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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549 

 

FORM 10-Q 

(Mark One)

 

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2020

or

 

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from            to            .

Commission File Number: 001-36730

 

SYNEOS HEALTH, INC.

(Exact name of registrant as specified in its charter)

 

Delaware

 

27-3403111

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification No.)

 

1030 Sync Street, Morrisville, North Carolina 27560-5468

(Address of principal executive offices and Zip Code)

(919) 876-9300

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Class A Common Stock, $0.01 par value per share

SYNH

The Nasdaq Stock Market LLC

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. 

 

Large accelerated filer

 

☒

  

Accelerated filer

 

☐

Non-accelerated filer

 

☐

  

Smaller reporting company

 

☐

 

 

 

 

Emerging growth company

 

☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  ☐  No  ☒

As of October 26, 2020, there were approximately 103,997,108 shares of the registrant’s common stock outstanding.

 

 

 

Table of Contents

 

SYNEOS HEALTH, INC.

FORM 10-Q

TABLE OF CONTENTS

 

 

PART I - FINANCIAL INFORMATION

 

 

 

 

 

 

Page

 

 

 

Item 1.

Financial Statements

3

 

 

 

 

Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2020 and 2019 (unaudited)

3

 

 

 

 

Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2020 and 2019 (unaudited)

4

 

 

 

 

Condensed Consolidated Balance Sheets as of September 30, 2020 and December 31, 2019 (unaudited)

5

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2020 and 2019 (unaudited)

6

 

 

 

 

Condensed Consolidated Statements of Shareholders’ Equity for the three and nine months ended September 30, 2020 and 2019 (unaudited)

7

 

 

 

 

Notes to Condensed Consolidated Financial Statements (unaudited)

8

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

26

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

45

 

 

 

Item 4.

Controls and Procedures

45

 

 

 

 

PART II - OTHER INFORMATION

 

 

 

 

Item 1.

Legal Proceedings

46

 

 

 

Item 1A.

Risk Factors

46

 

 

 

Item 2.

Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities

49

 

 

 

Item 5.

Other Information

50

 

 

 

Item 6.

Exhibits

51

 

 

 

 

Signature

52

 

 

2

Table of Contents

 

PART I. FINANCIAL INFORMATION

Item 1.  Financial Statements.

 

SYNEOS HEALTH, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

 

Three Months Ended

September 30,

 

 

Nine Months Ended

September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

 

 

(in thousands, except per share data)

 

Revenue

 

$

1,099,004

 

 

$

1,177,028

 

 

$

3,275,758

 

 

$

3,462,861

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs and operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Direct costs (exclusive of depreciation and amortization)

 

 

820,228

 

 

 

913,674

 

 

 

2,550,134

 

 

 

2,718,005

 

Selling, general, and administrative expenses

 

 

111,096

 

 

 

109,864

 

 

 

334,042

 

 

 

333,860

 

Restructuring and other costs

 

 

6,523

 

 

 

13,456

 

 

 

23,414

 

 

 

39,751

 

Transaction and integration-related expenses

 

 

6,955

 

 

 

10,454

 

 

 

17,900

 

 

 

34,766

 

Depreciation

 

 

17,301

 

 

 

18,844

 

 

 

51,830

 

 

 

57,663

 

Amortization

 

 

38,147

 

 

 

41,293

 

 

 

115,746

 

 

 

124,423

 

Total operating expenses

 

 

1,000,250

 

 

 

1,107,585

 

 

 

3,093,066

 

 

 

3,308,468

 

Income from operations

 

 

98,754

 

 

 

69,443

 

 

 

182,692

 

 

 

154,393

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total other expense (income), net:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

20,442

 

 

 

30,181

 

 

 

68,126

 

 

 

95,439

 

Loss on extinguishment of debt

 

 

346

 

 

 

—

 

 

 

346

 

 

 

4,355

 

Other expense (income), net

 

 

10,596

 

 

 

(30,713

)

 

 

(2,573

)

 

 

(29,365

)

Total other expense (income), net

 

 

31,384

 

 

 

(532

)

 

 

65,899

 

 

 

70,429

 

Income before provision for income taxes

 

 

67,370

 

 

 

69,975

 

 

 

116,793

 

 

 

83,964

 

Income tax expense

 

 

3,954

 

 

 

11,055

 

 

 

15,892

 

 

 

43,756

 

Net income

 

$

63,416

 

 

$

58,920

 

 

$

100,901

 

 

$

40,208

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.61

 

 

$

0.57

 

 

$

0.97

 

 

$

0.39

 

Diluted

 

$

0.60

 

 

$

0.56

 

 

$

0.96

 

 

$

0.38

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

104,277

 

 

 

103,594

 

 

 

104,247

 

 

 

103,553

 

Diluted

 

 

105,588

 

 

 

105,021

 

 

 

105,483

 

 

 

104,881

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

3

Table of Contents

 

SYNEOS HEALTH, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

 

 

 

Three Months Ended

September 30,

 

 

Nine Months Ended

September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

 

 

(in thousands)

 

Net income

 

$

63,416

 

 

$

58,920

 

 

$

100,901

 

 

$

40,208

 

Unrealized gain (loss) on derivative instruments, net of income tax expense (benefit) of $1,384; $0; $(5,203); and $(332), respectively

 

 

5,219

 

 

 

74

 

 

 

(6,642

)

 

 

(13,104

)

Foreign currency translation adjustments, net of income tax expense of $0 for all periods

 

 

33,832

 

 

 

(34,421

)

 

 

(12,086

)

 

 

(25,736

)

Comprehensive income

 

$

102,467

 

 

$

24,573

 

 

$

82,173

 

 

$

1,368

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

4

Table of Contents

 

SYNEOS HEALTH, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

 

 

September 30, 2020

 

 

December 31, 2019

 

 

 

(in thousands, except par value)

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash, cash equivalents, and restricted cash

 

$

248,896

 

 

$

163,689

 

Accounts receivable and unbilled services, net

 

 

1,264,502

 

 

 

1,303,641

 

Prepaid expenses and other current assets

 

 

82,315

 

 

 

94,834

 

Total current assets

 

 

1,595,713

 

 

 

1,562,164

 

Property and equipment, net

 

 

196,258

 

 

 

203,926

 

Operating lease right-of-use assets

 

 

213,056

 

 

 

218,531

 

Goodwill

 

 

4,343,354

 

 

 

4,350,380

 

Intangible assets, net

 

 

882,485

 

 

 

973,081

 

Deferred income tax assets

 

 

18,256

 

 

 

37,012

 

Other long-term assets

 

 

135,609

 

 

 

108,701

 

Total assets

 

$

7,384,731

 

 

$

7,453,795

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

104,936

 

 

$

136,686

 

Accrued expenses

 

 

583,015

 

 

 

568,911

 

Deferred revenue

 

 

710,170

 

 

 

696,907

 

Current portion of operating lease obligations

 

 

39,568

 

 

 

38,055

 

Current portion of finance lease obligations

 

 

16,689

 

 

 

17,777

 

Current portion of long-term debt

 

 

56,875

 

 

 

58,125

 

Total current liabilities

 

 

1,511,253

 

 

 

1,516,461

 

Long-term debt

 

 

2,465,358

 

 

 

2,550,395

 

Operating lease long-term obligations

 

 

209,809

 

 

 

218,343

 

Finance lease long-term obligations

 

 

28,300

 

 

 

36,914

 

Deferred income tax liabilities

 

 

7,931

 

 

 

11,101

 

Other long-term liabilities

 

 

65,602

 

 

 

90,927

 

Total liabilities

 

 

4,288,253

 

 

 

4,424,141

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies (Note 15)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

 

 

 

 

Preferred stock, $0.01 par value; 30,000 shares authorized, 0 shares issued and outstanding at September 30, 2020 and December 31, 2019

 

 

—

 

 

 

—

 

Common stock, $0.01 par value; 600,000 shares authorized, 103,994 and 103,866 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively

 

 

1,040

 

 

 

1,039

 

Additional paid-in capital

 

 

3,454,381

 

 

 

3,441,471

 

Accumulated other comprehensive loss, net of taxes

 

 

(90,321

)

 

 

(71,593

)

Accumulated deficit

 

 

(268,622

)

 

 

(341,263

)

Total shareholders’ equity

 

 

3,096,478

 

 

 

3,029,654

 

Total liabilities and shareholders’ equity

 

$

7,384,731

 

 

$

7,453,795

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

5

Table of Contents

 

SYNEOS HEALTH, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

 

Nine Months Ended

September 30,

 

 

 

2020

 

 

2019

 

 

 

(In thousands)

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income

 

$

100,901

 

 

$

40,208

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

167,576

 

 

 

182,086

 

Share-based compensation

 

 

47,266

 

 

 

40,864

 

Provision for doubtful accounts

 

 

1,357

 

 

 

948

 

Provision for deferred income taxes

 

 

21,306

 

 

 

13,091

 

Foreign currency transaction gains

 

 

(7,747

)

 

 

(6,090

)

Fair value adjustment of contingent obligations

 

 

(3,791

)

 

 

(571

)

Loss on extinguishment of debt

 

 

346

 

 

 

4,355

 

Other non-cash items

 

 

1,881

 

 

 

1,177

 

Changes in operating assets and liabilities, net of effect of business combinations:

 

 

 

 

 

 

 

 

Accounts receivable, unbilled services, and deferred revenue

 

 

15,542

 

 

 

(110,083

)

Accounts payable and accrued expenses

 

 

(2,226

)

 

 

12,337

 

Other assets and liabilities

 

 

(31,244

)

 

 

(20,389

)

Net cash provided by operating activities

 

 

311,167

 

 

 

157,933

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(38,493

)

 

 

(50,645

)

Investments in unconsolidated affiliates

 

 

(6,859

)

 

 

(9,227

)

Net cash used in investing activities

 

 

(45,352

)

 

 

(59,872

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from issuance of long-term debt, net of discount

 

 

—

 

 

 

183,195

 

Payments of debt financing costs

 

 

(300

)

 

 

(2,593

)

Repayments of long-term debt

 

 

(113,750

)

 

 

(370,936

)

Proceeds from accounts receivable financing agreement

 

 

31,600

 

 

 

128,000

 

Repayments of accounts receivable financing agreement

 

 

(6,600

)

 

 

(22,400

)

Proceeds from revolving line of credit

 

 

300,000

 

 

 

—

 

Repayments of revolving line of credit

 

 

(300,000

)

 

 

—

 

Payments of contingent consideration related to business combinations

 

 

(26,634

)

 

 

(178

)

Payments of finance leases

 

 

(12,735

)

 

 

(9,429

)

Payments for repurchases of common stock

 

 

(62,029

)

 

 

(56,716

)

Proceeds from exercises of stock options

 

 

22,973

 

 

 

39,675

 

Payments related to tax withholdings for share-based compensation

 

 

(20,701

)

 

 

(12,503

)

Net cash used in financing activities

 

 

(188,176

)

 

 

(123,885

)

Effect of exchange rate changes on cash, cash equivalents, and restricted cash

 

 

7,568

 

 

 

(904

)

Net change in cash, cash equivalents, and restricted cash

 

 

85,207

 

 

 

(26,728

)

Cash, cash equivalents, and restricted cash - beginning of period

 

 

163,689

 

 

 

155,932

 

Cash, cash equivalents, and restricted cash - end of period

 

$

248,896

 

 

$

129,204

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

6

Table of Contents

 

SYNEOS HEALTH, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Unaudited)

 

 

 

Three Months Ended

September 30,

 

 

Nine Months Ended

September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

 

 

(In thousands)

 

Shareholders’ equity, beginning balance

 

$

2,999,684

 

 

$

2,823,899

 

 

$

3,029,654

 

 

$

2,856,144

 

Impact from adoption of ASU 2016-13

 

 

—

 

 

 

—

 

 

 

(2,771

)

 

 

—

 

Shareholders’ equity, adjusted beginning balance

 

 

2,999,684

 

 

 

2,823,899

 

 

 

3,026,883

 

 

 

2,856,144

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

 

1,042

 

 

 

1,035

 

 

 

1,039

 

 

 

1,034

 

Repurchases of common stock

 

 

(5

)

 

 

(1

)

 

 

(11

)

 

 

(13

)

Issuances of common stock

 

 

3

 

 

 

4

 

 

 

12

 

 

 

17

 

Ending balance

 

 

1,040

 

 

 

1,038

 

 

 

1,040

 

 

 

1,038

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional paid-in capital:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

 

3,446,852

 

 

 

3,404,389

 

 

 

3,441,471

 

 

 

3,402,638

 

Repurchases of common stock

 

 

(16,795

)

 

 

(4,648

)

 

 

(36,529

)

 

 

(43,515

)

Issuances of common stock

 

 

9,231

 

 

 

13,282

 

 

 

2,173

 

 

 

25,839

 

Share-based compensation

 

 

15,093

 

 

 

12,803

 

 

 

47,266

 

 

 

40,864

 

Ending balance

 

 

3,454,381

 

 

 

3,425,826

 

 

 

3,454,381

 

 

 

3,425,826

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated other comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

 

(129,372

)

 

 

(92,688

)

 

 

(71,593

)

 

 

(88,195

)

Unrealized gain (loss) on derivative instruments, net of taxes

 

 

5,219

 

 

 

74

 

 

 

(6,642

)

 

 

(13,104

)

Foreign currency translation adjustment, net of taxes

 

 

33,832

 

 

 

(34,421

)

 

 

(12,086

)

 

 

(25,736

)

Ending balance

 

 

(90,321

)

 

 

(127,035

)

 

 

(90,321

)

 

 

(127,035

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated deficit:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

 

(318,838

)

 

 

(488,837

)

 

 

(341,263

)

 

 

(459,333

)

Impact from adoption of ASU 2016-13

 

 

—

 

 

 

—

 

 

 

(2,771

)

 

 

—

 

Adjusted beginning balance

 

 

(318,838

)

 

 

(488,837

)

 

 

(344,034

)

 

 

(459,333

)

Repurchases of common stock

 

 

(13,200

)

 

 

(2,396

)

 

 

(25,489

)

 

 

(13,188

)

Net income

 

 

63,416

 

 

 

58,920

 

 

 

100,901

 

 

 

40,208

 

Ending balance

 

 

(268,622

)

 

 

(432,313

)

 

 

(268,622

)

 

 

(432,313

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shareholders’ equity, ending balance

 

$

3,096,478

 

 

$

2,867,516

 

 

$

3,096,478

 

 

$

2,867,516

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

7

Table of Contents

 

SYNEOS HEALTH, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

1. Basis of Presentation and Changes in Significant Accounting Policies

Nature of Operations

Syneos Health, Inc. (the “Company”) is a global provider of end-to-end biopharmaceutical outsourcing solutions. The Company operates under two reportable segments, Clinical Solutions and Commercial Solutions, and derives its revenue through a suite of services designed to enhance its customers’ ability to successfully develop, launch, and market their products. The Company offers its solutions on both a standalone and integrated basis with biopharmaceutical development and commercialization services ranging from Phase I-IV clinical trial services to services associated with the commercialization of biopharmaceutical products. The Company’s customers include small, mid-sized, and large companies in the pharmaceutical, biotechnology, and medical device industries.

Unaudited Interim Financial Information

The Company prepared the accompanying unaudited condensed consolidated financial statements in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information. The significant accounting policies followed by the Company for interim financial reporting are consistent with the accounting policies followed for annual financial reporting.

The unaudited condensed consolidated financial statements, in management’s opinion, include all adjustments of a normal recurring nature necessary for a fair presentation. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, filed with the Securities and Exchange Commission on February 20, 2020. The results of operations for the three and nine months ended September 30, 2020 are not necessarily indicative of the results to be expected for the full year ending December 31, 2020 or any other future period. The unaudited condensed consolidated balance sheet at December 31, 2019 is derived from the amounts in the audited consolidated balance sheet included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

COVID-19 Pandemic

On March 11, 2020, the World Health Organization designated the outbreak of the novel strain of coronavirus that causes the disease known as COVID-19 as a global pandemic. Governments and businesses around the world have taken unprecedented actions to mitigate the spread of COVID-19, including, but not limited to, shelter-in-place orders, quarantines, significant restrictions on travel, social distancing practices as well as restrictions that prohibit many employees from going to work. The Company experienced significant impacts to its business and results of operations for the three and nine months ended September 30, 2020 due to COVID-19. While certain governments have eased restrictions, the pandemic continues to be disruptive to the Company’s business. The extent to which COVID-19 impacts the Company’s future results will depend on future developments. The pandemic and associated economic impacts could continue to significantly impact the Company’s future financial condition, results of operations and cash flows.

8

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Recently Adopted Accounting Standards

In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-13 (“ASU 2016-13”), Financial Instruments - Credit Losses (Topic 326) to modify the impairment model to utilize an expected loss methodology in place of the previous incurred loss methodology and require consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The Company adopted ASU 2016-13 on January 1, 2020, and recorded the impact of the adoption through a cumulative-effect adjustment to accumulated deficit. Results for reporting periods beginning on January 1, 2020 are presented under ASU No. 2016-13, while prior period amounts continue to be reported and disclosed in accordance with the Company’s historical accounting treatment. Adoption of the new standard resulted in the recording of additional allowance for doubtful accounts of approximately $2.8 million as of January 1, 2020.

In March 2020, the FASB issued ASU No. 2020-04 (“ASU 2020-04”), Reference Rate Reform (Topic 848). ASU 2020-04 contains practical expedients related to reference rate reform activities that impact debt, leases, derivatives and other contracts. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. The Company has elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with the Company’s past presentation. The Company continues to evaluate the impact of the guidance and may apply other elections as applicable.

2. Financial Statement Details

Cash, Cash Equivalents, and Restricted Cash

Certain of the Company’s subsidiaries participate in a notional cash pooling arrangement to manage global liquidity requirements. The participants combine their cash balances in pooling accounts at the same financial institution with the ability to offset bank overdrafts of one participant against positive cash account balances held by another participant. The net cash balance related to this pooling arrangement is included in cash, cash equivalents, and restricted cash in the unaudited condensed consolidated balance sheets. During the nine months ended September 30, 2020, the Company made a non-cash investment of $27.3 million to acquire certain intellectual property rights from a customer in lieu of cash payment for services rendered.

Accounts Receivable and Unbilled Services, net

Accounts receivable and unbilled services (including contract assets), net of allowance for doubtful accounts, consisted of the following (in thousands):

 

 

 

September 30, 2020

 

 

December 31, 2019

 

Accounts receivable billed

 

$

663,065

 

 

$

787,652

 

Unbilled services (including contract assets)

 

 

609,596

 

 

 

521,370

 

Less: Allowance for doubtful accounts

 

 

(8,159

)

 

 

(5,381

)

Accounts receivable and unbilled services, net

 

$

1,264,502

 

 

$

1,303,641

 

 

Unbilled services is comprised of approximately equal parts of unbilled accounts receivables and contract assets. Unbilled accounts receivables arise when the right to bill is contingent solely on the passage of time (e.g., in the following month) and contract assets arise in instances where the right to bill is associated with a contingency (e.g., achievement of a milestone).

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Accounts Receivable Factoring Arrangement

The Company has an accounts receivable factoring agreement to sell certain eligible unsecured trade accounts receivable, without recourse, to an unrelated third-party financial institution for cash. For the nine months ended September 30, 2020 and 2019, the Company factored $113.1 million and $162.0 million, respectively, of trade accounts receivable on a non-recourse basis and received $112.7 million and $160.8 million, respectively, in cash proceeds from the sale. The fees associated with these transactions were insignificant.

Goodwill

The changes in the carrying amount of goodwill by segment for the nine months ended September 30, 2020 were as follows (in thousands):

 

 

 

Clinical

Solutions (a)

 

 

Commercial

Solutions (b)

 

 

Total

 

Balance as of January 1, 2020

 

$

2,784,952

 

 

$

1,565,428

 

 

$

4,350,380

 

Impact of foreign currency translation

 

 

(6,858

)

 

 

(168

)

 

 

(7,026

)

Balance as of September 30, 2020

 

$

2,778,094

 

 

$

1,565,260

 

 

$

4,343,354

 

 

(a) Accumulated impairment losses of $8.1 million associated with the Clinical Solutions segment were recorded prior to 2016 and related to the former Phase I Services segment, now a component of the Clinical Solutions segment. No impairment of goodwill was recorded for the nine months ended September 30, 2020.

(b) Accumulated impairment losses of $8.0 million associated with the Commercial Solutions segment were recorded prior to 2015 and related to the former Global Consulting segment, now a component of the Commercial Solutions segment. No impairment of goodwill was recorded for the nine months ended September 30, 2020.

As of September 30, 2020, the Company evaluated whether a triggering event had occurred because of the broad impacts of the COVID-19 pandemic. The COVID-19 pandemic negatively impacted the Company’s results of operations during the three and nine months ended September 30, 2020 and the Company expects the pandemic to continue to negatively impact its full year 2020 results of operations. However, at this time, the Company does not believe there has been a significant change in the long-term fundamentals of its business. The Company has concluded a triggering event did not occur, and, as a result, no interim impairment testing was required during the three months ended September 30, 2020. The Company will continue to evaluate the impacts of the COVID-19 pandemic on its business.

Transaction and Integration-Related Expenses

Transaction and integration-related expenses consisted of the following (in thousands):

 

 

 

Three Months Ended

September 30,

 

 

Nine Months Ended

September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Professional fees

 

$

5,656

 

 

$

7,108

 

 

$

18,217

 

 

$

26,632

 

Debt modification and related expenses

 

 

4

 

 

 

1,582

 

 

 

75

 

 

 

5,555

 

Integration and personnel retention-related costs

 

 

1,143

 

 

 

1,394

 

 

 

3,399

 

 

 

3,150

 

Fair value adjustments to contingent obligations

 

 

152

 

 

 

370

 

 

 

(3,791

)

 

 

(571

)

Total transaction and integration-related expenses

 

$

6,955

 

 

$

10,454

 

 

$

17,900

 

 

$

34,766

 

 

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Accumulated Other Comprehensive Loss, Net of Taxes

Accumulated other comprehensive loss, net of taxes, consisted of the following (in thousands):

 

 

 

Three Months Ended

September 30,

 

 

Nine Months Ended

September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Beginning balance

 

$

(129,372

)

 

$

(92,688

)

 

$

(71,593

)

 

$

(88,195

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

 

(102,675

)

 

 

(72,270

)

 

 

(56,757

)

 

 

(80,955

)

Other comprehensive income (loss) before reclassifications

 

 

33,832

 

 

 

(34,421

)

 

 

(12,086

)

 

 

(25,736

)

Ending balance

 

 

(68,843

)

 

 

(106,691

)

 

 

(68,843

)

 

 

(106,691

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative instruments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

 

(26,697

)

 

 

(20,418

)

 

 

(14,836

)

 

 

(7,240

)

Other comprehensive income (loss) before reclassifications

 

 

1

 

 

 

(1,105

)

 

 

(17,970

)

 

 

(15,351

)

Reclassification adjustments

 

 

5,218

 

 

 

1,179

 

 

 

11,328

 

 

 

2,247

 

Ending balance

 

 

(21,478

)

 

 

(20,344

)

 

 

(21,478

)

 

 

(20,344

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated other comprehensive loss, net of taxes

 

$

(90,321

)

 

$

(127,035

)

 

$

(90,321

)

 

$

(127,035

)

 

Changes in accumulated other comprehensive loss consisted of the following (in thousands):

 

 

 

Three Months Ended

September 30,

 

 

Nine Months Ended

September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Foreign currency translation adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments, net of taxes

 

$

33,832

 

 

$

(34,421

)

 

$

(12,086

)

 

$

(25,736

)

Unrealized loss on derivative instruments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized loss during period, before taxes

 

 

(478

)

 

 

(1,144

)

 

 

(27,137

)

 

 

(15,760

)

Income tax benefit

 

 

(479

)

 

 

(39

)

 

 

(9,167

)

 

 

(409

)

Unrealized gain (loss) during period, net of taxes

 

 

1

 

 

 

(1,105

)

 

 

(17,970

)

 

 

(15,351

)

Reclassification adjustment, before taxes

 

 

7,081

 

 

 

1,218

 

 

 

15,292

 

 

 

2,324

 

Income tax expense

 

 

1,863

 

 

 

39

 

 

 

3,964

 

 

 

77

 

Reclassification adjustment, net of taxes

 

 

5,218

 

 

 

1,179

 

 

 

11,328

 

 

 

2,247

 

Total unrealized gain (loss) on derivative instruments, net of taxes

 

 

5,219

 

 

 

74

 

 

 

(6,642

)

 

 

(13,104

)

Total other comprehensive income (loss), net of taxes

 

$

39,051

 

 

$

(34,347

)

 

$

(18,728

)

 

$

(38,840

)

Other Expense (Income), Net

Other expense (income), net consisted of the following (in thousands):

 

 

 

Three Months Ended

September 30,

 

 

Nine Months Ended

September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Net realized foreign currency loss (gain)

 

$

4,823

 

 

$

(26,762

)

 

$

2,772

 

 

$

(25,631

)

Net unrealized foreign currency loss (gain)

 

 

4,794

 

 

 

(5,131

)

 

 

(7,747

)

 

 

(6,090

)

Other, net

 

 

979

 

 

 

1,180

 

 

 

2,402

 

 

 

2,356

 

Total other expense (income), net

 

$

10,596

 

 

$

(30,713

)

 

$

(2,573

)

 

$

(29,365

)

 

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3. Long-Term Debt Obligations

The Company’s debt obligations consisted of the following (in thousands):

 

 

 

September 30, 2020

 

 

December 31, 2019

 

Term Loan A due March 2024

 

$

1,471,250

 

 

$

1,550,000

 

Term Loan B due August 2024

 

 

760,564

 

 

 

795,564

 

Accounts receivable financing agreement due October 2022

 

 

300,000

 

 

 

275,000

 

Total debt obligations

 

 

2,531,814

 

 

 

2,620,564

 

Less: Term loan original issuance discount

 

 

(3,883

)

 

 

(4,928

)

Less: Unamortized deferred issuance costs

 

 

(5,698

)

 

 

(7,116

)

Less: Current portion of debt

 

 

(56,875

)

 

 

(58,125

)

Total debt obligations, non-current portion

 

$

2,465,358

 

 

$

2,550,395

 

 

The Company is party to a credit agreement (as amended, the “Credit Agreement”) that includes a $1.55 billion Term Loan A facility that matures on March 26, 2024 (“Term Loan A”), a $1.60 billion Term Loan B facility that matures on August 1, 2024 (“Term Loan B”), and a $600.0 million revolving credit facility (the “Revolver”) that matures on March 26, 2024.

During the three months ended September 30, 2020, the Company made $40.0 million and $35.0 million of voluntary prepayments against Term Loan A and Term Loan B, respectively, and repaid the outstanding $150.0 million balance on the Revolver. The Term Loan A prepayments were applied to the mandatory principal payments due October 2020 and January 2021, and to a partial principal payment for April 2021. Additionally, during the three and nine months ended September 30, 2020, the Company made $19.4 million and $38.8 million of mandatory principal payments towards Term Loan A, respectively. As a result of previous voluntary prepayments, the Company is not required to make a mandatory payment against the Term Loan B principal balance until maturity in August 2024.

Revolver and Letters of Credit

The Revolver includes letters of credit (“LOCs”) with a sublimit of $150.0 million. As of September 30, 2020, there were $18.6 million of LOCs outstanding, leaving $581.4 million of available borrowings under the Revolver, including $131.4 million available for LOCs.

The lease agreement for the corporate headquarters in Morrisville, North Carolina includes a provision that may require the Company to issue LOCs in certain amounts to the landlord based on the debt rating of the Company issued by Moody’s Investors Service (or other nationally-recognized debt rating agency). As of September 30, 2020 (and through the date of this filing), the Company’s debt rating was such that no LOCs were required. Any required LOCs could be issued under the Company’s Revolver, and, if issued under the Revolver, would reduce its available borrowing capacity by the same amount accordingly.

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Accounts Receivable Financing Agreement

On September 25, 2020, the Company amended its accounts receivable financing agreement to increase the amount it can borrow from $275.0 million to $300.0 million and to extend the maturity to October 2022, unless terminated earlier pursuant to its terms, and drew down the additional $25.0 million. Under this agreement, certain of the Company’s consolidated subsidiaries sell accounts receivable and unbilled services (including contract assets) balances to a wholly-owned, bankruptcy-remote special purpose entity (“SPE”), which is the borrower under the facility. The facility is without recourse to the Company or any subsidiaries of the Company other than the SPE, other than with respect to limited indemnity obligations of the selling entities and the servicer of the receivables in respect of the character of the receivables sold by them and the performance of the servicing duties. The Company has guaranteed the performance of these obligations. The available borrowing capacity varies according to the levels of the Company’s eligible accounts receivable and unbilled services (including contract assets) sold to the SPE. Loans under this agreement will accrue interest at a reserve-adjusted LIBOR rate or a base rate equal to the higher of the overnight bank funding rate plus 0.50% and the applicable lender’s prime rate. The Company may prepay loans upon one business day’s prior notice and may terminate or reduce the facility limit of the accounts receivable financing agreement with 15 days’ prior notice.

As of September 30, 2020, the Company had $300.0 million of outstanding borrowings under the accounts receivable financing agreement, which are recorded in long-term debt on the accompanying unaudited condensed consolidated balance sheet. There was no remaining borrowing capacity available under this agreement as of September 30, 2020.

As of September 30, 2020, the contractual maturities of the Company’s debt obligations (excluding leases) were as follows (in thousands):

 

 

 

Principal

 

 

Interest (a)

 

2020

 

$

—

 

 

$

11,581

 

2021

 

 

85,937

 

 

 

45,234

 

2022

 

 

445,313

 

 

 

41,985

 

2023

 

 

155,000

 

 

 

36,233

 

2024

 

 

1,845,564

 

 

 

12,050

 

Less: Deferred issuance costs

 

 

(5,698

)

 

 

 

 

Less: Term loan original issuance discount

 

 

(3,883

)

 

 

 

 

Total

 

$

2,522,233

 

 

$

147,083

 

 

(a) The interest payments on long-term debt in the above table are based on interest rates in effect as of September 30, 2020.

4. Derivatives

The Company has entered into various interest rate swaps to mitigate its exposure to changes in interest rates on its term loans.

In May 2016, the Company entered into interest rate swaps that had an initial notional value of $300.0 million and became effective on June 30, 2016. A portion of the interest rate swaps expired on June 30, 2018, and the remainder expired on May 14, 2020.

In June 2018, the Company entered into an interest rate swap with multiple counterparties that had an initial aggregate notional value of $1.01 billion, an effective date of December 31, 2018, and will expire on June 30, 2021. As of September 30, 2020, the notional value of this interest rate swap was $917.1 million.

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In March 2020, the Company entered into interest rate swaps with multiple counterparties. The interest rate swaps had an initial aggregate notional value of $549.2 million, increasing to $1.42 billion in 2021, an effective date of March 31, 2020, and will expire on March 31, 2023. As of September 30, 2020, the notional value of these interest rate swaps was $573.5 million.

The fair values of the Company’s derivative financial instruments and the line items on the accompanying condensed consolidated balance sheets to which they were recorded were as follows (in thousands):

 

 

Balance Sheet Classification

 

September 30, 2020

 

 

December 31, 2019

 

Interest rate swaps - current

 

Prepaid expenses and other current assets

 

$

—

 

 

$

155

 

Fair value of derivative assets

 

$

—

 

 

$

155

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate swaps - current

 

Accrued expenses

 

$

22,165

 

 

$

11,358

 

Interest rate swaps - non-current

 

Other long-term liabilities

 

 

6,979

 

 

 

6,095

 

Fair value of derivative liabilities

 

$

29,144

 

 

$

17,453

 

 

5. Fair Value Measurements

Assets and Liabilities Carried at Fair Value

As of September 30, 2020 and December 31, 2019, the Company’s financial assets and liabilities carried at fair value included cash and cash equivalents, restricted cash, trading securities, accounts receivable, unbilled services (including contract assets), accounts payable, accrued expenses, deferred revenue, contingent obligations, liabilities under the accounts receivable financing agreement, and derivative instruments.

The fair values of cash and cash equivalents, restricted cash, accounts receivable, unbilled services (including contract assets), accounts payable, accrued expenses, deferred revenue, and the liabilities under the accounts receivable financing agreement approximate their respective carrying amounts because of the liquidity and short-term nature of these financial instruments.

Financial Instruments Subject to Recurring Fair Value Measurements

As of September 30, 2020, the fair values of the major classes of the Company’s assets and liabilities measured at fair value on a recurring basis were as follows (in thousands):

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Investments

Measured

at Net

Asset Value

 

 

Total

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trading securities (a)

 

$

20,864

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

20,864

 

Partnership interest (b)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

7,336

 

 

 

7,336

 

Total assets

 

$

20,864

 

 

$

—

 

 

$

—

 

 

$

7,336

 

 

$

28,200

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative instruments (c)

 

$

—

 

 

$

29,144

 

 

$

—

 

 

$

—

 

 

$

29,144

 

Contingent obligations related to business combinations (d)

 

 

—

 

 

 

—

 

 

 

6,641

 

 

 

—

 

 

 

6,641

 

Total liabilities

 

$

—

 

 

$

29,144

 

 

$

6,641

 

 

$

—

 

 

$

35,785

 

 

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As of December 31, 2019, the fair values of the major classes of the Company’s assets and liabilities measured at fair value on a recurring basis were as follows (in thousands):

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Investments

Measured

at Net

Asset Value

 

 

Total

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trading securities (a)

 

$

21,552

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

21,552

 

Partnership interest (b)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

7,226

 

 

 

7,226

 

Derivative instruments (c)

 

 

—

 

 

 

155

 

 

 

—

 

 

 

—

 

 

 

155

 

Total assets

 

$

21,552

 

 

$

155

 

 

$

—

 

 

$

7,226

 

 

$

28,933

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative instruments (c)

 

$

—

 

 

$

17,453

 

 

$

—

 

 

$

—

 

 

$

17,453

 

Contingent obligations related to business combinations (d)

 

 

—

 

 

 

—

 

 

 

37,324

 

 

 

—

 

 

 

37,324

 

Total liabilities

 

$

—

 

 

$

17,453

 

 

$

37,324

 

 

$

—

 

 

$

54,777

 

 

(a) Represents fair value of investments in mutual funds based on quoted market prices that are used to fund the liability associated with the Company’s deferred compensation plan.

(b) The Company has committed to invest $21.5 million as a limited partner in two private equity funds. The private equity funds invest in opportunities in the healthcare and life sciences industry. As of September 30, 2020, the Company’s remaining unfunded commitment in the private equity funds was $14.4 million. The Company holds minor ownership interests (less than 3%) in each of the private equity funds and has determined that it does not exercise significant influence over the private equity funds’ operating and finance activities. As the private equity funds do not have readily determinable fair values, the Company has estimated the fair values using each fund’s Net Asset Value, the amount by which the value of all assets exceeds all debt and liabilities, in accordance with ASC Topic 946, Financial Services – Investment Companies.

(c) Represents the fair value of interest rate swap arrangements (see “Note 4 – Derivatives” for further information).

(d) Represents the fair value of contingent consideration obligations related to business combinations. The fair values of these liabilities are determined based on the Company’s best estimate of the probable timing and amount of settlement.

The following table presents a reconciliation of changes in the carrying amount of contingent obligations classified as Level 3 for the nine months ended September 30, 2020 (in thousands):

 

Balance as of December 31, 2019

 

$

37,324

 

Additions

 

 

—

 

Changes in fair value recognized in earnings

 

 

(4,049

)

Payments

 

 

(26,634

)

Balance as of September 30, 2020

 

$

6,641

 

 

During the nine months ended September 30, 2020, there were no transfers of assets or liabilities between Level 1, Level 2, or Level 3 fair value measurements.

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Financial Instruments Subject to Non-Recurring Fair Value Measurements

Certain assets, including goodwill and identifiable intangible assets, are carried on the accompanying condensed consolidated balance sheets at cost and, subsequent to initial recognition, are measured at fair value on a non-recurring basis when certain identified events or changes in circumstances that may have a significant adverse effect on the carrying values of these assets occur. These assets are classified as Level 3 fair value measurements within the fair value hierarchy. Goodwill is tested for impairment annually or more frequently if events or changes in circumstances indicate a triggering event has occurred. Intangible assets are tested for impairment upon the occurrence of certain triggering events. As of September 30, 2020 and December 31, 2019, assets carried on the condensed consolidated balance sheets and not remeasured to fair value on a recurring basis totaled $5.23 billion and $5.32 billion, respectively.

Fair Value Disclosures for Financial Instruments Not Carried at Fair Value

The estimated fair values of the outstanding term loans are determined based on quoted market prices. As these liabilities are not actively traded, they are classified as Level 2 fair value measurements. The estimated fair values of the Company’s outstanding term loans were as follows (in thousands):

 

 

 

September 30, 2020

 

 

December 31, 2019

 

 

 

Carrying

Value (a)

 

 

Estimated

Fair Value

 

 

Carrying

Value (a)

 

 

Estimated

Fair Value

 

Term Loan A due March 2024

 

$

1,467,892

 

 

$

1,452,859

 

 

$

1,545,721

 

 

$

1,550,000

 

Term Loan B due August 2024

 

 

760,039

 

 

 

751,536

 

 

 

794,915

 

 

 

795,564

 

 

(a) The carrying value of the term loan debt is shown net of original issue debt discounts.

6. Restructuring and Other Costs

Merger-Related Restructuring

During 2017, in connection with the merger (the “Merger”) with Double Eagle Parent, Inc. (“inVentiv”), the parent company of inVentiv Health, Inc., the Company established a restructuring plan to eliminate redundant positions and reduce its facility footprint worldwide. The Company expects to continue the ongoing evaluations of its workforce and facilities infrastructure needs in an effort to optimize its resources. During the nine months ended September 30, 2020, the Company recognized approximately $1.0 million of employee severance and benefits related costs and $1.2 million of facility closure and lease termination costs. The Company expects to continue to incur costs related to restructuring of its operations in order to achieve targeted synergies. However, the timing and the amount of these costs depend on various factors, including, but not limited to, identifying and realizing synergy opportunities and executing the integration of its combined operations.

Non Merger-Related Restructuring and Other Costs

During the nine months ended September 30, 2020, the Company recognized approximately $20.2 million of costs related to employee severance and benefits, $0.4 million of facility closure and lease termination costs, and $0.6 million of other costs in its continued efforts to optimize its resources worldwide. The costs incurred during the three months ended September 30, 2020 were primarily related to the Company’s cost management strategies in response to the COVID-19 pandemic as well as the Company’s ForwardBound initiative.

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Accrued Restructuring Liabilities

The following table summarizes activity related to the liabilities associated with restructuring and other costs during the nine months ended September 30, 2020 (in thousands):

 

 

 

Employee

Severance

Costs

 

 

Other

Costs

 

 

Total

 

Balance as of December 31, 2019

 

$

5,728

 

 

$

22

 

 

$

5,750

 

Expenses incurred (a)

 

 

21,214

 

 

 

595

 

 

 

21,809

 

Cash payments made

 

 

(22,245

)

 

 

(617

)

 

 

(22,862

)

Balance as of September 30, 2020

 

$

4,697

 

 

$

—

 

 

$

4,697

 

 

(a) The amount of expenses incurred for the nine months ended September 30, 2020 excludes $1.6 million of facility lease closure and lease termination costs that are reflected as a reduction of operating lease right-of-use assets on the unaudited condensed consolidated balance sheet under ASC 842.

The Company expects the employee severance costs accrued as of September 30, 2020 will be paid within the next twelve months. Certain facility costs will be paid over the remaining lease terms of the exited facilities that range from 2020 through 2027. Liabilities associated with these costs are included in accrued expenses and other long-term liabilities on the accompanying condensed consolidated balance sheets.

7. Shareholders’ Equity

Shares Outstanding

Shares of common stock outstanding were as follows (in thousands):

 

 

 

Three Months Ended

September 30,

 

 

Nine Months Ended

September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Common stock shares, beginning balance

 

 

104,236

 

 

 

103,460

 

 

 

103,866

 

 

 

103,372

 

Repurchases of common stock

 

 

(506

)

 

 

(141

)

 

 

(1,106

)

 

 

(1,323

)

Issuances of common stock

 

 

264

 

 

 

474

 

 

 

1,234

 

 

 

1,744

 

Common stock shares, ending balance

 

 

103,994

 

 

 

103,793

 

 

 

103,994

 

 

 

103,793

 

 

Stock Repurchase Program

On February 26, 2018, the Company’s Board of Directors (the “Board”) authorized the repurchase of up to an aggregate of $250.0 million of the Company’s common stock to be executed from time to time in open market transactions effected through a broker at prevailing market prices, in block trades, or through privately negotiated transactions (the “stock repurchase program”). On December 5, 2019, the Board increased the dollar amount authorized under the stock repurchase program to up to an aggregate of $300.0 million and extended the term of the stock repurchase program to December 31, 2020.

The stock repurchase program does not obligate the Company to repurchase any particular amount of the Company’s common stock and may be modified, extended, suspended, or discontinued at any time. The timing and amount of repurchases will be determined by the Company’s management based on a variety of factors such as the market price of the Company’s common stock, the Company’s corporate requirements for cash, and overall market conditions. The stock repurchase program is subject to applicable legal requirements, including federal and state securities laws and applicable Nasdaq rules.

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The Company may also repurchase shares of its common stock pursuant to a trading plan meeting the requirements of Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, which permits shares of the Company’s common stock to be repurchased when the Company might otherwise be precluded from doing so by law.

During the three months ended September 30, 2020, the Company repurchased 506,244 shares of its Class A common stock in a private transaction under the stock repurchase program described above, for a total purchase price of approximately $30.0 million.

The following table sets forth repurchase activity under the stock repurchase program from inception through September 30, 2020:

 

 

 

Total number of

shares purchased

 

 

Average price

paid per share

 

 

Approximate

value of

shares purchased

(in thousands)

 

March 2018

 

 

948,100

 

 

$

39.55

 

 

$

37,493

 

April 2018

 

 

1,024,400

 

 

 

36.60

 

 

 

37,492

 

January 2019

 

 

552,100

 

 

 

39.16

 

 

 

21,623

 

February 2019

 

 

120,600

 

 

 

41.40

 

 

 

4,993

 

June 2019

 

 

509,100

 

 

 

45.29

 

 

 

23,055

 

August 2019

 

 

141,100

 

 

 

49.93

 

 

 

7,045

 

March 2020

 

 

600,000

 

 

 

53.38

 

 

 

32,029

 

September 2020

 

 

506,244

 

 

 

59.26

 

 

 

30,000

 

Total

 

 

4,401,644

 

 

 

 

 

 

$

193,730

 

 

The Company immediately retired all of the repurchased common stock and charged the par value of the shares to common stock. The excess of the repurchase price over the par value was applied on a pro rata basis against additional paid-in capital, with the remainder applied to accumulated deficit.

As of September 30, 2020, the Company had remaining authorization to repurchase up to approximately $106.3 million of shares of its common stock under the stock repurchase program.

8. Earnings Per Share

The following table provides a reconciliation of the numerators and denominators of the basic and diluted earnings per share computations (in thousands, except per share data):

 

 

 

Three Months Ended

September 30,

 

 

Nine Months Ended

September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Numerator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

63,416

 

 

$

58,920

 

 

$

100,901

 

 

$

40,208

 

Denominator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic weighted average common shares outstanding

 

 

104,277

 

 

 

103,594

 

 

 

104,247

 

 

 

103,553

 

Effect of dilutive securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock options and other awards under deferred share-based compensation programs

 

 

1,311

 

 

 

1,427

 

 

 

1,236

 

 

 

1,328

 

Diluted weighted average common shares outstanding

 

 

105,588

 

 

 

105,021

 

 

 

105,483

 

 

 

104,881

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.61

 

 

$

0.57

 

 

$

0.97

 

 

$

0.39

 

Diluted

 

$

0.60

 

 

$

0.56

 

 

$

0.96

 

 

$

0.38

 

 

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Potential common shares outstanding that are considered anti-dilutive are excluded from the computation of diluted earnings per share. Potential common shares related to stock options and other awards under share-based compensation programs may be determined to be anti-dilutive based on the application of the treasury stock method. Potential common shares are also considered anti-dilutive in periods when the Company incurs a net loss.

The number of potential shares outstanding that were anti-dilutive and therefore excluded from the computation of diluted earnings per share, weighted for the portion of the period they were outstanding, were 177,330 and 220,269 for the three months ended September 30, 2020 and 2019, respectively, and 713,269 and 295,706 for the nine months ended September 30, 2020 and 2019, respectively.

9. Income Taxes

Income Tax Expense

For the three and nine months ended September 30, 2020, the Company recorded income tax expense of $4.0 million and $15.9 million, respectively, compared to pre-tax income of $67.4 million and $116.8 million, respectively. Income tax expense for the three and nine months ended September 30, 2020 included a discrete tax benefit of $18.8 million and $24.3 million, respectively, primarily related to the recognition of United States federal unrecognized tax benefits, excess tax benefits from share-based compensation, and the tax benefit from foreign tax credits claimed on amended returns filed during the year. The effective tax rate for the three and nine months ended September 30, 2020, excluding discrete items, varied from the United States federal statutory income tax rate of 21.0% primarily due to foreign income inclusions such as the Global Intangible Low-Taxed Income provisions (“GILTI”), state and local taxes on United States income, and research and general business credits.

For the three and nine months ended September 30, 2019, the Company recorded income tax expense of $11.1 million and $43.8 million, respectively, compared to pre-tax income of $70.0 million and $84.0 million, respectively. Income tax expense for the three and nine months ended September 30, 2019 included a discrete tax benefit of $0.1 million and discrete tax expense of $10.3 million, respectively, primarily related to a reduction in deferred tax assets associated with the closing of a Canadian business unit and prior year adjustments. The effective tax rate for the three and nine months ended September 30, 2019, excluding discrete items, varied from the United States federal statutory income tax rate of 21.0% primarily due to base erosion and anti-abuse minimum tax (“BEAT”), foreign income inclusions such as GILTI, and a valuation allowance change on domestic deferred tax assets.

BEAT

The Tax Cuts and Jobs Act of 2017 introduced a tax on United States corporations that derive tax benefits from deductible payments to non-United States affiliates called BEAT. BEAT applies when base eroding payments are in excess of three percent of the Company’s total deductible payments and also where BEAT exceeds regular United States taxable income, similar to an alternate minimum tax. Changes to the Company’s contractual arrangements, operating structure, and/or final regulations that modify the application of this provision could have a significant impact on the Company’s tax provision.

The Company does not anticipate its base eroding payments to exceed the three percent threshold of its deductible payments in 2020; therefore, the Company has not recorded any associated BEAT liability for the three and nine months ended September 30, 2020.

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Unrecognized Tax Benefits

The Company’s gross unrecognized tax benefits, exclusive of associated interest and penalties, were $8.4 million and $23.2 million as of September 30, 2020 and December 31, 2019, respectively. The decrease of $14.8 million was primarily due to statute lapses related to domestic unrecognized tax benefits.

Tax Returns under Audit

The Company is not currently under any United States Federal income tax audit; however, income tax returns are currently under examination by tax authorities in several state and foreign jurisdictions. Management regularly assesses the potential outcomes of both ongoing and potential future examinations and has concluded that the provision for income taxes adequately reflects their impact.

Tax Legislation

The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted on March 27, 2020 in the United States to address the economic impacts of the COVID-19 pandemic. The CARES Act includes corporate income tax, payroll tax, and other provisions. The Company does not expect there to be a significant impact to its income tax provision as a result of the CARES Act and other global measures for the year ending December 31, 2020. The Company qualifies for certain employer payroll tax credits, which will be treated as government subsidies to offset related operating expenses, as well as the deferral of certain payroll and other tax payments into the future. The Company has deferred, and plans to continue deferring, the timing of certain income tax payments and other taxes as permitted by the CARES Act and other stimulus measures enacted globally.

Numerous final and proposed tax regulations were issued during the three months ended September 30, 2020, including additional guidance related to changes included in the Tax Cuts and Jobs Act. The regulations included updated guidance related to items such as interest expense limitations pursuant to Section 163(j), GILTI high-tax exclusion, and Foreign Tax Credits. These regulations included certain elective provisions and may be retroactively applied to the 2018 and 2019 tax years. The Company is continuing to evaluate these elective provisions.

10. Revenue from Contracts with Customers

Unsatisfied Performance Obligations

As of September 30, 2020, the total aggregate transaction price allocated to the unsatisfied performance obligations under contracts with contract terms greater than one year and that are not accounted for as a series pursuant to ASU No. 2014-09, Revenue from Contracts with Customers (“ASC 606”) was $5.76 billion. This amount includes revenue associated with reimbursable out-of-pocket expenses. The Company expects to recognize revenue over the remaining contract term of the individual projects, with contract terms generally ranging from one to five years. The amount of unsatisfied performance obligations is presented net of any constraints and, as a result, is lower than the potential contractual revenue. The contracts excluded due to constraints include contracts that do not commence within a certain period of time or that require the Company to undertake numerous activities to fulfill these performance obligations, including various activities that are outside of the Company’s control. Accordingly, such contracts have been excluded from the unsatisfied performance obligations balance presented above.

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Timing of Billing and Performance

During the three and nine months ended September 30, 2020, the Company recognized approximately $298.6 million and $485.0 million, respectively, of revenue that was included in the deferred revenue balance at the beginning of the periods. During the three and nine months ended September 30, 2020, approximately $32.8 million and $25.6 million of the Company’s revenue recognized was allocated to performance obligations partially satisfied in previous periods, respectively. The revenue from performance obligations partially satisfied in previous periods predominately related to changes in scope and estimates in full service clinical studies. Changes in unbilled services (including contract assets) and deferred revenue balances during the three and nine months ended September 30, 2020 were not significantly impacted by any other factors.

11. Segment Information

The Company is managed through two reportable segments: Clinical Solutions and Commercial Solutions. Each reportable segment consists of multiple service offerings that, when combined, create a fully integrated biopharmaceutical services organization. Clinical Solutions offers a variety of services spanning Phases I-IV of clinical development, including full-service global studies, as well as individual service offerings such as clinical monitoring, investigator recruitment, patient recruitment, data management, and study startup to assist customers with their drug development process. Commercial Solutions provides the pharmaceutical, biotechnology, and healthcare industries with commercialization services, including deployment solutions, communication solutions (public relations and advertising), and consulting services. 

The Company’s Chief Operating Decision Maker (“CODM”) reviews segment performance and allocates resources based upon segment revenue and income from operations. Inter-segment revenue is eliminated from the segment reporting presented to the CODM and is not included in the segment revenue presented in the table below. Certain costs are not allocated to the Company’s reportable segments and are reported as general corporate expenses. These costs primarily consist of share-based compensation and general operating expenses associated with the Board and the Company’s senior leadership, finance, investor relations, and internal audit functions. The Company does not allocate depreciation, amortization, asset impairment charges, restructuring and other costs, or transaction and integration-related expenses to its segments. Additionally, the CODM reviews the Company’s assets on a consolidated basis and does not allocate assets to its reportable segments for purposes of assessing segment performance or allocating resources.

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Information about reportable segment operating results was as follows (in thousands):  

 

 

 

Three Months Ended

September 30,

 

 

Nine Months Ended

September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Clinical Solutions

 

$

829,163

 

 

$

867,427

 

 

$

2,451,168

 

 

$

2,522,307

 

Commercial Solutions

 

 

269,841

 

 

 

309,601

 

 

 

824,590

 

 

 

940,554

 

Total revenue

 

 

1,099,004

 

 

 

1,177,028

 

 

 

3,275,758

 

 

 

3,462,861

 

Segment direct costs:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Clinical Solutions

 

 

600,634

 

 

 

655,851

 

 

 

1,868,028

 

 

 

1,936,021

 

Commercial Solutions

 

 

211,894

 

 

 

250,904

 

 

 

658,118

 

 

 

759,591

 

Total segment direct costs

 

 

812,528

 

 

 

906,755

 

 

 

2,526,146

 

 

 

2,695,612

 

Segment selling, general, and administrative expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Clinical Solutions

 

 

66,431

 

 

 

68,659

 

 

 

204,154

 

 

 

205,986

 

Commercial Solutions

 

 

21,171

 

 

 

21,416

 

 

 

65,997

 

 

 

69,671

 

Total segment selling, general, and administrative expenses

 

 

87,602

 

 

 

90,075

 

 

 

270,151

 

 

 

275,657

 

Segment operating income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Clinical Solutions

 

 

162,098

 

 

 

142,917

 

 

 

378,986

 

 

 

380,300

 

Commercial Solutions

 

 

36,776

 

 

 

37,281

 

 

 

100,475

 

 

 

111,292

 

Total segment operating income

 

 

198,874

 

 

 

180,198

 

 

 

479,461

 

 

 

491,592

 

Direct costs and operating expenses not allocated to segments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share-based compensation included in direct costs

 

 

7,700

 

 

 

6,919

 

 

 

23,988

 

 

 

22,393

 

Share-based compensation included in selling, general, and administrative expenses

 

 

7,393

 

 

 

5,884

 

 

 

23,278

 

 

 

18,471

 

Corporate selling, general, and administrative expenses

 

 

16,101

 

 

 

13,905

 

 

 

40,613

 

 

 

39,732

 

Restructuring and other costs

 

 

6,523

 

 

 

13,456

 

 

 

23,414

 

 

 

39,751

 

Transaction and integration-related expenses

 

 

6,955

 

 

 

10,454

 

 

 

17,900

 

 

 

34,766

 

Depreciation and amortization

 

 

55,448

 

 

 

60,137

 

 

 

167,576

 

 

 

182,086

 

Total income from operations

 

$

98,754

 

 

$

69,443

 

 

$

182,692

 

 

$

154,393

 

 

12. Operations by Geographic Location

The following table summarizes total revenue by geographic area (in thousands, all intercompany transactions have been eliminated):

 

 

 

Three Months Ended

September 30,

 

 

Nine Months Ended

September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

North America (a)

 

$

694,286

 

 

$

780,460

 

 

$

2,085,895

 

 

$

2,299,439

 

Europe, Middle East, and Africa

 

 

258,590

 

 

 

251,519

 

 

 

768,938

 

 

 

768,653

 

Asia-Pacific

 

 

121,155

 

 

 

119,268

 

 

 

348,394

 

 

 

325,129

 

Latin America

 

 

24,973

 

 

 

25,781

 

 

 

72,531

 

 

 

69,640

 

Total revenue

 

$

1,099,004

 

 

$

1,177,028

 

 

$

3,275,758

 

 

$

3,462,861

 

 

(a) Revenue for the North America region includes revenue attributable to the United States of $659.6 million and $745.6 million, or 60.0% and 63.3% of total revenue, for the three months ended September 30, 2020 and 2019, respectively. Revenue for the North America region includes revenue attributable to the United States of $1,981.7 million and $2,190.9 million, or 60.5% and 63.3% of total revenue, for the nine months ended September 30, 2020 and 2019, respectively. No other country represented more than 10% of total revenue for any period.

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The following table summarizes long-lived assets by geographic area (in thousands, all intercompany transactions have been eliminated):

 

 

 

September 30, 2020

 

 

December 31, 2019

 

Property and equipment, net:

 

 

 

 

 

 

 

 

North America (a)

 

$

149,485

 

 

$

159,709

 

Europe, Middle East, and Africa

 

 

31,095

 

 

 

28,514

 

Asia-Pacific

 

 

11,440

 

 

 

12,742

 

Latin America

 

 

4,238

 

 

 

2,961

 

Total property and equipment, net

 

$

196,258

 

 

$

203,926

 

 

(a) Long-lived assets for the North America region include property and equipment, net attributable to the United States of $143.9 million and $153.1 million as of September 30, 2020 and December 31, 2019, respectively.

13.  Concentration of Credit Risk

Financial assets that subject the Company to credit risk primarily consist of cash and cash equivalents, accounts receivable and unbilled services (including contract assets). The Company’s cash and cash equivalents consist principally of cash and are maintained at several financial institutions with reputable credit ratings. The Company maintains cash depository accounts with several financial institutions worldwide and is exposed to credit risk related to the potential inability to access liquidity in financial institutions where its cash and cash equivalents are concentrated. The Company has not historically incurred any losses with respect to these balances and believes that they bear minimal credit risk.

As of September 30, 2020 and December 31, 2019, the majority of the Company’s cash and cash equivalents were held within the United States.

No single customer accounted for greater than 10% of the Company’s revenue for the three and nine months ended September 30, 2020.

As of September 30, 2020 and December 31, 2019, no single customer accounted for greater than 10% of the Company’s accounts receivable and unbilled services (including contract assets) balances.

14. Related-Party Transactions

No related party expenses were recorded for the three months ended September 30, 2020. During the second quarter of 2020, the Company sold its contingent staffing business to a related party in exchange for potential future cash consideration not to exceed $4.0 million. The future cash consideration is contingent on the financial performance of the sold business over the next three years. The Company will recognize the contingent consideration in the consolidated statements of operations as it is resolved. No significant related-party revenue was recorded for the nine months ended September 30, 2020.

No related party expenses were recorded for the three months ended September 30, 2019. For the nine months ended September 30, 2019, the Company incurred reimbursable out-of-pocket expenses of $1.1 million for professional services obtained from a provider whose board of directors included a member who was also a member of the Company’s Board. This provider ceased to be a related party as of December 31, 2019. No significant related-party revenue was recorded for the nine months ended September 30, 2019.

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15. Commitments and Contingencies

Legal Proceedings

The Company is party to legal proceedings incidental to its business. While the Company’s management currently believes the ultimate outcome of these proceedings, individually and in the aggregate, will not have a significant adverse effect on the Company’s consolidated financial statements, litigation is subject to inherent uncertainties. Were an unfavorable ruling to occur, there exists the possibility of a significant adverse impact on the Company’s financial condition and results of operations.

On December 1, 2017, the first of two virtually identical actions alleging federal securities law claims was filed against the Company and certain of its officers on behalf of a putative class of its shareholders. The first action, captioned Bermudez v. INC Research, Inc., et al, No. 17-09457 (S.D.N.Y.) in the Southern District of New York, names as defendants the Company, Michael Bell, Alistair MacDonald, Michael Gilbertini, and Gregory S. Rush (the “Bermudez action”), and the second action, Vaitkuvienë v. Syneos Health, Inc., et al, No. 18-0029 (E.D.N.C.) in the Eastern District of North Carolina, filed on January 25, 2018 (the “Vaitkuvienë action”), names as defendants the Company, Alistair MacDonald, and Gregory S. Rush (the “Initial Defendants”). Both complaints allege similar claims under Section 10(b) and Section 20(a) of the Securities Exchange Act of 1934 on behalf of a putative class of purchasers of the Company’s common stock between May 10, 2017 and November 8, 2017 and November 9, 2017. The complaints allege that the Company published inaccurate or incomplete information regarding, among other things, the financial performance and business outlook for inVentiv’s business prior to the Merger and with respect to the combined company following the Merger. On January 30, 2018, two alleged shareholders separately filed motions seeking to be appointed lead plaintiff and approving the selection of lead counsel. On March 30, 2018, Plaintiff in the Bermudez action filed a notice of voluntary dismissal of the Bermudez action, without prejudice, and as to all defendants. On May 29, 2018, the Court in the Vaitkuvienë action appointed the San Antonio Fire & Police Pension Fund and El Paso Firemen & Policemen’s Pension Fund as Lead Plaintiffs and, on June 7, 2018, the Court entered a schedule providing for, among other things, Lead Plaintiffs to file an amended complaint by July 23, 2018 (later extended to July 30, 2018). Lead Plaintiffs filed their amended complaint on July 30, 2018, which also includes a claim against the Initial Defendants, as well as each member of the board of directors at the time of the INC Research - inVentiv Health merger vote in July 2017 (the “Defendants”), contending that the inVentiv merger proxy was misleading under Section 14(a) of the Act. Lead Plaintiffs seek, among other things, orders (i) declaring that the lawsuit is a proper class action and (ii) awarding compensatory damages in an amount to be proven at trial, including interest thereon, and reasonable costs and expenses incurred in this action, including attorneys’ fees and expert fees, to Lead Plaintiffs and other class members. Defendants filed a Motion to Dismiss Plaintiffs’ Amended Complaint on September 20, 2018. Lead Plaintiffs filed a Response in Opposition to such motion on November 21, 2018, and Defendants filed a Reply to such response on December 5, 2018. The District Court referred the Motion to Dismiss to a magistrate judge for a report and recommendation. On September 26, 2019, the magistrate judge stayed the action and, on August 7, 2020, the magistrate judge lifted the stay. Also on August 7, 2020, the magistrate judge issued a report (the “Magistrate Report”) recommending to the District Court that Defendants’ Motion to Dismiss be denied. On September 4, 2020, Defendants filed written objections to the Magistrate Report, requesting that the District Court grant the Motion to Dismiss. The Company and the other defendants deny the allegations in these complaints and intend to defend vigorously against these claims.

