despite the pandemic by developing new and more productive ways to work and examining and improving processes and workflows.
2021 Financial Results
For the year ended December 31, 2021, we generated approximately $1.877 billion of revenues and $1.881 billion of adjusted revenues. Refer to Appendix B for a reconciliation of our non-GAAP to GAAP financial measures. We generated recurring revenues through our subscription-based model and re-occurring revenue transactions, which accounted for 79.1% of our revenues for the year ended December 31, 2021. In each of the past three years, we have also achieved annual revenue renewal rates in excess of 90%. (For information on annual revenue renewal rates, see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Key Performance Indicators — Annual Revenue Renewal Rates).
The table below highlights our key financial metrics in 2021 and 2020, respectively.
| | Key Financial Results(1)(2) | | | | | | | | | 2021 Results | | | | 2020 Results | | | | | Adjusted EBITDA | | | | | $ | 800M | | | | | | $ | 487M | | | | | | Adjusted EBITDA Margins | | | | | | 43% | | | | | | | 38% | | | | | | Revenue | | | | | $ | 1,877M | | | | | | $ | 1,254M | | | | | | Adjusted Revenue | | | | | $ | 1,881M | | | | | | $ | 1,277M | | | | | | Adjusted Free Cash Flow | | | | | $ | 459M | | | | | | $ | 302M | | | | | | Market Capitalization (for the years ended December 31, 2021 and 2020, respectively) | | | | | $ | 16B | | | | | | $ | 18B | | | |
(1)
Results are for the full year as of December 31, 2021 and December 31, 2020.
(2)
See Appendix B for a reconciliation of our non-GAAP to GAAP financial measures.
Alignment of Pay to Business Objectives
With regard to our variable/at-risk pay, we utilize multiple metrics to incentivize behavior that supports the achievement of our corporate goals.
For our AIP, the metrics selected to best support our short-term objectives include Adjusted Revenue, Adjusted EBITDA, Adjusted Free Cash Flow, Product Revenue and Contribution, Customer Delight, and Individual Performance.
Our LTI program includes Performance-Based Restricted Share Units that apply longer term metrics including Consolidated Revenue and Adjusted EBITDA margin, with a TSR modifier as compared to the S&P 500 measured over a cumulative 3-year period.
Compensation for Our Named Executive Officers 2021
For 2021, our NEOs were:
| | Name | | | | Title | | | | | Jerre Stead | | | | Executive Chairman and Chief Executive Officer | | | | | Jonathan Collins | | | | Executive Vice President of Onex Corporation, owns shares representing a majority of the voting rights of the shares of Onex Corporation and Chief Financial Officer | | | | | Steen Lomholt-Thomsen | | | | Chief Revenue Officer | | | | | Mukhtar Ahmed | | | | President, Science Group | | | | | Gordon Samson | | | | Chief Product Officer | | | | | Richard Hanks | | | | Former Chief Financial Officer | | | | | Jeff Roy | | | | Former President, IP Group | | as such may be deemed to beneficially own all of the common stock beneficially owned by Onex Corporation. Mr. Schwartz disclaims any such beneficial ownership. Mr. Schwartz has indirect voting and investment control of Onex Corporation. The business address of each of Onex US Principals LP, Onex American Holdings GP LLC, Onex Partners IV GP LP, Onex Partners IV GP LLC, Onex Private Equity Holdings LLC, Onex American Holdings Subco LLC and Onex Partners Holdings LLC is 165 W Center Street, Suite 401, Marion, Ohio 43302. The business address of each of Onex Partners IV LP, Onex Partners IV PV LP, Onex Camelot Co-Invest LP and Onex Partners IV Select LP is 712 Fifth Avenue, 40th Floor, New York, NY 10019. The business address of each of the other holders is 161 Bay Street, Toronto, A6, M5J2S1. |
Compensation Mix — Performance Based/At-Risk Compensation
The graphics below show the total target compensation mix of our CEO and our other NEOs. These illustrate that a majority of the NEOs’ total target compensation is at risk (93% for our CEO and an average of 79% for our other NEOs). For purposes of these estimates, total compensation is composed of base salary, AIP target and RSU target, with AIP and PSU targets both counting as at-risk pay.
(6) | | | The information in the table above is based solely on information contained in this shareholder’s Schedule 13D/A under the Exchange Act filed by such shareholder with the SEC. Selige Co-Investor Pooling Limited, Selige Co-Investor Pooling S.C.Sp, and Castik Capital S.a.r.l., have shared voting power and shared dispositive power over 38,089,963 ordinary shares. Selige Co-Investor Pooling Limited has its registered office at 22 Grenville Street, St. Helier, Jersey JE4 8PX, Channel Islands. Selige Co-Investor Pooling S.C.Sp has its registered office at 1 Route d’Esch, L-1470 Luxembourg. Castik Capital has its registered address at 1 Route d’Esch, L-1470 Luxembourg. |
(1) Other NEOs include Messrs. Collins, Lomholt-Thomsen, Ahmed, Samson and Hanks.
Base Salary
Base salary represents annual fixed compensation and is a standard element of compensation necessary to attract and retain executive leadership talent. In making base salary decisions for our NEOs other than the CEO, the HRCC considers the CEO’s recommendations, as well as each NEO’s position and level of responsibility within the Company. The HRCC also takes into account factors such as relevant market data, overall Company performance, individual performance and contributions, and internal equity within the Company.
During 2021, the HRCC determined the appropriate annual base salary rate for each NEO as follows:
| | Name | | | | 2021 Year-End Base Salary | | | | 2020 Year-End Base Salary | | | | % Increase | | | | | Jerre Stead | | | | | $ | 750,000 | | | | | | $ | 750,000 | | | | | | | 0% | | | | | | Jonathan Collins(1) | | | | | $ | 750,000 | | | | | | | N/A | | | | | | | 0% | | | | | | Steen Lomholt-Thomsen(1)(2) | | | | | $ | 580,000 | | | | | | | N/A | | | | | | | 0% | | | | | | Mukhtar Ahmed(1)(2)(3) | | | | | $ | 623,829 | | | | | | $ | 602,415 | | | | | | | 4% | | | | | | Gordon Samson(1)(2)(3) | | | | | $ | 535,475 | | | | | | $ | 374,520 | | | | | | | 43% | | | | | | Richard Hanks(1) | | | | | $ | 550,000 | | | | | | $ | 500,000 | | | | | | | 10% | | | | | | Jeff Roy(1) | | | | | $ | 550,000 | | | | | | $ | 450,000 | | | | | | | 22% | | | |
(1)
Mr. Collins joined Clarivate on December 16, 2021 as Executive Vice President and Chief Financial Officer; Mr. Lomholt-Thomsen joined Clarivate in August 2021 as Chief Revenue Officer; Mr. Ahmed will be departing the Company on October 1, 2022; Mr. Samson became an Executive Officer in July 2021 when he was promoted to President, IP Group; Richard Hanks will be departing the Company on July 1, 2022; and Mr. Roy departed the Company on July 31, 2021.
(2)
Messrs. Lomholt-Thomsen, Ahmed and Samson are based in the United Kingdom and each of their 2021 and 2020 salaries have been converted to USD using a GBP: USD exchange rate of 1.3387, which is a rate set at the beginning of 2021 with a six-month forward look that we use for budget planning. The 2020 exchange rate, used for reporting their salaries in the prior year’s executive compensation tables, was GBP: USD 1.3387.
(3)
Messrs. Samson, Hanks and Roy received an increase in March 2021 based on an analysis of market data, overall Company performance, individual performance and contributions, and internal equity within the Company. Mr. Samson received an increase in July 2021 with respect to his expanded responsibilities as President, IP Group. Mr. Ahmed received an increase in April 2021 as we converted the value of Mr. Ahmed’s car allowance into additional base salary.
2021 Annual Incentive Plan
Our AIP provides cash incentives tied to annual pre-established financial goals with a Customer Delight additive modifier and a lever for individual performance. For details, see “2021 Annual Incentive Plan” below.
Our AIP provides the opportunity for annual incentive payments to be made to approximately 74.5% of our colleagues. Payments are based on achievement of pre-established corporate financial goals with a Customer Delight modifier and an individual performance modifier.
Each NEO has a target AIP, which is defined as a percentage of the respective NEO’s eligible base pay.
The table below provides a comparison of the end-of-year AIP targets for 2021 and 2020.
| | Name | | | | 2021 AIP Target | | | | 2020 AIP Target | | | | | Jerre Stead | | | | | | 150% | | | | | | | 150% | | | | | | Jonathan Collins(1) | | | | | | N/A | | | | | | | N/A | | | | | | Steen Lomholt-Thomsen(1) | | | | | | 100% | | | | | | | N/A | | | | | | Mukhtar Ahmed(1) | | | | | | 100% | | | | | | | 100% | | | | | | Gordon Samson(1) (2) | | | | | | 100% | | | | | | | 85% | | | | | | Richard Hanks(1) | | | | | | 100% | | | | | | | 100% | | | | | | Jeff Roy(1) | | | | | | 100% | | | | | | | 100% | | | |
(1)
Mr. Collins became an executive officer on his hire date of December 16, 2021 and was not eligible to participate in our 2021 AIP; Mr. Lomholt-Thomsen became an executive officer on his hire date of August 2, 2021 and his bonus was pro-rated based on his date of hire; Mr. Ahmed will be departing the Company on October 1, 2022; Mr. Samson became an Executive Officer on July 6, 2021 when he was promoted to President, IP Group; Richard Hanks will be departing the Company on July 1, 2022; and Mr. Roy departed the Company on July 31, 2021.
(2)
In 2021, the HRCC adjusted the AIP target for Mr. Samson based upon a review of his role due to his promotion to President of our IP Group, internal equity, and a competitive analysis of our compensation peer group that was recommended by Pay Governance based on their research.
To reward achievement in 2021, we maintained a target-based AIP that delivered annual cash payments to the NEOs and other senior colleagues based on achievement of pre-determined financial goals of the Company tied to adjusted revenue, adjusted EBITDA and adjusted free cash flow (for colleagues with group-wide responsibility) and Business Segment (IP and Science) revenue and product contribution (for colleagues within our business segments). The AIP also has a Customer Delight modifier and an individual performance modifier. Our active NEOs had targeted amounts ranging from 100% to 150% of their annual base salaries, depending upon their positions.
AIP Goals
Our AIP goals can be viewed in the following categories:
•
Financial. The corporate financial goals we selected for the AIP represent our key business performance areas: adjusted revenue, adjusted EBITDA and adjusted free cash flow. In addition to the corporate financial goals for AIP which are applicable to all NEOs, colleagues who were in the Science and IP business areas had business group financial goals tied to Product Line revenue and product contribution in their respective business groups.
•
Customer Delight Additive Modifier. The Customer Delight additive modifier, which could increase the payment earned from corporate financial performance by up to 10%, was selected because an improvement in our Customer Delight score, as measured by the results of surveys sent to 100% of our customers, was one of our strategic goals in 2021 as Customer Delight can directly impact our revenues and represents a key component of our measurement of success.
•
Individual Performance Modifier. The individual performance modifier can be used to increase or decrease an individual’s final AIP payment based upon that individual’s personal performance, provided that the maximum payment could not exceed 200% of the AIP target.
The table below illustrates the goals set for each of the NEOs.
(7) | | AIP Individual Goals
| | | | | Name | | | Corporate
Financial Goals
| | | Customer Delight
Additive Modifier
| | | Individual Performance
Modifier
| | | | | Jerre Stead | | | | | 100% | | | | Up to 10%Includes (i) 56,636 ordinary shares directly held by Mr. Gear and (ii) 101,082 ordinary shares issuable upon settlement of
calculated payment
attributable to corporate
financial performance
| | | RSUs held by Mr. Gear that will vest within 60 days of May be used to increase
or decrease final payment
with a maximum payment
limited to 2X Target | | | | | Jonathan Collins(1) | | | | | 0% | | | | | Steen Lomholt-Thomsen | | | | | 100% | | | | | Mukhtar Ahmed | | | | | 100% | | | | | Gordon Samson | | | | | 100% | | | | | Richard Hanks | | | | | 100% | | | | | Jeff Roy(2) | | | | | 100% | | 15, 2023. |
(1)
Mr. Collins is not eligible to participate in our 2021 AIP Program as he commenced employment on December 16, 2021.
(2)
As part of his severance arrangement, Mr. Roy is not eligible to receive a payment under our 2021 AIP Program.
Achievement of AIP Goals
•
Financial. The tables below provide the threshold, target and maximum AIP opportunities and actual results achieved in 2021 at the corporate level. Payout percentages are interpolated between payout levels.
| | 2021 CORPORATE AIP GOALS(1) | | | | | Metric | | | Weighting | | | Payout Level | | | 2021 Corporate Goal (in millions) | | | 2021 Corporate Goal as % of Target | | | 2021 Results (in millions) | | | Payout % | | | | | Adjusted Revenue(2) | | | | | | | | | Threshold | | | | | 0% | | | | | $ | 1,740 | | | | | | 96.6% | | | | | | | | | | | | | | | | | | | 40% | | | | Target | | | | | 100% | | | | | $ | 1,802 | | | | | | 100.0% | | | | | $ | 1,774 | | | | | | 63.5% | | | | | | | | | | | Maximum | | | | | 150% | | | | | $ | 1,847 | | | | | | 102.5% | | | | | | | | | | | | | | | | | | Adjusted EBITDA(2) | | | | | | | | | Threshold | | | | | 0% | | | | | $ | 765 | | | | | | 94.4% | | | | | | | | | | | | | | | | | | | 40% | | | | Target | | | | | 100% | | | | | $ | 806 | | | | | | 100.0% | | | | | $ | 758 | | | | | | 0.0% | | | | | | | | | | | Maximum | | | | | 150% | | | | | $ | 847 | | | | | | 105.0% | | | | | | | | | | | | | | | | | | Adjusted Free Cash Flow(2) | | | | | | | | | Threshold | | | | | 0% | | | | | $ | 430 | | | | | | 91.9% | | | | | | | | 20% | | | | Target | | | | | 100% | | | | | $ | 468 | | | | | | 100.0% | | | | | $ | 420 | | | | | | 0.0% | | | | | | | | | | | Maximum | | | | | 150% | | | | | $ | 491 | | | | | | 105.0% | | | | | | | | | | | | | | | |
(1)
2021 Corporate Goals and 2021 Results exclude ProQuest as the goals were set prior to the acquisition of ProQuest.
(2)
See Appendix B for a reconciliation of our non-GAAP to GAAP financial measures.The adjusted results for 2021 are at plan FX rates since that is how the corporate goals were established.
