UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
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ý
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended
September 30, 2015
or
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from to .
Commission File Number: 001-36730
INC RESEARCH HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
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Delaware
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27-3403111
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification Number)
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3201 Beechleaf Court, Suite 600, Raleigh, North Carolina 27604-1547
(Address of principal executive offices and Zip Code)
(919) 876-9300
(Registrant’s telephone number, including area code)
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
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No
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Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes
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No
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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
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Large accelerated filer
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Accelerated filer
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Non-accelerated filer
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x
(Do not check if a smaller reporting company)
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Smaller reporting company
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¨
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
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No
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As of
October 22, 2015
, there were approximately
56,483,381
shares of the registrant's common stock outstanding.
INC RESEARCH HOLDINGS, INC.
FORM 10-Q
TABLE OF CONTENTS
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Page
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Item 1.
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Item 2.
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Item 3.
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Item 4.
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Item 1.
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Item 1A.
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Item 2.
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Item 5.
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Item 6.
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
INC RESEARCH HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
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Three Months Ended September 30,
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Nine Months Ended September 30,
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2015
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2014
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2015
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2014
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(In thousands, except per share data)
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Net service revenue
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$
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234,494
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$
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207,763
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$
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673,384
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$
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596,003
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Reimbursable out-of-pocket expenses
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115,651
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90,861
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322,970
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255,141
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Total revenue
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350,145
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298,624
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996,354
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851,144
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Costs and operating expenses:
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Direct costs
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135,530
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129,557
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398,988
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381,102
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Reimbursable out-of-pocket expenses
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115,651
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90,861
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322,970
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255,141
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Selling, general and administrative
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40,429
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38,185
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113,354
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104,332
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Restructuring and other costs
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(28
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)
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2,951
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1,566
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6,126
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Transaction expenses
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403
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—
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922
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2,042
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Asset impairment charges
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—
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—
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3,931
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17,245
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Depreciation
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4,357
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4,734
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13,543
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16,628
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Amortization
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9,462
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9,597
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28,413
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23,337
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Total operating expenses
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305,804
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275,885
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883,687
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805,953
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Income from operations
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44,341
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22,739
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112,667
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45,191
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Other income (expense), net:
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Interest income
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28
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26
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157
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226
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Interest expense
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(3,065
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(12,929
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(12,687
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(41,853
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Loss on extinguishment of debt
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—
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—
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(9,795
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—
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Other income (expense), net
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(1,003
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5,136
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4,138
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6,177
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Total other expense, net
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(4,040
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(7,767
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(18,187
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(35,450
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Income before provision for income taxes
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40,301
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14,972
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94,480
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9,741
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Income tax benefit (expense)
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(2,487
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(2,417
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(8,089
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16,569
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Net income
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37,814
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12,555
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86,391
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26,310
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Class C common stock dividends
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—
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(125
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—
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(375
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Net income attributable to common stockholders
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$
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37,814
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$
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12,430
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$
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86,391
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$
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25,935
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Earnings per share attributable to common stockholders:
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Basic
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$
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0.67
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$
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0.24
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$
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1.47
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$
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0.50
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Diluted
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$
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0.64
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$
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0.24
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$
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1.42
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$
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0.50
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Weighted average common shares outstanding:
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Basic
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56,325
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51,905
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58,583
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51,900
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Diluted
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58,764
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52,514
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60,826
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52,215
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The accompanying notes are an integral part of these condensed consolidated financial statements.
INC RESEARCH HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
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Three Months Ended September 30,
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Nine Months Ended September 30,
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2015
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2014
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2015
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2014
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(In thousands)
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Net income
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$
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37,814
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$
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12,555
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$
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86,391
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$
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26,310
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Foreign currency translation adjustments, net
of tax benefit (expense) of $0, $(1,281), $0 and $44, respectively
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(880
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(8,927
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(12,274
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(11,029
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Comprehensive income
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$
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36,934
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$
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3,628
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$
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74,117
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$
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15,281
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The accompanying notes are an integral part of these condensed consolidated financial statements.
INC RESEARCH HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
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September 30, 2015
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December 31, 2014
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(In thousands, except share data)
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ASSETS
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Current assets:
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Cash and cash equivalents
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$
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136,091
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$
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126,453
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Restricted cash
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431
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505
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Accounts receivable:
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Billed, net
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176,952
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130,270
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Unbilled
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153,795
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118,101
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Current portion of deferred income taxes
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16,610
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16,177
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Prepaid expenses and other current assets
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37,423
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35,393
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Total current assets
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521,302
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426,899
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Property and equipment, net
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39,734
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43,725
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Goodwill
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552,838
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556,863
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Intangible assets, net
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161,755
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190,359
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Deferred income taxes, less current portion
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15,910
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15,665
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Other long-term assets
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11,502
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11,576
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Total assets
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$
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1,303,041
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$
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1,245,087
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LIABILITIES AND STOCKHOLDERS' EQUITY
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Current liabilities:
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Accounts payable
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$
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14,348
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$
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16,548
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Accrued liabilities
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110,505
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111,655
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Deferred revenue
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337,279
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246,902
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Current portion of long-term debt
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—
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4,250
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Current portion of capital lease obligations
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53
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441
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Total current liabilities
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462,185
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379,796
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Long-term debt, less current portion
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475,000
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415,277
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Capital lease obligations, less current portion
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—
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11
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Deferred income taxes
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27,826
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30,368
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Other long-term liabilities
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20,177
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27,426
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Total liabilities
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985,188
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852,878
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Commitments and contingencies (Note 15)
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Stockholders' equity:
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Preferred stock, $0.01 par value; 30,000,000 authorized, 0 shares issued and outstanding at September 30, 2015 and December 31, 2014, respectively
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—
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—
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Common stock, $0.01 par value; 600,000,000 shares authorized; 56,483,381 and 61,233,850 shares issued and outstanding at September 30, 2015 and December 31, 2014, respectively
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565
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612
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Additional paid-in-capital
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584,002
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634,946
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Accumulated other comprehensive loss
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(38,474
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(26,200
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Accumulated deficit
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(228,240
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(217,149
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Total stockholders' equity
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317,853
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392,209
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Total liabilities and stockholders' equity
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$
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1,303,041
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$
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1,245,087
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The accompanying notes are an integral part of these condensed consolidated financial statements.
INC RESEARCH HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
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Nine Months Ended September 30,
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2015
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2014
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(In thousands)
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Operating activities
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Net income
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$
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86,391
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$
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26,310
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Adjustments to reconcile net income to net cash provided by operating activities:
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Depreciation and amortization
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41,956
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39,965
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Loss on extinguishment of debt
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9,795
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—
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Stock repurchase costs
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922
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—
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Amortization of capitalized loan fees
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1,079
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4,818
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Stock-based compensation
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3,288
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2,305
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Provision (recovery) for doubtful accounts
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(440
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2,811
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Deferred income taxes
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112
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(22,233
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Foreign currency adjustments
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(2,302
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(10,697
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Asset impairment charges
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3,931
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17,245
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Other adjustments
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(152
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388
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Changes in operating assets and liabilities:
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Accounts receivable billed and unbilled
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(84,107
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(11,373
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Accounts payable and accrued liabilities
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(2,085
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18,546
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Deferred revenue
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93,753
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51,338
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Other assets and liabilities
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(11,019
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(2,095
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Net cash provided by operating activities
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141,122
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117,328
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Investing activities
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Acquisition of business, net of cash acquired
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—
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(2,302
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Purchase of property and equipment
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(11,565
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(17,739
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Net cash used in investing activities
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(11,565
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(20,041
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Financing activities
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Payments on long-term debt
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(475,001
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(5,453
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Proceeds from issuance of long-term debt
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525,000
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—
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Payments of debt financing costs
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(4,987
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—
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Payments related to business combinations
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(973
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—
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Principal payments toward capital lease obligations
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(398
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(2,455
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Payments of stock repurchase costs
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(922
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—
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Payments for repurchase of common stock
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(150,000
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(38
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Payments related to tax withholding for stock-based compensation
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(3,161
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—
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Proceeds from the exercise of stock options
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1,058
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108
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Dividends paid
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—
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(375
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)
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Net cash used in financing activities
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(109,384
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(8,213
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Effect of exchange rate changes on cash and cash equivalents
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(10,535
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(243
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Net change in cash and cash equivalents
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9,638
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88,831
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Cash and cash equivalents at the beginning of the period
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126,453
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96,972
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Cash and cash equivalents at the end of the period
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$
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136,091
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$
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185,803
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The accompanying notes are an integral part of these condensed consolidated financial statements.
INC RESEARCH HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation and Changes in Significant Accounting Policies
Principal Business
INC Research Holdings, Inc. (the "Company") is a Contract Research Organization ("CRO") providing a comprehensive range of clinical development services for the biopharmaceutical and medical device industries to its customers across various therapeutic areas. The international infrastructure of the Company’s development business enables it to conduct Phase I to Phase IV clinical trials globally for pharmaceutical, biotechnology and medical device companies.
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 ("U.S. 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, 2014
filed with the Securities and Exchange Commission on February 24, 2015. The results of operations for the
three and nine months ended
September 30, 2015
are not necessarily indicative of the results to be expected for the year ending
December 31, 2015
or any other future period. The amounts in the
December 31, 2014
consolidated condensed balance sheet are derived from the audited financial statements as of
December 31, 2014
.
Recently Issued Accounting Standards
In May 2014, the Financial Accounting Standards Board ("FASB") issued ASU No. 2014-09,
Revenue from Contracts with Customers
. ASU 2014-09 will eliminate transaction- and industry-specific revenue recognition guidance under current U.S. GAAP and replace it with a principle based approach for determining revenue recognition. ASU 2014-09 will require that companies recognize revenue based on the value of transferred goods or services as they occur in the contract. The ASU also will require additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. In July 2015, the FASB issued ASU 2015-14,
Revenue from Contracts with Customers: Deferral of the Effective Date
, which delayed the effective date of ASU 2014-09 by one year and modified the standard to allow early adoption. For public entities, the standard is now effective for reporting periods beginning after December 15, 2017. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. Entities can transition to the standard either retrospectively or as a cumulative-effect adjustment as of the date of adoption. The Company is currently evaluating the impact of the adoption of this standard on its consolidated financial statements.
In April 2015, the FASB issued ASU No. 2015-03,
Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs.
The amendments in this ASU require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts, and is to be applied on a retrospective basis. ASU 2015-03 is effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early adoption of the amendments is permitted. As of
September 30, 2015
, the Company had debt issuance costs related to
its term loans of
$0.8 million
in prepaid expenses and other current assets and
$2.4 million
in other long-term assets that would be reclassified to long-term debt, net.
In April 2015, the FASB issued ASU No. 2015-05,
Customer's Accounting For Fees Paid In A Cloud Computing Arrangement
, which provides guidance for a customer's accounting for cloud computing costs. Under ASU 2015-05, if a software cloud computing arrangement contains a software license, customers should account for the license element of the arrangement in a manner consistent with the acquisition of other software licenses. If the arrangement does not contain a software license, customers should account for the arrangement as a service contract. This standard may be applied either prospectively to all arrangements entered into or materially modified after the effective date, or retrospectively. ASU 2015-05 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015, and early adoption is permitted. The Company is currently evaluating the impact of the adoption of this standard on its consolidated financial statements.
In August 2015, the FASB issued ASU No. 2015-15,
Interest - Imputed Interest (Subtopic 835-30): Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements
, which is effective immediately and clarifies that the guidance in ASU 2015-03 does not apply to line-of-credit arrangements. Accordingly, while ASU 2015-15 requires that debt issuance costs be presented in the balance sheet as a direct reduction from the carrying value of the associated debt liability, ASU 2015-15 states that entities may continue presenting unamortized debt issuance costs for line-of-credit arrangements as an asset. Accordingly, the Company will defer costs associated with line-of-credit arrangements as an asset and subsequently amortize such costs ratably over the term of the arrangement.
2. Financial Statement Details
Accounts receivable billed, net
Accounts receivable billed, net of provision for doubtful accounts, consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2015
|
|
December 31, 2014
|
|
Accounts receivable, billed
|
$
|
180,234
|
|
|
$
|
133,997
|
|
|
Less provision for doubtful accounts
|
(3,282
|
)
|
|
(3,727
|
)
|
|
Accounts receivable billed, net
|
$
|
176,952
|
|
|
$
|
130,270
|
|
Goodwill and Long-Lived Assets
In connection with the annual goodwill impairment analysis performed in the fourth quarter of 2014, the Company's Phase I Services reporting unit failed Step I of the goodwill impairment test. The Company performed Step II of the goodwill impairment test to asses if the goodwill has been impaired, which resulted in no further impairment during 2014. During the first quarter of 2015, the Company continued to observe deteriorating performance due to reduced revenue resulting from cancellations and lower than expected new business awards in its Phase I Services asset group and reporting unit. This resulted in a triggering event requiring an evaluation of both long-lived assets and goodwill for potential impairment. As of the date of this evaluation, there were no remaining intangible assets associated with Phase I Services.
In accordance with the authoritative guidance for
Intangibles - Goodwill and Other
under ASC 350, the impairment test of goodwill was performed at the reporting unit level and involved a two-step process. The first step involved comparing the fair value of the Phase I Services reporting unit with the carrying amount of its assets and liabilities, including goodwill, as goodwill was specifically assigned to this reporting unit. This impairment test of goodwill determined that the Phase I Services reporting unit’s fair value was less than the carrying amount of its assets and liabilities, requiring the Company to proceed
with the second step of the goodwill impairment test. In the second step of the testing process, the impairment loss was determined by comparing the implied fair value of the Phase I Services reporting unit’s goodwill to the recorded amount of goodwill. The implied fair value was calculated based on discounted estimated future cash flows. The estimated future cash flows were based upon, among other things, certain assumptions about expected future operating performance, growth rates and other factors. This first quarter evaluation resulted in a
$2.9 million
impairment charge, which represented the remaining goodwill balance of the Phase I Services reporting unit.
The changes in carrying amount of goodwill for the
nine months ended September 30, 2015
were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
Clinical Development Services
|
|
Phase I Services
|
|
Global Consulting
|
|
Balance at December 31, 2014:
|
|
|
|
|
|
|
|
|
Gross goodwill
|
$
|
570,106
|
|
|
$
|
542,683
|
|
|
$
|
8,142
|
|
|
$
|
19,281
|
|
|
Accumulated impairment losses
|
(13,243
|
)
|
|
—
|
|
|
(5,219
|
)
|
|
(8,024
|
)
|
|
Total goodwill and accumulated impairment losses
|
556,863
|
|
|
542,683
|
|
|
2,923
|
|
|
11,257
|
|
|
2015 Activity:
|
|
|
|
|
|
|
|
|
Impairment of goodwill
|
(2,923
|
)
|
|
—
|
|
|
(2,923
|
)
|
|
—
|
|
|
Impact of foreign currency translation
|
(1,102
|
)
|
|
(1,102
|
)
|
|
—
|
|
|
—
|
|
|
Balance at September 30, 2015:
|
|
|
|
|
|
|
|
|
Gross goodwill
|
569,004
|
|
|
541,581
|
|
|
8,142
|
|
|
19,281
|
|
|
Accumulated impairment losses
|
(16,166
|
)
|
|
—
|
|
|
(8,142
|
)
|
|
(8,024
|
)
|
|
Total goodwill and accumulated impairment losses
|
$
|
552,838
|
|
|
$
|
541,581
|
|
|
$
|
—
|
|
|
$
|
11,257
|
|
The Company also performed an impairment test of the long-lived assets by comparing the carrying amount of Phase I Services asset group to the sum of their undiscounted expected future cash flows. In accordance with the authoritative guidance for
Property, Plant and Equipment
under ASC 360, impairment exists if the sum of the undiscounted expected future cash flows is less than the carrying amount of its related group of assets. If impairment exists, the impairment loss is measured and recorded based on the amount by which the carrying amount of the long-lived asset (asset group) exceeds its fair value. The indirect cost valuation approach was used to estimate the fair value. Under this valuation approach, the Company estimated the fair value by applying an index or trend factor to the historical cost. As a result of this evaluation, the Company recorded a long-lived assets impairment charge during the first quarter of 2015 of
$1.0 million
. As part of this evaluation, the Company also reviewed the estimated useful lives assigned to long-lived assets and determined no adjustment was deemed necessary at that time.
As a result of these evaluations, the Company recorded total asset impairment charges of
$3.9 million
for the
nine
months ended
September 30, 2015
.