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The Company is presently unable to predict the duration, scope, or result of the Vaitkuvienë action, or any other related lawsuit. As such, the Company is presently unable to develop a reasonable estimate of a possible loss or range of losses, if any, related to this matter. While the Company intends to defend the putative class action litigation vigorously, the outcome of such litigation or any other litigation is necessarily uncertain. The Company could be forced to expend significant resources in the defense of this lawsuit or future ones, and it may not prevail. As such, these matters could have a significant adverse effect on the Company’s business, annual, or interim results of operations, cash flows, or its financial condition.

Assumed Contingent Tax-Sharing Obligations

As a result of the Merger, the Company assumed contingent tax-sharing obligations arising from inVentiv Health, Inc.’s 2016 merger with Double Eagle Parent, Inc. As of September 30, 2020 and December 31, 2019, the estimated fair value of the assumed contingent tax-sharing obligations was $6.6 million and $32.7 million, respectively.

Contingent Earn-out Liability

In connection with the acquisition of Kinapse Topco Limited (“Kinapse”) in August 2018, the Company recorded a contingent earn-out liability to be paid based on Kinapse meeting revenue targets as of March 31, 2021. The estimated fair value of the contingent earn-out liability was $4.6 million as of December 31, 2019 and was included in other long-term liabilities in the condensed consolidated balance sheet. During the three months ended March 31, 2020, the Company adjusted the fair value of the contingent earn-out liability to zero to reflect the updated probability of achievement of the revenue targets. The change in fair value of the earn-out liability was recorded in transaction and integration-related expenses in the condensed consolidated statement of operations.

16. Subsequent Event

On October 26, 2020, the Company entered into a stock purchase agreement for the purchase of 100% of the outstanding shares of SHCR Holdings Corporation (“Synteract”) for an aggregate purchase price of approximately $400 million in cash. Synteract is a contract research organization focused on the emerging biopharmaceutical industry. The transaction is expected to close in the fourth quarter of 2020, subject to the satisfaction or waiver of the closing conditions.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Forward Looking Statements

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our unaudited condensed consolidated financial statements and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q, and with our audited consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019.

In addition to historical condensed consolidated financial information, this Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that reflect, among other things, our current expectations and anticipated results of operations, all of which are subject to known and unknown risks, uncertainties, and other factors that may cause our actual results, performance or achievements, market trends, or industry results to differ materially from those expressed or implied by such forward-looking statements. Therefore, any statements contained herein that are not statements of historical fact may be forward-looking statements and should be evaluated as such, including statements regarding the closing of our acquisition of SHCR Holdings Corporation (“Synteract”) and the source of funding for such acquisition, our anticipated results of operations, our business strategy, possible impairment charges, the future impact of the COVID-19 pandemic on our business, financial results, and financial condition, and planned capital expenditures. Without limiting the foregoing, the words “anticipates,” “believes,” “can,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “might,” “plans,” “projects,” “should,” “would,” “targets,” “will” and the negative thereof, and similar words and expressions are intended to identify forward-looking statements. Unless legally required, we assume no obligation to update any such forward-looking information to reflect actual results or changes in the factors affecting such forward-looking information.

We caution you that any such forward-looking statements are further qualified by important factors that could cause our actual operating results to differ materially from those in the forward-looking statements, including without limitation, regional, national, or global political, economic, business, competitive, market, and regulatory conditions and the following: any inability to satisfy or any failure to waive the closing conditions related to our acquisition of Synteract; any failure to realize the anticipated benefits of the acquisition of Synteract; the need to hire, develop, and retain key personnel; the impact of unfavorable economic conditions, including the uncertain international economic environment, changes in exchange rates, and effective income tax rate fluctuations; risks associated with the COVID-19 pandemic; the impact of potentially underpricing our contracts, overrunning our cost estimates, or failing to receive approval for or experiencing delays with documentation of change orders; any adverse effects from customer or therapeutic area concentration; our potential failure to generate a large number of new business awards and the risk of delay, termination, reduction in scope, or failure to go to contract of our business awards; our potential failure to convert backlog to revenue; fluctuations in our operating results and effective income tax rate; the cyber-security and other risks associated with our information systems infrastructure; changes and costs of compliance with regulations related to data privacy; risks associated with acquired businesses, including the ability to integrate acquired operations, products, and technologies in our business; the risks associated with doing business internationally; risks related to the impact of the U.K.’s withdrawal from the European Union; impact of the Tax Cuts and Jobs Act; challenges by tax authorities of our intercompany transfer pricing policies; our potential failure to successfully increase our market share, grow our business, and execute our growth strategies; our ability to effectively upgrade our information systems; our failure to perform our services in accordance with contractual requirements, regulatory standards, and ethical considerations; the risk of litigation and personal injury claims; risks related to the management of clinical trials; failure of our insurance to cover our indemnification obligations and other liabilities; risks related to marketing drugs for biopharmaceutical companies; our ability to protect our intellectual property; the risks associated with potential future acquisitions or investments in our customers’ businesses or drugs; our relationships with customers who are in competition with each other; any failure to realize the full value of our goodwill and intangible

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assets; risks related to restructuring; our compliance with anti-corruption and anti-bribery laws; our dependence on third parties; potential employment liability; downgrades of our credit ratings; outsourcing trends and changes in aggregate spending and research and development budgets; the impact of, including changes in, government regulations and healthcare reform; our ability to keep pace with rapid technological change; the cost of and our ability to service our substantial indebtedness; and other risks related to ownership of our common stock. For a further discussion of the risks relating to our business, refer to “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2019.

Overview of Our Business and Services

Syneos Health, Inc. (the “Company,” “we,” “us,” and “our”) is a leading global biopharmaceutical solutions organization providing a full suite of clinical and commercial services to customers in the biopharmaceutical, biotechnology, and medical device industries. We offer both stand-alone and integrated biopharmaceutical product development solutions through our Contract Research Organization (“CRO”) and Contract Commercial Organization (“CCO”), ranging from Early Phase (Phase I) clinical trials to the full commercialization of biopharmaceutical products, with the goal of increasing the likelihood of regulatory approval and commercial success.

Our operations are divided into two reportable segments, Clinical Solutions and Commercial Solutions, to reflect the structure under which we operate, evaluate our performance, make strategic decisions, and allocate resources. Our Clinical Solutions segment offers a variety of services spanning Phases I-IV of clinical development, including full-service global studies, as well as individual service offerings such as clinical monitoring, investigator recruitment, patient recruitment, data management, and study startup to assist customers with their drug development process. Our Commercial Solutions segment provides the pharmaceutical, biotechnology, and healthcare industries with commercialization services, including deployment solutions, communication solutions (public relations and advertising), and consulting services. We integrate our clinical and commercial capabilities into customized solutions by sharing knowledge, data, and insights through our biopharmaceutical acceleration model (“BAM”). This collaboration across the development and commercialization continuum facilitates unique insights into patient populations, therapeutic environments, product timelines, and the competitive landscape. For further discussion, refer to “Note 11 - Segment Information” of our unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.

COVID-19 Pandemic

On March 11, 2020, the World Health Organization designated the outbreak of the novel strain of coronavirus that causes the disease known as COVID-19 as a global pandemic. Governments and businesses around the world have taken unprecedented actions to mitigate the spread of COVID-19, including, but not limited to, shelter-in-place orders, quarantines, significant restrictions on travel, social distancing practices as well as restrictions that prohibit many employees from going to work.

Since March 2020, we have implemented contingency planning to protect the health and well-being of our employees, with most employees working remotely where possible. We have global and regional crisis teams in place monitoring the rapidly evolving situation and recommending risk mitigation actions. We have implemented travel restrictions as well as visitor protocols and we are following social distancing practices. We have assessed and implemented continuity plans to provide customers with continued services.

We experienced significant impacts to our business and results of operations for the three and nine months ended September 30, 2020 due to COVID-19 and the mitigation actions taken to slow its spread.

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Since March 2020, the COVID-19 pandemic and its adverse effects have become more prevalent in the locations where we, our customers, suppliers, and partners conduct significant portions of our business, such as Europe and North America, and, as a result, we have experienced more pronounced disruptions in our operations during the second and third quarters of 2020. As a result of these conditions, we have taken steps to mitigate the revenue and cash flow impacts in the second and third quarters of 2020, including cost management strategies consisting of certain temporary compensation adjustments, our ForwardBound margin enhancement initiative, hiring restrictions, staffing reductions, voluntary and involuntary employee furloughs, reductions in third-party costs, and other initiatives. Some of these cost savings measures ended in the third quarter, including certain compensation adjustments.

In our Clinical Solutions segment, we continue to expect impacts to be temporary and relate to limitations on our ability to physically access investigative sites, delays in patient enrollment and trial start-up activities, as well as delayed decision making related to new business awards. Our full service studies and, to a lesser extent, our functional service provider offering have been impacted, and we expect them to continue to be impacted, by a switch from site-based monitoring visits to remote monitoring visits, and reduced capacity of businesses that utilize our services or facilities we use to conduct our business during the pandemic. As of September 30, 2020, a substantial number of our clinical trial sites have returned to allowing physical monitoring visits. In our Commercial Solutions segment, we continue to expect impacts to be temporary and relate to delayed decision making related to new business awards, delays or cancellations of existing projects, declines in field team visits to healthcare providers, and travel disruptions.

We remain confident in our liquidity position, which includes cash on hand of $248.9 million as of September 30, 2020, and access to our revolving credit facility. We have also implemented cash conservation initiatives, including reducing operating costs, deferring certain payroll taxes and other tax payments as permitted by various government stimulus packages in multiple jurisdictions, and entering into interest rate swaps to fix certain variable rate debt at lower interest rates.

While certain governments eased restrictions during the latter part of the second quarter and continued to do so during the third quarter, the pandemic continues to be disruptive to our business. The extent to which COVID-19 impacts our future results will depend on future developments. To the extent that the pandemic continues or worsens or if new waves of infection occur, national, state, and local governments may impose additional restrictions or extend the restrictions already in place. The continuing spread of COVID-19 and the related safety and business operating restrictions could result in a number of adverse impacts to our business, including, but not limited to, additional disruption to the economy and our customers, additional work restrictions, and supply chains being interrupted or slowed. Also, governments may impose other laws, regulations, or taxes that could adversely impact our business, financial condition, or results of operations. Further, depending on the extent to which our customers are affected, they could further delay or reduce purchases of services we provide. The effects of COVID-19 also could impact us in a number of other ways including, but not limited to, additional reductions to our profitability, fluctuations in foreign currency markets, the availability of future borrowings, the cost of borrowings, credit risks of our customers and counterparties, and potential impairment of the carrying amount of goodwill or other long-lived assets.

We will continue to actively monitor the situation and may take further precautionary and preemptive actions as may be required by national, state, or local authorities or that we determine are in the best interests of our employees, customers, partners, suppliers, and shareholders. To the extent the pandemic worsens, we cannot predict the effects it may have on our business, in particular with respect to demand for our services, our strategy, and our prospects, the effects on our customers, or the impact on our financial results. See Part II, Item 1A “Risk Factors” of this Quarterly Report on Form 10-Q for further discussion of the potential impact of the pandemic on our business.

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New Business Awards and Backlog

We add new business awards to backlog when we enter into a contract or when we receive a written commitment from the customer selecting us as a service provider, provided that:

 

•

collection of the award value is probable;

 

•

the project or projects are expected to commence within a certain period of time from the end of the quarter in which the award was granted;

 

•

project contingencies such as the outcome of other clinical trials, funding approvals, or other events, are not anticipated to prevent the project or projects from commencing in accordance with the expected timeline;

 

•

the customer has entered or intends to enter into a comprehensive contract as soon as practicable; and

 

•

for awards related to deployment solutions and functional service provider offerings, a maximum of twelve months of services are included in the award value.

In addition, we continually evaluate our backlog to determine if any of the previously awarded work is no longer expected to be performed, regardless of whether we have received formal cancellation notice from the customer. If we determine that any previously awarded work is no longer probable of being performed, we remove the value from our backlog based on the risk of cancellation. We recognize revenue from these awards as services are performed, provided we have entered into a contract with the customer.

We report new business awards for our Clinical Solutions and Commercial Solutions segments on a trailing twelve months (“TTM”) basis. Our total backlog represents backlog for our Clinical Solutions segment and the deployment solutions offering within our Commercial Solutions segment. We do not report backlog for the remaining service offerings in the Commercial Solutions segment.

Backlog

Our backlog consists of anticipated future revenue from business awards that either have not started, or that are in process and have not been completed. Our backlog also reflects any cancellation or adjustment activity related to these awards. The average duration of our contracts will fluctuate from period to period based on the contracts comprising our backlog at any given time. The majority of our contracts contain early termination provisions that typically require notice periods ranging from 30 to 90 days depending on the service offering.

Our backlog was as follows as of September 30 (in millions):

 

 

 

2020

 

 

2019

 

 

Change

 

Clinical Solutions

 

$

9,196.3

 

 

$

7,781.8

 

 

$

1,414.5

 

 

 

18.2

%

Commercial Solutions - Deployment Solutions

 

 

586.7

 

 

 

597.5

 

 

 

(10.8

)

 

 

(1.8

)%

Total backlog

 

$

9,783.0

 

 

$

8,379.3

 

 

$

1,403.7

 

 

 

16.8

%

 

We expect approximately $0.96 billion of our backlog as of September 30, 2020 will be recognized as revenue during the remainder of 2020. We adjust the amount of our backlog each quarter for the effects of fluctuations in foreign currency exchange rates.

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Net New Business Awards

New business awards, net of cancellations, were as follows for the TTM periods ended September 30 (in millions):

 

 

 

2020

 

 

2019

 

Clinical Solutions

 

$

4,711.3

 

 

$

3,911.9

 

Commercial Solutions

 

 

1,180.8

 

 

 

1,260.1

 

Total net new business awards

 

$

5,892.1

 

 

$

5,172.0

 

 

New business awards have varied and may continue to vary significantly from quarter to quarter. Fluctuations in our net new business award levels often result from the fact that we may receive a small number of relatively large orders in any given reporting period. Because of these large orders, our backlog and net new business awards in a reporting period may reach levels that are not sustainable in subsequent reporting periods.

We believe that our backlog and net new business awards might not be consistent indicators of future revenue because they have been, and likely will continue to be, affected by a number of factors, including the variable size and duration of projects, many of which are performed over several years, and changes to the scope of work during the course of projects. Additionally, projects may be canceled or delayed by the customer or regulatory authorities. Net new business awards and backlog have been and we expect will continue to be affected by the broad effects of the COVID-19 pandemic on the global economy and major financial markets, as well as various other risks and uncertainties detailed in Part II, Item 1A “Risk Factors” of this Quarterly Report on Form 10-Q. We generally do not have a contractual right to the full amount of the awards reflected in our backlog. If a customer cancels an award, we might be reimbursed for the costs we have incurred. As we increasingly compete for and enter into large contracts that are more global in nature, we expect that the rate at which our backlog and net new business awards convert into revenue is likely to decrease, and the duration of projects and the period over which related revenue is recognized to lengthen. For more information about risks related to our backlog see Part I, Item 1A “Risk Factors - Risks Related to Our Business - Our backlog might not be indicative of our future revenues, and we might not realize all of the anticipated future revenue reflected in our backlog” included in “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019.

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Results of Operations

The following table sets forth amounts from our unaudited condensed consolidated statements of operations along with dollar and percentage changes (in thousands, except percentages):

 

 

 

Three Months Ended

September 30,

 

 

 

 

 

 

 

 

 

 

 

2020

 

 

2019

 

 

Change

 

Revenue

 

$

1,099,004

 

 

$

1,177,028

 

 

$

(78,024

)

 

 

(6.6

)%

Costs and operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Direct costs (exclusive of depreciation and amortization)

 

 

820,228

 

 

 

913,674

 

 

 

(93,446

)

 

 

(10.2

)%

Selling, general, and administrative expenses

 

 

111,096

 

 

 

109,864

 

 

 

1,232

 

 

 

1.1

%

Restructuring and other costs

 

 

6,523

 

 

 

13,456

 

 

 

(6,933

)

 

 

(51.5

)%

Transaction and integration-related expenses

 

 

6,955

 

 

 

10,454

 

 

 

(3,499

)

 

 

(33.5

)%

Depreciation and amortization

 

 

55,448

 

 

 

60,137

 

 

 

(4,689

)

 

 

(7.8

)%

Total operating expenses

 

 

1,000,250

 

 

 

1,107,585

 

 

 

(107,335

)

 

 

(9.7

)%

Income from operations

 

 

98,754

 

 

 

69,443

 

 

 

29,311

 

 

 

42.2

%

Total other expense (income), net

 

 

31,384

 

 

 

(532

)

 

 

31,916

 

 

n/m

 

Income before provision for income taxes

 

 

67,370

 

 

 

69,975

 

 

 

(2,605

)

 

 

(3.7

)%

Income tax expense

 

 

3,954

 

 

 

11,055

 

 

 

(7,101

)

 

 

(64.2

)%

Net income

 

$

63,416

 

 

$

58,920

 

 

$

4,496

 

 

 

7.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended

September 30,

 

 

 

 

 

 

 

 

 

 

 

2020

 

 

2019

 

 

Change

 

Revenue

 

$

3,275,758

 

 

$

3,462,861

 

 

$

(187,103

)

 

 

(5.4

)%

Costs and operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Direct costs (exclusive of depreciation and amortization)

 

 

2,550,134

 

 

 

2,718,005

 

 

 

(167,871

)

 

 

(6.2

)%

Selling, general, and administrative expenses

 

 

334,042

 

 

 

333,860

 

 

 

182

 

 

 

0.1

%

Restructuring and other costs

 

 

23,414

 

 

 

39,751

 

 

 

(16,337

)

 

 

(41.1

)%

Transaction and integration-related expenses

 

 

17,900

 

 

 

34,766

 

 

 

(16,866

)

 

 

(48.5

)%

Depreciation and amortization

 

 

167,576

 

 

 

182,086

 

 

 

(14,510

)

 

 

(8.0

)%

Total operating expenses

 

 

3,093,066

 

 

 

3,308,468

 

 

 

(215,402

)

 

 

(6.5

)%

Income from operations

 

 

182,692

 

 

 

154,393

 

 

 

28,299

 

 

 

18.3

%

Total other expense, net

 

 

65,899

 

 

 

70,429

 

 

 

(4,530

)

 

 

(6.4

)%

Income before provision for income taxes

 

 

116,793

 

 

 

83,964

 

 

 

32,829

 

 

 

39.1

%

Income tax expense

 

 

15,892

 

 

 

43,756

 

 

 

(27,864

)

 

 

(63.7

)%

Net income

 

$

100,901

 

 

$

40,208

 

 

$

60,693

 

 

 

150.9

%

 

Revenue

For the three months ended September 30, 2020, our revenue decreased by $78.0 million, or 6.6%, to $1,099.0 million from $1,177.0 million for the three months ended September 30, 2019. For the nine months ended September 30, 2020, our revenue decreased by $187.1 million, or 5.4%, to $3,275.8 million from $3,462.9 million for the nine months ended September 30, 2019. These decreases were primarily driven by the impact of the COVID-19 pandemic, including the related decline in reimbursable out-of-pocket expenses, in both our Clinical Solutions and Commercial Solutions segments, as discussed below.

No single customer accounted for greater than 10% of our revenue for the three and nine months ended September 30, 2020. Revenue from our top five customers accounted for approximately 23% and 22% of revenue for the three months ended September 30, 2020 and 2019, respectively, and 22% and 23% of revenue for the nine months ended September 30, 2020 and 2019, respectively.

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Revenue for each of our segments was as follows (dollars in thousands):

 

 

 

Three Months Ended September 30,

 

 

 

 

 

 

 

 

 

 

 

2020

 

 

% of total

 

 

2019

 

 

% of total

 

 

Change

 

Clinical Solutions

 

$

829,163

 

 

 

75.4

%

 

$

867,427

 

 

 

73.7

%

 

$

(38,264

)

 

 

(4.4

)%

Commercial Solutions

 

 

269,841

 

 

 

24.6

%

 

 

309,601

 

 

 

26.3

%

 

 

(39,760

)

 

 

(12.8

)%

Total revenue

 

$

1,099,004

 

 

 

 

 

 

$

1,177,028

 

 

 

 

 

 

$

(78,024

)

 

 

(6.6

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30,

 

 

 

 

 

 

 

 

 

 

 

2020

 

 

% of total

 

 

2019

 

 

% of total

 

 

Change

 

Clinical Solutions

 

$

2,451,168

 

 

 

74.8

%

 

$

2,522,307

 

 

 

72.8

%

 

$

(71,139

)

 

 

(2.8

)%

Commercial Solutions

 

 

824,590

 

 

 

25.2

%

 

 

940,554

 

 

 

27.2

%

 

 

(115,964

)

 

 

(12.3

)%

Total revenue

 

$

3,275,758

 

 

 

 

 

 

$

3,462,861

 

 

 

 

 

 

$

(187,103

)

 

 

(5.4

)%

 

Clinical Solutions

For the three and nine months ended September 30, 2020, revenue attributable to our Clinical Solutions segment decreased compared to the same periods in the prior year primarily due to the impacts of the COVID-19 pandemic, including the related decline in reimbursable out-of-pocket expenses, and the sale of the contingent staffing business during the second quarter. For the three months ended September 30, 2020, revenue was positively impacted by $7.5 million from foreign currency exchange rates fluctuations, whereas for the nine months ended September 30, 2020, revenue was negatively impacted by $4.0 million from foreign currency exchange rates fluctuations compared to the respective prior periods.

During the third quarter, the pandemic continued to impact our ability to physically access investigative sites and delayed patient enrollment and trial start-up activities. However, there were positive trends related to these activities. The negative impacts of the pandemic were partially mitigated by performing remote monitoring visits that had previously been converted from site-based monitoring. As a result, revenue for the third quarter was more comparable with the prior year period than it was in the second quarter, although the Company continues to experience lower reimbursable out-of-pocket expenses as a result of remote monitoring. The decrease in revenue for the nine months ended September 30, 2020 was partially offset by revenue growth during the first quarter.

Although we are aggressively managing our response to the COVID-19 pandemic, it is expected to continue to negatively impact our full year 2020 Clinical Solutions revenue. At this time, we believe that the most significant ongoing impacts to revenue in our Clinical Solutions segment will be temporary and relate to limitations on our ability to physically access investigative sites, delays in patient enrollment and trial start-up activities, as well as delayed decision making related to new business awards. Our full service studies and, to a lesser extent, our functional service provider offering have been impacted, and we expect them to continue to be impacted, by a switch from site-based monitoring visits to remote monitoring visits, and reduced capacity of businesses that utilize our services or facilities we use to conduct our business during the pandemic. The trend of more remote monitoring visits is expected to continue after the pandemic, resulting in lower reimbursable out-of-pocket expenses and related revenue in the future. As of September 30, 2020, a substantial number of our clinical trial sites have returned to allowing physical monitoring visits.

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Commercial Solutions

For the three and nine months ended September 30, 2020, revenue attributable to our Commercial Solutions segment decreased compared to the same periods in the prior year primarily due to the impacts of the COVID-19 pandemic, including the related decline in reimbursable out-of-pocket expenses as well as the negative impact of delays in new project starts.

Although we are aggressively managing our response to the COVID-19 pandemic, it is expected to continue to negatively impact our full year 2020 Commercial Solutions revenue. At this time, we believe that the most significant ongoing impacts to revenue in our Commercial Solutions segment will be temporary and relate to delayed decision making related to new business awards, delays or cancellations of existing projects, declines in field team visits to healthcare providers, and travel disruptions.

Direct Costs

Direct costs consist principally of compensation expense and benefits associated with our employees and other employee-related costs, and reimbursable out-of-pocket expenses directly related to delivering on our projects. While we have some ability to manage the majority of these costs relative to the amount of contracted services we have during any given period, direct costs as a percentage of revenue can vary from period to period. Such fluctuations are due to a variety of factors, including, among others: (i) the level of staff utilization on our projects; (ii) adjustments to the timing of work on specific customer contracts; (iii) the experience mix of personnel assigned to projects; (iv) the service mix and pricing of our contracts; and (v) the timing of the incurrence of reimbursable out-of-pocket expenses. As a result of the COVID-19 pandemic, we have experienced reduced travel and other reimbursable out-of-pocket expenses related to lower customer site visits for Clinical Solutions, as well as lower physician office visits and investigator meetings for Commercial Solutions. In addition, as global projects wind down or as delays and cancellations occur, staffing levels in certain countries or functional areas can become misaligned with the current business volume.

Direct costs consisted of the following (dollars in thousands):

 

 

 

Three Months Ended September 30,

 

 

 

 

 

 

 

 

 

 

 

2020

 

 

2019

 

 

Change

 

Direct costs (exclusive of depreciation and amortization)

 

$

820,228

 

 

$

913,674

 

 

$

(93,446

)

 

 

(10.2

)%

% of revenue

 

 

74.6

%

 

 

77.6

%

 

 

 

 

 

 

 

 

Gross margin %

 

 

25.4

%

 

 

22.4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30,

 

 

 

 

 

 

 

 

 

 

 

2020

 

 

2019

 

 

Change

 

Direct costs (exclusive of depreciation and amortization)

 

$

2,550,134

 

 

$

2,718,005

 

 

$

(167,871

)

 

 

(6.2

)%

% of revenue

 

 

77.8

%

 

 

78.5

%

 

 

 

 

 

 

 

 

Gross margin %

 

 

22.2

%

 

 

21.5

%

 

 

 

 

 

 

 

 

 

For the three months ended September 30, 2020, our direct costs decreased by $93.4 million, or 10.2%, compared to the three months ended September 30, 2019. For the nine months ended September 30, 2020, our direct costs decreased by $167.9 million, or 6.2%, compared to the nine months ended September 30, 2019. These decreases were primarily driven by the impacts of the COVID-19 pandemic and our cost management strategies in both our Clinical Solutions and Commercial Solutions segments as discussed below.

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Clinical Solutions

Direct costs for our Clinical Solutions segment, excluding share-based compensation expense, were as follows (dollars in thousands):

 

 

 

Three Months Ended September 30,

 

 

 

 

 

 

 

 

 

 

 

2020

 

 

2019

 

 

Change

 

Direct costs

 

$

600,634

 

 

$

655,851

 

 

$

(55,217

)

 

 

(8.4

)%

% of segment revenue

 

 

72.4

%

 

 

75.6

%

 

 

 

 

 

 

 

 

Segment gross margin %

 

 

27.6

%

 

 

24.4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30,

 

 

 

 

 

 

 

 

 

 

 

2020

 

 

2019

 

 

Change

 

Direct costs

 

$

1,868,028

 

 

$

1,936,021

 

 

$

(67,993

)

 

 

(3.5

)%

% of segment revenue

 

 

76.2

%

 

 

76.8

%

 

 

 

 

 

 

 

 

Segment gross margin %

 

 

23.8

%

 

 

23.2

%

 

 

 

 

 

 

 

 

 

For the three months ended September 30, 2020, our Clinical Solutions direct costs decreased by $55.2 million, or 8.4%, compared to the three months ended September 30, 2019. For the nine months ended September 30, 2020, our Clinical Solutions segment direct costs decreased by $68.0 million, or 3.5%, compared to the nine months ended September 30, 2019. The decrease for the periods compared to the prior year was primarily due to lower reimbursable out-of-pocket expenses and billable headcount, primarily due to COVID-19. There were additional decreases in direct costs from the impact of various cost management strategies and foreign currency exchange rate fluctuations. These cost management strategies included certain temporary compensation adjustments, our ForwardBound margin enhancement initiative, hiring restrictions, staffing reductions, voluntary and involuntary employee furloughs, reductions in third-party costs, and other initiatives. Some of these cost savings measures ended in the third quarter, including certain compensation adjustments.

Gross margins for our Clinical Solutions segment were 27.6% for the three months ended September 30, 2020, compared to 24.4% for the three months ended September 30, 2019 and 23.8% for the nine months ended September 30, 2020, compared to 23.2% for the nine months ended September 30, 2019. Gross margins were higher during the current year periods as compared to the same periods in 2019, primarily due to reduced travel and other reimbursable out-of-pocket expenses, and the impact of our cost management strategies, partially offset by the impact from lower revenue.

Although we are aggressively managing our response to the COVID-19 pandemic, it is expected to continue to negatively impact our full year 2020 Clinical Solutions margins. At this time, we continue to believe that the most significant impacts to margins in our Clinical Solutions segment will be those noted in the above Revenue section, partially offset by the impact of our cost management strategies and the impact of lower reimbursable out-of-pocket expenses. The trend of more remote monitoring visits is expected to continue after the pandemic, resulting in lower reimbursable out-of-pocket expenses and related revenue in the future.  

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Table of Contents

 

Commercial Solutions

Direct costs for our Commercial Solutions segment, excluding share-based compensation expense, were as follows (dollars in thousands):

 

 

 

Three Months Ended September 30,

 

 

 

 

 

 

 

 

 

 

 

2020

 

 

2019

 

 

Change

 

Direct costs

 

$

211,894

 

 

$

250,904

 

 

$

(39,010

)

 

 

(15.5

)%

% of segment revenue

 

 

78.5

%

 

 

81.0

%

 

 

 

 

 

 

 

 

Segment gross margin %

 

 

21.5

%

 

 

19.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30,

 

 

 

 

 

 

 

 

 

 

 

2020

 

 

2019

 

 

Change

 

Direct costs

 

$

658,118

 

 

$

759,591

 

 

$

(101,473

)

 

 

(13.4

)%

% of segment revenue

 

 

79.8

%

 

 

80.8

%

 

 

 

 

 

 

 

 

Segment gross margin %

 

 

20.2

%

 

 

19.2

%

 

 

 

 

 

 

 

 

 

For the three months ended September 30, 2020, our Commercial Solutions segment direct costs decreased by $39.0 million, or 15.5%, compared to the three months ended September 30, 2019. For the nine months ended September 30, 2020, our Commercial Solutions segment direct costs decreased by $101.5 million, or 13.4%, compared to the nine months ended September 30, 2019. These decreases were primarily related to reduced billable headcount, declines in reimbursable out-of-pocket expenses, and the impact of our cost management strategies, which were all primarily in response to the COVID-19 pandemic. These cost management strategies included certain temporary compensation adjustments, our ForwardBound margin enhancement initiative, hiring restrictions, staffing reductions, voluntary and involuntary employee furloughs, reductions in third-party costs, and other initiatives. Some of these cost savings measures ended in the third quarter, including certain compensation adjustments.

 

Gross margins for our Commercial Solutions segment were 21.5% for the three months ended September 30, 2020, compared to 19.0% for the three months ended September 30, 2019 and 20.2% for the nine months ended September 30, 2020, compared to 19.2% for the nine months ended September 30, 2019. Gross margins were higher during the current year periods compared to the same periods in 2019 primarily due to lower reimbursable out-of-pocket expenses and the impact of our cost management strategies, which were both primarily due to the COVID-19 pandemic, partially offset by the impact from lower revenue.

Although lower reimbursable out-of-pocket expenses has resulted in higher gross margins, we continue to aggressively manage our response to the COVID-19 pandemic to limit impact to our full year 2020 Commercial Solutions profitability. At this time, we continue to believe that the most significant impacts in our Commercial Solutions segment will be those noted in the above Revenue section, partially offset by the impact of our cost management strategies.

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Table of Contents

 

Selling, General, and Administrative Expenses

Selling, general, and administrative expenses were as follows (dollars in thousands):

 

 

 

Three Months Ended September 30,

 

 

 

 

 

 

 

 

 

 

 

2020

 

 

2019

 

 

Change

 

Selling, general, and administrative expenses

 

$

111,096

 

 

$

109,864

 

 

$

1,232

 

 

 

1.1

%

% of total revenue

 

 

10.1

%

 

 

9.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30,

 

 

 

 

 

 

 

 

 

 

 

2020

 

 

2019

 

 

Change

 

Selling, general, and administrative expenses

 

$

334,042

 

 

$

333,860

 

 

$

182

 

 

 

0.1

%

% of total revenue

 

 

10.2

%

 

 

9.6

%

 

 

 

 

 

 

 

 

Selling, general, and administrative expenses for the three and nine months ended September 30, 2020 were comparable to the same periods in 2019. Higher employee-related costs, including share-based compensation, were partially offset by the favorable impacts from our cost management strategies, primarily in response to the COVID-19 pandemic as well as our ForwardBound margin enhancement initiative. Our cost management strategies implemented in response to the uncertainty caused by the pandemic included certain temporary compensation adjustments, hiring restrictions, staffing reductions, voluntary and involuntary employee furloughs, reductions in third-party costs, and other initiatives. Some of these cost savings measures ended in the third quarter, including certain compensation adjustments.

Restructuring and Other Costs

Restructuring and other costs were $6.5 million and $13.5 million for the three months ended September 30, 2020 and 2019, respectively, and $23.4 million and $39.8 million for the nine months ended September 30, 2020 and 2019, respectively. In connection with the 2017 merger (the “Merger”) with Double Eagle Parent, Inc., the parent company of inVentiv Health, Inc., we established a restructuring plan to eliminate redundant positions and reduce our facility footprint worldwide. Additionally, for the three and nine months ended September 30, 2020 and 2019, we incurred employee severance costs and facility closure costs for non Merger-related restructuring activities, as we continue the ongoing evaluations of our workforce and facilities infrastructure needs in an effort to optimize our resources. The costs incurred during the three months ended September 30, 2020 were primarily related to our cost management strategies in response to the COVID-19 pandemic as well as our ForwardBound initiative.

Restructuring and other costs consisted of the following (in thousands):

 

 

 

Three Months Ended

September 30,

 

 

Nine Months Ended

September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Merger-related restructuring and other costs:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Employee severance and benefit costs

 

$

—

 

 

$

2,288

 

 

$

962

 

 

$

14,537

 

Facility and lease termination costs

 

 

425

 

 

 

2,283

 

 

 

1,256

 

 

 

10,741

 

Non Merger-related restructuring and other costs:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Employee severance and benefit costs

 

 

5,903

 

 

 

5,797

 

 

 

20,209

 

 

 

11,070

 

Facility and lease termination costs

 

 

72

 

 

 

2,855

 

 

 

349

 

 

 

3,130

 

Other costs

 

 

123

 

 

 

233

 

 

 

638

 

 

 

273

 

Total restructuring and other costs

 

$

6,523

 

 

$

13,456

 

 

$

23,414

 

 

$

39,751

 

 

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Table of Contents

 

We expect to continue to incur significant costs related to the restructuring of our operations. However, the timing and the amount of these costs depends on various factors, including, but not limited to, identifying and realizing synergy opportunities and executing the integration of our combined operations. We may also continue to incur additional restructuring and other costs during 2020 related to our cost savings initiatives, including our response to the COVID-19 pandemic and our ForwardBound margin enhancement initiative.

Transaction and Integration-Related Expenses

Transaction and integration-related expenses consisted of the following (in thousands):

 

 

 

Three Months Ended

September 30,

 

 

Nine Months Ended

September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Professional fees

 

$

5,656

 

 

$

7,108

 

 

$

18,217

 

 

$

26,632

 

Debt modification and related expenses

 

 

4

 

 

 

1,582

 

 

 

75

 

 

 

5,555

 

Integration and personnel retention-related costs

 

 

1,143

 

 

 

1,394

 

 

 

3,399

 

 

 

3,150

 

Fair value adjustments to contingent obligations

 

 

152

 

 

 

370

 

 

 

(3,791

)

 

 

(571

)

Total transaction and integration-related expenses

 

$

6,955

 

 

$

10,454

 

 

$

17,900

 

 

$

34,766

 

 

As expected, our transaction and integration-related expenses have decreased in both 2020 periods as compared to the 2019 periods. We expect to continue to incur professional fees and integration-related costs associated with the Merger, primarily related to the continued consolidation of our legal entities and information technology systems.

The decrease in fair value adjustments to contingent obligations during the nine months ended September 30, 2020 as compared to 2019 is primarily due to a decrease in the estimate of the contingent earn-out liability associated with our acquisition of Kinapse Topco Limited in 2018.

Depreciation and Amortization Expense

Total depreciation and amortization expense was $55.4 million and $60.1 million for the three months ended September 30, 2020 and 2019, respectively, and $167.6 million and $182.1 million for the nine months ended September 30, 2020 and 2019, respectively. The decreases in total depreciation and amortization expense were primarily due to decreases in amortization expense from intangible assets resulting from business combinations completed in prior periods and decreases in depreciation expense related to fully depreciated assets.

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Table of Contents

 

Total Other Expense (Income), Net

Total other expense (income), net consisted of the following (dollars in thousands):

 

 

 

Three Months Ended September 30,

 

 

 

 

 

 

 

 

 

 

 

2020

 

 

2019

 

 

Change

 

Interest expense, net

 

$

20,442

 

 

$

30,181

 

 

$

(9,739

)

 

 

(32.3

)%

Loss on extinguishment of debt

 

 

346

 

 

 

—

 

 

 

346

 

 

n/m

 

Other expense (income), net

 

 

10,596

 

 

 

(30,713

)

 

 

41,309

 

 

n/m

 

Total other expense (income), net

 

$

31,384

 

 

$

(532

)

 

$

31,916

 

 

n/m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30,

 

 

 

 

 

 

 

 

 

 

 

2020

 

 

2019

 

 

Change

 

Interest expense, net

 

$

68,126

 

 

$

95,439

 

 

$

(27,313

)

 

 

(28.6

)%

Loss on extinguishment of debt

 

 

346

 

 

 

4,355

 

 

 

(4,009

)

 

 

(92.1

)%

Other income, net

 

 

(2,573

)

 

 

(29,365

)

 

 

26,792

 

 

 

(91.2

)%

Total other expense, net

 

$

65,899

 

 

$

70,429

 

 

$

(4,530

)

 

 

(6.4

)%

 

Total other expense (income), net was $31.4 million and $(0.5) million for the three months ended September 30, 2020 and 2019, respectively, and $65.9 million and $70.4 million for the nine months ended September 30, 2020 and 2019, respectively. The decreases in interest expense were primarily due to reductions in our higher interest rate debt as well as lower variable base interest rates. Other expense (income), net primarily consists of foreign currency gains and losses that result from exchange rate fluctuations on our monetary asset balances denominated in currencies other than our functional currency.

Income Tax Expense

For the three and nine months ended September 30, 2020, we recorded income tax expense of $4.0 million and $15.9 million, respectively, compared to pre-tax income of $67.4 million and $116.8 million, respectively. Income tax expense for the three and nine months ended September 30, 2020 included a discrete tax benefit of $18.8 million and $24.3 million, respectively, primarily related to the recognition of United States federal unrecognized tax benefits, excess tax benefits from share-based compensation, and the tax benefit from foreign tax credits claimed on amended returns filed during the year. The effective tax rate for the three and nine months ended September 30, 2020, excluding discrete items, varied from the United States federal statutory income tax rate of 21.0% primarily due to foreign income inclusions such as the Global Intangible Low-Taxed Income provisions (“GILTI”), state and local taxes on United States income, and research and general business credits.

For the three and nine months ended September 30, 2019, we recorded income tax expense of $11.1 million and $43.8 million, respectively, compared to pre-tax income of $70.0 million and $84.0 million, respectively. Income tax expense for the three and nine months ended September 30, 2019 included a discrete tax benefit of $0.1 million and discrete tax expense of $10.3 million, respectively, primarily related to a reduction in deferred tax assets associated with the closing of a Canadian business unit in the nine month period and prior year adjustments. The effective tax rate for the three and nine months ended September 30, 2019, excluding discrete items, varied from the United States federal statutory income tax rate of 21.0% primarily due to base erosion and anti-abuse minimum tax (“BEAT”), foreign income inclusions such as GILTI, and a valuation allowance change on domestic deferred tax assets.

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Table of Contents

 

We currently maintain a valuation allowance against a portion of our state deferred tax assets and a portion of our foreign deferred tax assets as of September 30, 2020. We intend to continue to maintain a valuation allowance on these deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of these allowances.

The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted on March 27, 2020 in the United States to address the economic impacts of the COVID-19 pandemic. The CARES Act includes corporate income tax, payroll tax, and other relief provisions. We do not expect there to be a significant impact to our income tax provision as a result of the CARES Act and other global measures for the year ending December 31, 2020. We qualify for certain employer payroll tax credits, which will be treated as government subsidies to offset related operating expenses, as well as the deferral of certain payroll and other tax payments into the future. We have deferred, and plan to continue deferring, the timing of certain income tax payments and other taxes as permitted by the CARES Act and other stimulus measures enacted globally.

Numerous final and proposed tax regulations were issued during the three months ended September 30, 2020, including additional guidance related to changes included in the Tax Cuts and Jobs Act. The regulations included updated guidance related to items such as interest expense limitations pursuant to Section 163(j), GILTI high-tax exclusion, and Foreign Tax Credits. These regulations included certain elective provisions and may be retrospectively applied to our 2018 and 2019 tax years. We are continuing to evaluate these elective provisions.

Liquidity and Capital Resources

Key measures of our liquidity were as follows (in thousands):

 

 

 

September 30, 2020

 

 

December 31, 2019

 

Balance sheet statistics:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

248,629

 

 

$

163,227

 

Restricted cash

 

 

267

 

 

 

462

 

Working capital (excluding restricted cash)

 

 

84,193

 

 

 

45,241

 

As of September 30, 2020, we had $248.9 million of cash, cash equivalents, and restricted cash. As of September 30, 2020, the majority of our cash, cash equivalents, and restricted cash was held within the United States. In addition, we had $581.4 million (net of $18.6 million in outstanding letters of credit (“LOCs”)) available for borrowing under our revolving credit facility (the “Revolver”), of which $131.4 million was available for LOCs.

On October 26, 2020, we entered into a stock purchase agreement (the “Purchase Agreement”) with Synteract, Inc.’s parent company for the purchase of 100% of the outstanding shares of Synteract for an aggregate purchase price of $400 million in cash (the “Synteract Acquisition”), subject to certain customary working capital and other adjustments. Synteract is a contract research organization focused on the emerging biopharmaceutical industry. The Synteract Acquisition is expected to close in the fourth quarter of 2020, subject to the satisfaction or waiver of the closing conditions. The purchase price of the Synteract Acquisition is expected to be funded using cash on hand and borrowings under our Revolver.

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Table of Contents

 

We have historically funded our operations and growth, including acquisitions, primarily with our working capital, cash flow from operations, and funds available through various borrowing arrangements. Our principal liquidity requirements are to fund our debt service obligations, capital expenditures, expansion of service offerings, possible acquisitions, integration and restructuring costs, geographic expansion, stock repurchases, working capital, and other general corporate expenses. Cash from operations also could be affected by various risks and uncertainties, including, but not limited to, the effects of the COVID-19 pandemic on the global economy and major financial markets, as well as other risks detailed in Part II, Item 1A “Risk Factors” of this Quarterly Report on Form 10-Q. We have implemented cash conservation initiatives, including delaying certain capital expenditures, reducing operating costs, deferring certain payroll taxes and other tax payments as permitted by various government stimulus packages in multiple jurisdictions, and entering into interest rate swaps to fix certain variable rate debt at lower interest rates. Based on past performance and current expectations, we believe our cash and cash equivalents, cash generated from operations, and funds available under the Revolver will be sufficient to meet our working capital needs, capital expenditures, scheduled debt and interest payments, income tax obligations, and other currently anticipated liquidity requirements for at least the next 12 months.

As the impact of the COVID-19 pandemic on the economy and our operations evolves, we will continue to assess our liquidity needs. A continued worldwide disruption could materially affect our future access to sources of liquidity, particularly our cash flows from operations, and financial condition. In the event of a sustained market deterioration, we may need additional liquidity, which would require us to evaluate available alternatives and take appropriate actions.

Indebtedness

As of September 30, 2020, we had approximately $2.58 billion of total principal indebtedness (including $45.0 million in finance lease obligations), consisting of $2.23 billion in term loan debt, and $300.0 million in borrowings against our accounts receivable financing agreement.

Credit Agreement

We are party to a credit agreement (as amended, the “Credit Agreement”) that includes a $1.55 billion Term Loan A facility that matures on March 26, 2024 (“Term Loan A”), a $1.60 billion Term Loan B facility that matures on August 1, 2024 (“Term Loan B”), and a $600.0 million Revolver that matures on March 26, 2024.

During the three months ended September 30, 2020, we made $40.0 million and $35.0 million of voluntary prepayments against Term Loan A and Term Loan B, respectively, and repaid the outstanding $150.0 million balance on the Revolver. The Term Loan A prepayments were applied to the mandatory principal payments due October 2020 and January 2021 and to a partial principal payment for April 2021. Additionally, during the three and nine months ended September 30, 2020, we made $19.4 million and $38.8 million of mandatory principal payments towards Term Loan A, respectively. As a result of previous voluntary prepayments, we are not required to make a mandatory payment against the Term Loan B principal balance until maturity in August 2024.

In February 2020, as a result of our Secured Leverage Ratio (as defined in the Credit Agreement) being less than or equal to 2.75x, the Adjusted Eurocurrency Rate Spread (as defined in the Credit Agreement) on our Term B Loans decreased from 2.00% to 1.75%.

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Table of Contents

 

Our ability to make payments on our indebtedness and to fund planned capital expenditures and necessary working capital will depend on our ability to generate cash in the future. Our ability to meet our cash needs through cash flows from operations will depend on the demand for our services, as well as general economic, financial, competitive, and other factors, many of which are beyond our control, including the broad effects of the COVID-19 pandemic on the global economy and major financial markets. Our business may not generate cash flow in an amount sufficient to enable us to pay the principal of, or interest on, our indebtedness, or to fund our other liquidity needs, including working capital, capital expenditures, acquisitions, investments, and other general corporate requirements. If we cannot fund our liquidity needs, we will have to take actions such as reducing or delaying capital expenditures, acquisitions or investments, selling assets, restructuring or refinancing our debt, reducing the scope of our operations and growth plans, or seeking additional capital. We cannot assure you that any of these remedies could, if necessary, be affected on commercially reasonable terms, or at all, or that they would permit us to meet our scheduled debt service obligations. Our Credit Agreement contains covenant restrictions that limit our ability to direct the use of proceeds from any disposition of assets and, as a result, we may not be allowed to use the proceeds from any such dispositions to satisfy all current debt service obligations.

Debt Covenants

Our Credit Agreement contains usual and customary restrictive covenants. Our Credit Agreement requires us to maintain a maximum First Lien Leverage Ratio (as defined in the Credit Agreement) of no more than 4.5 to 1.0 as of the last day of each fiscal quarter from and after March 31, 2020. We were in compliance with all applicable debt covenants as of September 30, 2020.

Revolver and Letters of Credit

The Revolver includes LOCs with a sublimit of $150.0 million. As of September 30, 2020, there were $18.6 million of LOCs outstanding, leaving $581.4 million of available borrowings under the Revolver, including $131.4 million available for LOCs.

Accounts Receivable Financing Agreement

On September 25, 2020, we amended our accounts receivable financing agreement to increase the amount we can borrow from $275.0 million to $300.0 million and extend the maturity date to October 2022, and drew down the additional $25.0 million. As of September 30, 2020, we had $300.0 million of outstanding borrowings under this agreement with no remaining borrowing capacity available.

Interest Rates

We have entered into various interest rate swaps to mitigate our exposure to changes in interest rates on our term loans. As of September 30, 2020, the percentage of our total principal debt (excluding leases) that is subject to fixed interest rates was approximately 59%. Each quarter-point increase or decrease in the applicable floating interest rate at September 30, 2020 would change our annual interest expense by approximately $2.6 million.

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Stock Repurchase Program

On February 26, 2018, our Board of Directors (our “Board”) authorized the repurchase of up to an aggregate of $250.0 million of our common stock to be executed from time to time in open market transactions effected through a broker at prevailing market prices, in block trades, or privately negotiated transactions through December 31, 2019 (the “stock repurchase program”). On December 5, 2019, our Board approved an expansion and extension of the stock repurchase program. The Board increased the share repurchase authorization of our common stock to $300.0 million and extended the term of the program to December 31, 2020. Share repurchases are funded primarily with our working capital, cash flow from operations, and funds available through various borrowing arrangements.

We are not obligated to repurchase any particular amount of our common stock, and the stock repurchase program may be modified, extended, suspended, or discontinued at any time. The timing and amount of repurchases is determined by our management based on a variety of factors such as the market price of our common stock, our corporate requirements for cash, and overall market conditions. The stock repurchase program is subject to applicable legal requirements, including federal and state securities laws and applicable Nasdaq rules.

The following table sets forth repurchase activity under the stock repurchase program from inception through September 30, 2020:

 

 

 

Total number of

shares purchased

 

 

Average price

paid per share

 

 

Approximate

value of

shares purchased

(in thousands)

 

March 2018

 

 

948,100

 

 

$

39.55

 

 

$

37,493

 

April 2018

 

 

1,024,400

 

 

 

36.60

 

 

 

37,492

 

January 2019

 

 

552,100

 

 

 

39.16

 

 

 

21,623

 

February 2019

 

 

120,600

 

 

 

41.40

 

 

 

4,993

 

June 2019

 

 

509,100

 

 

 

45.29

 

 

 

23,055

 

August 2019

 

 

141,100

 

 

 

49.93

 

 

 

7,045

 

March 2020

 

 

600,000

 

 

 

53.38

 

 

 

32,029

 

September 2020

 

 

506,244

 

 

 

59.26

 

 

 

30,000

 

Total

 

 

4,401,644

 

 

 

 

 

 

$

193,730

 

As of September 30, 2020, we had remaining authorization to repurchase up to approximately $106.3 million of shares of our common stock under the stock repurchase program.

Cash, Cash Equivalents and Restricted Cash

Our cash flows from operating, investing, and financing activities were as follows (in thousands):

 

 

 

Nine Months Ended September 30,

 

 

 

 

 

 

 

2020

 

 

2019

 

 

Change

 

Net cash provided by operating activities

 

$

311,167

 

 

$

157,933

 

 

$

153,234

 

Net cash used in investing activities

 

 

(45,352

)

 

 

(59,872

)

 

 

14,520

 

Net cash used in financing activities

 

 

(188,176

)

 

 

(123,885

)

 

 

(64,291

)

 

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Cash Flows from Operating Activities

Cash flows provided by operating activities increased by $153.2 million during the nine months ended September 30, 2020, compared to the nine months ended September 30, 2019. The increase is primarily due to both positive changes in operating assets and liabilities relative to the prior year and higher cash-related net income. Fluctuations in accounts receivable, unbilled services (including contract assets), and deferred revenue occur on a regular basis as we perform services, achieve milestones or other billing criteria, send invoices to customers, and collect outstanding accounts receivable. This activity varies by individual customer and contract. We attempt to negotiate payment terms that provide for payment of services prior to or soon after the provision of services, but the levels of accounts receivable, unbilled services (including contract assets), and deferred revenue can vary significantly from period to period. The impacts of the COVID-19 pandemic could result in lower cash flows from operating activities during 2020 as a result of the impacts on our revenue and costs.

Cash Flows from Investing Activities

For the nine months ended September 30, 2020, we used $45.4 million in cash for investing activities, which consisted of $38.5 million for purchases of property and equipment and $6.9 million for investments in unconsolidated affiliates. We continue to closely monitor our capital expenditures, especially in light of the COVID-19 pandemic, while making strategic investments in the development of our information technology infrastructure to meet the needs of our workforce, enable efficiencies, reduce business continuity risks, and conform to changes in governing rules and regulations.

For the nine months ended September 30, 2019, we used $59.9 million in cash for investing activities, which consisted of $50.6 million for purchases of property and equipment and $9.2 million for investments in unconsolidated affiliates.

Cash Flows from Financing Activities

For the nine months ended September 30, 2020, our financing activities used $188.2 million in cash, which consisted primarily of repurchases of our common stock, contingent consideration payments, and repayments of long-term debt.

For the nine months ended September 30, 2019, we used $123.9 million in cash for financing activities, which consisted primarily of repayments of our term loan debt and payments for repurchases of our common stock. These payments were partially offset by proceeds from issuance of term loan debt, additional borrowings under our accounts receivable financing agreement, and proceeds from exercise of stock options.

Contractual Obligations and Commitments

There have been no material changes during the nine months ended September 30, 2020, outside of the ordinary course of business, to our contractual obligations as previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019.

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Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates, judgments, and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses during the period, as well as disclosures of contingent assets and liabilities at the date of the financial statements. We evaluate our estimates on an ongoing basis, including those related to revenue recognition, share-based compensation, valuation of goodwill and identifiable intangibles, tax-related contingencies and valuation allowances, allowance for doubtful accounts, and litigation contingencies, among others. These estimates are based on the information available to management at the time these estimates, judgments, and assumptions are made. Actual results may differ materially from these estimates. Except as set forth below, there have been no significant changes to our critical accounting policies and estimates. For additional information on all of our critical accounting policies and estimates, refer to Part II - Item 7 - Management’s Discussion and Analysis included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019.

Goodwill and Intangible Assets

Goodwill represents the excess of purchase price over the estimated fair value of net assets acquired, including the amount assigned to identifiable intangible assets, in business combinations. In accordance with ASC Topic 350, Intangibles - Goodwill and Other, goodwill is not subject to amortization but must be tested for impairment annually or more frequently if events or changes in circumstances indicate that goodwill might be impaired. Goodwill is tested for impairment at the reporting unit level, which is one level below the operating segment level. This test requires us to determine if the implied fair value of the reporting unit’s goodwill is less than its carrying amount.

The impairment analysis requires significant judgments, estimates and assumptions. There is no assurance that the actual future earnings or cash flows of the reporting units will not decline significantly from the projections used in the impairment analysis. Goodwill impairment charges may be recognized in future periods in one or more of the reporting units to the extent changes in factors or circumstances occur, including deterioration in the macroeconomic environment, industry, deterioration in our performance or future projections, or changes in plans for one or more of our reporting units. Specifically, the broad impacts of the COVID-19 pandemic may contribute to the potential impairment of the carrying value of our goodwill and long-lived assets in the future.

We completed our annual impairment test for potential impairment as of October 1, 2019 for all five of our reporting units, determining that there were no impairments. Our goodwill is principally related to the Merger completed on August 1, 2017. As of September 30, 2020, we evaluated whether a triggering event had occurred because of the broad impacts of the COVID-19 pandemic. The COVID-19 pandemic negatively impacted our results of operations during the three and nine months ended September 30, 2020. We expect the pandemic to continue to negatively impact our full year 2020 results of operations. However, at this time, we do not believe there has been a significant change in the long-term fundamentals of our business. Therefore, we have concluded a triggering event did not occur, and, as a result, no interim impairment testing was required during the three months ended September 30, 2020. We will continue to evaluate the impacts of the COVID-19 pandemic on our business. Depending on the extent to which future developments negatively impact our results of operations and financial outlook, an interim impairment test may be required in the future.

Intangible assets consist of backlog, customer relationships, and trademarks. We amortize intangible assets related to customer relationships and trademarks on a straight-line basis over the estimated useful life of the asset. Intangible assets related to backlog are amortized based on our expectations of the timing of when revenue associated with the backlog is expected to be recognized.

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We review intangible assets at the end of each reporting period to determine if facts and circumstances indicate that the useful life is shorter than originally estimated or that the carrying amount of the assets might not be recoverable. If such facts and circumstances exist, we assess the recoverability of identified assets by comparing the projected undiscounted net cash flows associated with the related asset or group of assets over their remaining lives to their respective carrying amounts. Impairments, if any, are based on the excess of the carrying amount over the fair value of those assets and occur in the period in which the impairment determination is made. As of September 30, 2020, we evaluated whether a triggering event had occurred because of the broad impacts of the COVID-19 pandemic. The COVID-19 pandemic negatively impacted our results of operations during the three and nine months ended September 30, 2020. We expect the pandemic to continue to negatively impact our full year 2020 results of operations. However, at this time, we do not believe there has been a significant change in the long-term fundamentals of our business. Therefore, we have concluded a triggering event did not occur, and, as a result, no interim impairment testing was required during the three months ended September 30, 2020. We will continue to evaluate the impacts of the COVID-19 pandemic on our business. Depending on the extent to which future developments negatively impact our results of operations and financial outlook, an interim impairment test may be required in the future.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Except for the broad effects of the COVID-19 pandemic on the global economy and major financial markets, there have been no material changes to our quantitative and qualitative disclosures about market risk as compared to the quantitative and qualitative disclosures about market risk described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our CEO and CFO, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act), as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, our CEO and CFO have concluded that as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

Changes in Internal Controls

There have been no changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act during the period covered by this Quarterly Report on Form 10-Q that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

We are party to legal proceedings incidental to our business. While our management currently believes the ultimate outcome of these proceedings, individually and in the aggregate, will not have a material adverse effect on our consolidated financial statements, litigation is subject to inherent uncertainties. Were an unfavorable ruling to occur, there exists the possibility of a material adverse impact on our financial condition and results of operations.

Please refer to “Note 15 – Commitments and Contingencies” of our unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional material developments to legal proceedings included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019.

Item 1A. Risk Factors.

Other than the following risk factors, there have been no significant changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2019. Refer to “Risk Factors” in Part 1, Item 1A of that report for a detailed discussion of risk factors affecting us.

Our acquisition strategy may present additional risks, including the risk that we may be unable to fully realize the competitive and operating synergies projected to be achieved through any specific acquisition.

We have historically grown our business both organically and through acquisitions, most notably our 2017 merger (the “Merger”) with Double Eagle Parent, Inc. (“inVentiv”), the parent company of inVentiv Health, Inc., and our pending acquisition (the “Synteract Acquisition”) of SHCR Holdings Corporation (“Synteract”). We have and will continue to assess the need and opportunity to offer additional services through acquisitions of other companies. Acquisitions involve numerous risks, including the following:

 

•

ability to identify suitable acquisition opportunities or obtain any necessary financing on commercially acceptable terms;

 

•

increased risk to our financial position and liquidity through changes to our capital structure and assumption of acquired liabilities, including any indebtedness incurred to finance the acquisitions and related interest expense;

 

•

diversion of management’s attention from normal daily operations of the business;

 

•

insufficient revenues to offset increased expenses associated with acquisitions;

 

•

assumption of liabilities and exposure to unforeseen liabilities of acquired companies, including liabilities for their failure to comply with healthcare, tax, and other regulations;

 

•

inability to achieve identified operating and financial synergies and other benefits anticipated to result from an acquisition;

 

•

difficulties integrating and documenting processes and controls in conformance with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002;

 

•

ability to integrate acquired operations, products, and technologies into our business;

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•

difficulties retaining and integrating acquired personnel and distinct cultures into our business; and

 

•

the potential loss of key employees, customers, or projects.

For example, fully realizing the anticipated benefits of the Merger and the Synteract Acquisition will depend on, among other things, our ability to integrate the businesses, achieve operating synergies and obtain the other expected benefits from the transactions. We have incurred and will continue to incur substantial expenses in connection with consummation of the Merger and the Synteract Acquisition and combining the businesses, operations, networks, systems, technologies, policies, and procedures of these companies, including integrating and documenting processes and controls in conformance with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, which were not applicable to inVentiv prior to the Merger or Synteract prior to the Synteract Acquisition. If we are unsuccessful in managing our integrated operations, or if we do not fully realize the expected operating efficiencies, cost savings, and other benefits currently anticipated from the Merger or the Synteract Acquisition, our operations and financial condition could be adversely affected and we might not be able to take advantage of business development opportunities.