•
Customer Delight. Customer Delight performance was measured through a highly-structured and data-driven bi-annual customer survey completed by 18,066 of our customers globally. The survey contained five questions related to certain key themes, with a strong focus on the ease of doing business with Clarivate.
As shown in the table below, we set the minimum Customer Delight additive modifier at 76. The maximum modifier would take effect if the Customer Delight score was 78 or higher. Our final score was 78; thus, the calculated business payout was increased by 10%.
| | AIP Customer Delight Modifier | | | | | Customer Delight Score | | | Customer Delight Score | | | Additive Modifier | | | 2021 Customer Delight Score | | | Final Additive Modifier | | | | | Threshold | | | | | <=76 | | | | | | 1.00x | | | | | | | | | | | | | | | | | | Target | | | | | 77 | | | | | | 1.05x | | | | | | 78 | | | | | | 1.10X | | | | | | Stretch | | | | | 78 | | | | | | 1.10x | | | | | | | | | | | | | | | |
•
Final AIP Payments. For the NEOs, the HRCC determined that payouts should be based on actual business results (25.4%) with the customer delight modifier applied, resulting in a final payment of the NEOs at 27.94% of target.
| | Final Calculation-AIP Payments | | | | | | | | | | | | | | | | Corporate Performance | | | | | | | | | | | | | | | | | | | | | | | | | | Name | | | | AIP Target ($) | | | | % of AIP Tied to Goal Set | | | Performance Level Achieved | | | Amount Earned ($) | | | | Customer Delight ($) | | | | Individual Modifier | | | | Final AIP Payment ($) | | | | | Jerre Stead | | | | | | 1,125,000 | | | | | | | 100% | | | | | | 25.4% | | | | | | 285,750 | | | | | | | 28,575 | | | | | | | — | | | | | | | 314,325 | | | | | | Jonathan Collins(1) | | | | | | — | | | | | | | — | | | | | | — | | | | | | — | | | | | | | — | | | | | | | — | | | | | | | — | | | | | | Steen Lomholt-Thomsen(2) | | | | | | 241,534 | | | | | | | 100% | | | | | | 25.4% | | | | | | 61,350 | | | | | | | 6,135 | | | | | | | — | | | | | | | 67,485 | | | | | | Mukhtar Ahmed(3) | | | | | | 618,547 | | | | | | | 100% | | | | | | 25.4% | | | | | | 157,111 | | | | | | | 15,711 | | | | | | | — | | | | | | | 172,822 | | | | | | Gordon Samson(3) | | | | | | 443,578 | | | | | | | 100% | | | | | | 25.4% | | | | | | 112,669 | | | | | | | 11,267 | | | | | | | — | | | | | | | 123,936 | | | | | | Richard Hanks | | | | | | 538,219 | | | | | | | 100% | | | | | | 25.4% | | | | | | 136,708 | | | | | | | 13,670 | | | | | | | — | | | | | | | 150,378 | | | | | | Jeff Roy(4) | | | | | | — | | | | | | | — | | | | | | — | | | | | | — | | | | | | | — | | | | | | | — | | | | | | | — | | | |
(1)
Mr. Collins joined Clarivate in December 2021 and was not eligible to participate in our 2021 AIP.
(2)
Mr. Lomholt-Thomsen joined Clarivate in August 2021 and was eligible for a pro-rata payment of our 2021 AIP.
(3)
Messrs. Ahmed and Samson are based in the United Kingdom and in the AIP tables above, their payments have been converted to USD using a GBP: USD exchange rate of 1.3387.
(4)
As part of his severance arrangement, Mr. Roy is not eligible to receive payment under our 2021 AIP Program.
2021 Long-Term Incentive Program
Incentive Award Plan Grant Practices
Annual LTI awards to NEOs are typically granted in the first quarter of the year, although LTI awards may also be granted to NEOs as part of the hiring process or in connection with a change in responsibility. The HRCC approves the type and number of awards to be granted and the performance criteria for awards. For all such grants, the grant date is no earlier than the date of HRCC approval.
The HRCC has delegated to the CEO the authority to grant equity awards, including annual LTI awards, to eligible employees (other than the CEO and colleagues subject to Section 16 of the Exchange Act), provided the total awards remain within specified limits and subject to terms and conditions approved by the HRCC. In addition, on a quarterly basis, the HRCC reviews the shares granted from this award budget.
Equity Programs
We consider share ownership to be a key component in our compensation programs because it aligns the goals of our colleagues with those of our shareholders and because we believe all colleagues should have an opportunity to take part in our success. Thus, we implemented equity programs that ensure all our colleagues have an opportunity to be shareholders. Through the LTI program, our most senior leaders are eligible for annual equity awards under the Clarivate 2019 Incentive Award Plan (the “Incentive Award Plan”). Our key equity programs include a Long-Term Incentive (“LTI”) program for NEOs and senior management, which is composed of performance-based restricted share units (“PSUs”) and restricted share units (“RSUs”) for our most senior executives, and our Customer Delight program that, provided we meet our Customer Delight goals, makes RSUs available for colleagues not otherwise eligible for the LTI program. Additionally, we provide RSUs to a limited number of our highest and most critical performers (including those in our High Performing program) who are not eligible to participate in the LTI program.
As discussed above, PSUs are granted to our most senior leaders, thereby placing a larger percentage of their compensation “at risk.”
The following is the mix of performance and time-based equity awarded through our annual equity grants program to align a focus on performance. See “2021 Equity Awards” below for a description of equity granted outside of the annual equity cycle.
| | Ratio of Performance to Time-Based Equity | | | | | Position | | | | PSUs | | | | RSUs | | | | | CEO | | | | | | 75% | | | | | | | 25% | | | | | | Other NEOs | | | | | | 50% | | | | | | | 50% | | | |
RSUs vest over three years, with 1/3 of the award vesting on each of the first three anniversaries of the grant date.
PSUs vest at the end of a three-year period subject to achievement of performance measures and continued employment. The award has three one-year performance periods with a three-year relative TSR modifier as compared to the S&P 500. At the end of the three-year period, performance achievement percentages for each of the one-year performance periods are averaged and the resulting overall performance achievement percentage is modified in accordance with our three-year relative TSR modifier. The table below contains the performance metrics relative to the first performance period of 2021 and the TSR modifier that will increase or decrease the final payout by as much as 20%, as illustrated below. The overall payout of the PSUs is capped at 200% of the target shares granted.
| | 2021 PSU Metrics | | | | | Consolidated Revenue and Adjusted EBITDA Margin % | | | Modifier: 3-Year Relative TSR vs. S&P 500 | | | | | 2021 Goals | | | | Performance Range | | | Payout Range | | | Consolidated Revenue ($m) (50%) | | | Adjusted EBITDA Margin % (50%) | | | Percentile | | | Modifier | | | | | Maximum | | | | | 200% | | | | | $ | 1,850 | | | | | | 46.0% | | | | | | =>P75 | | | | | | 1.2x | | | | | | Target | | | | | 100% | | | | | $ | 1,802 | | | | | | 45.0% | | | | | | P50 | | | | | | 1.0x | | | | | | Threshold | | | | | 50% | | | | | $ | 1,750 | | | | | | 42.5% | | | | | | <=P25 | | | | | | 0.8x | | | |
Based on 2021 financial results, actual performance versus the financial goals was 63.6% of target that will be weighted one-third in the final financial goal assessment at the end of 2023. Our three-year relative TSR performance modifier won’t be measured until the completion of the three-year performance period ending December 31, 2023.
The table below provides details of the RSUs and PSUs granted to our NEOs in 2021.
| | 2021 NEO EQUITY AWARDS | | | | | | | | RSUs | | | | | | PSUs(1) | | | | | NEO | | | Units (#) | | | Grant Value ($) | | | | | | Target Units (#) | | | Grant Value ($) | | | | | Jerre Stead | | | | | 90,310 | | | | | | 2,124,994 | | | | | | | | | 90,310 | | | | | | 2,122,285 | | | | | | Jonathan Collins | | | | | — | | | | | | — | | | | | | | | | — | | | | | | — | | | | | | Steen Lomholt-Thomsen(2) | | | | | 15,308 | | | | | | 347,492 | | | | | | | | | 3,401 | | | | | | 73,904 | | | | | | Mukhtar Ahmed | | | | | 35,061 | | | | | | 824,985 | | | | | | | | | 11,687 | | | | | | 274,645 | | | | | | Gordon Samson(3) | | | | | 12,114 | | | | | | 274,988 | | | | | | | | | 4,038 | | | | | | 87,746 | | | | | | Richard Hanks | | | | | 53,123 | | | | | | 1,249,984 | | | | | | | | | 17,707 | | | | | | 416,115 | | | | | | Jeff Roy | | | | | 35,061 | | | | | | 824,985 | | | | | | | | | 11,687 | | | | | | 274,645 | | | |
(1)
The PSU grants represent 33% of the total PSUs granted in 2021 (i.e., the PSUs with respect to the first one-year performance period). See footnote to the Summary Compensation Table for more information.
(2)
Mr. Lomholt-Thomsen’s grants were pro-rated to reflect his hire date of August 2, 2021.
(3)
Mr. Samson’s grants were pro-rated to reflect his promotion on July 6, 2021, to President, IP Group.
In addition to the grants in the table above, the following grants were made to our NEOs during 2021.
•
Mr. Collins received a sign-on RSU grant for 312,767 shares with a total grant date value of $7,403,195 in connection with his commencement of employment. The RSUs will vest 40% on March 1, 2022, 40% on March 1, 2023, and 20% on March 1, 2024, subject to continued employment through each vesting date.
•
Mr. Lomholt-Thomsen received a sign-on RSU grant for 264,317 shares with a total grant date value of $5,999,996 in connection with his commencement of employment. The RSUs will vest 60% on August 15, 2022, 20% on August 15, 2023, and 20% on August 15, 2024, subject to continued employment through each vesting date.
•
Mr. Ahmed received a special PSU grant for 109,505 shares with a total grant date value of $2,499,999 with metrics tied specially to ProQuest performance metrics. The PSUs were eligible to vest 50% on September 28, 2022, and 50% on March 1, 2023. The PSUs were forfeited in connection with Mr. Ahmed’s upcoming departure.
•
Mr. Samson received an RSU grant for 46,748 shares with a total grant date value of $1,215,448 related to the normal annual performance cycle in June 2021, prior to him being part of the Executive Leadership Team. He was promoted on July 6, 2021 to President, IP Group and became an executive officer at that time.
Retirement, Health and Welfare Benefits
We sponsor a qualified defined contribution plan (“401(k) Plan”) for all U.S. colleagues, including our U.S.-based NEOs. In addition, we sponsor a qualified defined contribution plan for UK colleagues, including our UK-based NEOs. Other than the qualified plans described above, we do not provide any other pension plan, supplemental retirement plan, or deferred compensation plan to our NEOs. We do provide company matches to employee contributions to qualified retirement plans and these are reported as All Other Compensation in the Summary Compensation Table.
We also provide NEOs with life and medical insurance, and other benefits generally available to all colleagues. The only perquisite we provide our NEOs is reimbursement to be used toward an annual executive physical for enhanced biometric testing and screenings based on gender, age, and lifestyle. This reimbursement is not to exceed $5,000 in any given year, and we do not gross up for the reimbursement.
In 2021, we eliminated automobile allowances for two of our NEOs pursuant to the terms of their employment agreements that were in place before we became a public company.
Share Ownership Guidelines
We have adopted the following share ownership guidelines for our non-employee directors, CEO, executive officers and leadership team. All have met or are on track to achieve their applicable guideline by the end of the 5-year compliance period.
(8) | | Position | | | | Share Ownership Guidelines | | | | | Chief Executive Officer | | | | 6 times base salary | | | | | Other Executive Officers and Leadership Team | | | | 3 times base salary | | | | | Non-employee Directors | | | | 5 times annual retainer | | Includes 14,575 ordinary shares directly held by Ms. Alberola. |
(9) | | What counts as ownership | | | | What does not count as ownership | | | | | Shares ownedIncludes (i) 12,501 ordinary shares directly held by Mr. Angelakis; and (ii) 12,259,847 ordinary shares held by A-PQ Holdings, LLC. Mr. Angelakis directly or indirectly viacontrols a trust Sharesmajority of the voting power of Atairos Partners GP, Inc. Atairos Partners GP, Inc. is the general partner of Atairos Partners, L.P., which is the sole voting shareholder of Atairos Group, Inc. Atairos Group, Inc. is the sole member of A-PQ Holdings, LLC. Mr. Angelakis disclaims beneficial ownership of the reported securities held in a 401(k) account
Sharesdirectly and indirectly by A-PQ Holdings, LLC except to the extent of his pecuniary interest therein. |
(10) | Includes 90,935 ordinary shares directly held by spouse or minor children Unvested RSUs | | | | Unvested PSUs
Unexercised stock options | | Ms. Okun Bomba. |
(11) | | What counts as ownership | | | | What does not count as ownership | | | | | Unvested deferred shares/share units | | | | | | Includes 18,826 ordinary shares directly held by Ms. Chahal. |
Insider Trading Policy
We have an insider trading policy that prohibits officers, directors, colleagues and consultants of the Company from trading while in possession of material, non-public information about the Company. We impose quarterly trading blackouts applicable to certain designated colleagues who may have access to inside information prior to the release of earnings and we require all executive officers and other designated insider colleagues to pre-clear any transactions with the Company before trading in the Company’s shares.
No Hedging Policy
Certain forms of hedging or monetization transactions allow an individual to lock in much of the value of his or her ordinary shares, often in exchange for all or part of the potential for upside appreciation in the ordinary shares. These transactions allow the continued ownership of the covered securities, but without the full risks and rewards of ownership. When that occurs, the individual entering into the transaction may no longer have the same objectives as the Company’s other shareholders. Therefore, our insider trading policy prohibits directors, executive officers, colleagues and consultants from engaging in such transactions.