Accrued liabilities
Accrued liabilities consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2015
|
|
December 31, 2014
|
|
Compensation, including bonuses, fringe benefits, and payroll taxes
|
$
|
62,112
|
|
|
$
|
64,555
|
|
|
Accrued interest
|
413
|
|
|
2,678
|
|
|
Accrued taxes
|
13,040
|
|
|
10,784
|
|
|
Accrued rebates to customers
|
9,037
|
|
|
7,742
|
|
|
Accrued professional services
|
5,723
|
|
|
6,614
|
|
|
Accrued restructuring costs, current portion
|
1,912
|
|
|
1,777
|
|
|
Contingent consideration payable on acquisitions
|
—
|
|
|
1,113
|
|
|
Current portion of deferred income tax liability
|
338
|
|
|
319
|
|
|
Other liabilities
|
17,930
|
|
|
16,073
|
|
|
Total accrued liabilities
|
$
|
110,505
|
|
|
$
|
111,655
|
|
Other long-term liabilities
Other long-term liabilities consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2015
|
|
December 31, 2014
|
|
Uncertain tax positions
|
$
|
9,696
|
|
|
$
|
13,012
|
|
|
Accrued restructuring costs, less current portion
|
2,937
|
|
|
4,367
|
|
|
Other liabilities
|
7,544
|
|
|
10,047
|
|
|
Total other long-term liabilities
|
$
|
20,177
|
|
|
$
|
27,426
|
|
Other income (expense), net
Other income (expense), net consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
September 30, 2015
|
|
September 30, 2014
|
|
September 30, 2015
|
|
September 30, 2014
|
|
Net realized foreign currency gain (loss)
|
$
|
1,092
|
|
|
$
|
(544
|
)
|
|
$
|
1,099
|
|
|
$
|
(4,636
|
)
|
|
Net unrealized foreign currency gain (loss)
|
(2,161
|
)
|
|
5,756
|
|
|
2,302
|
|
|
10,697
|
|
|
Other, net
|
66
|
|
|
(76
|
)
|
|
737
|
|
|
116
|
|
|
Total other income (expense), net
|
$
|
(1,003
|
)
|
|
$
|
5,136
|
|
|
$
|
4,138
|
|
|
$
|
6,177
|
|
3. Business Combinations
Acquisition of MEK Consulting
On March 5, 2014, the Company acquired stock and assets of MEK Consulting, consisting of MEK Consulting Egypt Ltd., MEK Consulting Danismanlik Ltd. Sti., MEK Consulting Hellas EPE, and MEK Consulting SARL (MEK Consulting), collectively referred to as MEK. MEK is a full service CRO with operations in Egypt, Greece, Jordan, Lebanon, and Turkey. The aggregate purchase price for the acquisition totaled
$4.0 million
, which consisted of (i)
$3.0 million
cash, of which
$0.5 million
was placed
in escrow for
one
year following the closing, to satisfy potential indemnification claims, and (ii)
$1.0 million
contingent consideration, payable, if earned during the
one
-year period following the closing. In addition, the purchase agreement included provisions for
$2.0 million
of retention payments to operational staff and key employees that will be accounted for as compensation expense and expensed as earned during the
three
year period following the closing.
During the second quarter of 2015, the Company finalized the amount of the contingent consideration based on the achievement of the pre-agreed targets. The final contingent consideration totaled
$0.8 million
and, as a result, the Company released
$0.2 million
of accrued liabilities. The reduction in the contingent consideration was recorded in the "Other income (expense), net" line item in the Condensed Consolidated Statements of Operations. Additionally, the Company paid the
$0.5 million
of cash previously withheld to cover potential indemnification claims to the former owners of MEK.
Since the period of acquisition, the Company has recognized a total of
$1.4 million
of compensation expense for retention of operational staff and key employees, including
$0.1 million
and
$0.3 million
in the
three months ended
September 30, 2015
and
2014
, and
$0.4 million
and
$0.6 million
in the
nine months ended September 30, 2015
and
2014
, respectively. This compensation expense is included within "Direct costs" line item in the Condensed Consolidated Statements of Operations. The remaining
$0.6 million
of the retention payments will be accrued and expensed ratably over the remaining contingent employment periods, to the extent it is earned.
4.
Long-Term Debt
2015 Credit Agreement
On May 14, 2015, the Company entered into a
five
-year
$675.0 million
credit agreement ("2015 Credit Agreement") which is comprised of a
$525.0 million
term loan A ("2015 Term Loan") and a
$150.0 million
revolving line of credit ("2015 Revolver"). All obligations under the 2015 Credit Agreement are guaranteed by the Company and certain of the Company's direct and indirect wholly-owned domestic subsidiaries. The obligations under the 2015 Credit Agreement are secured by substantially all of the assets of the Company and the guarantors.
As of
September 30, 2015
,
$475.0 million
was outstanding on the 2015 Term Loan. Beginning on September 30, 2015 and continuing through March 31, 2020, the 2015 Term Loan has scheduled quarterly principal payments of the initial principal borrowed of
1.25%
, or
$6.6 million
per quarter in year 1;
1.875%
, or
$9.8 million
per quarter in years 2 and 3;
2.50%
, or
$13.1 million
per quarter in year 4; and
3.125%
, or
$16.4 million
per quarter in year 5; with the remaining outstanding principal due on May 14, 2020. On June 15, 2015, the Company made a
$50.0 million
prepayment on the term loan which will be applied against the regularly-scheduled quarterly principal payments. As such, the Company will not be required to make a mandatory principal payment until March 31, 2017.
The 2015 Credit Agreement provides Eurodollar Rate and Base Rate term loans. Eurodollar Rate term loans are one-, two-, three-, or six-month loans (or, with permission, twelve-month) and interest is due on the last day of each three-month period of the loans. Base Rate term loans have interest due on the last day of each calendar quarter. In advance of the last day of the then-current type of loan, the Company may select a new type of loan, so long as it does not extend beyond May 14, 2020.
The 2015 Revolver includes letters of credit (LOC) and swingline loans available in an amount not to exceed
$15.0 million
each. Fees are charged on all outstanding LOCs at an annual rate equal to the margin in effect on Eurodollar Rate revolving loans plus fronting fees. The fee is payable quarterly in arrears on the last day of the calendar quarter after the issuance date until the LOC expires. As of
September 30, 2015
, there were approximately
$1.0 million
of LOCs and
no
swingline loans outstanding, leaving
$149.0 million
in available borrowings under the 2015 Revolver.
The 2015 Term Loan and 2015 Revolver bear interest at a rate per annum equal to, at the Borrower's option, either: (i) a base rate determined by reference to the highest of: (a) the Prime Rate in effect on such date, (b) the Federal Funds Effective Rate in effect on such day plus
1/2
of
1.00%
; and (c) the sum of (1) the Eurodollar Rate that would be payable on such day for the Eurodollar Rate Loan with a one-
month interest period, and (2)
1.00%
; or (ii) a LIBOR rate determined by reference to the costs of funds for Eurodollar deposits for the interest period relevant to such borrowing adjusted for certain reserve requirements (Eurodollar Rate).
The applicable margin with respect to Base Rate is between
0.50%
and
1.25%
and the applicable margin with respect to the Eurodollar Rate borrowings is between
1.50%
and
2.25%
depending on the "Secured Net Leverage Ratio" (as defined in the 2015 Credit Agreement). The Company also pays a quarterly Commitment Fee between
0.20%
and
0.35%
on the average daily unused balance of the 2015 Revolver depending on the Secured Net Leverage Ratio at the adjustment date. As of
September 30, 2015
, the interest rate on the 2015 Term Loan was
2.21%
.
The 2015 Credit Agreement permits the Borrower to increase term loan or revolving commitments under the term loan facility and/or revolving credit facility and/or to request the establishment of one or more new term loan facilities and/or revolving facilities in an aggregate amount not to exceed
$150.0 million
if certain net leverage requirements are met. The availability of such additional capacity is subject to, among other things, receipt of commitments from existing lenders or other financial institutions.
The Company's maturities of obligations under the 2015 Credit Agreement for the years ending
December 31,
are as follows (in thousands):
|
|
|
|
|
|
|
|
2015 (remaining 3 months)
|
$
|
—
|
|
|
2016
|
—
|
|
|
2017
|
35,313
|
|
|
2018
|
45,938
|
|
|
2019
|
59,062
|
|
|
2020
|
334,687
|
|
|
Total long-term debt
|
$
|
475,000
|
|
2015 Refinancing
On May 14, 2015, the Company entered into the 2015 Credit Agreement and repaid all of its outstanding obligations under the 2014 Credit Agreement and paid transaction costs associated with the 2015 Credit Agreement. In addition, the Company recognized a
$9.4 million
loss on extinguishment of the 2014 Credit Agreement which was comprised of
$5.1 million
of unamortized discount and
$4.3 million
of unamortized debt issuance costs. In June 2015, the Company made a prepayment of
$50.0 million
under the 2015 Credit Agreement. As a result, the Company recognized an additional
$0.4 million
loss on extinguishment of debt.
The 2014 Credit Agreement was comprised of a
$425.0 million
term loan B, a
$100.0 million
revolving line of credit, and letter of credit and swingline facilities. The term loan had scheduled quarterly principal payments of
0.25%
of the aggregate initial principal borrowed, or
$1.1 million
per quarter, with the remaining outstanding principal due on November 13, 2021. The 2014 Credit Agreement bore interest at approximately
4.5%
during 2015 prior to repayment.
For the
nine months ended
September 30, 2014
, the Company had outstanding debt under the 2011 Credit Agreement which was comprised of a
$300.0 million
term loan, a
$75.0 million
revolving line of credit and a letter of credit and swingline facilities. As of
September 30, 2014
, the outstanding balance under the 2011 term loan was
$287.7 million
and the combined interest rate was
4.25%
. Additionally, at
September 30, 2014
the Company had an outstanding principal balance of
$300.0 million
in secured Senior Notes bearing interest of
11.5%
annually. In connection with the Company's initial public offering in November 2014, the Company repaid the 2011 Credit Agreement and Senior Notes and entered into the 2014 Credit Agreement.
Debt Covenants
The 2015 Credit Agreement contains usual and customary restrictive covenants that, among other things, place limitations on the Company's ability to pay dividends or make other restricted payments; prepay, redeem or purchase debt; incur liens; make loans and investments; incur additional indebtedness; amend or otherwise alter debt and other material documents; make acquisitions and dispose of assets; transact with affiliates; and engage in businesses that are not related to the Company's existing business.
In addition, the 2015 Credit Agreement contains financial covenants which require the Company to maintain a Secured Net Leverage Ratio and Interest Coverage Ratio as of the last day of any four consecutive fiscal quarters. The Secured Net Leverage Ratio is a relationship between the level of secured outstanding borrowings, net of a certain amount of cash not to exceed
$75.0 million
, and Consolidated EBITDA. The Interest Coverage Ratio is a relationship between Consolidated EBITDA and Consolidated Interest Expense. Specifically, these covenants require the Company to maintain a maximum Secured Net Leverage Ratio of no more than
4
to 1 and a minimum Interest Coverage Ratio of no less than
3
to 1. The Company was in compliance with its debt covenants for all periods through
September 30, 2015
.
Debt Discounts and Debt Issuance Costs
The Company recorded debt issuance costs of approximately
$4.2 million
and
$4.6 million
as of
September 30, 2015
and
December 31, 2014
, respectively. These costs are included as a component of other assets and are being amortized as a component of interest expense using the effective interest method over the term of the debt arrangements.
Borrowings under the Company’s 2014 Credit Agreement were issued net of a discount. As a result, the Company had a net discount balance of
$5.5 million
as of
December 31, 2014
. The discount was recorded as a reduction of the principal balance and was accreted up as a component of interest expense using the effective interest method over the term of the debt arrangement.
5. Fair Value Measurements
At
September 30, 2015
and
December 31, 2014
, the Company’s financial instruments included cash and cash equivalents, restricted cash, accounts receivable, accounts payable, accrued liabilities and debt. The fair value of the cash and cash equivalents, restricted cash, accounts receivable, accounts payable and accrued liabilities approximate their respective carrying amounts based on the liquidity and short-term nature of these instruments.
The fair value of the long-term debt is determined based on market prices for similar financial instruments or model-derived valuations based on observable inputs and falls under Level 2 of the fair value hierarchy as defined in the authoritative guidance. The estimated fair value of the long-term debt was
$475.0 million
and
$423.4 million
at
September 30, 2015
and
December 31, 2014
, respectively.
The Company does not have any recurring fair value measurements. There were
no
transfers between Level 1, Level 2 or Level 3 during the
nine months ended
September 30, 2015
.
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 are not remeasured to fair value on a recurring basis. These assets are tested for impairment annually and when a triggering event occurs. As of
September 30, 2015
and
December 31, 2014
, these assets carried on the balance sheet and not remeasured to fair value on a recurring basis total
$714.6 million
and
$747.2 million
, respectively.
The fair value of these assets falls under Level 3 of the fair value hierarchy as defined in the authoritative guidance and the fair value is estimated as follows:
Goodwill – As of
September 30, 2015
and
December 31, 2014
, the Company had recorded goodwill of
$552.8 million
and
$556.9 million
, respectively. Goodwill represents the difference between the purchase price and the fair value of the identifiable tangible and intangible net assets when an acquisition is accounted for using the purchase method. The Company performs a quantitative goodwill impairment assessment on each reporting unit. The Company derives each reporting unit’s fair value through a combination of the market approach (the guideline publicly traded company method) and the income approach (a discounted cash flow analysis). The Company then compares the carrying value of each reporting unit, inclusive of its assigned goodwill, to its fair value.
If the carrying value of the net assets assigned to the reporting unit exceeds the estimated fair value of the reporting unit, the Company performs the second step of the impairment test to determine the implied estimated fair value of the reporting unit’s goodwill. The Company determines the implied estimated fair value of goodwill by determining the present value of the estimated future cash flows for each reporting unit and comparing the reporting unit’s risk profile and growth prospects to selected, reasonably similar publicly traded companies. During the first quarter of 2015, the Company recognized a
$2.9 million
impairment charge related to goodwill, as discussed in Note 2 "Financial Statement Details."
Finite-lived Intangible Assets – As of
September 30, 2015
and
December 31, 2014
, the Company had recorded finite-lived intangible assets of
$126.8 million
and
$155.4 million
, respectively. If a triggering event occurs, the Company determines the estimated fair value of finite-lived intangible assets by determining the present value of the expected cash flows.
Indefinite-lived Intangible Assets – As of
September 30, 2015
and
December 31, 2014
, the Company had recorded indefinite-lived intangible assets of
$35.0 million
. When evaluating indefinite-lived intangible assets for impairment, the Company performs a quantitative impairment analysis. The Company determines the estimated fair value of the indefinite-lived intangible asset (trademark) by determining the present value of the estimated royalty payments on an after-tax basis that it would be required to pay the owner for the right to use such trade name. If the carrying amount exceeds the estimated fair value, an impairment loss is recognized in an amount equal to the excess.
6. Restructuring and Other Costs
During the second quarter of 2015, the Company initiated restructuring activities to better align its resources worldwide. Specifically, the Company initiated a plan to reduce its workforce by approximately
60
employees, primarily in the United States and certain countries in Europe and principally within the Clinical Development Services operations group and several corporate administrative functions. The Company completed the majority of these actions in June and July of 2015 and expects to complete the remaining activities by the end of 2015. For the
nine months ended
September 30, 2015
, the Company incurred
$1.8 million
of severance costs related to these activities.
For the
nine months ended
September 30, 2015
, the Company recorded a net reduction in facility closure expenses of
$0.2 million
primarily related to the reversal of previously accrued liabilities as a result of completing negotiations with respect to exiting certain facilities during the first quarter of 2015. Following these negotiations, the Company reduced its exit cost estimates related to the corresponding lease agreements by approximately
$0.7 million
, which was partially offset by expenses of
$0.5 million
primarily related to early lease termination fees.
The costs related to all restructuring plans are included in the "Restructuring and other costs" line item in the Condensed Consolidated Statements of Operations. Restructuring costs are not allocated to the Company’s reportable segments because they are not part of the segment performance measures regularly reviewed by management. During the
nine months ended
September 30, 2015
, the Company made payments and provision adjustments for all plans as presented below (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee Severance Costs
|
|
Facility Closure Charges
|
|
Total
|
|
Balance at December 31, 2014
|
$
|
—
|
|
|
$
|
6,144
|
|
|
$
|
6,144
|
|
|
Expenses incurred, net
|
1,761
|
|
|
(195
|
)
|
|
1,566
|
|
|
Payments made
|
(1,378
|
)
|
|
(1,483
|
)
|
|
(2,861
|
)
|
|
Balance at September 30, 2015
|
$
|
383
|
|
|
$
|
4,466
|
|
|
$
|
4,849
|
|
7. Stockholders' Equity
In May 2015, the Company repurchased
5,053,482
shares of its Class A common stock pursuant to an agreement with investment funds affiliated with its Sponsors, Avista Capital Partners, L.P. ("Avista") and Ontario Teachers' Pension Plan Board ("OTPP"), in a private transaction at a price of
$29.68
per share, after deducting underwriting discounts, commissions and related expenses, resulting in a total purchase price of approximately
$150.0 million
. In conjunction with this transaction, the Company's Sponsors and certain other stockholders sold in a registered secondary common stock offering an additional
8,050,000
shares of the Company's common stock, including
1,050,000
shares that were offered and sold pursuant to the underwriters' exercise in full of its option to purchase additional shares. Immediately following this transaction, OTPP, which was the only holder of Class B common stock, elected to convert
6,866,555
Class B shares into Class A shares on the pre-established
one
-for-one basis.