We may also spend time and money investigating and negotiating with potential acquisition targets but not complete the transaction. Any acquisition could involve other risks, including, among others, the assumption of additional liabilities and expenses, difficulties and expenses in connection with integrating the acquired companies and achieving the expected benefits, issuances of potentially dilutive securities or interest-bearing debt, loss of key employees of the acquired companies, transaction expenses, diversion of management's attention from other business concerns, and, with respect to the acquisition of international companies, the inability to overcome differences in international business practices, language and customs. Our failure to successfully integrate potential future acquisitions could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

The COVID-19 pandemic has adversely impacted our business and results of operations, and is expected to continue to do so.

On March 11, 2020, the World Health Organization designated the outbreak of the novel strain of coronavirus that causes the disease known as COVID-19 as a global pandemic. Governments around the world have taken unprecedented actions to mitigate the spread of COVID-19, including stay-at-home orders, social distancing requirements, quarantine requirements, and limitations on travel, including the closing of national borders. Governments have also encouraged businesses to allow their employees to work remotely and minimize travel. As a result of these restrictions and recommendations, most of our employees are working remotely where possible and we have limited employee travel.

As a result of the COVID-19 pandemic, we have experienced, and expect to continue to experience, disruptions that have severely impacted, and are expected to continue to impact, our business and our operations, including:

 

•

delays or difficulties in commencing new and operating ongoing clinical trials, including the inability to access investigative sites, delays in enrolling patients and difficulty obtaining necessary pharmaceutical products and supplies;

 

•

within the Commercial Solutions segment, delayed decision making related to new business awards, delays or cancellations of existing customer projects, and restrictions on the ability of our field teams to visit healthcare providers;

 

•

diversion of healthcare resources away from the conduct of clinical trials, including the diversion of hospitals serving as our clinical trial sites and hospital staff supporting the conduct of our clinical trials, as well as the reduction of our customers’ operating budgets;

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•

interruption of key clinical trial activities, such as clinical trial site data monitoring, due to social distancing requirements, stay-at-home orders imposed or recommended by federal or state governments, employers, and others or interruption of clinical trial subject visits and study procedures;

 

•

shutdowns or other business disruptions at our customers;

 

•

limitations on our employee resources, including because of stay-at-home orders from federal or state governments, sickness of employees or their families or the desire of employees to avoid contact with large groups of people;

 

•

diversion of management resources to focus on mitigating the impacts of the COVID-19 pandemic; and

 

•

impacts from prolonged remote work arrangements, such as strains on our business continuity plans, cybersecurity risks, and inability of certain employees to perform their work remotely.

We currently expect that these disruptions will continue to negatively impact our results of operations for the year ending December 31, 2020. The COVID-19 pandemic continues to evolve rapidly. The extent to which the pandemic will impact our business, liquidity and financial results will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the ultimate duration and severity of the pandemic; the effectiveness of any vaccines created; the frequency and severity of future waves of infections; travel restrictions and social distancing requirements in the countries where we conduct business; the effectiveness of actions taken to contain and treat the disease; and how quickly and to what extent more normalized economic and operating conditions can resume. If we or our customers experience prolonged shutdowns or other business disruptions beyond current expectations, our ability to conduct our business could be materially and adversely impacted, and our business, liquidity, and financial results may be adversely affected.

The continued spread of COVID-19 has led to disruption and volatility in the global capital markets, which increases the cost of, and adversely impacts access to, capital and increases economic uncertainty. This volatility and uncertainty adversely affected our stock price, and may again adversely affect our stock price in the future. The actions that governments and individuals have taken in response to COVID-19 have led to a sharp contraction in many aspects of the United States economy and a steep rise in unemployment. The pandemic has caused an economic recession, which may lead our customers to reduce their operating budgets or drive them to internally perform the clinical development and commercialization tasks that we provide, in which case our business would suffer. Even after the COVID-19 pandemic has subsided, we may continue to experience material adverse effects to our business as a result of the global economic impact of the pandemic.

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Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities.

Recent Sales of Unregistered Securities

Not applicable.

Purchases of Equity Securities by the Issuer

During the three months ended September 30, 2020, we repurchased 506,244 shares of our Class A common stock in a private transaction under our previously announced stock repurchase program described below, for a total purchase price of approximately $30.0 million. As of September 30, 2020, we have remaining authorization to repurchase up to approximately $106.3 million of shares of our Class A common stock under the stock repurchase program.

 

Period

 

Total number of shares purchased

 

 

Average price paid per share

 

 

Total number of shares purchased as part of publicly announced plans or programs (1)

 

 

Approximate dollar value of shares that may yet be purchased under the plans or programs (in thousands)

 

July 1, 2020 - July 31, 2020

 

 

—

 

 

$

—

 

 

 

—

 

 

$

—

 

August 1, 2020 - August 31, 2020

 

 

—

 

 

$

—

 

 

 

—

 

 

$

—

 

September 1, 2020 - September 30, 2020

 

 

506,244

 

 

$

59.26

 

 

 

506,244

 

 

$

106,270

 

 

 

 

506,244

 

 

 

 

 

 

 

506,244

 

 

 

 

 

 

(1) On February 26, 2018, our Board authorized the repurchase of up to an aggregate of $250.0 million of our Class A common stock, par value $0.01 per share, from time to time in open market transactions effected through a broker at prevailing market prices, in block trades, or privately negotiated transactions through December 31, 2019 (the “stock repurchase program”). The stock repurchase program commenced on March 1, 2018. On December 5, 2019, our Board increased the dollar amount authorized under the stock repurchase program to an aggregate of $300.0 million and extended the term of the program to December 31, 2020. Share repurchases are funded primarily with our working capital, cash flow from operations, and funds available through various borrowing arrangements. The stock repurchase program does not obligate us to repurchase any particular amount of our Class A common stock, and may be modified, extended, suspended, or discontinued at any time. The timing and amount of repurchases is determined by our management based on a variety of factors such as the market price of our Class A common stock, our corporate cash requirements, and overall market conditions. The stock repurchase program is subject to applicable legal requirements, including federal and state securities laws and applicable Nasdaq rules. We may also repurchase shares of our Class A common stock pursuant to a trading plan meeting the requirements of Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, which would permit shares of our Class A common stock to be repurchased when we might otherwise be precluded from doing so by law.

We immediately retired all of the repurchased common stock and charged the par value of the shares to common stock. The excess of the repurchase price over the par value was applied on a pro rata basis against additional paid-in capital, with the remainder applied to accumulated deficit.

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Item 5. Other Information.

On October 26, 2020, Syneos Health Clinical, Inc. (“Buyer”), our wholly-owned subsidiary, entered into a stock purchase agreement (the “Purchase Agreement”) with Synteract, Inc.’s parent company, SHCR Holdings, LLC (“Seller”), for the purchase of 100% of the outstanding shares of SHCR Holdings Corporation (“Synteract”) for an aggregate purchase price of $400 million in cash (the “Synteract Acquisition”), subject to certain customary working capital and other adjustments. The Synteract Acquisition is expected to close in the fourth quarter of 2020, subject to the satisfaction or waiver of customary closing conditions.

Consummation of the Synteract Acquisition is subject to various conditions, including, among others, the expiration of the applicable waiting period under the Hart-Scott Rodino Antitrust Improvements Act of 1976, as amended and certain foreign regulatory approvals. The Purchase Agreement contains termination rights for each of Buyer and Seller, including, among others, if the closing of the transaction does not occur on or before February 23, 2021, subject to extension until May 24, 2021 in certain circumstances.

The purchase price of the Synteract Acquisition is expected to be funded using cash on hand and borrowings under our revolving credit facility.

The foregoing summary of the Purchase Agreement is qualified in its entirety by the full text of the Purchase Agreement, which is attached hereto as Exhibit 2.1 and is incorporated by reference herein.

 

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Item 6. Exhibits

 

 

 

 

Incorporated by Reference

(Unless Otherwise Indicated)

Exhibit

Number

 

Exhibit Description

Form

File No.

Exhibit

Filing Date

2.1

 

Stock Purchase Agreement, dated as of October 26, 2020, by and between SHCR Holdings, LLC and Syneos Health Clinical, Inc.

—

—

—

Filed herewith

10.1

 

Fourth Amendment to the Purchase and Sale Agreement, dated as of September 25, 2020, among each of the entities listed on the signature pages as a New Originator, each of the entities listed on the signature pages as an Existing Originator, and Syneos Health, LLC, as servicer, and Syneos Health Receivables LLC.

—

—

—

Filed herewith

10.2

 

Ninth Amendment to the Receivables Financing Agreement, dated as of September 25, 2020, by and among Syneos Health Receivables LLC, as borrower, Syneos Health, LLC, as initial servicer, and PNC Bank, National Association, as administrative agent and as lender.

—

—

—

Filed herewith

10.3

 

Second Amendment to the Purchase and Sale Agreement, dated as of July 25, 2019, among inVentiv Commercial Services, LLC, each of the entities listed on the signature pages as an Existing Originator, and Syneos Health, LLC, as servicer, and Syneos Health Receivables LLC.

—

—

—

Filed herewith

31.1

 

Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

—

—

—

Filed herewith

31.2

 

Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

—

—

—

Filed herewith

32.1

 

Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

—

—

—

Furnished herewith

32.2

 

Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

—

—

—

Furnished herewith

101.INS

 

Inline XBRL Instance Document - the Instance Document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document.

—

—

—

Filed herewith

101.SCH

 

Inline XBRL Taxonomy Extension Schema Document.

—

—

—

Filed herewith

101.CAL

 

Inline XBRL Taxonomy Extension Calculation Linkbase Document.

—

—

—

Filed herewith

101.DEF

 

Inline XBRL Taxonomy Extension Definition Linkbase Document.

—

—

—

Filed herewith

101.LAB

 

Inline XBRL Taxonomy Extension Label Linkbase Document.

—

—

—

Filed herewith

101.PRE

 

Inline Taxonomy Extension Presentation Linkbase Document.

—

—

—

Filed herewith

104

 

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

—

—

—

Filed herewith

 

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

 

 

 

SYNEOS HEALTH, INC.

 

 

 

 

 

 

 

 

 

 

Date:  October 28, 2020

 

BY:

 

/s/ Jason Meggs

 

 

 

 

Jason Meggs

 

 

 

 

Chief Financial Officer

(Principal Financial Officer)

 

52

Exhibit 2.1

 

EXECUTION VERSION

 

 

 

STOCK PURCHASE AGREEMENT

BY AND BETWEEN

SHCR HOLDINGS, LLC

AND

SYNEOS HEALTH CLINICAL, INC.

 

DATED AS OF OCTOBER 26, 2020

 

 

 

 

 

 

TABLE OF CONTENTS

 

 

 

 

 

Page

 

 

 

 

 

 

 

Article I

 

 

 

 

 

 

 

 

 

CERTAIN DEFINITIONS

 

 

 

 

 

 

 

1.1

 

Certain Definitions

 

1

 

 

 

 

 

 

 

Article II

 

 

 

 

 

 

 

 

 

PURCHASE AND SALE

 

 

 

 

 

 

 

2.1

 

Purchase and Sale of the Shares

 

15

2.2

 

Consideration

 

15

2.3

 

Adjustments to the Net Purchase Price

 

15

 

 

 

 

 

 

 

Article III

 

 

 

 

 

 

 

 

 

CLOSING

 

 

 

 

 

 

 

3.1

 

Closing

 

19

3.2

 

Deliveries by Seller to Buyer

 

19

3.3

 

Deliveries by Buyer to Seller

 

19

3.4

 

Delivery by Buyer to Escrow Agent

 

20

3.5

 

Payoff Letters

 

20

3.6

 

Payment of Transaction Expenses

 

20

3.7

 

Simultaneity

 

20

3.8

 

Withholding.

 

20

 

 

 

 

 

 

 

Article IV

 

 

 

 

 

 

 

 

 

REPRESENTATIONS AND WARRANTIES OF SELLER

 

 

 

 

 

 

 

4.1

 

Organization and Qualification

 

21

4.2

 

Organizational Documents

 

21

4.3

 

Capitalization

 

21

4.4

 

Authority; Enforceability

 

22

4.5

 

No Conflict; Required Filings and Consents

 

22

4.6

 

Permits; Compliance

 

23

4.7

 

Regulatory Matters

 

23

4.8

 

Financial Statements; Undisclosed Liabilities

 

25

4.9

 

Conduct of the Business; No Material Adverse Effect

 

25

4.10

 

Absence of Litigation

 

26

4.11

 

Employee Benefit Plans; ERISA

 

26

 

ii

 

4.12

 

Contracts

 

28

4.13

 

Taxes

 

30

4.14

 

Affiliate Transactions

 

31

4.15

 

Environmental Matters

 

32

4.16

 

Realty

 

32

4.17

 

Personal Property

 

33

4.18

 

Labor Matters

 

33

4.19

 

Intellectual Property

 

34

4.20

 

Improper and Other Payments

 

36

4.21

 

Insurance

 

37

4.22

 

Customers and Suppliers.

 

37

4.23

 

Brokers

 

37

4.24

 

Disclaimer of Seller

 

38

 

 

 

 

 

 

 

Article V

 

 

 

 

 

 

 

 

 

REPRESENTATIONS AND WARRANTIES OF BUYER

 

 

 

 

 

 

 

5.1

 

Organization

 

38

5.2

 

Authority; Enforceability

 

39

5.3

 

No Conflict; Required Filings and Consents

 

39

5.4

 

Brokers

 

39

5.5

 

Absence of Litigation

 

39

5.6

 

Sufficient Funds

 

40

5.7

 

Solvency

 

40

5.8

 

Investment Intent

 

40

5.9

 

Legal Requirements and Approvals

 

40

5.10

 

Inspection; No Other Representations

 

40

 

 

 

 

 

 

 

Article VI

 

 

 

 

 

 

 

 

 

COVENANTS

 

 

 

 

 

 

 

6.1

 

Affirmative Covenants of Seller

 

41

6.2

 

Negative Covenants of Seller

 

42

6.3

 

Access and Information

 

44

6.4

 

Confidentiality

 

45

6.5

 

No Contacts

 

45

6.6

 

Continuation of Indemnification

 

45

6.7

 

Continuation of Insurance

 

46

6.8

 

Employee Matters

 

46

6.9

 

Clindata Consideration Agreement

 

47

6.10

 

Kinderpharm Earnout Payment

 

50

6.11

 

Belgium Tax Payment

 

50

6.12

 

Terminated Agreement

 

50

6.13

 

Resignation Letters

 

50

 

iii

 

6.14

 

Exclusivity

 

50

6.15

 

Representation and Warranty Insurance Policy

 

51

6.16

 

Code Section 280G

 

51

6.17

 

Insurance

 

52

6.18

 

Pension Liability

 

52

 

 

 

 

 

 

 

Article VII

 

 

 

 

 

 

 

 

 

ADDITIONAL AGREEMENTS

 

 

 

 

 

 

 

7.1

 

Transfer Taxes

 

52

7.2

 

Appropriate Action; Consents; Filings

 

53

7.3

 

Public Announcements

 

55

7.4

 

Retention and Access to Records

 

55

 

 

 

 

 

 

 

Article VIII

 

 

 

 

 

 

 

 

 

CLOSING CONDITIONS

 

 

 

 

 

 

 

8.1

 

Conditions to Obligations of Each Party Under This Agreement

 

56

8.2

 

Additional Conditions to Obligations of Buyer

 

56

8.3

 

Additional Conditions to Obligations of Seller

 

57

 

 

 

 

 

 

 

Article IX

 

 

 

 

 

 

 

 

 

TERMINATION

 

 

 

 

 

 

 

9.1

 

Termination

 

58

9.2

 

Effect of Termination

 

59

 

 

 

 

 

 

 

Article X

 

 

 

 

 

 

 

 

 

GENERAL PROVISIONS

 

 

 

 

 

 

 

10.1

 

Notices

 

59

10.2

 

Non-Survival of Representations and Warranties

 

60

10.3

 

Amendment and Modification

 

60

10.4

 

Waiver

 

60

10.5

 

Headings

 

60

10.6

 

Severability

 

61

10.7

 

Entire Agreement

 

61

10.8

 

Assignment

 

61

10.9

 

Parties in Interest

 

61

10.10

 

Failure or Delay Not Waiver; Remedies Cumulative

 

61

10.11

 

Specific Performance

 

62

10.12

 

Governing Law; Jurisdiction Waiver of Jury Trial

 

62

 

iv

 

10.13

 

Counterparts

 

63

10.14

 

Interpretation

 

63

10.15

 

Costs of Dispute

 

64

10.16

 

Fees, Expenses and Other Payments

 

64

10.17

 

Non-Recourse

 

64

10.18

 

Certain Legal Representation Matters

 

64

10.19

 

Disclosure Letter

 

65

10.20

 

Jointly Drafted

 

66

10.21

 

Time of the Essence

 

66

 

 

 

 

v

 

 

SCHEDULES

SCHEDULE A

Working Capital Schedule

 

 

EXHIBITS

 

 

EXHIBIT A

Form of Escrow Agreement

 

EXHIBIT B

Sponsor Agreement

 

 

 

vi

 

STOCK PURCHASE AGREEMENT

STOCK PURCHASE AGREEMENT, dated as of October 26, 2020 (this “Agreement”), by and between SHCR HOLDINGS, LLC, a Delaware limited liability company (“Seller”) and SYNEOS HEALTH CLINICAL INC., a Delaware corporation (“Buyer”).

W I T N E S S E T H:

WHEREAS, Seller is the record and beneficial owner of one hundred percent (100%) of the issued and outstanding shares of common stock, par value $0.001 per share (the “Shares”), of SHCR Holdings Corporation, a Delaware corporation (the “Company”);

WHEREAS, the Company and its Subsidiaries (collectively, the “Company Subsidiaries”) are primarily engaged in conducting clinical trials and related services on behalf of biopharmaceutical companies;

WHEREAS, Buyer desires to purchase and acquire from Seller, and Seller desires to sell and transfer to Buyer, all of Seller’s right, title and interest in and to the Company and the Company Subsidiaries by way of a purchase by Buyer and sale by Seller of the Shares, upon the terms and subject to the conditions hereinafter set forth;

WHEREAS, the respective Boards of Directors of Seller and Buyer have approved this Agreement and the transactions contemplated hereby; and

WHEREAS, simultaneously with this Agreement, Amulet Capital Partners, L.P. has entered into a non-solicitation agreement in the form attached hereto as Exhibit B (the “Sponsor Agreement”).

NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants, and agreements of the parties set forth in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

Article I

CERTAIN DEFINITIONS

1.1Certain Definitions

“280G Vote” has the meaning set forth in Section 6.13.

“Accounting Firm” has the meaning set forth in Section 2.3(b).

“Accounting Principles” means the accounting methodologies, principles and procedures set forth in Part B of the Working Capital Schedule.

 

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“Accounts Receivable” means all accounts or notes receivable (including any security or collateral for such accounts receivable and including both billed and unbilled work).

“Action” means any action, complaint, claim, suit, litigation, arbitration, proceeding (including any civil, criminal, administrative, or appellate proceeding), hearing, inquiry, public examination, indictment, investigation or audit commenced, brought, conducted or heard by or before any Governmental Entity.

“Actual Closing Cash and Cash Equivalents” has the meaning set forth in Section 2.3(b).

“Actual Closing Indebtedness” has the meaning set forth in Section 2.3(b).

“Actual Closing Working Capital” has the meaning set forth in Section 2.3(b).

“Actual Transaction Expenses” has the meaning set forth in Section 2.3(b).

“Adjustment Escrow Account” means the account established by the Escrow Agent pursuant to the Escrow Agreement for satisfaction of any Deficit Amount pursuant to Section 2.3(c)(ii).

“Adjustment Escrow Amount” means cash in the amount of four million U.S. Dollars ($4,000,000) to be held by the Escrow Agent in the Adjustment Escrow Account in accordance with the terms of the Escrow Agreement.

“Affiliate” means, in relation to any Person, any other Person that, directly or indirectly, through one or more intermediaries, controls, is controlled by or is under common control with such Person and, as used herein, the term “control” (including, with correlative meanings, the terms “controlling,” “controlled by” and “under common control with”), with respect to any Person, means possession, directly or indirectly, of the power to direct or cause the direction of the management of such Person whether through the ownership of, or ability to vote, a majority of the voting securities, the right to appoint a majority of directors or members of other governing bodies or otherwise.

“Affiliate Contract” has the meaning set forth in Section 4.14(b).

“Aggregate Clindata Payment Obligations” has the meaning set forth in Section 6.9(b).

“Agreement” has the meaning set forth in the Preamble.

“Alternative Transaction” means any transaction or series of transactions (other than the transactions contemplated by this Agreement), however structured, resulting in (i) any acquisition or purchase of all or a material portion of the assets of the Company and the Company Subsidiaries, taken as a whole, or all or a material portion of equity securities of the Company or any Company Subsidiary or (ii) any merger, consolidation, business combination, recapitalization, liquidation, dissolution or similar transaction involving the Company or any of the Company Subsidiaries.

 

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“Annual Cap” has the meaning set forth in Section 6.9(b).

“Audited Financial Statements” has the meaning set forth in Section 4.8(a).

“Banker’s Fees” means the aggregate amount of fees and expenses payable to the Company’s financial advisors, Jefferies & Company, Inc., in connection with the transactions contemplated by this Agreement.

“Base Balance Sheet” has the meaning set forth in Section 4.8(a).

“Base Purchase Price” means Four Hundred Million U.S. Dollars ($400,000,000).

“Business Day” means any day other than a Saturday, a Sunday or any other day on which commercial banking institutions in the States of New York or North Carolina are authorized or obligated to be closed.

“Buyer” has the meaning set forth in the Preamble.

“Buyer Fundamental Representations” means the representations and warranties set forth in Sections 5.1, 5.2 and 5.4.

“CARES Act” means the Coronavirus Aid, Relief, and Economic Security Act or any similar applicable federal, state or local Law.

“Cash and Cash Equivalents” means the aggregate amount of all cash, cash equivalents and liquid investments, including readily marketable equity securities, government guaranteed debt obligations, time deposits with, or insured certificates of deposit or bankers’ acceptances of, any commercial bank and commercial paper and variable or fixed rate notes, but excluding Restricted Cash and all checks, wires in transit and drafts that are dated prior to the Closing or were initiated or deposited by the Company or any Company Subsidiary for the account of a third party prior to the Measurement Time, as applicable, that have not yet been drawn or cleared as of immediately prior to the Measurement Time. For the avoidance of doubt, with respect to the Company and the Company Subsidiaries, “Cash and Cash Equivalents” shall include all checks, wires in transit and drafts that are dated prior to the Closing or were initiated or deposited for the account of the Company or any Company Subsidiary prior to the Measurement Time, as applicable, that have not yet been received or cleared as of immediately prior to the Measurement Time; provided that such checks, wires in transit or drafts actually clear after the Measurement Time.

“Cleanup” means all actions required to: (a) clean up, remove or remediate a Release of Hazardous Materials in the environment; (b) perform pre-remedial studies and investigations and post-remedial monitoring and care; or (c) respond to any Order relating to the cleanup, removal, treatment or remediation of Hazardous Materials in the environment.

“Clindata Consideration Agreement” has meaning set forth in Section 6.9(a).

“Clindata Estimated Earnout Statement” has the meaning set forth in Section 6.9(b).

 

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“Clindata Obligations” has the meaning set forth in Section 6.9(a).

“Clindata Payment Amount” has the meaning set forth in Section 6.9(f).

“Closing” has the meaning set forth in Section 3.1.

“Closing Date” has the meaning set forth in Section 3.1.

“Closing Statement” has the meaning set forth in Section 2.3(b).

“Code” means the Internal Revenue Code of 1986, as amended.

“Company” has the meaning set forth in the Recitals.

“Company Service Provider” means any current or former director, officer or employee of the Company or any Company Subsidiary.

“Company Subsidiaries” has the meaning set forth in the Recitals.

“Company Website” means any public or private website owned, maintained or operated at any time by or on behalf of the Company or Company Subsidiaries.  

“Confidentiality Agreement” has the meaning set forth in Section 6.4.

“Consent” has the meaning set forth in Section 4.5(b).

“Continuing Employee” means each employee of the Company and any Company Subsidiary as of immediately prior to the Closing.

“contracts” or “Contracts” means any agreement, contract, subcontract, lease, license, sublicense or other legally binding commitment or undertaking (whether written or oral).

“COVID-19” means both the viral pneumonia named coronavirus disease 2019 (COVID-19) by the World Health Organization and the virus named Severe Acute Respiratory Syndrome Coronavirus 2 (SARS-CoV-2) by the International Committee on Taxonomy of Viruses and any mutations thereof.

“COVID-19 Effect” means any (i) required or recommended quarantines, travel restrictions, or social distancing, in each case, issued by a Governmental Entity, (ii) factory shutdowns or slowdowns, workplace or worksite shutdowns or slowdowns or work from home requirements or recommendations, or shipment interruptions or slowdowns, in each case, related to or resulting from COVID-19, (iii) other measures initiated or occurring in response to COVID-19, and (iv) other events or conditions related to or resulting from COVID-19 and/or the response of any Governmental Entity thereto.

“Credit Agreement” means that certain Credit Agreement, dated as of May 25, 2016 (as amended, restated, supplemented or otherwise modified from time to time), among SynteractHCR Holdings Corporation, a Delaware corporation (the “Seller Borrower”), the

 

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Company, the lenders party thereto from time to time and Capital One, National Association, as agent for the lenders.

“Current D&O Policies” has the meaning set forth in Section 6.7.

“Datasite” means the online Merrill data site established in connection with the transactions contemplated by this Agreement and the Transaction Documents.

“Deferred Payroll Taxes” means any Taxes payable by the Company that (x) relate to the portion of the “payroll tax deferral period” (as defined in Section 2302(d) of the CARES Act) that occurs prior to the Closing,  (y) are payable following the Closing as permitted by Section 2302(a) of the CARES Act, calculated without giving effect to any tax credits afforded under the CARES Act, the Families First Coronavirus Response Act or any similar applicable federal, state or local Law to reduce the amount of any such Taxes payable or owed, and (z) any similar regime that permits deferral of payroll taxes in any non-US jurisdiction.

“Deficit Amount” has the meaning set forth in Section 2.3(c)(ii).

“Deficit Payment” has the meaning set forth in Section 2.3(c)(ii).

“Disclosure Letter” means the disclosure letter being delivered contemporaneously with the execution of this Agreement.

“Effective Time” has the meaning set forth in Section 3.1.

 

5

 

“Environmental Claim” means any Action by any Person alleging potential liability (including such liability for Cleanup costs, governmental response costs, natural resources damages, property damages, personal injuries or administrative, civil or criminal penalties) arising out of, based on or resulting from (a) the Release or threat of Release of any Hazardous Materials at any location, whether or not leased or operated by the Company or any Company Subsidiary, or (b) circumstances forming the basis of any violation or alleged violation of any applicable Environmental Law.

“Environmental Laws” means all applicable Laws, in effect as of the date of this Agreement, relating to (a) pollution or protection of the environment or (b) the manufacture, processing, distribution, use, treatment, storage, Release, disposal, transport or handling of Hazardous Materials.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and the rules and regulations promulgated thereunder.

“ERISA Affiliate” means the Company or any Company Subsidiary or any Person that, together with the Company or any Company Subsidiary, would be deemed a “single employer” under Section 414 of the Code or Section 4001(b) of ERISA.

“Escrow Account” means the Adjustment Escrow Account and the Special Escrow Account.

“Escrow Agent” means Delaware Trust Company.

“Escrow Agreement” means the Escrow Agreement to be entered into on the Closing Date among the Escrow Agent, Buyer and Seller, substantially in the form attached hereto as Exhibit A.

“Escrow Amount” means the sum of the Adjustment Escrow Amount and the Special Escrow Amount.

“Estimated Closing Cash and Cash Equivalents” has the meaning set forth in Section 2.3(a).

“Estimated Closing Indebtedness” has the meaning set forth in Section 2.3(a).

“Estimated Closing Statement” has the meaning set forth in Section 2.3(a).

“Estimated Closing Working Capital” has the meaning set forth in Section 2.3(a).

“Estimated Transaction Expenses” has the meaning set forth in Section 2.3(a).

“Excess Amount” has the meaning set forth in Section 2.3(c)(i).

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Existing Indebtedness Payoff Amount” has the meaning set forth in Section 3.5.

 

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“Export Control Laws” means all applicable Laws and regulations relating to the export, re-export, transfer, import of products, software or technology.

“FDA” has the meaning set forth in Section 4.7(c).

“Financial Statements” has the meaning set forth in Section 4.8(a).

“Fraud” means the actual and knowing common law fraud with respect to the making of a representation or warranty set forth in this Agreement.

“GAAP” means United States generally accepted accounting principles.

“Governmental Entity” means (a) any nation or government, and any state, province or other political subdivision or territory thereof; (b) any entity, authority or body exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, including any government authority, agency, department, board, commission or instrumentality of the United States or any other nation, any state, province or other political subdivision or territory thereof, or any international or multinational authority; or (c) any court or legally constituted tribunal or arbitrator.

“Hazardous Materials” means any substance, material or waste that is regulated by any Governmental Entity as “hazardous,” a “contaminant,” a “pollutant,” “toxic” or words of similar meaning under any applicable Environmental Law.

“Health Care Laws” has the meaning set forth in Section 4.7(a).

“HSR Act” has the meaning set forth in Section 4.5(b).

“Indebtedness” means, with respect to any Person and without duplication, (a) all liabilities of such Person for borrowed money, whether secured or unsecured, including all outstanding principal, interest, fees and other amounts payable with respect thereto, (b) all liabilities of such Person evidenced by notes, debentures, bonds or similar instruments, including all outstanding principal, interest, fees and other amounts payable with respect thereto and for which such Person is responsible for the payment thereof, (c) any amounts owing as deferred purchase price for property or services, including any unearned but unpaid “earnout” payments, other than the earnout payments under (x) the Clindata Consideration Agreement which shall be addressed as set forth in Section 6.9 and (y) the Kinderpharm Agreement which shall be addressed as set forth in Section 6.10, (d), (e) all liabilities related to the Belgian Tax Matter (as defined in the Disclosure Letter) to the extent not paid prior to the Measurement Time, (f) $2,579,173, representing the liability related to the unutilized portion of the leased facility located in Carlsbad, CA following restructuring of the applicable lease, (g) in the event the Pension Liability has not been paid in full prior to the Measurement Time, $663,623, representing the Pension Liability, (h) all accrued but unpaid severance obligations (including the employer portion of any applicable payroll taxes with respect thereto), (i) all interest rate swaps, collars, caps and similar hedging obligations, (j) any obligations under acceptance credit, letters of credit or similar facilities, in each case, solely to the extent drawn, (k) any obligation for a lease classified as a capital lease or finance lease in the Financial Statements, (l) any Deferred Payroll Taxes to the extent unpaid as of the Measurement Time, and (m) all

 

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prepayment penalties, make-whole payments and breakage fees associated with any of the foregoing clauses (a) through (l), to the extent required to be paid at the Closing, whether or not any of the foregoing is evidenced by any note, indenture, guaranty or agreement; provided, for the avoidance of doubt, that “Indebtedness” of the Company and the Company Subsidiaries shall not include (i) any amounts with respect to or included in Transaction Expenses or Working Capital, (ii) any intercompany indebtedness or other intercompany liability between or among the Company and any Company Subsidiary, or between or among Company Subsidiaries, or (iii) any lease obligations for leases classified as operating leases in the Financial Statements.

“Intellectual Property” means all intellectual property, including (a) copyrights and registrations, and applications for any of the foregoing; (b) patent rights, including any continuations, continuations-in-part, divisionals, renewals and reissues thereof, and applications for any of the foregoing; (c) trademarks, service marks, trade names, trade dress, and other similar designations of source or origin, and registrations and applications for any of the foregoing; (d) trade secrets and other confidential and proprietary processes, know-how and information; and (e) Internet domain names.

“IRS” means the United States Internal Revenue Service, or any successor agency thereto.

“IT Systems” means all systems used by the Company or Company Subsidiaries in such company’s business including the information and communications technology infrastructure and systems (including, all software, hardware, firmware, networks and Company Websites), and any security and disaster recovery arrangements relating thereto.

“Kinderpharm Agreement” has the meaning set forth in Section 6.10.

“Knowledge of Seller” means the actual knowledge of Steven Powell and Karl Deonanan, in each case, after reasonable inquiry of their respective direct reports and others who would reasonably be expected to have subject matter expertise with respect to the applicable representation or warranty.

“Laws” means all domestic and foreign, federal, national, provincial, state, local and multinational laws, statutes, ordinances, codes, rules, regulations, policies, Orders, judgments, injunctions, writs and decrees, in each case, enacted, adopted or promulgated by a Governmental Entity.

“Leased Realty” has the meaning set forth in Section 4.16(a).

“Leases” has the meaning set forth in Section 4.16(a).

“Liens” means, with respect to any property or asset, any and all liens, encumbrances, security interests, mortgages, pledges or claims of a similar kind with respect thereto.

“Litigation” has the meaning set forth in Section 4.10(a).

“Material Adverse Effect” means any effect, condition, change, event, occurrence, development or circumstance (any such item, an “Effect”) that has had or would reasonably be

 

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expected to have a material adverse effect on the (a) financial condition, business or results of operations of the Company and the Company Subsidiaries, taken as a whole, or (b) ability of the Seller or the Company to consummate the transactions contemplated by this Agreement or to perform their respective material obligations under this Agreement; provided, however, that, for purposes of clause (a), no Effect caused by or resulting from any of the following, either alone or in combination with any other Effect, shall constitute, or be taken into account in determining whether there has been, is, or will be, a “Material Adverse Effect”: (i) any Effect changing or affecting the pharmaceutical industry, the contract research organization industry generally or any other industry in which the Company or any Company Subsidiary operates, (ii) any epidemic, pandemic, disease outbreak, act of nature, earthquake, flood, hurricane, typhoon, or other natural disaster, or the escalation or worsening of any of the foregoing (including, for the avoidance of doubt any COVID-19 Effect), (iii) any global, national or regional political conditions, including hostilities, political instability, the declaration by any Governmental Entity of a state of emergency or similar proclamation, acts of terrorism (including cyberattacks) or war, (iv) any Effect affecting the global economy, the economy of the United States, or the economy of any other nation in which the Company or any Company Subsidiary conducts business, generally, or the economy of any state, province, region or other locality in which the Company or any Company Subsidiary conducts business, including in each case, trade disputes or the imposition of tariffs, duties or other trade restrictions, (v) any Effect arising from changes in the credit, debt, capital or financial markets (including changes in interest or exchange rates), (vi) any action expressly permitted or required to be taken by Seller, the Company or any Company Subsidiary under the terms of this Agreement, (vii) any Effect that results from or arises out of any action taken or omitted to be taken at the express prior written request of Buyer or with Buyer’s prior written consent, (viii) any Effect arising from the announcement or the execution of this Agreement, or the pendency of the transactions contemplated hereby, including any Effect of the transactions contemplated hereby on relationships with customers, suppliers, Governmental Entities, employees, or other third parties, (ix) any change in Law (for the avoidance of doubt, including tax Laws) or GAAP or any interpretation thereof in the United States or internationally, including any other nation in which the Company or any Company Subsidiary conducts business, (x) any breach by Buyer of its obligations under this Agreement, or (xi) any failure of the Company or any Company Subsidiary to meet any internal or published projections, forecasts or revenue or earnings predictions for any period ending on or after the date of this Agreement (it being understood that the facts or occurrences giving rise to such failure may be deemed to constitute, or be taken into account in determining whether there has been, a Material Adverse Effect unless such facts or occurrences are separately excluded hereunder), unless, in the case of clauses (i), (ii), (iii), (iv), (v) and (ix) above, such changes would reasonably be expected to have a materially disproportionate impact on the financial condition, business or results of operations of the Company and the Company Subsidiaries, taken as a whole, relative to other affected Persons (but taking into account for purposes of determining whether a Material Adverse Effect has occurred only the disproportionate portion of such adverse impact).

“Material Contracts” has the meaning set forth in Section 4.12(a).

“Material Customers” has the meaning set forth in Section 4.22(a).

“Material Suppliers” has the meaning set forth in Section 4.22(b).

 

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“Measurement Time” means 11:59 p.m. local time on the date immediately prior to the Closing Date.

“Net Purchase Price” means (a) the Base Purchase Price, plus (b) the amount of all Estimated Closing Cash and Cash Equivalents of the Company and the Company Subsidiaries as of the Measurement Time, plus (c) the amount, if any, by which the Estimated Closing Working Capital exceeds the Working Capital Target, minus (d) the amount, if any, by which the Working Capital Target exceeds the Estimated Closing Working Capital, minus (e) all Estimated Closing Indebtedness of the Company and the Company Subsidiaries, minus (f) all Estimated Transaction Expenses. The Net Purchase Price shall be determined without duplication of any item included within one or more categories that increase or reduce the Base Purchase Price as set forth herein.

“New Plans” has the meaning set forth in Section 6.8(a).

“Non-Recourse Person” has the meaning set forth in Section 10.17.

“Objection Notice” has the meaning set forth in Section 2.3(b).

“Old Plans” has the meaning set forth in Section 6.8(a).

“Order” means any order, award, decision, injunction, judgment, writ, decree, ruling, subpoena, verdict or arbitration award entered, issued, made or rendered by any Governmental Entity.

“Organizational Documents” has the meaning set forth in Section 4.2.

“Outside Date” has the meaning set forth in Section 9.1(c).

“Parachute Payment Waiver” means, with respect to any Person, a written agreement waiving such Person’s right to receive any “parachute payments” (within the meaning of Section 280G of the Code and the Department of Treasury regulations promulgated thereunder) solely to the extent required to avoid the imposition of a tax by virtue of the operation of Section 280G of the Code and to accept in substitution therefor the right to receive such payments only if approved by the shareholders of Seller in a manner that complies with Section 280G(b)(5)(B) of the Code and the regulations promulgated thereunder.

“Pension Liability” has the meaning set forth in Section 6.18.

“Permits” has the meaning set forth in Section 4.6(a).

“Permitted Liens” means (a) statutory Liens and landlords’ and mechanics’, carriers’, workmen’s, repairmen’s or other similar Liens arising or incurred in the ordinary course of business with respect to liabilities that are not yet delinquent or are being contested in good faith in appropriate proceedings; (b) Liens for current Taxes, assessments and other governmental charges that are not yet delinquent and/or the amount or validity of which is being contested in good faith by appropriate proceedings and for which adequate reserves have been established in accordance with GAAP; (c) recorded or unrecorded easements, rights-of-way, prescriptive easements, encroachments, servitudes, covenants, conditions, restrictions, licenses, reservations

 

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and other charges or encumbrances or defects or imperfections of title of any kind (i) that do not materially impair the use of the property or assets subject thereto for the purposes for which it is currently used or the operation of the business of the Company and the Company Subsidiaries, taken as a whole, as conducted in the ordinary course of business, or (ii) that would be revealed by an investigation of title to the extent and nature that a prudent buyer of real property in the jurisdiction in which the applicable real property is located would carry out; (d) zoning, entitlement, building, environmental and other land-use restrictions that do not materially impair the use of the property subject thereto for the purposes for which it is currently used or the operation of the business of the Company and the Company Subsidiaries, taken as a whole, as conducted in the ordinary course of business; (e) Liens arising under worker’s compensation, unemployment insurance, social security, retirement and similar Laws, (f) Liens that affect the underlying fee interest of any Leased Realty, (g) any set of facts that an accurate up-to-date survey would show; (h) Liens in connection with the Credit Agreement; provided that, such Liens shall be released as of the Closing Date; (i) licenses of, and similar permissions regarding use of, Intellectual Property granted in the ordinary course of business; (j) Liens securing rental payment under lease arrangements; (k) restrictions on transfer arising under applicable securities Laws; and (l) other Liens arising pursuant to liabilities incurred in the ordinary course of business that: (i) do not materially and adversely affect any material assets or properties of the Company and the Company Subsidiaries, taken as a whole, (ii) do not materially and adversely interfere with the conduct of the business of the Company and the Company Subsidiaries, taken as a whole, and (iii) were not incurred in connection with any Indebtedness.

“Person” means an individual, corporation, limited or general partnership, limited liability partnership, limited liability company, joint venture, association, joint stock company, trust, unincorporated organization, other entity or group (as defined in Section 13(d) of the Exchange Act), or the foreign equivalent of any of the foregoing.

“Personal Data” means any and all information to the extent any such information, alone or in combination with other information, identifies or is associated with an identifiable natural person or household; and (ii) any other information that is classified as “personal data”, “personal information”, “personally identifiable information” or similar term under applicable Laws.

“Plan” means each (a) “employee benefit plan” within the meaning of Section 3(3) of ERISA (whether or not subject to ERISA) and (b) other benefit and compensation plan, policy, program, practice, arrangement or agreement, including pension, profit sharing, savings, termination, executive compensation, phantom stock, change-in-control, retention, salary continuation, vacation, sick leave, disability, death benefit, insurance, hospitalization, medical, dental, life, employee loan, educational assistance, fringe benefit, deferred compensation, retirement or post-retirement, severance, equity or equity-based, performance incentive and/or bonus plan, contract, policy, program, practice, arrangement or agreement, in each case, that is sponsored, maintained or contributed to by the Company or any Company Subsidiary for any Company Service Provider or to which the Company or any Company Subsidiary has any liability (excluding, in each case, any plan, program or arrangement that is required by statute or sponsored or maintained by a Governmental Entity).

“Premium Cap” has the meaning set forth in Section 6.7.

 

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“Privacy and Security Laws” means all Laws regarding collecting, accessing, using, disclosing, transmitting, securing, sharing, transferring or storing Personal Data, including, without limitation, federal, state or foreign laws or regulations regarding (a) data privacy or information security; (b) data breach notification; (c) trespass, computer crime and other Laws governing unauthorized access to or use of electronic data; and (d) email, telephone, or text message communications. For the avoidance of doubt, Privacy and Security Laws include the General Data Protection Regulation (Regulation (EU) 2016/679) (“GDPR”) and the Clinical Trials Directive (Directive (EU) 2001/20/EC).

“Privacy Policies” has the meaning set forth in Section 4.19(d).  

“Regulatory Agencies” has the meaning set forth in Section 4.7(c).

“Regulatory Law” means the Sherman Act of 1890, the Clayton Antitrust Act of 1914, the HSR Act, the Federal Trade Commission Act of 1914, and all other federal, state or foreign (non-United States) statutes, rules, regulations, orders, decrees, administrative and judicial doctrines and other Laws, including any antitrust, competition or trade regulation Laws, that are designed or intended to (a) prohibit, restrict or regulate actions having the purpose or effect of monopolization or restraint of trade or lessening competition through merger or acquisition, or (b) protect the national security or the national economy of any nation.

“Release” means any release, spill, emission, discharge, leaking, pumping, injection, deposit, disposal, dispersal, leaching or migration into the environment (including ambient air, surface water, groundwater and surface or subsurface strata), in each case, in violation of any applicable Environmental Law.

“Representation and Warranty Insurance Policy” means that certain Buyer-side Representations and Warranties Insurance Policy conditionally bound promptly after the date of this Agreement and issued by Liberty Surplus Insurance Corporation.

“Representatives” means, with respect to any Person, its Affiliates and its and their respective officers, directors, managers, employees, members, equityholders, owners, partners, capital providers, attorneys, investment bankers, accountants, consultants and other agents, advisors and representatives.

“Resolution Period” has the meaning set forth in Section 2.3(b).

“Restricted Cash” means (i) cash that would be included in the line item captioned “Restricted Cash” in the Audited Financial Statements applying the practices, procedures and methodologies used in the preparation of such Audited Financial Statements (the “Investigator Costs”) and (ii) any other cash which is not freely usable by the Company and the Company Subsidiaries because it is subject to restrictions on use or distribution by Law, contract or otherwise  (the “Other Restricted Cash”); provided that, for the avoidance of doubt, Cash subject to restrictions on repatriation only shall not be considered “Restricted Cash”.

“Retained Firm” has the meaning set forth in Section 10.18(a).

“Retention Bonus Amount” means an amount equal to $3,000,000.

 

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“S&D” has meaning set forth in Section 6.9(a).

“Sanctioned Person” means any Person that is the target of Sanctions Laws, including (a) any Person listed in any list of designated Persons maintained by the U.S. Treasury Department’s Office of Foreign Assets Control or other U.S. or non-U.S. Government Entity under Sanctions Laws; (b) any Person organized or resident in a country or territory subject to comprehensive sanctions (currently Iran, Syria, Cuba, North Korea, and the Crimea region of Ukraine) or (c) any Person 50% or more owned or, where relevant under applicable Sanctions Laws, Controlled by any such Person or Persons or acting for or on behalf of such Person or Persons.

“Sanctions Laws” means applicable economic or financial sanctions or trade embargoes imposed, administered, or enforced by relevant government entities, including those administered by the U.S. government through the U.S. Treasury Department’s Office of Foreign Assets Control or the U.S. Department of State, the European Union or its Member States, or Her Majesty’s Treasury of the United Kingdom.

“Section 280G Approval” has the meaning set forth in Section 6.16.

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

“Security Incident” has the meaning set forth in Section 4.19(g).

“Security Policies” has the meaning set forth in Section 4.19(d).  

“Seller” has the meaning set forth in the Preamble.

“Seller Borrower” has the meaning set forth in the definition of Credit Agreement.

“Seller Fundamental Representations” means the representations and warranties set forth in Sections 4.1, 4.3, and 4.4.

“Shares” has the meaning set forth in the Recitals.

“SHCR Representative” has the meaning set forth in Section 6.6.

“Solvent” has the meaning set forth in Section 5.7.

“Special Escrow Account” means the account established by the Escrow Agent pursuant to the Escrow Agreement for satisfaction of any Clindata Obligations pursuant to Section 6.9.

“Special Escrow Amount” means cash in an amount equal to the Aggregate Clindata Payment Obligations, determined in accordance with Section 6.9, to be held by the Escrow Agent in the Special Escrow Account in accordance with the terms of the Escrow Agreement and Section 6.9.

 

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“Sponsor Agreement” has the meaning set forth in the Recitals.

“Subsidiary” or “Subsidiaries” means, with respect to any Person, any other Person of which such first Person (either alone or through or together with any other Person pursuant to any agreement, arrangement, contract or other commitment) (a) owns, directly or indirectly, stock or other equity interests entitling the holder thereof to exercise a majority of the voting power for the election of the board of directors or other governing body of such corporation, partnership, limited liability company, joint venture or other entity or (b) acts as the managing member or general partner.

“Synteract” has the meaning set forth in Section 6.9(a).

“Tax Returns” means all federal, state, local and foreign tax returns, declarations, statements, reports, schedules, information returns and other documents (including any related supporting information) and any amendments or supplements thereto, required to be filed with respect to Taxes.

“Taxes” means any federal, state, local and foreign income, gross receipts, capital, capital gains, license, payroll, employment, excise, severance, stamp, occupation, premium, property, environmental, profits, windfall profits, customs, vehicle, airplane, boat, vessel or other title or registration, capital stock, franchise, employees’ income withholding, foreign or domestic withholding, social security, unemployment, disability, sales, use, goods and services, ad valorem, transfer, value added, alternative, add-on minimum and any other tax, fee, assessment, levy, impost, tariff, charge or duty in the nature of a tax and any interest, penalty, addition or additional amount thereon imposed, assessed or collected by or under the authority of any Governmental Entity.

“Termination Event” has the meaning set forth in Section 6.9(g).

“Transaction Documents” means each other agreement, document, instrument or certificate contemplated by this Agreement to be executed in connection with the consummation of the transactions contemplated hereby, including the Escrow Agreement and the Sponsor Agreement.

“Transaction Expenses” means (i) all fees, costs and expenses of, or payable or subject to reimbursement by, the Company and the Company Subsidiaries that remain unpaid as of immediately prior to the Measurement Time in connection with the negotiation, preparation, execution and performance of this Agreement and the consummation of the transactions contemplated hereby, including all costs, fees and disbursements of financial advisors, attorneys, accountants and other advisors and service providers, in each case, to the extent payable or subject to reimbursement by the Company or any Company Subsidiary, (ii) any transaction bonuses, retention payments, or change of control or similar payments (each, a “Transaction Payment”) payable by the Company or a Company Subsidiary to any Company Service Provider solely as a result of the consummation of the Closing (but excluding any payments pursuant to “double-trigger” arrangements resulting in payments and/or benefits provided upon a termination of employment by the Company or its Affiliates on or following the consummation of the Closing), and the employer portion of any employment Taxes that are incurred by the

 

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Company or a Company Subsidiary in connection with the payment of any amounts described in this subclause (ii), or in connection with the payment of any Transaction Payments payable by Seller to a Company Service Provider (including with respect to any equity-based compensatory award), and (iii) the Retention Bonus Amount.

“Unaudited Financial Statements” has the meaning set forth in Section 4.8(a).

“Working Capital” means, without duplication, only those line items set forth in the Sample Closing Working Capital Calculation included in the Working Capital Schedule, in each case, calculated in accordance with the Accounting Principles, which may be a positive or negative number.

“Working Capital Schedule” means the schedule of working capital matters attached hereto as Schedule A.

“Working Capital Target” has the meaning set forth in the Working Capital Schedule.

Article II

PURCHASE AND SALE

2.1Purchase and Sale of the Shares. Upon the terms and subject to the conditions of this Agreement, at the Closing, Seller shall sell, convey, assign, transfer and deliver to Buyer, and Buyer shall purchase, acquire and accept from Seller, all of Seller’s right, title and interest in and to the Shares, free and clear of all Liens (other than restrictions under applicable securities laws).

2.2Consideration Upon the terms and subject to the conditions of this Agreement, in consideration of the aforesaid sale, conveyance, assignment, transfer and delivery of the Shares at the Closing, Buyer shall pay to Seller at the Closing an amount in cash equal to the Net Purchase Price minus the Escrow Amount, which Escrow Amount shall be deposited by Buyer into the Escrow Account at the Closing to be held in escrow by the Escrow Agent pursuant to the terms of the Escrow Agreement. The Net Purchase Price shall be subject to adjustment in accordance with Section 2.3 below.

2.3Adjustments to the Net Purchase Price

(a)Closing Date Adjustment. The purpose of the purchase price adjustment set forth in this Section 2.3 is to measure (i) the difference between the Working Capital of the Company and the Company Subsidiaries on a consolidated basis as of the Measurement Time and the Working Capital Target and (ii) any changes in the Cash and Cash Equivalents of the Company and the Company Subsidiaries, the Indebtedness of the Company and the Company Subsidiaries, and the Transaction Expenses from their respective estimated amounts to the final amounts, in each case, as calculated in accordance with the Accounting Principles. Not less than three (3) Business Days prior to the Closing Date, Seller shall deliver, or cause to be delivered, to Buyer a consolidated statement for the Company and the Company Subsidiaries (the “Estimated Closing Statement”), which shall set forth Seller’s good faith estimate of (i) the Cash and Cash Equivalents of the Company and the Company Subsidiaries on a consolidated basis as of the

 

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Measurement Time (the “Estimated Closing Cash and Cash Equivalents”), (ii) the Indebtedness of the Company and the Company Subsidiaries on a consolidated basis as of the Measurement Time (the “Estimated Closing Indebtedness”), (iii) the Transaction Expenses that remain unpaid as of the Measurement Time (the “Estimated Transaction Expenses”), and (iv) the Working Capital of the Company and the Company Subsidiaries on a consolidated basis as of the Measurement Time (the “Estimated Closing Working Capital”), together with reasonable supporting documentation for such estimates. The Estimated Closing Statement shall be prepared in a manner consistent with the Accounting Principles. The Estimated Closing Statement shall be conclusive for purposes of the calculation of the Net Purchase Price payable at the Closing, but shall be subject to adjustment after the Closing pursuant to this Section 2.3. Buyer shall have the right to review and comment on the Estimated Closing Statement and Seller shall in good faith consider any comments made by Buyer with respect to the Estimated Closing Statement; provided that if the parties cannot mutually agree upon any proposed revisions to the Estimated Closing Statement, then, without limiting any other rights or remedies the Buyer may have, the estimates set forth in the Estimated Closing Statement as prepared by Seller in good faith shall be the estimates for purposes of calculating the Net Purchase Price.

(b)Post-Closing Determination. Within sixty (60) days after the Closing Date, Buyer shall prepare and deliver to Seller a consolidated statement for the Company and the Company Subsidiaries as of the Measurement Time (the “Closing Statement”), which shall include the Cash and Cash Equivalents of the Company and the Company Subsidiaries on a consolidated basis as of the Measurement Time, the Indebtedness of the Company and the Company Subsidiaries on a consolidated basis as of the Measurement Time, the Transaction Expenses that remain unpaid as of the Measurement Time, and the Working Capital of the Company and the Company Subsidiaries on a consolidated basis as of the Measurement Time. The Closing Statement shall be prepared in a manner consistent with the Accounting Principles. Buyer shall promptly make available to Seller all relevant records and work papers that are subject to customary release letters used in preparing the Closing Statement and the computation of Cash and Cash Equivalents, Indebtedness, Transaction Expenses and Working Capital of the Company and the Company Subsidiaries on a consolidated basis as of the Measurement Time. If Seller disagrees with the computation of the Cash and Cash Equivalents, Indebtedness, Transaction Expenses or Working Capital of the Company and the Company Subsidiaries on a consolidated basis as of the Measurement Time as calculated by Buyer or any other items reflected on the Closing Statement, Seller may, within thirty (30) days after receipt of the Closing Statement, deliver a notice (an “Objection Notice”) to Buyer setting forth in reasonable detail the objections Seller has, including the nature, amount and basis of each item of disagreement, and Seller’s calculation of the Cash and Cash Equivalents, the Indebtedness, the Transaction Expenses and the Working Capital of the Company and the Company Subsidiaries on a consolidated basis as of the Measurement Time. If Seller does not deliver an Objection Notice within such period of thirty (30) days, then Buyer’s calculations of the Cash and Cash Equivalents, Indebtedness, Transaction Expenses and Working Capital of the Company and the Company Subsidiaries on a consolidated basis as of Closing shall be deemed to be the Actual Closing Cash and Cash Equivalents, the Actual Closing Indebtedness, the Actual Transaction Expenses and the Actual Closing Working Capital (each, as defined below). If Seller timely delivers an Objection Notice to Buyer, then Buyer and Seller shall use commercially reasonable efforts to resolve any disagreement as to the computation of the Cash and Cash Equivalents, Indebtedness, Transaction Expenses and Working Capital of the Company and the Company

 

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Subsidiaries on a consolidated basis as of the Measurement Time, in each case, as soon as practicable, but if they cannot reach a final resolution within thirty (30) days after Buyer has received the Objection Notice (the “Resolution Period”), Buyer and Seller shall jointly retain KPMG LLP or, if KPMG LLP is unwilling or unable to serve or if otherwise agreed by Buyer and Seller, another accounting firm of comparable stature reasonably acceptable to both Buyer and Seller; provided that, if the parties hereto are unable to agree on a replacement accounting firm within ten (10) days following the expiration of the Resolution Period, either party may request for the president of the American Arbitration Association to appoint a senior partner in a nationally recognized accounting firm to serve as the Accounting Firm (the accounting firm as so selected in accordance with the foregoing, the “Accounting Firm”); provided, further, that to the extent that the aggregate adjustment to the Net Purchase Price as set forth in the Closing Statement is not subject to a dispute set forth in the Objection Notice, then payment of such undisputed adjustment amount shall be made within five (5) Business Days after the delivery of the Objection Notice. Buyer and Seller shall direct the Accounting Firm to render a determination within thirty (30) days after its retention and Buyer, Seller and their respective agents shall cooperate with the Accounting Firm during its engagement. The Accounting Firm shall consider only those items and amounts set forth in the Objection Notice that Buyer and Seller are unable to resolve. In resolving any disputed item, the Accounting Firm may not assign a value to any item greater than the greatest value for such item claimed by either party or less than the smallest value for such item claimed by either party. In rendering its determination, the Accounting Firm shall act as an expert and not as an arbitrator. The Accounting Firm’s determination shall be based solely on written submission made by Buyer and Seller (and not independent review) and the terms and provisions of this Agreement and prepared in a manner consistent with the Accounting Principles. The determination of the Cash and Cash Equivalents, the Indebtedness, the Transaction Expenses and the Working Capital of the Company and the Company Subsidiaries on a consolidated basis as of the Measurement Time by the Accounting Firm shall, in each case, be conclusive and binding upon Buyer and Seller. Buyer and Seller shall bear the costs and expenses of the Accounting Firm based on the portion that the contested amount not awarded to each party compares to the amount actually contested by or on behalf of such party, expressed as a percentage. The Cash and Cash Equivalents of the Company and the Company Subsidiaries on a consolidated basis as of the Measurement Time, as finally determined pursuant to this Section 2.3(b), are referred to herein as the “Actual Closing Cash and Cash Equivalents.” The Indebtedness of the Company and the Company Subsidiaries on a consolidated basis as of the Measurement Time, as finally determined pursuant to this Section 2.3(b), is referred to herein as the “Actual Closing Indebtedness.” The Transaction Expenses that remain unpaid as of the Measurement Time, as finally determined pursuant to this Section 2.3(b), are referred to herein as the “Actual Transaction Expenses.” The Working Capital of the Company and the Company Subsidiaries on a consolidated basis as of the Measurement Time, as finally determined pursuant to this Section 2.3(b), is referred to herein as the “Actual Closing Working Capital.” The process set forth in this Section 2.3(b) shall be the exclusive remedy of Buyer and Seller for any disputes regarding the purchase price adjustment related to items reflected on the Closing Statement or covered by the calculation of the Transaction Expenses and the Cash and Cash Equivalents, Indebtedness and Working Capital of the Company and the Company Subsidiaries on a consolidated basis as of the Measurement Time.

 

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(c)Payment from Adjustments.

(i)Payment of Excess Amount. If (A) the Actual Closing Working Capital plus the Actual Closing Cash and Cash Equivalents minus the sum of the Actual Closing Indebtedness and the Actual Transaction Expenses exceeds (including, if such amount is a less negative number) (B) the Estimated Closing Working Capital plus the Estimated Closing Cash and Cash Equivalents minus the sum of the Estimated Closing Indebtedness and the Estimated Transaction Expenses (the amount of such excess being the “Excess Amount”), then the Net Purchase Price shall be increased by such Excess Amount, and within five (5) Business Days after the determination thereof, (x) Buyer shall pay, by wire transfer of immediately available funds to one or more accounts designated by Seller, an amount equal to such Excess Amount and (y) Buyer and Seller shall provide a joint written instruction to the Escrow Agent to deliver, by wire transfer of immediately available funds to one or more accounts designated by Seller, the Adjustment Escrow Amount.

(ii)Payment of Deficit Amount. If (A) the Actual Closing Working Capital plus the Actual Closing Cash and Cash Equivalents minus the sum of the Actual Closing Indebtedness and the Actual Transaction Expenses is less than (including, if such amount is a larger negative number) (B) the Estimated Closing Working Capital plus the Estimated Closing Cash and Cash Equivalents minus the sum of the Estimated Closing Indebtedness and the Estimated Transaction Expenses (the amount of such deficit being the “Deficit Amount”), then the Net Purchase Price shall be decreased by the lesser of (x) such Deficit Amount and (y) the Escrow Amount (such lesser amount, the “Deficit Payment”), and within five (5) Business Days after the determination thereof, Buyer and Seller shall provide a joint written instruction to the Escrow Agent to deliver from the Adjustment Escrow Account and, if applicable, the Special Escrow Account, to Buyer, by wire transfer of immediately available funds to an account designated in writing by Buyer, an amount equal to such Deficit Payment. In the event the Deficit Payment is in excess of the Adjustment Escrow Amount, Buyer may elect to recover such excess from the Special Escrow Account. In the event any amounts remain in the Adjustment Escrow Account after payment of the Deficit Payment, Buyer and Seller shall provide a joint written instruction to the Escrow Agent to deliver such amounts, by wire transfer of immediately available funds to one or more accounts designated by Seller, at the same time as payment of the Deficit Payment is made to Buyer.