No Pledging Policy
We have a policy that prohibits our directors, executive officers, colleagues and consultants from pledging the Company’s securities as collateral to secure loans or otherwise. This includes a prohibition on holding the Company’s securities in a margin account, which would allow the director or executive officer to borrow against their holdings to buy securities.
Risk Assessment and Mitigation of Compensation Policies and Practices
The Board of Directors is responsible for the oversight of the Company’s ongoing assessment and management of material risks impacting our business. The HRCC oversees compensation risk management by participating in the creation and approval of compensation elements, programs and performance metrics that encourage an appropriate level of risk-taking consistent with our business strategy.
The HRCC has reviewed our incentive compensation program, discussed the concept of risk as it relates to our compensation program, considered various mitigating factors and reviewed these items with its independent compensation consultant. In addition, the HRCC asked Pay Governance to conduct an independent risk assessment of our executive compensation program. Based on these reviews and discussions, the HRCC does not believe our compensation program creates risks that are reasonably likely to have a material adverse effect on our business.
Beginning in 2020, and continuing in 2021, we established short-term and long-term incentive plans that include a mix of performance metrics that align with our overall corporate goals and strategy and do not encourage excessive risk taking in order to meet one particular goal. As noted above in “Compensation Policies,” we have share ownership guidelines and prohibitions against hedging and pledging of our securities.
In October 2021, we adopted an executive compensation recoupment policy under which the HRCC is permitted to recover the excess of any incentive-based compensation that is subject to any objective financial, operation, stock price or total shareholder return measure and that is provided to any of our current or former executive officers based on the original financial statements, over the incentive-based compensation that would have been provided based on the restatement. The potential recovery period is the three-year period preceding the date on which we are required to prepare the restatement.
The recovery can take place by requiring the reimbursement of previously paid compensation, cancelling or rescinding outstanding compensation or using any other method that is permitted by applicable law or contract.
Impact of Accounting and Tax Treatment
The HRCC annually reviews and considers the deductibility of the compensation paid to our executive officers, including each of the NEOs. The HRCC considers the accounting and tax treatment to Clarivate and the NEOs in its decision-making process, including the recognition of share-based compensation, the Tax Cuts and Jobs Act which eliminated the exception that allowed for the deductibility of certain performance-based compensation under Section 162(m) of the Internal Revenue Code, and Section 409A of the Internal Revenue Code. We strive to ensure that there are no significant negative accounting or tax implications due to the design of our compensation programs; however, we will base our decisions on what we believe is necessary and appropriate to further the growth of our Company, align with our shareholders’ interests, and pay for performance.
EXECUTIVE COMPENSATION TABLES
2021 Summary Compensation Table
The following summary compensation table sets forth information concerning compensation earned by our NEOs in 2021.
| | Name and Principal Position(1) | | | | Year | | | | Salary(2) ($) | | | | Bonus(3) ($) | | | | Stock Awards(4) ($) | | | | Option Awards ($) | | | | Non-Equity Incentive Plan Compen- sation(5) ($) | | | | All Other Compen- sation (6) ($) | | | | Total ($) | | | | | Jerre Stead Executive Chairman and Chief Executive Officer | | | | | | 2021 | | | | | | | 752,060 | | | | | | | — | | | | | | | 4,247,279 | | | | | | | — | | | | | | | 314,325 | | | | | | | 8,346 | | | | | | | 5,322,011 | | | | | | | 2020 | | | | | | | 641,126 | | | | | | | — | | | | | | | 19,272,972 | | | | | | | — | | | | | | | 749,733 | | | | | | | 8,372 | | | | | | | 20,672,203 | | | | | | | 2019 | | | | | | | 380,769 | | | | | | | — | | | | | | | 12,960,000 | | | | | | | 2,940,000 | | | | | | | 300,000 | | | | | | | 8,346 | | | | | | | 16,589,115 | | | | | | Jonathan Collins Executive Vice President and Chief Financial Officer | | | | | | 2021 | | | | | | | 32,555 | | | | | | | — | | | | | | | 7,403,195 | | | | | | | — | | | | | | | — | | | | | | | 16 | | | | | | | 7,435,766 | | | | | | Steen Lomholt-Thomsen Chief Revenue Officer | | | | | | 2021 | | | | | | | 241,669 | | | | | | | 700,006 | | | | | | | 6,421,391 | | | | | | | — | | | | | | | 67,485 | | | | | | | 122,471 | | | | | | | 7,553,022 | | | | | | Mukhtar Ahmed (7) President, Science Group | | | | | | 2021 | | | | | | | 618,479 | | | | | | | — | | | | | | | 3,599,629 | | | | | | | — | | | | | | | 172,822 | | | | | | | 39,355 | | | | | | | 4,430,285 | | | | | | | 2020 | | | | | | | 602,415 | | | | | | | — | | | | | | | 2,103,894 | | | | | | | — | | | | | | | 421,691 | | | | | | | 59,909 | | | | | | | 3,187,909 | | | | | | | 2019 | | | | | | | 476,688 | | | | | | | — | | | | | | | — | | | | | | | — | | | | | | | 350,000 | | | | | 62, 800 | | | | | | 889,488 | | | | | | Gordon Samson(7) Chief Product Officer | | | | | | 2021 | | | | | | | 479,049 | | | | | | | — | | | | | | | 1,578,182 | | | | | | | — | | | | | | | 123,936 | | | | | | | 83,506 | | | | | | | 2,264,672 | | | | | | Richard Hanks Former Chief Financial Officer | | | | | | 2021 | | | | | | | 539,698 | | | | | | | — | | | | | | | 1,666,099 | | | | | | | — | | | | | | | 150,378 | | | | | | | 8,442 | | | | | | | 2,364,616 | | | | | | | 2020 | | | | | | | 502,747 | | | | | | | — | | | | | | | 2,103,894 | | | | | | | — | | | | | | | 360,500 | | | | | | | 8,495 | | | | | | | 2,975,636 | | | | | | | 2019 | | | | | | | 500,000 | | | | | | | — | | | | | | | — | | | | | | | — | | | | | | | 350,000 | | | | | | | 8,442 | | | | | | | 858,442 | | | | | | Jeff Roy Former President, IP Group | | | | | | 2021 | | | | | | | 315,213 | | | | | | | — | | | | | | | 1,485,018 | | | | | | | — | | | | | | | — | | | | | | | 577,995 | | | | | | | 2,378,226 | | | | | | | 2020 | | | | | | | 452,472 | | | | | | | — | | | | | | | 2,103,894 | | | | | | | — | | | | | | | 315,000 | | | | | | | 7,629 | | | | | | | 2,878,995 | | | | | | | 2019 | | | | | | | 416,527 | | | | | | | — | | | | | | | — | | | | | | | — | | | | | | | 250,000 | | | | | | | 8,442 | | | | | | | 674,969 | | | |
(1)
Mr. Collins became an executive officer on his hire date of December 16, 2021; Mr. Lomholt-Thomsen became an executive officer on his hire date of August 2, 2021; Mr. Ahmed will be departing the Company on October 1, 2022; Mr. Samson became an executive officer on July 6, 2021; Richard Hanks will be departing the Company on July 1, 2022; and Mr. Roy departed the Company on July 31, 2021.
(2)
Salary earned for Mr. Collins and Mr. Lomholt-Thomsen is for the period of hire date through end of 2021; salary earned for Mr. Samson represents the entire year of 2021 (including the period prior to him becoming an executive officer); and salary earned for Mr. Roy represents the period he was employed by us during 2021.
(3)
This amount represents a sign-on bonus paid to Mr. Lomholt-Thomsen upon his hire. The bonus is required to be repaid if he voluntarily resigns or is terminated due to cause within 18 months of
his hire date. Mr. Collins received a sign-on bonus in the amount of $750,000 paid in March 2022. The bonus is required to be repaid in full if he voluntarily resigns or is terminated due to cause within 6 months of his hire date and is to be repaid on a pro-rated basis if he voluntarily resigns or is terminated due to cause between 6 and 12 months of his hire date.
(4)
Amounts shown are the aggregate grant date fair value of PSUs and RSUs granted under our long-term incentive program as described above under “2021 Long Term Incentive Program”, computed in accordance with FASB ASC Topic 718, excluding the effect of any estimated forfeitures. Information about the assumptions used to calculate the grant date fair value of the stock can be found in our Annual Report on Form 10-K under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Note 3: Summary of Significant Accounting Policies — Share Based Compensation” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Note 17: Employment and Compensation Arrangements.” PSUs are reported at target performance, which was the most probable outcome of their performance conditions as of their grant date. These amounts do not correspond with the actual value that may be realized by the NEOs
At the maximum performance level of 200%, the grant date fair value of the PSUs would be as follows: Mr. Stead, $4,244,570; Mr. Lomholt-Thomsen, $147,807; Messrs. Ahmed and Roy, $549,289 each; Mr. Samson, $175,491 and Mr. Hanks, $832,229. A special PSU grant made to Mr. Ahmed has a maximum performance level of 100% or $2,499,999 (which PSUs were forfeited in connection with Mr. Ahmed’s upcoming termination of employment). The grant date fair value of the PSUs is calculated using a Monte Carlo valuation which takes into consideration the probability of the PSUs paying out at different levels.
The PSU grants, excluding the special PSU grant to Mr. Ahmed, represent only the first tranche of the total PSUs awarded for 2021. Since performance metrics were not established on the date of grant for the remaining performance periods, as a result and for accounting purposes, the PSUs with respect to the second and third performance periods are not considered granted until the respective performance goals for each such tranche of PSUs are established. Accordingly, the grant date fair value of the second and third tranches will not be reported in the Stock Awards column until 2022 and 2023, respectively. Refer to “2021 Long-Term Incentive Program” above.
Mr. Roy’s grant value includes $385,388 in incremental fair value resulting from modifications of the awards pursuant to the terms of his severance agreement.
(5)
Represents annual incentive payments under our AIP that were paid in March 2022 for 2021 performance. Mr. Collins is not eligible for an AIP payment for the 2021 plan year per his offer of employment and Mr. Roy is not eligible for an AIP payment for the 2021 plan year per his severance agreement.
(6)
All Other Compensation includes (a) relocation bonus of $110,001 paid to Mr. Lomholt-Thomsen, which is required to be repaid if he voluntarily resigns or is terminated due to cause within 18 months of his hire date, (b) Company contributions to the Company’s defined contribution plan offered to employees located in the UK — $11,600 to Mr. Lomholt-Thomsen, $37,109 to Mr. Ahmed and $47,905 to Mr. Samson, (c) housing allowance of $32,129 for Mr. Samson, and (d) severance payments of $571,075 to Mr. Roy. Mr. Roy’s severance payments are described in more detail under “NEO Changes”, below.
(7)
Messrs. Ahmed and Samson are based in the United Kingdom and their salaries have been converted to USD using a GBP: USD exchange rate of 1.3387, which is a rate set at the beginning of 2021 using a six-month forward look, which we use for the purposes of our budgetary planning. The 2020 and 2019 exchange rates were 1.3387 and 1.274, respectively.
Grants of Plan-Based Awards
The following table provides information regarding grants of plan-based awards to our NEOs. No stock options were granted in fiscal year 2021.
| | | | | | | | | | | | | | | | | | | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) | | | | Estimated Future Payouts Under Equity Incentive Plan Awards(2) | | | | All Other Stock Awards: Number of Shares of Stock or Units(3) ($) | | | | Grant Date Fair Value of Stock Awards(4) ($) | | | | | Name | | | | Grant Date | | | | Approval Date | | | | Threshold $ | | | | Target $ | | | | Maximum $ | | | | Threshold # | | | | Target # | | | | Maximum # | | | | | Jerre Stead | | | | | | | | | | | | | | | | | | | | 562,500 | | | | | | | 1,125,000 | | | | | | | 2,250,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 03/01/2021 | | | | | | | 02/22/2021 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 36,124 | | | | | | | 90,310 | | | | | | | 180,620 | | | | | | | | | | | | | | 2,122,285 | | | | | | | 03/01/2021 | | | | | | | 02/22/2021 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 90,310 | | | | | | | 2,124,994 | | | | | | Jonathan Collins | | | | | | 12/16/2021 | | | | | | | 11/26/2021 | | | | | | | — | | | | | | | — | | | | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | 312,767 | | | | | | | 7,403,195 | | | | | | Steen Lomholt- Thomsen | | | | | | | | | | | | | | | | | | | | 120,767 | | | | | | | 241,534 | | | | | | | 483,068 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 08/15/2021 | | | | | | | 07/14/2021 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 1,360 | | | | | | | 3,401 | | | | | | | 6,802 | | | | | | | | | | | | | | 73,904 | | | | | | | 08/15/2021 | | | | | | | 07/14/2021 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 15,308 | | | | | | | 347,492 | | | | | | | 08/15/2021 | | | | | | | 07/14/2021 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 264,317 | | | | | | | 5,999,996 | | | | | | Mukhtar Ahmed(5) | | | | | | | | | | | | | | | | | | | | 309,274 | | | | | | | 618,547 | | | | | | | 1,237,094 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 03/01/2021 | | | | | | | 02/02/2021 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 4,674 | | | | | | | 11,687 | | | | | | | 23,374 | | | | | | | | | | | | | | 274,645 | | | | | | | 03/01/2021 | | | | | | | 02/02/2021 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 35,061 | | | | | | | 824,985 | | | | | | | 11/29/2021 | | | | | | | 11/26/2021 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 54,752 | | | | | | | 109,505 | | | | | | | 109,505 | | | | | | | | | | | | | | 2,499,999 | | | | | | Gordon Samson | | | | | | | | | | | | | | | | | | | | 221,789 | | | | | | | 443,578 | | | | | | | 887,156 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 06/21/2021 | | | | | | | 05/11/2021 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 46,748 | | | | | | | 1,215,448 | | | | | | | 08/15/2021 | | | | | | | 06/30/2021 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 1,615 | | | | | | | 4,038 | | | | | | | 8,076 | | | | | | | | | | | | | | 87,746 | | | | | | | 08/15/2021 | | | | | | | 06/30/2021 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 12,114 | | | | | | | 274,988 | | | | | | Richard Hanks(5) | | | | | | | | | | | | | | | | | | | | 269,110 | | | | | | | 538,219 | | | | | | | 1,076,438 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 03/01/2021 | | | | | | | 02/02/2021 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 7,082 | | | | | | | 17,707 | | | | | | | 35,414 | | | | | | | | | | | | | | 416,115 | | | | | | | 03/01/2021 | | | | | | | 02/02/2021 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 53,123 | | | | | | | 1,249,984 | | | | | | Jeff Roy(5) | | | | | | | | | | | | | | | | | | | | 147,945 | | | | | | | 295,890 | | | | | | | 591,781 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 03/01/2021 | | | | | | | 02/02/2021 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 4,674 | | | | | | | 11,687 | | | | | | | 23,374 | | | | | | | | | | | | | | 274,645 | | | | | | | 03/01/2021 | | | | | | | 02/02/2021 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 35,061 | | | | | | | 824,985 | | | |
(1)
The threshold, target and maximum amounts shown under “Estimated Future Payouts Under Non- Equity Incentive Plan Awards” reflect the ranges of payments that could be made under the AIP. Actual payments under the AIP are shown in the Summary Compensation Table. Mr. Collins did not participate in the AIP for 2021 and Mr. Roy is not entitled to any AIP payout for 2021 pursuant to the terms of his separation.