In August 2015, the Company's Sponsors and certain other stockholders sold
8,000,000
shares of the Company's Class A common stock in a registered secondary common stock offering. Immediately following this transaction, OTPP elected to convert all outstanding Class B shares into Class A shares on the pre-established
one
-for-one basis.
The following is a summary of the Company's authorized, issued and outstanding shares:
|
|
|
|
|
|
|
|
|
|
|
September 30, 2015
|
|
December 31, 2014
|
|
Shares Authorized:
|
|
|
|
|
|
|
Class A common stock
|
300,000,000
|
|
|
300,000,000
|
|
|
Class B common stock
|
300,000,000
|
|
|
300,000,000
|
|
|
Preferred stock
|
30,000,000
|
|
|
30,000,000
|
|
|
Total shares authorized
|
630,000,000
|
|
|
630,000,000
|
|
|
Shares Issued:
|
|
|
|
|
|
|
Class A common stock
|
56,483,381
|
|
|
51,199,856
|
|
|
Class B common stock
|
—
|
|
|
10,033,994
|
|
|
Preferred stock
|
—
|
|
|
—
|
|
|
Total shares issued
|
56,483,381
|
|
|
61,233,850
|
|
|
Shares Outstanding:
|
|
|
|
|
|
|
Class A common stock
|
56,483,381
|
|
|
51,199,856
|
|
|
Class B common stock
|
—
|
|
|
10,033,994
|
|
|
Preferred stock
|
—
|
|
|
—
|
|
|
Total shares outstanding
|
56,483,381
|
|
|
61,233,850
|
|
8. Earnings Per Share
The following table provides a reconciliation of the numerators and denominators of the basic and diluted earnings per share computations for the
three and nine months ended
September 30, 2015
and
September 30, 2014
(in thousands, except per share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Numerator)
|
|
Number of Shares (Denominator)
|
|
Per-Share Amount
|
|
For the three months ended September 30, 2015
|
|
|
|
|
|
|
Basic net income per share
|
$
|
37,814
|
|
|
56,325
|
|
|
$
|
0.67
|
|
|
Effect of dilutive securities
|
—
|
|
|
2,439
|
|
|
|
|
Diluted net income per share
|
$
|
37,814
|
|
|
58,764
|
|
|
$
|
0.64
|
|
|
|
|
|
|
|
|
|
For the three months ended September 30, 2014
|
|
|
|
|
|
|
Basic net income per share
|
$
|
12,430
|
|
|
51,905
|
|
|
$
|
0.24
|
|
|
Effect of dilutive securities
|
—
|
|
|
609
|
|
|
|
|
Diluted net income per share
|
$
|
12,430
|
|
|
52,514
|
|
|
$
|
0.24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Numerator)
|
|
Number of Shares (Denominator)
|
|
Per-Share Amount
|
|
For the nine months ended September 30, 2015
|
|
|
|
|
|
|
Basic net income per share
|
$
|
86,391
|
|
|
58,583
|
|
|
$
|
1.47
|
|
|
Effect of dilutive securities
|
—
|
|
|
2,243
|
|
|
|
|
Diluted net income per share
|
$
|
86,391
|
|
|
60,826
|
|
|
$
|
1.42
|
|
|
|
|
|
|
|
|
|
For the nine months ended September 30, 2014
|
|
|
|
|
|
|
Basic net income per share
|
$
|
25,935
|
|
|
51,900
|
|
|
$
|
0.50
|
|
|
Effect of dilutive securities
|
—
|
|
|
315
|
|
|
|
|
Diluted net income per share
|
$
|
25,935
|
|
|
52,215
|
|
|
$
|
0.50
|
|
The computation of diluted earnings per share excludes unexercised stock options and unvested restricted stock units ("RSUs") that are anti-dilutive. The following common stock equivalents were excluded from the earnings per share computation as their inclusion would have been anti-dilutive (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|
Weighted average number of stock options and RSUs calculated using the treasury stock method that were excluded due to the exercise/threshold price exceeding the average market price of our common stock during the period
|
344
|
|
|
644
|
|
|
184
|
|
|
820
|
|
9. Stock-Based Compensation
The following table summarizes option activity as of and for the nine month period ended
September 30, 2015
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Options
|
|
Weighted Average Exercise Price
|
|
Weighted Average Grant Date Fair Value
|
|
Outstanding at December 31, 2014
|
|
3,930,220
|
|
|
$
|
11.64
|
|
|
|
|
Granted
|
|
446,598
|
|
|
$
|
41.65
|
|
|
$
|
13.80
|
|
|
Exercised
|
|
(466,714
|
)
|
|
$
|
10.02
|
|
|
|
|
Forfeited
|
|
(88,755
|
)
|
|
$
|
15.56
|
|
|
|
|
Expired
|
|
(10,244
|
)
|
|
$
|
10.57
|
|
|
|
|
Outstanding at September 30, 2015
|
|
3,811,105
|
|
|
$
|
15.28
|
|
|
|
As of
September 30, 2015
, the Company recorded a receivable of
$0.4 million
from the Company's brokerage services provider associated with the exercises of stock options by Company's employees. This receivable was included in the "
Prepaid expenses and other current assets
" line item on the Company’s Condensed Consolidated Balance Sheet as of
September 30, 2015
and was fully paid in cash on October 1, 2015.
The following table summarizes RSU activity as of and for the period ended
September 30, 2015
:
|
|
|
|
|
|
|
|
|
|
|
|
Number of RSUs
|
|
Weighted Average
Grant Date Fair Value
|
|
Non-vested at December 31, 2014
|
674
|
|
|
|
|
Granted
|
223,292
|
|
|
$
|
41.65
|
|
|
Vested
|
—
|
|
|
|
|
Forfeited
|
—
|
|
|
|
|
Non-vested at September 30, 2015
|
223,966
|
|
|
|
Total stock-based compensation expense recognized in the Condensed Consolidated Statements of Operations for the
three and nine months ended
September 30, 2015
and
2014
was as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|
Direct costs
|
$
|
732
|
|
|
$
|
491
|
|
|
$
|
1,468
|
|
|
$
|
1,026
|
|
|
Selling, general and administrative
|
936
|
|
|
390
|
|
|
1,820
|
|
|
1,279
|
|
|
Total stock-based compensation expense
|
$
|
1,668
|
|
|
$
|
881
|
|
|
$
|
3,288
|
|
|
$
|
2,305
|
|
10. Income Taxes
The Company's effective tax rate for the
three and nine months ended
September 30, 2015
and
2014
was lower than the U.S. federal statutory rate primarily due to (i) income or losses generated in jurisdictions where the income tax expense or benefit was offset by a corresponding change in the
valuation allowance on net deferred tax assets, (ii) the geographic split of pre-tax income, and (iii) discrete tax adjustments related to the release of valuation allowances and unrecognized tax benefits.
The Company recorded a valuation allowance against all of its deferred tax assets related to net operating loss carryforwards in the United States as of
September 30, 2015
and
December 31, 2014
, respectively. The Company assesses both positive and negative evidence available to estimate whether future taxable income will be available to permit the use of the existing deferred tax assets. As of
September 30, 2015
, a significant component of the evidence evaluated was the historical losses experienced in the United States. Such objective negative evidence limits the Company's ability to consider other subjective evidence, such as its projections for future growth. However, given the Company's current and anticipated future earnings, the Company believes it is reasonably possible that within the next 12 months sufficient positive evidence may become available to allow the Company to conclude that a significant portion of the valuation allowance will no longer be needed. The release of the valuation allowance would result in the recognition of certain deferred tax assets and a decrease to income tax expense for the period in which the release is recorded. The exact timing and amount of the valuation allowance released are subject to change and are based on the level of profitability that the Company is able to achieve and reasonably forecast.
The Company recognizes a tax benefit from an uncertain tax position only if the Company believes it is more likely than not to be sustained upon examination based on the technical merits of the position. Judgment is required in determining what constitutes an individual tax position, as well as the assessment of the outcome of each tax position. The Company considers many factors when evaluating and estimating tax positions and tax benefits. In addition, the calculation of tax liabilities involves dealing with uncertainties in the application of complex tax regulations in domestic and foreign jurisdictions. If events occur and the payment of these amounts ultimately proves to be unnecessary, the reversal of liabilities would result in tax benefits being recognized in the period when it is determined the liabilities are no longer necessary. If the calculation of liability related to uncertain tax positions proves to be more or less than the ultimate assessment, a tax expense or benefit to expense, respectively, would result.
As of
September 30, 2015
and
December 31, 2014
, the Company had gross unrecognized tax benefits of
$20.6 million
and
$21.6 million
, respectively. The total amount of unrecognized tax benefit that, if recognized, would impact the effective tax rate was
$9.7 million
and
$13.0 million
, respectively. During the
three and nine months ended
September 30, 2015
, the Company released
$0.5 million
and
$2.9 million
in uncertain tax benefits. The release of the benefits was recorded as a discrete adjustment to income tax expense. The Company believes it is reasonably possible that approximately
$2.4 million
of gross unrecognized tax benefits related to intercompany transactions will be released in the next twelve months due to statute of limitations expirations.
11. Segment Information
The Company is managed through
three
reportable segments: Clinical Development Services, Phase I Services and Global Consulting. Clinical Development Services offers a variety of clinical development services including full-service global studies, as well as ancillary services such as clinical monitoring, investigator recruitment, patient recruitment, data management and study reports to assist customers with their drug development process. Phase I Services focuses on clinical development services for Phase I trials that include scientific exploratory medicine, first-in-human studies through proof-of-concept stages, and support for Phase I studies in established compounds. Global Consulting provides consulting services regarding clinical trial regulatory affairs, regulatory consulting services, quality assurance audits and pharmacovigilance consulting, non-clinical consulting and medical writing consulting.
The Company’s Chief Operating Decision Maker (Company's CODM) reviews segment performance and allocates resources based upon segment revenue and segment contribution margin. The Company’s CODM does not review inter-segment revenue when evaluating segment performance and allocating resources to each segment. Thus, inter-segment revenue is not included in the segment revenue presented in the table below. As such, total segment revenue in the table below is equal to the Company’s consolidated net service revenue. All direct costs are allocated to the Company’s segments, and as such, segment total direct costs are equal to the Company’s consolidated direct costs and consolidated gross margin. Revenue, direct costs and contribution margin for each of our segments were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
September 30, 2015
|
|
September 30, 2014
|
|
September 30, 2015
|
|
September 30, 2014
|
|
Revenue:
|
|
|
|
|
|
|
|
|
Clinical Development Services
|
$
|
227,209
|
|
|
$
|
202,085
|
|
|
$
|
655,262
|
|
|
$
|
581,510
|
|
|
Phase I Services
|
5,276
|
|
|
3,782
|
|
|
12,141
|
|
|
8,377
|
|
|
Global Consulting
|
2,009
|
|
|
1,896
|
|
|
5,981
|
|
|
6,116
|
|
|
Segment revenue
|
234,494
|
|
|
207,763
|
|
|
673,384
|
|
|
596,003
|
|
|
Reimbursable out-of-pocket expenses not allocated to segments
|
115,651
|
|
|
90,861
|
|
|
322,970
|
|
|
255,141
|
|
|
Total revenue
|
$
|
350,145
|
|
|
$
|
298,624
|
|
|
$
|
996,354
|
|
|
$
|
851,144
|
|
|
Direct costs:
|
|
|
|
|
|
|
|
|
Clinical Development Services
|
$
|
130,755
|
|
|
$
|
124,663
|
|
|
$
|
385,411
|
|
|
$
|
367,245
|
|
|
Phase I Services
|
3,163
|
|
|
2,838
|
|
|
8,478
|
|
|
7,395
|
|
|
Global Consulting
|
1,612
|
|
|
2,056
|
|
|
5,099
|
|
|
6,462
|
|
|
Segment direct costs
|
135,530
|
|
|
129,557
|
|
|
398,988
|
|
|
381,102
|
|
|
Reimbursable out-of-pocket expenses not allocated to segments
|
115,651
|
|
|
90,861
|
|
|
322,970
|
|
|
255,141
|
|
|
Direct costs and reimbursable out-of-pocket expenses
|
$
|
251,181
|
|
|
$
|
220,418
|
|
|
$
|
721,958
|
|
|
$
|
636,243
|
|
|
Segment contribution margin:
|
|
|
|
|
|
|
|
|
Clinical Development Services
|
$
|
96,454
|
|
|
$
|
77,422
|
|
|
$
|
269,851
|
|
|
$
|
214,265
|
|
|
Phase I Services
|
2,113
|
|
|
944
|
|
|
3,663
|
|
|
982
|
|
|
Global Consulting
|
397
|
|
|
(160
|
)
|
|
882
|
|
|
(346
|
)
|
|
Segment contribution margin
|
98,964
|
|
|
78,206
|
|
|
274,396
|
|
|
214,901
|
|
|
Less expenses not allocated to segments:
|
|
|
|
|
|
|
|
|
Selling, general and administrative
|
40,429
|
|
|
38,185
|
|
|
113,354
|
|
|
104,332
|
|
|
Restructuring and other costs
|
(28
|
)
|
|
2,951
|
|
|
1,566
|
|
|
6,126
|
|
|
Transaction expenses
|
403
|
|
|
—
|
|
|
922
|
|
|
2,042
|
|
|
Asset impairment charges
|
—
|
|
|
—
|
|
|
3,931
|
|
|
17,245
|
|
|
Depreciation and amortization
|
13,819
|
|
|
14,331
|
|
|
41,956
|
|
|
39,965
|
|
|
Consolidated income from operations
|
$
|
44,341
|
|
|
$
|
22,739
|
|
|
$
|
112,667
|
|
|
$
|
45,191
|
|
12. Operations by Geographic Location
The Company conducts operations in North America, Europe, Middle East and Africa, Asia-Pacific, and Latin America through wholly-owned subsidiaries and representative sales offices. The Company attributes net service revenue to geographical locations based upon the location of the customer (i.e., the location to which the Company invoices the end customer). The following table summarizes total revenue by geographic area (in thousands and all intercompany transactions have been eliminated):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
September 30, 2015
|
|
September 30, 2014
|
|
September 30, 2015
|
|
September 30, 2014
|
|
Net service revenue:
|
|
|
|
|
|
|
|
|
North America(1)
|
$
|
171,756
|
|
|
$
|
146,837
|
|
|
$
|
491,207
|
|
|
$
|
420,139
|
|
|
Europe, Middle East and Africa
|
58,083
|
|
|
55,343
|
|
|
168,876
|
|
|
157,771
|
|
|
Asia-Pacific
|
4,569
|
|
|
5,590
|
|
|
13,154
|
|
|
18,071
|
|
|
Latin America
|
86
|
|
|
(7
|
)
|
|
147
|
|
|
22
|
|
|
Total net service revenue
|
234,494
|
|
|
207,763
|
|
|
673,384
|
|
|
596,003
|
|
|
Reimbursable-out-of-pocket expenses
|
115,651
|
|
|
90,861
|
|
|
322,970
|
|
|
255,141
|
|
|
Total revenue
|
$
|
350,145
|
|
|
$
|
298,624
|
|
|
$
|
996,354
|
|
|
$
|
851,144
|
|
(1) Net service revenue for the North America region includes revenue attributable to the U.S. of
$165.9 million
and
$145.8 million
, or
70.7%
and
70.2%
of net service revenue, for the
three months ended September 30, 2015
and
2014
, respectively. Net service revenue for the North America region includes revenue attributable to the U.S. of
$477.0 million
and
$418.5 million
, or
70.8%
and
70.2%
of net service revenue for the
nine months ended September 30, 2015
and
2014
, respectively.
No
other countries represented more than
10%
of net service revenue for any period.
The following table summarizes long-lived assets by geographic area (in thousands and all intercompany transactions have been eliminated):
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2015
|
|
December 31, 2014
|
|
Total property and equipment, net:
|
|
|
|
|
North America(1)
|
$
|
26,873
|
|
|
$
|
28,287
|
|
|
Europe, Middle East, and Africa(2)
|
8,387
|
|
|
10,212
|
|
|
Asia-Pacific
|
3,989
|
|
|
4,473
|
|
|
Latin America
|
485
|
|
|
753
|
|
|
Total property and equipment, net
|
$
|
39,734
|
|
|
$
|
43,725
|
|
(1) Long-lived assets for the North America region include property and equipment, net attributable to the U.S. of
$26.5 million
and
$26.6 million
as of
September 30, 2015
and
December 31, 2014
, respectively.
(2) Long-lived assets for the Europe, Middle East, and Africa regions include property and equipment, net attributable to Spain of
$4.1 million
and
$4.5 million
as of
September 30, 2015
and
December 31, 2014
, respectively.
13. Concentration of Credit Risk
Financial assets that subject the Company to credit risk primarily consist of cash and cash equivalents and billed and unbilled accounts receivable. The Company holds cash and cash equivalents, consisting principally of cash, which have balances that often exceed insurance limits set by the Federal Deposit Insurance Corporation ("FDIC") at several major financial institutions with reputable credit ratings . The Company believes these instruments bear minimal credit risk. There was no governmental insurance coverage on bank balances of
$0.5 million
at
September 30, 2015
and
$1.2 million
at
December 31, 2014
, held in the Netherlands.