For the avoidance of doubt, Buyer agrees that recovery from the Adjustment Escrow Account and the Special Escrow Account shall be the sole and exclusive remedy available to Buyer or any of its Affiliates against Seller, any of its Affiliates or any of their respective directors, officers, employees, agents or representatives arising out of or relating to any Deficit Amount and neither Buyer nor any of its Affiliates shall have any claim against Seller, any of its Affiliates or any of their respective directors, officers, employees, agents or representatives in respect thereof. Any such amounts shall be treated by the parties hereto as an adjustment to the Net Purchase Price, unless otherwise required by Law.

 

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Article III

CLOSING

3.1Closing The closing of the transactions contemplated by this Agreement (the “Closing”) shall take place at the offices of Skadden, Arps, Slate, Meagher & Flom LLP, One Manhattan West, New York, New York or by an electronic exchange of documents, in each case, at 10:00 a.m. (local time), on the third (3rd) Business Day following the satisfaction or, to the extent permitted by applicable Law, waiver of the conditions precedent set forth in Article VIII (except for those conditions that can only be satisfied on the Closing Date, but subject to the satisfaction of such conditions), or at such other time and place as the parties hereto may mutually agree. The date on which the Closing occurs is called the “Closing Date.” Notwithstanding the foregoing, the parties hereto intend that the Closing shall be deemed to be effective, and the transactions contemplated by this Agreement shall be deemed to occur simultaneously, at 12:01 a.m., United States Eastern Time, on the Closing Date (the “Effective Time”).

3.2Deliveries by Seller to Buyer Prior to or at the Closing, Seller shall deliver or cause to be delivered to Buyer the following:

(a)a certificate or certificates evidencing the Shares, properly endorsed by Seller to Buyer, or an instrument of assignment of such Shares, duly executed by Seller, as may be necessary to transfer to Buyer ownership of the Shares, free and clear of any and all Liens (other than restrictions under applicable securities laws);

(b)the Escrow Agreement, duly executed by Seller;

(c)a duly executed IRS Form W-9 of Seller;

(d)the officer’s certificate of Seller referred to in Section 8.2(d); and

(e)evidence reasonably satisfactory to Buyer that the  280G Vote has occurred, to the extent applicable.

3.3Deliveries by Buyer to Seller. Prior to or at the Closing, Buyer shall deliver or cause to be delivered to Seller the following:

(a)by wire transfer of immediately available funds to one or more bank accounts designated in writing by Seller at least two (2) Business Days prior to the Closing Date, cash in an aggregate amount equal to the Net Purchase Price minus the Adjustment Escrow Amount;

(b)the Escrow Agreement, duly executed by Buyer and the Escrow Agent; and

(c)the officer’s certificate of Buyer referred to in Section 8.3(c).

 

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3.4Delivery by Buyer to Escrow Agent. At the Closing, Buyer shall deliver or cause to be delivered, by wire transfer of immediately available funds to the Escrow Account in accordance with the Escrow Agreement, cash in an aggregate amount equal to the Escrow Amount.

3.5Payoff Letters. Prior to the Closing Date, Seller shall (i) deliver (or cause to be delivered) notices of the payoff, prepayment, discharge and termination of any outstanding Indebtedness or obligations of the Seller Borrower pursuant to and in accordance with the Credit Agreement (the amount outstanding under the Credit Agreement, together with any fees, costs and charges payable under the Credit Agreement, the “Existing Indebtedness Payoff Amount”) and (ii) obtain customary payoff letters or other similar evidence with respect to the Credit Agreement at least two (2) Business Days prior to the Closing Date (but shall be subject to customary conditions). Buyer shall (x) irrevocably pay off, or cause to be paid off, at or prior to the Effective Time the Existing Indebtedness Payoff Amount and (y) use its commercially reasonable efforts to provide all customary cooperation as may be reasonably requested by Seller to assist Seller in connection with its obligation under this Section 3.5.

3.6Payment of Transaction Expenses. At the Closing, Buyer shall deliver or cause to be delivered, on behalf of the Company and the Company Subsidiaries, payment of the amounts owed to the payees of all Transaction Expenses as listed in the Estimated Closing Statement delivered to Buyer pursuant to Section 2.3(a); provided, in the case of Transaction Expenses contemplated by clause (ii) of the definition of Transaction Expenses, Buyer shall deliver such payment to the Company for distribution to the recipients thereof via the next normal payroll cycle of the Company or any of its Subsidiaries, as applicable.

3.7Simultaneity. Except as otherwise contained in this Agreement, all actions to be taken at the Closing shall be deemed, to the extent feasible, to have taken place simultaneously, unless explicitly stated otherwise. Any action, the taking of which is a necessary condition to the taking of any other action, shall be taken subject to the commission of all other actions to be taken at the Closing.

3.8Withholding. Buyer shall be entitled to deduct and withhold or cause to be deducted and withheld any amounts with respect to Taxes under any Law from the consideration otherwise payable to Seller pursuant to this Agreement; provided that, Buyer shall provide notice to Seller of Buyer’s intention to withhold in respect of any payment (other than any withholding (i) required as a result of a failure by Seller to timely deliver the IRS Form W-9 contemplated by Section 3.2 or (ii) in respect of any amounts that are properly characterized as compensation for applicable Tax purposes), together with the basis for such withholding, at least five (5) Business Days prior to any such withholding (unless a change in Law prevents Buyer from providing such advance notice, in which case Buyer shall use commercially reasonable efforts to provide notice as soon as possible following Buyer becoming aware of such change in Law) and Buyer shall reasonably cooperate with Seller and the Company to minimize or eliminate such withholding. To the extent that amounts are so withheld or deducted and paid over to the applicable Governmental Entity, such amounts shall be treated for all purposes of this Agreement as having been delivered and paid to Seller.

 

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Article IV

REPRESENTATIONS AND WARRANTIES OF SELLER

Except as set forth in the Disclosure Letter, Seller hereby represents and warrants to Buyer as of the date hereof and as of the Closing as follows:

4.1Organization and Qualification. Seller, the Company and each Company Subsidiary is duly incorporated or organized, validly existing and in good standing (to the extent such concept is recognized under applicable Laws) under the laws of the jurisdiction of its incorporation or organization, and has all requisite corporate or other applicable entity power and authority to own, lease and operate its properties and assets and to carry on its business in all material respects as now being conducted. Each of the Company and the Company Subsidiaries is duly licensed or qualified to do business in each jurisdiction in which the nature of the business conducted by it or the ownership, lease or operation of its properties or assets makes such license or qualification necessary, other than where the failure to be so duly licensed or qualified would not, individually or in the aggregate, reasonably be expected to have, a Material Adverse Effect. Section 4.1 of the Disclosure Letter sets forth a list of each Company Subsidiary. Other than capital stock or other equity interests of the Company Subsidiaries, neither the Company nor any Company Subsidiary owns, directly or indirectly, any capital stock or other equity interests in or of any Person.

4.2Organizational Documents. Copies of the certificate of incorporation, the bylaws or similar organizational documents (collectively, the “Organizational Documents”), in each case, as amended or restated to date, of the Company and each Company Subsidiary have been furnished or made available to Buyer. Neither the Company nor any Company Subsidiary is in violation in any material respect of any provision of its Organizational Documents.

4.3Capitalization.

(a)The authorized capital stock of the Company consists of 1,000 Shares, of which as of the date of this Agreement 100 Shares are issued and outstanding and owned beneficially and of record by Seller, free and clear of any and all Liens other than Permitted Liens. All of the issued and outstanding shares of capital stock of the Company have been duly authorized and validly issued, are fully paid and nonassessable and are free of preemptive rights.

(b)Section 4.3(b) of the Disclosure Letter sets forth with respect to each Company Subsidiary its jurisdiction of incorporation or organization; its authorized, issued and outstanding capital stock or other equity interests; and the percentage of such capital stock or other equity interests owned by the Company and any Company Subsidiary and the identity of such owner. Each issued and outstanding share of capital stock or other equity interest of each Company Subsidiary has been duly authorized and validly issued, is fully paid and nonassessable to the extent such concepts are applicable with respect to such equity interests and is free of preemptive rights. All such shares of capital stock or other equity interests of each Company Subsidiary that are owned by the Company or any Company Subsidiary are owned free and clear of any and all Liens other than Permitted Liens.

 

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(c)Except as described on Section 4.3(a) or Section 4.3(b) of the Disclosure Letter, there are no (i) capital stock, equity interests, or securities convertible into or exercisable for capital stock or equity interests or phantom stock or similar interests of the Company or any Company Subsidiary; (ii) options, warrants or other rights (including registration rights), agreements, arrangements or commitments to which the Company or any Company Subsidiary is a party relating to the issued or unissued capital stock or other equity interests of the Company or any Company Subsidiary or obligating the Company or any Company Subsidiary to grant, issue or sell any shares of the capital stock or other equity interests of the Company or any Company Subsidiary or subjecting any such share of capital stock or other equity interest to any right of first refusal, right of first offer, tag-along right, drag-along right or similar right; (iii) obligations, contingent or otherwise, of the Company or any Company Subsidiary to repurchase, redeem or otherwise acquire any shares of the capital stock or other equity interests of the Company or any Company Subsidiary; or (iv) voting trusts, proxies or other agreements or understandings to which the Company or any Company Subsidiary is a party or by which the Company or any Company Subsidiary is bound with respect to the voting of any shares of capital stock or other equity interests of the Company or any Company Subsidiary. There are no restrictions of any kind on the transfer of the Shares, other than restrictions under applicable securities Laws.

(d)The Seller owns beneficially and of record, free and clear of any Liens, and has full power and authority to convey to Buyer free and clear of any Liens, the Shares. Other than the Shares, the Seller holds no other capital stock or other equity securities of the Company.  The Shares are not subject to any Contract restricting or relating to the voting, transfer or disposition of such Shares to which the Seller is a party or otherwise to the Knowledge of Seller. At the Closing, Buyer will own beneficially and of record, all of the capital stock or other equity interests of the Company free and clear of all Liens, other restrictions under applicable securities Laws.

4.4Authority; Enforceability. Seller has all requisite power and authority to execute and deliver this Agreement and the Transaction Documents to which it is a party,  and to perform its obligations hereunder and thereunder, and to consummate the transactions contemplated hereby and thereby. The execution, delivery and performance by Seller of this Agreement and the Transaction Documents has been duly authorized by all necessary limited liability company action on the part of Seller, including Seller’s board of directors, and no other action or limited liability company proceeding on the part of Seller will be necessary to authorize this Agreement and the Transaction Documents or to consummate the transactions contemplated hereby or thereby. This Agreement and the Transaction Documents to which Seller is a party has been duly executed and delivered by Seller and assuming due and valid authorization, execution and delivery hereof by Buyer, constitutes the valid and binding obligation of Seller enforceable against it in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally and by general equitable principles.

4.5No Conflict; Required Filings and Consents.

(a)The execution and delivery by Seller of this Agreement and the Transaction Documents does not, and the performance by Seller of its obligations under this Agreement and thereunder will not, (i)  conflict with or violate the Organizational Documents of

 

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Seller, the Company or any Company Subsidiary, (ii) in any material respect conflict with or violate any Laws applicable to Seller, the Company or any Company Subsidiary or by or to which any of their respective properties or assets is bound or subject, or (iii) result in any material breach of or constitute a material default (or an event that with notice or lapse of time or both would constitute a material default), under, or give to others any rights of termination, amendment, acceleration or cancellation of, or require payment under, any Material Contract or result in the creation of a material Lien on, any of the properties or assets of Seller, the Company or any Company Subsidiary.

(b)The execution, delivery and performance by Seller of this Agreement and the Transaction Documents to which Seller is a party will not require Seller, the Company or any Company Subsidiary to obtain any material consent, approval, authorization or permit of, or to make any filing with or notification to (“Consent”), any Governmental Entity or any third party, except for (i) applicable requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”) and other Regulatory Laws; and (ii) as may be necessary as a result of any fact or circumstance relating solely to Buyer (including, without limitation, its sources of financing).

4.6Permits; Compliance.

(a)The Company and each Company Subsidiary is in possession of all material franchises, grants, authorizations, licenses, registrations, qualifications, permits, easements, variances, exemptions, consents, certificates, approvals and orders necessary to own, lease and operate its properties and assets and to carry on its business in all material respects as currently conducted (collectively, the “Permits”).  All such Permits are in full force and effect and the Company and each applicable Company Subsidiary has complied in all material respects with the terms and conditions of such Permits. There is no material Action pending or, to the Knowledge of Seller, threatened regarding the suspension, termination or cancellation of any such Permits. None of the Permits will lapse, terminate or expire as a result of the transactions contemplated hereby.

(b)The Company and the Company Subsidiaries are, and since January 1, 2019 have been, in compliance in all material respects with all Laws applicable to the Company or any Company Subsidiary. Since January 1, 2019, neither the Company nor any of the Company Subsidiaries has received any written communication from a Governmental Entity alleging that the Company or any of the Company Subsidiaries is not in compliance with any applicable Law.

4.7Regulatory Matters.

(a)Neither the Company, any Company Subsidiary, nor, to the Knowledge of Seller, any officer, director,  employees or agent, with respect to the Company’s or any Company Subsidiary’s business operations, is in violation of any Health Care Laws, except where the failure to be in compliance would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.  For purposes of this Agreement, “Health Care Laws” means: the Federal Food, Drug, and Cosmetic Act and the regulations promulgated thereunder; the Public Health Services Act (42 U.S.C. 201 et seq.);  all federal, state, local and all foreign

 

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health care related fraud and abuse laws, including, without limitation, the U.S. Anti-Kickback Statute (42 U.S.C. Section 1320a-7b(b)), the U.S. Stark Law (42 U.S.C. Section 1395nn), the U.S. Civil False Claims Act (31 U.S.C. Section 3729 et seq.), Sections 1320a-7 and 1320a-7a of Title 42 of the United States Code and the regulations promulgated pursuant to such statutes;  all federal, state, local and all foreign criminal laws relating to health care fraud and abuse, including but not limited to 18 U.S.C. Sections 286 and 287; quality, safety and accreditation standards and requirements of any applicable federal, state, local or foreign laws; and, any and all other applicable health care laws, regulations, manual provisions, policies, administrative guidance and contractual agreements as to which compliance is mandated by applicable Health Care Laws.  

(b)Neither the Company, any Company Subsidiary, nor, to the Knowledge of Seller, any employee, officer, director or agent  has been excluded, suspended or debarred from participation in any U.S. federal health care program or human clinical research, and, to the Knowledge of Seller, neither the Company nor any Company Subsidiary is subject to an inquiry, investigation or, proceeding that would reasonably be expected to subject the Company, any Company Subsidiary, or any of their respective employees, officers, or directors to exclusion, suspension or debarment from such participation.

(c)The clinical trials that are conducted as the Company’s business are, and since January 1, 2018, have been conducted in all material respects in accordance with the protocols, procedures and controls designed and approved for such clinical trials and the Company and the Company Subsidiaries have made all such material filings and obtained all such material approvals as may be required by the Food and Drug Administration of the U.S. Department of Health and Human Services (the “FDA”) or from any other U.S. or foreign government or drug or medical device regulatory agency, or health care facility Institutional Review Board (collectively, the “Regulatory Agencies”).  Since January 1, 2018, the Company has not received written notice of any claim, action, suit, proceeding, hearing, enforcement, investigation, arbitration or other action from any Regulatory Agency alleging that any clinical trial conducted by the Company or any Company Subsidiary is in material violation of any Health Care Law or approval and, to the Knowledge of Seller, no such Regulatory Agency is considering any such claim, litigation, arbitration, action, suit, investigation or proceeding. Since January 1, 2018, the Company has not received written notice that any Regulatory Agency has taken, is taking or intends to take action to limit, suspend, modify or revoke any material approvals and, to the Knowledge of Seller, no Regulatory Agency is considering such action.

(d)To the Knowledge of Seller, there is no material false information or material omission since January 1, 2018 in any application, submission, statement or response by the Company to a Governmental Entity.  The Company has received no notice since January 1, 2018 of any investigation or review by any Regulatory Agency.  

(e)The Company has not received any warning letter from the FDA or any other Regulatory Agency since January 1, 2018 and to the Knowledge of Seller, there is no information reasonably suggesting that the Company is at risk of receiving a warning letter from the FDA or any other Regulatory Agency.

 

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4.8Financial Statements; Undisclosed Liabilities.

(a)Seller has previously furnished or made available to Buyer: (i) the audited consolidated balance sheets of the Company as of December 31, 2019, and December 31, 2018, and the related audited consolidated statements of operations and comprehensive loss, stockholders’ equity and cash flows for the years then ended (collectively, the “Audited Financial Statements”), and (ii) the unaudited interim consolidated balance sheet of the Company as of June 30, 2020 (the “Base Balance Sheet”), and the related unaudited interim consolidated statements of operations and comprehensive loss for the period then ended (collectively, with the Base Balance Sheet, the “Unaudited Financial Statements” and, collectively with the Audited Financial Statements, the “Financial Statements”). The Financial Statements have been prepared based upon the information contained in the books and records of Seller, the Company and the Company Subsidiaries, have been properly prepared in accordance with GAAP, consistently applied over the periods presented and present fairly, in all material respects, the financial position of the Company and the Company Subsidiaries as of such dates and results of their operations for the periods then ended, subject, in the case of the Unaudited Financial Statements, to (x) the absence of footnote disclosures and other presentation items, which if presented would not differ materially from those presented in the Audited Financial Statement and (y) changes resulting from normal year-end adjustments in a manner consistent with past practice (which are, individually and in the aggregate immaterial).

(b)Neither the Company nor any Company Subsidiary has any material liabilities of any kind that would have been required to be reflected on or reserved on the Base Balance Sheet in accordance with GAAP consistently applied over the period presented, that were not so reflected or reserved against, other than (i) liabilities incurred in the ordinary course of business after the date of the Base Balance Sheet (none of which are for breach of contract, violation of Law, or related to any Action), (ii) liabilities incurred in connection with the transactions contemplated hereby, and (iii) liabilities disclosed in Section 4.8(b) of the Disclosure Letter.

(c)All Accounts Receivable reflected on the Financial Statements, as of the respective dates thereof, and all Accounts Receivable arising subsequent to the date of the Base Balance Sheet have been determined in accordance with GAAP and represent, as of the respective dates thereof, valid Accounts Receivable arising from bona fide, arms’ length sales actually made or services actually performed, in each case, in the ordinary course of business consistent with past practice and have been collected or are collectible in the ordinary course of business of the Company and the Company Subsidiaries in the aggregate recorded amounts thereof and not subject to any setoffs or counterclaims, and do not reflect any changes from the Base Balance Sheet in discounts, rebates or other benefits offered to customers, in each case subject to reserves with respect thereto and otherwise as would not be material to the Company and the Company Subsidiaries in the aggregate. Since the date of the Base Balance Sheet, neither the Company nor any Company Subsidiary has canceled, or agreed to cancel, in whole or in part, any Accounts Receivable except in the ordinary course of business consistent with past practice.

4.9Conduct of the Business; No Material Adverse Effect. Since the date of the Base Balance Sheet and prior to the date hereof, (a) except in connection with the transactions contemplated hereby, each of the Company and the Company Subsidiaries has conducted its

 

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business in the ordinary course of business consistent with past practice, (b) there has not been any Effect that would, individually or in the aggregate, have a Material Adverse Effect, and (c) neither the Company nor any Company Subsidiary has taken any action which, if taken after the date hereof, would require the consent of Buyer under Sections 6.2(c), (d), (e), (f), (g), (h), (i), (k), (o), (p) or (q).  

4.10Absence of Litigation.

(a)(i) There is no material claim, action, suit, proceeding, litigation, or, to the Knowledge of Seller, investigation or inquiry of any kind, at Law or in equity (including actions or proceedings seeking injunctive relief), by or before any Governmental Entity or by or on behalf of any third party (“Litigation”) pending or, to the Knowledge of Seller, threatened against the Company or any Company Subsidiary, and (ii) neither the Company nor any Company Subsidiary is a party or subject to or in default under any material Order of any Governmental Entity. Since January 1, 2019, there has been no Action against the Company or any Company Subsidiary or any of their respective assets or properties or officers, directors or employees in their capacity as an officer, director or employee, respectively, involving any settlement or resolution amounts in excess of $100,000.

(b)There is no Litigation pending or, to the Knowledge of Seller, threatened against Seller that, if adversely determined, (i) would prevent or materially restrict, impede or delay the performance by Seller of its obligations under this Agreement or (ii) would reasonably be expected to have, individually or in the aggregate, a material adverse effect on the ability of Seller to perform its obligations under this Agreement.

4.11Employee Benefit Plans; ERISA.

(a)Section 4.11(a) of the Disclosure Letter sets forth a true and complete list of each material Plan. No Plan is maintained through a human resources and benefits outsourcing entity, professional employer organization, or other similar vendor or provider.  No Company Service Provider participates in or receives (or is eligible to receive) any compensation or benefits from any plan, program, arrangement or agreement maintained, adopted, entered into or contributed to by Seller or any Affiliate of Seller that is not the Company or a Company Subsidiary.

(b)With respect to each Plan, Seller has provided or made available to Buyer copies of each of the following documents: (i) a copy of the Plan (including all amendments thereto); (ii) a copy of the most recent annual report, if required under ERISA or the Code; (iii) if the Plan is funded through a trust or any third-party funding vehicle, a copy of the trust or other funding agreement (including all amendments thereto); (iv) the most recent actuarial reports to the extent applicable; (v) the most recent determination letter received from the IRS with respect to each Plan to the extent applicable; and (vi) all material records, notices and filings concerning IRS or U.S. Department of Labor audits or investigations with respect to such Plan.

(c)No Plan is and, none of the Company, any Company Subsidiary nor any of their respective ERISA Affiliates sponsors, maintains, contributes to, is a party to, or is required or obligated to contribute to, or otherwise has had any obligation or liability in connection with

 

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(whether fixed or contingent), any (i) employee benefit plan subject to Section 302 or Title IV of ERISA or Section 412 of the Code, (ii) “multiemployer plan” (within the meaning of Sections 3(37) and 4001(a)(3) of ERISA), (iii) a multiple employer plan (within the meaning of Section 413 of the Code) or (iv) a multiple employer welfare arrangement (within the meaning of Section 3(40) of ERISA). Each Plan intended to be qualified under Section 401(a) of the Code has received a favorable determination letter from the IRS as to its qualification or is a prototype plan to whose sponsor a favorable opinion letter has been issued by the IRS and, to the Knowledge of Seller, no event has occurred that would reasonably be expected to result in disqualification of such Plan.

(d)Each Plan has been operated and administered in all material respects in accordance with its terms and applicable Law, including, but not limited to, ERISA, the Code and other applicable Laws. There are no pending or, to the Knowledge of Seller, threatened in writing, material claims by or on behalf of any of the Plans, by any employee or beneficiary covered under any such Plan or otherwise involving any such Plan.  No Plan, and none of the Company, any Company Subsidiary or any Plan fiduciary with respect to any Plan, in any case, is the subject of an audit or investigation by any Governmental Entity, nor, to the Knowledge of Seller, is any such audit or investigation pending or, to the Knowledge of Seller, threatened.

(e)With respect to each Plan, since January 1, 2019, (i) no breaches of fiduciary duty or other failures to act or comply in connection with the administration or investment of the assets of such Plan have occurred, and (ii) no Lien has been imposed under the any applicable Law.  Since January 1, 2019, there has not been any non-exempt prohibited transaction (within the meaning of Section 406 of ERISA or Section 4975 of the Code) with respect to any Plan that would reasonably result in liability to the Company or any Company Subsidiary. None of the Company or any Company Subsidiary has made any filing in respect of any Plan under the Employee Plans Compliance Resolution System or the Department of Labor Delinquent Filer Program.

(f)All payments, benefits, contributions (including all employer contributions and employee salary reduction contributions) and premiums related to each Plan have been timely paid or made in full or, to the extent not yet due, properly accrued on the date of the Base Balance Sheet in accordance with the terms of the Plan and all applicable Laws.

(g)Except as required by applicable Law, no Plan provides material benefits, including death or medical benefits (whether or not insured), with respect to current or former employees of the Company or any Company Subsidiary beyond their retirement or other termination of service.

(h)Neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will, either alone or in combination with any other event, (i) entitle any Company Service Provider to severance pay, unemployment compensation or any other compensatory payment, (ii) accelerate the time of payment, funding or vesting, or increase the amount of or otherwise enhance any benefit due to any Company Service Provider, (iii) increase any compensation or benefits under any Plan, (iv) result in the forgiveness of any indebtedness of any current or former director, officer or employee of the Company or any Company Subsidiary or (v) result in any payment or benefit by the Company or

 

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any Company Subsidiary to any Company Service Provider that would constitute an “excess parachute payment” (as such term is defined in Section 280G(b)(1) of the Code).

(i)Each of the Company, the Company Subsidiaries and each of their respective ERISA Affiliates are in compliance in all material respects with (i) the applicable requirements of Section 4980B of the Code and any similar state law, (ii) the applicable requirements of HIPAA and the regulations (including the proposed regulations) thereunder and (iii) the applicable requirements of the Patient Protection and Affordable Care Act of 2010, as amended.

4.12Contracts.

(a)Section 4.12(a) of the Disclosure Letter sets forth a list of the following contracts (other than Plans) to which the Company or any Company Subsidiary is a party, or by which any of their properties or assets are bound, as of the date of this Agreement (“Material Contracts”):

(i)each master contract (excluding work orders, purchase orders, change orders and similar documentation) directly related to the Company’s obligations to perform a clinical trial on behalf of a sponsor which is still in effect and which contains ongoing obligations with any Material Customer;

(ii)any collective bargaining agreement or other contract with any labor union, labor organization or works council;

(iii)any contract entered into within the past thirty six (36) months relating to the acquisition by the Company or any Company Subsidiary of any other material business or Person, whether by merger, consolidation or other business combination or by the acquisition of the equity securities, or a material portion of the assets of, such business or Person, in each case, that contains material obligations that are still in effect or for consideration in excess of $1,000,000, other than any such contract for the purchase of products in the ordinary course of business;

(iv)any contract entered into within the past thirty six (36) months providing for the sale, transfer or other disposition of any equity securities of the Company or any Company Subsidiary or any material assets of the Company or any Company Subsidiary, in each case, that contains material obligations that are still in effect or for consideration in excess of $1,000,000, other than any such contract for the sale of the Company’s or applicable Company Subsidiary’s products in the ordinary course of businesses;

(v)any contract under which the Company or any Company Subsidiary has incurred Indebtedness or any guarantee of any Indebtedness of any other Person;

(vi)any joint venture, product development, research and development or limited partnership agreement involving a sharing of profits, losses, costs or liabilities by the Company or any Company Subsidiary with any other Person;

 

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(vii)any contract entered into since January 1, 2019 in the nature of a settlement agreement arising out of any actual or threatened Action asserted by any Person (including, without limitation, any Governmental Entity) providing for aggregate unsatisfied payment obligations in excess of $100,000 or other material non-monetary obligations that have not been satisfied;

(viii)any contract that (A) limits or purports to limit, in any material respect, the ability of the Company or any Company Subsidiary to compete in any line of business currently conducted by the Company or any Company Subsidiary in any geographical area or during any period of time, (B) provides for “most favored nations” terms or (C) establishes an exclusive sale or purchase obligation with respect to any product or service or any geographic location;

(ix)any contract pursuant to which (A) the Company or any Company Subsidiary is granted a license or similar grant of rights to Intellectual Property or (B) the Company or any Company Subsidiary grants to any Person a license or similar rights to Intellectual Property owned by the Company or any Company Subsidiary, in each case that is material to the Company and the Company Subsidiaries, taken as a whole, other than (1) licenses for generally commercially available un-customized software or other technology with aggregate annual license or other fees of less than $100,000, (2) agreements with customers of the Company or any Company Subsidiary to procure the Company’s or any Company Subsidiary’s products and services  in the ordinary course of business, and (3) for clarity, nondisclosure agreements, employee invention assignment and confidentiality agreements;

(x)any Contract for capital expenditures involving individual or aggregate payments or consideration of more than $150,000 under which there are material outstanding obligations;

(xi)any Contract under which the Company or any Company Subsidiary has material outstanding indemnification obligations to any Person, other than those entered into in the ordinary course of business consistent with past practice; and

(xii)each master contract (excluding work orders, purchase orders, change orders and similar documentation) with any Material Supplier, other than those that can be terminated without material penalty by the Company or such Company Subsidiary upon ninety (90) days’ notice or less.

(b)Copies of all written Material Contracts have been furnished or made available to Buyer, except for any such Material Contracts that are deemed by Seller to be competitively sensitive. (i) Neither the Company nor any Company Subsidiary or, to the Knowledge of Seller, any other party thereto is in material breach of or material default under any Material Contract and, to the Knowledge of Seller, no event has occurred that, with the passage of time or the giving of notice or both, would constitute such a material breach or material default; (ii) neither the Company nor any Company Subsidiary has received a written notice of material breach or material default or any event that with notice or lapse of time, or both, would constitute a material breach or material default by either the Company or a Company

 

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Subsidiary of any Material Contract; and (iii) each of the Material Contracts constitutes the valid and binding obligation of the Company or a Company Subsidiary, as applicable, and, to the Knowledge of Seller, each other party thereto, enforceable against the Company or a Company Subsidiary, as applicable, and, to the Knowledge of Seller, each other party thereto in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ right generally and by general equitable principles.

4.13Taxes.

(a)The Company and each Company Subsidiary has (i) duly filed or caused to be filed with the appropriate Governmental Entity all material Tax Returns required to be filed by it, taking into account any authorized extensions, and all such Tax Returns are true, correct and complete in all material respects, and (ii) paid all material Taxes required to be paid to any Governmental Entity.

(b)No material deficiencies or adjustments for Taxes have been proposed in writing or claimed, asserted or assessed against either the Company or any Company Subsidiary by any Governmental Entity that have not been fully paid, finally settled or for which adequate reserves have been made in accordance with GAAP.

(c)There are no audits, suits, or other proceedings, ongoing or pending, or threatened or proposed, with respect to any Taxes of the Company or the Company Subsidiaries.

(d)There are no Liens for Taxes against any assets of the Company or the Company Subsidiaries, other than Permitted Liens.

(e)There are no outstanding waivers, extensions or comparable consents in effect regarding the application of the statutory period of limitations for the assessment of Tax with respect to any material Taxes or material Tax Returns of the Company or any Company Subsidiary.

(f)No claim or notice has been received from a Governmental Entity in a jurisdiction where the Company or a Company Subsidiary does not file a Tax Return asserting that the Company or such Company Subsidiary may be subject to taxation in such jurisdiction with respect to Taxes that are the subject of such Tax Return.

(g)Neither the Company nor any of the Company Subsidiaries has participated within the past two (2) years in a transaction that was intended to qualify under Section 355 of the Code (or so much of Section 356 of the Code as relates to Section 355 of the Code).

(h)Neither the Company nor any Company Subsidiary has any material liability for Taxes of any Person (other than the Company or another Company Subsidiary, as applicable) arising from the application of Treasury Regulations Section 1.1502-6 or any analogous provision of state, local or foreign Law applicable to the Company or any Company Subsidiary, or as a transferee or successor.

 

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(i)Neither the Company nor any Company Subsidiary is a party to, is bound by, or has any obligation under, any Tax sharing agreement, Tax indemnity agreement, Tax allocation agreement, or similar agreement (excluding commercial agreements entered into with one or more unrelated third parties in the course of business, the principal purposes of which are not related to Taxes).

(j)Neither the Company nor any of the Company Subsidiaries will be required to include any material item of income in, or exclude any material item of deduction from, taxable income for any taxable period (or portion thereof) beginning on or after the Closing Date as a result of (i) a change in accounting method made prior to Closing, (ii) an installment sale or open transaction disposition made prior to the Closing, (iii) the long-term contract method of accounting, (iv) a written agreement with a taxing authority, (v) the use of an improper method of accounting for any taxable period (or portion thereof) ending on prior to the Closing Date, (vi) any advanced or prepaid amount received, or deferred revenue accrued, prior to the Closing, or (vii) an intercompany transaction or excess loss account described in the Treasury Regulations promulgated under Section 1502 of the Code (or any similar provision of state, provincial, local or non-U.S. Law).

(k)Neither the Company nor any of the Company Subsidiaries conducts a trade or business, has a permanent establishment, operates or conducts business through any branch, or is otherwise subject to income taxation on a net basis in a country other than the country of its formation.

(l)No Company Subsidiary that is formed under the Laws of a jurisdiction outside the United States holds any material “United States property” for the purpose of Section 956 of the Code.

(m)No Company Subsidiary has made any entity classification election pursuant to Treasury Regulations Section 301.7701-3.

(n)Neither the Company nor any Company Subsidiary has participated in any transaction that is or is substantially similar to a “listed transaction” within the meaning of Treasury Regulations Section 1.6011-4(b) (or any similar provision of state, local or non-U.S. Law).

(o)Neither the Company nor any Company Subsidiary has any unpaid Tax liability under Section 965 of the Code or has made any election under Section 965(h) of the Code.

4.14Affiliate Transactions.

(a)Except for (i) payment of compensation for employment to directors, officers and employees in the ordinary course of business, and (ii) participation by directors, officers and employees in any Plans set forth in the Disclosure Letter or sponsored by Seller, no director, officer or employee of Seller, the Company or any Company Subsidiary, nor to the Knowledge of Seller, any of their Affiliates, is a party to any material agreement, arrangement, contract or other commitment to which the Company or any Company Subsidiary is a party or by which any of their respective assets or properties is bound, or, to the Knowledge of Seller, has a

 

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material interest in any agreement, arrangement, contract or other commitment, asset or property (real or personal), tangible or intangible, owned by, used in or pertaining to the business of the Company or any Company Subsidiary or any customer, supplier or any Person that has a material business relationship with the Company or any Company Subsidiary.

(b)Except for those Contracts set forth on Section 4.14(b) of the Disclosure Letter (each, an “Affiliate Contract”), no Contract exists between Seller or any of its Affiliates (other than the Company or a Company Subsidiary), on the one hand, and the Company or any Company Subsidiary, on the other hand.

4.15Environmental Matters.

(a)The Company and the Company Subsidiaries are in compliance in all material respects with all applicable Environmental Laws, and since January 1, 2019, neither the Company nor any Company Subsidiary has received any written notifications that it is not in compliance in all material respects with all applicable Environmental Laws.

(b)The Company and the Company Subsidiaries possess all material Permits required under applicable Environmental Laws and are in compliance in all material respects with the terms and conditions thereof. Since January 1, 2019, neither the Company nor any Company Subsidiary has received any written notifications that it is not in material compliance with all such Permits. All such Permits held by the Company and the Company Subsidiaries pursuant to applicable Environmental Laws are in full force and effect, and, to the Knowledge of Seller, no appeal or any other proceeding is pending to revoke or modify in a manner materially adverse to the Company and the Company Subsidiaries, taken as a whole, any such Permit.

(c)There is no material Environmental Claim pending or, to the Knowledge of Seller, threatened against the Company or any Company Subsidiary.

(d)Neither the Company nor any Company Subsidiary is subject to any Order with any Person that would reasonably be expected to result in material liabilities to the Company or such Company Subsidiary under applicable Environmental Laws or require the Cleanup of Hazardous Materials.

4.16Realty.

(a)Section 4.16(a) of the Disclosure Letter sets forth a list of all real property to which the Company or any Company Subsidiary has the right to use or occupy pursuant to a lease, sublease or other similar agreement (collectively, the “Leased Realty”). To the Knowledge of Seller, the Company or one of the Company Subsidiaries possesses, in all material respects, valid leasehold interests in the Leased Realty pursuant to the agreements set forth on Section 4.16(a) of the Disclosure Letter (the “Leases”), free and clear of any Liens except Permitted Liens. Copies of all Leases have been furnished or made available to Buyer. Each Lease is in full force and effect and enforceable against the Company or the Company Subsidiary, as applicable, and, to the Knowledge of Seller, each other party thereto in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws now or hereafter in effect affecting creditors’ rights generally and general equitable principles. To the Knowledge of Seller, neither the Company nor

 

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any Company Subsidiary has received any notice of default, termination or cancellation from a landlord with respect to any Lease. Neither the Company nor any Company Subsidiary is in material breach or violation of, or default under, any Lease. To the Knowledge of Seller, no other parties to the Leases are in material breach or violation of, or default under, any Lease. No event has occurred that, with notice or lapse of time or both, would constitute such a material breach or violation of, or default under any Lease by the Company or any Company Subsidiary or, to the Knowledge of Seller, by any other parties thereto.

(b)Neither the Company nor any Company Subsidiary owns any real property.

(c)Neither the Company nor any Company Subsidiary has entered into any lease or sublease granting to any Person the right to use or occupy any portion of the Leased Realty.

(d)All buildings, facilities, structures, improvements and fixtures and systems included in the Leased Realty are in reasonable operating condition and repair, ordinary wear and tear excepted.

4.17Personal Property. The Company and each Company Subsidiary has, in all material respects, legal title to, or a valid and enforceable right to use, all equipment and other tangible personal property that is material to the operation of the business of the Company or such Company Subsidiary in the ordinary course of business, in each case, free and clear of any and all Liens except Permitted Liens.

4.18Labor Matters.

(a)Except for any industry-wide agreements in a particular jurisdiction, (i) neither the Company nor any Company Subsidiary is a party to or bound by or subject to any collective bargaining agreement, labor agreement or other contract with a labor union, labor organization or works council relating to the employees of the Company or any Company Subsidiary, (ii) no employees of the Company or any Company Subsidiary are represented by any labor union, labor organization or works council, and (iii) there is no unfair labor practice charge, material grievance, material arbitration, labor strike, work stoppage, lockout, slowdown, or other material labor dispute pending or, to the Knowledge of Seller, threatened against the Company or any Company Subsidiary, and no labor strike, work stoppage, lockout, slowdown or other material labor dispute has occurred since January 1, 2019.

(b)The Company and each Company Subsidiary is in compliance in all material respects with all applicable Laws with respect to employment and labor matters. The Company and each Company Subsidiary has properly classified in all material respects all of their service providers, in all material respects, as employed or self-employed, employees or independent contractors and as exempt or non-exempt. There is no material Litigation pending or, to the Knowledge of Seller, threatened in writing against the Company or any Company Subsidiary brought by or on behalf of any current or former employee of the Company or any Company Subsidiary.

 

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(c)No individual providing services to the Company or any Company Subsidiary is employed or engaged by Seller or a Seller Affiliate other than the Company or a Company Subsidiary.

(d)(i) The Company and each Company Subsidiary has paid in full to all of its employees or accrued for in accordance with GAAP, in all material respects, all wages, salaries, commissions, bonuses, benefits and other compensation due to or on behalf of such employees; and (ii) there is no material claim with respect to payment of wages, salary or overtime pay that has been asserted or is now pending or, to the Knowledge of Seller, threatened before any Governmental Entity with respect to any Persons currently or formerly employed by the Company or any Company Subsidiary.

(e)There are no material liabilities, whether contingent or absolute, of the Company or any Company Subsidiary relating to workers’ compensation benefits that are not fully insured against by a bona fide third-party insurance carrier.

(f)Since January 1, 2019, none of the Company or any Company Subsidiary has engaged in or effectuated any “plant closing” or employee “mass layoff” (in each case, as defined in the Worker Adjustment Retraining and Notification Act of 1988, as amended, or any similar state or local statute, rule or regulation) affecting any site of employment or one or more facilities or operating units within any site of employment or facility of the Company and or any Company Subsidiary.

4.19Intellectual Property and Privacy.

(a)Section 4.19(a) of the Disclosure Letter sets forth a list (together with identification of the record (and if different, beneficial) owner and filing details thereof), as of the date of this Agreement, of all: (i) patents and patent applications; (ii) trademark and service mark registrations and applications; (iii) Internet domain name registrations;  (iv) copyright registrations and applications; and (v) material software proprietary to and commercially distributed by the Company or a Company Subsidiary, in each case (i)-(v), owned by the Company or any Company Subsidiary.  As of the date of this Agreement, (1) the foregoing registrations and applications are in effect and subsisting, and (2) either the Company or a Company Subsidiary is the sole owner of such applications and registrations free and clear of all Liens other than Permitted Liens.  

(b)The conduct of the business as currently conducted by the Company and the Company Subsidiaries does not infringe, misappropriate, or otherwise violate any Person’s Intellectual Property in any material respect, and there is no claim alleging otherwise pending, or threatened in writing, against the Company or any Company Subsidiary.  No Person, to the Knowledge of Seller, is infringing, misappropriating or otherwise violating any Intellectual Property owned by the Company or any Company Subsidiary in any material respect, and no such claim is pending, or threatened in writing, against any Person by the Company or any Company Subsidiary.

(c)The Company and each Company Subsidiary make commercially reasonable efforts to protect the confidentiality of trade secrets and other confidential

 

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information used in or retained by the business of the Company and the Company Subsidiaries in all material respects. The Company and each Company Subsidiary has secured from all current and former officers, directors, employees, advisors, consultants, agents and contractors of the Company and each Company Subsidiary who contributed to or participated in the creation or development of any portion of, or otherwise had, have or may have any rights in or to, any Intellectual Property owned or purported to be owned by the Company or a Company Subsidiary, valid, binding and enforceable written assignments to the Company or a Company Subsidiary, such that ownership of such Intellectual Property (and any rights therein) properly vests in Company or such Company Subsidiary (or otherwise have secured such rights by operation of law).  No such Person has asserted and no such Person has any right, title, interest or other claim in or to the right to receive any royalties or other consideration with respect to any Intellectual Property created or developed by them.

(d)The Company and the Company Subsidiaries are and since January 1, 2018 have been in compliance in all material respects with (i) all applicable Privacy and Security Laws; (ii)  their respective policies regarding privacy and data security, including in relation to the collection, retention, storage, disposal, use, disclosure, transfer, protection, security and other processing of Personal Data (collectively, “Privacy Policies”); and (iii) all applicable contracts, agreements, permits, licenses or other obligations related to Personal Data. As of the date of this Agreement, since January 1, 2019, none of the Company or any Company Subsidiary has received any written notice, complaint, or demand from any Governmental Entity or other Person, nor has any claim been served on the Company or any Company Subsidiary, in either case alleging a material violation of (i) individual privacy or personal information rights; (ii) Privacy and Data Security Laws; (iii) Privacy Policies; (iv) Security Policies (as defined herein); or (v) contracts related to Personal Data.  The Company and the Company Subsidiaries take and since January 1, 2018 have taken commercially reasonable actions, including implementation and maintenance of commercially reasonable technical and organizational measures (that includes written information security policies) to protect (i) the security, integrity, availability and privacy of Personal Data in their possession, custody or control; and (ii) Personal Data, in their possession, custody or control, from loss, theft, unauthorized access, use, disclosure, acquisition, modification or other processing (collectively, the “Security Policies”). The Company and the Company Subsidiaries are and since January 1, 2018 have been in compliance with such Security Policies. No disclosures made or contained in any Privacy Policy have been materially inaccurate, misleading or deceptive (in any case, including by omission), or in material violation of any Privacy and Security Laws.

(e)The Company and the Company Subsidiaries have, and since January 1, 2018 have, contractually obligated third parties that service, host, manage, access or otherwise process Personal Data in any material respect for or on behalf of the Company or a Company Subsidiary to comply with (i) Privacy and Security Laws; and (ii) the Company and the Company Subsidiaries’ material contractual obligations with respect to Personal Data, including any confidentiality and processing obligations. No third party has materially breached such contractual obligations and the Company and the Company Subsidiaries have no knowledge that any such third parties, in their provision of services to Company or the Company Subsidiaries, have materially failed to comply with relevant contracts or applicable Privacy and Security Laws.

 

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(f)The Company’s and the Company Subsidiaries’ IT Systems operate and perform in a manner that (i) is materially in accordance with all applicable documentation and specification; and (ii) permits the Company and the Company Subsidiaries to conduct their business as currently conducted. The Company and the Company Subsidiaries have, since January 1, 2019 and presently, used commercially reasonable methods and technology to protect the confidentiality, integrity, availability and security of the Company’s and the Company Subsidiaries’ IT Systems against unauthorized access, interruption or corruption. The Company and the Company Subsidiaries have implemented and routinely tested commercially reasonable business continuity and disaster recovery plans relating to IT Systems and Personal Data.

(g)The Company and the Company Subsidiaries have not experienced any actual or reasonably suspected breach of security, loss of, theft of, unauthorized use of, unauthorized disclosure of, unauthorized processing of, unauthorized acquisition of, unauthorized modification of, or other unauthorized access to its IT Systems or the Personal Data in the Company or the Company Subsidiaries’ possession, custody or control in any material respect (any, a “Security Incident”) except as would not be material to the Company or the Company Subsidiaries’ operations. The Company and the Company Subsidiaries have made all notifications to Persons, Governmental Entities and other third parties required to be made by the Company or the Company Subsidiaries by any Privacy and Security Laws, Security Policies, Privacy Policies, or contracts arising out of relating to any Security Incident except as would not be material to the Company or the Company Subsidiaries’ operations.

(h)Neither the execution, delivery or performance of this Agreement (or any of the Transaction Documents) nor the consummation of the transactions contemplated by this Agreement, will result in any material violation of any Privacy Policies, Security Policies, Privacy and Security Laws or contracts pertaining to Personal Data.

(i)To the Knowledge of Seller, there is no notice, complaint, warrant, judicial order, regulatory opinion, inquiry or investigative demand regarding the Company or the Company Subsidiaries’ collection, use, processing, transfer, storage or disclosure of Personal Data or the Company or the Company Subsidiaries’ data protection or information security practices.

4.20Improper and Other Payments; Sanctions.

(a)Since January 1, 2018, neither the Company nor any Company Subsidiary nor any of their directors or officers, nor, to the Knowledge of Seller, any other Persons acting on behalf of the Company or any Company Subsidiary has (i) offered, promised, made, paid, or received, directly or indirectly, any unlawful bribes, kickbacks, or other similar payments to or from any Person (including any customer or supplier) or any Governmental Entity; (ii) offered, promised, made, or paid any illegal contributions, directly or indirectly, to a political party, political party official, or candidate for office; or (iii) materially violated the Foreign Corrupt Practices Act of 1977, as amended), or otherwise taken any action in violation of any applicable anti-bribery or anti-corruption Law.

(b)Since January 1, 2018, the Company and the Company Subsidiaries have (i) complied with applicable Export Control Laws and Sanctions Laws; (ii) not been the subject

 

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of or otherwise involved in investigations or enforcement actions by any government entity or other legal proceedings with respect to any actual or alleged violations of Export Control Laws or Sanctions Laws, and has not been notified of any such pending or threatened actions; (iii) secured and maintained all necessary Permits, registrations, agreements or other authorizations, including amendments thereof pursuant to the Export Control Laws or Sanctions Laws; and (iv) maintained in place reasonable policies to comply with Export Control Laws and Sanctions Laws.

(c)Neither the Company, the Company Subsidiaries, nor any of their respective directors or officers, or, to the Knowledge of Seller, employees, is a Sanctioned Person or is subject to debarment or any list-based designations under Export Control Laws.

4.21Insurance.  Neither Seller nor the Company has received any notice from the insurer under any insurance policy maintained by Seller or any of its Affiliates and covering the Company and/or the Company Subsidiaries with respect to any pending claim disclaiming coverage or canceling or materially amending any such policy, and there is no material claim with respect to the Company or any Company Subsidiary pending under any such policy.  All premiums due and payable for such insurance policies have been duly paid, and such policies (or extensions, renewals or replacements thereof with comparable policies) shall be in full force and effect without interruption until the Closing Date. The Company and the Company Subsidiaries maintain insurance coverage containing commercially reasonable policy terms and limits that are required under applicable Law and their respective contracts.

4.22Customers and Suppliers.

(a)Section 4.22(a) of the Disclosure Letter sets forth a complete and accurate list of the twenty (20) largest customers of the Company and the Company Subsidiaries, taken as a whole, based on current backlog as of the date of this Agreement (the “Material Customers”). None of the Material Customers has cancelled, terminated or otherwise adversely and materially modified, or to the Knowledge of Seller, intends to cancel, terminate or otherwise adversely and materially modify, the relationship of such Person with the Company or any Company Subsidiary, as applicable.

(b)Section 4.22(b) of the Disclosure Letter sets forth a complete and accurate list of the suppliers that were paid more than $1,000,000 in the aggregate by the Company and the Company Subsidiaries during the twelve (12) months ended December 31, 2019, or that are otherwise regarded as key vendors by the Company (the “Material Suppliers”). None of the Material Suppliers has cancelled, terminated or otherwise adversely and materially modified, or to the Knowledge of Seller, intends to cancel, terminate or otherwise adversely and materially modify, the relationship of such Person with the Company or any Company Subsidiary, as applicable.

4.23Brokers. Except for the Banker’s Fees (which are the obligation of Seller), no broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the transactions contemplated by this Agreement or the Transaction Documents based upon arrangements made by or on behalf of Seller, the Company or any Company Subsidiary.

 

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4.24Disclaimer of Seller (A) EXCEPT AS EXPRESSLY SET FORTH IN THIS ARTICLE IV OR ANY CERTIFICATE REQUIRED TO BE DELIVERED PURSUANT TO SECTION 3.2(C) AND SECTION 3.2(D), NONE OF SELLER, THE COMPANY, THE COMPANY SUBSIDIARIES, OR ANY OF THEIR RESPECTIVE OFFICERS, DIRECTORS, MANAGERS, MEMBERS, STOCKHOLDERS, AFFILIATES, BENEFICIARIES, EMPLOYEES OR REPRESENTATIVES MAKES OR HAS MADE ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AT LAW OR IN EQUITY, IN RESPECT OF THE COMPANY OR ANY COMPANY SUBSIDIARY, THE BUSINESS OF THE COMPANY OR ANY COMPANY SUBSIDIARY, OR THE SHARES OR THE CAPITAL STOCK OR OTHER EQUITY INTERESTS OR THE ASSETS OF THE COMPANY OR ANY COMPANY SUBSIDIARY, INCLUDING WITH RESPECT TO (I) MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OR (II) THE PROBABLE SUCCESS OR PROFITABILITY OF THE COMPANY OR COMPANY SUBSIDIARY, AFTER THE CLOSING AND (B) EXCEPT AS SET FORTH IN THIS ARTICLE IV OR ANY CERTIFICATE REQUIRED TO BE DELIVERED PURSUANT TO SECTION 3.2(C) AND SECTION 3.2(D), NONE OF SELLER, THE COMPANY OR THE COMPANY SUBSIDIARIES, OR ANY OF THEIR RESPECTIVE OFFICERS, DIRECTORS, MANAGERS, MEMBERS, STOCKHOLDERS, AFFILIATES, BENEFICIARIES, EMPLOYEES OR REPRESENTATIVES WILL HAVE OR BE SUBJECT TO ANY LIABILITY OR INDEMNIFICATION OBLIGATION TO BUYER OR TO ANY OTHER PERSON RESULTING FROM THE DISTRIBUTION TO BUYER, ITS AFFILIATES OR REPRESENTATIVES OF, OR BUYER’S USE OF, ANY INFORMATION, DOCUMENTS, PROJECTIONS, FORECASTS OR OTHER MATERIALS RELATING TO THE COMPANY OR ANY COMPANY SUBSIDIARY, INCLUDING ANY INFORMATION, DOCUMENTS, PROJECTIONS, FORECASTS OR OTHER MATERIALS MADE AVAILABLE TO BUYER, WHETHER ORALLY OR IN WRITING, IN ANY DATA ROOM RELATING TO THE TRANSACTION, IN MANAGEMENT PRESENTATIONS, FUNCTIONAL “BREAK-OUT” DISCUSSIONS, RESPONSES TO QUESTIONS OR REQUESTS SUBMITTED BY OR ON BEHALF OF BUYER OR IN ANY OTHER FORM IN CONSIDERATION OR INVESTIGATION OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. ANY SUCH OTHER REPRESENTATION OR WARRANTY IS HEREBY EXPRESSLY DISCLAIMED. NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, NOTHING HEREIN RESTRICTS CLAIMS FOR FRAUD.

Article V

REPRESENTATIONS AND WARRANTIES OF BUYER

Buyer hereby represents and warrants to Seller as of the date hereof and as of the Closing as follows:

5.1Organization. Buyer is a corporation, duly organized, validly existing and in good standing under the laws of Delaware, and has all requisite power and authority to own, lease and operate its properties and assets and to carry on its business in all material respects as now being conducted.

 

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5.2Authority; Enforceability. Buyer has all requisite power and authority to execute and deliver this Agreement and the Transaction Documents to which Buyer is a party, and to perform its obligations hereunder and thereunder, and to consummate the transactions contemplated hereby and thereby. The execution and delivery by Buyer of this Agreement and the performance by Buyer of this Agreement and the Transaction Documents have been duly authorized by all necessary corporate action by Buyer and no other corporate proceeding on the part of Buyer is necessary to authorize this Agreement or the Transaction Documents or to consummate the transactions contemplated hereby or thereby. This Agreement and the Transaction Documents to which Buyer is a party has been duly executed and delivered by Buyer and assuming the due and valid authorization, execution and delivery hereof by Seller, constitutes the valid and binding obligation of Buyer enforceable against Buyer in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally and by general equitable principles.

5.3No Conflict; Required Filings and Consents.

(a)The execution and delivery of this Agreement and the Transaction Documents by Buyer does not, and the performance by Buyer of its obligations under this Agreement will not, (i) conflict with or violate the Organizational Documents of Buyer, (ii) conflict with or violate, in any material respect, any Laws applicable to Buyer or by or to which any of Buyer’s properties or assets are bound or subject or (iii) result in any material breach of or constitute a material default (or an event that with notice or lapse of time or both would become a material default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, or require payment under, or result in the creation of a material Lien on, any of the properties or assets of Buyer, pursuant to any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which Buyer is a party or by which Buyer or any of its properties or assets is bound or subject, except as would not reasonably be expected to prohibit or materially restrict, impede or delay the consummation of the transactions contemplated by this Agreement.

(b)The execution and delivery of this Agreement by Buyer and the Transaction Documents to which Buyer is a party does not, and the performance by Buyer of its obligations under this Agreement will not, require Buyer to obtain any Consent of any Governmental Entity or third party except for applicable requirements of the HSR Act and other Regulatory Laws.

5.4Brokers. No broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the transactions contemplated by this Agreement or the Transaction Documents based upon arrangements made by or on behalf of Buyer or any of its Affiliates.

5.5Absence of Litigation. There is no Litigation pending or, to the knowledge of Buyer, threatened against Buyer that, if adversely determined, (a) would prevent or materially restrict, impede or delay the performance by Buyer of its obligations under this Agreement or (b) would reasonably be expected to have, individually or in the aggregate, a material adverse effect on the ability of Buyer to perform its obligations under this Agreement.

 

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5.6Sufficient Funds. Buyer has, and will have on the Closing Date, sufficient immediately available funds, or access to such funds to Buyer through an existing financing facility, to consummate the transactions contemplated hereby, including to pay the amounts required to be paid by Buyer at or prior to the Effective Time pursuant to Article II and Article III and all fees and expenses of Buyer related to the transactions contemplated by this Agreement. Buyer does not know of any circumstance or condition that would reasonably be expected to prevent or substantially delay the availability of such funds at Closing.

5.7Solvency. As of the Effective Time, after giving effect to all of the transactions contemplated by this Agreement, including any related financing and the payment of the Net Purchase Price, including any adjustments thereto pursuant to Section 2.3, any repayment or refinancing of Indebtedness contemplated in this Agreement, payment of all related fees and expenses and payment of any Transaction Expenses, and assuming for these purposes the accuracy of the representations and warranties set forth in Article IV hereof and the satisfaction of the conditions set forth in Sections 8.1 and 8.2, as of the Effective Time, Buyer, the Company and the Company Subsidiaries shall be Solvent. For the purposes of this Section 5.7, the term “Solvent” when used with respect to any Person, means that, as of any date of determination, (a) the “fair saleable value” of such Person’s assets will, as of such date, exceed (i) the value of all “liabilities, including contingent and other liabilities,” of such Person, as applicable, as such quoted terms are generally determined in accordance with applicable Laws governing determinations of the insolvency of debtors, and (ii) the amount that will be required to pay the probable liabilities of such Person on its respective existing debts (including contingent liabilities) as such debts become absolute and matured, (b) such Person will not have, as of such date, unreasonably small capital for the operation of the businesses in which it is engaged or proposed to be engaged following such date and (c) such Person will be able to pay its liabilities, including contingent and other liabilities, as they mature.

5.8Investment Intent. Buyer is acquiring the Shares for investment for its own account for investment only, and not with a view to any resale or public distribution thereof. Buyer shall not offer to sell or otherwise dispose of the Shares in violation of any applicable Laws to any such offer, sale or other disposition. Buyer acknowledges that (a) the Shares have not been registered under the Securities Act or any other securities Laws; (b) there is no public market for the Shares and there can be no assurance that a public market will develop; and (c) Buyer must bear the economic risk of its investment in the Shares for an indefinite period of time.

5.9Legal Requirements and Approvals. Other than the Consent of the applicable Governmental Entity pursuant to the HSR Act and other Regulatory Laws,  Buyer has no knowledge of any other Consent of any Governmental Entity that will be required to consummate the transactions contemplated by this Agreement.  

5.10Inspection; No Other Representations. Buyer is an informed and sophisticated purchaser, and has engaged advisors, experienced in the evaluation and purchase of companies such as the Company and the Company Subsidiaries as contemplated hereunder. Buyer has undertaken such investigation and has been provided with and has evaluated such documents and information as it has deemed necessary to enable Buyer to make an informed decision with respect to the execution, delivery and performance of this Agreement and the transactions

 

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contemplated hereby. Buyer has received all materials relating to the business of the Company and the Company Subsidiaries that it has requested and has been afforded the opportunity to obtain any additional information necessary to evaluate the merits of the transactions contemplated hereby. Buyer acknowledges that Seller has given Buyer reasonable access to the key employees, documents and facilities of the Company and the Company Subsidiaries. Seller, the Company and their representatives have answered to Buyer’s reasonable satisfaction all inquiries that Buyer or its representatives have made concerning the business of the Company and the Company Subsidiaries or otherwise relating to the transactions contemplated hereby. Buyer has not relied upon, and agrees to acquire the Shares without reliance upon any express or implied representations or warranties of any nature, whether in writing, orally or otherwise, made by or on behalf of or imputed to Seller or the Company, the Company Subsidiaries or their respective Representatives, except as expressly set forth in Article IV of this Agreement or any certificate delivered pursuant to this Agreement. Without limiting the generality of the foregoing, Buyer acknowledges that neither Seller nor any of its Representatives (including the Company and the Company Subsidiaries) makes any representation or warranty with respect to (a) any projections, estimates or budgets delivered to or made available to Buyer of future revenues, future results of operations (or any component thereof), future cash flows or future financial condition (or any component thereof) of the Company and the Company Subsidiaries or the future business and operations of the Company and the Company Subsidiaries or (b) any other information or documents made available to Buyer or its counsel, accountants or other advisors with respect to the Company, the Company Subsidiaries or any of their respective businesses, assets, liabilities or operations, except as expressly set forth in Article IV of this Agreement or any certificate delivered pursuant to this Agreement. In connection with Buyer’s investigation of the Company and each Company Subsidiary, Seller has delivered, or made available to Buyer and its Affiliates, agents and other Representatives, certain projections and other forecasts, including projected financial statements, cash flow items and other data of the Company and Company Subsidiaries relating to the business of the Company and the Company Subsidiaries and certain business plan information of the Company and the Company Subsidiaries. Buyer acknowledges that there are uncertainties inherent in attempting to make such projections and other forecasts and plans and accordingly is not relying on them, that Buyer is familiar with such uncertainties, that Buyer is taking full responsibility for making its own evaluation of the adequacy and accuracy of all projections and other forecasts and plans so furnished to it, and that Buyer and its Affiliates, agents and representatives shall have no claim against any Person with respect thereto. Accordingly, Buyer acknowledges that, without limiting the generality of Section 4.24, neither Seller nor any of its representatives, agents or Affiliates (including the Company and the Company Subsidiaries) have made any representation or warranty with respect to such projections and other forecasts and plans. Notwithstanding anything herein to the contrary, nothing herein restricts claims for Fraud.