(2)
Awards reported in this column represent the number of PSUs granted under the 2019 Incentive Plan. The PSUs granted on March 1, 2021, and August 15, 2021, represent only the first tranche of the total PSUs awarded for these grants in 2021. Since metrics were not established on the date of grant for the remaining performance periods, as a result and for accounting purposes, the PSUs with respect to the second and third performance periods are not considered granted until the respective performance goals for each such tranche of PSUs are established. Accordingly, the grant date fair value of the second and third tranches will not be reported until 2022 and 2023, respectively. Refer to “2021 Long-Term Incentive Program” above.
(3)
Awards reported in this column represent the number of time-based RSUs granted under the 2019 Incentive Plan.
(4)
Represents the grant date fair value of stock awards, computed in accordance with FASB ASC
Topic 718, excluding the effect of any estimated forfeitures. PSUs are reported at target performance, which was the most probable outcome of their performance conditions as of their grant date. At the maximum performance level of 200%, the grant date fair value of the PSUs granted on March 1, 2021, and August 15, 2021, would be as follows: Mr. Stead, $4,244,570; Mr. Lomholt-Thomsen, $147,807; Messrs. Ahmed and Roy, $549,289 each; Mr. Samson, $175,491 and Mr. Hanks, $832,229. The PSU grant made to Mr. Ahmed on November 29, 2021 (and which were forfeited in connection with his upcoming termination of employment), had a maximum performance level of 100% or $2,499,999.
Mr. Collins received a sign-on RSU grant for 312,767 shares with a total grant date value of $7,403,195 in connection with his commencement of employment. The RSUs will vest 40% on March 1, 2022, 40% on March 1, 2023, and 20% on March 1, 2024, subject to continued employment through each vesting date.
Mr. Lomholt-Thomsen received a sign-on RSU grant for 264,317 shares with a total grant date value of $5,999,996 in connection with his commencement of employment. The RSUs will vest 60% on August 15, 2022, 20% on August 15, 2023, and 20% on August 15, 2024, subject to continued employment through each vesting date.
(5)
Grants made during 2021 to Messrs. Ahmed and Hanks, that are not vested or accelerated per their severance agreements, will be forfeited upon their terminations in 2022 and grants made to Mr. Roy during 2021, that were not accelerated per his severance agreement, were forfeited upon his termination in 2021.
Outstanding Equity Awards at Fiscal Year-End
The following table provides information concerning the outstanding equity awards held by our NEOs at the end of fiscal year 2021. None of our NEOs were holding unexercisable stock options at the end of the fiscal year.
| | Name | | | | | | | | | | | Number of Securities Underlying Unexercised Options ($) | | | | Option Exercise Price ($) | | | | Option Expiration Date | | | | Number of Shares or Units of Stock That Have Not Vested(1) (#) | | | | Market Value of Shares or Units of Stock That Have Not Vested(2) ($) | | | | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested(3) (#) | | | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested(2)(3) ($) | | | | Grant Date | | | | Exercisable | | | | | Jerre Stead | | | | | | 05/20/2019 | | | | | | | 1,000,000 | | | | | | | 13.30 | | | | | | | 05/19/2029 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 04/01/2020 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 300,450 | | | | | | | 7,066,584 | | | | | | | 12/17/2020 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 150,225 | | | | | | | 3,533,292 | | | | | | | 03/01/2021 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 90,310 | | | | | | | 2,124,091 | | | | | | | 270,930 | | | | | | | 6,372,274 | | | | | | Jonathan Collins | | | | | | 12/16/2021 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 312,767 | | | | | | | 7,356,280 | | | | | | | | | | | | | | | | | | | | Steen Lomholt- Thomsen | | | | | | 08/15/2021 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 279,625 | | | | | | | 6,576,780 | | | | | | | 10,205 | | | | | | | 240,022 | | | | | | Mukhtar Ahmed(4) | | | | | | 04/01/2020 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 10,433 | | | | | | | 245,384 | | | | | | | 46,944 | | | | | | | 1,104,123 | | | | | | | 12/17/2020 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 23,472 | | | | | | | 552,061 | | | | | | | 03/01/2021 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 35,061 | | | | | | | 824,635 | | | | | | | 35,061 | | | | | | | 824,635 | | | | | | | 11/29/2021 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 109,505 | | | | | | | 2,575,558 | | | | | | Gordon Samson | | | | | | 06/21/2021 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 46,748 | | | | | | | 1,099,513 | | | | | | | | | | | | | | | | | | | | | 08/15/2021 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 12,114 | | | | | | | 284,921 | | | | | | | 12,114 | | | | | | | 284,921 | | | | | | Richard Hanks(5) | | | | | | 03/03/2017 | | | | | | | 73,997 | | | | | | | 6.61 | | | | | | | 12/31/2024 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 03/03/2017 | | | | | | | 52,854 | | | | | | | 10.39 | | | | | | | 12/31/2024 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 03/03/2017 | | | | | | | 52,854 | | | | | | | 14.18 | | | | | | | 12/31/2024 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 03/03/2017 | | | | | | | 31,713 | | | | | | | 17.96 | | | | | | | 12/31/2024 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 05/23/2017 | | | | | | | 4,756 | | | | | | | 6.61 | | | | | | | 12/31/2024 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 04/01/2020 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 10,433 | | | | | | | 245,384 | | | | | | | 46,944 | | | | | | | 1,104,123 | | | | | | | 12/17/2020 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 23,472 | | | | | | | 552,061 | | | | | | | 03/01/2021 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 53,123 | | | | | | | 1,249,453 | | | | | | | 53,123 | | | | | | | 1,249,453 | | | | | | Jeff Roy(6) | | | | | | — | | | | | | | — | | | | | | | — | | | | | | | — | | | | | | | — | | | | | | | — | | | | | | | — | | | | | | | — | | | |
(1)
Awards shown are time-based RSUs. These awards are scheduled to vest as follows if the individual remains continuously employed by the Company through the vest date.
(12) | | Name | | | | Vesting Date | | | | Number of
Shares
Vesting
| | | | | Jerre Stead | | | | | | 03/01/2022 | | | | | | | 30,103 | | | | | | | 03/01/2023 | | | | | | | 30,103 | | | | | | | 03/01/2024 | | | | | | | 30,104 | | | | | | Jonathan Collins | | | | | | 03/01/2022 | | | | | | | 125,106 | | | | | | | 03/01/2023 | | | | | | | 125,107 | | | | | | | 03/01/2024 | | | | | | | 62,554 | | | | | | Steen Lomholt-Thomsen | | | | | | 08/15/2022 | | | | | | | 163,692 | | | | | | | 08/15/2023 | | | | | | | 57,966 | | | | | | | 08/15/2024 | | | | | | | 57,967 | | | | | | Mukhtar Ahmed | | | | | | 03/01/2022 | | | | | | | 11,687 | | | | | | | 04/01/2022 | | | | | | | 5,216 | | | | | | | 03/01/2023 | | | | | | | 11,687 | | | | | | | 04/01/2023 | | | | | | | 5,217 | | | | | | | 03/01/2024 | | | | | | | 11,687 | | | | | | Gordon Samson | | | | | | 03/01/2022 | | | | | | | 15,582 | | | | | | | 08/15/2022 | | | | | | | 4,038 | | | | | | | 03/01/2023 | | | | | | | 15,583 | | | | | | | 08/15/2023 | | | | | | | 4,038 | | | | | | | 03/01/2024 | | | | | | | 15,583 | | | | | | | 08/15/2024 | | | | | | | 4,038 | | | | | | Richard Hanks(5)
| | | | | | 03/01/2022 | | | | | | | 17,707 | | | | | | | 04/01/2022 | | | | | | | 5,216 | | | | | | | 03/01/2023 | | | | | | | 17,708 | | | | | | | 04/01/2023 | | | | | | | 5,217 | | | | | | | 03/01/2024 | | | | | | | 17,708 | | | Includes 157,462 ordinary shares directly held by Mr. Collins. |
(2)
Market value reflects the $23.52 closing price of Clarivate stock on December 31, 2021.
(3)
Awards shown include both the Original PSUs granted April 1, 2020, and the TSR PSUs granted December 17, 2020, of which only one of these awards is eligible to vest following the close of the 2022 fiscal year based on our achievement of certain performance conditions, as described in the section below titled Executive Employment Agreements. Under no circumstances will both the TSR PSUs and the Original PSUs vest. PSUs will vest at the end of a three-year performance period from the grant date, subject to meeting performance metrics and the individual remaining continuously employed by the Company through the vesting date.
(4)
Per Mr. Ahmed’s severance agreement, all PSUs will be forfeited.
(5)
Per Mr. Hanks’ severance agreement, the expiration date of all his outstanding stock options is set at December 31, 2024; any RSUs that vest after December 31, 2023, and all PSUs will be forfeited.
(6)
Mr. Roy has no outstanding equity as of December 31, 2021.
Option Exercises and Stock Vested
The following table provides information concerning stock options exercised by our NEOs and the vesting of restricted stock units held by our NEOs during 2021.
| | | | | | Option Awards | | | | Stock Awards | | | | | Name | | | | Number of Shares Acquired on Exercise (#) | | | | Value Realized on Exercise ($)(1) | | | | Number of Shares Acquired on Vesting(1) (#) | | | | Value Realized on Vesting(2) ($) | | | | | Jerre Stead | | | | | | — | | | | | | | — | | | | | | | — | | | | | | | — | | | | | | Jonathan Collins | | | | | | — | | | | | | | — | | | | | | | — | | | | | | | — | | | | | | Steen Lomholt-Thomsen | | | | | | — | | | | | | | — | | | | | | | — | | | | | | | — | | | | | | Mukhtar Ahmed | | | | | | 396,409 | | | | | | | 4,945,649 | | | | | | | 5,216 | | | | | | | 142,136 | | | | | | Gordon Samson | | | | | | — | | | | | | | — | | | | | | | — | | | | | | | — | | | | | | Richard Hanks | | | | | | 216,174 | | | | | | | 3,231,790 | | | | | | | 5,216 | | | | | | | 142,136 | | | | | | Jeff Roy | | | | | | 413,587 | | | | | | | 5,057,290 | | | | | | | 22,119 | | | | | | | 549,667 | | | |
(1)
The value realized upon option exercise is the difference between the exercise price and the fair market value of the shares on the date of exercise.
(2)
Represents the aggregate dollar amount realized, which is calculated by multiplying the number of shares of RSUs that vested by the fair market value of our stock on the vesting date.
EXECUTIVE EMPLOYMENT AGREEMENTS
Our CEO was offered and declined an employment agreement.
The Company has entered into employment agreements with each of our other NEOs. These employment agreements are for the purpose of establishing each NEO’s employment terms and providing a description of the compensation elements and benefits to which each NEO is entitled. None of the employment agreements provide for severance upon a voluntary termination nor do they provide for single-trigger change-in-control payments.
The employment agreements provide each executive with an annual base salary to be reviewed at the discretion of management and the HRCC and adjusted dependent on performance. In addition, each executive is eligible to participate in the AIP and is entitled to participate in employee benefit plans, programs and arrangements as are customarily provided to our executives. The employment agreements with Messrs. Collins, Hanks and Roy do not constitute a contract of employment, do not entitle them to employment for any specified period and therefore their employment is considered “at will.” The employment agreements with Messrs. Lomholt-Thomsen, Ahmed and Samson constitute a UK contract of employment.
Although these employment agreements provide for separation pay and certain other benefits upon termination of employment, the Company adopted the Executive Severance Plan (ESP) on June 30, 2021, that supersedes the provisions of the NEO’s employment agreements. Payment of severance under the ESP is contingent upon the executive entering into a severance agreement, including a release of claims, with the Company. There is no eligibility for severance benefits under the employment agreements if the applicable executive voluntarily resigns or the Company terminates him for cause. Under the terms of their employment agreements, Messrs. Lomholt-Thomsen, Ahmed and Samson are subject to perpetual confidentiality and intellectual property provisions and restrictive covenants related to non-competition and non-solicitation of employees, customers, and suppliers for 12‑months post-termination. Mr. Hanks has stock option agreements, entered into in 2017, that subject him to perpetual confidentiality and intellectual property provisions and 12-month post- termination restrictive covenants related to non-competition and non-solicitation of employees and customers.
Our CEO is not entitled to severance under the ESP. The following describes, for our other NEOs, the benefits that would be received under the ESP in various termination circumstances.
In the event of an involuntary termination without cause, the NEOs are entitled to severance in the amount of 18 months of annual base salary, 1.5 times AIP target and 18 months of continued benefits coverage relative to medical, dental and vision plans. Any unvested RSUs shall become vested to the extent the RSUs would have otherwise vested had the NEOs’ employment continued over the 18-month period following the NEOs’ termination date. All outstanding PSUs will be forfeited. The expiration date of any outstanding stock options will be extended to two years from December 31 of the year the NEO is terminated.