The Company earns substantially all of its net service revenue by performing services under contracts with pharmaceutical and biotechnology companies. The concentration of credit risk is equal to the outstanding billed and unbilled accounts receivable, less deferred revenue related thereto. The Company does not require collateral or other securities to support customer receivables. The Company maintains a credit approval process and makes significant judgments in connection with assessing customers' ability to pay throughout the contractual obligation. Despite this assessment, from time to time, customers are unable to meet their payment obligations. The Company continuously monitors customers' credit worthiness and applies judgment in establishing a provision for estimated credit losses based on historical experience and any specific customer collection issues that have been identified.
No customer accounted for 10% or more of total net service revenue for the
three and nine months ended
September 30, 2015
. For each of the
three and nine months ended
September 30, 2014
, various subsidiaries of Astellas Pharma, Inc. accounted for
12%
of total net service revenue. For the
three and nine months ended
September 30, 2014
, various subsidiaries of Otsuka Holdings Co., Ltd. accounted for
12%
and
14%
of total net service revenue, respectively.
At
September 30, 2015
and
December 31, 2014
,
no
customer accounted for more than
10%
of billed and unbilled accounts receivable.
14. Related-Party Transactions
Through November 7, 2014, the Company had an agreement with a significant stockholder for the stockholder to perform certain consulting services. In conjunction with the corporate reorganization in November 2014, the Company paid cash of approximately
$3.4 million
to terminate this agreement. Prior to the termination of this agreement, the Company recognized
$0.1 million
and
$0.4 million
of consulting services expense for the
three and nine months ended
September 30, 2014
, respectively.
The Company recorded net service revenue of
$0.1 million
for both the
three and nine months ended
September 30, 2015
, from a customer who had a significant stockholder who is also a significant stockholder of the Company. There were
no
related-party revenue transactions for the
three and nine months ended
September 30, 2014
.
15. Commitments and Contingencies
The Company records accruals for claims, suits, investigations and proceedings when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. The Company reviews claims, suits, investigations and proceedings at least quarterly and records or adjusts accruals related to such matters to reflect the impact and status of any settlements, rulings, advice of counsel or other information pertinent to a particular matter.
In the normal course of business, the Company periodically becomes involved in various claims and lawsuits that are incidental to its business. While the outcome of these matters could differ from management's expectations, the Company does not believe the resolution of these matters will have a material effect upon the Company's financial statements.
The Company currently maintains insurance for risks associated with the operation of its business, provision of professional services and ownership of property. These policies provide coverage for a variety of potential losses, including loss or damage to property, bodily injury, general commercial liability, professional errors and omissions, and medical malpractice.
The Company is self-insured for certain losses relating to health insurance claims for the majority of its employees located within the United States. The Company purchases stop-loss coverage from third party insurance carriers to limit individual or aggregate loss exposure with respect to the Company's health insurance claims.
Accrued insurance liabilities and related expenses are based on estimates of claims incurred but not reported. Incurred but not reported claims are generally determined by taking into account historical claims payments and known trends such as claim frequency and severity. The Company makes estimated judgments and assumptions with respect to these calculations, including but not limited to, estimated healthcare cost trends, estimated lag time to report any paid claims, average cost per claim and other factors. The Company believes the estimates of future liability are reasonable based on its methodology; however, changes in claims activity (volume and amount per claim) could materially affect the estimate for these liabilities. The Company continually monitors claim activity and incidents and makes necessary adjustments based on these evaluations. As of
September 30, 2015
, the Company had accrued self-insurance reserves of
$2.7 million
.
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 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, 2014
.
In addition to historical condensed consolidated financial information, the following discussion contains forward-looking statements 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. Without limiting the foregoing, the words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “should,” “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: 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; the impact of underpricing our contracts, overrunning our cost estimates or failing to receive approval for or experiencing delays with documentation of change orders; the risks associated with our information systems infrastructure; any adverse effects from customer or therapeutic area concentration; the risks associated with doing business internationally; our potential failure to successfully increase our market share, grow our business, and execute our growth strategies; our failure to perform our services in accordance with contractual requirements, regulatory standards and ethical considerations; the risk of litigation and personal injury claims; the impact of unfavorable economic conditions and exchange rate and effective income tax rate fluctuations; the risks associated with potential future acquisitions or investments in our customers' businesses or drugs; the impact of changes in government regulations and healthcare reform; and our ability to service our substantial indebtedness. For a further discussion of the risks relating to our business, see “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended
December 31, 2014
and in our Form 10-Q for the quarter ended March 31, 2015.
Overview of our Business and Services
We are a leading global CRO, based on revenues, and are exclusively focused on Phase I to Phase IV clinical development services for the biopharmaceutical and medical device industries. We provide our customers highly differentiated therapeutic alignment and expertise, with a particular strength in central nervous system, or CNS, oncology and other complex diseases. We consistently and predictably deliver clinical development services in a complex environment and offer a proprietary, operational approach to clinical trials through our Trusted Process
®
methodology. Our service offerings focus on optimizing the development of and, therefore, the commercial potential for, our customers’ new biopharmaceutical compounds, enhancing returns on their research and development, or R&D, investments, and reducing their overhead by offering an attractive variable cost alternative to fixed cost, in-house resources.
Our extensive range of services supports the entire drug development process from Phase I to Phase IV and allows us to offer our customers an integrated suite of investigative site support and clinical
development services. We offer these services across a wide variety of therapeutic areas with deep clinical expertise with a primary focus on Phase II to Phase IV clinical trials. We provide total biopharmaceutical program development while also providing discrete services for any part of a trial. Our combination of service area experts and depth of clinical capability allows for enhanced protocol design and actionable trial data.
We have three reportable segments: Clinical Development Services, Phase I Services and Global Consulting. Clinical Development Services offers a variety of clinical development services, including full-service global studies, as well as ancillary services such as clinical monitoring, investigator recruitment, patient recruitment, data management and study reports to assist customers with their drug development process. Phase I Services focuses on clinical development services for Phase I trials that include scientific exploratory medicine, first-in-human studies through proof-of-concept stages, and support for Phase I studies in established compounds. Global Consulting provides consulting services regarding clinical trial regulatory affairs, regulatory consulting services, quality assurance audits and pharmacovigilance consulting, non-clinical consulting and medical writing consulting. For financial information regarding revenue and long-lived assets by geographic areas, please see
Note 12 - Operations by Geographic Location
in our condensed consolidated financial statements included in Item 1 of this Quarterly Report on Form 10-Q.
The discussion and analysis of our financial condition and results of operations herein is presented on a consolidated basis. Because our Clinical Development Services segment accounts for substantially all of our business operations, we believe that a discussion of our reportable segments’ operations would not be meaningful disclosure for investors. See further discussion in
Note 11 - Segment Information
to our unaudited condensed consolidated financial statements.
We earn net service revenue primarily for services performed under contracts for global clinical drug trials, based upon a combination of milestones and output measures that are specific to the services performed and defined by the contract. Engagements for Phase II to Phase IV clinical trials, which represent the majority of our revenue, are typically long duration contracts ranging from several months to several years. The contracts for these engagements typically cover the detailed scope of work, phases, milestones, billing schedules and processes for review of work and clinical results. Contracts are individually priced and negotiated based on the anticipated level of effort required to complete the project, the complexity and performance risks, and the level of competition in the market.
Direct costs associated with these contracts consist principally of compensation expense and benefits associated with our employees and other employee-related costs. While we can 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 net service 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 created by our ability to effectively manage our workforce, (ii) adjustments to the timing of work on specific customer contracts, (iii) the experience mix of personnel assigned to projects, and (iv) the service mix and pricing of our contracts. 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.
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 its service provider, provided that (i) the customer has received appropriate internal funding approval, (ii) the project or projects are not contingent upon completion of another trial or event, (iii) the project or projects are expected to commence within the next 12 months and (iv) the customer has entered or intends to enter into a comprehensive contract as soon as practicable. Contracts generally have terms ranging from several months to several years. We recognize revenue on these awards as services are performed, provided we have entered into a contractual commitment with the customer.
Our new business awards, net of cancellations of prior awards, for the
three months ended
September 30, 2015
and
September 30, 2014
were
$327.7 million
and
$249.3 million
, respectively. Our new business awards, net of cancellations of prior awards, for the
nine months ended
September 30, 2015
and
September 30, 2014
were
$879.1 million
and
$633.5 million
, respectively. Net new business awards were higher in the first nine months of 2015 compared to the first nine months of 2014, primarily due to (i) the 2014 periods including a cancellation valued at approximately $132.0 million, impacting net awards by $85.0 million, (ii) the continued growth of our business across therapeutic areas, and (iii) the timing of the conversion of our relationship with a major customer from primarily a functional service provider relationship to a more traditional full service arrangement. New business awards have varied and will continue to vary significantly from quarter to quarter. Fluctuations in our reported backlog and 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 that reporting period might reach levels that are not sustained in subsequent reporting periods.
The dollar amount of our backlog consists of anticipated future net service revenue from business awards that either have not started but are anticipated to begin in the future, or that are in process and have not been completed. Our backlog also reflects any cancellation or adjustment activity related to these contracts. The average duration of our contracts will fluctuate from period to period in the future based on the contracts comprising our backlog at any given time. The majority of our contracts can be terminated by our customers with 30 days' notice. We adjust the amount of our backlog each quarter for foreign currency fluctuations. For the three,
nine
and twelve months ended
September 30, 2015
, fluctuations in foreign currency exchange rates resulted in an unfavorable impact on our
September 30, 2015
backlog in the amount of
$3.1 million
,
$29.0 million
and
$48.1 million
, respectively, primarily due to the weakening of the Euro and British Pound against the U.S. dollar. As of
September 30, 2015
and
2014
, our backlog was
$1.8 billion
and
$1.5 billion
, respectively. Included within backlog at
September 30, 2015
is approximately
$0.2 billion
that we expect to generate revenue from in
2015
.
We believe that backlog and net new business awards might not be consistent indicators of future revenue because they have been, and likely will be, affected by a number of factors, including the variable size and duration of projects, many of which are performed over several years, cancellations and changes to the scope of work during the course of projects. Additionally, projects may be canceled or delayed by the customer or delayed by regulatory authorities. Projects that have been delayed for less than 12 months remain in backlog, but the anticipated timing of the recognition of revenue is uncertain. We generally do not have a contractual right to the full amount of the revenue 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 the rate at which our backlog and net new business awards convert into revenue to decrease, or lengthen. See "Risk Factors - Risks Related to Our Business - Our Backlog might not be indicative of our future revenue, and we might not realize all of the anticipated future revenue reflected in our backlog" in our Annual Report on Form 10-K for the fiscal year ended
December 31, 2014
and in our Form 10-Q for the quarter ended March 31, 2015.
Results of Operations
The following tables set forth amounts from our condensed consolidated financial statements along with the percentage changes for the
three and nine months ended
September 30, 2015
and
2014
(in thousands, except percentages):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
|
|
September 30, 2015
|
|
September 30, 2014
|
|
Change
|
|
Net service revenue
|
$
|
234,494
|
|
|
$
|
207,763
|
|
|
$
|
26,731
|
|
|
12.9
|
%
|
|
Reimbursable out-of-pocket expenses
|
115,651
|
|
|
90,861
|
|
|
24,790
|
|
|
27.3
|
%
|
|
Total revenue
|
350,145
|
|
|
298,624
|
|
|
51,521
|
|
|
17.3
|
%
|
|
Direct costs
|
135,530
|
|
|
129,557
|
|
|
5,973
|
|
|
4.6
|
%
|
|
Reimbursable out-of-pocket expenses
|
115,651
|
|
|
90,861
|
|
|
24,790
|
|
|
27.3
|
%
|
|
Selling, general and administrative
|
40,429
|
|
|
38,185
|
|
|
2,244
|
|
|
5.9
|
%
|
|
Restructuring and other costs
|
(28
|
)
|
|
2,951
|
|
|
(2,979
|
)
|
|
(100.9
|
)%
|
|
Transaction expenses
|
403
|
|
|
—
|
|
|
403
|
|
|
—
|
%
|
|
Depreciation
|
4,357
|
|
|
4,734
|
|
|
(377
|
)
|
|
(8.0
|
)%
|
|
Amortization
|
9,462
|
|
|
9,597
|
|
|
(135
|
)
|
|
(1.4
|
)%
|
|
Total operating expenses
|
305,804
|
|
|
275,885
|
|
|
29,919
|
|
|
10.8
|
%
|
|
Income from operations
|
44,341
|
|
|
22,739
|
|
|
21,602
|
|
|
95.0
|
%
|
|
Total other expense, net
|
(4,040
|
)
|
|
(7,767
|
)
|
|
(3,727
|
)
|
|
(48.0
|
)%
|
|
Income before provision for income taxes
|
40,301
|
|
|
14,972
|
|
|
25,329
|
|
|
169.2
|
%
|
|
Income tax expense
|
(2,487
|
)
|
|
(2,417
|
)
|
|
70
|
|
|
2.9
|
%
|
|
Net income
|
$
|
37,814
|
|
|
$
|
12,555
|
|
|
$
|
25,259
|
|
|
201.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
|
|
|
September 30, 2015
|
|
September 30, 2014
|
|
Change
|
|
Net service revenue
|
$
|
673,384
|
|
|
$
|
596,003
|
|
|
$
|
77,381
|
|
|
13.0
|
%
|
|
Reimbursable out-of-pocket expenses
|
322,970
|
|
|
255,141
|
|
|
67,829
|
|
|
26.6
|
%
|
|
Total revenue
|
996,354
|
|
|
851,144
|
|
|
145,210
|
|
|
17.1
|
%
|
|
Direct costs
|
398,988
|
|
|
381,102
|
|
|
17,886
|
|
|
4.7
|
%
|
|
Reimbursable out-of-pocket expenses
|
322,970
|
|
|
255,141
|
|
|
67,829
|
|
|
26.6
|
%
|
|
Selling, general and administrative
|
113,354
|
|
|
104,332
|
|
|
9,022
|
|
|
8.6
|
%
|
|
Restructuring and other costs
|
1,566
|
|
|
6,126
|
|
|
(4,560
|
)
|
|
(74.4
|
)%
|
|
Transaction expenses
|
922
|
|
|
2,042
|
|
|
(1,120
|
)
|
|
(54.8
|
)%
|
|
Asset impairment charges
|
3,931
|
|
|
17,245
|
|
|
(13,314
|
)
|
|
(77.2
|
)%
|
|
Depreciation
|
13,543
|
|
|
16,628
|
|
|
(3,085
|
)
|
|
(18.6
|
)%
|
|
Amortization
|
28,413
|
|
|
23,337
|
|
|
5,076
|
|
|
21.8
|
%
|
|
Total operating expenses
|
883,687
|
|
|
805,953
|
|
|
77,734
|
|
|
9.6
|
%
|
|
Income from operations
|
112,667
|
|
|
45,191
|
|
|
67,476
|
|
|
149.3
|
%
|
|
Total other expense, net
|
(18,187
|
)
|
|
(35,450
|
)
|
|
(17,263
|
)
|
|
(48.7
|
)%
|
|
Income before provision for income taxes
|
94,480
|
|
|
9,741
|
|
|
84,739
|
|
|
869.9
|
%
|
|
Income tax benefit (expense)
|
(8,089
|
)
|
|
16,569
|
|
|
24,658
|
|
|
148.8
|
%
|
|
Net income
|
$
|
86,391
|
|
|
$
|
26,310
|
|
|
$
|
60,081
|
|
|
228.4
|
%
|
Net Service Revenue and Reimbursable Out-of-Pocket Expenses
For the
three and nine months ended
September 30, 2015
and
September 30, 2014
, total revenue was comprised of the following (in thousands, except percentages):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
|
|
September 30, 2015
|
|
September 30, 2014
|
|
Change
|
|
Net service revenue
|
$
|
234,494
|
|
|
$
|
207,763
|
|
|
$
|
26,731
|
|
|
12.9
|
%
|
|
Reimbursable out-of-pocket expenses
|
115,651
|
|
|
90,861
|
|
|
24,790
|
|
|
27.3
|
%
|
|
Total revenue
|
$
|
350,145
|
|
|
$
|
298,624
|
|
|
$
|
51,521
|
|
|
17.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
|
|
|
September 30, 2015
|
|
September 30, 2014
|
|
Change
|
|
Net service revenue
|
$
|
673,384
|
|
|
$
|
596,003
|
|
|
$
|
77,381
|
|
|
13.0
|
%
|
|
Reimbursable out-of-pocket expenses
|
322,970
|
|
|
255,141
|
|
|
67,829
|
|
|
26.6
|
%
|
|
Total revenue
|
$
|
996,354
|
|
|
$
|
851,144
|
|
|
$
|
145,210
|
|
|
17.1
|
%
|
For the
three months ended
September 30, 2015
, net service revenue increased by
$26.7 million
, or
12.9%
, to
$234.5 million
from
$207.8 million
for the
three months ended
September 30, 2014
. For the
nine months ended
September 30, 2015
, net service revenue increased by
$77.4 million
, or
13.0%
, to
$673.4 million
from
$596.0 million
for the
nine months ended
September 30, 2014
. These increases were primarily driven by continued strong awards over the last two years, a lower cancellation rate of previously awarded business and a positive revenue mix. In
2015
, our revenue grew across all therapeutic areas and has been particularly strong in the central nervous system, oncology and other complex therapeutic
areas. During the
three and nine months ended
September 30, 2015
, fluctuations in foreign currency exchange rates resulted in an unfavorable impact of
$10.3 million
and
$31.9 million
, respectively, on net service revenue as compared to the
three and nine months ended
September 30, 2014
.