Article VI

COVENANTS

6.1Affirmative Covenants of Seller. Prior to the Closing or the earlier termination of this Agreement pursuant to Article IX, Seller shall, and shall cause the Company and each Company Subsidiary to, unless (i) otherwise expressly contemplated by this Agreement, (ii) taken in response to any COVID-19 Effect, or (iii) consented to in writing by Buyer (which

 

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consent shall not be unreasonably conditioned, withheld, or delayed), use commercially reasonable efforts to: (a) operate the business of the Company and the Company Subsidiaries in all material respects in the ordinary course consistent with past practice, (b) maintain in all material respects relationships of the Company and the Company Subsidiaries with customers, suppliers  and other Persons with which the Company and the Company Subsidiaries has significant business relationships, and (c) retain the services of their respective officers and key employees. Notwithstanding the foregoing, during the period from the date hereof until the Closing or the earlier termination of this Agreement pursuant to Article IX, Seller, the Company and each Company Subsidiary shall be permitted to utilize any and all available Cash and Cash Equivalents of the Company and the Company Subsidiaries from time to time to (w) pay any Transaction Expenses, (x) repay any outstanding Indebtedness of the Company and the Company Subsidiaries, (y) declare and pay one or more dividends or other distributions to Seller out of funds legally available therefore, and (z) pay operating and other ordinary course expenses, at such times and in such amounts as the Company or applicable Company Subsidiary shall deem necessary, appropriate or desirable.

6.2Negative Covenants of Seller. From the date of this Agreement until the Closing or the earlier termination of this Agreement pursuant to Article IX hereof, Seller shall not permit the Company or any of the Company Subsidiaries to do any of the following, except (i) as required by Law, (ii) as expressly contemplated by this Agreement, (iii) as expressly contemplated in Section 6.2 of the Disclosure Letter, (iv) taken in response to any COVID-19 Effect, or (v) as consented to in writing by Buyer (which consent shall not be unreasonably conditioned, withheld or delayed) (provided that (x) none of the following shall be construed to restrict the right and ability of the Company or any Company Subsidiary, prior to the Closing, to take any action expressly permitted under the last sentence of Section 6.1 above and (y) nothing contained in this Agreement is intended to give Buyer, directly or indirectly, the right to control or direct the operations of the Company or any Company Subsidiary prior to the Effective Time):

(a)except pursuant to any Plans in effect on the date hereof, (i) materially increase the compensation payable to or to become payable to any Company Service Provider; (ii) accelerate the vesting or payment of any compensation or benefits of any Company Service Provider; (iii) establish, adopt, terminate or amend in any material respect any Plan that would result in or increase a liability of the Company or any Company Subsidiary (or any plan, program, agreement or arrangement that would be a Plan if in effect on the date hereof); or (iv) take action to fund or secure any payments or benefits that are payable or to be provided to any current or former director, officer or employee of the Company or any Company Subsidiary under any Plan;

(b)(i) hire any Person to be an officer or employee of the Company or any Company Subsidiary or engage any other service provider to provide services to the Company or any Company Subsidiary, in either case, except for the hiring or engagement of Persons with annual base pay or rate not in excess of $235,000 in the ordinary course of business to replace (A) an employee whose employment or engagement was terminated for cause or as a result of the resignation of such employee, or (B) a service provider whose engagement was terminated for cause or expired, in each case, with compensation and benefits substantially similar to those provided to similarly situated employees or service providers of the Company and the Company Subsidiaries or (ii) terminate (except for cause) the employment or engagement of any Company

 

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Service Provider, except for the termination of employment or engagement of Company Service Providers with an annual base pay or rate not in excess of $235,000 in the ordinary course of business;

(c)change or amend any Organizational Documents;

(d)(i) effect any reorganization or recapitalization; (ii) split, combine or reclassify any of its capital stock; (iii) issue or authorize or propose the issuance of any other securities in respect of, in lieu of, or in substitution for, shares of its capital stock; (iv) deliver, award, grant or sale of, any of its equity interests, any securities convertible into or exercisable or exchangeable for any such equity interests, or any rights, warrants or options to acquire any such equity interests; (v) dispose of, pledge or otherwise encumber any of its equity interests; or (vi) issue any rights to subscribe for or acquire any of its equity interests;

(e)sell, lease, exchange, mortgage, pledge, transfer or otherwise dispose of, or agree to sell, lease, exchange, mortgage, pledge, transfer or otherwise dispose of, in each case, any of its material assets or properties, except for such dispositions with a fair market value of less than $250,000;

(f)(i) change any of its methods of accounting, (ii) make, change or rescind any express or deemed entity classification or other material election relating to Taxes, (iii) amend any material Tax Returns in any material respect, (iv) except as contemplated by Section 6.11, settle or compromise any material Litigation, audit, assessment, controversy or other proceeding relating to Taxes, (v) change any accounting period relating to material Taxes, (vi) enter into any “closing agreement” with any taxing authority, (vii) consent to any extension or waiver of the limitations period applicable to any material Tax claim or assessment or (viii) make any voluntary Tax disclosure or Tax amnesty or similar filing;

(g)incur any material obligation for Indebtedness or cancel any material Indebtedness owed to the Company or any Company Subsidiary, whether or not evidenced by a note, bond, debenture, guarantee or similar instrument other than (i) pursuant to the Credit Agreement or any other existing facility to the extent available at such time, or incurred to replace, renew, extend, refinance or refund any existing Indebtedness, (ii) with respect to any Indebtedness between or among the Company and any Company Subsidiaries, or between or among the Company Subsidiaries, or (iii) Indebtedness permitted under the Credit Agreement or any replacement facility that will be satisfied in full at or prior to the Closing;

(h)settle or compromise any Litigation involving a payment obligation by the Company or any Company Subsidiary in an amount (in excess of any applicable insurance proceeds) in excess of $100,000;

(i)permit or allow any material assets of the Company or any Company Subsidiary with a fair market value in excess of $50,000 to be subjected to any Lien other than Permitted Liens or Liens that will be released at or before the Closing;

(j)enter into, adopt, amend or terminate any collective bargaining agreement;

 

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(k)acquire by merging or consolidating with, or by purchasing a substantial portion of the assets or securities of, or by any other manner, any material corporation, partnership, joint venture or other entity, in each case, for consideration in excess of $50,000, other than transactions between or among the Company and any Company Subsidiaries, or between or among Company Subsidiaries;

(l)make or authorize material capital expenditures or material commitments for capital expenditures that cause the Company and the Company Subsidiaries to exceed their consolidated annual capital expenditure budget which was previously made available to Buyer prior to the date of this Agreement by more than $50,000;

(m)(i) terminate or materially amend or modify any Material Contract, (ii) enter into any contract that, if in effect on the date hereof, would have been a Material Contract (except in the ordinary course of business), or (iii) waive in any material respect any term of, or waive any material default under, or release, settle or compromise any material claim by or against the Company or any Company Subsidiary or material liability or obligation owing to the Company or any Company Subsidiary under, any Material Contract;

(n)dissolve, wind up or liquidate;

(o)cancel or compromise any material debt or claim, or waive or release any material right of the Company or any Company Subsidiary or any of its assets, properties, rights or interests;

(p)alter in any material respect the manner in which the Company and the Company Subsidiaries have regularly and customarily maintained their books and records, except as may be required by applicable Law, any Governmental Entity or professional standards of accountancy, or change in any material respect any accounting policies or practices;

(q)defer payment of any payable or any other liability beyond the date that similar payables or other liabilities have been paid during the trailing twelve-month period, or accelerate the collection of any receivable in comparison to collection practices during the trailing twelve-month period; or

(r)agree, whether in writing or otherwise, to do any of the foregoing.

6.3Access and Information. Subject to Section 6.4 and applicable Law, from the date of this Agreement until the Closing or earlier termination of this Agreement pursuant to Article IX hereof, Seller shall, and shall cause the Company and the Company Subsidiaries to, afford to Buyer and its Representatives access reasonably necessary for Buyer to perform its obligations under this Agreement at reasonable times during normal business hours under supervision of the Company’s or the applicable Company Subsidiary’s personnel to (i) the properties of the Company and the Company Subsidiaries and to the books and records thereof, and (ii) specified members of management of the Company and the Company Subsidiaries as the parties may reasonably agree; provided that all requests for access pursuant to this Section 6.3 shall be made in writing and shall be directed to and coordinated with such persons as Seller may direct in writing (or such person or persons as he may designate in writing to Buyer); provided, further, that any such access shall be conducted at a reasonable time during ordinary business hours,

 

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upon reasonable advance notice to Seller, and without undue disruption to the business operations of the Company and the Company Subsidiaries. Notwithstanding anything to the contrary contained herein, neither Seller, the Company nor any Company Subsidiary shall be required to disclose to Buyer or Buyer’s Representatives any information (i) to the extent related to the sale process or Seller’s evaluation thereof, including projections and financial or other information related thereto, other than projections and financial or other information prepared in the ordinary course of business and not prepared for the sale process, (ii) if doing so presents a reasonable risk of violating any contract to which Seller, the Company or any Company Subsidiary is a party or any Law to which Seller, the Company or any Company Subsidiary is subject or which Seller believes in good faith (upon the advice of counsel) would result in a loss of the ability to successfully assert a claim of privilege, (iii) reasonably pertinent to any Litigation in which Seller, the Company or any Company Subsidiary, on the one hand, and Buyer or any of its Subsidiaries or Affiliates, on the other hand, are adverse parties, or (iv) that Seller, the Company or any Company Subsidiary reasonably determines in good faith is competitively sensitive.

6.4Confidentiality. From and after the date of this Agreement, each of Seller and Buyer shall continue to comply with all of their respective obligations under the Confidentiality Agreement, dated as of October 3, 2020, between Seller and Buyer or an Affiliate of Buyer on the other hand (the “Confidentiality Agreement”), which shall survive any termination of this Agreement in accordance with its terms. All information disclosed and access provided pursuant to Section 6.3 shall be subject to the terms and conditions of the Confidentiality Agreement. Concurrently with the consummation of the transactions contemplated by this Agreement, the Confidentiality Agreement shall terminate (notwithstanding anything contained therein to the contrary).

6.5No Contacts. Prior to the Closing, without the prior written consent of Seller, Buyer shall not, directly or indirectly through its Representatives or otherwise, contact or communicate with the employees, customers, suppliers or any other Person with a material business relationship with Seller, the Company or any Company Subsidiary in connection with the transactions contemplated by this Agreement.

6.6Continuation of Indemnification. After the Closing, Buyer shall cause the Company and each Company Subsidiary to continue to indemnify and hold harmless, to the fullest extent permitted by applicable Law, each of the Company’s and the Company Subsidiaries’ present and former directors, managers and  officers (“SHCR Representatives”), in each case in their capacities as such, from and against all damages, costs, and expenses actually incurred or suffered in connection with any threatened or pending action, suit, or proceeding at Law or in equity by any Person or any arbitration or administrative or other proceeding relating to the business of the Company and the Company Subsidiaries or the status of such individual as a director, officer or manager at or prior to the Closing, and in furtherance thereof to advance to such SHCR Representatives expenses associated with any such action, suit, or proceeding to the fullest extent permitted (a) by Law, (b) as would have been permitted by the Organizational Documents in effect as of the date of this Agreement, or (c) pursuant to any agreement that provides for indemnification by the Company or any Company Subsidiary for the foregoing Persons in effect as of the date of this Agreement. Buyer shall cause the Company and the Company Subsidiaries to retain or include in their respective Organizational Documents any

 

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indemnification provision or provisions, including provisions respecting the advancement of expenses, in effect immediately prior to the date of this Agreement for the benefit of each of the SHCR Representatives and shall not thereafter amend the same (except to the extent that such amendment preserves, increases or broadens the indemnification or other rights theretofore available to such SHCR Representatives, or if required by applicable Law). If, after the Closing, the Company or any Company Subsidiary merges into, consolidates with, or transfers all or substantially all of its assets to another Person, then and in each such case Buyer shall cause such Company or Company Subsidiary to make proper provision so that the surviving or resulting entity or the transferee in such transaction shall assume the obligations of such Company or Company Subsidiary, as applicable, under this Section 6.6. The obligations set forth in this Section 6.6 shall continue for a period of six (6) years following the Closing and shall continue in effect thereafter with respect to any action, suit, or proceeding commenced prior to the sixth (6th) anniversary of the Closing Date, and such obligations are intended to benefit each SHCR Representative who has held such capacity on or prior to the Closing Date and is either a party to an indemnification agreement with the Company or any Company Subsidiary or now or hereafter is entitled to indemnification or advancement of expenses pursuant to any provisions contained in the applicable Organizational Documents.

6.7Continuation of Insurance. Prior to the Closing, Buyer shall, at its sole cost and expense, purchase a “tail” policy providing directors’ and officers’ liability insurance coverage, for the benefit of those Persons who are covered by Seller’s, the Company’s and/or the Company Subsidiaries’ directors’ and officers’ liability insurance policies as of the date hereof (the “Current D&O Policies”), for a period of six (6) years following the Closing with respect to matters occurring prior to the Closing, that is at least equal to the coverage provided under the Current D&O Policies; provided that Buyer shall not be required to pay in excess of one hundred fifty percent (150%) of the annual premiums paid as of the date hereof under the Current D&O Policies to obtain a tail policy hereunder (the “Premium Cap”); provided, further, that if the aggregate premiums of such insurance coverage exceeds such amount, Buyer shall only be required to obtain a policy with the greatest coverage available for a cost not exceeding such Premium Cap. Nothing in this Agreement is intended to, shall be construed to or shall release, waive or impair any rights to directors’ and officers’ insurance claims under any policy that is or has been in existence with respect to Seller, the Company, any of the Company Subsidiaries or any of their respective directors manager, officers or employees, it being understood and agreed that the insurance provided for in this Section 6.7 is not prior to or in substitution for any such claims under such policies.

6.8Employee Matters.

(a)For all purposes (including purposes of vesting, eligibility to participate and level of benefits) under any employee benefit plans of Buyer and its Subsidiaries, solely to the extent such plans provide benefits to any Continuing Employee after the Closing Date (the “New Plans”), each such Continuing Employee shall be credited with his or her years of service with the Company and the Company Subsidiaries and their respective predecessors before the Effective Time, to the same extent as such Continuing Employee was entitled, before the Effective Time, to credit for such service under any Plan in which such Continuing Employee participated or was eligible to participate immediately prior to the Closing Date; provided that the foregoing service credit shall not be required to apply (i) to the extent that its application

 

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would result in a duplication of benefits related to the same period of service or (ii) for benefit accrual purposes under any defined benefit pension plan. In addition, and without limiting the generality of the foregoing, (1) each Continuing Employee shall be immediately eligible to participate, without any waiting time, in any and all New Plans to the extent coverage under such New Plan is replacing comparable coverage under a Plan in which such Continuing Employee participated immediately before the Closing Date (such plans, collectively, the “Old Plans”), and (2) for purposes of each New Plan providing medical, dental, pharmaceutical and/or vision benefits to any Continuing Employee, Buyer shall, or shall cause its Subsidiaries to, use commercially reasonable best efforts to cause (x) all pre-existing condition exclusions and actively-at-work requirements of such New Plan to be waived for such Continuing Employee and his or her covered dependents, to the extent such conditions were inapplicable or waived under the comparable Old Plans of the Company in which such Continuing Employee participated immediately prior to the date such Continuing Employee’s participation in the corresponding New Plan begins and (y) any eligible expenses incurred by any Continuing Employee and his or her covered dependents during the portion of the plan year of the Old Plan ending on the Closing Date to be taken into account under such New Plan for purposes of satisfying all deductible, coinsurance and maximum out-of-pocket requirements applicable to such Continuing Employee and his or her covered dependents for the applicable plan year as if such amounts had been paid in accordance with such New Plan.

(b)Buyer will permit the employees of the Company and the Company Subsidiaries to carry over and take accrued, but unused, vacation days with pay in accordance with the applicable policies of the Company as in effect as of the Closing Date.

(c)From and after the Closing, the Buyer may use all or a portion of the Retention Bonus Amount to pay out retention bonuses to certain employees of the Company and the Company Subsidiaries, in such amounts and allocated to such employees as determined by Buyer in its sole discretion upon consultation with the Company’s management team.  

(d)Nothing contained in this Agreement shall, or shall be construed so as to, (i) prevent or restrict in any way the right of Buyer to terminate, reassign, promote or demote any Company Service Provider (or to cause any of the foregoing actions) at any time following the Closing, or to change (or cause the change of) the title, powers, duties, responsibilities, functions, locations, compensation or terms or conditions of employment or service of any such service providers at any time following the Closing; (ii) constitute an amendment or modification of any Plan or employee benefit plan; or (iii) create any third party rights in any such Company Service Provider (including any beneficiary or dependent thereof); or (iv) obligate the Buyer to adopt or maintain any particular plan or program or other compensatory or benefits arrangement at any time or prevent the Buyer from modifying or terminating any such plan, program or other compensatory or benefits arrangement at any time.

6.9Clindata Consideration Agreement.

(a)Buyer acknowledges and agrees that, pursuant to that certain Consideration Agreement (the “Clindata Consideration Agreement”), dated as of January 31, 2020, by and among Seller, Synteract, Inc., a California corporation and a wholly owned Subsidiary of the Company (“Synteract”), and Statistics and Data Limited, a limited liability

 

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company duly incorporated in Mauritius (“S&D”), from and after the Closing: (i) any remaining obligations of Synteract to make performance-based cash payments to S&D shall remain outstanding, unaffected by the Closing, and (ii) any remaining obligations of Seller to issue Common Interests (as defined in the Clindata Consideration Agreement) to S&D shall automatically convert into obligations of Synteract to make cash payments to S&D that shall remain outstanding, unaffected by the Closing, in each case, at such times and upon the terms and subject to the conditions set forth in the Clindata Consideration Agreement (collectively, the “Clindata Obligations”).

(b)Not less than three (3) Business Days prior to the Closing Date, Seller shall deliver, or caused to be delivered, to Buyer (i) such information with respect to the Common Interests of Seller and the implied value per Common Interest as of the Closing as Synteract may reasonably require to satisfy the payment obligations described in Section 6.9(a), and (ii) a statement (such statement the “Clindata Estimated Earnout Statement”) setting forth the maximum amount that may become payable to S&D in respect of the Clindata Obligations pursuant to each section of Article 1 of the Clindata Consideration Agreement (the “Aggregate Clindata Payment Obligations”), including the maximum amount that may become payable to S&D in respect of performance-based payment obligations for each of Year 1, Year 2 and Year 3 (each as defined in the Clindata Consideration Agreement) (such maximum amount in respect of Year 1, Year 2 or Year 3, respectively, the “Annual Cap”).  An amount equal to the Aggregate Clindata Payment Obligations shall be deposited into escrow in accordance with Section 3.4 of this Agreement and shall constitute the Special Escrow Amount.

(c)In the event Buyer disputes any calculations set forth in the Clindata Estimated Earnout Statement, the procedures set forth in Section 2.3(b) shall apply to the resolution of such disputes, mutatis mutandis. Upon the completion of the adjustments to the Net Purchase Price pursuant to Section 2.3 and the resolution of any disputes related to the calculations set forth in the Clindata Estimated Earnout Statement, if any, the parties shall equitably adjust the amount of the Special Escrow Amount and the resulting amount of the Clindata Obligations, and shall deposit or release, as applicable, funds from the Special Escrow Account in accordance therewith and shall deliver joint written instructions to the Escrow Agent accordingly.

(d)From the Closing Date until the Clindata Obligations are satisfied in full or otherwise discharged in accordance with the Clindata Consideration Agreement, Buyer shall, and shall cause the Company and the Company Subsidiaries to, (i) comply with the obligations set forth in Section 1.6(a) of the Clindata Consideration Agreement, (ii) afford to Seller and its Representatives access to the books and records of the Synteract Human Health Business and to representatives of the Company and the Company Subsidiaries having responsibility for maintaining such books and records or who are otherwise involved in the determination of Net Revenue or the satisfaction of the Clindata Obligations from and after the Closing, and (iii) inform Seller in the event there is a material change of role or responsibility of either Brink or Erasmus. All requests for access pursuant to this Section 6.9(d) shall be made in writing and shall be directed to and coordinated with such persons as Buyer shall direct in writing; provided, further, that any such access shall be subject to customary confidentiality restrictions and conducted at a reasonable time during ordinary business hours, upon reasonable advance notice to Buyer, and without undue disruption to the business operations of the Company and the

 

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Company Subsidiaries. For the avoidance of doubt, the business operations constituting the “Synteract Human Health Business” shall be determined based on the operations of the Company and the Company Subsidiaries prior to the Closing and shall not include any expansion or modification to the Synteract Human Health Business that may occur after the Closing, whether through a combination with Buyer’s existing or future operations or otherwise.

(e)Buyer shall, or shall cause Synteract to, prepare in good faith and deliver to Seller, together with reasonable supporting documentation, the Annual Statement (as defined in the Clindata Consideration Agreement), no later than ten (10) Business Days prior to delivering such Annual Statement to S&D in accordance with the terms of the Clindata Consideration Agreement. Seller shall have the right to review and comment on the Annual Statement and Buyer shall accept the comments made by Seller in good faith with respect to the Annual Statement.

(f)Within five (5) Business Days after a determination of the amount of any payment due to S&D in respect of the Clindata Obligations (each, a “Clindata Payment Amount”), Buyer and Seller shall provide a joint written instruction to the Escrow Agent to deliver from the Special Escrow Account (i) an amount to Buyer equal to the applicable Clindata Payment Amount, by wire transfer of immediately available funds to an account designated in writing by Buyer in order for Buyer to satisfy such Clindata Obligation (which Buyer shall promptly pay to S&D) and (ii) with respect to each Annual Statement, to Seller an amount equal to the difference between the applicable Annual Cap and the amount of such Clindata Payment Amount, by wire transfer of immediately available funds to an account designated in writing by Seller. In the event any amounts remain in the Special Escrow Account after the payment in full of all Clindata Obligations, Buyer and Seller shall provide a joint written instruction to the Escrow Agent to deliver such remaining amounts to Seller, by wire transfer of immediately available funds to one or more accounts designated by Seller.

(g)Notwithstanding the foregoing, if the employment of either Brink or Erasmus with Synteract SA is terminated for any reason (other than death, disability or solely as a result of a material breach by Synteract SA of a Key Employment Contract (in each case as defined in the Clindata Consideration Agreement), but including any change of role or responsibility that is treated as termination under the Clindata Agreement), or if the Synteract Human Health Business ceases to operate in a way that results in the termination of any further payment obligations under the Clindata Consideration Agreement (a “Termination Event”), then Buyer shall notify Seller within three (3) Business Days following such Termination Event, and Buyer and Seller shall provide a joint written instruction to Escrow Agent to deliver the remaining balance of the Special Escrow Account to Seller, by wire transfer of immediately available funds to an account designated in writing by Seller.  

(h)In the event of any claim or dispute by or with S&D related to any Annual Statement or the Clindata Obligations, Buyer shall promptly notify Seller in writing of such claim or dispute, and Seller shall either control such dispute, at Seller’s sole cost and expense, by providing written notice thereof to Buyer, or pay all reasonable and documented out-of-pocket costs and expenses of Buyer to defend any such claim, including reasonable and documented attorneys’ fees.  If Seller elects to control the defense of any such claim or dispute, Buyer shall be entitled to participate in the defense of any such claim or dispute and to employ separate

 

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counsel of its choice for such purpose at its own expense, and shall provide reasonable cooperation to Seller in the defense of such claim or dispute, including by making employees, information and documentation reasonably available at Seller’s expense.  Buyer shall not, and shall cause the Company and the Company Subsidiaries not to, enter into any settlement of any such claim or dispute without the prior written consent of Seller.

6.10Kinderpharm Earnout Payment.  Seller acknowledges and agrees that, pursuant to the terms of that certain Management Interest Purchase and Contribution Agreement by and among Seller, Synteract, Kinderpharm LLC and the members of Kinderpharm LLC (the “Kinderpharm Agreement”), the 2020 Earnout Consideration (as defined in the Kinderpharm Agreement) shall be deemed accelerated and fully earned as a result of the transactions contemplated by this Agreement and, in accordance therewith at or prior to the Closing, Seller shall issue 338 Common Interests of Seller to the Class B Contribution Members (as defined in the Kinderpharm Agreement) in respect of the 2020 Earnout Consideration, with no further obligation or liability on the part of the Company or any of the Company Subsidiaries thereunder from and after the Closing.

6.11Belgium Tax Payment.  Prior to the Closing, Seller shall (i) cause SynteractHCR Benelux NV to pay all amounts due in connection with the Belgian Tax Matter and that certain Notification of Taxation, by the Federale Overheidsdienst Financien Algemene Administratie van de Fiscalteit, dated September 27, 2019, together with all interest payable thereon and (ii) register SynteractHCR Benelux NV’s projects or programs with the Ministry of Science (Belspo).

6.12Terminated Agreements.  At or prior to the Closing, Seller shall, and shall cause the Company to, take all actions necessary to terminate  each Affiliate Contract marked with an asterisk (*) on Section 4.14 of the Disclosure Letter, including that certain Advisory Services Agreement, dated as of May 25, 2016, by and between the Company and Amulet Capital Partners, L.P. and the engagement letter with the Company’s financial advisor, in each case, in a manner that does not result in any incremental Taxes or other costs or expenses for the Company or any of the Company Subsidiaries and with no further obligations or liability on the part of the Company or any of the Company Subsidiaries thereunder from and after the Closing.

6.13Resignation Letters. Prior to the Closing, the Seller shall, and shall cause the Company to, remove or cause the resignation of, effective as of the Closing, each of the directors and officers of the Company or any Company Subsidiary that is domiciled in the United States with respect to whom Buyer has delivered written notice to Seller requesting resignation or removal at least five (5) Business Days prior to the Closing Date. Such resignation letters shall be in form and substance reasonably acceptable to Buyer.

6.14Exclusivity.

(a)Seller shall, and shall cause the Company and the Company Subsidiaries, and their respective officers, directors, affiliates, advisors and other Representatives to, refrain from, directly and indirectly (through agents or otherwise) soliciting or knowingly encouraging or facilitating any new or existing inquiries or accepting any new or existing proposals by or from, or continuing or engaging in any discussions or negotiations with or furnishing any

 

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information to, any other Person (other than Buyer and its Representatives) concerning an Alternative Transaction.

(b)Seller shall notify any Person (other than Buyer and its Representatives) with which it is engaged in discussions concerning an Alternative Transaction and any Person that hereafter submits any offer or makes any inquiries concerning an Alternative Transaction, that Seller is contractually prohibited from continuing to engage or engaging in any such discussions, and shall request that any such Persons destroy or return any confidential information regarding the Company or the Company Subsidiaries or their respective businesses, in accordance with the terms of the applicable confidentiality agreements between Seller and any such Persons.

6.15Representation and Warranty Insurance Policy.   Buyer acknowledges and represents that, as of or shortly after the date of this Agreement, Buyer has or will have obtained a conditional binder to the Representation and Warranty Insurance Policy.  Buyer shall not amend the Representation and Warranty Insurance Policy in any manner adverse to Seller without Seller’s express prior written consent.  Without limiting the foregoing, Buyer shall cause the insurer under the Representation and Warranty Insurance Policy to expressly agree not to pursue, directly or indirectly, any subrogation rights against Seller (except in the event of Seller’s Fraud (which, for the avoidance of doubt, shall be defined in the Representation and Warranty Insurance Policy to have the same meaning as set forth in this Agreement and interpreted in accordance with Section 10.12(a))), and will not amend such waiver in the Representation and Warranty Insurance Policy in a manner that is adverse to Seller without Seller’s express prior written consent.  Seller shall deliver a soft copy (e.g., thumb drive) of the contents of the Datasite as of the Closing to Buyer no later than ten (10) Business Days following the Closing Date. Seller shall, and shall cause the Company to, use commercially reasonable efforts to cause its and their respective representatives to, provide such cooperation and assistance as may be reasonably required by Buyer in connection with the arrangement of the Representation and Warranty Insurance Policy; provided, however, for the avoidance of doubt, (x) the issuance of the Representation and Warranty Insurance Policy is not a condition to Buyer’s obligation to consummation the transactions contemplated hereby and (y) any absence of coverage under the Representation and Warranty Insurance Policy for any reason, including due to exclusions from coverage thereunder or the failure of the Representation and Warranty Insurance Policy to be in full force and effect for any reason, will not expand, alter, amend, change or otherwise affect Seller’s obligations or liability under this Agreement.

6.16Code Section 280G.  If any Person who is a “disqualified individual” (within the meaning of Section 280G of the Code and the Department of Treasury regulations promulgated thereunder) with respect to the Company may receive any payment(s) or benefit(s) that could constitute parachute payments under Section 280G of the Code in connection with the transactions contemplated by this Agreement, then:  (a) Seller shall use commercially reasonable efforts to obtain a Parachute Payment Waiver from each such “disqualified individual” and shall deliver such Parachute Payment Waiver to Buyer; and (b) as soon as practicable following the delivery of the Parachute Payment Waivers (if any) to Buyer, Seller and the Company shall prepare and distribute to shareholders a disclosure statement describing all potential parachute payments and benefits that may be received by such disqualified individual(s) and shall submit such payments to its shareholders for approval, in each case, in accordance with the requirements

 

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of Section 280G(b)(5)(B) of the Code and the Department of Treasury regulations promulgated thereunder, such that, if approved by the requisite majority of the shareholders, such payments and benefits shall not be deemed to be “parachute payments” under Section 280G of the Code (the foregoing actions, a “280G Vote”).  Prior to the Closing, if a 280G Vote is undertaken, Seller shall deliver to Buyer evidence reasonably satisfactory to Buyer, (i) that a 280G Vote was solicited in conformance with Section 280G of the Code, and the requisite shareholder approval was obtained with respect to any payments and/or benefits that were subject to the Company shareholder vote (the “Section 280G Approval”) or (ii) that the Section 280G Approval was not obtained and as a consequence, pursuant to the Parachute Payment Waiver, such “parachute payments” shall not be made or provided.  The form of the Parachute Payment Waiver, the disclosure statement, any other materials to be submitted to shareholders in connection with the 280G Vote and the calculations related to the foregoing shall be subject to advance review and approval by Buyer, which approval shall not be unreasonably withheld. Prior to the solicitation of Parachute Payment Waivers, Buyer shall provide Seller and the Company with any compensatory arrangement that it or its Affiliates entered into or agreed with any disqualified individual.

6.17Insurance. Prior to the Closing, the Seller shall, and shall cause the Company to, substitute the Company for Seller under the insurance policies of the Company and the Company Subsidiaries that name Seller as a primary insured party, including those policies that, by their terms and as set forth on Section 4.14 of the Disclosure Letter, go into run-off as a result of the consummation of the transactions contemplated by this Agreement to the extent a substitution is required in order for the Company to purchase a “tail” policy for or extension of such insurance. At the request of Buyer, Seller shall provide reasonable assistance to Buyer to obtain “tail” policies or extensions of such policies, at Buyer’s expense. This Section 6.17 shall not apply to the Current D&O Policies, which are governed by Section 6.7.

6.18Pension Liability. The Seller shall use commercially reasonable efforts to pay in full all liabilities related to the pension payable to Dr. Francisco Harrison (the “Pension Liability”) prior to the Measurement Time.  To the extent not paid prior to the Measurement Time, the unpaid portion of the Pension Liability payable by the Company or any Company Subsidiary after the Measurement Time shall be included in the definition of “Indebtedness” as set forth therein.

Article VII

ADDITIONAL AGREEMENTS

7.1Transfer Taxes. All transfer, documentary, sales, use, stamp, registration and other similar transaction taxes and fees (including any penalties and interest), if any, imposed solely and directly by reason of the transactions contemplated by this Agreement (but, in each case, excluding any Taxes or fees imposed on or by reference to income, profits or gains) shall be paid 50% by Buyer and 50% by Seller when due, and Buyer will file all necessary Tax Returns and other documentation with respect to all such transfer, documentary, sales, use, stamp, registration and other similar taxes and fees, and, if required by applicable law, Seller will join in the execution of any such Tax Returns and other documentation.

 

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7.2Appropriate Action; Consents; Filings.

(a)Upon the terms and subject to the conditions set forth in this Agreement (including, without limitation, those set forth in this Section 7.2), Buyer and Seller shall each use their respective reasonable best efforts to promptly (i) take, or cause to be taken, all actions, and do, or cause to be done, and assist and cooperate with the other party in doing, all things necessary, proper or advisable under applicable Law or otherwise to consummate and make effective the transactions contemplated by this Agreement; (ii) obtain from any Governmental Entities any actions, non-actions, clearances, waivers, consents, approvals, permits or Orders required to be obtained by Buyer, Seller or any of their respective Affiliates in connection with the authorization, execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby; (iii) make all necessary registrations and filings, and thereafter make any other required submissions, with respect to this Agreement required under the HSR Act and under any other Regulatory Law and any other applicable Law; (iv) avoid the entry of, or have vacated or terminated, any Order that would restrain, prevent or delay the Closing, including, without limitation, defending any lawsuits or other legal proceedings, whether judicial or administrative, challenging this Agreement or the consummation of the transactions contemplated hereby; and (v) execute and deliver any additional instruments necessary to consummate the transactions contemplated by this Agreement. No party to this Agreement shall consent to any voluntary delay of the consummation of the transactions contemplated by this Agreement at the behest of any Governmental Entity without the consent of the other party to this Agreement, which consent shall not be unreasonably withheld, conditioned or delayed.

(b)In furtherance of the foregoing, to the extent not filed prior to the date hereof, the parties hereto shall cooperate with each other and shall use their respective reasonable best efforts to (i) file required Notification and Report Forms under the HSR Act with the United States Federal Trade Commission and the United States Department of Justice no later than five (5) Business Days from the date hereof, and (ii) obtain those Consents of Governmental Entities set forth in Section 4.5(b)(ii) of the Disclosure Letter, in each case, as soon as practicable following the date of this Agreement, and shall respond as promptly as practicable to all requests or inquiries for additional documentation or information that may be requested pursuant to such filings. Buyer will pay all filing fees to any Governmental Entity in connection with any required Consent of any Governmental Entity.

(c)Notwithstanding Section 7.2(a), (i) without the prior written consent of Buyer, Seller shall not take, or agree to take, any action in connection with the matters set forth in this Section 7.2 that would be binding on the Company or any Company Subsidiary after the Closing, and (ii) without the prior written consent of Seller, Buyer shall not take, or agree to take, any action in connection with the matters set forth in this Section 7.2 that would be binding on the Company or any Company Subsidiary prior to the Closing

(d)Without limiting this Section 7.2, Buyer agrees to take any and all steps and to make any and all undertakings necessary to avoid or eliminate each and every impediment under any antitrust, merger control, competition, or trade regulation Law that may be asserted by any Governmental Entity with respect to the transactions contemplated by this Agreement so as to enable the Closing to occur as soon as reasonably possible, including, without limitation,

 

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proposing, negotiating, committing to, and effecting by consent decree, hold separate order, or otherwise, the sale, divestiture, licensing, or disposition of such assets or businesses of the Company or any Company Subsidiary, or otherwise taking or committing to take actions that limit the Company’s or the Company Subsidiaries’ freedom of action with respect to, or their ability to retain, any of the businesses, product lines, or assets of the Company or any Company Subsidiary, in each case, as may be required in order to avoid the entry of, or to effect the dissolution of, any injunction, temporary restraining order, or other order in any suit or proceeding that would otherwise have the effect of preventing or delaying the Closing; provided, however, that nothing in this Section 7.2 shall require Buyer to take any steps or to make any undertakings that would (i) adversely affect the Company and the Company Subsidiaries in any material respect, or (ii) require Buyer to propose, negotiate, commit to, or effect by consent decree, hold separate order, or otherwise, the sale, divestiture, licensing, or disposition of such assets or businesses of Buyer or its Subsidiaries (not including the Company and the Company Subsidiaries), or otherwise to take or commit to take actions that limit Buyer’s freedom of action with respect to, or its ability to retain, any of the business, product lines, or asset of Buyer or its Subsidiaries (not including the Company and the Company Subsidiaries).

(e)Subject to applicable legal limitations and instructions of any Governmental Entity, each party to this Agreement shall promptly notify the other party of any written communication it or any of its Affiliates receives from any Governmental Entity relating to the matters that are the subject of this Agreement and permit the other party a reasonable opportunity to review in advance any proposed substantive communication by such party to any Governmental Entity. Prior to the Closing, neither Buyer nor any of its Affiliates nor any of their respective Representatives shall contact, communicate with, submit any documentation to, or make any filing with any Governmental Entity in connection with any of the transactions contemplated hereby without the prior written consent of Seller. To the extent practicable under the circumstances, none of the parties to this Agreement shall agree to participate in any substantive meeting with any Governmental Entity in respect of any filings, investigation (including any settlement of the investigation), Litigation or other inquiry unless it consults with the other party in advance and, where permitted, allows the other party to participate. Subject to applicable legal limitations and instructions of any Governmental Entity, the parties to this Agreement will: (i) coordinate and cooperate fully with each other in exchanging such information and providing such assistance as the other party may reasonably request in connection with its communications with any Governmental Entity, (ii) provide each other with copies of all written correspondence, filings or communications between them or any of their representatives, on the one hand, and any Governmental Entity or members of such Governmental Entity’s staff, on the other hand, with respect to this Agreement and the transactions contemplated by this Agreement and (iii) prior to submitting any substantive written communication to any Governmental Entity, permit the other party and its counsel a reasonable opportunity to review such communication in advance, and consider in good faith the views of the other party provided in a timely manner in connection with such communication; provided, however, that materials may be redacted as necessary (x) to comply with contractual obligations or restrictions, (y) to address reasonable attorney-client or other privilege or confidentiality concerns, and (z) to protect the confidentiality of competitively sensitive information.

(f)Without limiting this Section 7.2, each of the parties hereto shall use their respective reasonable best efforts to obtain all material Consents required to be obtained by such

 

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party from any third party (other than any Governmental Entity to the extent otherwise addressed in this Section 7.2) prior to the Closing in connection with the consummation of the transactions contemplated by this Agreement. Notwithstanding the foregoing, neither Seller, the Company nor the Company Subsidiaries shall have any obligation to pay any material fee to any such third party for the purpose of obtaining any such Consent or any costs or expenses of any such third party resulting from the process of obtaining such Consents.

(g)During the period beginning on the date of this Agreement and continuing until the earlier of the Closing or the termination of this Agreement pursuant to Article IX in accordance with its terms, neither Buyer, on the one hand, nor Seller, the Company or any Company Subsidiary, on the other hand, shall acquire or agree to acquire, by merging with or into or consolidating with, or by purchasing a portion of the assets of or equity in, any business or any corporation, partnership, association or other business organization or division thereof, if the entering into of a definitive agreement relating to, or the consummation of, such acquisition, merger or consolidation would reasonably be expected to: (i) materially increase the risk of any Governmental Entity seeking or entering an order prohibiting the consummation of the transactions contemplated by this Agreement; (ii) materially increase the risk of not being able to remove any such order on appeal or otherwise; or (iii) otherwise prevent the consummation of the transactions contemplated by this Agreement.

(h)Notwithstanding anything contained in this Agreement to the contrary, if all the conditions to consummation of the transactions contemplated hereby set forth in Article VIII hereof (other than those conditions which, by their nature, are to be satisfied at the Closing) have been satisfied on or before December 15, 2020, or are otherwise reasonably expected to be satisfied on or before December 31, 2020, other than the consents and approvals set forth in Section 8.1(b) of the Disclosure Letter, then the parties shall cooperate in good faith and use their respective reasonable best efforts to modify the structure of the transactions contemplated by this Agreement by restructuring or reorganizing the applicable Company Subsidiaries in such a manner as would allow the Closing to occur on or before December 31, 2020 notwithstanding the failure to receive such consents; provided that the parties shall not be required to take any action that would reasonably be expected to materially affect the operations of the Company and the Company Subsidiaries, taken as a whole.

7.3Public Announcements. From the date hereof through the Closing Date, neither Buyer, on the one hand, nor Seller, the Company or any Company Subsidiary, on the other hand, shall issue any public report, statement or press release or otherwise make any public statement regarding this Agreement or the transactions contemplated hereby, without the prior written consent of Buyer and Seller, unless otherwise required by applicable Law, in which case such party shall advise the other party hereto and discuss the contents before issuing any such report, statement or press release.

7.4Retention and Access to Records. For a period of seven (7) years following the Closing Date, Buyer shall maintain all books and records of the Company and the Company Subsidiaries relating to periods ending on or prior to the Closing Date and shall make them, and any individuals responsible for maintenance of such books and records, available to Seller upon reasonable notice during normal business hours; provided, however, that access to such books, records, documents and individuals shall not interfere with the normal operations of Buyer, its

 

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Affiliates, the Company and the reasonable out-of-pocket expenses of Buyer, its Affiliates and the Company incurred in connection therewith shall be paid by Seller, and Buyer shall not be required to make available such books, records or documents if such information is reasonably pertinent to any Litigation in which Buyer or any of its Affiliates (which includes the Company and the Company Subsidiaries after the Closing), on the one hand, and Seller, on the other hand, are adverse parties. Buyer shall furnish copies of such books and records to Seller promptly upon the request of Seller.

Article VIII

CLOSING CONDITIONS

8.1Conditions to Obligations of Each Party Under This Agreement. The respective obligations of each party to consummate the transactions contemplated hereby shall be subject to the satisfaction at or prior to the Closing of the following conditions, any or all of which may be waived, in whole or in part, to the extent permitted by applicable Law, by Buyer and Seller in writing:

(a)No Order. No Governmental Entity, including any court or tribunal of competent jurisdiction, shall have enacted, issued, promulgated, enforced or entered any Law (whether temporary, preliminary or permanent) which is in effect and which has the effect of making the transactions contemplated hereby illegal or otherwise prohibits the performance by Buyer, Seller, the Company or any Company Subsidiary of their respective obligations under this Agreement.

(b)Regulatory Laws. The filings, consents and approvals required to be made or obtained under applicable Regulatory Laws in order to consummate the Closing as set forth in Section 8.1(b) of the Disclosure Letter, shall have been made or obtained and the waiting period under the HSR Act shall have expired or been terminated.

8.2Additional Conditions to Obligations of Buyer. The obligations of Buyer to consummate the transactions contemplated hereby are subject to the satisfaction at or prior to the Closing of the following conditions, any or all of which may be waived, in whole or in part, to the extent permitted by applicable Law, by Buyer:

(a)Representations and Warranties. The representations and warranties of Seller contained in this Agreement (other than the Seller Fundamental Representations) shall be true and correct (without giving effect to any “materiality” or “Material Adverse Effect” qualifiers set forth therein) as of the date of this Agreement and at and as of the Closing with the same force and effect as if made at and as of the Closing (other than those representations and warranties that address matters only as of a particular date or only with respect to a specific period of time, which need only be true and correct as of such date or with respect to such period), except where the failure of such representations and warranties to be true and correct (without giving effect to any “materiality” or “Material Adverse Effect” qualifiers set forth therein) would not reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect. Each of the Seller Fundamental Representations shall be true and correct in all respects except for de minimis exceptions as of the date of this Agreement and at

 

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and as of the Closing with the same force and effect as if made at and as of the Closing (other than those representations and warranties that address matters only as of a particular date or only with respect to a specific period of time, which need only be true and correct in all respects except for de minimis exceptions as of such date or with respect to such period).

(b)Agreements and Covenants. Seller shall have performed or complied in all material respects with all agreements and covenants required by this Agreement to be performed or complied with by Seller at or prior to the Closing.

(c)Material Adverse Effect. Since the date of this Agreement, there shall not have occurred any Material Adverse Effect.

(d)Officer’s Certificate. Buyer shall have received a certificate of a duly authorized officer of Seller as to the satisfaction of the conditions set forth in Section 8.2(a), Section 8.2(b) and Section 8.2(c).

8.3Additional Conditions to Obligations of Seller. The obligations of Seller to consummate the transactions contemplated hereby are subject to the satisfaction at or prior to the Closing of the following conditions, any or all of which may be waived, in whole or in part, to the extent permitted by applicable Law, by Seller:

(a)Representations and Warranties. The representations and warranties of Buyer contained in this Agreement (other than the Buyer Fundamental Representations) shall be true and correct (without giving effect to any “materiality” or “material adverse effect” qualifiers set forth therein) as of the date of this Agreement and at and as of the Closing with the same force and effect as if made at and as of the Closing (other than those representations and warranties that address matters only as of a particular date or only with respect to a specific period of time, which need only be true and correct as of such date or with respect to such period), except where the failure of such representations and warranties to be true and correct (without giving effect to any “materiality” or “material adverse effect” qualifiers set forth therein) would not have a material adverse effect on Buyer’s ability to consummate the Closing and perform its obligations hereunder. Each of the Buyer Fundamental Representations shall be true and correct in all respects except for de minimis exceptions as of the date of this Agreement and at and as of the Closing with the same force and effect as if made at and as of the Closing (other than those representations and warranties that address matters only as of a particular date or only with respect to a specific period of time, which need only be true and correct in all respects except for de minimis exceptions as of such date or with respect to such period).

(b)Agreements and Covenants. Buyer shall have performed or complied in all material respects with all agreements and covenants required by this Agreement to be performed or complied with by Buyer on or prior to the Closing Date.

(c)Officer’s Certificate. Seller shall have received a certificate of a duly authorized officer of Buyer as to the satisfaction of the conditions set forth in Section 8.3(a) and 8.3(b).

 

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Article IX

TERMINATION

9.1Termination. This Agreement may be terminated by giving written notice at any time prior to the Closing as follows:

(a)by mutual consent of Buyer and Seller;

(b)by either Buyer or Seller, if there shall be any Order that is final and non-appealable permanently restraining, enjoining or otherwise prohibiting the consummation of any of the transactions contemplated by this Agreement; provided, that the right to terminate this Agreement under this Section 9.1(b) shall not be available to any party if such Order was primarily due to the failure of such party to perform any of its obligations hereunder;

(c)by Buyer, (i) at any time after February 23, 2021 (the “Outside Date”) if the transactions contemplated hereby to occur at the Closing shall not have been consummated for any reason other than the failure of Buyer to comply in all material respects with any covenant or agreement of Buyer, or (ii) at any time, if Seller shall have breached or violated any of its representations, warranties or covenants set forth in this Agreement in a manner that would prevent the satisfaction of the conditions to Closing set forth in Section 8.2(a) or Section 8.2(b), and (except in the case of a breach of the obligation to close within two (2) Business Days after the date contemplated in Section 3.1, in which case such two (2) Business Day period shall apply) such breach or violation shall not have been cured within ten (10) days after written notice thereof has been given by Buyer to Seller; provided, however, that with respect to Section 9.2(c)(i), if the sole reason that the transactions contemplated hereby to occur at the Closing have not been consummated on or before the Outside Date is that the required approval from any Governmental Entity, the consent of which is required as a condition to the consummation of the transactions contemplated hereby, has not been obtained, then Buyer may not terminate this Agreement pursuant to Section 9.1(c)(i) until after May 24, 2021; provided, further, that Buyer shall not be entitled to terminate this Agreement pursuant to Section 9.1(c)(ii) if Buyer is in breach or violation of any of its representations, warranties or covenants set forth in this Agreement in a manner that would prevent the satisfaction of the conditions to Closing set forth in Section 8.3(a) or Section 8.3(b); or

(d)by Seller, (i) at any time after the Outside Date if the transactions contemplated hereby to occur at the Closing shall not have been consummated for any reason other than the failure of Seller to comply in all material respects with any covenant or agreement of Seller, or (ii) at any time, if Buyer shall have breached or violated any of its representations, warranties or covenants set forth in this Agreement in a manner that would prevent the satisfaction of the conditions to Closing set forth in Section 8.3(a) or Section 8.3(b), and (except in the case of a breach of the obligation to close within two (2) Business Days after the date contemplated in Section 3.1, in which case such two (2) Business Day period shall apply) such breach or violation shall not have been cured within ten (10) days after notice thereof has been given by Seller to Buyer; provided, however, with respect to Section 9.1(d)(i), that if the sole reason that the transactions contemplated hereby to occur at the Closing have not been consummated on or before the Outside Date is that the required approval from any Governmental

 

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Entity, the consent of which is required as a condition to the consummation of the transactions contemplated hereby, has not been obtained, then Seller may not terminate this Agreement pursuant to Section 9.1(d)(i) until after May 24, 2021; provided, further, that Seller shall not be entitled to terminate this Agreement pursuant to Section 9.1(d)(ii) if Seller is in breach or violation of any of its representations, warranties or covenants set forth in this Agreement in a manner that would prevent the satisfaction of the conditions to Closing set forth in Section 8.2(a) or Section 8.2(b).

9.2Effect of Termination. Except as provided in Section 6.4 and Section 10.16, in the event of the termination of this Agreement pursuant to Section 9.1, this Agreement shall forthwith become null and void, there shall be no liability on the part of Buyer or Seller or any of their respective Representatives to any other party and all rights and obligations of any party hereto shall cease, except that nothing herein shall relieve any party hereto from liability for any willful and material breach of this Agreement or for Fraud.

Article X

GENERAL PROVISIONS

10.1Notices. All notices and other communications required or permitted under this Agreement (a) must be in writing, (b) will be duly given (i) when delivered personally to the recipient, (ii) upon delivery by electronic email or (iii) one Business Day after being sent to the recipient by nationally recognized overnight private carrier (charges prepaid) and (c) must be addressed as follows (as applicable):

(a)If to Buyer:

Syneos Health
1030 Sync Street
Morrisville, NC 27560

Attention: General Counsel
Email: Jonathan.Olefson@SyneosHealth.com

Sara.Epstein@SyneosHealth.com

 

with a copy to:

Latham & Watkins LLP
885 Third Avenue

New York, New York  10022

Attn.:Thomas Malone

Jane Greyf

Email: thomas.malone@lw.com

Jane.Greyf@lw.com

 

 

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(b)If to Seller:

 

c/o Amulet Capital Partners
1 Lafayette Place, Suite 301
Greenwich, CT 06830
Attn: Ramsey Frank

Nick Amigone

Email: rfrank@amuletcapital.com

namigone@amuletcapital.com

with a copy to:

Skadden, Arps, Slate, Meagher & Flom LLP
One Rodney Square
Wilmington, DE 19801
Attention: Steven J. Daniels, Esq.
Email: steven.daniels@skadden.com

or to such other address as Buyer or Seller may designate to the other party in writing.

 

10.2Non-Survival of Representations and Warranties. None of the representations, warranties and covenants in this Agreement or in any schedule, instrument or other document delivered pursuant to this Agreement shall survive the Effective Time or the earlier termination of this Agreement, regardless of any applicable statute of limitations; provided that this Section 10.2 shall not limit any covenant or agreement contained in this Agreement that by its terms is to be performed in whole or in part after the Effective Time, including any post-Closing adjustments and related covenants contemplated by Section 2.3 hereof, or the termination of this Agreement. Notwithstanding anything herein to the contrary, nothing herein restricts claims for Fraud.

10.3Amendment and Modification. This Agreement may be amended, modified or supplemented in any and all respects by the parties hereto at any time prior to the Closing; provided, however, that this Agreement may not be so amended, modified or supplemented except by an instrument in writing signed by Buyer and Seller.

10.4Waiver. At any time prior to the Closing, Buyer and Seller may (a) extend the time for the performance of any of the obligations or other acts of the other party or parties hereto, (b) waive any inaccuracies in the representations and warranties of the other party or parties contained herein or in any document delivered pursuant hereto and (c) waive compliance by the other party or parties with any of the obligations, covenants, agreements or conditions contained herein. Any such extension or waiver shall be valid only if set forth in a written instrument signed by the party or parties sought to be charged with such waiver.

10.5Headings. The headings and captions contained in this Agreement are for reference purposes only and shall not affect or be deemed to affect in any way the meaning or interpretation of this Agreement. All references in this Agreement to any “Article,” “Section,” “Schedule” or “Exhibit” are to the corresponding Article, Section, Schedule or Exhibit of or to this Agreement.

 

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10.6Severability. If any term or other provision of this Agreement, or any portion thereof, is invalid, illegal or incapable of being enforced by any rule of law or public policy, all other terms and provisions of this Agreement, or the remaining portion thereof, shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination that any such term or other provision, or any portion thereof, is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that the transactions contemplated hereby are consummated to the fullest extent possible.

10.7Entire Agreement. This Agreement (together with the Schedules and Exhibits attached hereto and the Disclosure Letter) and the Confidentiality Agreement and the other agreements, documents, certificates and instruments contemplated by this Agreement to be executed in connection with the transactions contemplated hereby, constitute the entire agreement of the parties hereto and supersede all prior negotiations, correspondence, agreements and undertakings, both written and oral, between or among the parties, or any of them, with respect to the subject matter hereof. It shall be expressly understood that this Agreement shall govern the transactions contemplated hereby as a whole and that the other documents and agreements to be delivered at Closing shall not be construed as amendments or variations of this Agreement but rather shall be complemented by and interpreted in light of this Agreement. In the event that any provision of any of the other documents and agreements to be delivered at Closing is inconsistent with, conflicts with or contradicts any term of this Agreement, the terms of this Agreement will prevail.

10.8Assignment. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned, directly or indirectly (whether by operation of Law or otherwise), by any party hereto without the prior written consent of the other party hereto.

10.9Parties in Interest. Subject to Section 10.8, but without relieving any party hereto of any obligation hereunder, this Agreement shall be binding upon and inure solely to the benefit of and be enforceable by and against each party hereto and its respective successors and permitted assigns. Nothing in this Agreement, express or implied, shall confer on any Person other than the parties hereto, and their respective successors and permitted assigns, any rights, remedies, obligations or liabilities under or by reason of this Agreement, including any third-party beneficiary rights, except that (a) the SHCR Representatives shall be third-party beneficiaries of Sections 6.6 and 6.7, and (b) the Retained Firm shall be a third-party beneficiary of Section 10.18 to the extent it applies to the Retained Firm.

10.10Failure or Delay Not Waiver; Remedies Cumulative. No failure or delay on the part of any party hereto in the exercise of any right hereunder shall impair such right or be construed to be a waiver of, or acquiescence in, any breach of any representation, warranty or agreement herein, nor shall any single or partial exercise of any such right preclude other or further exercise thereof or of any other right. All rights and remedies existing under this Agreement are cumulative to, and not exclusive of, any rights or remedies otherwise available.

 

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10.11Specific Performance.

Each party hereto acknowledges that money damages would be both incalculable and an insufficient remedy for any breach of this Agreement by such party and that any such breach would cause Buyer, on the one hand, and Seller, on the other hand, irreparable harm. Accordingly, each party hereto also agrees that, in the event of any breach or threatened breach of the provisions of this Agreement by such party, Buyer, on the one hand, and Seller, on the other hand, shall be entitled to equitable relief without the requirement of posting a bond or other security, including in the form of injunctions and orders for specific performance. Any and all remedies herein expressly conferred upon a party will be deemed cumulative with and not exclusive of any other remedy conferred hereby, or by law or equity upon such party, and the exercise by a party of any one remedy will not preclude the exercise of any other remedy. Each of Seller, on the one hand, and Buyer, on the other hand, hereby agrees not to raise any objections to the availability of the equitable remedy of specific performance to prevent or restrain breaches or threatened breaches of this Agreement by Seller or Buyer, as applicable, and to specifically enforce the terms and provisions of this Agreement to prevent breaches or threatened breaches of, or to enforce compliance with, the covenants and obligations of Seller or Buyer, as applicable, under this Agreement.

10.12Governing Law; Jurisdiction Waiver of Jury Trial.

(a)This Agreement and all Actions seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby, shall be governed by the laws of the State of Delaware, its rules of conflict of laws notwithstanding. Each party hereby agrees and irrevocably consents to be subject to the jurisdiction of the Court of Chancery of the State of Delaware in and for New Castle County, or if the Court of Chancery lacks jurisdiction over such dispute, in any state or federal court having jurisdiction over the matter situated in New Castle County, Delaware, in any Action seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby. Each party hereby irrevocably consents to the service of any and all process in any such Action by the delivery of such process to such party at the address and in the manner provided in Section 10.1 hereof or by any other legally available method. Each of the parties hereto irrevocably and unconditionally waives any objection to the laying of venue of any Action arising out of this Agreement or the transactions contemplated hereby in the Court of Chancery of the State of Delaware in and for New Castle County, or if the Court of Chancery lacks jurisdiction over such dispute, in any state or federal court having jurisdiction over the matter situated in New Castle County, Delaware, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such Action brought in any such court has been brought in an inconvenient forum. For the avoidance of doubt, this Section 10.12(a) shall apply with respect to any claim involving assertions of Fraud.

(b)EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION

 

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DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR THE BREACH, TERMINATION OR VALIDITY OF THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (I) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (II) EACH SUCH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (III) EACH SUCH PARTY MAKES THIS WAIVER VOLUNTARILY AND (IV) EACH SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 10.12(b).

10.13Counterparts. This Agreement may be executed in any number of counterparts, including by means of email in portable document format (.pdf) or other electronic transmission of signatures of the parties complying with the U.S. federal ESIGN Act of 2000 (e.g., www.docusign.com), each of which when executed shall be deemed to be an original copy of this Agreement and all of which taken together shall constitute one and the same agreement.

10.14Interpretation. As used in this Agreement, (a) the words “include,” “includes” or “including” shall be deemed to be followed by the phrase “without limitation” to the extent not already included thereafter, and shall not be construed to limit any general statement that it follows to the specific or similar items or matters immediately following it; (b) the word “or” is not exclusive, unless the context otherwise requires; (c) words of any gender include each other gender, words denoting natural persons shall be deemed to include business entities and vice versa, and any reference to a Person herein shall be deemed to include all direct and indirect Subsidiaries of such Person and its successors and permitted assigns, unless otherwise indicated or the context otherwise requires; (d) words defined in the singular have the parallel meaning in the plural and vice versa; (e) references to “written” or “in writing” include in electronic form; (f) the terms “hereof,” “herein,” “hereby,” “hereto,” “hereinafter,” “hereunder” and derivative or similar words shall, unless otherwise stated, be construed to refer to this entire Agreement as a whole, including the Schedules and Exhibits hereto, and not merely to any particular provision of this Agreement, and references to articles, sections, paragraphs, exhibits and schedules are to the articles, sections and paragraphs of, and exhibits and schedules to, this Agreement, unless otherwise specified; (g) references to “ordinary course of business” shall be deemed to be followed by the phrase “consistent with past practice and giving effect to any COVID-19 Effect” (h) except as otherwise provided in this Agreement, references to any statute or Law in this Agreement shall be deemed to refer to such statute or Law as amended from time to time and to any rules or regulations promulgated thereunder; and (i) references to Sections and Articles shall be to the applicable Section or Article, respectively, of this Agreement unless otherwise indicated. Terms defined in the text of this Agreement as having a particular meaning have such meaning throughout this Agreement and when used in any certificate or other document made or delivered pursuant hereto, except as otherwise indicated in this Agreement or unless otherwise defined therein. All references in this Agreement to “dollars” or “$” shall mean United States Dollars and all payments hereunder shall be made in United States Dollars. All references to “has furnished to Buyer” “made available to Buyer” or “provided to Buyer” (or similar references, and with any correlative word or phrase) means that the information or documents referred to as having been furnished, made available or provided were furnished or provided directly to Buyer

 

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or its representatives, in either tangible or electronic form, or made available to Buyer and its representatives in the Datasite at least twelve (12) hours before the execution of this Agreement. Accounting terms in this Agreement have the meanings given to them under GAAP, and in any cases in which there exist elective options or choices in GAAP determinations or in which management discretion is permitted in classification, standards, or other aspects of GAAP related determinations, the historical accounting principles and practices of the Company and the Company Subsidiaries shall continue to be applied on a consistent basis. All references to “days” in this Agreement shall mean calendar days except where the defined term “Business Days” is expressly referenced. When calculating the period of time before which, within which or following which any act is to be done or step taken, the date that is the reference date in beginning the calculation of such period shall be excluded (for example, if an action is to be taken within two (2) days of a triggering event and such event occurs on a Tuesday, then the action must be taken by the end of the day on Thursday). If the last day of such period is a non-Business Day, the period in question shall end on the next succeeding Business Day.