In the event of an involuntary termination without cause, within 12 months following a Change in Control, the NEOs are entitled to severance in the amount of 24 months of annual base salary, 2 times AIP target and 24 months of continued benefits coverage relative to medical, dental and vision plans. The expiration date of any outstanding stock options will be extended to two years from December 31 of the year the NEO is terminated. Pursuant to the terms of the NEOs’ current award agreements, any unvested RSUs and PSUs shall immediately vest (with PSUs vesting at such level of performance determined by the Board).
The cash severance amount due under the ESP is paid in accordance with the terms of the applicable separating NEO’s separation agreement, which may provide for payment in a lump sum or in installments.
In the event of termination due to death or disability, the NEOs are not entitled to any severance or continuation of benefits under the ESP. Pursuant to the terms of the NEOs’ current award agreements, any unvested RSUs and PSUs shall immediately vest (with PSUs deemed earned at target).
With exception to what is described above, Messrs. Stead, Ahmed, Hanks and Roy each has an agreement for the Original PSUs dated April 1, 2020, and an agreement for the TSR PSUs dated December 17, 2020. The Original PSU agreement provides for accelerated vesting at target in the event of death or Disability, while the TSR PSU agreement provides for forfeiture in the event of death or Disability. If the NEO’s employment is terminated within 12 months following a Change in Control, (a) any outstanding Original PSUs shall be accelerated at a performance level to be determined by the Administrator at the time of the Change in Control, and (b) any TSR PSUs will vest at Maximum performance level to the extent that none of the Original PSUs are accelerated. For clarity, the vesting of only one of the two PSU awards granted in 2020, the Original PSUs, or the TSR PSUs, may be accelerated in the event of a Change in Control. The Original PSUs and TSR PSUs are all forfeited by Messrs. Ahmed, Hanks and Roy upon their terminations.
NEO Changes
On December 16, 2021, Jonathan Collins joined the Company as Executive Vice President and Chief Financial Officer. Pursuant to his employment agreement, Mr. Collins will receive an initial annual base salary of $750,000, a target annual cash incentive bonus opportunity equal to 100% of his base salary under the Company’s annual incentive plan effective January 1, 2022, and a target annual long-term equity incentive compensation opportunity with a grant date value equal to $2.5 million. In addition, as compensation for forfeited unvested incentive compensation from his prior employer, on or around the time executives’ bonuses are paid under the Company’s annual incentive plan for 2021, Mr. Collins received a one-time cash sign-on bonus of $750,000. Mr. Collins’ sign-on bonus is required to be repaid in full if he voluntarily resigns or is terminated due to cause within 6 months of his hire date and is to be repaid on a pro-rated basis if he voluntarily resigns or is terminated due to cause between 6 and 12 months following his hire date. In addition, on December 16, 2021, Mr. Collins received a one-time sign-on grant of restricted share units, with a grant date value equal to $7.4 million (with the number of Company shares underlying the restricted share units calculated using the closing price of Company shares on the New York Stock Exchange on November 30, 2021).
On August 2, 2021, Steen Lomholt-Thomsen joined the Company as Chief Revenue Officer. Pursuant to his employment agreement, Mr. Lomholt-Thomsen will receive an initial annual base salary of $580,000, a target annual cash incentive bonus opportunity equal to 100% of his base salary under the Company’s annual incentive plan, and a target annual long-term equity incentive compensation opportunity with a grant date value equal to $1.4 million. In addition, Mr. Lomholt-Thomsen received a one-time cash sign-on bonus of $700,006, a one-time sign-on grant of restricted share units, with a grant date value of $6 million and a relocation allowance of $110,001. Mr. Lomholt-Thomsen’s cash sign-on bonus is required to be repaid if he voluntarily resigns or is terminated due to cause within 18 months of his hire date.
On December 10, 2021, the Company entered into a separation agreement with Richard Hanks, Chief Financial Officer. Mr. Hanks will be departing the Company effective July 1, 2022. Pursuant to the terms of Mr. Hanks’ separation agreement and consistent with the ESP, Mr. Hanks is entitled to the following: (i) cash payments equal to $1,650,000 payable in six quarterly installments; (ii) a lump sum payment totaling $36,500, representing reimbursement for the average monthly cost of COBRA for 18 months; (iii) accelerated vesting of 22,925 unvested restricted stock units; and (iv) a prorated portion of his 2022 bonus in the amount of $275,000. In addition, the period of time during which Mr. Hanks’ vested stock options will remain exercisable will be extended to December 31, 2024.
On July 24, 2021, the Company entered into a separation agreement with Jeff Roy, President, IP Group. Mr. Roy departed the Company effective July 31, 2021. Pursuant to the terms of Mr. Roy’s separation agreement and consistent with the ESP, Mr. Roy is entitled to the following: (i) cash payments equal to $1,650,000 payable in six quarterly installments; (ii) a lump sum payment totaling $21,075, representing reimbursement for the average monthly cost of COBRA for 18 months; and (iii) accelerated vesting of 16,903 unvested restricted stock units. In addition, the period of time during which Mr. Roy’s vested stock options will remain exercisable will be extended to December 31, 2023.
On January 7, 2022, the Company entered into a separation agreement with Mukhtar Ahmed, President, Science Group. Mr. Ahmed will be departing the Company effective October 1, 2022.
Pursuant to the terms of Mr. Ahmed’s separation agreement and consistent with the ESP, Mr. Ahmed is entitled to the following: (i) cash payments equal to $1,871,503 payable in five quarterly installments; (ii) a lump sum payment totaling $33,468, representing reimbursement for the average monthly cost of healthcare for 18 months; and (iii) accelerated vesting of 28,591 unvested restricted stock units;and (iv) a prorated portion of his 2022 bonus in the amount of $467,876.
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
The information in the table below provides the estimated value of compensation that would have been paid to each of our NEOs in the event the NEO was involuntarily terminated by the Company for reason other than cause on December 31, 2021.
| | Name | | | | Description of Payments | | | | Involuntary Termination Without Cause (not Related to Change in Control) ($) | | | | Involuntary Termination Without Cause (Change in Control) ($) | | | | Death or Disability ($) | | | | | Jerre Stead | | | | 2020 Original PSUs(1) | | | | | | — | | | | | | | — | | | | | | | 7,066,584 | | | | | | | | | | 2020 TSR PSUs(2) | | | | | | — | | | | | | | 4,239,950 | | | | | | | — | | | | | | | | | | 2021 PSUs(3) | | | | | | — | | | | | | | 6,372,274 | | | | | | | 6,372,274 | | | | | | | | | | RSUs(4) | | | | | | — | | | | | | | 2,124,091 | | | | | | | 2,124,091 | | | | | | Total Jerre Stead | | | | | | | | | | — | | | | | | | 12,736,315 | | | | | | | 15,562,949 | | | | | | Jonathan Collins | | | | RSUs(4) | | | | | | 5,885,010 | | | | | | | 7,356,280 | | | | | | | 7,356,280 | | | | | | | | | | Severance(5) | | | | | | 2,250,000 | | | | | | | 3,000,000 | | | | | | | — | | | | | | | | | | Continued Benefits(5) | | | | | | 39,240 | | | | | | | 52,320 | | | | | | | — | | | | | | Total Jonathan Collins | | | | | | | | | | 8,174,250 | | | | | | | 10,408,600 | | | | | | | 7,356,280 | | | | | | Steen Lomholt-Thomsen | | | | 2021 PSUs(3) | | | | | | — | | | | | | | 240,022 | | | | | | | 240,022 | | | | | | | | | | RSUs(4) | | | | | | 6,336,735 | | | | | | | 6,576,780 | | | | | | | 6,576,780 | | | | | | | | | | Severance(5) | | | | | | 1,740,015 | | | | | | | 2,320,021 | | | | | | | — | | | | | | Total Steen Lomholt-Thomsen | | | | | | | | | | 8,076,750 | | | | | | | 9,136,822 | | | | | | | 6,816,802 | | | | | | Mukhtar Ahmed | | | | 2020 Original PSUs(1) | | | | | | — | | | | | | | — | | | | | | | 1,104,123 | | | | | | | | | | 2020 TSR PSUs(2) | | | | | | — | | | | | | | 662,464 | | | | | | | — | | | | | | | | | | 2021 PSUs(3) | | | | | | — | | | | | | | 3,400,192 | | | | | | | 3,400,192 | | | | | | | | | | RSUs(4) | | | | | | 795,141 | | | | | | | 1,070,019 | | | | | | | 1,070,019 | | | | | | | | | | Severance(5) | | | | | | 1,871,503 | | | | | | | 2,495,337 | | | | | | | — | | | | | | | | | | Continued Benefits(5) | | | | | | 33,468 | | | | | | | 33,468 | | | | | | | — | | | | | | Total Mukhtar Ahmed | | | | | | | | | | 2,700,111 | | | | | | | 7,661,480 | | | | | | | 5,574,334 | | | | | | Gordon Samson | | | | 2021 PSUs(3) | | | | | | — | | | | | | | 284,921 | | | | | | | 284,921 | | | | | | | | | | RSUs(4) | | | | | | 827,975 | | | | | | | 1,384,434 | | | | | | | 1,384,434 | | | | | | | | | | Severance(5) | | | | | | 1,606,440 | | | | | | | 2,141,920 | | | | | | | — | | | | | | Total Gordon Samson | | | | | | | | | | 2,434,415 | | | | | | | 3,811,276 | | | | | | | 1,669,356 | | | | | | Richard Hanks(6) | | | | RSUs(4) | | | | | | 539,196 | | | | | | | n/a | | | | | | | n/a | | | | | | | | | | Severance(5) | | | | | | 1,650,000 | | | | | | | n/a | | | | | | | n/a | | | | | | | | | | 2022 AIP(6) | | | | | | 275,000 | | | | | | | n/a | | | | | | | n/a | | | | | | | | | | Continued Benefits(5) | | | | | | 36,500 | | | | | | | n/a | | | | | | | n/a | | | | | | Total Richard Hanks | | | | | | | | | | 2,500,696 | | | | | | | n/a | | | | | | | n/a | | | | | | Jeff Roy(6) | | | | RSUs(4) | | | | | | 397,559 | | | | | | | n/a | | | | | | | n/a | | | | | | | | | | Severance(5) | | | | | | 1,650,000 | | | | | | | n/a | | | | | | | n/a | | | | | | | | | | Continued Benefits(5) | | | | | | 21,075 | | | | | | | n/a | | | | | | | n/a | | | | | | Total Jeff Roy | | | | | | | | | | 2,068,634 | | | | | | | n/a | | | | | | | n/a | | | |
(1)
As described in “Executive Employment Agreements,” the vesting of the Original PSUs will accelerate at target performance level in the event of death or disability.
(2)
As described in “Executive Employment Agreements,” for purposes of this table, the vesting of the TSR PSUs at maximum performance is being reported. If the Original PSUs were to be accelerated at target performance, the value of such acceleration would be $7,066,584 for Mr. Stead and $1,104,123 for Mr. Ahmed.
(3)
As described in “Executive Employment Agreements,” the vesting of PSUs will accelerate in full in the event of death or disability or upon a termination without cause in the 12 months following a change in control. In the event of an involuntary termination without cause, the PSUs will forfeit.
(4)
As described in “Executive Employment Agreements,” the vesting of RSUs will accelerate in full in the event of death or disability or upon a termination without cause in the 12 months following a change in control. In the event of an involuntary termination without cause, any unvested RSUs shall become vested to the extent the RSUs would have otherwise vested had the NEOs’ employment continued over the 18-month period following the NEOs’ termination date. Mr. Stead is not subject to ESP and his RSUs forfeit upon involuntary termination without cause per the grant agreement. Mr. Lomholt-Thomsen’s signing on RSU grant provides for immediate vesting upon involuntary termination without cause.
(5)
See “Executive Employment Agreements” for a description of how salary, AIP and continued benefits are determined for each NEO. Mr. Collins’ employment agreement provides for severance pay equivalent to termination within 12 months following a Change in Control in the Executive Severance Plan, even if a plan does not exist at that time. Mr. Roy has $1,100,000 remaining due in severance payments as of December 31, 2021.
(6)
Only reporting the actual circumstances of the departures of Messrs. Hanks and Roy and the actual number of RSUs that will accelerate in full. Mr. Hank’s severance agreement provides a fixed amount for a pro-rated AIP payment for the 2022 performance period.
CEO PAY RATIO
The tables below set forth our CEO pay ratio, as described below.
(13) | | CEO Annual Total Compensation | | | | | | 5,322,011 | | | | | | Median Employee Annual Total Compensation | | | | | | 50,138 | | | | | | Estimated CEOMr. Cortas may be deemed to Median Employee Pay Ratio | | | | | | 106:1 | | | be the indirect beneficial owner of 116,666,507 ordinary shares held by Leonard Green & Partners, L.P. See Footnote 2 of this table. Mr. Cortas disclaims beneficial ownership of the ordinary shares reported herein except to the extent of his pecuniary interest therein and the information reported in this table shall not be deemed an admission that he is the beneficial owner of such securities for purposes of Section 16 or for any other purpose. |
The table above shows (i) the 2021 annual total compensation of our CEO calculated in accordance with SEC rules; (ii) the 2021 total annual compensation of our median employee; and (iii) the ratio of the annual total compensation of our CEO to that of our median employee.
Methodology
Our CEO pay ratio is a reasonable estimate calculated in a manner consistent with SEC rules.
Our methodology and process are explained below.
•
We selected December 1, 2021, as the date to determine the median employee. On this date we had 11,416 employees globally, comprised of 3,207 employees located in the United States and 8,209 employees located outside of the U.S.
•
We included all full-time and part-time employees worldwide, excluding our CEO, except that, as permitted under the SEC rules, we relied on the de minimis exception to decrease the number of countries where we obtained data, which allowed us to exclude up to 5% of our workforce. We excluded the 547 employees representing 4.8% of the population in the jurisdictions identified below. Once removed, the median employee is based on a population of 10,869 employees.