Net service revenue from our top five customers accounted for approximately
33.4%
and
35.6%
of total net service revenue for the
three months ended
September 30, 2015
and
September 30, 2014
, respectively. Net service revenue from our top five customers accounted for approximately
34.5%
and
37.1%
of total net service revenue for the
nine months ended
September 30, 2015
and
September 30, 2014
, respectively.
No customer accounted for 10% or more of total net service revenue for the
three and nine months ended
September 30, 2015
. For each of the
three and nine months ended
September 30, 2014
, various subsidiaries of Astellas Pharma, Inc. accounted for
12%
of total net service revenue. For the
three and nine months ended
September 30, 2014
, various subsidiaries of Otsuka Holdings Co., Ltd. accounted for
12%
and
14%
of total net service revenue, respectively.
For the
three months ended
September 30, 2015
, reimbursable out-of-pocket expenses, which represent expenses related to our clinical studies that are passed directly through to customers, increased by
$24.8 million
, or
27.3%
, to
$115.7 million
from
$90.9 million
for the
three months ended
September 30, 2014
. For the
nine months ended
September 30, 2015
, reimbursable out-of-pocket expenses, increased by
$67.8 million
, or
26.6%
, to
$323.0 million
from
$255.1 million
for the
nine months ended
September 30, 2014
. The reimbursements are offset by an equal amount shown under the same caption in the "Costs and operating expenses" section in our Condensed Consolidated Statements of Operations and, accordingly, have no impact on gross margin. Reimbursable out-of-pocket expenses fluctuate significantly from period to period based on the timing of program initiation or closeout and the mix of program complexity and do not necessarily change in correlation to net service revenue.
Direct Costs and Reimbursable Out-of-pocket Expenses
For the
three and nine months ended
September 30, 2015
and
September 30, 2014
, direct costs and reimbursable out-of-pocket expenses were as follows (in thousands, except percentages):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
|
|
September 30, 2015
|
|
September 30, 2014
|
|
Change
|
|
Direct costs
|
$
|
135,530
|
|
|
$
|
129,557
|
|
|
$
|
5,973
|
|
|
4.6
|
%
|
|
Reimbursable out-of-pocket expenses
|
115,651
|
|
|
90,861
|
|
|
24,790
|
|
|
27.3
|
%
|
|
Total direct costs and reimbursable out-of-pocket expenses
|
$
|
251,181
|
|
|
$
|
220,418
|
|
|
$
|
30,763
|
|
|
14.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
|
|
|
September 30, 2015
|
|
September 30, 2014
|
|
Change
|
|
Direct costs
|
$
|
398,988
|
|
|
$
|
381,102
|
|
|
$
|
17,886
|
|
|
4.7
|
%
|
|
Reimbursable out-of-pocket expenses
|
322,970
|
|
|
255,141
|
|
|
67,829
|
|
|
26.6
|
%
|
|
Total direct costs and reimbursable out-of-pocket expenses
|
$
|
721,958
|
|
|
$
|
636,243
|
|
|
$
|
85,715
|
|
|
13.5
|
%
|
The following is a summary of the year-over-year fluctuation in components of direct costs during the
three and nine months ended
September 30, 2015
as compared to the
three and nine months ended
September 30, 2014
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
|
2014 to 2015
|
|
2014 to 2015
|
|
Change in:
|
|
|
|
|
Salaries, benefits and incentive compensation
|
$
|
6,977
|
|
|
$
|
24,945
|
|
|
Other
|
(1,004
|
)
|
|
(7,059
|
)
|
|
Total
|
$
|
5,973
|
|
|
$
|
17,886
|
|
Our direct costs increased by
$6.0 million
, or
4.6%
, to
$135.5 million
for the
three months ended
September 30, 2015
from
$129.6 million
for the
three months ended
September 30, 2014
. Our direct costs increased by
$17.9 million
, or
4.7%
, to
$399.0 million
for the
nine months ended
September 30, 2015
from
$381.1 million
for the
nine months ended
September 30, 2014
.
Salaries, benefits and incentive compensation increased by
$7.0 million
for the
three months ended
September 30, 2015
and
$24.9 million
for the
nine months ended
September 30, 2015
compared to the same periods in the prior year. These increases were primarily driven by an increase in salaries and benefits as a result of the additions in personnel to support the growth of our business, partially offset by a reduction in incentive based compensation and favorable fluctuations in foreign currency, as discussed further below.
Other direct costs decreased by
$1.0 million
for the
three months ended
September 30, 2015
, compared to the
three months ended
September 30, 2014
, primarily due to the favorable resolution of disputed pass through costs partially offset by an increase in contract labor costs to support revenue growth.
During the
nine months ended
September 30, 2015
other direct costs decreased by
$7.1 million
compared to the
nine months ended
September 30, 2014
, primarily due to (i) the 2014 period including a provision for non-recoverable Value Added Taxes (“VAT”) as compared to the 2015 including a release of a portion of these liabilities and (ii) certain one-time benefits realized in the first and third quarters of 2015. Partially offsetting these decreases was an increase in expenses related to contract labor and travel costs to support revenue growth.
As discussed above, direct costs in the nine months ended September 30, 2015 included certain one-time benefits that we do not believe are representative of ongoing operations, which we estimate to be approximately
$6.6 million
. Specifically, in the first quarter of 2015 we realized benefits of
$5.1 million
related to (i) a favorable resolution of several VAT and other tax items, (ii) a change in estimate related to employee incentive compensation, and (iii) a favorable settlement of disputed pass through costs. As discussed above, during the third quarter of 2015, we realized a benefit of
$4.9 million
from the favorable resolution of disputed pass through costs; however, we had initially recorded approximately
$3.4 million
of these obligations in the first half of 2015 resulting in the net favorable impact on the full nine month period ended September 30, 2015 of approximately
$1.5 million
.
During the
three and nine months ended
September 30, 2015
, fluctuations in foreign currency exchange rates resulted in a favorable impact of
$10.2 million
and
$29.7 million
, respectively, on direct costs as compared to the
three and nine months ended
September 30, 2014
.
As we continue to expand our business and initiate new studies, the increase in headcount-related expenses may outpace our revenue growth. However, we continue to see the benefits from a number of our cost saving initiatives including (i) leveraging our therapeutic management overhead infrastructure over the expanded revenue base, (ii) improving the utilization of our facilities, and (iii) the consolidation of our clinical trial management systems resulting in achieving better efficiencies due to standardization.
As noted above, reimbursable out-of-pocket expenses increased by
27.3%
or
$24.8 million
, to
$115.7 million
for the
three months ended
September 30, 2015
from
$90.9 million
for the
three months ended
September 30, 2014
. Reimbursable out-of-pocket expenses increased by
26.6%
or
$67.8 million
, to
$323.0 million
for the
nine months ended
September 30, 2015
from
$255.1 million
for the
nine months ended
September 30, 2014
. Reimbursable out-of-pocket expenses fluctuate significantly from period to period based on the timing of program initiation or closeout and the mix of program complexity and do not necessarily change in correlation to net service revenue.
Selling, General and Administrative Expenses
For the
three and nine months ended
September 30, 2015
and
September 30, 2014
, selling, general and administrative expenses were as follows (in thousands, except percentages):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
|
|
September 30, 2015
|
|
September 30, 2014
|
|
Change
|
|
Selling, general and administrative
|
$
|
40,429
|
|
|
$
|
38,185
|
|
|
$
|
2,244
|
|
|
5.9
|
%
|
|
Percentage of net service revenue
|
17.2
|
%
|
|
18.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
|
|
|
September 30, 2015
|
|
September 30, 2014
|
|
Change
|
|
Selling, general and administrative
|
$
|
113,354
|
|
|
$
|
104,332
|
|
|
$
|
9,022
|
|
|
8.6
|
%
|
|
Percentage of net service revenue
|
16.8
|
%
|
|
17.5
|
%
|
|
|
|
|
The following is a summary of the year-over-year fluctuation in components of our selling, general and administrative expenses during the
three and nine months ended
September 30, 2015
as compared to the
three and nine months ended
September 30, 2014
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
|
2014 to 2015
|
|
2014 to 2015
|
|
Change in:
|
|
|
|
|
Salaries, benefits, and incentive compensation
|
$
|
3,166
|
|
|
$
|
6,819
|
|
|
Professional services fees
|
(383
|
)
|
|
800
|
|
|
Provision for doubtful accounts
|
(1,570
|
)
|
|
(3,252
|
)
|
|
Marketing expenses
|
139
|
|
|
2,037
|
|
|
Facilities and IT related costs
|
580
|
|
|
2,458
|
|
|
Other expenses
|
312
|
|
|
160
|
|
|
Total
|
$
|
2,244
|
|
|
$
|
9,022
|
|
Selling, general and administrative expenses increased by
$2.2 million
, or
5.9%
, to
$40.4 million
for the
three months ended
September 30, 2015
from
$38.2 million
for the
three months ended
September 30, 2014
. Selling, general and administrative expenses increased by
$9.0 million
, or
8.6%
, to
$113.4 million
for the
nine months ended
September 30, 2015
from
$104.3 million
for the
nine months ended
September 30, 2014
. These increases were driven primarily by (i) an increase in salaries, benefits, and incentive compensation, primarily as a result of the additions in personnel to support the growth of our business and the newly established public company infrastructure, (ii) an increase in facilities and information technology related cost, primarily driven by increased headcount as discussed above, and (iii) an increase in marketing expense primarily driven by the higher level of the advertising and trade show activities. These costs were partially offset by a positive change in bad debt expense as a result of the collection of previously reserved receivables.
On a year-to-date basis, our selling, general and administrative expenses were also positively impacted by settlement of certain employee related liabilities totaling approximately
$1.1 million
. In addition, included within the net increase in selling, general and administrative expenses is a net reduction from fluctuations in foreign currency exchange rates of
$1.5 million
and
$4.3 million
, respectively, for the
three and nine months ended
September 30, 2015
as compared to
September 30, 2014
.
Selling, general and administrative expenses as a percentage of net service revenue decreased from
18.4%
for the
three months ended
September 30, 2014
to
17.2%
for the
three months ended
September 30, 2015
. Selling, general and administrative expenses as a percentage of net service revenue decreased from
17.5%
for the
nine months ended
September 30, 2014
to
16.8%
for the
nine months ended
September 30, 2015
. These decreases were attributable to (i) our ability to leverage selling, general and administrative functions as we grow revenue, (ii) our cost savings initiatives, (iii) the positive impact of the settlement of liabilities noted above, and (iv) the reduction in bad debt expense due to recoveries of previously reserved amounts.
Restructuring and Other Costs
Restructuring and other costs were
$1.6 million
for the
nine months ended
September 30, 2015
, consisting of employee severance costs of
$1.8 million
, partially offset by a net reduction in facility closure costs of
$0.2 million
. Following the completion of negotiations related to exiting certain facilities during the first quarter of 2015, we reduced our exit cost estimates related to the corresponding lease agreements by approximately
$0.7 million
, which was partially offset by expenses of
$0.5 million
primarily related to early lease termination fees.
Restructuring and other costs were
$3.0 million
for the
three months ended
September 30, 2014
, consisting of facility closure costs of
$2.7 million
and employee severance costs of
$0.2 million
. Restructuring and other costs were
$6.1 million
for the
nine months ended
September 30, 2014
, primarily consisting of severance costs of
$2.7 million
and facility closure and other costs of
$3.4 million
. These costs were primarily related to the restructuring activities we initiated during the second quarter of 2014 as a result of the closure of our Glasgow facility and partial closure of our Cincinnati facility.
Transaction Expenses
For the
three months ended
September 30, 2015
, we incurred transaction expenses of
$0.4 million
primarily consisting of third party fees associated with our August 2015 registered secondary common stock offering. There were
no
transaction expenses incurred for the
three months ended
September 30, 2014
.
For the
nine months ended
September 30, 2015
, we incurred transaction expenses of
$0.9 million
, primarily consisting of third party fees associated with our May 2015 stock repurchase and registered secondary common stock offerings in May and August 2015. For the
nine months ended
September 30, 2014
, transaction expenses were
$2.0 million
, consisting of
$1.7 million
of third party fees associated with the 2014 debt refinancing and
$0.3 million
of legal fees associated with our March 2014 acquisition of MEK Consulting.
Asset Impairment Charges
During the second quarter of 2014, we determined that Phase I Services and Global Consulting reporting units were not performing according to management's expectations, requiring an evaluation of the impairment of the goodwill and intangible assets. As a result of this evaluation, for the
nine months ended
September 30, 2014
, we recorded a
$9.2 million
impairment of goodwill and an
$8.0 million
impairment of intangible assets associated with the Phase I Services and Global Consulting reporting units for a total asset impairment charge of
$17.2 million
. There were
no
asset impairment charges for the
three months ended
September 30, 2014
.
During 2015, we continued to observe deteriorating performance due to reduced revenue resulting from cancellations and lower than expected new business awards in our Phase I Services reporting unit. This
resulted in a triggering event during the first quarter of 2015, requiring an evaluation of both long-lived assets and goodwill for potential impairment. At the date of this evaluation, there were no intangible assets associated with Phase I Services. As a result of this evaluation, for the
nine months ended
September 30, 2015
, we recorded a total asset impairment charge of
$3.9 million
, consisting of a long-lived assets impairment charge of
$1.0 million
and a goodwill impairment charge of
$2.9 million
. There were
no
asset impairment charges for the
three months ended
September 30, 2015
.
Depreciation and Amortization Expense
Total depreciation and amortization expense decreased to
$13.8 million
for the
three months ended
September 30, 2015
from
$14.3 million
for the
three months ended
September 30, 2014
, primarily due to a decrease in depreciation expense of
$0.4 million
resulting from lower capital expenditures during 2015 compared to 2014 and the write-off of long-lived assets in the Phase I Services reporting unit during the first quarter of 2015.
Total depreciation and amortization expense increased to
$42.0 million
for the
nine months ended
September 30, 2015
from
$40.0 million
for the
nine months ended
September 30, 2014
. Amortization expense increased
$5.1 million
for the
nine months ended
September 30, 2015
as compared to the
nine months ended
September 30, 2014
, primarily due to the reduction in estimated useful lives of certain intangible assets during the second quarter of 2014. These increases were partially offset by a
$3.1 million
decrease in depreciation expense for the
nine months ended
September 30, 2015
compared to the
nine months ended
September 30, 2014
, principally due to (i) lower capital expenditures in 2015, (ii) a reduction in 2014 of the useful life of certain data centers and information system assets, and (iii) the write-off of long-lived assets in the Phase I Services reporting unit during the first quarter of 2015.
Other Expense, Net
For the
three and nine months ended
September 30, 2015
and 2014, other income and expenses were as follows (in thousands, except percentages):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
|
|
September 30, 2015
|
|
September 30, 2014
|
|
Change
|
|
Interest income
|
$
|
28
|
|
|
$
|
26
|
|
|
$
|
2
|
|
|
7.7
|
%
|
|
Interest expense
|
(3,065
|
)
|
|
(12,929
|
)
|
|
(9,864
|
)
|
|
(76.3
|
)%
|
|
Other income (expense), net
|
(1,003
|
)
|
|
5,136
|
|
|
(6,139
|
)
|
|
(119.5
|
)%
|
|
Total other expense, net
|
$
|
(4,040
|
)
|
|
$
|
(7,767
|
)
|
|
$
|
(3,727
|
)
|
|
(48.0
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
|
|
|
September 30, 2015
|
|
September 30, 2014
|
|
Change
|
|
Interest income
|
$
|
157
|
|
|
$
|
226
|
|
|
$
|
(69
|
)
|
|
(30.5
|
)%
|
|
Interest expense
|
(12,687
|
)
|
|
(41,853
|
)
|
|
(29,166
|
)
|
|
(69.7
|
)%
|
|
Loss on extinguishment of debt
|
(9,795
|
)
|
|
—
|
|
|
9,795
|
|
|
—
|
%
|
|
Other income, net
|
4,138
|
|
|
6,177
|
|
|
(2,039
|
)
|
|
(33.0
|
)%
|
|
Total other expense, net
|
$
|
(18,187
|
)
|
|
$
|
(35,450
|
)
|
|
$
|
(17,263
|
)
|
|
(48.7
|
)%
|
Total other expense, net decreased to
$4.0 million
for the
three months ended
September 30, 2015
from
$7.8 million
for the
three months ended
September 30, 2014
. Total other expense, net decreased to
$18.2 million
for the
nine months ended
September 30, 2015
from
$35.5 million
for the
nine months ended
September 30, 2014
. These decreases were primarily driven by a
$9.9 million
and
$29.2 million
decrease in interest expense for the
three and nine months ended
September 30, 2015
compared to the
three and nine months ended
September 30, 2014
, respectively, due to lower outstanding debt balances
and decreased interest rates in 2015 as a result of our debt repayment and refinancing activities during the fourth quarter of 2014 and second quarter of 2015.