10.15Costs of Dispute. Notwithstanding anything to the contrary in this Agreement, in the event of any dispute between the parties arising under this Agreement, the party prevailing in that dispute shall be entitled to receive from the other party reimbursement for its attorneys’ fees, court costs, expert witness fees and other similar costs.

10.16Fees, Expenses and Other Payments. Except as otherwise provided in this Agreement, each party shall bear its own expenses in connection with the transactions contemplated by this Agreement, including costs of their respective attorneys, accountants, investment bankers, brokers and other representatives.

10.17Non-Recourse. This Agreement may be enforced by Buyer only against, and any claim, action, suit, or other legal proceeding by Buyer based upon, arising out of or related to this Agreement or any Transaction Document, or the negotiation, execution or performance of this Agreement or any Transaction Document (whether in contract, tort or equity, at law, or granted by statute, whether by or through attempted veil piercing of the corporate, limited partnership or limited liability veil, or otherwise) may be brought only against, the parties to this Agreement or such Transaction Documents, and then only as, and subject to the terms and limitations, expressly set forth in this Agreement or such Transaction Documents. Neither Buyer nor any other Person shall have any recourse against any past, present, or future Representative of Seller or any Affiliate of Seller (including the Company and the Company Subsidiaries) or any of their successors or permitted assigns (except any party to the Transaction Documents) (each, a “Non-Recourse Person”), and no such Non-Recourse Person shall have any liability for any obligations or liabilities of Seller under this Agreement or for any claim, action, or proceeding based on, in respect of or by reason of the transactions contemplated hereby

10.18Certain Legal Representation Matters.

(a)In any dispute or proceeding arising under or in connection with this Agreement or the transactions contemplated by this Agreement, Seller and its equityholders shall have the right, at their election, to retain the firm of Skadden, Arps, Slate, Meagher & Flom LLP (the “Retained Firm”) to represent Seller or any of such equityholders in such matter, and Buyer hereby irrevocably consents to and waives any conflict associated with, and agrees to cause its

 

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Affiliates to consent to and waive any conflict associated with, any such representation in any such matter. Each of Buyer and Seller acknowledges and agrees that the Retained Firm has acted as counsel for Seller (and its Affiliates), the Company and the Company Subsidiaries in connection with this Agreement. The parties agree that the fact that the Retained Firm has represented Seller, the Company and the Company Subsidiaries prior to the Closing shall not prevent the Retained Firm from representing Seller (or any of its Affiliates, including the equityholders of Seller) in connection with any matters involving this Agreement, including any disputes between any of the parties hereto that may arise after the Closing. Buyer and Seller hereby waive any actual or potential conflict of interest relating to the Retained Firm’s representation of Seller in the transactions contemplated by this Agreement.

(b)Buyer, on behalf of itself and its Affiliates (including, after the Closing, the Company and the Company Subsidiaries) and their respective Representatives and their respective successors and assigns, hereby irrevocably acknowledges and agrees that all attorney-client communications between, on the one hand, Seller, the Company and/or any Company Subsidiary (and their respective Representatives) and, on the other hand, their counsel (including, without limitation, the Retained Firm), that specifically relate to the negotiation, preparation, execution and delivery of this Agreement or any schedule, exhibit, agreement, instrument, certificate or other document delivered pursuant hereto or thereto or in connection with the transactions completed hereunder or in connection with the Closing of the transactions contemplated hereby, shall be deemed privileged communications that belong solely to Seller and as to which such privilege may be waived only by Seller, and neither Buyer nor any Person purporting to act on behalf of or through Buyer will (i) have access to any such privileged communications or to the files of the Retained Firm, whether or not the Closing shall have occurred, or (ii) seek to obtain any such privileged communications by any process. Without limiting the generality of the foregoing, upon and after the Closing, (1) Seller and its Affiliates shall be the sole holders of the attorney-client privilege with respect to such engagement, and none of the Company and the Company Subsidiaries shall be a holder thereof, (2) to the extent that files of the Retained Firm in respect of such engagement constitute property of the client, only Seller and its Affiliates (and not the Company or any of the Company Subsidiaries) shall hold such property rights, and (3) the Retained Firm shall have no duty whatsoever to reveal or disclose any such attorney-client communications or files to any of the Company or any of the Company Subsidiaries by reason of any attorney-client relationship between the Retained Firm and the Company or any of the Company Subsidiaries; provided, notwithstanding the foregoing, Buyer shall have the right to assert such privilege against third parties.

10.19Disclosure Letter. Notwithstanding anything to the contrary contained in the Disclosure Letter or in this Agreement, (a) the information and disclosures contained in any section of the Disclosure Letter shall be deemed to be disclosed and incorporated by reference in any other section of the Disclosure Letter as though fully set forth in such other section for which the applicability of such information and disclosure is reasonably apparent on the face of such information or disclosure, (b) the disclosure of any matter in the Disclosure Letter shall not be construed as indicating that such matter is necessarily required to be disclosed in order for any representation or warranty to be true and correct, (c) the Disclosure Letter is qualified in its entirety by reference to this Agreement except to the extent it qualifies any provision of this Agreement, and is not intended to constitute, and shall not be construed as constituting, representations and warranties by any party except to the extent expressly set forth herein, (d) the

 

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inclusion of any item in the Disclosure Letter shall be deemed neither an admission that such item is material to the business, financial condition or results of operations of the Company or any of the Company Subsidiaries nor an admission of any obligation or liability to any third party, (e) matters reflected in the Disclosure Letter are not necessarily limited to matters required by this Agreement to be reflected therein and any additional matters are set forth therein for informational purposes and do not necessarily include other matters of a similar nature, and (f) headings are inserted in the Disclosure Letter for convenience of reference only and shall not have the effect of amending or changing the express description of the sections as set forth in this Agreement

10.20Jointly Drafted. This Agreement is the product of negotiations among the parties hereto, each of which is represented by legal counsel, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provision of this Agreement. Rules of construction relating to interpretation against the drafter of an agreement shall not apply to this Agreement and are expressly waived by each party hereto. The parties hereto acknowledge and agree that prior drafts of this Agreement and the other agreements and documents contemplated hereby will not be deemed to provide any evidence as to the meaning of any provision hereof or the intent of the parties hereto with respect hereto and that such drafts will be deemed to be the joint work product of the parties hereto.

10.21Time of the Essence(a). Time is of the essence with respect to the transactions contemplated by this Agreement and the other documents and agreements to be delivered at Closing.

[SIGNATURE PAGE FOLLOWS]

 

 

 

66

 

IN WITNESS WHEREOF, the undersigned parties hereto have caused this Stock Purchase Agreement to be executed as of the date first written above.

 

SHCR HOLDINGS, LLC

 

 

By:

/s/ Nicholas Amigone

 

Name:

Nicholas Amigone

 

Title:

Vice President & Secretary

 

 

 

 

 

 

SYNEOS HEALTH CLINICAL, INC.

 

 

 

By:

/s/ Jonathan Olefson

 

Name:

Jonathan Olefson

 

Title:

Director

 

 

 

 

 

SCHEDULE A

 

Working Capital Schedule

 

See attached.

 

 

 

 

EXHIBIT A

 

Form of Escrow Agreement

 

See attached.

 

2

 

EXHIBIT B

 

Sponsor Agreement

 

See attached.

 

3

Exhibit 10.1

 

EXECUTION VERSION

FOURTH AMENDMENT TO THE
PURCHASE AND SALE AGREEMENT

THIS FOURTH AMENDMENT TO THE PURCHASE AND SALE AGREEMENT (this “Amendment”), dated as of September 25, 2020, is entered into among each of the entities listed on the signature pages hereto as a New Originator (each a “New Originator”, and collectively, the “New Originators”), each of the entities listed on the signature pages hereto as an Existing Originator (each, an “Existing Originator” and collectively, the “Existing Originators” and together with the New Originators, collectively, the “Originators” and each, an “Originator”), and SYNEOS HEALTH, LLC (f/k/a INC RESEARCH, LLC) (“Syneos Health”), as servicer (in such capacity, the “Servicer”) and SYNEOS HEALTH RECEIVABLES LLC (the “Buyer”).

Capitalized terms used but not otherwise defined herein (including such terms used above) have the respective meanings assigned thereto in the Purchase and Sale Agreement described below.

BACKGROUND

A.The parties hereto (except the New Originators) have entered into a Purchase and Sale Agreement, dated as of June 29, 2018 (as amended, restated, supplemented or otherwise modified through the date hereof, the “Purchase and Sale Agreement”).

B.Concurrently herewith, the Buyer, as borrower, the Servicer and PNC Bank, National Association, as administrative agent and as a lender (the “Administrative Agent”) are entering into that certain Ninth Amendment to the Receivables Financing Agreement, dated as of the date hereof (the “RFA Amendment”).

C.Concurrently herewith, the Borrower, the Servicer, the Administrative Agent and Bank of America, N.A. are entering into that certain Third Amendment to the Deposit Account Control Agreement, dated as of the date hereof.

D.Each of the New Originators desires to become an Originator under the Purchase and Sale Agreement pursuant to Section 4.3 of the Purchase and Sale Agreement.

E.The parties hereto desire to join each of the New Originators to the Purchase and Sale Agreement and to amend the Purchase and Sale Agreement as hereinafter set forth.

NOW THEREFORE, with the intention of being legally bound hereby, and in consideration of the mutual undertakings expressed herein, each party to this Amendment hereby agrees as follows:

SECTION 1.Amendments to the Purchase and Sale Agreement.  The Purchase and Sale Agreement is hereby amended as follows:

(a)With respect to each of the New Originators, each reference in the Purchase and Sale Agreement to “the Closing Date” or “the date hereof” when applicable to such New Originator shall be deemed to be a reference to “September 25, 2020”.

738117215 18569090

 

(b)With respect to the New Originators, each reference in the Purchase and Sale Agreement to “the Cut-Off Date” when applicable to the New Originator shall be deemed to be a reference to “August 31, 2020”.

(c)Section 1.5 of the Purchase and Sale Agreement is hereby amended by deleting the first sentence thereof and replacing it with the following:

“It is the express intent of each Originator and the Buyer that each conveyance by such Originator to the Buyer pursuant to this Agreement of the Receivables, including without limitation, all Receivables, if any, constituting general intangibles as defined in the UCC, and all Related Rights be construed as an absolute, irrevocable, valid and perfected sale (or contribution) and absolute assignment (without recourse except as provided herein) of such Receivables and Related Rights by such Originator to the Buyer (rather than the grant of a security interest to secure a debt or other obligation of such Originator) and that the right, title and interest in and to such Receivables and Related Rights conveyed to the Buyer be prior to the rights of and enforceable against all other Persons at any time, including, without limitation, lien creditors, secured lenders, purchasers and any Person claiming through such Originator, and intend to treat each such conveyance as a “true sale” for all purposes under applicable law and accounting principles.”

(d)Section 3.2(c) of the Purchase and Sale Agreement is hereby amended and restated as follows:

“(c) Third, to the extent any portion of the Purchase Price remains unpaid, an Intercompany Loan shall automatically be made by such Originator to the Buyer with an initial principal amount equal to the lesser of (x) such remaining unpaid portion of such Purchase Price and (y) the maximum amount such that the Intercompany Loan Ratio shall not exceed 15%.”

(e)The proviso to Section 3.2 of the Purchase and Sale Agreement is hereby amended by adding “or in any way obligate any Originator to maintain or preserve the Buyer’s financial condition or cause the Buyer to achieve certain levels of operating results” at the end of such proviso.

(f)A new clause (vii) is hereby added to Section 6.1(b) of the Purchase and Sale Agreement to read as follows:

“(vii)Intercompany Loan Ratio.  That the Intercompany Loan Ratio equals or exceeds 15%.”

 

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(g)Section 9.1(s) of the Purchase and Sale Agreement is hereby amended and restated as follows:

“(s)any liability under Section 5.03 of the Receivables Financing Agreement; provided that, the collective obligations of the Originators with respect to any liability pursuant to this clause (s) shall be limited to 10% of the Outstanding Balance as of the date any such liability accrues; or”

(h)Schedule I to the Purchase and Sale Agreement is hereby replaced in its entirety with Schedule I attached hereto.

(i)Schedule II to the Purchase and Sale Agreement is hereby replaced in its entirety with Schedule II attached hereto.

(j)Schedule III to the Purchase and Sale Agreement is hereby replaced in its entirety with Schedule III attached hereto.

(k)Schedule IV to the Purchase and Sale Agreement is hereby replaced in its entirety with Schedule IV attached hereto.

(l)Exhibit B to the Purchase and Sale Agreement is hereby amended by deleting the proviso in Section 2(b) of such Exhibit B and replacing such proviso with “provided, however, that no Intercompany Loan shall be made by the Intercompany Lender on any Payment Date if the Intercompany Loan Ratio would exceed 15% after giving effect thereto”.

SECTION 2.Joinder.  Each of the New Originators hereby absolutely and unconditionally agrees to become a party to the Purchase and Sale Agreement as an “Originator” thereunder and to be bound by all of the provisions thereof, including the provisions of Article IX thereof.  For greater certainty, each New Originator hereby acknowledges that pursuant to (i) Section 1.2 of the Purchase and Sale Agreement, on and after the date hereof it hereby sells all of its right, title and interest in, to and under the Receivables, the Related Rights with respect thereto and all proceeds of the foregoing to the Buyer and (ii) Section 1.5 of the Purchase and Sale Agreement, it has granted and hereby grants a security interest to Buyer in, to and under all of such New Originator’s right, title and interest in and to: (A) the Receivables and the Related Rights now existing and hereafter arising transferred or purported to be transferred by such New Originator under the Purchase and Sale Agreement, (B) all monies due or to become due and all amounts received with respect thereto and (C) all books and records of such New Originator to the extent related to any of the foregoing, to secure such New Originator’s obligations under the Purchase and Sale Agreement.  Upon effectiveness of this Amendment, each New Originator shall be an “Originator” for all purposes of the Purchase and Sale Agreement and each of the other Transaction Documents.  Each New Originator further acknowledges that it has received copies of the Purchase and Sale Agreement and the other Transaction Documents.  Each of the parties hereto hereby agrees that the provisions of this Amendment are in all material respects equivalent in form to the “Joinder Agreement” set forth as Exhibit C to the Purchase and Sale Agreement.

 

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SECTION 3.Representations and Warranties of the Originators.  Each Originator hereby represents and warrants as of the date hereof as follows:

(a)Representations and Warranties.  The representations and warranties made by it in the Purchase and Sale Agreement and each of the other Transaction Documents to which it is a party are true and correct as of the date hereof.

(b)Enforceability.  The execution and delivery by it of this Amendment, and the performance of its obligations under this Amendment, the Purchase and Sale Agreement (as amended hereby) and the other Transaction Documents to which it is a party are within its organizational powers and have been duly authorized by all necessary action on its part, and this Amendment, the Purchase and Sale Agreement (as amended hereby) and the other Transaction Documents to which it is a party are (assuming due authorization and execution by the other parties thereto) its valid and legally binding obligations, enforceable in accordance with their terms, except (i) as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors’ rights generally and (ii) as such enforceability may be limited by general principles of equity, regardless of whether such enforceability is considered in a proceeding in equity or at law.

(c)No Event of Default. No Purchase and Sale Termination Event, Unmatured Purchase and Sale Termination Event, Event of Default or Unmatured Event of Default has occurred and is continuing, or would occur as a result of this Amendment or the transactions contemplated hereby.

(d)Intercompany Loan Balances.  After giving effect to this Amendment and the sale of Receivables to the Buyer under the Purchase and Sale Agreement occurring on the date hereof, the ratio of (A) the aggregate outstanding principal balance of all Intercompany Loans on the date hereof to (B) the aggregate Purchase Price for all outstanding Receivables purchased on or prior to the date hereof does not exceed 5%.

SECTION 4.Effect of Amendment; Ratification.  All provisions of the Purchase and Sale Agreement and the other Transaction Documents, as expressly amended and modified by this Amendment, shall remain in full force and effect. After this Amendment becomes effective, all references in the Purchase and Sale Agreement (or in any other Transaction Document) to “the Purchase and Sale Agreement”, “this Agreement”, “hereof”, “herein” or words of similar effect referring to the Purchase and Sale Agreement shall be deemed to be references to the Purchase and Sale Agreement as amended by this Amendment. This Amendment shall not be deemed, either expressly or impliedly, to waive, amend or supplement any provision of the Purchase and Sale Agreement other than as set forth herein. The Purchase and Sale Agreement, as amended by this Amendment, is hereby ratified and confirmed in all respects.

SECTION 5.Effectiveness.  This Amendment shall become effective concurrently with the effectiveness of the RFA Amendment.

SECTION 6.Severability.  Any provisions of this Amendment which are prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such

 

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prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

SECTION 7.Transaction Document.  This Amendment shall be a Transaction Document for purposes of the Receivables Financing Agreement.

SECTION 8.Counterparts.  This Amendment may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same agreement.  Delivery of an executed counterpart hereof by facsimile or other electronic means shall be equally effective as delivery of an originally executed counterpart. The words “execution,” “execute”, “signed,” “signature,” and words of like import in or related to any document to be signed in connection with this Amendment and the transactions contemplated hereby shall be deemed to include electronic signatures, the electronic matching of assignment terms and contract formations on electronic platforms approved by the Administrative Agent, or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic Transactions Act.

SECTION 9.GOVERNING LAW AND JURISDICTION.

(a)THIS AMENDMENT, INCLUDING THE RIGHTS AND DUTIES OF THE PARTIES HERETO, SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (INCLUDING SECTIONS 5-1401 AND 5-1402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK, BUT WITHOUT REGARD TO ANY OTHER CONFLICTS OF LAW PROVISIONS THEREOF).

(b)EACH PARTY HERETO HEREBY IRREVOCABLY SUBMITS TO (I) WITH RESPECT TO THE BUYER, THE ORIGINATORS AND THE SERVICER, THE EXCLUSIVE JURISDICTION, AND (II) WITH RESPECT TO EACH OF THE OTHER PARTIES HERETO, THE NON-EXCLUSIVE JURISDICTION, IN EACH CASE, OF ANY NEW YORK STATE OR FEDERAL COURT SITTING IN NEW YORK CITY, NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AMENDMENT, AND EACH PARTY HERETO HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING (I) IF BROUGHT BY THE BUYER, THE SERVICER, ANY ORIGINATOR OR ANY AFFILIATE THEREOF, SHALL BE HEARD AND DETERMINED, AND (II) IF BROUGHT BY ANY OTHER PARTY TO THIS AMENDMENT, MAY BE HEARD AND DETERMINED, IN EACH CASE, IN SUCH NEW YORK STATE COURT OR, TO THE EXTENT PERMITTED BY LAW, IN SUCH FEDERAL COURT.  NOTHING IN THIS SECTION 9 SHALL AFFECT THE RIGHT OF THE ADMINISTRATIVE AGENT OR ANY OTHER CREDIT PARTY TO BRING ANY ACTION OR PROCEEDING AGAINST THE BUYER OR THE SERVICER OR ANY OF THEIR RESPECTIVE PROPERTY IN THE COURTS OF OTHER JURISDICTIONS.  EACH OF THE BUYER, EACH ORIGINATOR AND THE SERVICER HEREBY IRREVOCABLY WAIVES, TO THE

 

738117215 18569090

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FULLEST EXTENT IT MAY EFFECTIVELY DO SO, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING.  THE PARTIES HERETO AGREE THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.

SECTION 10.Section Headings.  The various headings of this Amendment are included for convenience only and shall not affect the meaning or interpretation of this Amendment, the Purchase and Sale Agreement or any provision hereof or thereof.

[Signature pages follow]

 

738117215 18569090

6

 

 

 

IN WITNESS WHEREOF, the parties hereto have executed this Amendment by their duly authorized officers as of the date first above written.

 

SYNEOS HEALTH, LLC,

as the Servicer and as an Existing Originator

 

 

 

 

 

 

By:

 

/s/ Jason Meggs

Name:

 

Jason Meggs

Title:

 

Chief Financial Officer

 

 

 

 

 

 

INVENTIV COMMERCIAL SERVICES, LLC,

as an Existing Originator

 

 

 

 

 

 

By:

 

/s/ Jason Meggs

Name:

 

Jason Meggs

Title:

 

Chief Financial Officer

 

 

 

 

 

 

ADDISON WHITNEY LLC,

as a New Originator

 

 

 

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

 

 

 

 

 

 

BIOSECTOR 2 LLC,

as a New Originator

 

 

 

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

 

 

 

 

738117215 18569090

S- 1

Fourth Amendment to the Purchase

and Sale Agreement

 

 

IN WITNESS WHEREOF, the parties hereto have executed this Amendment by their duly authorized officers as of the date first above written.

 

SYNEOS HEALTH, LLC,

as the Servicer and as an Existing Originator

 

 

 

 

 

 

By:

 

 

Name:

 

Jason Meggs

Title:

 

Chief Financial Officer

 

 

 

 

 

 

INVENTIV COMMERCIAL SERVICES, LLC,

as an Existing Originator

 

 

 

 

 

 

By:

 

 

Name:

 

Jason Meggs

Title:

 

Chief Financial Officer

 

 

 

 

 

 

ADDISON WHITNEY LLC,

as a New Originator

 

 

 

 

 

 

By:

 

/s/ Sara Epstein

Name:

 

Sara Epstein

Title:

 

Vice President and Assistant Secretary

 

 

 

 

 

 

BIOSECTOR 2 LLC,

as a New Originator

 

 

 

 

 

 

By:

 

/s/ Sara Epstein

Name:

 

Sara Epstein

Title:

 

Vice President and Assistant Secretary

 


 

738117215 18569090

S- 1

Fourth Amendment to the Purchase

and Sale Agreement

 

 

 

CADENT MEDICAL COMMUNICATIONS, LLC,

as a New Originator

 

 

 

 

 

 

By:

 

/s/ Sara Epstein

Name:

 

Sara Epstein

Title:

 

Vice President and Assistant Secretary

 

 

 

 

 

 

CHAMBERLAIN COMMUNICATIONS GROUP LLC,

as a New Originator

 

 

 

 

 

 

By:

 

/s/ Sara Epstein

Name:

 

Sara Epstein

Title:

 

Vice President and Assistant Secretary

 

 

 

 

 

 

CHANDLER CHICCO AGENCY, L.L.C.,

as a New Originator

 

 

 

 

 

 

By:

 

/s/ Sara Epstein

Name:

 

Sara Epstein

Title:

 

Vice President

 

 

 

 

 

 

GERBIG, SNELL/WEISHEIMER ADVERTISING, LLC,

as a New Originator

 

 

 

 

 

 

By:

 

/s/ Sara Epstein

Name:

 

Sara Epstein

Title:

 

Vice President and Assistant Secretary

 


 

738117215 18569090

S- 2

Fourth Amendment to the Purchase

and Sale Agreement

 

 

 

SYNEOS HEALTH MEDICAL COMMUNICATIONS, LLC,

as a New Originator

 

 

 

 

 

 

By:

 

/s/ Sara Epstein

Name:

 

Sara Epstein

Title:

 

Vice President and Assistant Secretary

 

 

 

 

 

 

NAVICOR GROUP, LLC,

as a New Originator

 

 

 

 

 

 

By:

 

/s/ Sara Epstein

Name:

 

Sara Epstein

Title:

 

Vice President and Assistant Secretary

 

 

 

 

 

 

PALIO + IGNITE, LLC,

as a New Originator

 

 

 

 

 

 

By:

 

/s/ Sara Epstein

Name:

 

Sara Epstein

Title:

 

Vice President and Assistant Secretary

 

 

 

 

 

 

THE SELVA GROUP, LLC

as a New Originator

 

 

 

 

 

 

By:

 

/s/ Sara Epstein

Name:

 

Sara Epstein

Title:

 

Vice President and Assistant Secretary

 

 

 

 

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S- 3

Fourth Amendment to the Purchase

and Sale Agreement

 

 

 

SYNEOS HEALTH COMMUNICATIONS, INC.,

as a New Originator

 

 

 

 

 

 

By:

 

/s/ Sara Epstein

Name:

 

Sara Epstein

Title:

 

Vice President and Secretary

 

 

 

 

 

 

TAYLOR STRATEGY PARTNERS, LLC,

as a New Originator

 

 

 

 

 

 

By:

 

/s/ Sara Epstein

Name:

 

Sara Epstein

Title:

 

Vice President and Assistant Secretary

 

 

 

 

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Fourth Amendment to the Purchase

and Sale Agreement

 

 

 

SYNEOS HEALTH RECEIVABLES LLC,

as the Buyer

 

 

 

 

 

 

By:

 

/s/ Robert Parks

Name:

 

Robert Parks

Title:

 

President

 

 

 

 

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Fourth Amendment to the Purchase

and Sale Agreement

 

 

Consented to:

 

PNC BANK, NATIONAL ASSOCIATION,

as Administrative Agent and as a Lender

 

 

 

 

 

 

By:

 

/s/ Christopher Blaney

Name:

 

Christopher Blaney

Title:

 

Senior Vice President

 

 

 

 

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Fourth Amendment to the Purchase

and Sale Agreement

 

 

Schedule I

LIST AND LOCATION OF EACH ORIGINATOR

 

Originator

Location

Syneos Health, LLC

Delaware

inVentiv Commercial Services, LLC

New Jersey

Addison Whitney LLC

North Carolina

BioSector 2 LLC

New York

Cadent Medical Communications, LLC

Ohio

Chamberlain Communications Group LLC

Delaware

Chandler Chicco Agency, L.L.C.

New York

Gerbig, Snell/Weisheimer Advertising, LLC

Ohio

Syneos Health Medical Communications, LLC

Ohio

Navicor Group, LLC

Ohio

Palio + Ignite, LLC

Ohio

Syneos Health Communications, Inc.

Ohio

The Selva Group, LLC

Ohio

Taylor Strategy Partners, LLC

Ohio

 

 

 

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Schedule I-1

Purchase and Sale Agreement (QINC)

 

 

Schedule II

LOCATION OF BOOKS AND RECORDS OF ORIGINATORS

 

Originator

Location of Books and Records

Syneos Health, LLC

1030 Sync Street, Morrisville, NC 27560

inVentiv Commercial Services, LLC

470 Atlantic Avenue, 11th Floor, Boston, MA 02210

Addison Whitney LLC

470 Atlantic Avenue, 11th Floor, Boston, MA 02210

BioSector 2 LLC

470 Atlantic Avenue, 11th Floor, Boston, MA 02210

CADENT MEDICAL COMMUNICATIONS, LLC

470 Atlantic Avenue, 11th Floor, Boston, MA 02210

Chamberlain Communications Group LLC

470 Atlantic Avenue, 11th Floor, Boston, MA 02210

CHANDLER CHICCO AGENCY, L.L.C.

470 Atlantic Avenue, 11th Floor, Boston, MA 02210

GERBIG, SNELL/WEISHEIMER ADVERTISING, LLC

470 Atlantic Avenue, 11th Floor, Boston, MA 02210

Syneos Health Medical Communications, LLC

470 Atlantic Avenue, 11th Floor, Boston, MA 02210

NAVICOR GROUP, LLC

470 Atlantic Avenue, 11th Floor, Boston, MA 02210

Palio + Ignite, LLC

470 Atlantic Avenue, 11th Floor, Boston, MA 02210

Syneos Health Communications, Inc.

470 Atlantic Avenue, 11th Floor, Boston, MA 02210

THE SELVA GROUP, LLC

470 Atlantic Avenue, 11th Floor, Boston, MA 02210

Taylor Strategy Partners, LLC

470 Atlantic Avenue, 11th Floor, Boston, MA 02210

 

 

738117215 18569090

Schedule II-1

Purchase and Sale Agreement (QINC)

 

 

Schedule III

TRADE NAMES

Syneos Health, LLC

Syneos Health, LLC was formerly known as INC Research, LLC, INC Research, Inc., and Integrated Neuroscience Consortium, Inc.

Syneos Health has been used as a trade name since January 4, 2018.

Syneos Health, LLC has qualified to do business in the State of California.

inVentiv Commercial Services, LLC

inVentiv Commercial Services, LLC was formerly known as Ventiv Commercial Services, LLC, Ventiv Pharma Services, LLC, and Ventiv Health US. Sales LLC.

Syneos Health has been used as a trade name since January 4, 2018.

inVentiv Commercial Services, LLC has qualified to do business in the State of New Jersey and the State of Texas under the name “inVentiv Commercial, LLC”.

Addison Whitney LLC

Addison Whitney LLC was formerly known as AW Acquisition LLC.

 

BioSector 2 LLC

BioSector 2 LLC was formerly known as Sector 2 LLC.

 

Cadent Medical Communications, LLC

Cadent Medical Communications, LLC was formerly known as S.G. Madison & Associates, LLC.

 

Cadent Medical Communications, LLC has qualified to do business in the State of Ohio under the name “Cadent Medical Communications”.

 

Chamberlain Communications Group LLC

Chamberlain Communications Group LLC was formerly known as Chamberlin Communications LLC.

 

Chandler Chicco Agency, L.L.C.

N/A

 

738117215 18569090

Schedule III-1

Purchase and Sale Agreement

 

 

Gerbig, Snell/Weisheimer Advertising, LLC

N/A

 

Syneos Health Medical Communications, LLC

Syneos Health Medical Communications, LLC was formerly known as inVentiv Medical Communications, LLC and inVentiv Medical Education Group, LLC.

Navicor Group, LLC

N/A

 

Palio + Ignite, LLC

Palio + Ignite, LLC was formerly known as Palio Communications, LLC.

 

The Selva Group, LLC

N/A

 

Syneos Health Communications, Inc.

Syneos Health Communications, Inc. was formerly known as inVentiv Health Communications, Inc, inVentiv Communications, Inc., inChord Communications, Inc., Gerbig, Snell/Weisheimer & Associates, Inc., and Gerbig, Snell, Weisheimer & Associates, Inc.

 

Syneos Health Communications, Inc. has qualified to do business in the state of New York under the name “inVentiv Communications, Inc.”

 

Taylor Strategy Partners, LLC

Taylor Strategy Partners, LLC was formerly known as Taylor Search Partners, LLC

 

738117215 18569090

Schedule III-2

Purchase and Sale Agreement

 

 

Schedule IV

NOTICE ADDRESSES

If to Syneos Health, LLC:

 

Syneos Health, LLC

c/o Syneos Health, Inc.

1030 Sync Street

Morrisville, NC 27560

Attention:  General Counsel

 

with a copy to:

 

Latham & Watkins LLP

885 3rd Avenue

New York, NY 10022-4834

Attention:  Graeme Smyth, Esq.

 

If to inVentiv Commercial Services, LLC:

 

inVentiv Commercial Services, LLC

c/o Syneos Health, Inc.

1030 Sync Street

Morrisville, NC 27560

Attention:  General Counsel

 

with a copy to:

 

Latham & Watkins LLP

885 3rd Avenue

New York, NY 10022-4834

Attention:  Graeme Smyth, Esq.

 

If to Addison Whitney LLC:

 

Addison Whitney LLC

c/o Syneos Health, Inc.

1030 Sync Street

Morrisville, NC 27560

Attention:  General Counsel

 

with a copy to:

 

Latham & Watkins LLP

885 3rd Avenue

New York, NY 10022-4834

Attention:  Graeme Smyth, Esq.

 

738117215 18569090

Schedule IV-1

 

 

 

 

If to BioSector 2 LLC:

 

BioSector 2 LLC

c/o Syneos Health, Inc.

1030 Sync Street

Morrisville, NC 27560

Attention:  General Counsel

 

with a copy to:

 

Latham & Watkins LLP

885 3rd Avenue

New York, NY 10022-4834

Attention:  Graeme Smyth, Esq.

 

If to Cadent Medical Communications, LLC :

 

Cadent Medical Communications, LLC

c/o Syneos Health, Inc.

1030 Sync Street

Morrisville, NC 27560

Attention:  General Counsel

 

with a copy to:

 

Latham & Watkins LLP

885 3rd Avenue

New York, NY 10022-4834

Attention:  Graeme Smyth, Esq.

 

If to Chamberlain Communications Group LLC :

 

Chamberlain Communications Group LLC

c/o Syneos Health, Inc.

1030 Sync Street

Morrisville, NC 27560

Attention:  General Counsel

 

with a copy to:

 

Latham & Watkins LLP

885 3rd Avenue

New York, NY 10022-4834

Attention:  Graeme Smyth, Esq.

 

 

738117215 18569090

Schedule IV-2

 

 

 

If to Chandler Chicco Agency, L.L.C.:

 

Chandler Chicco Agency, L.L.C.

c/o Syneos Health, Inc.

1030 Sync Street

Morrisville, NC 27560

Attention:  General Counsel

 

with a copy to:

 

Latham & Watkins LLP

885 3rd Avenue

New York, NY 10022-4834

Attention:  Graeme Smyth, Esq.

 

If to Gerbig, Snell/Weisheimer Advertising, LLC:

 

Gerbig, Snell/Weisheimer Advertising, LLC

c/o Syneos Health, Inc.

1030 Sync Street

Morrisville, NC 27560

Attention:  General Counsel

 

with a copy to:

 

Latham & Watkins LLP

885 3rd Avenue

New York, NY 10022-4834

Attention:  Graeme Smyth, Esq.

 

If to Syneos Health Medical Communications LLC:

 

Syneos Health Medical Communications LLC

c/o Syneos Health, Inc.

1030 Sync Street

Morrisville, NC 27560

Attention:  General Counsel

 

with a copy to:

 

Latham & Watkins LLP

885 3rd Avenue

New York, NY 10022-4834

Attention:  Graeme Smyth, Esq.

 

 

738117215 18569090

Schedule IV-3

 

 

 

If to Navicor Group, LLC:

 

Navicor Group, LLC

c/o Syneos Health, Inc.

1030 Sync Street

Morrisville, NC 27560

Attention:  General Counsel

 

with a copy to:

 

Latham & Watkins LLP

885 3rd Avenue

New York, NY 10022-4834

Attention:  Graeme Smyth, Esq.

 

If to Palio + Ignite, LLC:

 

Palio + Ignite, LLC

c/o Syneos Health, Inc.

1030 Sync Street

Morrisville, NC 27560

Attention:  General Counsel

 

with a copy to:

 

Latham & Watkins LLP

885 3rd Avenue

New York, NY 10022-4834

Attention:  Graeme Smyth, Esq.

 

If to The Selva Group, LLC:

 

The Selva Group, LLC

c/o Syneos Health, Inc.

1030 Sync Street

Morrisville, NC 27560

Attention:  General Counsel

 

with a copy to:

 

Latham & Watkins LLP

885 3rd Avenue

New York, NY 10022-4834

Attention:  Graeme Smyth, Esq.

 

 

738117215 18569090

Schedule IV-4

 

 

 

If to Syneos Health Communications, Inc.:

 

Syneos Health Communications, Inc.

c/o Syneos Health, Inc.

1030 Sync Street

Morrisville, NC 27560

Attention:  General Counsel

 

with a copy to:

 

Latham & Watkins LLP

885 3rd Avenue

New York, NY 10022-4834

Attention:  Graeme Smyth, Esq.

 

If to Taylor Strategy Partners, LLC:

 

Taylor Strategy Partners, LLC

c/o Syneos Health, Inc.

1030 Sync Street

Morrisville, NC 27560

Attention:  General Counsel

 

with a copy to:

 

Latham & Watkins LLP

885 3rd Avenue

New York, NY 10022-4834

Attention:  Graeme Smyth, Esq.

 

738117215 18569090

Schedule IV-5

 

 

Exhibit 10.2

 

EXECUTION VERSION

 

NINTH AMENDMENT TO THE

RECEIVABLES FINANCING AGREEMENT

This NINTH AMENDMENT TO THE RECEIVABLES FINANCING AGREEMENT (this “Amendment”), dated as of September 25, 2020, is entered into by and among the following parties:

 

(i)

SYNEOS HEALTH RECEIVABLES LLC, as Borrower;

 

(ii)

SYNEOS HEALTH, LLC (f/k/a INC RESEARCH, LLC), as initial Servicer; and

 

(iii)

PNC BANK, NATIONAL ASSOCIATION (“PNC”), as Administrative Agent and as Lender.

Capitalized terms used but not otherwise defined herein (including such terms used above) have the respective meanings assigned thereto in the Receivables Financing Agreement described below.

BACKGROUND

A.The parties hereto have entered into a Receivables Financing Agreement, dated as of June 29, 2018 (as amended, restated, supplemented or otherwise modified through the date hereof, the “Receivables Financing Agreement”).

B.Concurrently herewith, the Borrower, as buyer, the Servicer, as servicer and as an originator, and the other originators party thereto, are entering into that certain Fourth Amendment to the Purchase and Sale Agreement, dated as of the date hereof (the “PSA Amendment”).

C.Concurrently herewith, the Borrower, the Administrative Agent, the Lender and PNC Capital Markets LLC are entering into that certain Amended and Restated Fee Letter, dated as of the date hereof (the “Fee Letter”).

D.Concurrently herewith, the Borrower, the Servicer, the Administrative Agent and Bank of America, N.A. are entering into that certain Third Amendment to the Deposit Account Control Agreement, dated as of the date hereof (the “DACA Amendment” and, together with the PSA Amendment and the Fee Letter, the “Related Agreements”).

E.The parties hereto desire to amend the Receivables Financing Agreement as set forth herein.

NOW THEREFORE, with the intention of being legally bound hereby, and in consideration of the mutual undertakings expressed herein, each party to this Amendment hereby agrees as follows:

SECTION 1.Amendments to the Receivables Financing Agreement.  The Receivables Financing Agreement is hereby amended to incorporate the changes shown on the marked pages of the Receivables Financing Agreement attached hereto as Exhibit A.

738083484 18569090

 

 

 

 

SECTION 2.Representations and Warranties of the Borrower and the Servicer.  The Borrower and the Servicer each hereby represent and warrant to each of the parties hereto as of the date hereof as follows:

(a)Representations and Warranties.  The representations and warranties made by it in the Receivables Financing Agreement and each of the other Transaction Documents to which it is a party are true and correct as of the date hereof.

(b)Enforceability.  The execution and delivery by it of this Amendment, and the performance of its obligations under this Amendment, the Related Agreements, the Receivables Financing Agreement (as amended hereby) and the other Transaction Documents to which it is a party are within its organizational powers and have been duly authorized by all necessary action on its part, and this Amendment, the Related Agreements, the Receivables Financing Agreement (as amended hereby) and the other Transaction Documents to which it is a party are (assuming due authorization and execution by the other parties thereto) its valid and legally binding obligations, enforceable in accordance with their terms, except (i) as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors’ rights generally and (ii) as such enforceability may be limited by general principles of equity, regardless of whether such enforceability is considered in a proceeding in equity or at law.

(c)No Event of Default.  After giving effect to this Amendment, no Event of Default or Unmatured Event of Default has occurred and is continuing, or would occur as a result of this Amendment, the Related Agreements or the transactions contemplated hereby or thereby.

SECTION 3.Effect of Amendment; Ratification.  All provisions of the Receivables Financing Agreement and the other Transaction Documents, as expressly amended and modified by this Amendment, shall remain in full force and effect.  After this Amendment becomes effective, all references in the Receivables Financing Agreement (or in any other Transaction Document) to “the Receivables Financing Agreement”, “this Agreement”, “hereof”, “herein” or words of similar effect referring to the Receivables Financing Agreement shall be deemed to be references to the Receivables Financing Agreement as amended by this Amendment. This Amendment shall not be deemed, either expressly or impliedly, to waive, amend or supplement any provision of the Receivables Financing Agreement other than as set forth herein.  The Receivables Financing Agreement, as amended by this Amendment, is hereby ratified and confirmed in all respects.

SECTION 4.Effectiveness.  This Amendment shall become effective as of the date hereof, subject to the conditions precedent that the Administrative Agent shall have received the following:  

(a)counterparts to this Amendment executed by each of the parties hereto;

(b)evidence that the “Amendment Fee” under and as defined in the Fee Letter has been paid; and

(c)such other agreements, documents, instruments, UCC financing statements, secretary certificates, lien searches and opinions listed on Annex A hereto or otherwise as the Administrative Agent may reasonably request prior to the date hereof.

2

 

 

 

SECTION 5.Severability.  Any provisions of this Amendment which are prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

SECTION 6.Transaction Document.  This Amendment shall be a Transaction Document for purposes of the Receivables Financing Agreement.

SECTION 7.Counterparts.  This Amendment may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same agreement.  Delivery of an executed counterpart hereof by facsimile or other electronic means shall be equally effective as delivery of an originally executed counterpart.  The words “execution,” “execute”, “signed,” “signature,” and words of like import in or related to any document to be signed in connection with this Amendment and the transactions contemplated hereby shall be deemed to include electronic signatures, the electronic matching of assignment terms and contract formations on electronic platforms approved by the Administrative Agent, or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic Transactions Act.

SECTION 8.GOVERNING LAW AND JURISDICTION.

(a)THIS AMENDMENT, INCLUDING THE RIGHTS AND DUTIES OF THE PARTIES HERETO, SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (INCLUDING SECTIONS 5-1401 AND 5-1402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK, BUT WITHOUT REGARD TO ANY OTHER CONFLICTS OF LAW PROVISIONS THEREOF).

(b)EACH PARTY HERETO HEREBY IRREVOCABLY SUBMITS TO (I) WITH RESPECT TO THE BORROWER AND THE SERVICER, THE EXCLUSIVE JURISDICTION, AND (II) WITH RESPECT TO EACH OF THE OTHER PARTIES HERETO, THE NON-EXCLUSIVE JURISDICTION, IN EACH CASE, OF ANY NEW YORK STATE OR FEDERAL COURT SITTING IN NEW YORK CITY, NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AMENDMENT, AND EACH PARTY HERETO HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING (I) IF BROUGHT BY THE BORROWER, THE SERVICER OR ANY AFFILIATE THEREOF, SHALL BE HEARD AND DETERMINED, AND (II) IF BROUGHT BY ANY OTHER PARTY TO THIS AMENDMENT, MAY BE HEARD AND DETERMINED, IN EACH CASE, IN SUCH NEW YORK STATE COURT OR, TO THE EXTENT PERMITTED BY LAW, IN SUCH FEDERAL COURT.  NOTHING IN THIS SECTION 8 SHALL AFFECT THE RIGHT OF THE ADMINISTRATIVE AGENT OR ANY OTHER CREDIT PARTY TO BRING ANY ACTION OR PROCEEDING AGAINST THE BORROWER OR THE SERVICER OR ANY OF THEIR RESPECTIVE PROPERTY IN THE COURTS OF OTHER JURISDICTIONS.  EACH OF THE BORROWER AND THE SERVICER HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING.  THE

3

 

 

 

PARTIES HERETO AGREE THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.

SECTION 9.Section Headings.  The various headings of this Amendment are included for convenience only and shall not affect the meaning or interpretation of this Amendment, the Receivables Financing Agreement or any provision hereof or thereof.

SECTION 10.Performance Guaranty Ratification.  After giving effect to this Amendment, the Related Agreements and the transactions contemplated by this Amendment and the Related Agreements, all of the provisions of the Performance Guaranty shall remain in full force and effect and the Performance Guarantor hereby ratifies and affirms the Performance Guaranty and acknowledges that the Performance Guaranty has continued and shall continue in full force and effect in accordance with its terms.

SECTION 11.Post-Closing Covenant.  The Borrower and the Servicer shall deliver to the Administrative Agent, no later than October 26, 2020, an opinion of counsel to the “Existing Originators” (as defined in the PSA Amendment), in form and substance acceptable to the Administrative Agent, covering “true sale” matters with respect to the “Existing Originators” (as defined in the PSA Amendment) relating to sales and contributions occurring after the date hereof.  Failure to timely comply with this Section 11 shall constitute an immediate Event of Default with no grace period.

[Signature pages follow]

 

 

4

 

 

 

IN WITNESS WHEREOF, the parties hereto have executed this Amendment by their duly authorized officers as of the date first above written.

 

SYNEOS HEALTH RECEIVABLES LLC,

as the Borrower

 

 

 

 

 

By:

 

/s/ Robert Parks

 

Name:

 

Robert Parks

 

Title:

 

President

 

 

SYNEOS HEALTH, LLC,

as the Servicer

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

 

 

 

 

 

S-1

Ninth Amendment to the Receivables
Financing Agreement

 

 

IN WITNESS WHEREOF, the parties hereto have executed this Amendment by their duly authorized officers as of the date first above written.

 

SYNEOS HEALTH RECEIVABLES LLC,

as the Borrower

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

 

 

SYNEOS HEALTH, LLC,

as the Servicer

 

 

 

 

 

By:

 

/s/ Jason Meggs

 

Name:

 

Jason Meggs

 

Title:

 

Chief Financial Officer

 

 

 

 

 

S-2

Ninth Amendment to the Receivables
Financing Agreement

 

 

 

PNC BANK, NATIONAL ASSOCIATION,
as Administrative Agent

 

 

 

 

 

By:

 

/s/Christopher Blaney

 

Name:

 

Christopher Blaney

 

Title:

 

Senior Vice President

 

 

PNC BANK, NATIONAL ASSOCIATION,
as a Lender

 

 

 

 

 

By:

 

/s/Christopher Blaney

 

Name:

 

Christopher Blaney

 

Title:

 

Senior Vice President

 

 

 

 

 

S-3

Ninth Amendment to the Receivables
Financing Agreement

 

 

 

Acknowledged and agreed:

 

 

 

SYNEOS HEALTH, INC.,
as Performance Guarantor

 

 

 

 

 

By:

 

/s/ Jason Meggs

 

Name:

 

Jason Meggs

 

Title:

 

Chief Financial Officer

 

 

 

 

 

S-4

Ninth Amendment to the Receivables
Financing Agreement

 

 

Exhibit A

 

(attached)

 

 

Exhibit-A

 

 

 

 

EXECUTION VERSION

EXHIBIT A to the NINTH AMENDMENT, dated as of September 25, 2020

 

CONFORMED COPY INCLUDES

FIRST AMENDMENT, dated as of August 1, 2018 SECOND AMENDMENT, dated as of August 29, 2018 THIRD AMENDMENT, dated as of October 25, 2018 FOURTH AMENDMENT, dated as of January 2, 2019 FIFTH AMENDMENT, dated as of July 25, 2019 SIXTH AMENDMENT, dated as of September 30, 2019

OMNIBUS AMENDMENT, dated as of January 31, 2020 EIGHTH AMENDMENT, dated as of March 18, 2020

 

 

 

 

 

 

RECEIVABLES FINANCING AGREEMENT

 

Dated as of June 29, 2018 by and among

SYNEOS HEALTH RECEIVABLES LLC,

as Borrower,

 

THE PERSONS FROM TIME TO TIME PARTY HERETO,

as Lenders,

 

PNC BANK, NATIONAL ASSOCIATION,

as Administrative Agent,

 

SYNEOS HEALTH, LLC,

as initial Servicer, and

PNC CAPITAL MARKETS LLC,

as Structuring Agent

 

 

 

 

 

 

 

 

738120104 18569090

 

 

 

TABLE OF CONTENTS

 

Page

 

ARTICLE I       DEFINITIONS

 

 

SECTION 1.01.

 

Certain Defined Terms

 

 

SECTION 1.02.

 

Other Interpretative Matters

 

ARTICLE II      TERMS OF THE LOANS

 

 

SECTION 2.01.

 

Loan Facility

 

 

SECTION 2.02.

 

Making Loans; Repayment of Loans

 

 

SECTION 2.03.

 

Interest and Fees

 

 

SECTION 2.04.

 

Records of Loans

 

 

SECTION 2.05.

 

Selection of Interest Rates and Tranche Periods

 

 

SECTION 2.06.

 

Defaulting Lenders

 

ARTICLE III      [Reserved]

 

ARTICLE IV      SETTLEMENT PROCEDURES AND PAYMENT PROVISIONS

 

 

SECTION 4.01.

 

Settlement Procedures

 

 

SECTION 4.02.

 

Payments and Computations, Etc

 

ARTICLE V      INCREASED COSTS; FUNDING LOSSES; TAXES; ILLEGALITY

 

AND SECURITY INTEREST

3826

 

SECTION 5.01.

 

Increased Costs

3926

 

SECTION 5.02.

 

Funding Losses

 

 

SECTION 5.03.

 

Taxes

 

 

SECTION 5.04.

 

Inability to Determine Adjusted LIBOR or LMIR; Change in Legality

 

 

SECTION 5.05.

 

Security Interest

 

 

SECTION 5.06.

 

Successor Adjusted LIBOR or LMIR

4726

ARTICLE VI      CONDITIONS to Effectiveness and CREDIT EXTENSIONS

4731

 

SECTION 6.01.

 

Conditions Precedent to Effectiveness and the Initial Credit Extension

4831

 

SECTION 6.02.

 

Conditions Precedent to All Credit Extensions

 

 

SECTION 6.03.

 

Conditions Precedent to All Releases

 

ARTICLE VII      REPRESENTATIONS AND WARRANTIES

 

 

SECTION 7.01.

 

Representations and Warranties of the Borrower

 

 

SECTION 7.02.

 

Representations and Warranties of the Servicer

 

ARTICLE VIII      COVENANTS

 

 

SECTION 8.01.

 

Covenants of the Borrower

 

 

SECTION 8.02.

 

Covenants of the Servicer

7332

 

SECTION 8.03.

 

Separate Existence of the Borrower

 

 

738083484 18569090

- i -

 

 

 

TABLE OF CONTENTS

(Continued)

Page

 

 

ARTICLE IX      ADMINISTRATION AND COLLECTION OF RECEIVABLES

 

 

SECTION 9.01.

 

Appointment of the Servicer

 

 

SECTION 9.02.

 

Duties of the Servicer

 

 

SECTION 9.03.

 

Collection Account Arrangements

 

 

SECTION 9.04

 

Enforcement Rights

 

 

SECTION 9.05.

 

Responsibilities of the Borrower

 

 

SECTION 9.06.

 

Servicing Fee

 

ARTICLE X      EVENTS OF DEFAULT

 

 

SECTION 10.01.

 

Events of Default

 

ARTICLE XI      THE ADMINISTRATIVE AGENT

 

 

SECTION 11.01.

 

Authorization and Action

 

 

SECTION 11.02.

 

Administrative Agent’s Reliance, Etc

 

 

SECTION 11.03.

 

Administrative Agent and Affiliates

 

 

SECTION 11.04.

 

Indemnification of Administrative Agent

 

 

SECTION 11.05.

 

Delegation of Duties

 

 

SECTION 11.06.

 

Action or Inaction by Administrative Agent

 

 

SECTION 11.07.

 

Notice of Events of Default; Action by Administrative Agent

 

 

SECTION 11.08

 

Non-Reliance on Administrative Agent and Other Parties

 

 

SECTION 11.09.

 

Successor Administrative Agent

8737

 

SECTION 11.10.

 

Structuring Agent

8837

 

SECTION 11.11

 

LIBOR Notification

37

ARTICLE XII       [RESERVED]

8838

ARTICLE XIII       INDEMNIFICATION

8838

 

SECTION 13.01.

 

Indemnities by the Borrower

8838

 

SECTION 13.02.

 

Indemnification by the Servicer

 

 

SECTION 13.03.

 

Currency Indemnity

39

 

ARTICLE XIV

 

MISCELLANEOUS

9340

 

SECTION 14.01.

 

Amendments, Etc

9340

 

SECTION 14.02.

 

Notices, Etc

 

 

SECTION 14.03.

 

Assignability; Addition of Lenders

 

 

SECTION 14.04.

 

Costs and Expenses

 

 

SECTION 14.05.

 

No Proceedings

 

 

SECTION 14.06.

 

Confidentiality

 

 

SECTION 14.07.

 

GOVERNING LAW

9941

 

738083484 18569090

- ii -

 

 

TABLE OF CONTENTS

(Continued)

Page

 

 

 

SECTION 14.08.

 

Execution in Counterparts

9941

 

SECTION 14.09.

 

Integration; Binding Effect; Survival of Termination

9941

 

SECTION 14.10.

 

CONSENT TO JURISDICTION

 

 

SECTION 14.11.

 

WAIVER OF JURY TRIAL

 

 

SECTION 14.12.

 

Ratable Payments

 

 

SECTION 14.13.

 

Limitation of Liability

 

 

SECTION 14.14.

 

Intent of the Parties

 

 

SECTION 14.15.

 

USA Patriot Act

 

 

SECTION 14.16.

 

Right of Setoff

 

 

SECTION 14.17.

 

Severability

 

 

SECTION 14.18.

 

Mutual Negotiations

 

 

SECTION 14.19.

 

Captions and Cross References

 

 

SECTION 14.20.

 

Post-Closing Covenant

 

 

 

 

 

738083484 18569090

- iii -

 

 

 

“Adjusted LIBOR” means with respect to any Tranche Period, the interest rate per annum determined by the Administrative Agent by dividing (the resulting quotient rounded upwards, if necessary, to the nearest 1/100th of 1% per annum) (i) the rate of interest determined by the Administrative Agent in accordance with its usual procedures (which determination shall be conclusive absent manifest error) to be the rate per annum for deposits in Dollars as reported by Bloomberg Finance L.P. and shown on US0001M Screen as the composite offered rate for London interbank deposits for such Tranche Period (or on any successor or substitute page of such service, or any successor to or substitute for such service, providing rate quotations comparable to those currently provided on such page of such service, as determined by the Administrative Agent from time to time for purposes of providing quotations of interest rates applicable to dollar deposits in the London interbank market) at or about 11:00 a.m. (London time) on the Business Day which is two (2) Business Days prior to the first day of such Tranche Period for an amount comparable to the Portion of Capital to be funded at Adjusted LIBOR during such Tranche Period, by (ii) a number equal to 1.00 minus the Euro-Rate Reserve Percentage; provided, however, that with respect to the initial Tranche Period for a Loan that is not advanced on a Monthly Settlement Date, Adjusted LIBOR shall be the interest rate per annum equal to LMIR for each day during such initial Tranche Period from the date that such Loan is made pursuant to Section 2.01 until the next occurring Monthly Settlement Date. The calculation of Adjusted LIBOR may also be expressed by the following formula:

 

Composite of London interbank offered rates shown on Bloomberg Finance L.P. Screen US0001M

or appropriate successor

Adjusted LIBOR   ==                                                             

 

1.00 - Euro-Rate Reserve Percentage

 

Adjusted LIBOR shall be adjusted on the effective date of any change in the Euro-Rate Reserve Percentage as of such effective date. The Administrative Agent shall give prompt notice to the Borrower of Adjusted LIBOR as determined or adjusted in accordance herewith (which determination shall be conclusive absent manifest error). Notwithstanding the foregoing, if Adjusted LIBOR as determined herein would be less than zero (0.00), such rate0.15% or any other rate as may be agreed by the Borrower and Administrative Agent in writing, Adjusted LIBOR shall be deemed to be zero percent (0.00%)equal to 0.15% or such other rate for purposes of this Agreement.

 

“Administrative Agent” means PNC, in its capacity as contractual representative for the Credit Parties, and any successor thereto in such capacity appointed pursuant to Article XI or Section 14.03(f).

 

“Advent” means Advent International Corporation and its Affiliates.

 

“Adverse Claim” means any ownership interest or claim, mortgage, deed of trust, pledge, lien, security interest, hypothecation, charge or other encumbrance or security arrangement of any nature whatsoever, whether voluntarily or involuntarily given, including, but not limited to, any conditional sale or title retention arrangement, and any assignment, deposit arrangement or lease intended as, or having the effect of, security and any filed financing statement or other notice of any of the foregoing (whether or not a lien or other encumbrance is created or exists at the time of the filing); it being understood that any of the foregoing in favor of, or assigned to, the Administrative Agent (for the benefit of the Secured Parties) shall not constitute an Adverse Claim.

 

 

738120104 18569090

2

 

 

“Advisors” has the meaning set forth in Section 14.06(c).

“Affected Person” means each Credit Party and each of their respective Affiliates. “Affiliate” means, as to any Person: (a) any other Person that, directly or indirectly, is in control of, is controlled by or is under common control with such Person or (b) who is a director or officer: (i) of such Person or (ii) of any Person described in clause (a). For purposes of this definition, control of a Person shall mean the power, direct or indirect: (x) to vote 35% or more of the securities having ordinary voting power for the election of directors or managers of such Person or (y) to direct or cause the direction of the management and policies of such Person, in either case whether by ownership of securities, contract, proxy or otherwise.

 

“Aggregate Capital” means, at any time of determination, the aggregate outstanding Capital of all Lenders at such time.

 

“Aggregate Interest” means, at any time of determination, the aggregate accrued and unpaid Interest on the Loans of all Lenders at such time.

 

“Agreement” has the meaning set forth in the preamble to this Agreement.

 

“Alternative Currency” means Euros, GBP, AUD, CHF, CAD and any other currencies the Administrative Agent and the Lenders have approved in writing in their sole discretion.

 

“Anti-Terrorism Laws” means any Applicable Law relating to terrorism financing, trade sanctions programs and embargoes, import/export licensing, money laundering or bribery, and any regulation, order, or directive promulgated, issued or enforced pursuant to such Applicable Laws, all as amended, supplemented or replaced from time to time.

 

“Applicable Law” means, with respect to any Person, (x) all provisions of law, statute, treaty, constitution, ordinance, rule, regulation, ordinance, requirement, restriction, permit, executive order, certificate, decision, directive or order of any Governmental Authority applicable to such Person or any of its property and (y) all judgments, injunctions, orders, writs, decrees and awards of all courts and arbitrators in proceedings or actions in which such Person is a party or by which any of its property is bound. For the avoidance of doubt, FATCA shall constitute an “Applicable Law” for all purposes of this Agreement.

 

“Assignment and Acceptance Agreement” means an assignment and acceptance agreement entered into by a Lender, an Eligible Assignee and the Administrative Agent, and, if required, the Borrower, pursuant to which such Eligible Assignee may become a party to this Agreement, in substantially the form of Exhibit C hereto.

 

“Attorney Costs” means and includes all reasonable fees, costs, expenses and disbursements of any law firm or other external counsel and all disbursements of internal counsel.

“AUD” means the lawful currency of the Commonwealth of Australia.

 

“Bankruptcy Code” means the United States Bankruptcy Reform Act of 1978 (11 U.S.C. § 101, et seq.), as amended from time to time.

 

 

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“Base Rate” means, for any day and any Lender, a fluctuating interest rate per annum as shall be in effect from time to time, which rate shall be at all times equal to the higher of:

 

(a)the rate of interest in effect for such day as publicly announced from time to time by such Lender or its Affiliate as its “reference rate” or “prime rate”, as applicable. Such “reference rate” or “prime rate” is set by the applicable Lender or its Affiliate based upon various factors, including such Person’s costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above or below such announced rate, and is not necessarily the lowest rate charged to any customer; and

 

(b)0.50% per annum above the latest Federal FundsOvernight Bank Funding Rate.

 

“Beneficial Owner” means, for the Borrower, each of the following: (a) each individual, if any, who, directly or indirectly, owns 25% or more of the Borrower’s Capital Stock; and (b) a single individual with significant responsibility to control, manage, or direct the Borrower.

 

“Beneficial Ownership Regulation” means 31 C.F.R. § 1010.230.

“Borrower” has the meaning specified in the preamble to this Agreement.

“Borrower Indemnified Amounts” has the meaning set forth in Section 13.01(a).

“Borrower Indemnified Party” has the meaning set forth in Section 13.01(a).

“Borrower Material Adverse Effect” means a material adverse effect on any of the following:

 

(a)the assets, operations, business or financial condition of the Borrower;

 

(b)the ability of the Borrower to perform its obligations under this Agreement or any other Transaction Document to which it is a party;

 

(c)the validity or enforceability of this Agreement or any other Transaction Document to which the Borrower is a party, or the validity, enforceability, value or collectability of any material portion of the Pool Receivables;

 

(d)the status, perfection, enforceability or priority of the Administrative Agent’s security interest in the Collateral; or

 

(e)the rights and remedies of any Credit Party under the Transaction Documents or associated with its respective interest in the Collateral.