(14) | | Country | | | | Number of
Employees
Excluded
| | | | | Austria | | | | | | 88 | | | | | | Brazil | | | | | | 24 | | | | | | Bulgaria | | | | | | 1 | | | | | | Chile | | | | | | 13 | | | | | | Colombia | | | | | | 9 | | | | | | Czechia | | | | | | 6 | | | | | | Denmark | | | | | | 2 | | | | | | Egypt | | | | | | 1 | | | | | | Finland | | | | | | 1 | | | | | | France | | | | | | 96 | | | | | | Hong Kong | | | | | | 25 | | | | | | Hungary | | | | | | 4 | | | | | | Ireland | | | | | | 32 | | | | | | Italy | | | | | | 33 | | | | | | Kazakhstan | | | | | | 2 | | | | | | Mexico | | | | | | 30 | | | | | | Netherlands | | | | | | 13 | | | | | | New Zealand | | | | | | 8 | | | | | | Philippines | | | | | | 1 | | | | | | Poland | | | | | | 5 | | | Includes 7,591 ordinary shares directly held by Dr. Pritchett. |
(15) | | Country | | | | Number of
Employees
Excluded
| | | | | Russian Federation | | | | | | 12 | | | | | | Singapore | | | | | | 25 | | | | | | South Africa | | | | | | 6 | | | | | | Sweden | | | | | | 58 | | | | | | Taiwan | | | | | | 19 | | | | | | Turkey | | | | | | 6 | | | | | | Ukraine | | | | | | 1 | | | | | | United Arab Emirates | | | | | | 26 | | | | | | Total | | | | | | 547 | | | Includes (i) 32,452 ordinary shares directly held by Mr. Roedel; (ii) 39,395 ordinary shares indirectly held by the Richard W. Roedel Trust; and (iii) 4,090 ordinary shares held by Mr. Roedel’s Profit Sharing Plan. |
(16) | Includes (i) 22,603 ordinary shares directly held by Mr. Snyder; (ii) 8,821,984 shares held by Cambridge Information Group, Inc. (“CIG”); (iii) 259,396 shares held by Cambridge Information Group I, LLC; (iv) 10,489,466 shares held by Cambridge Information Group II LLC; (v) 4,033,271 shares held by Cambridge Information Group III LLC; and (vi) 3,417 shares held by CSA GP Corporation. Mr. Snyder is the Chief Executive Officer of and a shareholder in CIG, which acts as a manager of Cambridge Information Group I LLC, Cambridge Information Group II LLC and Cambridge Information Group III LLC (collectively with CIG and CSA GP Corporation, the “CIG Entities”). CSA GP Corporation is a wholly owned subsidiary of CIG. Mr. Snyder disclaims beneficial ownership of the reported securities held by the CIG Entities except to the extent of his pecuniary interest therein. |
(17) | Includes 659,559 ordinary shares directly held by Mr. Samson. |
(18) | Includes 97,038 ordinary shares directly held by Mr. Lomholt-Thomsen. |
(19) | Includes 44,756 ordinary shares directly held by Ms. Wilson. |
(20) | Includes (i) 1,214,934 ordinary shares directly held by all current directors and executive officers as a group; (ii) 152,577,373 ordinary shares indirectly held; and (iii) 101,082 ordinary shares issuable upon the settlement of RSUs that will vest within 60 days of May 15, 2023. |
•
Median employee: For purposes of this calculation, for each employee we used total base pay (including commissions and additional month pay where applicable) and target AIP. We identified employees within $1,000 of the median and removed those employees who had anomalous compensation characteristics to determine the median employee. We then calculated the compensation of the median employee using the same methodology we used to calculate the CEO’s compensation reported in the Summary Compensation Table. Our median employee was based in the United States.
•
SEC rules for identifying the median employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their employee populations and compensation practices. As a result, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies have different employee populations and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios. In addition, the median employee’s annual total compensation is unique to that individual, and therefore, is not an indicator of the annual total compensation of any other individual or group of employees.
CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS
Review and Approval of Related Person Transactions
We follow processes and policies, including our written policy on related person transactions that are designed to detect and, if appropriate, approve and disclose any transaction that would constitute a “related person transaction” under SEC rules. Such transactions would include material transactions and transactions involving an amount exceeding $120,000 in which any Clarivate directors, nominees for director, executive officers, greater than five percent shareholders or any of their respective immediate family members or affiliates, or the employers of any of them, has a direct or indirect material interest.
Our Board of Directors has delegated the responsibility for reviewing related person transactions to the Audit Committee. To support this process, each year we solicit internal disclosure of any transactions between Clarivate and its directors and officers, their immediate family members, and their affiliated entities and employers, including the nature of each transaction and the amount involved. The Audit Committee annually reviews and evaluates such information for each director as part of its assessment of each director’s independence.
In addition, all directors, officers, and employees of Clarivate are governed by the Clarivate Code of Conduct, which requires individuals to act in the best interest of Clarivate and avoid conflicts of interest. Individuals are responsible for identifying conflicts of interest as soon as they arise and contacting our Compliance team prior to engaging in the conduct if they are unsure whether such relationship or transaction poses a conflict.
If the Audit Committee were presented with a proposed related party transaction, it would evaluate the relevant facts and circumstances and either approve or disapprove it. Factors would include the terms of the transaction relative to the terms that could be obtained in arm’s length dealings with an unrelated party, the extent of the related party’s interest in the transaction, the conflicts of interest (if any) and the provisions of the Clarivate Code of Conduct and whether the transaction meets any of the criteria for pre- approval.
Transactions Involving Related Persons
Agreements Entered Into in Connection With Acquisition of ProQuest
Upon completion of the acquisition of ProQuest, Clarivate (i) issued 46,910,923 ordinary shares, to CIG, Atairos and certain other equityholders of ProQuest (the “ProQuest Seller Group”), (ii) repaid approximately $1.0 billion of ProQuest debt and (iii) paid approximately $3.0 billion in cash to the ProQuest Seller Group.
At closing of the ProQuest acquisition, Clarivate entered into a Director Nomination Agreement (the “Director Nomination Agreement”) with Andrew M. Snyder, dated December 1, 2021, pursuant to which Mr. Snyder has the right to be nominated for election to Clarivate’s Board of Directors annually until the third anniversary of the closing.
Also at closing of the ProQuest acquisition, Clarivate entered into an amendment to its existing registration rights agreement in order to provide the ProQuest Seller Group with rights to require Clarivate to register their ordinary shares for resale under the Securities Act. Under the terms of the amendment, the ProQuest Seller Group agreed not to dispose of their Clarivate ordinary shares until the first anniversary of the closing date on December 1, 2022, subject to certain adjustments and exceptions, and CIG further agreed to extend these lock-up restrictions to half of its Clarivate ordinary shares until the second anniversary of the closing date on December 1, 2023.
As part of the acquisition, Clarivate also assumed a Finance lease in which CIG is the Lessor. For the period of December 1, 2021 to December 31, 2021, Clarivate recognized interest expense of $98,000 and amortization of Finance lease ROU asset of $1,291,000. The Finance lease ROU asset of $30,560,000 is shown on Clarivate’s financial statements and the corresponding lease liability of $30,835,0000 is treated as indebtedness.
Capri Restructuring
On May 15, 2021, Clarivate entered into an agreement with Capri Acquisition Topco Limited (“Capri”) and Solaro ExchangeCo Limited (“NewCo”), and for certain limited purposes, LGP. Under the agreement, Capri contributed 177,206,779 of its Clarivate ordinary shares to NewCo. Clarivate then acquired NewCo in exchange for the issuance of the same number of Clarivate ordinary shares to Capri. This transaction did not involve any change in beneficial ownership of Clarivate’s ordinary shares, and the issuance of the new ordinary shares to Capri was exempt from the registration requirements of the Securities Act under Section 4(a)(2) thereof. Pursuant to authority granted to Clarivate by shareholders at the 2021 Annual General Meeting, following its acquisition of Newco, Clarivate purchased the ordinary shares held by Newco for a nominal price and then canceled such shares.
Other (dollar amounts in thousands)
Two controlled affiliates of Baring are vendors of ours. Total expenses incurred for these vendors were $880, $830 and $765 for the years ended December 31, 2021, 2020 and 2019, respectively. The Company had an outstanding liability to these vendors of $330 and $237 as of December 31, 2021 and 2020, respectively.
A controlled affiliate of Onex is a customer of ours. The net revenue from this customer during the period was $1,790 and $2,136 for the years ended December 31, 2021 and 2020, respectively. The Company had no outstanding receivable as of December 31, 2021 and 2020. This customer was not a related party for the year ended December 31, 2019.
Three controlled affiliates of Leonard Green & Partners, L.P. are customers of ours. The net revenue from these customers during the period was $128, $42,184 and $180 for the year ended December 31, 2021 and $129, $10,857 and $136 for the year ended December 31, 2020, respectively. The Company had an outstanding receivable of $32, $70,952 and $51 as of December 31, 2021 and $31, $54,656 and $264 as of December 31, 2020. These customers were not a related party for the year ended December 31, 2019.
Three controlled affiliates of Leonard Green & Partners, L.P. are vendors of ours. Total expenses incurred for these vendors were $1,257, $32,394 and $6,110 for the year ended December 31, 2021 and $295, $6,934 and $1,817 for the year ended December 31, 2020, respectively. The Company had no outstanding liability to these vendors as of December 31, 2021 and $0, $0 and $1,995 as of December 31, 2020. These vendors were not a related party for the year ended December 31, 2019.
One of our independent directors has an immediate family member who is a member of management within one of Clarivate’s customers. Total revenue from the customer was $1,028, $1,497 and $33 for the years ended December 31, 2021, 2020 and 2019, respectively. The Company had $60, $100 and $4 outstanding receivables as of December 31, 2021, 2020 and 2019, respectively.
SHAREHOLDER PROPOSALS FOR THE 2023 ANNUAL GENERAL MEETING
Shareholder Proposals Eligible for Inclusion in the Company’s Proxy Statement
A shareholder wishing to present a proposal to be included in our Proxy Statement for the 2022 Annual General Meeting of Shareholders must comply with these instructions and the proxy proposal submission rules of the SEC. One important requirement is that the proposal be received by the Secretary of Clarivate no later than December 8, 2022. Proposals we receive after that date will not be included in the Proxy Statement for the 2023 Annual General Meeting. We urge shareholders to submit proposals by registered or certified mail, return receipt requested, to:
Clarivate Plc,
Attention: Secretary
70 St Mary Axe
London EC3 8BA
United Kingdom
You may obtain a copy of the current rules for submitting shareholder proposals through the SEC’s website at www.sec.gov or from the SEC at:
Securities and Exchange Commission
Division of Corporation Finance
100 F Street, NE
Washington, DC 20549
Shareholder Proposals Not Eligible for Inclusion in the Company’s Proxy Statement
A shareholder proposal not included in our proxy statement for the 2023 Annual General Meeting will be ineligible for presentation at the 2023 Annual General Meeting unless the shareholder gives timely notice of the proposal in writing to the Secretary of Clarivate at the principal executive offices of Clarivate and complies with the requirements of our Articles of Association, which are summarized below.
A proposal may be properly brought before an annual general meeting by any shareholder of the Company who is a shareholder of record on both the date of the giving of the notice by such shareholder provided for in the Articles of Association and the record date for the determination of shareholders entitled to vote at such annual general meeting, and who complies with the notice and other procedures set forth in the Articles of Association, which are summarized below. Please see our Articles of Association for the full procedures.
Shareholder Proposals Other Than Director Nominations
The Articles of Association set forth requirements for shareholders wishing to propose business other than the nomination of directors at an annual general meeting. An eligible shareholder who follows these procedures is not entitled to have their proposal included in the Company’s Proxy Statement and therefore would be required to solicit their own proxies in accordance with any applicable laws and rules.
To be timely such shareholder’s notice must be delivered to the Secretary of the Company at the principal executive offices of the Company no earlier than January 5, 2023 and no later than February 4, 2023, unless the 2023 Annual General Meeting occurs on a date more than 30 days earlier or later than the 2022 Annual General Meeting. In that case, the board will determine a date a reasonable period prior to the 2023 Annual General Meeting by which the shareholder’s notice must be delivered and publicize that date in a filing with the SEC or via press release at least 14 days prior to the date set by the board.
To be in proper written form, a shareholder’s notice to the Company must set forth as to such matter such shareholder proposes to bring before the annual general meeting:
•
a reasonably brief description of the business desired to be brought before the annual general meeting, including the text of the proposal or business, and the reasons for conducting such business at the annual general meeting;
•
the name and address, as they appear on the Company’s Register of shareholders, of the shareholder proposing such business and any Associated Person (as defined below);
•
the class or series and number of shares of the Company that are held of record or are beneficially owned by such shareholder or any Associated Person and any derivative positions held or beneficially held by the shareholder or any Associated Person;
•
whether and the extent to which any hedging or other transaction or series of transactions has been entered into by or on behalf of such shareholder or any Associated Person with respect to any securities of the Company, and a description of any other agreement, arrangement or understanding (including any short position or any borrowing or lending of shares), the effect or intent of which is to mitigate loss to, or to manage the risk or benefit from share price changes for, or to increase or decrease the voting power of, such shareholder or any Associated Person with respect to any securities of the Company;
•
any material interest of the shareholder or an Associated Person in such business, including a reasonably detailed description of all agreements, arrangements and understandings between or among any of such shareholders or between or among any proposing shareholders and any other person or entity (including their names) in connection with the proposal of such business by such shareholder; and
•
a statement as to whether such shareholder or any Associated Person will deliver a proxy statement and form of proxy to holders of at least the percentage of the Company’s voting shares required under applicable law and the rules of the Designated Stock Exchange to carry the proposal.
An Associated Person of any shareholder includes:
•
any affiliate (as defined in the articles) of, or person acting in concert with, such shareholder;
•
any beneficial owner of shares of the Company owned of record or beneficially by such shareholder and on whose behalf the proposal or nomination, as the case may be, is being made; and
•
any person controlling, controlled by or under common control with a person referred to in the preceding two bullets.
Shareholder’s Nomination of a Director
The Articles of Association also set forth requirements for shareholders wishing to nominate directors. An eligible shareholder who follows these procedures is not entitled to have their nomination included in the Company’s Proxy Statement and therefore would be required to solicit their own proxies in accordance with any applicable laws and rules.