The decrease in total other expense, net for the
three months ended
September 30, 2015
compared to the
three months ended
September 30, 2014
was partially offset by a
$6.1 million
decrease in other income, net, primarily due to higher foreign currency gains in 2014 as compared to losses in 2015 as a result of the strengthening of the U.S. dollar. The decrease in total other expense, net for the
nine months ended
September 30, 2015
compared to the
nine months ended
September 30, 2014
was partially offset by a
$2.0 million
decrease in other income, net, primarily due to higher foreign currency gains in 2014 as compared to 2015 as a result of the strengthening of the U.S. dollar and the
$9.8 million
loss on extinguishment of debt associated with the 2015 debt refinancing in the second quarter of 2015.
Income Tax Benefit (Expense)
Income tax expense was
$2.5 million
for the
three months ended
September 30, 2015
compared to
$2.4 million
for the
three months ended
September 30, 2014
. Income tax benefit (expense) was a tax expense of
$8.1 million
for the
nine months ended
September 30, 2015
compared to a tax benefit of
$16.6 million
for the
nine months ended
September 30, 2014
. Our effective tax rate varies from the statutory rate of
35%
principally due to maintaining a full valuation allowance on our deferred tax assets in the United States and the resulting changes in the valuation allowance from period to period. In addition, income taxes for the
three and nine months ended
September 30, 2015
were impacted by
$0.8 million
and
$2.9 million
, respectively, related to discrete tax adjustments primarily from the release of a portion of unrecognized tax benefits. Income taxes for the
three and nine months ended
September 30, 2014
were impacted by a
$23.1 million
discrete income tax benefit recognized as the result of the release of the valuation allowance on certain foreign tax deferred tax assets, primarily net operating losses. Other variances from the statutory rate of 35% were due to (i) income or losses generated in jurisdictions where the income tax expense or benefit was offset by a corresponding change in the valuation allowance on net deferred tax assets and (ii) the geographical split of pre-tax income.
We recorded a valuation allowance against all of our deferred tax assets related to net operating loss carryforwards in the United States as of
September 30, 2015
and
December 31, 2014
, respectively. We assess both positive and negative evidence available to estimate whether future taxable income will be available to permit the use of the existing deferred tax assets. As of
September 30, 2015
, a significant component of the evidence evaluated was the historical losses experienced in the United States. Such objective negative evidence limits our ability to consider other subjective evidence, such as our projections for future growth. However, given our current earnings and anticipated future earnings, we believe it is reasonably possible that within the next 12 months sufficient positive evidence may become available to allow us to conclude that a significant portion of the valuation allowance will no longer be needed. The release of the valuation allowance would result in the recognition of certain deferred tax assets and a decrease to income tax expense for the period in which the release is recorded. The exact timing and amount of the valuation allowance released are subject to change and are based on the level of profitability that we are able to achieve and can reasonably forecast.
Net Income
Net income increased to
$37.8 million
and
$86.4 million
for the
three and nine months ended
September 30, 2015
, respectively, from
$12.6 million
and
$26.3 million
for the
three and nine months ended
September 30, 2014
, respectively. These increases were primarily due to the reasons discussed above, in particular, the impact of increased net services revenue, the overall decrease of operating expenses as a percentage of net service revenue, the decrease in asset impairment charges compared to the prior year, and the decrease in interest expense as a result of our 2014 and 2015 debt refinancing activities. Partially offsetting these increases was the
$9.8 million
loss on extinguishment of debt associated with the 2015 debt refinancing in the second quarter of 2015, and the change in income tax position from income tax benefit to income tax expense due to the release of the valuation allowance in the second quarter of 2014.
Liquidity and Capital Resources
Key measures of our liquidity are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
2015
|
|
December 31,
2014
|
|
Balance sheet statistics:
|
|
|
|
|
Cash and cash equivalents
|
$
|
136,091
|
|
|
$
|
126,453
|
|
|
Restricted cash
|
431
|
|
|
505
|
|
|
Working capital, excluding restricted cash
|
58,686
|
|
|
46,598
|
|
We fund our operations and growth, including acquisitions, primarily with our working capital, cash flow from operations and funds available for borrowing under our
$150.0 million
revolving credit facility. Our principal liquidity requirements are to fund our debt service obligations, capital expenditures, expansion of services, possible acquisitions, integration and restructuring costs, geographic expansion, working capital and other general corporate expenses. Based on past performance and current expectations, we believe our cash and cash equivalents, cash generated from operations and funds available under our revolving credit facility 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.
On May 14, 2015, we entered into a new five-year
$675.0 million
2015 Credit Agreement, consisting of a
$525.0 million
term loan facility and a
$150.0 million
revolving line of credit, letter of credit and swingline facility. On June 15, 2015, we made a
$50.0 million
prepayment on the term loan, which will be applied against the regularly-scheduled quarterly principal payments. See
Note 4 - Long-Term Debt
to our condensed consolidated financial statements for information about the terms of this agreement.
As of
September 30, 2015
, we had total principal amount of indebtedness (including capital leases) of approximately
$475.1 million
. Further, we had undrawn commitments available for additional borrowings under our senior secured facilities of
$149.0 million
(net of
$1.0 million
in outstanding letters of credit as of
September 30, 2015
) which we may use for working capital and other purposes. The issuance of additional debt and the related incremental interest expense could adversely affect our operations and financial condition or limit our ability to secure additional capital and other resources.
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. Management believes that cash on hand, cash flows from operations and funds available under the revolving credit facility will be sufficient to meet our working capital and other currently anticipated cash needs, scheduled debt and interest payments and income tax obligations. However, 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. Our business might 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 equity capital. There can be no assurances 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 2015 Credit Agreement limits the use of proceeds from any disposition of assets and, as a result, we may not be allowed, under the agreement, to use the proceeds from any such dispositions to satisfy all current debt service obligations.
Nine Months Ended
September 30, 2015
compared to
Nine Months Ended
September 30, 2014
For the
nine months ended
September 30, 2015
and
2014
, our cash flows from operating, investing and financing activities were as follows (in thousands, except percentages):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
|
|
|
September 30, 2015
|
|
September 30, 2014
|
|
Change
|
|
Net cash provided by operating activities
|
$
|
141,122
|
|
|
$
|
117,328
|
|
|
$
|
23,794
|
|
|
20.3
|
%
|
|
Net cash used in investing activities
|
(11,565
|
)
|
|
(20,041
|
)
|
|
8,476
|
|
|
42.3
|
%
|
|
Net cash used in financing activities
|
(109,384
|
)
|
|
(8,213
|
)
|
|
(101,171
|
)
|
|
(1,231.8
|
)%
|
Cash Flows from Operating Activities
For the
nine months ended
September 30, 2015
, our operating activities provided
$141.1 million
in cash flow, consisting of a net income of
$86.4 million
, adjusted for net non-cash items of
$58.2 million
primarily related to depreciation and amortization, loss on extinguishment of debt, stock repurchase costs, amortization of capitalized loan fees, stock-based compensation, asset impairment charges and foreign currency adjustments. In addition,
$3.5 million
of cash was used by changes in operating assets and liabilities, consisting primarily of an increase in billed and unbilled accounts receivable and other assets and liabilities, partially offset by an increase in deferred revenue.
For the
nine months ended
September 30, 2014
, our operating activities provided
$117.3 million
in cash flow, consisting of a net income of
$26.3 million
, adjusted for net non-cash items of
$34.6 million
primarily related to depreciation and amortization, amortization of capitalized loan fees, stock-based compensation, asset impairment charges, foreign currency adjustments and deferred income taxes. In addition,
$56.4 million
of cash was provided by changes in operating assets and liabilities, consisting primarily of an increase in deferred revenue and accounts payable and accrued liabilities, partially offset by a decrease in billed and unbilled accounts receivable.
The changes in operating assets and liabilities result primarily from the net movement in accounts receivable, unbilled revenue and deferred revenue, coupled with changes in accrued liabilities. Fluctuations in billed and unbilled receivables 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 unbilled services and deferred revenue can vary significantly from period to period.
Cash flows from operations increased by
$23.8 million
during the
nine months ended
September 30, 2015
compared to the
nine months ended
September 30, 2014
, primarily due to year-over-year increase in net income of
$60.1 million
and a year-over-year increase in net non-cash items of
$23.6 million
, partially offset by a decrease of
$59.9 million
due to a reduction in the cash inflow from working capital.
Cash Flows from Investing Activities
For the
nine months ended
September 30, 2015
, we used
$11.6 million
in cash for investing activities for the purchase of property and equipment. For the full year 2015, we expect our total capital expenditures to be between
$20.0 million
and
$22.0 million
.
For the
nine months ended
September 30, 2014
, we used
$20.0 million
in cash for investing activities, comprised of the purchase of property and equipment of
$17.7 million
and the 2014 MEK Consulting acquisition payment of
$2.3 million
.
Cash Flows from Financing Activities
For the
nine months ended
September 30, 2015
, financing activities used
$109.4 million
in cash, primarily driven by payments of
$150.9 million
related to the stock repurchase in May 2015,
$3.2 million
in payments related to tax withholdings for stock-based compensation and payments of
$1.0 million
related to the 2014 MEK Consulting acquisition. These cash outflows were partially offset by net inflows of
$45.0 million
, consisting primarily of the proceeds from the 2015 debt refinancing, offset by the June 2015 prepayment of $50.0 million of debt principal under the 2015 Credit Agreement and proceeds of
$1.1 million
from the exercise of stock options.
For the
nine months ended
September 30, 2014
, financing activities used
$8.2 million
in cash, primarily driven by
$7.9 million
in net repayments on long term debt and capital leases obligations.
Contractual Obligations and Commitments
On May 14, 2015, we entered into a new five-year 2015 Credit Agreement. See
Note 4 - Long-Term Debt
to our condensed consolidated financial statements for information about the terms of this agreement.
The following table summarizes our expected material contractual obligations under this agreement as of
September 30, 2015
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payment Due by Period
|
|
|
Total
|
|
Remaining 2015
(3 Months)
|
|
2016 to 2017
|
|
2018 to 2019
|
|
2020
|
|
Long-term debt
|
$
|
475,000
|
|
|
$
|
—
|
|
|
$
|
35,313
|
|
|
$
|
105,000
|
|
|
$
|
334,687
|
|
|
Interest on long-term debt
|
44,104
|
|
|
2,671
|
|
|
20,956
|
|
|
17,780
|
|
|
2,697
|
|
|
Total:
|
$
|
519,104
|
|
|
$
|
2,671
|
|
|
$
|
56,269
|
|
|
$
|
122,780
|
|
|
$
|
337,384
|
|
We do not have any off-balance sheet arrangements except for operating leases entered into in the normal course of business. Other than the items included above, there have been no material changes, outside of the ordinary course of business, to our contractual obligations as previously disclosed in our Annual Report on Form 10-K for fiscal year ended
December 31, 2014
.
Recently Issued Accounting Standards
In May 2014, the FASB issued ASU No. 2014-09,
Revenue from Contracts with Customers
. ASU 2014-09 will eliminate transaction- and industry-specific revenue recognition guidance under current U.S. GAAP and replace it with a principle based approach for determining revenue recognition. ASU 2014-09 will require that companies recognize revenue based on the value of transferred goods or services as they occur in the contract. The ASU also will require additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. In July 2015, the FASB issued ASU 2015-14,
Revenue from Contracts with Customers: Deferral of the Effective Date
, which delayed the effective date of ASU 2014-09 by one year and modified the standard to allow early adoption. For public entities, the standard is now effective for reporting periods beginning after December 15, 2017. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. Entities can transition to the standard either retrospectively or as a cumulative-effect adjustment as of the date of adoption. We are currently evaluating the impact of the adoption of this standard on our consolidated financial statements.
In April 2015, the FASB issued ASU No. 2015-03,
Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs.
The amendments in this ASU require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts, and is to be
applied on a retrospective basis. ASU 2015-03 is effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early adoption of the amendments is permitted. As of
September 30, 2015
, we had debt issuance costs related to our term loans of
$0.8 million
in prepaid expenses and other current assets and
$2.4 million
in other long-term assets that would be reclassified to long-term debt, net.
In April 2015, the FASB issued ASU No. 2015-05,
Customer's Accounting For Fees Paid In A Cloud Computing Arrangement
, which provides guidance for a customer's accounting for cloud computing costs. Under ASU 2015-05, if a software cloud computing arrangement contains a software license, customers should account for the license element of the arrangement in a manner consistent with the acquisition of other software licenses. If the arrangement does not contain a software license, customers should account for the arrangement as a service contract. This standard may be applied either prospectively to all arrangements entered into or materially modified after the effective date or retrospectively. ASU 2015-05 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015, and early adoption is permitted. We are currently evaluating the impact of the adoption of this standard on our consolidated financial statements.
In August 2015, the FASB issued ASU No. 2015-15,
Interest - Imputed Interest (Subtopic 835-30): Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements
, which is effective immediately and clarifies that the guidance in ASU 2015-03 does not apply to line-of-credit arrangements. Accordingly, while ASU 2015-15 requires that debt issuance costs be presented in the balance sheet as a direct reduction from the carrying value of the associated debt liability, ASU 2015-15 states that entities may continue presenting unamortized debt issuance costs for line-of-credit arrangements as an asset. Accordingly, we will defer costs associated with line-of-credit arrangements as an asset and subsequently amortize such costs ratably over the term of the arrangement.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
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 fiscal year ended
December 31, 2014
.
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.
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. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.
Changes in Internal Controls
There were 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.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
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 condensed 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.
Item 1A. Risk Factors.
See “Item 1A. - Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2014 and “Item 1A. - Risk Factors” in our Form 10-Q for the quarter ended March 31, 2015, for a detailed discussion of risk factors affecting the Company. There have been no significant changes from the risk factors previously disclosed in these filings.
Item 2. Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities
Recent Sales of Unregistered Securities
Not applicable.
Use of Proceeds from Registered Securities
Not applicable.
Purchases of Equity Securities by the Issuer
Not applicable.
Item 5. Other Information
Not applicable.
Item 6. Exhibits
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Incorporated by Reference (Unless Otherwise Indicated)
|
|
Exhibit Number
|
|
Exhibit Description
|
Form
|
File No.
|
Exhibit
|
Filing Date
|
|
10.1
|
|
Form of Nonqualified Option Award Agreement for U.S. Executives under INC Research Holdings, Inc. 2014 Equity Incentive Plan
|
—
|
—
|
—
|
Filed herewith
|
|
10.2
|
|
Form of Nonqualified Option Award Agreement for Non-U.S. Executives under INC Research Holdings, Inc. 2014 Equity Incentive Plan
|
—
|
—
|
—
|
Filed herewith
|
|
10.3
|
|
Form of Nonqualified Option Award Agreement for U.S. Participants under INC Research Holdings, Inc. 2014 Equity Incentive Plan
|
—
|
—
|
—
|
Filed herewith
|
|
10.4
|
|
Form of Restricted Stock Award Agreement for U.S. Executives under INC Research Holdings, Inc. 2014 Equity Incentive Plan
|
—
|
—
|
—
|
Filed herewith
|
|
10.5
|
|
Form of Restricted Stock Award Agreement for Non-U.S. Executives under INC Research Holdings, Inc. 2014 Equity Incentive Plan
|
—
|
—
|
—
|
Filed herewith
|
|
10.6
|
|
Form of Restricted Stock Award Agreement for U.S. Participants under INC Research Holdings, Inc. 2014 Equity Incentive Plan
|
—
|
—
|
—
|
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 Executive Vice President and 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 Executive Vice President and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
—
|
—
|
—
|
Furnished herewith
|
|
101.INS
|
|
XBRL Instance Document.
|
—
|
—
|
—
|
Filed herewith
|
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document.
|
—
|
—
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—
|
Filed herewith
|
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document.
|
—
|
—
|
—
|
Filed herewith
|
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document.
|
—
|
—
|
—
|
Filed herewith
|
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document.
|
—
|
—
|
—
|
Filed herewith
|
|
101.PRE
|
|
Taxonomy Extension Presentation Linkbase Document.
|
—
|
—
|
—
|
Filed herewith
|
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Quarterly Report on Form 10-Q to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Raleigh, State of North Carolina, on
October 28, 2015
.