“Borrower Obligations” means all present and future indebtedness, reimbursement obligations, and other liabilities and obligations (howsoever created, arising or evidenced, whether direct or indirect, absolute or contingent, or due or to become due) of the Borrower to any Credit Party, Borrower Indemnified Party and/or any Affected Person, arising under or in connection with this Agreement or any other Transaction Document or the transactions contemplated hereby or thereby, and shall include, without limitation, all

 

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Capital and Interest on the Loans, all Fees and all other amounts due or to become due under the Transaction Documents (whether in respect of fees, costs, expenses, indemnifications or otherwise), including, without limitation, interest, fees and other obligations that accrue after the commencement of any Insolvency Proceeding with respect to the Borrower (in each case whether or not allowed as a claim in such proceeding).

 

“Borrower’s Net Worth” means, at any time of determination, an amount equal to (i) the Dollar Equivalent of the aggregate Outstanding Balance of all Pool Receivables at such time, minus (ii) the sum of (A) the Aggregate Capital at such time, plus (B) the Aggregate Interest at such time, plus (C) the aggregate accrued and unpaid Fees at such time, plus (D) the Dollar Equivalent of the aggregate outstanding principal balance owing under each Intercompany Loan Agreement at such time, plus (E) the Dollar Equivalent of the aggregate accrued and unpaid interest owing under each Intercompany Loan Agreement at such time, plus (F) without duplication, the aggregate accrued and unpaid other Borrower Obligations at such time.

 

“Borrowing Base” means, at any time of determination, the amount equal to the lesser of (a) the Facility Limit and (b) the amount equal to (i) the Net Receivables Pool Balance at such time, minus (ii) the Total Reserves at such time.

 

“Borrowing Base Deficit” means, at any time of determination, the amount, if any, by which (a) the Aggregate Capital at such time, exceeds (b) the sum of (i) the Borrowing Base at such time plus (ii) the aggregate amount of Collections (if any) then being held by, and under the exclusive control of, the Administrative Agent, solely to the extent such Collections (x) have been applied to reduce the Outstanding Balance of the related Receivables for purposes of calculating the Borrowing Base in clause (i) above and (y) have not been applied in reduction of the Aggregate Capital or otherwise in accordance with the priorities for payment specified in Section 4.01(a).

 

“Breakage Fee” means (i) for any Interest Period for which Interest is computed by reference to Adjusted LIBOR and a reduction of Capital is made for any reason on any day other than the last day of the related Tranche Period or (ii) to the extent that the Borrower shall for any reason, fail to borrow on the date specified by the Borrower in connection with any request for funding pursuant to Article II of this Agreement, the amount, if any, by which (A) the additional Interest (calculated without taking into account any Breakage Fee or any shortened duration of such Interest Period pursuant to the definition thereof) which would have accrued during such Interest Period on the reductions of Capital relating to such Interest Period had such reductions not been made (or, in the case of clause (ii) above, the amounts so failed to be borrowed or accepted in connection with any such request for funding by the Borrower), exceeds (B) the income, if any, received by the applicable Lender from the investment of the proceeds of such reductions of Capital (or such amounts failed to be borrowed by the Borrower). A certificate as to the amount of any Breakage Fee (including the computation of such amount) shall besubmitted by the affected Lender to the Borrower and shall be conclusive and binding for all purposes, absent manifest error.

 

“Business Day” means any day (other than a Saturday or Sunday) on which: (a) banks are not authorized or required to close in Pittsburgh, Pennsylvania, or New York City, New York and (b)if this definition of “Business Day” is utilized in connection with Adjusted LIBOR or LMIR, dealings are carried out in the London interbank market.

 

“CAD” means the lawful currency of Canada.

 

 

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“Capital” means, with respect to any Lender, the aggregate amounts paid to, or on behalf of, the Borrower in connection with all Loans made by such Lender pursuant to Article II, as reduced from time to time by Collections distributed and applied on account of such Capital pursuant to Section 4.01; provided, that if such Capital shall have been reduced by any distribution and thereafter all or a portion of such distribution is rescinded or must otherwise be returned for any reason, such Capital shall be increased by the amount of such rescinded or returned distribution as though it had not been made.

 

“Capital Stock” means, with respect to any Person, any and all common shares, preferred shares, interests, participations, rights in or other equivalents (however designated) of such Person’s capital stock, partnership interests, limited liability company interests, membership interests or other equivalent interests and any rights (other than debt securities convertible into or exchangeable for capital stock), warrants or options exchangeable for or convertible into such capital stock or other equity interests.

 

“Certificate of Beneficial Ownership” means, for the Borrower, a certificate in form and substance acceptable to the Administrative Agent (as amended or modified by the Administrative Agent from time to time in its sole discretion), certifying, among other things, the Beneficial Owner of the Borrower.

 

“Change in Control” means the occurrence of any of the following:

 

(a)Syneos Health ceases to own, directly, 100% of the issued and outstanding Capital Stock of the Borrower free and clear of all Adverse Claims;

 

(b)Parent ceases to own, directly or indirectly, 100% of the issued and outstanding Capital Stock of any Originator or the Servicer;

 

(c)any Adverse Claim should exist with respect to any Intercompany Loan Agreement or any Intercompany Loan;

 

(d)the acquisition by any Person or group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act), including any group acting for the purpose of acquiring, holding or disposing of Securities (within the meaning of Rule 13d-5(b)(1) under the Exchange Act, but excluding any employee benefit plan and/or Person acting as the trustee, agent or other fiduciary or administrator therefor), other than one or more Permitted Holders, of Capital Stock representing more than the greater of (x) 35% of the total voting power of all of the outstanding voting Capital Stock of Parent and

(y)the percentage of the total voting power of all of the outstanding voting Capital Stock of Parent owned, directly or indirectly, beneficially by the Permitted Holders; or

 

(e)the occurrence of a “change of control” (or similar event, however defined) under the Credit Agreement (or any refinancing thereof).

 

“Change in Law” means the occurrence, after the Closing Date, of any of the following:(a) the adoption or taking effect of any law, rule, regulation or treaty, (b) any change in any law, rule, regulation or treaty or in the administration, interpretation, implementation or application thereof by any Governmental Authority or (c) the making or issuance of any request, rule, guideline or directive (whether or not having

 

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the force of law) by any Governmental Authority; provided that notwithstanding anything herein to the contrary, (w) the final rule titled Risk-Based Capital Guidelines; Capital Adequacy Guidelines; Capital Maintenance: Regulatory Capital; Impact of Modifications to Generally Accepted Accounting Principles; Consolidation of Asset-Backed Commercial Paper Programs; and Other Related Issues, adopted by the United States bank regulatory agencies on December 15, 2009, (x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection therewith and (y) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to the agreements reached by the Basel Committee on Banking Supervision in “Basel III: A Global Regulatory Framework for More Resilient Banks and Banking Systems” (as amended, supplemented or otherwise modified or replaced from time to time), shall in each case be deemed to be a “Change in Law”, regardless of the date enacted, adopted or issued.

 

“CHF” means the lawful currency of Switzerland. “Closing Date” means June 29, 2018.

“Code” means the Internal Revenue Code of 1986, as amended, reformed or otherwise modified from time to time.

 

“Collateral” has the meaning set forth in Section 5.05(a).

 

“Collection Account” means each account listed on Schedule II to this Agreement (as such schedule may be modified from time to time in connection with the closing or opening of any Collection Account in accordance with the terms hereof) (in each case, in the name of the Borrower) and maintained at a bank or other financial institution acting as a Collection Account Bank pursuant to an Account Control Agreement for the purpose of receiving Collections.

 

“Collection Account Bank” means any of the banks or other financial institutions holding one or more Collection Accounts.

 

“Collections” means, with respect to any Pool Receivable: (a) all funds that are received by any Originator, the Borrower, the Servicer or any other Person on their behalf in payment of any amounts owed in respect of such Pool Receivable (including purchase price, service charges, finance charges, interest, fees and all other charges), or applied to amounts owed in respect of such Pool Receivable (including insurance payments, proceeds of drawings under supporting

“Contract” means, with respect to any Receivable, any and all contracts, instruments, agreements, leases, invoices, notes or other writings pursuant to which such Receivable arises or that evidence such Receivable or under which an Obligor becomes or is obligated to make payment in respect of such Receivable.

 

“Covered Entity” means (a) each of Borrower, the Servicer, each Originator, the Parent and each of the Parent’s Subsidiaries and (b) each Person that, directly or indirectly, is in control of a Person described in clause (a) above. For purposes of this definition, control of a Person shall mean the direct or indirect (x) ownership of, or power to vote, 35% or more of the issued and outstanding equity interests having ordinary voting power for the election of directors of such Person or other Persons performing similar functions for

 

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such Person, or (y) power to direct or cause the direction of the management and policies of such Person whether by ownership of equity interests, contract or otherwise.

 

“Credit Agreement” means that certain Credit Agreement, dated as of August 1, 2017, as amended, by and among Syneos Health, Inc. f/k/a INC Research Holdings, Inc., as the administrative borrower, the other borrowers party thereto, the financial institutions party thereto as lenders, JPMorgan Chase Bank, N.A. (as successor agent to Credit Suisse AG, Cayman Islands Branch), as administrative agent, the other financial institutions party thereto, as joint lead arrangers and joint bookrunners.

 

“Credit Agreement Replacement Rate” means the alternate rate of interest to the “Eurocurrency Rate” (as defined in the Credit Agreement), if any, established in accordance with Section 2.14(b) of the Credit Agreement as in effect on September 25, 2020.

 

“Credit and Collection Policy” means, as the context may require, those receivables credit and collection policies and practices of the Originators in effect on the Closing Date and described in Exhibit F, as modified in compliance with this Agreement.

 

“Credit Extension” means the making of any Loan.

 

“Credit Party” means each Lender and the Administrative Agent.

 

“Currency Reserve Amount” means, at any time of determination, the product of (a) 7.5%, times (b) the Dollar Equivalent of the aggregate Outstanding Balance of all Eligible Receivables then denominated in an Alternative Currency; provided however that the Administrative Agent may adjust the percentage listed in clause (a) in its sole discretion upon five (5) Business Days’ notice to the Borrower.

 

“Days’ Sales Outstanding” means, for any Fiscal Month, an amount computed as of the last day of such Fiscal Month equal to: (a) the Dollar Equivalent of the average of the Outstanding Balance of all Pool Receivables (other than Unbilled Receivables) as of the last day of each of the three most recent Fiscal Months ended on the last day of such Fiscal Month, divided by (b) (i) the Dollar Equivalent of the aggregate initial Outstanding Balance of all Pool Receivables (other than Unbilled Receivables) generated by the Originators during the three most recent Fiscal Months ended on the last day of such Fiscal Month, divided by (ii) 90.

“Debt” means, as to any Person at any time of determination, any and all indebtedness, obligations or liabilities (whether matured or unmatured, liquidated or unliquidated, direct or indirect, absolute or contingent, or joint or several) of such Person for or in respect of: (i) borrowed money, (ii) amounts raised under or liabilities in respect of any bonds, debentures, notes, note purchase, acceptance or credit facility, or other similar instruments or facilities, (iii) reimbursement obligations (contingent or otherwise) under any letter of credit, (iv) any other transaction (including production payments (excluding royalties), installment purchase agreements, forward sale or purchase agreements, capitalized leases and conditional sales agreements) having the commercial effect of a borrowing of money entered into by such Person to finance its operations or capital requirements (but not including accounts payable incurred in the ordinary course of such Person’s business payable on terms customary in the trade), (v) all net obligations of such Person in respect of interest rate or currency hedges or (vi) any Guaranty of any such Debt.

 

 

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“Deemed Collections” has the meaning set forth in Section 4.01(d).

 

“Default Ratio” means the ratio (expressed as a percentage and rounded to the nearest 1/100 of 1%, with 5/1000th of 1% rounded upward) computed as of the last day of each Fiscal Month by dividing: (a) the Dollar Equivalent of the aggregate Outstanding Balance of all Pool Receivables that became Defaulted Receivables during such Fiscal Month, by (b) the Dollar Equivalent of the aggregate initial Outstanding Balance of all Pool Receivables (other than Unbilled Receivables) generated by the Originators during the month that is six (6)  Fiscal Months (or if the Third Amendment Commencement Date, if any, has occurred, eight (8) Fiscal Months), before such Fiscal Month.

 

“Defaulted Receivable” means a Receivable, without duplication:

 

(a)as to which any payment, or part thereof, remains unpaid for 151 days or more (or if the Third Amendment Commencement Date, if any, has occurred, 211 days or more) after the original due date for such Receivable;

 

(b)as to which an Insolvency Proceeding shall have occurred with respect to the Obligor thereof or any other Person obligated thereon or owning any Related Security with respect thereto;

 

(c)that has been written off the applicable Originator’s or the Borrower’s books as uncollectible; or

 

(d)that, consistent with the Credit and Collection Policy, should be written off the applicable Originator’s or the Borrower’s books as uncollectible;

 

provided, however, that in each case above such amount shall be calculated without giving effect to any netting of credits that have not been matched to a particular Receivable for the purposes of aged trial balance reporting.

 

“Defaulting Lender” means any Lender that (a) has failed, within two (2) Business Days of the date required to be funded or paid, to (i) fund any portion of its Loans or (ii) pay over to any Credit Party any other amount required to be paid by it hereunder, unless, in the case of clause (i) above, such Lender notifies the Administrative Agent in writing that such failure is the result of such Lender’s good faith determination that a condition precedent to funding (specifically identified and including the particular default, if any) has not been satisfied, (b) has notified the Borrower or any Credit Party in writing, or has made a public statement to the effect, that it does not intend or expect to comply with any of its funding obligations under this Agreement (unless such writing or public statement indicates that such position is based on such Lender’s good faith determination that a condition precedent (specifically identified and including the particular default, if any) to funding a Loan under this Agreement cannot be satisfied) or generally under other agreements in which it commits to extend credit, (c) has failed, within three (3) Business Days after request by a Credit Party, acting in good faith, to provide a certification in writing from an authorized officer of such Lender that it will comply with its obligations (and is financially able to meet such obligations) to fund prospective Loans under this Agreement, provided that such Lender shall cease to be a Defaulting Lender pursuant to this clause (c) upon such Credit Party’s receipt of such certification in form and substance satisfactory to it and the Administrative Agent, or (d) has become the subject of an Insolvency Proceeding.

 

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“Delinquency Ratio” means the ratio (expressed as a percentage and rounded to the nearest 1/100 of 1%, with 5/1000th of 1% rounded upward) computed as of the last day of each Fiscal Month by dividing: (a) the Dollar Equivalent of the aggregate Outstanding Balance of all Pool Receivables that were Delinquent Receivables on such day, by (b) the Dollar Equivalent of the aggregate Outstanding Balance of all Pool Receivables on such day.

 

“Delinquent Receivable” means a Receivable as to which any payment, or part thereof, remains unpaid for 91 days or more from the original due date for such payment; provided, however, that such amount shall be calculated without giving effect to any netting of credits that have not been matched to a particular Receivable for the purposes of aged trial balance reporting.

 

“Dilution Horizon Ratio” means, for any Fiscal Month, the ratio (expressed as a percentage and rounded to the nearest 1/100th of 1%, with 5/1000th of 1% rounded upward) computed as of the last day of such Fiscal Month by dividing: (a) the Dollar Equivalent of the aggregate initial Outstanding Balance of all Pool Receivables (other than Unbilled Receivables) generated by the Originators during such Fiscal Month, by (b) the sum of (x) the Net Receivables Pool Balance as of the last day of such Fiscal Month plus (y) the aggregate Outstanding Balance as of the last day of such Fiscal Month of all Receivables and portions of Receivables that do not constitute Eligible Receivables on such date solely due to the failure to satisfy clause (r) and/or clause (w) of the definition of “Eligible Receivable”. Within thirty (30) days of the completion and the receipt by the Administrative Agent of the results of any annual audit or field exam of the Receivables and the servicing and origination practices of the Servicer and the Originators, the numerator of the Dilution Horizon Ratio may be adjusted, after consultation with the Borrower, by the Administrative Agent upon not less than five (5) Business Days notice to the Borrower to reflect such number of Fiscal Months as the Administrative Agent reasonably believes best reflects the business practices of the Servicer and the Originators and the actual amount of dilution and Deemed Collections that occur with respect to Pool Receivables based on the weighted average dilution lag calculation completed as part of such audit or field exam.

“Dilution Ratio” means, for any Fiscal Month, the ratio (expressed as a percentage and rounded to the nearest 1/100th of 1%, with 5/1000th of 1% rounded upward), computed as of the last day of each Fiscal Month by dividing: (i) the Dollar Equivalent of the aggregate amount of Deemed Collections during such Fiscal Month (other than any Deemed Collections with respect to any Receivables that were both (x) generated by an Originator during such Fiscal Month and (y) written off the applicable Originator’s or the Borrower’s books as uncollectible during such Fiscal Month), by (ii) the Dollar Equivalent of the aggregate initial Outstanding Balance of all Pool Receivables (other than Unbilled Receivables) generated by the Originators during the Fiscal Month that is one (1) month prior to such Fiscal Month.

 

“Dilution Reserve Percentage” means, at any time of determination, the product (expressed as a percentage and rounded to the nearest 1/100th of 1%, with 5/1000th of 1% rounded upward) of (a) the Dilution Horizon Ratio, multiplied by (b) the sum of (i) the Stress Factor times the average of the Dilution Ratios for the twelve (12) most recent Fiscal Months, plus (ii) the Dilution Volatility Component.

 

 

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“Dilution Volatility Component” means, for any Fiscal Month, the product (expressed as a percentage and rounded to the nearest 1/100th of 1%, with 5/1000th of 1% rounded upward) of:

 

(a)the positive difference, if any, between: (i) the highest Dilution Ratio for any Fiscal Month during the twelve (12) most recent Fiscal Months and (ii) the arithmetic average of the Dilution Ratios for such twelve (12) Fiscal Months; multiplied by

 

(b)the quotient of (i) the highest Dilution Ratio for any Fiscal Month during the twelve (12) most recent Fiscal Months, divided by (ii) the arithmetic average of the Dilution Ratios for such twelve (12) Fiscal Months.

 

“Dollar Equivalent” means, on any date on which a determination thereof is to be made, with respect to (a) any amount denominated in Dollars, such amount and (b) any amount denominated in a currency other than Dollars, the Dollar equivalent of such amount of such other currency as determined by referenced to the Spot Rate determined as of such determination date.

“Dollars” and “$” each mean the lawful currency of the United States of America. “Eligible Assignee” means (i) any Lender or any of its Affiliates, (ii) any Person managed by a Lender or any of its Affiliates and (iii) any other financial or other institution.

 

“Eligible Foreign Obligor” means an Obligor with respect to any Receivable that is either (i) an Eligible OECD Country Obligor or (ii) an Eligible Non-OECD Country Obligor.

 

“Eligible Non-OECD Country Obligor” means an Obligor with respect to any Receivable that is organized in or that has a head office (domicile), registered office, and chief executive office located in any country (other than the United States) that is not an OECD Country, is not a Sanctioned Country and has a long-term foreign currency rating of at least “BBB-” by S&P and “Baa3” by Moody’s.

“Eligible OECD Country Obligor” means an Obligor with respect to any Receivable that is organized in or that has a head office (domicile), registered office, and chief executive office located in an OECD Country (other than the United States).

 

“Eligible Receivable” means, at any time of determination, a Pool Receivable:

 

(a)the Obligor of which is: (i) either a U.S. Obligor or an Eligible Foreign Obligor; (ii) not a Governmental Authority; (iii) not a Sanctioned Person; (iv) not subject to any Insolvency Proceeding; (v) not an Affiliate of the Borrower, the Servicer, the Parent, the Performance Guarantor or any Originator; (vi) not the Obligor with respect to Delinquent Receivables with an aggregate Outstanding Balance exceeding 50% of the aggregate Outstanding Balance of all such Obligor’s Pool Receivables; (vii) not a natural person and (viii) not a material supplier to any Originator or an Affiliate of a material supplier;

 

(b)for which an Insolvency Proceeding shall not have occurred with respect to the Obligor thereof or any other Person obligated thereon or owning any Related Security with respect thereto;

 

 

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(c)that is denominated and payable only in Dollars or an Alternative Currency in the United States of America, and, solely for Receivables denominated in Dollars, the Obligor with respect to which has been instructed to remit Collections in respect thereof directly to a Lock-Box or Collection Account in the United States of America; provided however that if (i) a Ratings Event has occurred and is continuing and (ii) any payment on any Receivable denominated in an Alternative Currency is not transferred to a Collection Account within three (3) Business Days after receipt by any Syneos Party (any such Receivable, an “Applicable Receivable”), then any Receivable denominated in an Alternative Currency and the Obligor of which is the Obligor of such Applicable Receivable shall not be an Eligible Receivable;

 

(d)that does not have a due date which is 120 days or more after the original invoice date of such Receivable;

 

(e)that (i) arises under a Contract for the sale of goods or services in the ordinary course of the applicable Originator’s business and (ii) does not constitute a loan or other similar financial accommodation being provided by the applicable Originator;

 

(f)that arises under a duly authorized Contract that (i) is in full force and effect, (ii) is a legal, valid and binding obligation of the related Obligor, enforceable against such Obligor in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors’ rights generally and by general principles of equity regardless of whether enforceability is considered in a proceeding in equity or at law and

(iii)the payments thereunder are free and clear of, or increased to account for, any applicable withholding Taxes;

 

“Eligible Unbilled Receivable” means, at any time, any Unbilled Receivable that satisfies each of the following: (a) the related Originator has recognized the related revenue on its financial books and records under GAAP and (b) if the Outstanding Balance of such Unbilled Receivable were included in the definition of Modified Days’ Sales Outstanding, Modified Days’ Sales Outstanding would not exceed the Maximum Term; provided, however, for purposes of exclusion of any Unbilled Receivable pursuant to this clause (b), Unbilled Receivables shall be excluded in order based on the Outstanding Balance (with the smallest amount excluded first). For purposes of this definition of “Eligible Unbilled Receivable”, “Maximum Term” means 105 days.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any rule or regulation issued thereunder.

 

 

 

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“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any rule or regulation issued thereunder.

 

“ERISA Affiliate” means, with respect to any Person, any corporation, trade or business which together with the Person is a member of a controlled group of corporations or a controlled group of trades or businesses and would be deemed a “single employer” within the meaning of Sections 414(b), (c), (m) of the Code or Section 4001(b) of ERISA.

 

“Euro” or “€” each mean the single currency of participating member states of the European Monetary Union.

 

“Euro-Rate Reserve Percentage” means, the maximum effective percentage in effect on such day as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the reserve requirements (including without limitation, supplemental, marginal, and emergency reserve requirements) with respect to eurocurrency funding (currently referred to as “Eurocurrency Liabilities”).

 

“Event of Default” has the meaning specified in Section 10.01. For the avoidance of doubt, any Event of Default that occurs shall be deemed to be continuing at all times thereafter unless and until waived in accordance with Section 14.01.

 

“Excess Concentration” means the sum of the following amounts, without duplication:

 

(a)the sum of the amounts calculated for each of the Obligors equal to the excess (if any) of (i) the Dollar Equivalent of the aggregate Outstanding Balance of the Eligible Receivables of such Obligor, over (ii) the product of (x) such Obligor’s Concentration Percentage, multiplied by (y) the Dollar Equivalent of the aggregate Outstanding Balance of all Eligible Receivables then in the Receivables Pool; plus

 

(b)the excess (if any) of (i) the Dollar Equivalent of the aggregate Outstanding Balance of all Eligible Receivables that are Eligible Unbilled Receivables, over (ii) the product of (x) (A) so long as a Ratings Event has not occurred and is continuing, 60.0% or (B) if a Ratings Event has occurred and is continuing, 30.0%, multiplied by (y) the Dollar Equivalent of the aggregate Outstanding Balance of all Receivables then in the Receivables Pool; plus

 

(c)the excess (if any) of (i) the Dollar Equivalent of the aggregate Outstanding Balance of all Eligible Receivables, the Obligors of which are Eligible OECD Country Obligors, over (ii) the product of (x) 10.017.5%, multiplied by (y) the Dollar Equivalent of the aggregate Outstanding Balance of all Receivables then in the Receivables Pool; plus

 

(d)the excess (if any) of (i) the Dollar Equivalent of the aggregate Outstanding Balance of all Eligible Receivables, the Obligors of which are Eligible Tier I Non-OECD Country Obligors, over (ii) the product of (x) 2.55.0%, multiplied by (y) the Dollar Equivalent of the aggregate Outstanding Balance of all Receivables then in the Receivables Pool; plus

 

 

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(e)the excess (if any) of (i) the Dollar Equivalent of the aggregate Outstanding Balance of all Eligible Receivables, the Obligors of which are Eligible Tier II Non-OECD Country Obligors, over (ii) the product of (x) 1.0%, multiplied by (y) the Dollar Equivalent of the aggregate Outstanding Balance of all Receivables then in the Receivables Pool; plus

 

(f)the excess (if any) of (i) the Dollar Equivalent of the aggregate Outstanding Balance of all Eligible Receivables that have remained unpaid for more than 60 days but less than 91 days after the original due date of such Receivable, over (ii) the product of (x) 15.0%, multiplied by (y) the Dollar Equivalent of the aggregate initial Outstanding Balance of all Pool Receivables (other than Unbilled Receivables) generated by the Originators during the month that is three (3) Fiscal Months before the then-current Fiscal Month as of the date of determination; plus

 

(g)the excess (if any) of (i) the Dollar Equivalent of the aggregate Outstanding Balance of all Eligible Receivables that have a due date which is more than 90 days but less than 121 days after the original invoice date of such Receivable, over (ii) the product of (x) 10.0%, multiplied by (y) the Dollar Equivalent of the aggregate Outstanding Balance of all Receivables then in the Receivables Pool; plus

 

(h)the excess (if any) of (i) the Dollar Equivalent of the aggregate Outstanding Balance of all Eligible Receivables then denominated in an Alternative Currency over (ii) the product of (x) 2.5%, multiplied by (y) the Dollar Equivalent of the aggregate Outstanding Balance of all Receivables in the Receivables Pool; provided, however, that the Administrative Agent may in its sole discretion, upon prior notice to the Borrower, reduce the percentage in clause (ii)(x) above to 0.0% if a Ratings Event has occurred and is continuing during such period.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended or otherwise modified from time to time.

 

“Excluded Obligor” has the meaning set forth in the Excluded Receivable Letter Agreement.

 

“Excluded Receivable” means (i) any Receivable (without giving effect to the proviso to the definition thereto) the Obligor of which is Pfizer Inc. or any Subsidiary thereofan Excluded Obligor and (ii) any other Receivable or category of Receivable set forth in the Excluded Receivable Letter Agreement.

 

“Excluded Receivable Letter Agreement” means that certain letter agreement re: Excluded Receivables, dated as of September 25, 2020, among the Borrower, the Servicer, the Lenders and the Administrative Agent, as the same may be amended, restated, supplemented or otherwise modified from time to time.

 

“Excluded Taxes” means any of the following Taxes imposed on or with respect to an Affected Person or required to be withheld or deducted from a payment to an Affected Person:

(a)Taxes imposed on or measured by net income (however denominated), franchise Taxes and branch profits Taxes, in each case, (i) imposed as a result of such Affected Person being organized under the laws of, or having its principal office or, in the case of any Lender, its applicable lending office located in, the jurisdiction imposing such Tax (or any political subdivision thereof) or

 

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(ii) that are Other Connection Taxes, (b) in the case of a Lender, U.S. federal withholding Taxes imposed on amounts payable to or for the account of such Lender with respect to an applicable interest in the Loans or Commitment pursuant to a law in effect on the date on which (i) such Lender makes a Loan or its Commitment or (ii) such Lender changes its lending office, except in each case to the extent that amounts with respect to such Taxes were payable either to such Lender’s assignor immediately before such Lender became a party hereto or to such Lender immediately before it changed its lending office and (c) any U.S. federal withholding Taxes imposed pursuant to FATCA.

 

“Facility Limit” means $275,000,000300,000,000 as reduced from time to time pursuant to Section 2.02(e). References to the unused portion of the Facility Limit shall mean, at any time of determination, an amount equal to (x) the Facility Limit at such time, minus (y) the Aggregate Capital at such time.

 

“FATCA” means Sections 1471 through 1474 of the Code, as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future regulations or official interpretations thereof, any agreements entered into pursuant to Section 1471(b)(1) of the Code, any applicable intergovernmental agreement entered into between the United States and any other Governmental Authority in connection with the implementation of the foregoing and any fiscal or regulatory legislation, rules or official practices adopted pursuant to any such intergovernmental agreement.

 

“Federal Funds Rate” means, for any day, the per annum rate set forth in the weekly statistical release designated as H.15(519), or any successor publication, published by the Federal Reserve Board (including any such successor, “H.15(519)”) for such day opposite the caption “Federal Funds (Effective).” If on any relevant day such rate is not yet published in H. 15(519), the rate for such day will be the rate set forth in the daily statistical release designated as the Composite 3:30 p.m. Quotations for U.S. Government Securities, or any successor publication, published by the Federal Reserve Bank of New York (including any such successor, the “Composite 3:30 p.m. Quotations”) for such day under the caption “Federal Funds Effective Rate.” If on any relevant day the appropriate rate is not yet published in either H.15(519) or the Composite 3:30 p.m. Quotations, the rate for such day will be the arithmetic mean as determined by the Administrative Agent of the rates for the last transaction in overnight Federal funds arranged before 9:00 a.m. (New York City time) on that day by each of three leading brokers of Federal funds transactions in New York City selected by the Administrative Agent.

“Federal Reserve Board” means the Board of Governors of the Federal Reserve System, or any entity succeeding to any of its principal functions.

 

“Fee Letter” has the meaning specified in Section 2.03(a). “Fees” has the meaning specified in Section 2.03(a).

“Final Maturity Date” means the date that (i) is one hundred eighty (180) days following the Termination Date or (ii) such earlier date on which the Aggregate Capital becomes due and payable pursuant to Section 10.01.

 

 

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“Final Payout Date” means the date on or after the Termination Date when (i) the Aggregate Capital and Aggregate Interest have been paid in full, (ii) all Borrower Obligations shall have been paid in full, (iii) all other amounts owing to the Credit Parties and any other Borrower Indemnified Party or Affected Person hereunder and under the other Transaction Documents have been paid in full and (iv) all accrued Servicing Fees have been paid in full.

 

“Financial Officer” of any Person means, the chief executive officer, the chief financial officer, the senior vice president of finance, the chief accounting officer, the principal accounting officer, the controller, the treasurer or the assistant treasurer of such Person.

 

“Fiscal Month” means each calendar month.

 

“GAAP” means generally accepted accounting principles in the United States of America, consistently applied.

 

“GBP” means the lawful currency of the United Kingdom.

 

“Governmental Authority” means the government of the United States of America or any other nation, or of any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including any supra-national bodies such as the European Union or the European Central Bank).

 

“Group A Obligor” means any Obligor (or its parent or majority owner, as applicable, if such Obligor is not rated) with a short-term rating of at least: (a) “A-1” by S&P, or if such Obligor does not have a short-term rating from S&P, a rating of “A+” or better by S&P on such Obligor’s, its parent’s, or its majority owner’s (as applicable) long-term senior unsecured and uncredit-enhanced debt securities, or (b) “P-1” by Moody’s, or if such Obligor does not have a short-term rating from Moody’s, “Al” or better by Moody’s on such Obligor’s, its parent’s or its majority owner’s (as applicable) long-term senior unsecured and uncredit-enhanced debt securities; provided, that if an Obligor (or its parent or majority owner, as applicable, if such Obligor is not rated) receives a split rating from S&P and Moody’s, then such Obligor (or its “Intercompany Loan Agreement” has the meaning set forth in the Purchase and Sale Agreement.

 

“Intercompany Loan Ratio” means, at any time of determination, the ratio of (a) the aggregate outstanding principal balance of all Intercompany Loans at such time to (B) the aggregate “Purchase Price” (as defined in the Purchase and Sale Agreement) for all outstanding Receivables purchased under the Purchase and Sale Agreement at or prior to such time.

 

“Intended Tax Treatment” has the meaning set forth in Section 14.14.

 

“Interest” means, for each Loan for each day during any Interest Period (or portion thereof), the amount of interest accrued on the Capital of such Loan during such Interest Period (or portion thereof) in accordance with Section 2.03(b).

 

 

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“Interest Period” means, with respect to each Loan, (a) before the Termination Date: (i) initially, the period commencing on the date such Loan is made pursuant to Section 2.01 (or in the case of any fees payable hereunder, commencing on the Closing Date) and ending on (but not including) the next Monthly Settlement Date and (ii) thereafter, each period commencing on such Monthly Settlement Date and ending on (but not including) the next Monthly Settlement Date and (b) on and after the Termination Date, such period (including a period of one day) as shall be selected from time to time by the Administrative Agent (with the consent or at the direction of the Majority Lenders) or, in the absence of any such selection, each period of 30 days from the last day of the preceding Interest Period.

 

“Interest Rate” means, for any day in any Interest Period for any Loan (or any portion of Capital thereof):

 

(a)subject to Sections 5.04 and 5.06 and so long as no Event of Default has occurred and is continuing on such day, LMIR or solely to the extent determined pursuant to Section 2.05, Adjusted LIBOR; provided, however, that the Interest Rate applicable to any LIBOR Loan that is not advanced on a Monthly Settlement Date shall be LMIR for each day during the initial Interest Period applicable to such Loan from the date such Loan is made pursuant to Section 2.01 until the next occurring Monthly Settlement Date; or

 

(b)for any day while an Event of Default has occurred and is continuing, an interest rate per annum equal to the sum of 2.50% per annum plus the greater of (i) the interest rate per annum determined for such Loan and such day pursuant to clause (a) above, and (ii) the Base Rate in effect on such day;

 

provided, however, that no provision of this Agreement shall require the payment or permit the collection of Interest in excess of the maximum permitted by Applicable Law; provided, further, however, that Interest for any Loan shall not be considered paid by any distribution to the extent that at any time all or a portion of such distribution is rescinded or must otherwise be returned for any reason.

 

“Interim Report” means a report, in substantially the form of Exhibit J.

“Investment Company Act” means the Investment Company Act of 1940, as amended or otherwise modified from time to time.

 

“Investors” means (a) the Sponsors and (b) the Management Investors.

 

“LCR Security” means any commercial paper or security (other than equity securities issued to Parent or any Originator that is a consolidated subsidiary of Parent under GAAP) within the meaning of Paragraph .32(e)(viii) of the final rules titled Liquidity Coverage  Ratio: Liquidity Risk Measurement Standards, 79 Fed. Reg. 197, 61440 et seq. (October 10, 2014).

 

“Lenders” means each Person that is a party to this Agreement in the capacity of a “Lender”.

 

“Liberty Lane” means Liberty Lane IH LLC and its Affiliates. “LIBOR Loan” means any Loan accruing Interest at Adjusted LIBOR.

 

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“LIBOR Termination Date” has the meaning set forth in Section 5.06(a).

 

“Linked Account” means any controlled disbursement account, controlled balance account or other deposit account maintained by a Collection Account Bank for the Parent, the Performance Guarantor, the Servicer, any Originator or any Affiliate thereof and linked to any Collection Account by a zero balance account connection or other automated funding mechanism or controlled balance arrangement.

 

“LMIR” means for any day during any Interest Period, the interest rate per annum determined by the Administrative Agent (which determination shall be conclusive absent manifest error) by dividing (i) the one-month Eurodollar rate for Dollar deposits as reported by Bloomberg Finance L.P. and shown on US0001M Screen or any other service or page that may replace such page from time to time for the purpose of displaying offered rates of leading banks for London interbank deposits in Dollars, as of 11:00 a.m. (London time) on such day, or if such day is not a Business Day, then the immediately preceding Business Day (or if not so reported, then as determined by the Administrative Agent from another recognized source for interbank quotation), in each case, changing when and as such rate changes, by (ii) a number equal to 1.00 minus the Euro-Rate Reserve Percentage on such day. The calculation of LMIR may also be expressed by the following formula:

 

One-month Eurodollar rate for Dollars shown on Bloomberg US0001M Screen or appropriate successor

LMIR=

 

1.00 - Euro-Rate Reserve Percentage

 

LMIR shall be adjusted on the effective date of any change in the Euro-Rate Reserve Percentage as of such effective date. Notwithstanding the foregoing, if LMIR as determined herein would be less than zero percent (0.00%), such rate0.15% or any other rate as may be agreed by the Borrower and Administrative Agent in writing, LMIR shall be deemed to be zero percent (0.00%)equal to 0.15% or such other rate for purposes of this Agreement.

 

“Loan” means any loan made by a Lender pursuant to Section 2.02.

 

“Loan Request” means a letter in substantially the form of Exhibit A hereto executed and delivered by the Borrower to the Administrative Agent and the Lenders pursuant to Section 2.02(a).

 

“Lock-Box” means each locked postal box with respect to which a Collection Account Bank has executed an Account Control Agreement pursuant to which it has been granted exclusive access for the purpose of retrieving and processing payments made on the Receivables and which is listed on Schedule II (as such schedule may be modified from time to time in connection with the addition or removal of any Lock-Box in accordance with the terms hereof).

 

 

 

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“Loss Horizon Ratio” means the ratio (expressed as a percentage and rounded to the nearest 1/100 of 1%, with 5/1000th of 1% rounded upward) computed as of the last day of each Fiscal Month by dividing:

 

(a)the sum of (x) the Dollar Equivalent of the aggregate initial Outstanding Balance of all Pool Receivables (other than Unbilled Receivables) generated by the Originators during the six (6) most recent Fiscal Months plus (y) 65% of the aggregate initial Outstanding Balance of all Pool Receivables (other than Unbilled Receivables) generated by the Originators during the eighth most recent Fiscal Month; by

 

(b)the sum of (x) the Net Receivables Pool Balance as of such date plus (y) the Dollar Equivalent of the aggregate Outstanding Balance as of such date of all Receivables and portions of Receivables that do not constitute Eligible Receivables on such date solely due to the failure to satisfy clause (r) and/or clause (w) of the definition of “Eligible Receivable”.

 

“Loss Reserve Percentage” means, at any time of determination, the product (expressed as a percentage and rounded to the nearest 1/100th of 1%, with 5/1000th of 1% rounded upward) of (a) the Stress Factor, multiplied by (b) the highest average of the Default Ratios for any three (3) consecutive Fiscal Months during the twelve (12) most recent Fiscal Months, multiplied by

(c)the Loss Horizon Ratio.

 

“Management Investors” means the officers, directors, managers, employees and members of management of Parent, any Parent Company and/or any subsidiary of Parent.

 

“Majority Lenders” means Lenders representing more than 50% of the aggregate Commitments of all Lenders (or, if the Commitments have been terminated, Lenders representing more than 50% of the aggregate outstanding Capital held by all the Lenders).

 

“Material Adverse Effect” means relative to any Person (provided that if no particular Person is specified, “Material Adverse Effect” shall be deemed to be relative to the Performance Guarantor, the Servicer and the Originators, in the aggregate) with respect to any event or circumstance, a material adverse effect on any of the following:

“Net Receivables Pool Balance” means, at any time of determination: (a) the Dollar Equivalent of the aggregate Outstanding Balance of all Eligible Receivables then in the Receivables Pool, minus (b) the Excess Concentration.

 

“Ninth Amendment Closing Date” means September 25, 2020.

 

“Obligor” means, with respect to any Receivable, the Person obligated to make payments pursuant to the Contract relating to such Receivable.

 

“Obligor Percentage” means, at any time of determination, for each Obligor, a fraction, expressed as a percentage, (a) the numerator of which is the Dollar Equivalent of the aggregate Outstanding Balance of the Eligible Receivables of such Obligor less the amount (if any) then included in the calculation of the Excess Concentration with respect to such Obligor and (b) the denominator of which is the Dollar Equivalent of the aggregate Outstanding Balance of all Eligible Receivables at such time.

 

 

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“OECD Country” means a country which is a member of the Organization for Economic Cooperation and Development.

“OFAC” means the U.S. Department of Treasury’s Office of Foreign Assets Control. “Originator” and “Originators” have the meaning set forth in the Purchase and Sale Agreement, as the same may be modified from time to time by adding new Originators or removing Originators, in each case with the prior written consent of the Administrative Agent.

 

“Other Connection Taxes” means, with respect to any Affected Person, Taxes imposed as a result of a present or former connection between such Affected Person and the jurisdiction imposing such Tax (other than connections arising from such Affected Person having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction pursuant to or enforced any Transaction Document, or sold or assigned an interest in any Loan or Transaction Document).

 

“Other Taxes” means any and all present or future stamp or documentary Taxes or any other excise or property Taxes, charges or similar levies or fees arising from any payment made hereunder or from the execution, delivery, filing, recording or enforcement of, or otherwise in respect of, this Agreement, the other Transaction Documents and the other documents or agreements to be delivered hereunder or thereunder except any such Taxes that are Other Connection Taxes imposed with respect to an assignment.

 

“Overnight Bank Funding Rate” shall mean, for any day, the rate comprised of both overnight federal funds and overnight Eurocurrency borrowings by U.S.-managed banking offices of depository institutions, as such composite rate shall be determined by the Federal Reserve Bank of New York (“NYFRB”), as set forth on its public website from time to time, and as published on the next succeeding Business Day as the overnight bank funding rate by the NYFRB (or by such other recognized electronic source (such as Bloomberg) selected by the Administrative Agent for the purpose of displaying such rate); provided, that if such day is not a Business Day, the Overnight Bank Funding Rate for such day shall be such rate on the immediately preceding Business Day; provided, further, that if such rate shall at any time, for any reason, no longer exist, a comparable replacement rate determined by the Administrative Agent in consultation with the Borrower at such time (which determination shall be conclusive absent manifest error). If the Overnight Bank Funding Rate determined as above would be less than zero, then such rate shall be deemed to be zero. The rate of interest charged shall be adjusted as of each Business Day based on changes in the Overnight Bank Funding Rate without notice to the Borrower.

 

“Outstanding Balance” means, at any time of determination, with respect to any Receivable, the then outstanding principal balance thereof.

 

“Parent” means Syneos Health, Inc., a Delaware corporation.

 

“Parent Company” means any Person of which Parent is a direct or indirect Wholly-Owned Subsidiary.

 

“Parent Group” has the meaning set forth in Section 8.03(c). “Participant” has the meaning set forth in Section 14.03(d). “Participant Register” has the meaning set forth in Section 14.03(e). “PATRIOT Act” has the meaning set forth in Section 14.15.

 

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“PBGC” means the Pension Benefit Guaranty Corporation, or any successor thereto.

 

“Pension Plan” means a pension plan as defined in Section 3(2) of ERISA that is subject to Title IV of ERISA or Section 412 of the Code and with respect to which any Originator, the Borrower, the Servicer, the Parent, the Performance Guarantor or any of their respective ERISA Affiliates may have any liability, contingent or otherwise.

 

“Percentage” means, at any time of determination, with respect to any Lender, a fraction (expressed as a percentage), (a) the numerator of which is (i) prior to the termination of all Commitments hereunder, its Commitment at such time or (ii) if all Commitments hereunder have been terminated, the aggregate outstanding Capital of all Loans being funded by the Lenders at such time and (b) the denominator of which is (i) prior to the termination of all Commitments hereunder, the aggregate Commitments of all Lenders at such time or (ii) if all Commitments hereunder have been terminated, the Aggregate Capital at such time.

 

“Performance Guarantor” means Parent.

 

“Performance Guaranty” means the Performance Guaranty, dated as of the Closing Date, by the Performance Guarantor in favor of the Administrative Agent for the benefit of the Secured Parties, as such agreement may be amended, restated, supplemented or otherwise modified from time to time.

 

“Permitted Adverse Claims” means (a) liens created or arising in favor of the Administrative Agent for the benefit of the Credit Parties pursuant to the Transaction “Scheduled Termination Date” means September 30, 2021.October 3, 2022.1

 

“SEC” means the U.S. Securities and Exchange Commission or any governmental agencies substituted therefor.

 

“Secured Parties” means each Credit Party, each Borrower Indemnified Party and each Affected Person.

 

“Servicer” has the meaning set forth in the preamble to this Agreement.

 

“Servicer’s Account” means the deposit account with an account number ending in 4824 maintained by the Servicer or its Affiliate at Bank of America, N.A.

 

“Servicer Indemnified Amounts” has the meaning set forth in Section 13.02(a).

“Servicer Indemnified Party” has the meaning set forth in Section 13.02(a).

“Servicing Fee” means the fee referred to in Section 9.06(a) of this Agreement.

“Servicing Fee Rate” means the rate referred to in Section 9.06(a) of this Agreement.

1 PNC to confirm.

 

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“Settlement Date” means with respect to any Portion of Capital for any Interest Period or any Interest or Fees, (i) prior to the Termination Date and so long as no Event of Default has occurred and is continuing, the Monthly Settlement Date and (ii) on and after the Termination Date or if an Event of Default has occurred and is continuing, each day selected from time to time by the Administrative Agent (with the consent or at the direction of the Majority Lenders) (it being understood that the Administrative Agent (with the consent or at the direction of the Majority Lenders) may select such Settlement Date to occur as frequently as daily), or, in the absence of such selection, the Monthly Settlement Date.

 

“Settlement Item” means (i) each check or other payment order drawn on or payable against any Linked Account, which any Collection Account Bank takes for deposit or value, cashes or exchanges for a cashier’s check or official check in the ordinary course of business, and which is presented for settlement against any Collection Account, (ii) each check or other payment order drawn on or payable against any Collection Account, which any Collection Account Bank takes for deposit or value, assures payment pursuant to a banker’s acceptance, cashes or exchanges for a cashier’s check or official check in the ordinary course of business, (iii) each ACH credit entry initiated by any Collection Account Bank, as originating depository financial institution, on behalf of Borrower, as originator and (iv) any other payment order drawn on or payable against any Collection Account.

 

“Settlement Item Amounts” means the face amount of each Settlement Item.

“Sixth Amendment Closing Date” means September 30, 2019.

“Solvent” means, with respect to any Person and as of any particular date, (i) the present fair market value (or present fair saleable value) of the assets of such Person is not less than the total amount required to pay the probable liabilities of such Person on its total existing debts and liabilities (including contingent liabilities) as they become absolute and matured, (ii) such Person is able to realize upon its assets and pay its debts and other liabilities, contingent obligations and commitments as they mature and become due in the normal course of business, (iii) such Person is not incurring debts or liabilities beyond its ability to pay such debts and liabilities as they mature and (iv) such Person is not engaged in any business or transaction, and is not about to engage in any business or transaction, for which its property would constitute unreasonably small capital after giving due consideration to the prevailing practice in the industry in which such Person is engaged.

“Special Concentration Limit” has the meaning set forth in the definition of Concentration Percentage.

 

“Special Obligor” has the meaning set forth in the definition of Concentration Percentage.

 

“Sponsors” means, collectively, Advent, THL and Liberty Lane, their respective controlled Affiliates and funds managed or advised by any of them or any of their respective controlled Affiliates (in each case, other than any portfolio company).

 

 

 

 

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“Spot Rate” means, on any day, (i) for the purpose of exchanging Dollars to any other currency, or any other currency to Dollars in connection with applying funds to pay amounts owing hereunder or under the Transaction Documents in accordance with this Agreement, in each case other than in circumstances described in Section 4.02(e)(i), the actual rate used by the Administrative Agent’s principal foreign exchange trading office for the purchase by the Administrative Agent of the applicable currency with the other currency through its principal foreign exchange trading office, and (ii) for the purposes of making any other calculation hereunder, including for purposes of determining the Dollar Equivalent of any amount denominated in any other currency or with respect to the determination of the currency equivalent of any amount denominated in Dollars, in each case, the foreign exchange rate determined pursuant to the Servicer’s accounting systems from time to time, as consistently applied.

 

“Stress Factor” means, at any time of determination, (i) if a Ratings Event has occurred and is continuing, 2.50 and (ii) otherwise, 2.00.

 

“Structuring Agent” means PNC Capital Markets LLC, a Pennsylvania limited liability company.

 

“Sub-Servicer” has the meaning set forth in Section 9.01(d). “Subject Obligor” means Takeda Pharmaceutical Company Ltd.

“Subject Obligor Delinquency Trigger” shall have occurred as of any date of determination if 30% or more of the aggregate Outstanding Balance of all Pool Receivables, the Obligor of which is the Subject Obligor or any Affiliate thereof, constitute Delinquent Receivables as of such date.

 

“Subsidiary” means, as to any Person, a corporation, partnership, limited liability company or other entity of which shares of stock of each class or other interests having ordinary voting power (other than stock or other interests having such power only by reason of the happening of a contingency) to elect a majority of the Board of Directors or other managers of such entity are at the time owned, or management of which is otherwise controlled: (a) by such Person, (b) by one or more Subsidiaries of such Person or (c) by such Person and one or more Subsidiaries of such Person.

 

“Syneos Health” has the meaning specified in the preamble to this Agreement.

 

“Syneos Party” means the Borrower, the Servicer, the Performance Guarantor and each Originator.

 

“Taxes” means any and all present or future taxes, levies, imposts, duties, deductions, charges, withholdings (including backup withholding), assessments, fees or other charges imposed by any Governmental Authority and all interest, penalties, additions to tax and any similar liabilities with respect thereto.

 

“Termination Date” means the earliest to occur of (a) the Scheduled Termination Date, (b) the date on which the “Termination Date” is declared or deemed to have occurred under Section 10.01, (c) the occurrence of a Purchase and Sale Termination Event under the Purchase and Sale Agreement, (d) the date selected by the Borrower on which all Commitments have been reduced to zero pursuant to Section 2.02(e) or (e) the date (if any) on which the Borrower, the Servicer or any Originator delivers to the Administrative Agent a written notice that the Borrower is unable to pay the “Purchase Price” (as defined in the Purchase and Sale Agreement) for Receivables and Related Rights pursuant to Section 3.2 of the Purchase and Sale Agreement.

 

 

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“Third Amendment Closing Date” means October 25, 2018.

 

“Third Amendment Commencement Date” means the date elected by the Borrower as the “Third Amendment Commencement Date” in a written notice provided by the Borrower (or the Servicer on its behalf) to the Administrative Agent; provided, that such date may not occur more than 180 days following the Third Amendment Closing Date and any election following such date shall be null and void; provided, further, that neither the Borrower nor the Servicer on its behalf shall provide any notice of the election of the “Third Amendment Commencement Date” until such time as the Borrower (or the Servicer on its behalf) has provided such historical Receivables performance data as may be reasonably requested by the Administrative Agent on or prior to the Third Amendment Closing Date.

 

“THL” means Thomas H. Lee Partners, L.P. and its Affiliates. “Threshold Amount” means $150,000,000.

“Total Reserves” means, at any time of determination, an amount equal to the sum of (a) the product of (i) the sum of: (a) the Yield Reserve Percentage, plus (b) the greater of (I) the sum of the Concentration Reserve Percentage, plus the Minimum Dilution Reserve Percentage and (II) the sum of the Loss Reserve Percentage, plus the Dilution Reserve Percentage, times (ii) the Net Receivables Pool Balance at such time, plus (b) the Currency Reserve Amount.

“Tranche Period” means, with respect to any LIBOR Loan, a period of one, two, three or six months selected by the Borrower pursuant to Section 2.05. Each Tranche Period shall commence on a Monthly Settlement Date and end on (but not including) the Monthly Settlement Date occurring one, two, three or six calendar months thereafter, as selected by the Borrower pursuant to Section 2.05; provided, however, that if the date any Loan made pursuant to Section 2.01 is not a Monthly Settlement Date, the initial Tranche Period for such Loan shall commence on the date such Loan is made pursuant to Section 2.01 and end on the next Monthly Settlement Date occurring after the day in the applicable succeeding calendar month which corresponds numerically to the beginning day of such initial Tranche Period; provided, further, that if any Tranche Period would end after the Termination Date, such Tranche Period (including a period of one day) shall end on the Termination Date.

 

“Transaction Documents” means this Agreement, the Purchase and Sale Agreement, the Account Control Agreements, the Fee Letter, each Intercompany Loan Agreement, the Performance Guaranty, the Excluded Receivable Letter Agreement and all other certificates, instruments, UCC financing statements, reports, notices, agreements and documents executed or delivered under or in connection with this Agreement, in each case as the same may be amended, supplemented or otherwise modified from time to time in accordance with this Agreement.

 

“UCC” means the Uniform Commercial Code as from time to time in effect in the applicable jurisdiction.

 

“Unbilled Receivable” means, at any time, any Receivable as to which the invoice or bill with respect thereto has not yet been sent to the Obligor thereof.

 

“Unmatured Event of Default” means an event that but for notice or lapse of time or both would constitute an Event of Default.

 

 

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“U.S. Obligor” means an Obligor that is a corporation or other business organization and is organized under the laws of the United States of America (or of a United States of America territory, district, state, commonwealth, or possession, including, without limitation, Puerto Rico and the U.S. Virgin Islands) or any political subdivision thereof.

“U.S. Tax Compliance Certificate” has the meaning set forth in Section 5.03(f)(ii)(B)(3).

“Volcker Rule” means Section 13 of the U.S. Bank Holding Company Act of 1956, as amended, and the applicable rules and regulations thereunder.

 

“Wholly-Owned Subsidiary” of any Person means a subsidiary of such Person, 100% of the Capital Stock of which (other than directors’ qualifying shares or shares required by Requirements of Law to be owned by a resident of the relevant jurisdiction) shall be owned by such Person or by one or more Wholly-Owned Subsidiaries of such Person.

 

“Withdrawal Liability” means liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA.

 

“Yield Reserve Percentage” means at any time of determination:

(c)All computations of interest under subsection (b) above and all computations of Interest, Fees and other amounts hereunder shall be made on the basis of a year of 360 days (or, in the case of amounts determined by reference to the Base Rate, 365 or 366 days, as applicable) for the actual number of days (including the first but excluding the last day) elapsed. Whenever any payment or deposit to be made hereunder shall be due on a day other than a Business Day, such payment or deposit shall be made on the next succeeding Business Day and such extension of time shall be included in the computation of such payment or deposit.

 

(d)Application of Collections by Currency. In making the distributions and payments out of Collections hereunder and in setting aside and reserving Collections for future distributions and payments hereunder (including distributions and payments in respect of Releases, Principal, Interest and fees), the Servicer shall, to the extent Collections are available therefor and subject to any applicable priorities of payment set forth herein, (i) first, apply Collections received in a particular currency to amounts distributable or payable in such currency, and (ii) second, to the extent that Collections received in a particular currency are not sufficient to distribute, pay, set aside or reserve for amounts distributable or payable in such currency, apply any excess Collections received in another currency to such amounts.

 

(e)Conversion of Currencies.

 

(i)If on any Settlement Date or any other day a payment is due and payable hereunder it is necessary for funds in one currency to be converted into any other currency in order to make any payment required to be made hereunder, the Borrower shall (or shall cause the applicable Servicer to) solicit offer quotations from at least two (2) foreign exchange dealers reasonably acceptable to the Administrative Agent for effecting such exchange and

 

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shall select the quotation which provides for the best exchange rate. The Borrower or the applicable Servicer on its behalf shall effect such exchange on such Settlement Date or other day, as the case may be.

 

(ii)On any day when any computation or calculation hereunder requires the aggregation of amounts denominated in more than one currency, all amounts that are denominated in any currency shall be deemed to be the Dollar Equivalent thereof on such day for purposes of such computation or calculation.

 

ARTICLE V

 

INCREASED COSTS; FUNDING LOSSES; TAXES; ILLEGALITY AND SECURITY INTEREST

 

SECTION 5.01. Increased Costs.

 

(a)Increased Costs Generally. If any Change in Law shall:

 

(i)impose, modify or deem applicable any reserve, special deposit, liquidity, compulsory loan, insurance charge or similar requirement against assets of, deposits with or for the account of, or credit extended or participated in by, any Affected Person; Immediately upon the occurrence of the Final Payout Date, the Collateral shall be automatically released from the lien created hereby, and this Agreement and all obligations (other than those expressly stated to survive such termination) of the Administrative Agent, the Lenders and the other Credit Parties hereunder shall terminate, all without delivery of any instrument or performance of any act by any party, and all rights to the Collateral shall revert to the Borrower; provided, however, that promptly following written request therefor by the Borrower delivered to the Administrative Agent following any such termination, and at the expense of the Borrower, the Administrative Agent shall execute and deliver to the Borrower UCC-3 termination statements and such other documents as the Borrower shall reasonably request to evidence such termination.

 

SECTION 5.06. Successor Adjusted LIBOR or LMIR

 

(a)If the Administrative Agent determines (which determination shall be final and conclusive, absent manifest error) that either (i) (A) the circumstances set forth in Section 5.04 have arisen and are unlikely to be temporary, or (B) the circumstances set forth in Section 5.04 have not arisen but the applicable supervisor or administrator (if any) of Adjusted LIBOR or LMIR or a Governmental Authority having jurisdiction over the Administrative Agent has made  a public statement identifying the specific date after which Adjusted LIBOR or LMIR shall no longer be used for determining interest rates for loans (either such date, a “LIBOR Termination Date”), or (ii) a rate other than Adjusted LIBOR or LMIR, as applicable, has become a widely recognized benchmark rate for newly originated loans in Dollars in the U.S. market, then the Administrative Agent may (in consultation with the Borrower) choose a replacement index for Adjusted LIBOR or LMIR, as applicable, and make adjustments to applicable margins  and related amendments to this Agreement

 

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as referred to below such that, to the extent practicable, the all-in Interest based on the replacement index will be substantially equivalent to the all-in Interest based on Adjusted LIBOR or LMIR, as applicable, in effect prior to its replacement.  

(a)(b)         TheBenchmark  Replacement.         Notwithstanding anything to the contrary herein or in any other Transaction Document, upon the occurrence of a Benchmark Transition Event or an Early Opt-in Event has occurred, the Administrative Agent and the Borrower shall enter into an amendment to this Agreement to reflect the replacement index, the adjusted margins and such other related amendments as may be appropriate, in the discretion of the Administrative Agent, for the implementation and administration of the replacement index-based rate. Notwithstanding anything to the contrary in this Agreement or the other Transaction Documents (including, without limitation, Section 14.01), such amendment shall become effective without any further action or consent of any other party to this Agreement at 5:00 p.m. New York City time on the tenth (10th) Business Day after the date a draft of the amendment is provided to the Lenders, unless the Administrative Agent receives, on or before such tenth (10th) Business Day, a written notice from the Majority Lenders stating that such Majority Lenders object to such amendment. may amend this Agreement to replace Adjusted LIBOR or LMIR with a Benchmark Replacement; and any such amendment will become effective at 5:00 p.m. New York City time on the fifth (5th) Business Day after the Administrative Agent has provided such proposed amendment to all Lenders, so long as the Administrative Agent has not received, by such time, written notice of objection to such amendment from Lenders comprising the Majority Lenders. Until the Benchmark Replacement  is effective, each advance, conversion and renewal of a Loan bearing interest by reference to Adjusted LIBOR or LMIR will continue to bear interest with reference to Adjusted LIBOR or LMIR, as applicable; provided, however, that during a Benchmark Unavailability Period (i) any pending selection of, conversion to or renewal of a Loan bearing interest by reference to Adjusted LIBOR or LMIR, as applicable, that has not yet gone into effect may be revoked by the Borrower and if not so revoked, shall be deemed to be a selection of, conversion to or renewal of, (A)  solely to the extent that PNC is a lender under the Credit Agreement at such time, the Credit Agreement Replacement Rate, if any, and, (B) otherwise, the Base Rate, in each case, with respect to such Loan, and such Loan shall bear interest by reference to the Credit Agreement Replacement Rate or the Base Rate, as applicable (rather than by reference to Adjusted LIBOR or LMIR, as applicable), and (ii) all outstanding Loans bearing interest by reference to Adjusted LIBOR or LMIR, as applicable, shall automatically be converted to bear interest by reference to, (A) solely to the extent that PNC is a lender under the Credit Agreement at such time, the Credit Agreement Replacement Rate, if any, and, (B) otherwise, the Base Rate at the expiration of the existing Interest Period (or sooner, if Administrative Agent cannot continue to lawfully maintain such affected Loan bearing interest by reference to Adjusted LIBOR or LMIR, as applicable).