For a nomination for election of a director to be made by a shareholder of the Company (other than directors to be nominated by any series of preferred shares, voting separately as a class), or nominations made pursuant to a contract with the Company, such shareholder must:
•
be a shareholder of record on both the date of the giving of the notice by such shareholder provided for in the Articles of Association and the record date for the determination of shareholders entitled to vote at such annual general meeting,
•
on each such date beneficially own more than 15% of the issued ordinary shares and
•
have given timely notice thereof in proper written form to the Secretary of the Company.
If a shareholder is entitled to vote only for a specific category of Directors at a meeting of the shareholders, such shareholder’s right to nominate one or more persons for election as a Director at the meeting shall be limited to such category of Directors.
To be timely, a shareholder’s notice must be delivered to or mailed and received at the principal executive offices of the Company not less than 90 nor more than 120 days prior to the meeting; provided, that if less than 130 days’ notice or prior public disclosure of the date of the meeting is given or made to shareholders, notice by the shareholder to be timely must be so received not later than the close of business on the tenth day following the earlier of the day on which such notice of the date of the meeting was mailed or such public disclosure was made.
To be in proper written form, a shareholder’s notice to the Secretary must set forth:
•
as to each nominating shareholder:
•
the information about the shareholder and its Associated Persons specified above under “Shareholder Proposals Other Than Director Nominations;” and
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any other information relating to such shareholder that would be required to be disclosed pursuant to any applicable law and rules of the SEC or of the NYSE; and
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as to each person whom the shareholder proposes to nominate for election as a director:
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all information that would be required if such nominee was a nominating shareholder, as described above, except such information shall also include the business address and residence address of the person;
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the principal occupation or employment of the person;
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all information relating to such person that is required to be disclosed in solicitations of proxies for appointment of directors in an election contest, or is otherwise required, in each case pursuant to Regulation 14A under the Exchange Act or any successor provisions thereto, and any other information relating to the person that would be required to be disclosed pursuant to any applicable law and rules of the SEC or of the NYSE; and
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a description of all direct and indirect compensation and other material monetary arrangements and understandings during the past three years, and any other material relationship, between or among any nominating shareholder and its affiliates and associates, on the one hand, and each proposed nominee, his respective affiliates and associates, on the other hand, including, without limitation, all information that would be required to be disclosed pursuant to Item 404 under Regulation S-K of the Exchange Act if such nominating shareholder were the “registrant” for purposes of such rule and the proposed nominee were a director or executive officer of such registrant.
Such notice must be accompanied by a written consent of each proposed nominee to being named as a nominee and to serve as a director if elected. The Company may require any proposed nominee to furnish such other information as may be reasonably required by the Company to determine the eligibility of such proposed nominee to serve as an independent director of the Company in accordance with the rules of the NYSE.
OTHER MATTERS The Board does not know of any other business that will be presented at the Annual General Meeting. If any other business is properly brought before the Annual General Meeting, your proxy holders will vote on it as they think best unless you direct them otherwise in your proxy instructions. We urge you to submit your signed proxy promptly. BY ORDER OF THE BOARD OF DIRECTORS Jaspal Chahal Chief Legal Officer and General Counsel[ ], 2023
| | Our Annual Report on Form 10-K for the year ended December 31, 2021 has been mailed with this Proxy Statement. | | | | | You may also review that document and all exhibits on our website (http://ir.clarivate.com). | | | | | We will provide printed copies of exhibits to the Annual Report on Form 10-K but will charge a reasonable fee per page to any requesting shareholder. Send that request in writing to Clarivate Plc, 70 St Mary Axe, London EC3 8BA, United Kingdom, Attention: Investor Relations. | | | | | The request must include a representation by the shareholder that as of our Record Date, March 7, 2022, the shareholder was entitled to vote at the Annual General Meeting. | | |
APPENDIX A
SHARE REPURCHASE AGREEMENT
This Share Repurchase Agreement, dated as of [ ] (this “Agreement”), is made between [Shareholder Party] (“Seller”)FUTURE PROXY MATERIALSIf you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and Clarivate Plc,annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. Please mail your proxy card in the enclosed postage-paid return envelope no later than July 10, 2023 in order to allow sufficient time for us to receive your proxy card by mail. VOTE BY EMAIL You can also vote by email by sending a company limited by shares incorporated under the laws of Jersey, Channel Islands (the “Company”). WHEREAS, Seller wishes to sell to the Company, and the Company wishes to purchase from Seller, ordinary shares (“Ordinary Shares”)scanned PDF version of the Company on the terms and subjectoriginal voted proxy cardby email to the conditions set forth in this Agreement (the “Repurchase Transaction); WHEREAS, the shareholders of the Company have approved the Repurchase Transaction in the manner requiredGeneralMeeting2023@clarivate.com. A proxy card sent to us by the Companies (Jersey) Law 1991 (the “Jersey Companies Law”); and
WHEREAS, the board of directors of the Company (the “Board”) has formed a special committee of the Board (the “Special Committee”) comprised solely of directors not affiliated with Seller, and the Special Committee has approved the Repurchase Transaction on the terms and subject to the conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants set forth herein and for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties agree as follows:
Article 1
SALE AND REPURCHASE
Section 1.1. Repurchase. On the terms and subject to the conditions set forth in this Agreement, at the Closing (as defined below), Seller shall sell and transfer to the Company, and the Company shall purchase from Seller, [ ] Ordinary Shares (the “Repurchased Shares”). The price for each Repurchased Share willemail must be equal to $[ ] (the “Per Share Purchase Price”).
Section 1.2. Closing. The closing of the Repurchase Transaction (the “Closing”) shall be held at the offices of Davis Polk & Wardwell LLP, 450 Lexington Avenue, New York, NY 10017 at 9:00 A.M. New York time on [ ] (the “Closing Date”). At the Closing:
(a)
Seller shall deliver or cause to be delivered to the Company all of Seller’s right, title and interest in and to the Repurchased Shares, free and clear of all liens, claims, security interests and other encumbrances (collectively, “Encumbrances”), other than Encumbrances under applicable securities laws and the Company’s articles of association and the Shareholders Agreement (collectively, “Permitted Encumbrances”), together with all documentation reasonably necessary to transfer to the Company such right, title and interest; and
(b)
the Company shall pay to Seller the aggregate Per Share Purchase Price for the Repurchased Shares in immediately available fundsreceived by wire transfer to an account in accordance with the instructions provided by Seller to the Companyus no later than two11:59 p.m. Eastern time on July 24, 2023. TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: V19217-S67860 KEEP THIS PORTION FOR YOUR RECORDS THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. DETACH AND RETURN THIS PORTION ONLY CLARIVATE PLC THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE OPEN-MARKET SHARE REPURCHASE PROPOSAL. For Against Abstain 1. AUTHORIZATION TO REPURCHASE ORDINARY SHARES IN OPEN-MARKET TRANSACTIONS. ! ! ! NOTE: In their discretion, the proxies are authorized to vote upon such other business days prior toas may properly come before the Closing.
Section 1.3. Closing Conditions.
(a)
The obligationGeneral Meeting.This proxy when properly executed will be voted as directed herein by the undersigned shareholder. If no direction is made, this proxy will be voted "FOR" this Proposal. Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by an authorized officer. Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date Important Notice Regarding the Availability of the Company to purchase and payProxy Materials for the Repurchased Shares on the Closing DateGeneral Meeting: The Notice and Proxy Statement are available at www.proxyvote.com. V19218-S67860 CLARIVATE PLC General Meeting of Shareholders July 27, 2023 1:00 PM BST/8:00 AM EDT This proxy is subject to the satisfaction or waiver of the following conditions:
(i)
each representation and warranty made by Seller in Article 2 below shall be true and correct on and as of the Closing Date as though made as of the Closing Date;
(ii)
the receiptsolicited by the Special CommitteeBoard of a fairness opinion from [ ], inDirectorsThe undersigned hereby appoints Andrew Snyder, Jonathan Gear, Jonathan Collins and Jaspal Chahal, and each of them, each with the form previously reviewed bypower of substitution and power to act alone, as proxies to vote all the Special Committee or as otherwise mayordinary shares that the undersigned would be acceptableentitled to vote if personally present and acting at the Special Committee, stating to the effect that, based on and subject to the limitations and assumptions set forth therein, the Per Share Purchase PriceGeneral Meeting of Shareholders of Clarivate PLC to be paid by the Company
pursuant to this Agreement is fair, from a financial point of view, to the Company and the shareholders of the Company other than Seller; and
(iii)
the Special Committee shall have made a statutory solvency statement that, immediately following the Closing Date, the Company will be able to discharge its liabilities as they fall due and, having regard to those factors prescribed by the Jersey Companies Law, the Company will be able to continue to carryheld on business and discharge its liabilities as they fall due for the 12 months immediately following the Closing Date (or until the Company is dissolved on a solvent basis, if earlier).
(b)
The obligation of Seller to sell the Repurchased Shares on the Closing Date is subject to the condition that each representation and warranty made by the Company in Article 3 below shall be true and correct on and as of the Closing Date as though made as of the Closing Date.
Article 2
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby makes the following representations and warranties to the Company:
Section 2.1. Existence. Seller has been duly formed and is validly existing under the laws of jurisdiction of organization.
Section 2.2. Power and Authority. Seller has the full right, power and authority to execute and deliver this AgreementJuly 27, 2023 or at any postponement or adjournment thereof.(Continued and to perform its obligations hereunder; and all action required to be taken for the due and proper authorization, execution and delivery by it of this Agreement and the consummation of the transaction contemplated hereby has been duly and validly taken. Section 2.3. Authorization. This Agreement has been duly authorized, executed and delivered by or on behalf of Seller and constitutes a valid and binding agreement of Seller enforceable in accordance with its terms, except to the extent enforcement thereof may be limited by bankruptcy, insolvency, reorganization or other laws affecting enforcement of creditors’ rights or by general equitable principles.
Section 2.4. No Conflicts. The execution, delivery and performance by Seller of this Agreement will not (a) conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which Seller is a party or by which Seller is bound, (b) result in any violation of the provisions of the organizational documents of Seller or (c) result in the violation of any law or statute or any judgment, order, rule or regulation of any court or arbitrator or governmental or regulatory authority, except, in the case of clauses (a) and (c) above, for any such conflict, breach, violation or default that would not materially and adversely affect the sale of the Repurchased Shares and the consummation of any other transaction herein contemplated.
Section 2.5. Title. As of the date hereof and immediately prior to the delivery of the Repurchased Shares at the Closing, Seller is, and will be, the sole legal and beneficial owner of, and holds, and will hold, good and valid title to, the Repurchased Shares, free and clear of all Encumbrances (other than Permitted Encumbrances).
Article 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby makes the following representations and warranties to Seller:
Section 3.1. Existence. The Company has been duly incorporated and is validly existing and in good standing under the Jersey Companies Law.
Section 3.2. Power and Authority. The Company has the full right, power and authority to execute and deliver this Agreement and to perform its obligations hereunder; and all action required to be taken for the due and proper authorization, execution and delivery by it of this Agreement and the consummation of the transaction contemplated hereby has been duly and validly taken.
Section 3.3. Authorization. This Agreement has been duly authorized, executed and delivered by or on behalf of the Company and constitutes a valid and binding agreement of the Company enforceable in accordance with its terms, except to the extent enforcement thereof may be limited by bankruptcy, insolvency, reorganization or other laws affecting enforcement of creditors’ rights or by general equitable principles.
Section 3.4. No Conflicts. The execution, delivery and performance by the Company of this Agreement will not (a) conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries is bound, (b) result in any violation of the provisions of the organizational documents of the Company or any of its subsidiaries or (c) result in the violation of any law or statute or any judgment, order, rule or regulation of any court or arbitrator or governmental or regulatory authority, except, in the case of clauses (a) and (c) above, for any such conflict, breach, violation or default that would not materially and adversely affect the purchase of the Repurchased Shares and the consummation of any other transaction herein contemplated.
Section 3.5. Sufficient Funds. The Company will have, as of the Closing Date, access to legally available funds sufficient to consummate the Repurchase Transaction.
Article 4
MISCELLANEOUS
Section 4.1. Termination. This Agreement may be terminated prior to the Closing only by mutual written consent of the parties.
Section 4.2. Further Assurances. Each party hereto agrees to execute and deliver, or cause to be executed and delivered, such agreements, instruments and other documents, and take such other actions consistent with the terms of this Agreement, as the other party may reasonably request from time to time in order to carry out the purposes of this Agreement.
Section 4.3. Fees and Expenses. Promptly following delivery by the Company to Seller of a written request for payment (but in no event later than two (2) business days following delivery thereof), Seller shall reimburse the Company for any Special Committee Transaction Expenses in immediately available funds to an account designated by the Company in such written request. For purposes of this Agreement, “Special Committee Transaction Expenses” means any reasonable and documented out-of-pocket costs, fees and expenses incurred by the Special Committee, including the fees and expenses of legal and financial advisors to the Special Committee, in connection with the transaction contemplated hereby (but, for the avoidance of doubt, not including any fees that may be payable to the directors serving on the Special Committee); provided that the Special Committee Transaction Expenses shall not exceed $[ ] in the aggregate.
Section 4.4. Survival. All representations and warranties contained herein or made in writing by any party in connection herewith shall survive the execution and delivery of this Agreement and the consummation of the transactions contemplated thereby.
Section 4.5. Amendments and Waivers. Except as otherwise provided herein, the provisions of this Agreement may be amended or waived only by written agreement executed by the parties hereto.
Section 4.6. Assignment; Binding Agreement. This Agreement and the rights and obligations arising hereunder shall inure to the benefit of and be binding upon the parties hereto, and neither party may assign any of its rights or delegate any of its obligations hereunder without the express written consent of the other party.
Section 4.7. No Third Party Beneficiaries. Nothing in this Agreement shall convey any rights upon any person or entity which is not a party or a successor or permitted assignee of a party to this Agreement.
Section 4.8. Entire Agreement. This Agreement constitutes the sole and entire agreement among the parties with respect to the subject matter of this Agreement, and supersedes all prior representations, agreements and understandings, written or oral, with respect to the subject matter hereof.