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|
INC RESEARCH HOLDINGS INC.
|
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|
|
Date: October 28, 2015
|
|
/s/ Gregory S. Rush
|
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|
|
Gregory S. Rush
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|
Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)
|
EXHIBIT INDEX
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|
Incorporated by Reference (Unless Otherwise Indicated)
|
|
Exhibit Number
|
|
Exhibit Description
|
Form
|
File No.
|
Exhibit
|
Filing Date
|
|
10.1
|
|
Form of Nonqualified Option Award Agreement for U.S. Executives under INC Research Holdings, Inc. 2014 Equity Incentive Plan
|
—
|
—
|
—
|
Filed herewith
|
|
10.2
|
|
Form of Nonqualified Option Award Agreement for Non-U.S. Executives under INC Research Holdings, Inc. 2014 Equity Incentive Plan
|
—
|
—
|
—
|
Filed herewith
|
|
10.3
|
|
Form of Nonqualified Option Award Agreement for U.S. Participants under INC Research Holdings, Inc. 2014 Equity Incentive Plan
|
—
|
—
|
—
|
Filed herewith
|
|
10.4
|
|
Form of Restricted Stock Award Agreement for U.S. Executives under INC Research Holdings, Inc. 2014 Equity Incentive Plan
|
—
|
—
|
—
|
Filed herewith
|
|
10.5
|
|
Form of Restricted Stock Award Agreement for Non-U.S. Executives under INC Research Holdings, Inc. 2014 Equity Incentive Plan
|
—
|
—
|
—
|
Filed herewith
|
|
10.6
|
|
Form of Restricted Stock Award Agreement for U.S. Participants under INC Research Holdings, Inc. 2014 Equity Incentive Plan
|
—
|
—
|
—
|
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 Executive Vice President and 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 Executive Vice President and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
—
|
—
|
—
|
Furnished herewith
|
|
101.INS
|
|
XBRL Instance Document.
|
—
|
—
|
—
|
Filed herewith
|
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document.
|
—
|
—
|
—
|
Filed herewith
|
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document.
|
—
|
—
|
—
|
Filed herewith
|
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document.
|
—
|
—
|
—
|
Filed herewith
|
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101.LAB
|
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XBRL Taxonomy Extension Label Linkbase Document.
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—
|
—
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—
|
Filed herewith
|
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101.PRE
|
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Taxonomy Extension Presentation Linkbase Document.
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—
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—
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—
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Filed herewith
|
INC RESEARCH HOLDINGS, INC.
2014 Equity Incentive Plan
Stock Option Award Agreement for U.S. Participants
This Stock Option Award Agreement for U.S. Participants (this “
Agreement
”) is made by and between INC Research Holdings, Inc., a Delaware corporation (the “
Company
”), and [●] (the “
Participant
”), effective as of [●] (the “
Date of Grant
”).
RECITALS
WHEREAS
, the Company has adopted the INC Research Holdings, Inc. 2014 Equity Incentive Plan (as the same may be amended and/or amended and restated from time to time, the “
Plan
”), which Plan is incorporated herein by reference and made a part of this Agreement, and capitalized terms not otherwise defined in this Agreement will have the meanings ascribed to those terms in the Plan
; and
WHEREAS
, the Committee has authorized and approved the grant of an Award to the Participant of a Stock Option to purchase shares of Common Stock (“
Shares
”), subject to the terms and conditions set forth in the Plan and this Agreement.
NOW THEREFORE
, in consideration of the premises and mutual covenants set forth in this Agreement, the parties agree as follows:
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1.
|
Grant of Stock Option Award
. The Company has granted to the Participant, effective as of the Date of Grant, the right and option to purchase, on the terms and conditions set forth in the Plan and this Agreement, all or any part of an aggregate of
[●]
Shares, subject to adjustment as set forth in the Plan (the “
Option
”). The Option is intended to be a Nonqualified Stock Option.
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2.
|
Exercise Price
. The exercise price of the Option is $
[●]
per Share, subject to adjustment as set forth in the Plan (the “
Exercise Price
”).
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3.
|
Vesting of Option
. Subject to the terms and conditions set forth in the Plan and this Agreement, the Option will vest as follows:
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(a)
|
General
. Except as otherwise provided in Sections 3(b) and 4, the Option will vest in equal annual installments of 25% of the Shares over a four
year period on each anniversary of the Date of Grant, subject to the Participant’s continued Service through each applicable vesting date.
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(b)
|
Change in Control
. The Option will become fully vested immediately upon the Participant’s termination of Service in the event that the Participant’s Service is terminated by the Company without Cause (as defined in the Plan) or if Participant resigns for Good Reason at the time of, or within 12 months following, the consummation of a Change in Control occurring after the Date of Grant.
|
As used in this Agreement, “
Good Reason
” shall mean the occurrence, without Participant’s express written consent, of any of the following events: (i) a material reduction in Participant’s base salary or Target Bonus percentage under the INC Research, LLC Management Incentive Plan, if applicable; (ii) a material adverse change to Participant’s authority, job duties or responsibilities as compared to Participant’s authority, job duties or responsibilities immediately prior to the Change in Control; (iii) a requirement that Participant relocate to a principal place of employment more than fifty (50) miles from the Company’s offices at 3201 Beechleaf Court, in Raleigh, North Carolina or Participant’s assigned principal office location with any Subsidiary as of immediately prior to the occurrence of the Change in Control; or (iv) if Participant has an effective employment agreement, service agreement, or other similar agreement with the Company or any Subsidiary, a material breach of such agreement, provided, that, any event described in clauses (i), (ii), (iii) and (iv) above shall constitute Good Reason only if the Participant provides the Company with written notice of the basis for the Participant’s Good Reason within forty-five (45) days of the initial actions or inactions of the Company or any Subsidiary giving rise to such Good Reason and the Company or applicable Subsidiary has not cured the identified actions or inactions within thirty (30) days of such notice and provided further that Participant terminates his or her Service within thirty (30) days following the Company or applicable Subsidiary’s failure to cure within the thirty (30) day cure period.”
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4.
|
Forfeiture; Expiration
.
|
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|
(a)
|
Termination of Service
. Notwithstanding the Change in Control vesting as stated in Section 3(b) above, any unvested portion of the Option will be forfeited immediately, automatically and without consideration upon a termination of the Participant’s Service for any reason. In the event the Participant’s Service is terminated for Cause, the vested portion of the Option will also be forfeited immediately, automatically and without consideration upon that termination for Cause. Without limiting the generality of the foregoing, the Option and the Shares (and any resulting proceeds) will continue to be subject to Section 13 of the Plan.
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(b)
|
Expiration
. Any unexercised portion of the Option will expire on the tenth anniversary of the Date of Grant (the “
Expiration Date
”), or earlier as provided in this Agreement (including Section 5) or the Plan.
|
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5.
|
Period of Exercise
. Subject to the provisions of the Plan and this Agreement, the Participant may exercise all or any part of the vested portion of the Option at any time prior to the earliest to occur of:
|
2 | 6-Aug-2015 (Executive)
|
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|
(b)
|
the date that is one (1) year following termination of the Participant’s Service due to death or Disability;
|
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(c)
|
the date that is ninety (90) days following termination of the Participant’s Service without Cause or, to the extent applicable, for Good Reason;
|
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|
(d)
|
the date of termination of the Participant’s Service for Cause; or
|
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(e)
|
the date that is forty-five (45) days following the termination of the Participant’s Service for any reason other than pursuant to Sections 5(b), 5(c) or 5(d) above.
|
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|
(a)
|
Notice of Exercise
. Subject to Section 4 and 5, the Participant or, in the case of the Participant’s death or Disability, the Participant’s representative may exercise all or any part of the vested portion of the Option by delivering to the Company at its principal office a written notice of exercise in the form of the attached as shown on
Appendix A
or any other form that the Committee may permit (such notice, a “
Notice of Exercise
”). The Notice of Exercise will be signed by the person exercising the Option. In the event that the Option is being exercised by the Participant’s representative, the Notice of Exercise will be accompanied by proof (satisfactory to the Committee) of the representative’s right to exercise the Option. The Participant or the Participant’s representative will deliver to the Committee, at the time of giving the Notice of Exercise, payment in a form permissible under Section 7 for the full amount of the Purchase Price and applicable Tax-Related Items withholding as provided below.
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(b)
|
Issuance of Common Stock
. After all requirements with respect to the exercise of the Option have been satisfied, including, any Tax-Related Items withholding, the Committee will cause to be issued the Shares as to which the Option has been exercised (or, in the Committee’s discretion, in un-certificated form, upon the books of the Company’s transfer agent), registered in the name of the person exercising the Option (or in the names of such person and his or her spouse as community property or as joint tenants with right of survivorship). Neither the Company nor the Committee will be liable to the Participant or any other Person for damages relating to any delays in issuing the Shares or any mistakes or errors in the issuance of the Shares.
|
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|
(c)
|
Withholding Requirements
. The Company will have the power and the right to deduct or withhold automatically from any Shares deliverable under this Agreement, or to require the Participant or the Participant’s representative to remit to the Company, the minimum statutory amount necessary to satisfy federal, state and local Tax-Related Items, domestic or foreign, required by law or regulation to be withheld with respect to any taxable event arising as a result of this Agreement (collectively, “
Withheld Taxes
”); provided that any obligations to pay Withheld Taxes may be satisfied in the manner in which the Purchase Price is permitted to be paid under Section 7 or any other manner permitted by the Plan.
|
3 | 6-Aug-2015 (Executive)
|
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|
|
7.
|
Payment for Shares
. The “
Purchase Price
” will be the Exercise Price multiplied by the number of Shares with respect to which the Option is being exercised. All or part of the Purchase Price and any Withheld Taxes may be paid as follows:
|
|
|
|
|
(a)
|
Cash or Check
. In cash or by bank certified check.
|
|
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|
|
(b)
|
Brokered Cashless Exercise
. To the extent permitted by applicable law and unless otherwise provided by the Committee, from the proceeds of a sale through a broker on the date of exercise of some or all of the Shares to which the exercise relates. In that case, the Participant will provide the Company a properly executed Notice of Exercise, together with a copy of irrevocable instructions to a broker to deliver promptly to the Company the amount of sale proceeds to pay the aggregate purchase price and/or Withheld Taxes, as applicable. To facilitate the foregoing, the Company may, to the extent permitted by applicable law, enter into agreements or coordinate procedures with one or more brokerage firms.
|
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(c)
|
Net Exercise
. By reducing the number of Shares otherwise deliverable upon the exercise of the Option by the number of Shares having a Fair Market Value equal to the amount of the Purchase Price and/or Withheld Taxes, as applicable.
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(d)
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Surrender of Stock
. In each instance, at the sole discretion of the Committee, by surrendering, or attesting to the ownership of, Shares that are already owned by the Participant free and clear of any restriction or limitation, unless the Committee specifically agrees to accept such Shares subject to such restriction or limitation. Such Shares will be surrendered to the Company in good form for transfer and will be valued by the Company at their Fair Market Value on the date of the applicable exercise of the Option, or to the extent applicable, on the date the Withheld Taxes is to be determined. The Participant will not surrender, or attest to the ownership of, Shares in payment of the Purchase Price (or Withheld Taxes) if such action would cause the Company to recognize compensation expense (or additional compensation expense) with respect to this Option for financial reporting purposes that otherwise would not have occurred.
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8.
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Adjustment to Option
. In the event of any change with respect to the outstanding shares of Common Stock contemplated by Section 4.5 of the Plan, the Option may be adjusted in accordance with Section 4.5 of the Plan.
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9.
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Electronic Delivery and Acceptance
. The Company may, in its sole discretion, decide to deliver any documents related to current or future participation in the Plan by electronic means. The Participant hereby consents to receive such documents by electronic delivery and agrees to participate in the Plan through an on-line or electronic system established and maintained by the Company or a third party designated by the Company.
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10.
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Miscellaneous Provisions
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(a)
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Securities Laws Requirements
. No Shares will be issued or transferred pursuant to this Agreement unless and until all then applicable requirements imposed by federal and state securities and other laws, rules and regulations and by any regulatory
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4 | 6-Aug-2015 (Executive)
agencies having jurisdiction, and by any exchanges upon which the Shares may be listed, have been fully met. As a condition precedent to the issuance of Shares pursuant to this Agreement, the Company may require the Participant to take any reasonable action to meet those requirements. The Committee may impose such conditions on any Shares issuable pursuant to this Agreement as it may deem advisable, including, without limitation, restrictions under the Securities Act of 1933, as amended, under the requirements of any exchange upon which shares of the same class are then listed and under any blue sky or other securities laws applicable to those Shares.
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(b)
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Rights of a Shareholder of the Company
. Neither the Participant nor the Participant’s representative will have any rights as a shareholder of the Company with respect to any Shares subject to the Option until the Participant or the Participant’s representative becomes entitled to receive those Shares by (i) filing a Notice of Exercise, (ii) paying the Purchase Price and Withheld Taxes as provided in this Agreement, and the Company actually receiving those amounts, (iii) the Company issuing those Shares and entering the name of the Participant in the register of shareholders of the Company as the registered holder of those Shares and (iv) satisfying any other conditions as the Committee reasonably requires.
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(c)
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Transfer Restrictions
. The Shares purchased by exercise of the Option will be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the Plan or the rules, regulations and other requirements of the Securities and Exchange Commission, any stock exchange upon which such shares are listed, any applicable federal or state laws and any agreement with, or policy of, the Company or the Committee to which the Participant is a party or subject, and the Committee may cause orders or designations to be placed upon the books and records of the Company’s transfer agent to make appropriate reference to such restrictions.
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(d)
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No Right to Continued Service
. Nothing in this Agreement or the Plan confers upon the Participant any right to continue in Service for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Company (or any Subsidiary employing or retaining the Participant) or of the Participant, which rights are hereby expressly reserved by each, to terminate his or her Service at any time and for any reason, with or without Cause.
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(e)
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Notification
. Any notification required by the terms of this Agreement will be given by the Participant (i) in a writing addressed to the Company at its principal executive office and will be deemed effective upon actual receipt when delivered by personal delivery or by registered or certified mail, with postage and fees prepaid, or (ii) by electronic transmission to the Company’s e-mail address of the Company’s General Counsel and will be deemed effective upon actual receipt. Any notification required by the terms of this Agreement will be given by the Company (x) in a writing addressed to the address that the Participant most recently provided to the Company and will be deemed effective upon personal delivery or within three (3) days of
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5 | 6-Aug-2015 (Executive)
deposit with the United States Postal Service, by registered or certified mail, with postage and fees prepaid, or (y) by facsimile or electronic transmission to the Participant’s primary work fax number or e-mail address (as applicable) and will be deemed effective upon confirmation of receipt by the sender of such transmission.
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(f)
|
Entire Agreement
. This Agreement and the Plan constitute the entire agreement between the parties hereto with regard to the subject matter of this Agreement. This Agreement and the Plan supersede any other agreements, representations or understandings (whether oral or written and whether express or implied) that relate to the subject matter of this Agreement.
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(g)
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Waiver
. No waiver of any breach or condition of this Agreement will be deemed to be a waiver of any other or subsequent breach or condition whether of like or different nature.
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(h)
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Successors and Assigns
. The provisions of this Agreement will inure to the benefit of, and be binding upon, the Company and its successors and assigns and upon the Participant, the Participant’s executor, personal representative(s), distributees, administrator, permitted transferees, permitted assignees, beneficiaries, and legatee(s), as applicable, whether or not any such person will have become a party to this Agreement and have agreed in writing to be joined herein and be bound by the terms hereof.
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(i)
|
Severability
. The provisions of this Agreement are severable, and if any one or more provisions are determined to be illegal or otherwise unenforceable, in whole or in part, then the remaining provisions will nevertheless be binding and enforceable.
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(j)
|
Amendment
. Except as otherwise provided in the Plan, this Agreement will not be amended unless the amendment is agreed to in writing by both the Participant and the Company.
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(k)
|
Choice of Law; Jurisdiction
. This Agreement and all claims, causes of action or proceedings (whether in contract, in tort, at law or otherwise) that may be based upon, arise out of or relate to this Agreement will be governed by the internal laws of the State of Delaware, excluding any conflicts or choice-of-law rule or principle that might otherwise refer construction or interpretation of this Agreement to the substantive law of another jurisdiction. The Participant and each party to this Agreement agrees that it will bring all claims, causes of action and proceedings (whether in contract, in tort, at law or otherwise) that may be based upon, arise out of or be related to the Plan and this Agreement exclusively in the Delaware Court of Chancery or, in the event (but only in the event) that such court does not have subject matter jurisdiction over such claim, cause of action or proceeding, exclusively in the United States District Court for the District of Delaware (the “
Chosen Court
”), and hereby (i) irrevocably submits to the exclusive jurisdiction of the Chosen Court, (ii) waives any objection to laying venue in any such proceeding in the Chosen Court, (iii) waives any objection that the Chosen Court is an inconvenient forum or does not have jurisdiction over any party and (iv) agrees that service of process upon such
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6 | 6-Aug-2015 (Executive)
party in any such claim or cause of action will be effective if notice is given in accordance with this Agreement.
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(l)
|
Signature in Counterparts
. This Agreement may be signed in counterparts, manually or electronically, each of which will be an original, with the same effect as if the signatures to each were upon the same instrument.
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(m)
|
Acceptance
. The Participant hereby acknowledges receipt of a copy of the Plan and this Agreement. The Participant has read and understands the terms and provisions of the Plan and this Agreement, and accepts the Option subject to all of the terms and conditions of the Plan and this Agreement. In the event of a conflict between any term or provision contained in this Agreement and a term or provision of the Plan, the applicable term and provision of the Plan will govern and prevail.