(c)Selection of the replacement index, adjustments to the applicable margins, and amendments to this Agreement (i) will be determined with due consideration to the then-current market practices for determining and implementing a rate of interest for newly originated loans in the United States and loans converted from a rate based on Adjusted LIBOR or LMIR to a replacement index-based rate, and (ii) may also reflect adjustments to account for (A) the effects of the transition from Adjusted LIBOR or LMIR, as applicable, to the replacement index and (B) yield- or risk-based differences between Adjusted LIBOR or LMIR, as applicable, and the replacement index.

 

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(d)Until an amendment reflecting a new replacement index in accordance with this Section 5.06 is effective, each Portion of Capital accruing Interest with reference to Adjusted LIBOR or LMIR will continue to bear interest with reference to Adjusted LIBOR or LMIR, as applicable; provided however, that if the Administrative Agent determines (which determination shall be final and conclusive, absent manifest error) that a LIBOR Termination Date has  occurred, then following the LIBOR Termination Date, each Portion of Capital that would otherwise accrue Interest with reference to Adjusted LIBOR or LMIR shall automatically begin accruing Interest with reference to the Base Rate until such time as an amendment reflecting a replacement index and related matters as described above is implemented.  

 

(e)Notwithstanding anything to the contrary contained herein, if at any time the replacement index is less than zero, at such times, such index shall be deemed to be zero for purposes of this Agreement

 

(b)Benchmark Replacement Conforming Changes. In connection with the implementation of a Benchmark Replacement, the Administrative Agent will have the right to make Benchmark Replacement Conforming Changes from time to time and, notwithstanding anything to the contrary herein or in any other Transaction Document, any amendments implementing such Benchmark Replacement Conforming Changes will become effective without any further action or consent of any other party to this Agreement.

(c)Notices; Standards for Decisions and Determinations. The Administrative Agent will promptly notify the Borrower and the Lenders of (i) the implementation of any Benchmark Replacement, (ii) the effectiveness of any Benchmark Replacement Conforming Changes and (iii) the commencement of any Benchmark Unavailability Period. Any determination, decision or election that may be made by the Administrative Agent or the Lenders pursuant to this Section 5.06 including any determination with respect to a tenor, rate or adjustment or of the occurrence or non-occurrence of an event, circumstance or date and any decision to take or refrain from taking any action, will be conclusive and binding absent manifest error and may be made in its or their sole discretion and without consent from any other party hereto, except, in each case, as expressly required pursuant to this Section 5.06.

 

(d)Certain Defined Terms. As used in this Section 5.06:

 

(i)“Benchmark Replacement” means the sum of: (a) the alternate benchmark rate that has been selected by the Administrative Agent and the Borrower giving due consideration to (i) any selection or recommendation of a replacement rate or the mechanism for determining such a rate by the Relevant Governmental Body or (ii) any evolving or then-prevailing market convention for determining a rate of interest as a replacement to Adjusted LIBOR or LMIR, as applicable, for Dollar-denominated credit facilities and (b) the Benchmark Replacement Adjustment; provided that, if at any time the Benchmark Replacement as so determined would be less than the Benchmark Replacement Floor, the Benchmark Replacement will be deemed to be the Benchmark Replacement Floor for the purposes of this Agreement.

 

 

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(ii)“Benchmark Replacement Adjustment” means, with respect to any replacement of Adjusted LIBOR or LMIR, as applicable, with an alternate benchmark  rate for each applicable Interest Period, the spread adjustment, or method for calculating or determining such spread adjustment, (which may be a positive or negative value or zero) that has been selected by the Administrative Agent and the Borrower giving due consideration to (a) any selection or recommendation of a spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of Adjusted LIBOR or LMIR, as applicable, with the applicable Benchmark Replacement (excluding such spread adjustment) by the Relevant Governmental Body or (b) any evolving or then-prevailing market convention for determining a spread adjustment, or method for calculating or determining such spread adjustment, for such replacement of Adjusted LIBOR or LMIR, as applicable, for Dollar-denominated credit facilities at such time.

(iii)“Benchmark Replacement Conforming Changes” means, with respect to any Benchmark Replacement, any technical, administrative or operational changes (including changes to the definition of “Base Rate,” the definition of “Interest Period,” timing and frequency of determining rates and making payments of interest and other administrative matters) that the Administrative Agent decides may be appropriate to reflect the adoption and implementation of such Benchmark Replacement and to permit the administration thereof by the Administrative Agent in a manner substantially consistent with market practice (or, if the Administrative Agent decides that adoption of any portion of such market practice is not administratively feasible or if the Administrative Agent determines that no market practice for the administration of the Benchmark Replacement exists, in such other manner of administration as the Administrative Agent decides is reasonably necessary in connection with the administration of this Agreement).

 

(iv)Benchmark Replacement Date” means the earlier to occur of the following events with respect to Adjusted LIBOR or LMIR:

 

(A)in the case of clause (A) or (B) of the definition of “Benchmark Transition Event,” the later of (x) the date of the public statement or publication  of information referenced therein and (y) the date on which the administrator of the London Interbank Offered Rate for interbank deposits in Dollars (“USD LIBOR”) permanently or indefinitely ceases to provide USD LIBOR; or

 

(B)in the case of clause (C) of the definition of “Benchmark  Transition Event,” the date of the public statement or publication of information referenced therein.

 

(v)“Benchmark Replacement Floor” means the minimum rate of interest, if any, specified for Adjusted LIBOR or LMIR, as applicable, or, if no minimum rate of interest is specified, zero.

 

 

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(vi)“Benchmark Transition Event” means the occurrence of one or more of the following events with respect to Adjusted LIBOR or LMIR, as applicable:

 

(A)a public statement or publication of information by or on behalf of the administrator of USD LIBOR announcing that such administrator has ceased  or will cease to provide USD LIBOR, permanently or indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide USD LIBOR;

 

(B)a public statement or publication of information by  a Governmental Authority having jurisdiction over the Administrative Agent, the regulatory supervisor for the administrator of USD LIBOR, the U.S. Federal Reserve System, an insolvency official with jurisdiction over the administrator for USD LIBOR, a resolution authority with jurisdiction over the administrator for USD LIBOR or a court or an entity with similar insolvency or resolution authority over the administrator for USD LIBOR, which states that  the administrator of USD LIBOR has ceased or will cease to provide USD LIBOR permanently or indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide USD LIBOR; or

 

(C)a public statement or publication of information by the regulatory supervisor for the administrator of USD LIBOR or a Governmental Authority having jurisdiction over the Administrative Agent announcing that USD LIBOR is no longer representative.

 

(vii)“Benchmark Unavailability Period” means, if a Benchmark Transition Event and its related Benchmark Replacement Date have occurred with respect to Adjusted LIBOR or LMIR, as applicable, and solely to the extent that Adjusted LIBOR or LMIR, as applicable, (as the case may be) has not been replaced with a Benchmark Replacement, the period (x) beginning at the time that such Benchmark Replacement  Date has occurred if, at such time, no Benchmark Replacement has replaced Adjusted LIBOR or LMIR, as applicable, (as the case may be) for all purposes hereunder or under any Transaction Document in accordance with this Section 5.06 and (y) ending at the  time that a Benchmark Replacement has replaced Adjusted LIBOR or LMIR, as applicable, (as the case may be) for all purposes hereunder pursuant or under any Transaction Document to this Section 5.06.

 

(viii)“Early Opt-in Event” means a determination by the Administrative Agent that Dollar-denominated credit facilities being executed at such time, or that include language similar to that contained in this Section 5.06, are being executed or amended, as applicable, to incorporate or adopt a new benchmark interest rate to replace USD LIBOR.

 

(ix)“Relevant Governmental Body” means the Federal Reserve Board and/or the Federal Reserve Bank of New York, or a committee officially endorsed or convened by the Federal Reserve Board and/or the Federal Reserve Bank of New York or any successor thereto.

 

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ARTICLE VI

 

CONDITIONS TO EFFECTIVENESS AND CREDIT EXTENSIONS

 

SECTION 6.01. Conditions Precedent to Effectiveness and the Initial Credit Extension.

(a)This Agreement shall become effective as of the Closing Date when (a) the Administrative Agent shall have received each of the documents, agreements (in fully executed form), opinions of counsel, lien search results, UCC filings, certificates and other deliverables listed on the closing memorandum attached as Exhibit I hereto, in each case, in form and substance acceptable to the Administrative Agent and (b) all fees and expenses payable by the Borrower on the Closing Date to the Credit Parties have been paid in full in accordance with the terms of the Transaction Documents.

 

(b)In addition to the conditions set forth in Section 6.02 below, the initial Credit Extension under this Agreement shall be subject to the conditions precedent that:

 

(i)the conditions in Section 6.01(a) have been satisfied;

 

(ii)the Administrative Agent shall have received such historical receivables data with respect to the Originators, as reasonably requested by the Administrative Agent and in such format as is acceptable to the Administrative Agent;

 

(iii)the Administrative Agent shall have received satisfactory results of an audit or field exam (performed by representatives of the Administrative Agent) of the Servicer’s and each Originator’s collection, operating and reporting systems, the Credit and Collection Policy and historical receivables data;

(vii)Termination Event. The occurrence of a Purchase and Sale Termination Event under the Purchase and Sale Agreement.

 

(viii)Material Adverse Effect. Promptly after the occurrence thereof, notice of any Borrower Material Adverse Effect or Material Adverse Effect.

 

(ix)Intercompany Loan Ratio. That the Intercompany Loan Ratio equals or exceeds 15%.

 

(e)Conduct of Business. The Borrower will carry on and conduct its business in substantially the same manner and in substantially the same fields of enterprise as it is presently conducted.

 

(f)Compliance with Laws. The Borrower will comply with all Applicable Laws to which it may be subject if the failure to comply could reasonably be expected to have a Borrower Material Adverse Effect.

 

(g)Furnishing of Information and Inspection of Receivables. The Borrower will furnish or cause to be furnished to the Administrative Agent and each Lender from time to time such information with respect to the Pool Receivables and the other Collateral as the Administrative Agent

 

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or any Lender may reasonably request. The Borrower will, at the Borrower’s expense, during regular business hours with reasonable prior written notice (i) permit the Administrative Agent and each Lender or their respective agents or representatives to (A) examine and make copies of and abstracts from all books and records relating to the Pool Receivables or other Collateral, (B) visit the offices and properties of the Borrower for the purpose of examining such books and records and (C) discuss matters relating to the Pool Receivables, the other Collateral or the Borrower’s performance hereunder or under the other Transaction Documents to which it is a party with any of the officers, directors, and/or independent public accountants of the Borrower having knowledge of such matters and (ii) without limiting the provisions of clause (i) above, during regular business hours, at the Borrower’s expense, upon reasonable prior written notice from the Administrative Agent, permit certified public accountants or other auditors acceptable to the Administrative Agent to conduct a review of its books and records with respect to such Pool Receivables and other Collateral; provided, that the Borrower shall be required to reimburse the Administrative Agent for only one (1) combined review of the Servicer, the Borrower and the Originators pursuant to Section 8.02(e) and the Borrower pursuant to clause (ii) above in any twelve-month period, unless an Event of Default has occurred and is continuing.

 

(h)Payments  on  Receivables, Collection Accounts. The Borrower (or the Servicer on its behalf) will, and will cause each Originator to, at all times, instruct all Obligors to deliver payments on the Pool Receivables to a Collection Account or a Lock-Box, except with respect to payments on Pool Receivables denominated in an Alternative Currency or any other currency other than Dollars. The Borrower (or the Servicer on its behalf) will, and will cause  each Originator to, at all times, maintain such books and records necessary to identify Collections received from time to time on Pool Receivables and to segregate such Collections from other property of the Servicer and the Originators. If any payments on the Pool Receivables or other Collections are received by the Borrower, the Servicer or an Originator, it shall hold such

(dd)Other Additional Information. The Borrower will provide to the Administrative Agent and the Lenders such information and documentation as may reasonably be requested by the Administrative Agent or any Lender from time to time for purposes of compliance by the Administrative Agent or such Lender with applicable laws (including without limitation the PATRIOT Act and other “know your customer” and anti-money laundering rules and regulations), and any policy or procedure implemented by the Administrative Agent or such Lender to comply therewith.

 

(ee)Intercompany   Loan Ratio. The Borrower shall not permit the Intercompany Loan Ratio to exceed 15% at any time.

Final Payout Date:

SECTION 8.02.Covenants of the Servicer. At all times from the Closing Date until the

 

(a)Existence. The Servicer shall keep in full force and effect its existence and rights as a corporation or other entity under the laws of the State of Delaware. The Servicer shall obtain and preserve its qualification to do business in each jurisdiction in which the conduct of its business

 

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or the servicing of the Pool Receivables as required by this Agreement requires such qualification, except where the failure to do so could not reasonably be expected to have a Material Adverse Effect.

 

(b)Financial Reporting. The Servicer will maintain a system of accounting established and administered in accordance with GAAP, and the Servicer shall furnish to the Administrative Agent and each Lender:

 

(i)Compliance Certificates. (a) A compliance certificate promptly upon completion of the annual report of Parent and in no event later than 90 days after the close of Parent’s fiscal year, in form and substance substantially similar to Exhibit H signed by a Financial Officer of the Servicer stating that no Event of Default or Unmatured Event of Default has occurred and is continuing, or if any Event of Default or Unmatured Event of Default has occurred and is continuing, stating the nature and status thereof and (b) within 45 days after the close of each fiscal quarter of Parent, a compliance certificate in form and substance substantially similar to Exhibit H signed by a Financial Officer of the Servicer stating that no Event of Default or Unmatured Event of Default has occurred and is continuing, or if any Event of Default or Unmatured Event of Default has occurred and is continuing, stating the nature and status thereof.

 

(ii)Information Packages and Interim Reports. Commencing on the Commencement Date, as soon as available and in any event (a) not later than two (2) Business Days prior to each Settlement Date, an Information Package as of the most recently completed Fiscal Month and (b) if a Ratings Event has occurred and is continuing, upon prior written notice from the Administrative Agent, the Servicer shall furnish or cause to be furnished to the Administrative Agent and each Lender on the second Business Day of each calendar week, an Interim Report with respect to the Pool Receivables with data as of the close of business on the last day of the immediately preceding calendar week. such notice describing the same, and if applicable, the steps being taken by the Person(s) affected with respect thereto:

 

(i)Notice of Events of Default or Unmatured Events of Default. A statement of a Financial Officer of the Servicer setting forth details of any Event of Default or Unmatured Event of Default that has occurred and is continuing and the action which the Servicer proposes to take with respect thereto.

 

(ii)Representations and Warranties. The failure of any representation or warranty made or deemed made by the Servicer under this Agreement or any other Transaction Document to be true and correct in any material respect when made.

 

(iii)Litigation.   The institution of any litigation, arbitration proceeding or governmental proceeding which could reasonably be expected to have a Material Adverse Effect or a Borrower Material Adverse Effect.

 

(iv)Adverse Claim. (A) Any Person shall obtain an Adverse Claim (other than a Permitted Adverse Claim) upon the Collateral or any portion thereof, (B) any Person other than the Borrower, the Servicer or the Administrative Agent shall obtain any rights or direct

 

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any action with respect to any Collection Account (or related Lock-Box) or (C) any Obligor shall receive any change in payment instructions with respect to Pool Receivable(s) from a Person other than the Servicer or the Administrative Agent.

 

(v)Name Changes. At least thirty (30) days before any change in any Originator’s or the Borrower’s name, jurisdiction of organization or any other change requiring the amendment of UCC financing statements.

 

(vi)Change in Accountants or Accounting Policy. Any change in (i) the external accountants of the Borrower, the Servicer, any Originator, Performance Guarantor or the Parent, (ii) any accounting policy of the Borrower or (iii) any material accounting policy of any Originator that is relevant to the transactions contemplated by this Agreement or any other Transaction Document (it being understood that any change to the manner in which any Originator accounts for the Pool Receivables shall be deemed “material” for such purpose).

 

(vii)Termination Event.The occurrence of a Purchase and Sale Termination Event under the Purchase and Sale Agreement.

 

(viii)Material Adverse Effect. Promptly after the occurrence thereof, notice of any Borrower Material Adverse Effect or Material Adverse Effect.

 

(ix)Intercompany Loan Ratio. That the Intercompany Loan Ratio equals or exceeds 15%.

 

(c)Conduct of Business. The Servicer will carry on and conduct its business in substantially the same manner and in substantially the same fields of enterprise as it is presently conducted or fields complimentary or ancillary thereto.

(d)Compliance with Laws. The Servicer will comply with all Applicable Laws to which it may be subject if the failure to comply could reasonably be expected to have a Material Adverse Effect.

(e)Furnishing of Information and Inspection of Receivables. The Servicer will furnish or cause to be furnished to the Administrative Agent and each Lender from time to time such information with respect to the Pool Receivables and the other Collateral as the Administrative Agent or any Lender may reasonably request. The Servicer will, at the Servicer’s expense, during regular business hours with reasonable prior written notice, (i) permit the Administrative Agent and each Lender or their respective agents or representatives to (A) examine and make copies of and abstracts from all books and records relating to the Pool Receivables or other Collateral, (B) visit the offices and properties of the Servicer for the purpose of examining such books and records and (C) discuss matters relating to the Pool Receivables, the other Collateral or the Servicer’s performance hereunder or under the other Transaction Documents to which it is a party with any of the officers, directors, employees or independent public accountants of the Servicer (provided that representatives of the Servicer are present during such discussions) having knowledge of such matters and (ii) without limiting the provisions of clause (i) above, during regular business hours, at the Servicer’s expense, upon reasonable prior written notice from the Administrative Agent, permit certified public

 

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accountants or other auditors acceptable to the Administrative Agent to conduct a review of its books and records with respect to the Pool Receivables and other Collateral; provided, that the Servicer shall be required to reimburse the Administrative Agent for only one (1) combined review of the Borrower pursuant to Section 8.01(g) and the Servicer, the Borrower and the Originators pursuant to clause (ii) above in any twelve-month period unless an Event of Default has occurred and is continuing.

(f)Payments on Receivables, Collection Accounts. The Servicer will at all times, instruct all Obligors to deliver payments on the Pool Receivables to a Collection Account or a Lock-Box, except with respect to payments on Pool Receivables denominated in an Alternative Currency or any other currency other than Dollars. The Servicer will, at all times, maintain such books and records necessary to identify Collections received from time to time on Pool Receivables and to segregate such Collections from other property of the Servicer and the Originators. If any payments on the Pool Receivables or other Collections are received by the Borrower, the Servicer or an Originator, it shall hold such payments in trust for the benefit of the Administrative Agent, the Lenders and the other Secured Parties and promptly (but in any event within one (1) Business Day after becoming aware of such receipt) remit such funds into a Collection Account. The Servicer shall instruct (i) all obligors on Excluded Receivables and (ii) all payors of amounts owing to the Originators or their Affiliates (which do not constitute Pool Receivables or other Collateral), in each case, to remit payments with respect thereto to any bank account or other location that does not constitute a Collection Account or a Lock-Box. The Servicer shall use commercially reasonable efforts to ensure that no funds other than Collections on Pool Receivables and other Collateral are deposited into any Collection Account. If  such funds are nevertheless deposited into any Collection Account, the Servicer will within two (2) Business Days identify and transfer such funds to the appropriate Person entitled to such funds. The Servicer will not, and will not permit the Borrower, any Originator or any other Person to commingle Collections or other funds to which the Administrative Agent, any Lender or any other Secured Party is entitled, with any other funds. The Servicer shall only add a Collection Insolvency Proceeding shall be instituted by or against the Borrower, any Originator, the Performance Guarantor or the Servicer and, in the case of any such proceeding instituted against such Person (but not instituted by such Person), either such proceeding shall remain undismissed or unstayed for a period of sixty (60) consecutive days, or any of the actions sought in such proceeding (including the entry of an order for relief against, or the appointment of a receiver, trustee, custodian or other similar official for, it or for any substantial part of its property) shall occur; or the Borrower, any Originator, the Performance Guarantor or the Servicer shall take any corporate or organizational action to authorize any of the actions set forth above in this paragraph;

 

(f)on or after the Commencement Date, (i) the average for three consecutive Fiscal Months of: (A) the Default Ratio shall exceed 3.5%, (B) the Delinquency Ratio shall exceed 7.58.5% or (C) the Dilution Ratio shall exceed 17.5% or (ii) the Days’ Sales Outstanding shall exceed 80 days;

 

(g)a Change in Control shall occur;

(h)a Borrowing Base Deficit shall occur, and shall not have been cured within two (2) Business Days;

 

 

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(i)(i) the Borrower shall fail to pay any principal of or premium or interest on any of its Debt when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), and such failure shall continue after the applicable grace period, if any, specified in the agreement, mortgage, indenture or instrument relating to such Debt (whether or not such failure shall have been waived under the related agreement); (ii) any Originator, the Performance Guarantor or the Servicer, or any of their respective Subsidiaries, individually or in the aggregate, shall fail to pay any principal of or premium or interest on (x) any Debt under the Credit Agreement or (y) any of its other Debt that is outstanding in a principal amount of at least the Threshold Amount in the aggregate when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), and such failure shall continue after the applicable grace period (not to exceed 30 days), if any, specified in the Credit Agreement or such agreement, mortgage, indenture or instrument relating to such Debt (whether or not such failure shall have been waived under the related agreement); (iii) any other event shall occur or condition shall exist under the Credit Agreement or any other agreement, mortgage, indenture or instrument relating to any such Debt (as referred to in clause (i) or (ii) of this paragraph and shall continue after the applicable grace period (not to exceed 30 days), if any, specified in the Credit Agreement or such other agreement, mortgage, indenture or instrument, if the effect of such event or condition is to give the applicable debtholders the right (whether acted upon or not) to accelerate the maturity of such Debt (as referred to in clause (i) or (ii) of this paragraph) or to terminate the commitment of any lender thereunder, unless such event or condition shall have been waived under and in accordance with the related agreement or (iv) any such Debt (as referred to in clause (i) or (ii) of this paragraph) shall be declared to be due and payable, or required to be prepaid (other than by a regularly scheduled required prepayment), redeemed, purchased or defeased, or an offer to repay, redeem, purchase or defease such Debt shall be required to be made or the commitment of any lender thereunder terminated, in each case before the stated maturity thereof; officers, agents or employees has made any representations or warranties to it and that no act by the Administrative Agent hereafter taken, including any review of the affairs of the Borrower or any Affiliate thereof, shall be deemed to constitute any representation or warranty by the Administrative Agent. Each Credit Party represents and warrants to the Administrative Agent that, independently and without reliance upon the Administrative Agent or any other Credit Party and based on such documents and information as it has deemed appropriate, it has made and will continue to make its own appraisal of and investigation into the business, operations, property, prospects, financial and other conditions and creditworthiness of the Borrower, each Originator, the Performance Guarantor or the Servicer and the Pool Receivables and its own decision to enter into this Agreement and to take, or omit, action under any Transaction Document. Except for items expressly required to be delivered under any Transaction Document by the Administrative Agent to any Credit Party, the Administrative Agent shall not have any duty or responsibility to provide any Credit Party with any information concerning the Borrower, any Originator, the Performance Guarantor or the Servicer that comes into the possession of the Administrative Agent or any of its directors, officers, agents, employees, attorneys-in-fact or Affiliates.

 

 

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SECTION 11.09. Successor Administrative Agent.

 

(a)The Administrative Agent may, upon at least thirty (30) days’ notice to the Borrower, the Servicer and each Lender, resign as Administrative Agent. Except as provided below, such resignation shall not become effective until a successor Administrative Agent is appointed by the Majority Lenders as a successor Administrative Agent and has accepted such appointment subject to the prior written consent of the Borrower (such consent not to be unreasonably withheld, conditioned or delayed) provided such consent shall not be required if an Event of Default has occurred and is continuing. If no successor Administrative Agent shall have been so appointed by the Majority Lenders, within thirty (30) days after the departing Administrative Agent’s giving of notice of resignation, the departing Administrative Agent may, on behalf of the Secured Parties, appoint a successor Administrative Agent as successor Administrative Agent. If no successor Administrative Agent shall have been so appointed by the Majority Lenders within sixty (60) days after the departing Administrative Agent’s giving of notice of resignation, the departing Administrative Agent may, on behalf of the Secured Parties, petition a court of competent jurisdiction to appoint a successor Administrative Agent.

 

(b)Upon such acceptance of its appointment as Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent shall succeed to and become vested with all the rights and duties of the resigning Administrative Agent, and the resigning Administrative Agent shall be discharged from its duties and obligations under the Transaction Documents. After any resigning Administrative Agent’s resignation hereunder, the provisions of this Article XI and Article XIII shall inure to its benefit as to any actions taken or omitted to be taken by it while it was the Administrative Agent.

 

SECTION 11.10. Structuring Agent. Each of the parties hereto hereby acknowledges and agrees that the Structuring Agent shall not have any right, power, obligation, liability, responsibility or duty under this Agreement, other than the Structuring Agent’s right to receive fees pursuant to Section 2.03. Each Credit Party acknowledges that it has not relied, and will not rely, on the Structuring Agent in deciding to enter into this Agreement and to take, or omit to take, any action under any Transaction Document.

 

SECTION 11.11.LIBOR Notification. Section 5.06 (“Successor Adjusted LIBOR or LMIR”) provides a mechanism for determining an alternative rate of interest in the event that Adjusted LIBOR or LMIR is no longer available or in certain other circumstances. The Administrative Agent does not warrant or accept any responsibility for and shall not have any liability with respect to, the administration, submission or any other matter related to the London interbank offered rate or other rates in the definition of Adjusted LIBOR or LMIR or with respect to any alternative or successor rate thereto, or replacement rate therefor.

 

 

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ARTICLE XII

[RESERVED]

ARTICLE XIII

INDEMNIFICATION

 

SECTION 13.01.Indemnities by the Borrower.

 

(a)Without limiting any other rights that the Administrative Agent, the Credit Parties, the Affected Persons and their respective assigns, officers, directors, agents and employees (each, a “Borrower Indemnified Party”) may have hereunder or under Applicable Law, the Borrower hereby agrees to indemnify each Borrower Indemnified Party from and against any and all claims, losses and liabilities (including Attorney Costs) (all of the foregoing being collectively referred to as “Borrower Indemnified Amounts”) arising out of or resulting from this Agreement or any other Transaction Document or the use of proceeds of the Credit Extensions or the security interest in respect of any Pool Receivable or any other Collateral; excluding, however, (a) any portion of Borrower Indemnified Amounts to the extent a final non-appealable judgment of a court of competent jurisdiction holds that such Borrower Indemnified Amounts resulted from the gross negligence or willful misconduct by the Borrower Indemnified Party seeking indemnification and (b) Taxes that are covered by Section 5.03 (other than any Taxes that represent losses, claims, damages, etc. arising from any non-Tax claim). Without limiting or being limited by the foregoing, the Borrower shall pay within 10 days of demand (it being understood that if any portion of such payment obligation is made from Collections, such payment will be made at the time and in the order of priority set forth in Section 4.01), to each Borrower Indemnified Party any and all amounts necessary to indemnify such Borrower Indemnified Party from and against any and all Borrower Indemnified Amounts relating to or resulting from any of the following (but excluding Borrower Indemnified Amounts and Taxes described in clauses (a) and (b) above):

 

(i)any Pool Receivable which the Borrower or the Servicer includes as an Eligible Receivable as part of the Net Receivables Pool Balance but which is not an Eligible Receivable at such time;

 

(ii)any representation, warranty or statement made or deemed made by the Borrower (or any of its respective officers) under or in connection with this Agreement, any of the other Transaction Documents, any Information Package, any Interim Report or any other information or report delivered by or on behalf of the

 

(iv)any failure of a Collection Account Bank to comply with the terms of the applicable Account Control Agreement, the termination by a Collection Account Bank of any Account Control Agreement or any amounts (including in respect of an indemnity) payable by the Administrative Agent to a Collection Account Bank under any Account Control Agreement;

 

(v)the maintenance of any Linked Account with respect to any Collection Account or the debiting against any Collection Account of amounts as a result of any Settlement Item that originated in any Linked Account or any other account other than a Collection Account;

 

 

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(vi)the failure or delay to provide any Obligor with an invoice or other evidence of indebtedness; or

 

(vii)any failure of the Servicer to comply with its covenants, obligations and agreements contained in this Agreement or any other Transaction Document.

 

(b)If for any reason the foregoing indemnification is unavailable (other than pursuant to the exclusions contained in Section 13.02(a)) to any Servicer Indemnified Party or insufficient to hold it harmless, then the Servicer shall contribute to the amount paid or payable by such Servicer Indemnified Party as a result of such loss, claim, damage or liability in such proportion as is appropriate to reflect the relative economic interests of the Servicer and its Affiliates on the one hand and such Servicer Indemnified Party on the other hand in the matters contemplated by this Agreement as well as the relative fault of the Servicer and its Affiliates and such Servicer Indemnified Party with respect to such loss, claim, damage or liability and any other relevant equitable considerations. The reimbursement, indemnity and contribution obligations of the Servicer under this Section shall be in addition to (but without duplication of) any liability which the Servicer may otherwise have, shall extend upon the same terms and conditions to Servicer Indemnified Party, and shall be binding upon and inure to the benefit of any successors, assigns, heirs and personal representatives of the Servicer and the Servicer Indemnified Parties.

 

(c)Any indemnification or contribution under this Section shall survive the termination of this Agreement.

 

SECTION 13.03. Currency Indemnity.

 

(a)If, for the purpose of obtaining judgment in any court, it is necessary to convert an amount owing hereunder in one currency into another currency, each party hereto agrees, to the fullest extent that it may effectively do so, that the rate of exchange used shall be that provided for in the definition of Spot Rate.

 

(b)The obligations of Borrower and Servicer in respect of any amount due to any party hereto (or their respective assigns) or any holder of the obligations owing hereunder or under any other Transaction Document (the “Applicable Creditor”) shall, notwithstanding any judgment in a currency (the “Judgment Currency”) other than the currency in which such amount is stated to be due hereunder (the “Agreement Currency”), be discharged only to the extent that, on the Business Day following receipt by the Applicable Creditor of any amount adjudged to be so due in the Judgment Currency, the Applicable Creditor may in accordance with normal banking procedures in the relevant jurisdiction purchase the Agreement Currency with the Judgment Currency; if the amount of the Agreement Currency so purchased is less than the sum originally due to the Applicable Creditor in the Agreement Currency, the Borrower or the Servicer, as the case may be, shall, as a separate obligation and notwithstanding any such judgment, indemnify the Applicable Creditor against such loss.

(c)Any indemnification under this Section shall survive the termination of his Agreement.

 

 

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ARTICLE XIV

MISCELLANEOUS

 

SECTION 14.01.Amendments, Etc.

 

(a)No failure on the part of any Credit Party to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. No amendment or waiver of any provision of this Agreement or consent to any departure by any of the Borrower or any Affiliate thereof shall be effective unless in a writing signed by the Administrative Agent and the Majority Lenders (and, in the case of any amendment, also signed by the Borrower), and then such amendment, waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that (A) no amendment, waiver or consent shall, unless in writing and signed by the Servicer, affect the rights or duties of the Servicer under this Agreement; (B) no amendment, waiver or consent shall, unless in writing and signed by the Administrative Agent and each Lender:

 

(i)change (directly or indirectly) the definitions of, Borrowing Base Deficit, Defaulted Receivable, Delinquent Receivable, Eligible Receivable, Facility Limit, Final Maturity Date, Net Receivables Pool Balance or Total Reserves contained in this Agreement, or increase the then existing Concentration Percentage or Special Concentration Limit for any Obligor or change the calculation of the Borrowing Base;

 

(ii)reduce the amount of Capital or Interest that is payable on account of any Loan or with respect to any other Credit Extension or delay any scheduled date for payment thereof;

 

(iii)change any Event of Default;

 

(iv)release all or a material portion of the Collateral from the Administrative Agent’s security interest created hereunder;

 

(v)release the Performance Guarantor from any of its obligations under the Performance Guaranty or terminate the Performance Guaranty;

 

 

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(d)Notwithstanding the foregoing, to the extent not inconsistent with applicable securities laws, each party hereto (and each of its employees, representatives or other agents) may disclose to any and all persons, without limitation of any kind, the tax treatment and tax structure (as defined in Section 1.6011-4 of the Treasury Regulations) of the transactions contemplated by the Transaction Documents and all materials of any kind (including opinions or other tax analyses) that are provided to such Person relating to such tax treatment and tax structure.

 

SECTION 14.07.GOVERNING LAW. THIS AGREEMENT, INCLUDING THE RIGHTS AND DUTIES OF THE PARTIES HERETO, SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (INCLUDING SECTIONS 5-1401 AND 5-1402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK, BUT WITHOUT REGARD TO ANY OTHER CONFLICTS OF LAW PROVISIONS THEREOF, EXCEPT TO THE EXTENT THAT THE PERFECTION, THE EFFECT OF PERFECTION OR PRIORITY OF THE INTERESTS OF ADMINISTRATIVE AGENT OR ANY LENDER IN THE COLLATERAL IS GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK).

 

SECTION 14.08. Execution in Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and  all of which when taken together shall constitute one and the same agreement. Delivery of an executed counterpart hereof by facsimile or other electronic means shall be equally effective as delivery of an originally executed counterpart.SECTION 14.09. The words “execution,” “execute”, “signed,” “signature,” and words of like import in or related to any document to be signed in connection with this Agreement and the transactions contemplated hereby (including without limitation, joinders, amendments, Loan Requests, waivers and consents) shall be deemed to include electronic signatures, the electronic matching of assignment terms and contract formations on electronic platforms approved by the Administrative Agent, or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic Transactions Act.

 

SECTION 14.09.Integration; Binding Effect; Survival of Termination. This Agreement and the other Transaction Documents contain the final and complete integration of all prior expressions by the parties hereto with respect to the subject matter hereof and shall constitute the entire agreement among the parties hereto with respect to the subject matter hereof superseding all prior oral or written understandings. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. This Agreement shall create and constitute the continuing obligations of the parties hereto in accordance with its terms and shall remain in full force and effect until the Final Payout Date; provided, however, that the provisions of Sections 5.01, 5.02, 5.03, 11.04, 11.06, 13.01, 13.02, 13.03, 14.04, 14.05, 14.06, 14.09, 14.11 and 14.13 shall survive any termination of this Agreement.

 

 

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EXHIBIT A

Form of Loan Request

 

[Letterhead of Borrower]

[Date]

[Administrative Agent]

[Lenders]

Re: Loan Request Ladies and Gentlemen:

Reference is hereby made to that certain Receivables Financing Agreement, dated as of June 29, 2018 among Syneos Health Receivables LLC (the “Borrower”), Syneos Health, LLC, as Servicer (the “Servicer”), the Lenders party thereto, PNC Bank, National Association, as Administrative Agent (in such capacity, the “Administrative Agent”) and PNC Capital Markets LLC, as Structuring Agent (as amended, supplemented or otherwise modified from time to time, the “Agreement”). Capitalized terms used in this Loan Request and not otherwise defined herein shall have the meanings assigned thereto in the Agreement.

 

This letter constitutes a Loan Request pursuant to Section 2.02(a) of the Agreement. The Borrower hereby request a Loan in the aggregate amount of [$ ] to be made on [       ,  20  ]  (of  which  $[  ]  will be funded by PNC and $[   ]  will be funded by [   ]).   [The   Borrower hereby requests that such Loan bear interest initially at Adjusted LIBOR for a Tranche Period of [one, two, three, six] months.]12 The proceeds of such Loan should be deposited to [Account number], at [Name, Address and ABA Number of Bank]. After giving effect to such Loan, the Aggregate Capital will be [$ ].

 

The Borrower hereby represents and warrants as of the date hereof, and after giving effect to such Credit Extension, as follows:

 

(i)the representations and warranties of the Borrower and the Servicer contained in Sections 7.01 and 7.02 of the Agreement are true and correct in all material respects on and as of the date of such Credit Extension as though made on and as of such date unless such representations and warranties by their terms refer to an earlier date, in which case they shall be true and correct in all material respects on and as of such earlier date;

 

(ii)no Event of Default or Unmatured Event of Default has occurred and is continuing, and no Event of Default or Unmatured Event of Default would result from such Credit Extension;

 

12 Applicable solely to the extent that the Loan is made on a Monthly Settlement Date.

 

 

Exhibit A-

 

 

 

 

 

SCHEDULE I

Commitments

 

 

 

 

 

 

PNC Bank, National Association

Party

Capacity

Commitment

PNC Bank, National Association

Lender

$275,000,000300,000,000

 

 

Schedule I- 1

 

 

 

 

 

SCHEDULE II

Lock-Boxes, Collection Accounts and Collection Account Banks

 

 

Collection Account Bank

Collection Account Number

Associated Lock-Box (if any)

Bank of America, N.A.

[redacted]

[redacted]

Bank of America, N.A.

[redacted]

N/A

Bank of America, N.A.

[redacted]

[redacted]

Bank of America, N.A.

[redacted]

N/A

Bank of America, N.A.

[redacted]

N/A

Bank of America, N.A.

[redacted]

N/A

Bank of America, N.A.

[redacted]

N/A

Wells Fargo Bank, National Association

 

[redacted]

 

N/A

Wells Fargo Bank, National Association

 

[redacted]

N/A

 

 

Schedule II- 1

 

 

 

 

 

SCHEDULE III

Notice Addresses

 

 

 

(A)

in the case of the Borrower, at the following address:

 

Syneos Health Receivables LLC

c/o Syneos Health, Inc.

1030 Sync Street

Morrisville, NC 27560

Attention: General Counsel

 

with a copy to:

 

c/o Syneos Health, Inc.

1030 Sync Street

Morrisville, NC 27560

Attention: General Counsel

 

 

(B)

in the case of the Servicer, at the following address:

 

Syneos Health, LLC

c/o Syneos Health, Inc.

1030 Sync Street

Morrisville, NC 27560

Attention: General Counsel

 

(C)

in the case of the Administrative Agent, at the following address:

PNC Bank, National Association

The Tower at PNC Plaza

300 Fifth Avenue, 11th Floor

Pittsburgh, PA 15222

Attention: Brian Stanley

Telephone: (412) -768-30902001

Facsimile: (412) 762-9184-803-7142

Attention: Robyn Reeher

 

Email: brian.stanley@pnc.com ABFAdmin@pnc.com

 

 

(D)

in the case of any other Person, at the address for such Person specified in the other Transaction Documents; in each case, or at such other address as shall be designated by such Person in a written notice to the other parties to this Agreement.

 

 

Schedule III- 1

 

 

 

 

 

Annex A

(attached)

 

 

 

Annex-A

 

SYNEOS HEALTH, LLC (f/k/a INC RESEARCH, LLC)

PNC BANK, NATIONAL ASSOCIATION

Closing Memorandum

FOR

 

JOINDER OF ORIGINATORS TO,

 

AND RENEWAL OF,

 

TRADE RECEIVABLES SECURITIZATION PROGRAM

 

For September 25, 2020 Closing

Parties and Abbreviations:

 

Administrative Agent

PNC

BofA

Bank of America, N.A.

Borrower

Syneos Health Receivables LLC, a Delaware limited liability company structured as a typical bankruptcy-remote special purpose entity

Collection Account Banks

Wells and BofA

Existing Originators

Syneos Health, and inVentiv Commercial

inVentiv Commercial

inVentiv Commercial Services, LLC, a New Jersey limited liability company

Lender

PNC

Joining Originators

The Originators set forth on Schedule I

JPM

JPMorgan Chase Bank, N.A.

MB

Mayer Brown LLP, special counsel to Administrative Agent

Originators

Existing Originators and Joining Originators

Performance Guarantor

Syneos

PNC

PNC Bank, National Association

Servicer

Syneos Health

Syneos

Syneos Health, Inc., a Delaware corporation

Syneos Counsel

Latham & Watkins LLP, counsel to the Syneos Parties

Syneos Health

Syneos Health, LLC (f/k/a/ INC Research, LLC), a Delaware limited liability company

Syneos Parties

Each of the Servicer, the Originators, the Borrower and the Performance Guarantor

Structuring Agent

PNC Capital Markets LLC

 

 

 

 

 

 

 

Document

 

A.         BASIC DOCUMENTS

1.          Ninth Amendment to Receivables Financing Agreement

2.          Fourth Amendment to Purchase and Sale Agreement

3.          Amended and Restated Fee Letter

4.          Amendment No. 3 to Deposit Account Control Agreement (note: collection accounts will be assigned to the Borrower on the books and records of the Collection Account Bank such that the Borrower will be the “owner” and “customer of the bank” with respect to those accounts)

5.          Intercompany Loan Agreement for each Joining Originator

6.          Excluded Receivables Letter Agreement

 

B.          UNIFORM COMMERCIAL CODE FILING DOCUMENTATION

7.          UCC lien searches against each Joining Originator in its state of organization (as well as tax, ERISA, bankruptcy and judgment searches at such Joining Originator’s chief executive office)

8.          UCC-1 Financing Statements naming each Joining Originator as debtor/seller, Borrower as buyer/assignor, and the Administrative Agent as secured party/assignee, for filing with the applicable filing office in such Joining Originator’s jurisdiction of organization

9.          Lien Release Letter (JPM)

10.          UCC-3 filing regarding UCC-1 filing by JPM against each Joining Originator

11.          UCC-3 Amendments for Existing Originators UCC-1s

 

C.          LEGAL OPINIONS

12.          Opinion of counsel to the Joining Originators, Syneos Health, Syneos and the Borrower re: general corporate matters under the laws of Delaware and New York, enforceability, no-conflicts with organizational documents, material agreements, New York and Federal law, ’40 Act, Volcker Rule and UCC security interest and perfection matters

13.          Opinion of counsel to the Joining Originators and the Borrower re: substantive consolidation matters

2

 

 

 

 

Document

14.          Opinion of Baker Hostetler for Ohio based Joining Originators re: Security Interest and Perfection

15.          Opinion of DLA Piper for North Carolina based Joining Originators re: Security Interest and Perfection

 

D.          DOCUMENTATION AS TO AUTHORITY, INCUMBENCY AND OTHER MATTERS WITH RESPECT TO SYNEOS HEALTH, SYNEOS, THE BORROWER AND THE JOINING ORIGINATORS

16.          Officer’s Certificate of Syneos Health

a. Authorizing Resolutions

b. Certificate of Formation

c. Limited Liability Company Agreement

d. Incumbency and signatures

17.          Officer’s Certificate of Syneos

a.  Authorizing Resolutions

b. Articles of Incorporation

c. By-laws

d. Incumbency and signatures

18.          Officer’s Certificate of each Joining Originator

a.  Authorizing Resolutions

b. Certificate of Formation / Articles of Incorporation

c. Limited Liability Company Agreement / By-laws

d. Incumbency and signatures

19.          Officer’s Certificate of the Borrower

a. Authorizing Resolutions

b. Certificate of Formation

c. Amended and Restated Limited Liability Company Agreement

d. Incumbency and signatures

20.          Good Standing Certificate of Syneos Health from the State of Delaware

21.          Good Standing Certificate of Syneos from the State of Delaware

22.          Good Standing Certificate of each Joining Originator from its state of organization

23.          Good Standing Certificate of the Borrower from the State of Delaware

 

3

 

 

 

 

 

Document

 

E.          MISCELLANEOUS

24.          Pro Forma Information Package

25.          IRS Form W-9

 

F.          POST-CLOSING ITEMS

26.          Opinion of counsel to the Joining Originators and the Borrower re: true sale matters

 


4

 

 

 

Schedule I

 

Name and Jurisdiction of the Joining Originators

 

Legal Name

Jurisdiction

Addison Whitney LLC

North Carolina

BioSector 2 LLC

New York

Cadent Medical Communications, LLC

Ohio

Chamberlain Communications Group LLC

Delaware

Chandler Chicco Agency, L.L.C.

New York

Gerbig, Snell/Weisheimer Advertising, LLC

Ohio

Syneos Health Medical Communications, LLC

Ohio

Navicor Group, LLC

Ohio

Palio + Ignite, LLC

Ohio

Syneos Health Communications, Inc.

Ohio

The Selva Group, LLC

Ohio

Taylor Strategy Partners, LLC

Ohio

 

 

5

 

 

Exhibit 10.3

 

EXECUTION VERSION

SECOND AMENDMENT TO THE
PURCHASE AND SALE AGREEMENT

THIS SECOND AMENDMENT TO THE PURCHASE AND SALE AGREEMENT (this “Amendment”), dated as of July 25, 2019, is entered into among INVENTIV COMMERCIAL SERVICES, LLC (the “New Originator”), each of the entities listed on the signature pages hereto as an Existing Originator (each, an “Existing Originator” and collectively, the “Existing Originators” and together with the New Originator, collectively, the “Originators” and each, an “Originator”), and SYNEOS HEALTH, LLC (f/k/a INC RESEARCH, LLC), as servicer (in such capacity, the “Servicer”) and SYNEOS HEALTH RECEIVABLES LLC (the “Buyer”).

Capitalized terms used but not otherwise defined herein (including such terms used above) have the respective meanings assigned thereto in the Purchase and Sale Agreement described below.

BACKGROUND

A.The parties hereto (except the New Originator) have entered into a Purchase and Sale Agreement, dated as of June 29, 2018 (as amended, restated, supplemented or otherwise modified through the date hereof, the “Purchase and Sale Agreement”).

B.Concurrently herewith, the Buyer, as borrower, the Servicer and PNC Bank, National Association, as administrative agent and as a lender (the “Administrative Agent”) are entering into that certain Fifth Amendment to Receivables Financing Agreement, dated as of the date hereof (the “RFA Amendment”).

C.Concurrently herewith, the Borrower, the Servicer, the Administrative Agent and Bank of America, N.A. are entering into that certain Second Amendment to the Deposit Account Control Agreement, dated as of the date hereof.

D,The New Originator desires to become an Originator under the Purchase and Sale Agreement pursuant to Section 4.3 of the Purchase and Sale Agreement.

E.The parties hereto desire to join the New Originator to the Purchase and Sale Agreement and to amend the Purchase and Sale Agreement as hereinafter set forth.

NOW THEREFORE, with the intention of being legally bound hereby, and in consideration of the mutual undertakings expressed herein, each party to this Amendment hereby agrees as follows:

733003140 18569090

 

 

 

 

SECTION 1.Amendments to the Purchase and Sale Agreement.  The Purchase and Sale Agreement is hereby amended as follows:

(a)With respect to the New Originator, each reference in the Purchase and Sale Agreement to “the Closing Date” or “the date hereof” when applicable to the New Originator shall be deemed to be a reference to “July 25, 2019”.

(b)With respect to the New Originator, each reference in the Purchase and Sale Agreement to “the Cut-Off Date” when applicable to the New Originator shall be deemed to be a reference to “June 30, 2019”.

(c)Schedule I to the Purchase and Sale Agreement is hereby replaced in its entirety with Schedule I attached hereto.

(d)Schedule II to the Purchase and Sale Agreement is hereby replaced in its entirety with Schedule II attached hereto.

(e)Schedule III to the Purchase and Sale Agreement is hereby replaced in its entirety with Schedule III attached hereto.

(f)Schedule IV to the Purchase and Sale Agreement is hereby replaced in its entirety with Schedule IV attached hereto.

SECTION 2.Joinder.  The New Originator hereby absolutely and unconditionally agrees to become a party to the Purchase and Sale Agreement as an “Originator” thereunder and to be bound by all of the provisions thereof, including the provisions of Article IX thereof.  For greater certainty, the New Originator hereby acknowledges that pursuant to (i) Section 1.2 of the Purchase and Sale Agreement, on and after the date hereof it hereby sells all of its right, title and interest in, to and under the Receivables, the Related Rights with respect thereto and all proceeds of the foregoing to the Buyer and (ii) Section 1.5 of the Purchase and Sale Agreement, it has granted and hereby grants a security interest to Buyer in, to and under all of the New Originator’s right, title and interest in and to: (A) the Receivables and the Related Rights now existing and hereafter created by the New Originator transferred or purported to be transferred under the Purchase and Sale Agreement, (B) all monies due or to become due and all amounts received with respect thereto and (C) all books and records of the New Originator to the extent related to any of the foregoing, to secure the New Originator’s obligations under the Purchase and Sale Agreement.  Upon effectiveness of this Amendment, the New Originator shall be an “Originator” for all purposes of the Purchase and Sale Agreement and each of the other Transaction Documents.  The New Originator further acknowledges that it has received copies of the Purchase and Sale Agreement and the other Transaction Documents.  Each of the parties hereto hereby agrees that the provisions of this Amendment are in all material respects equivalent in form to the “Joinder Agreement” set forth as Exhibit C to the Purchase and Sale Agreement.

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SECTION 3.Representations and Warranties of the Originators.  Each Originator hereby represents and warrants as of the date hereof as follows:

(a)Representations and Warranties.  The representations and warranties made by it in the Purchase and Sale Agreement and each of the other Transaction Documents to which it is a party are true and correct as of the date hereof.

(b)Enforceability.  The execution and delivery by it of this Amendment, and the performance of its obligations under this Amendment, the Purchase and Sale Agreement (as amended hereby) and the other Transaction Documents to which it is a party are within its organizational powers and have been duly authorized by all necessary action on its part, and this Amendment, the Purchase and Sale Agreement (as amended hereby) and the other Transaction Documents to which it is a party are (assuming due authorization and execution by the other parties thereto) its valid and legally binding obligations, enforceable in accordance with their terms, except (i) as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors’ rights generally and (ii) as such enforceability may be limited by general principles of equity, regardless of whether such enforceability is considered in a proceeding in equity or at law.

(c)No Event of Default. No Purchase and Sale Termination Event, Unmatured Purchase and Sale Termination Event, Event of Default or Unmatured Event of Default has occurred and is continuing, or would occur as a result of this Amendment or the transactions contemplated hereby.

SECTION 4.Effect of Amendment; Ratification.  All provisions of the Purchase and Sale Agreement and the other Transaction Documents, as expressly amended and modified by this Amendment, shall remain in full force and effect. After this Amendment becomes effective, all references in the Purchase and Sale Agreement (or in any other Transaction Document) to “this Agreement”, “hereof”, “herein” or words of similar effect referring to the Purchase and Sale Agreement shall be deemed to be references to the Purchase and Sale Agreement as amended by this Amendment. This Amendment shall not be deemed, either expressly or impliedly, to waive, amend or supplement any provision of the Purchase and Sale Agreement other than as set forth herein. The Purchase and Sale Agreement, as amended by this Amendment, is hereby ratified and confirmed in all respects.

SECTION 5.Effectiveness.  This Amendment shall become effective concurrently with the effectiveness of the RFA Amendment.

SECTION 6.Severability.  Any provisions of this Amendment which are prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

SECTION 7.Transaction Document.  This Amendment shall be a Transaction Document for purposes of the Receivables Financing Agreement.

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SECTION 8.Counterparts.  This Amendment may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same agreement.  Delivery of an executed counterpart hereof by facsimile or other electronic means shall be equally effective as delivery of an originally executed counterpart.

SECTION 9.GOVERNING LAW AND JURISDICTION.

(a)THIS AMENDMENT, INCLUDING THE RIGHTS AND DUTIES OF THE PARTIES HERETO, SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (INCLUDING SECTIONS 5-1401 AND 5-1402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK, BUT WITHOUT REGARD TO ANY OTHER CONFLICTS OF LAW PROVISIONS THEREOF).

(b)EACH PARTY HERETO HEREBY IRREVOCABLY SUBMITS TO (I) WITH RESPECT TO THE BUYER, THE ORIGINATORS AND THE SERVICER, THE EXCLUSIVE JURISDICTION, AND (II) WITH RESPECT TO EACH OF THE OTHER PARTIES HERETO, THE NON-EXCLUSIVE JURISDICTION, IN EACH CASE, OF ANY NEW YORK STATE OR FEDERAL COURT SITTING IN NEW YORK CITY, NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AMENDMENT, AND EACH PARTY HERETO HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING (I) IF BROUGHT BY THE BUYER, THE SERVICER, ANY ORIGINATOR OR ANY AFFILIATE THEREOF, SHALL BE HEARD AND DETERMINED, AND (II) IF BROUGHT BY ANY OTHER PARTY TO THIS AMENDMENT, MAY BE HEARD AND DETERMINED, IN EACH CASE, IN SUCH NEW YORK STATE COURT OR, TO THE EXTENT PERMITTED BY LAW, IN SUCH FEDERAL COURT.  NOTHING IN THIS SECTION 9 SHALL AFFECT THE RIGHT OF THE ADMINISTRATIVE AGENT OR ANY OTHER CREDIT PARTY TO BRING ANY ACTION OR PROCEEDING AGAINST THE BUYER OR THE SERVICER OR ANY OF THEIR RESPECTIVE PROPERTY IN THE COURTS OF OTHER JURISDICTIONS.  EACH OF THE BUYER, EACH ORIGINATOR AND THE SERVICER HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING.  THE PARTIES HERETO AGREE THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.

SECTION 10.Section Headings.  The various headings of this Amendment are included for convenience only and shall not affect the meaning or interpretation of this Amendment, the Purchase and Sale Agreement or any provision hereof or thereof.

[Signature pages follow]

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IN WITNESS WHEREOF, the parties hereto have executed this Amendment by their duly authorized officers as of the date first above written.

 

SYNEOS HEALTH, LLC,

as the Servicer and as an Existing Originator

 

 

By:

/s/ Jason Meggs

Name:

Jason Meggs

Title:

Chief Financial Officer

 

 

INVENTIV HEALTH CLINICAL, LLC,

as an Existing Originator

 

 

By:

 

Name:

Thomas E. Zajkowski

Title:

Treasurer

 

 

INVENTIV COMMERCIAL SERVICES, LLC,

as the New Originator

 

 

By:

/s/ Jason Meggs

Name:

Jason Meggs

Title:

Manager

 

 

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Second Amendment to the Purchase

and Sale Agreement

 

 

IN WITNESS WHEREOF, the parties hereto have executed this Amendment by their duly authorized officers as of the date first above written.

 

 

SYNEOS HEALTH, LLC,

as the Servicer and as an Existing Originator

 

 

By:

 

Name:

Jason Meggs

Title:

Chief Financial Officer

 

 

INVENTIV HEALTH CLINICAL, LLC,

as an Existing Originator

 

 

By:

/s/ Thomas E. Zajkowski

Name:

Thomas E. Zajkowski

Title:

Treasurer

 

 

INVENTIV COMMERCIAL SERVICES, LLC,

as the New Originator

 

 

By:

 

Name:

Jason Meggs

Title:

Manager

 

 

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Second Amendment to the Purchase

and Sale Agreement

 

 

 

SYNEOS HEALTH RECEIVABLES LLC,

as the Buyer

 

 

By:

/s/ Thomas E. Zajkowski

Name:

Thomas E. Zajkowski

Title:

President

 

 

 

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Second Amendment to the Purchase

and Sale Agreement

 

 

Consented to:

PNC BANK, NATIONAL ASSOCIATION,

as Administrative Agent and as a Lender

 

 

 

By:

/s/ Christopher Blaney

Name:

Christopher Blaney

Title:

Senior Vice President

 

 

 

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Second Amendment to the Purchase

and Sale Agreement

 

 

Schedule I

 

LIST AND LOCATION OF EACH ORIGINATOR

Originator

Location

Syneos Health, LLC

Delaware

inVentiv Health Clinical, LLC

Delaware

inVentiv Commercial Services, LLC

New Jersey

 

 

 

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Schedule I-1

Purchase and Sale Agreement (QINC)

 

 

Schedule II

LOCATION OF BOOKS AND RECORDS OF ORIGINATORS

 

Originator

Location of Books and Records

Syneos Health, LLC

1030 Sync Street, Morrisville, NC 27560

inVentiv Health Clinical, LLC

1030 Sync Street, Morrisville, NC 27560

inVentiv Commercial Services, LLC

1030 Sync Street, Morrisville, NC 27560

 

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Schedule II-1

Purchase and Sale Agreement (QINC)

 

 

Schedule III

TRADE NAMES

Syneos Health, LLC

Syneos Health, LLC was formerly known as INC Research, LLC

Syneos Health has been used as a trade name since January 4, 2018.

Syneos Health, LLC has qualified to do business in the State of California under the name “Integrated Neurosciences Consortium, LLC”.

inVentiv Health Clinical, LLC

Syneos Health has been used as a trade name since January 4, 2018.

inVentiv Commercial Services, LLC

Syneos Health has been used as a trade name since January 4, 2018.

 

 

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Schedule III -1

Purchase and Sale Agreement

 

 

Schedule IV

NOTICE ADDRESSES

If to Syneos Health, LLC:

 

Syneos Health, LLC

c/o Syneos Health, Inc.

1030 Sync Street

Morrisville, NC 27560

Attention:  General Counsel

 

with a copy to:

 

Wyrick Robbins Yates & Ponton LLP

4101 Lake Boone Trail, Suite 300

Raleigh, NC 27607

Attention:  Carolyn W. Minshall, Esq.

 

 

If to inVentiv Health Clinical, LLC:

 

inVentiv Health Clinical, LLC

c/o Syneos Health, Inc.

1030 Sync Street

Morrisville, NC 27560

Attention:  General Counsel

 

with a copy to:

 

Wyrick Robbins Yates & Ponton LLP

4101 Lake Boone Trail, Suite 300

Raleigh, NC 27607

Attention:  Carolyn W. Minshall, Esq.

 

 

If to inVentiv Commercial Services, LLC:

 

inVentiv Commercial Services, LLC

c/o Syneos Health, Inc.

1030 Sync Street

Morrisville, NC 27560

Attention:  General Counsel

 

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Schedule IV-1

 

 

 

with a copy to:

 

Wyrick Robbins Yates & Ponton LLP

4101 Lake Boone Trail, Suite 300

Raleigh, NC 27607

Attention:  Carolyn W. Minshall, Esq.

 

 

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Schedule IV-2

 

 

 

Exhibit 31.1

CERTIFICATIONS

I, Alistair Macdonald, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Syneos Health, Inc. (the “registrant”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: October 28, 2020

 

/s/ Alistair Macdonald

Alistair Macdonald

Chief Executive Officer

(Principal Executive Officer)

 

 

 

Exhibit 31.2

CERTIFICATIONS

I, Jason Meggs, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Syneos Health, Inc. (the “registrant”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: October 28, 2020

 

/s/ Jason Meggs

Jason Meggs

Chief Financial Officer

(Principal Financial Officer)

 

 

 

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In accordance with 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, I, Alistair Macdonald, Chief Executive Officer of Syneos Health, Inc. (the “registrant”), do hereby certify, that to the best of my knowledge:

1. The registrant's Quarterly Report on Form 10-Q for the period ended September 30, 2020, (the “Report”), to which this Certification is attached as Exhibit 32.1, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company for the periods presented therein.

Date: October 28, 2020

 

/s/ Alistair Macdonald

Alistair Macdonald

Chief Executive Officer

(Principal Executive Officer)

 

This certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and shall not be deemed “filed” by the registrant for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and shall not be incorporated by reference into any filing of the registrant under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of the Report, irrespective of any general incorporation language contained in such filing.

A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

 

 

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In accordance with 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, I, Jason Meggs, Chief Financial Officer of Syneos Health, Inc. (the “registrant”), do hereby certify, that to the best of my knowledge:

1. The registrant's Quarterly Report on Form 10-Q for the period ended September 30, 2020 (the “Report”), to which this Certification is attached as Exhibit 32.2, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company for the periods presented therein.

Date: October 28, 2020

 

/s/ Jason Meggs

Jason Meggs

Chief Financial Officer

(Principal Financial Officer)

 

This certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and shall not be deemed “filed” by the registrant for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and shall not be incorporated by reference into any filing of the registrant under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of the Report, irrespective of any general incorporation language contained in such filing.

A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.