Section 4.9. Severability. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstances, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be in any way impaired thereby, it being intended that all of the rights and privileges of the parties shall be enforceable to the fullest extent permitted by law. To the extent that any such provision is so held to be invalid, illegal or unenforceable, the parties shall in good faith use commercially reasonable efforts to find and effect an alternative means to achieve the same or substantially the same result as that contemplated by such provision.
Section 4.10. Counterparts. This Agreement may be signed in any number of counterparts, each of which shall be deemed an original (including signatures delivered via facsimile or electronic mail) with the same effect as if the signatures thereto and hereto were upon the same instrument. The parties hereto may deliver this Agreement by facsimile or by electronic mail and each party shall be permitted to rely upon on the signatures so transmitted to the same extent and effect as if they were original signatures.
Section 4.11. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS AND DUTIES OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
Section 4.12. CONSENT TO JURISDICTION AND SERVICE OF PROCESS; WAIVER OF JURY TRIAL. Each party to this Agreement hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts located in the State of New York for any actions, suits or proceedings arising out of or relating to this Agreement and the transactions contemplated thereby; provided, that such consent to jurisdiction is solely for the purpose referred to in this Section 4.12 and shall not be deemed to be a general submission to the jurisdiction of said courts or in the State of New York other than for such purpose. Each of the parties hereby agrees not commence any such action, suit or proceeding other than before one of the above-named courts. EACH PARTY TO THIS AGREEMENT HEREBY WAIVES TO THE FULLEST EXTENT PERMITTED BY LAW ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
Section 4.13. Notices. Unless otherwise provided in this Agreement, all notices and other communications provided for hereunder shall be dated and in writing and shall be deemed to have been given (i) when delivered, if delivered personally, sent by email or sent by registered or certified mail, return receipt requested, postage prepaid, provided that such delivery is completed during normal business hours of the recipient, failing which such notice shall be deemed to have been given on the next business day, (ii) on the next business day if sent by overnight courier and delivered on such business day within ordinary business hours and, if not, the next business day following delivery; and (iii) when received, if received during normal business hours and, if not, the next business day after receipt, if delivered by means other than those specified above. Such notices shall be delivered to the address set forth below, or to such other address as a party shall have furnished to the other party in accordance with this Section.
If to Seller, to:
[ ]
Attention: [ ]
Email: [ ]
(with a copy emailed to [ ])
If to the Company, to:
70 St Mary Axe
London EC3 8BA
United Kingdom
Attention: General Counsel
Email: jaspal.chahal@clarivate.com
(with a copy emailed to joseph.hall@davispolk.com)
Section 4.14. Interpretation. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered as of the date first above written.
[SHAREHOLDER PARTY]
By:
Name:
Title:
CLARIVATE PLC
By:
Name:
Title:
APPENDIX B
Non-GAAP Financial Metrics
Non-GAAP financial metrics are a basis upon which our management assesses our performance and we believe they reflect the underlying trends and indicators of our business. Although we believe these measures are useful for investors for the same reasons, these measures are not a substitute for GAAP financial measures or disclosures. We provide reconciliations of these non-GAAP financial metrics to the corresponding most closely related GAAP measure.
Adjusted Revenues
Adjusted Revenues excludes the impact of the deferred revenues purchase accounting adjustments (recorded in connection with recent acquisitions). We present these measures because we believe they are useful to readers to better understand the underlying trends in our operations.
Our presentation of Adjusted Revenues is for informational purposes only and is not necessarily indicative of our future results. You should compensate for these limitations by relying primarily on our GAAP results and only using non-GAAP financial metrics for supplementary analysis.
The following table presents our calculation of Adjusted Revenues for the twelve months ended December 31, 2021 and 2020 and a reconciliation of this measure to our Revenues, net for the same periods:
| | | Year Ended December 31, | | (in millions) | | | 2021 | | | 2020 | | Revenues, net | | | | $ | 1,876.9 | | | | | $ | 1,254.0 | | | Deferred revenues adjustment(1) | | | | | 4.0 | | | | | | 23.1 | | | Adjusted revenues, net | | | | $ | 1,880.8 | | | | | $ | 1,277.1 | | |
(1)
Reflects the deferred revenues adjustment made as a result of purchase accounting prior to the adoption of FASB ASU No. 2021-08, “Accounting for Contract Assets and Contract Liabilities from Contracts with Customers”. In the fourth quarter of 2021, Clarivate adopted ASU No. 2021-08 which allows an acquirer to account for the related revenue contracts in accordance with Topic 606 as if it had originated the contracts. This guidance was applied retrospectively to all business combinations for which the acquisition date occurs during or subsequent to the fiscal year 2021.
Adjusted EBITDA and Adjusted EBITDA margin
Adjusted EBITDA is presented because it is a basis upon which our management assesses our performance, and we believe it is useful for investors to understand the underlying trends of our operations. Adjusted EBITDA represents net income (loss) before provision for income taxes, depreciation and amortization, interest income and expense adjusted to exclude acquisition or disposal-related transaction costs (such costs include net income from continuing operations before provision for income taxes, depreciation and amortization and interest income and expense from divestitures), share-based compensation, mandatory convertible preferred share dividend expense, unrealized foreign currency gains/(losses), costs associated with the transition services agreement with Thomson Reuters, which we entered into in connection with our separation from Thomson Reuters in 2016, separation and integration costs, transformational and restructuring expenses, acquisition-related adjustments to deferred revenues, costs related to our merger with Churchill Capital Corp in 2019, non-operating income or expense, the impact of certain non-cash, mark to market adjustments on financial instruments and other items that are included in net income for the period that the Company does not consider indicative of its ongoing operating performance and certain unusual items impacting results in a particular period. Per Clarivate’s Non-GAAP policy effective January 1, 2021, we have ceased use of adjustments for costs in connection with our separation from Thomson Reuters including costs related to the transition services agreement and separation, integration, and transformational expenses, as well as costs related
to our merger with Churchill Capital Corp in 2019. Adjusted EBITDA margin is calculated by dividing Adjusted EBITDA by Adjusted Revenues.
Our presentation of Adjusted EBITDA and Adjusted EBITDA margin should not be construed as an inference that our future results will be unaffected by any of the adjusted items, or that our projections and estimates will be realized in their entirety or at all. In addition, because of these limitations, Adjusted EBITDA should not be considered as a measure of liquidity or discretionary cash available to us to fund our cash needs, including investing in the growth of our business and meeting our obligations. You should compensate for these limitations by relying primarily on our GAAP results and only use Adjusted EBITDA and Adjusted EBITDA margin for supplementary analysis.
The following table presents our calculation of Adjusted EBITDA for the year ended December 31, 2021 and 2020 and reconciles these measures to our Net loss for the same periods:
| | | Year Ended December 31, | | (in millions) | | | 2021 | | | 2020 | | Net loss attributable to ordinary shares | | | | $ | (312.0) | | | | | $ | (350.6) | | | Dividends on preferred shares | | | | | 41.5 | | | | | | — | | | Net loss | | | | | (270.4) | | | | | | (350.6) | | | Provision (benefit) for income taxes | | | | | 12.3 | | | | | | (2.7) | | | Depreciation and amortization | | | | | 537.8 | | | | | | 303.2 | | | Interest expense and amortization of debt discount, net | | | | | 252.5 | | | | | | 111.9 | | | Deferred revenues adjustment(1) | | | | | 4.0 | | | | | | 23.1 | | | Transaction related costs(2) | | | | | 46.2 | | | | | | 99.3 | | | Share-based compensation expense | | | | | 139.6 | | | | | | 70.5 | | | Gain on sale of Techstreet | | | | | — | | | | | | (28.1) | | | Restructuring and impairment(3) | | | | | 129.5 | | | | | | 56.1 | | | Mark to market adjustment on financial instruments(4) | | | | | (81.3) | | | | | | 205.1 | | | Other(5) | | | | | 30.4 | | | | | | (1.1) | | | Adjusted EBITDA | | | | $ | 800.4 | | | | | $ | 486.6 | | | Adjusted EBITDA Margin | | | | | 42.6% | | | | | | 38.1% | | |
(1)
Reflects the deferred revenues adjustment made as a result of purchase accounting prior to the adoption of FASB ASU No. 2021-08, “Accounting for Contract Assets and Contract Liabilities from Contracts with Customers”. In the fourth quarter of 2021, Clarivate adopted ASU No. 2021-08 which allows an acquirer to account for the related revenue contracts in accordance with Topic 606 as if it had originated the contracts. This guidance was applied retrospectively to all business combinations for which the acquisition date occurs during or subsequent to the fiscal year 2021.
(2)
Includes costs incurred to complete business combination transactions, including acquisitions, dispositions and capital market activities and include advisory, legal, and other professional and consulting costs. This also includes the mark to market adjustments on the contingent stock consideration associated with the CPA Global and DRG acquisitions.
(3)
Reflects costs related to restructuring and impairment associated with the acquisition of primarily DRG and CPA Global in 2020. This also includes costs incurred in connection with the initiative, following our merger with Churchill Capital Corp in 2019, to streamline our operations by simplifying our organization and focusing on two segments. During 2021, the CPA Global plan continued as well as the addition of the One Clarivate and ProQuest Programs, which were approved restructuring actions to streamline operations within targeted areas of the Company. Additionally, during the year ended December 31, 2021 and 2020, we incurred impairment charges taken on right-of-use assets of $57,305 and $4,771 respectively, relating the exit and ceased use of leased properties.
(4)
Reflects mark to market adjustments on financial instruments under Accounting Standards Codification 815, Derivatives and Hedging, (“ASC 815”). Warrant instruments that do not meet the criteria to be considered indexed to an entity’s own stock shall be initially classified as a liability at their estimated fair values, regardless of the likelihood that such instruments will ever be settled in cash. In periods subsequent to issuance, changes in the estimated fair value of the liabilities are reported through earnings.
(5)
Includes primarily the net impact of foreign exchange gains and losses related to the re-measurement of balances and other items that do not reflect our ongoing operating performance. The 2021 YTD detail also includes an accrual of $8,000 for a legal case. The 2020 detail also includes costs related to a transition services agreement and offset by the reverse transition services agreement from the sale of MarkMonitor. For 2020, this also includes costs incurred in connection with and after our separation from Thomson Reuters in 2016 relating to the implementation of our standalone company infrastructure and related cost-savings initiatives. These costs include mainly transition consulting, technology infrastructure, personnel and severance expenses relating to our standalone company infrastructure, which are recorded in selling, general and administrative costs in our income statement, as well as expenses related to the restructuring and transformation of our business following our separation from Thomson Reuters in 2016 mainly related to the integration of separate business units into one functional organization and enhancements in our technology. These costs were largely wound down by the end of 2020.side)
Free Cash Flow and Adjusted Free Cash Flow
We use free cash flow and adjusted free cash flow in our operational and financial decision-making and believe free cash flow and adjusted free cash flow is useful to investors because similar measures are frequently used by securities analysts, investors, ratings agencies and other interested parties to evaluate our competitors and to measure the ability of companies to service their debt.
Our presentation of free cash flow and adjusted free cash flow should not be construed as a measure of liquidity or discretionary cash available to us to fund our cash needs, including investing in the growth of our business and meeting our obligations. You should compensate for these limitations by relying primarily on our GAAP results.
We define free cash flow as net cash provided by operating activities less capital expenditures. Adjusted free cash flow is calculated as free cash flow, less cash paid for restructuring and lease-exit activities, transition services agreement, transition, transformation and integration expenses, transaction related costs, interest on debt held in escrow, and debt issuance costs offset by cash received for hedge accounting transactions. Per Clarivate’s Non-GAAP policy effective January 1, 2021, we have ceased use of adjustments for costs in connection with our separation from Thomson Reuters including costs related to the transition services agreement and separation, integration, and transformational expenses, as well as costs related to our merger with Churchill Capital Corp in 2019.
The following table reconciles our non-GAAP free cash flow and Adjusted free cash flow measure to net cash provided by operating activities:
| | | Year Ended December 31, | | (in millions) | | | 2021 | | | 2020 | | Net cash provided by operating activities | | | | $ | 323.8 | | | | | $ | 263.5 | | | Capital expenditures | | | | | (118.5) | | | | | | (107.7) | | | Free cash flow | | | | | 205.2 | | | | | | 155.8 | | | Cash paid for restructuring costs(1) | | | | | 80.3 | | | | | | 26.0 | | | Cash paid for transaction related costs(2) | | | | | 78.2 | | | | | | 95.8 | | | Cash paid for transition, integration and other costs(3) | | | | | 1.6 | | | | | | 20.3 | | | Cash paid for transition services agreement(4) | | | | | — | | | | | | (2.2) | | | Cash paid for debt issuance costs | | | | | 57.8 | | | | | | 7.7 | | | Cash paid for interest held in escrow(5) | | | | | 36.3 | | | | | | — | | | Cash received for hedge accounting transactions | | | | | — | | | | | | (1.7) | | | Adjusted free cash flow | | | | $ | 459.4 | | | | | $ | 301.7 | | |
(1)
Reflects cash payments for costs primarily related to restructuring and lease-exit activities associated with the acquisition of DRG and CPA Global in 2020. This also includes cash paid for costs incurred in connection with the initiative, following our merger with Churchill Capital Corp in 2019, to streamline our operations by simplifying our organization and focusing on two segments.
(2)
Includes cash paid for costs incurred to complete business combination transactions, including acquisitions, dispositions and capital market activities and include advisory, legal, and other professional and consulting costs.
(3)
Includes cash paid for costs incurred in 2020 and 2019 in connection with and after our separation from Thomson Reuters in 2016 relating to the implementation of our standalone company infrastructure and related cost-savings initiatives, costs for which were largely wound down by December 31, 2020, as well as other costs that do not reflect our ongoing operating performance.
(4)
In 2020, this is related to a new transition services agreement, offset by the reverse transition services agreement from the sale of MarkMonitor assets.
(5)
Reflects the portion of cash paid on interest expense incurred on the principal related to the 2021 debt offering, that was held in escrow until the completion of the pending acquisition of ProQuest on December 1, 2021. Clarivate used the net proceeds to finance a portion of the purchase price and therefore, considered as part of the transaction costs associated with the pending acquisition.
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