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[Signature page follows.]
7 | 6-Aug-2015 (Executive)
IN WITNESS WHEREOF, the Company and the Participant have executed this Stock Option Award Agreement as of the date first written above.
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PARTICIPANT
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INC RESEARCH HOLDINGS, INC.
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By:
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/s/ Duncan Jamie Macdonald
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Name:
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Duncan Jamie Macdonald
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Title:
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Chief Executive Officer
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[Electronic Signature]
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____________________
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Participant Signature
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Name:
[Participant Name]
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Acceptance Date:
[Acceptance Date]
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[Signature Page – Form – Stock Option Award Agreement for U.S. Participants]
APPENDIX A
NOTICE OF EXERCISE
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INC Research Holdings, Inc.
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[Address 1]
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[Address 2]
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Attention: General Counsel
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Date of Exercise: _________________
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Ladies & Gentlemen:
1.
Exercise of Option
. This constitutes notice to INC Research Holdings, Inc. (the “
Company
”) that, pursuant to my INC Research Holdings, Inc. 2014 Equity Incentive Plan Stock Option Award Agreement, dated ___________, 20__ (the “
Award Agreement
”), I elect to purchase the number of Shares set forth below for the price set forth below. Capitalized terms used and not otherwise defined in this notice will have the meanings ascribed to those terms in the Award Agreement. By signing and delivering this notice to the Company, I hereby acknowledge that I am the holder of the Option exercised by this notice and have full power and authority to exercise the Option.
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Number of Shares as to which Option is exercised (“Optioned Shares”):
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Shares to be issued in name of:
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Date of Grant:
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Total Purchase Price:
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2.
Delivery of Payment
. With this notice, I hereby deliver to the Company the full exercise price of the Optioned Shares and any and all Tax-Related Items withholding due in connection with the exercise of my Option, subject to satisfaction of the Purchase Price any and all Tax-Related Items withholding in any other manner consistent with the Award Agreement and the Plan.
3.
Rights as Stockholder
. While the Company will endeavor to process this notice in a timely manner, I acknowledge that, until the issuance of the Optioned Shares (or, in the Committee’s discretion, in un-certificated form, upon the books of the Company’s transfer agent) and my satisfaction of any other conditions imposed by the Committee pursuant to the Plan or as set forth in the Award Agreement, no right to vote or receive dividends or any other rights as a stockholder will exist with respect to the Optioned Shares, notwithstanding the exercise of my Option. No
adjustment will be made for a dividend or other right for which the record date is prior to the date of issuance of the Optioned Shares.
4.
Interpretation
. Any dispute regarding the interpretation of this notice will be submitted promptly by me or by the Company to the Committee. The resolution of such a dispute by the Committee will be final and binding on all parties.
5.
Entire Agreement
. The Plan, the Award Agreement under which the Optioned Shares were granted are incorporated herein by reference and, together with this notice, constitute the entire agreement of the parties with respect to the subject matter of this notice.
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Very truly yours,
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Signature:
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Name:
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Address:
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Social Security Number:
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INC RESEARCH HOLDINGS, INC.
2014 Equity Incentive Plan
Stock Option Award Agreement for Non-U.S. Participants
This Stock Option Award Agreement for Non-U.S. Participants (the “
Option Agreement
”), including any special terms and conditions for the Participant’s country set forth in the appendix attached hereto (the “
Appendix
”) (the Option Agreement and the Appendix, together, this “
Agreement
”) is made by and between INC Research Holdings, Inc., a Delaware corporation (the “
Company
”), and [●] (the “
Participant
”), effective as of [●] (the “
Date of Grant
”).
RECITALS
WHEREAS
, the Company has adopted the INC Research Holdings, Inc. 2014 Equity Incentive Plan (as the same may be amended and/or amended and restated from time to time, the “
Plan
”), which Plan is incorporated herein by reference and made a part of this Agreement, and capitalized terms not otherwise defined in this Agreement will have the meanings ascribed to those terms in the Plan
; and
WHEREAS
, the Committee has authorized and approved the grant of an Award to the Participant of a Stock Option to purchase shares of Common Stock (“
Shares
”), subject to the terms and conditions set forth in the Plan and this Agreement (including the Appendix).
NOW THEREFORE
, in consideration of the premises and mutual covenants set forth in this Agreement, the parties agree as follows:
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1.
|
Grant of Stock Option Award
. The Company has granted to the Participant, effective as of the Date of Grant, the right and option to purchase, on the terms and conditions set forth in the Plan and this Agreement, all or any part of an aggregate of
[●]
Shares, subject to adjustment as set forth in the Plan (the “
Option
”). The Option is intended to be a Nonqualified Stock Option.
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2.
|
Exercise Price
. The exercise price of the Option is $
[●]
per Share, subject to adjustment as set forth in the Plan (the “
Exercise Price
”).
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3.
|
Vesting of Option
. Subject to the terms and conditions set forth in the Plan and this Agreement, the Option will vest as follows:
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(a)
|
General
. Except as otherwise provided in Sections 3(b) and 4, the Option will vest in equal annual installments of 25% of the Shares over a four
-year period on each anniversary of the Date of Grant, subject to the Participant’s continued Service through each applicable vesting date.
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(b)
|
Change in Control
. The Option will become fully vested immediately upon the Participant’s termination of Service in the event that the Participant’s Service is terminated by the Company without Cause (as defined in the Plan) or if Participant resigns for Good
|
Reason at the time of, or within 12 months following, the consummation of a Change in Control occurring after the Date of Grant.
As used in this Agreement, “
Good Reason
” shall mean the occurrence, without Participant’s express written consent, of any of the following events: (i) a material reduction in Participant’s base salary or Target Bonus percentage under the INC Research, LLC Management Incentive Plan, if applicable; (ii) a material adverse change to Participant’s authority, job duties or responsibilities as compared to Participant’s authority, job duties or responsibilities immediately prior to the Change in Control; (iii) a requirement that Participant relocate to a principal place of employment more than fifty (50) miles from the Company’s offices at 3201 Beechleaf Court, in Raleigh, North Carolina or Participant’s assigned principal office location with any Subsidiary as of immediately prior to the occurrence of the Change in Control; or (iv) if Participant has an effective employment agreement, service agreement, or other similar agreement with the Company or any Subsidiary, a material breach of such agreement, provided, that, any event described in clauses (i), (ii), (iii) and (iv) above shall constitute Good Reason only if the Participant provides the Company with written notice of the basis for the Participant’s Good Reason within forty-five (45) days of the initial actions or inactions of the Company or any Subsidiary giving rise to such Good Reason and the Company or applicable Subsidiary has not cured the identified actions or inactions within thirty (30) days of such notice and provided further that Participant terminates his or her Service within thirty (30) days following the Company or applicable Subsidiary’s failure to cure within the thirty (30) day cure period.”
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4.
|
Forfeiture; Expiration
.
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(a)
|
Termination of Service
. Notwithstanding the Change in Control vesting as stated in Section 3(b) above, any unvested portion of the Option will be forfeited immediately, automatically and without consideration upon a termination of the Participant’s Service (for any reason whatsoever, whether or not later found to be invalid or in breach of employment laws in the jurisdiction where the Participant is employed or the terms of the Participant’s employment agreement, if any). In the event the Participant’s Service is terminated for Cause, the vested portion of the Option will also be forfeited immediately, automatically and without consideration upon that termination for Cause. Without limiting the generality of the foregoing, the Option and the Shares (and any resulting proceeds) will continue to be subject to Section 13 of the Plan.
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(b)
|
Expiration
. Any unexercised portion of the Option will expire on the tenth anniversary of the Date of Grant (the “
Expiration Date
”), or earlier as provided in this Agreement (including Section 5) or the Plan.
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5.
|
Period of Exercise
. Subject to the provisions of the Plan and this Agreement, the Participant may exercise all or any part of the vested portion of the Option at any time prior to the earliest to occur of:
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2 | 6-Aug-2015 (Executive)
|
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(b)
|
the date that is one (1) year following termination of the Participant’s Service due to death or Disability;
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(c)
|
the date that is ninety (90) days following termination of the Participant’s Service without Cause or, to the extent applicable, for Good Reason;
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(d)
|
the date of termination of the Participant’s Service for Cause; or
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(e)
|
the date that is forty-five (45) days following the termination of the Participant’s Service for any reason other than pursuant to Sections 5(b), 5(c) or 5(d) above.
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(a)
|
Notice of Exercise
. Subject to Section 4 and 5, the Participant or, in the case of the Participant’s death or Disability, the Participant’s representative may exercise all or any part of the vested portion of the Option by delivering to the Company at its principal office a written notice of exercise in the form of the attached as shown on
Appendix A
or any other form that the Committee may permit (such notice, a “
Notice of Exercise
”). The Notice of Exercise will be signed by the person exercising the Option. In the event that the Option is being exercised by the Participant’s representative, the Notice of Exercise will be accompanied by proof (satisfactory to the Committee) of the representative’s right to exercise the Option. The Participant or the Participant’s representative will deliver to the Committee, at the time of giving the Notice of Exercise, payment in a form permissible under Section 7 for the full amount of the Purchase Price and applicable Tax-Related Items withholding as provided below.
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(b)
|
Issuance of Common Stock
. After all requirements with respect to the exercise of the Option have been satisfied, including any Tax-Related Items, the Committee will cause to be issued the Shares as to which the Option has been exercised (or, in the Committee’s discretion, in un-certificated form, upon the books of the Company’s transfer agent), registered in the name of the person exercising the Option (or in the names of such person and his or her spouse as community property or as joint tenants with right of survivorship if recognized in the Participant’s jurisdiction). Neither the Company nor the Committee will be liable to the Participant or any other Person for damages relating to any delays in issuing the Shares or any mistakes or errors in the issuance of the Shares.
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(c)
|
Responsibility for Taxes
. The Participant acknowledges that, regardless of any action taken by the Company or, if different, the Subsidiary employing or retaining the Participant (the “
Employer
”), the ultimate liability for all Tax-Related Items is and remains the Participant’s responsibility and may exceed the amount actually withheld by the Company or the Employer. The Participant further acknowledges that the Company and/or the Employer (1) make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the Options, including, but not limited to,
|
3 | 6-Aug-2015 (Executive)
the grant, vesting, or exercise of the Option, the subsequent sale of Shares acquired pursuant to such exercise and the receipt of any dividends; and (2) do not commit to and are under no obligation to structure the terms of the grant or any aspect of the Option to reduce or eliminate the Participant’s liability for Tax-Related Items or achieve any particular tax result. Further, if the Participant is subject to Tax-Related Items in more than one jurisdiction, the Participant acknowledges that the Company and/or the Employer (or former Employer, as applicable) may be required to withhold or account for Tax-Related Items in more than one jurisdiction.
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(d)
|
Withholding Requirements
. Prior to any relevant taxable or tax withholding event, as applicable, the Participant agrees to make adequate arrangements satisfactory to the Company and/or the Employer to satisfy all Tax-Related Items. In this regard, the Participant authorizes the Company and/or the Employer, or their respective agents, at their discretion, to satisfy their withholding obligations with regard to all Tax-Related Items by any of the means described in of the Plan or Section 7 of this Agreement.
|
Depending on the withholding method, the Company may withhold or account for Tax-Related Items by considering applicable minimum statutory withholding rates or other applicable withholding rates, including maximum applicable rates, in which case the Participant will receive a refund of any over-withheld amount in cash and will have no entitlement to the Common Stock equivalent. If the obligation for Tax-Related Items is satisfied by withholding in Shares, for tax purposes, the Participant is deemed to have been issued the full number of Shares subject to the exercised Options, notwithstanding that a number of the Shares is held back solely for the purpose of paying the Tax-Related Items.
Finally, the Participant agrees to pay to the Company or the Employer, including through withholding from the Participant’s wages or other cash compensation paid to the Participant by the Company and/or the Employer, any amount of Tax-Related Items that the Company or the Employer may be required to withhold or account for as a result of the Participant’s participation in the Plan that cannot be satisfied by the means previously described. The Company may refuse to issue or deliver the shares or the proceeds of the sale of Shares, if the Participant fails to comply with the Participant’s obligations in connection with the Tax-Related Items.
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7.
|
Payment for Shares
. The “
Purchase Price
” will be the Exercise Price multiplied by the number of Shares with respect to which the Option is being exercised. All or part of the Purchase Price and any Tax-Related Items withholding may be paid as follows:
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(a)
|
Cash or Check
. In cash or by bank certified check.
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(b)
|
Brokered Cashless Exercise
. To the extent permitted by applicable law and unless otherwise provided by the Committee, from the proceeds of a sale through a broker on the date of exercise of some or all of the Shares to which the exercise relates. In that case,
|
4 | 6-Aug-2015 (Executive)
the Participant will provide the Company a properly executed Notice of Exercise, together with a copy of irrevocable instructions to a broker to deliver promptly to the Company the amount of sale proceeds to pay the aggregate purchase price and/or Tax-Related Items withholding, as applicable. To facilitate the foregoing, the Company may enter into agreements or coordinate procedures with one or more brokerage firms.
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(c)
|
Net Exercise
. By reducing the number of Shares otherwise deliverable upon the exercise of the Option by the number of Shares having a Fair Market Value equal to the amount of the Purchase Price and/or Tax-Related Items withholding, as applicable.
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(d)
|
Surrender of Stock
. In each instance, at the sole discretion of the Committee, by surrendering, or attesting to the ownership of, Shares that are already owned by the Participant free and clear of any restriction or limitation, unless the Committee specifically agrees to accept such Shares subject to such restriction or limitation. Such Shares will be surrendered to the Company in good form for transfer and will be valued by the Company at their Fair Market Value on the date of the applicable exercise of the Option, or to the extent applicable, on the date the Tax-Related Items withholding is to be determined. The Participant will not surrender, or attest to the ownership of, Shares in payment of the Purchase Price (or Tax-Related Items withholding) if such action would cause the Company to recognize compensation expense (or additional compensation expense) with respect to this Option for financial reporting purposes that otherwise would not have occurred.
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8.
|
Adjustment to Option
. In the event of any change with respect to the outstanding Shares contemplated by Section 4.5 of the Plan, the Option may be adjusted in accordance with Section 4.5 of the Plan.
|
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9.
|
Nature of Grant
. In accepting the grant of the Option, the Participant acknowledges, understands and agrees that:
|
|
|
|
|
(a)
|
the Plan is established voluntarily by the Company, it is discretionary in nature and it may be modified, amended, suspended or terminated by the Company at any time, to the extent permitted by the Plan;
|
|
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|
|
(b)
|
the grant of the Option is voluntary and occasional and does not create any contractual or other right to receive future grants of options, or benefits in lieu of options, even if options have been granted in the past;
|
|
|
|
|
(c)
|
all decisions with respect to future Options or other grants, if any, will be at the sole discretion of the Company;
|
|
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|
|
(d)
|
the Option grant and the Participant’s participation in the Plan shall not be interpreted as forming a Service contract with the Company or any Subsidiary;
|
|
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|
|
(e)
|
the Participant is voluntarily participating in the Plan;
|
5 | 6-Aug-2015 (Executive)
|
|
|
|
(f)
|
the Option and the Shares subject to the Option, and the income and value of same, are not intended to replace any pension rights or compensation;
|
|
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|
|
(g)
|
the Option and the Shares subject to the Option, and the income and value of same, are not part of normal or expected compensation for any purpose, including, without limitation, calculating any severance, resignation, termination, redundancy, dismissal, end-of-service payments, bonuses, holiday pay, long-service awards, pension or retirement or welfare benefits or similar payments;
|
|
|
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|
(h)
|
the future value of the underlying Shares is unknown, indeterminable and cannot be predicted with certainty;
|
|
|
|
|
(i)
|
if the underlying Shares do not increase in value, the Option will have no value;
|
|
|
|
|
(j)
|
if the Participant exercises the Option and acquires Shares, the value of such Shares may increase or decrease in value, even below the Exercise Price;
|
|
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|
(k)
|
no claim or entitlement to compensation or damages shall arise from forfeiture of the Option resulting from a termination of the Participant’s Service (for any reason whatsoever, whether or not later found to be invalid or in breach of employment laws in the jurisdiction where the Participant is employed or the terms of the Participant’s employment agreement, if any), and in consideration of the grant of the Option to which the Participant is otherwise not entitled, the Participant irrevocably agrees never to institute any claim against the Company or any of its Subsidiaries, waives the Participant’s ability, if any, to bring any such claim, and releases the Company and its Subsidiaries from any such claim; if, notwithstanding the foregoing, any such claim is allowed by a court of competent jurisdiction, then, by participating in the Plan, the Participant shall be deemed irrevocably to have agreed not to pursue such claim and agrees to execute any and all documents necessary to request dismissal or withdrawal of such claim;
|
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|
|
(l)
|
neither the Company nor any Subsidiary shall be liable for any foreign exchange rate fluctuation between the Participant’s local currency and the United States Dollar that may affect the value of the Option or of any amounts due to the Participant pursuant to the exercise of the Option or the subsequent sale of any Shares acquired upon exercise.
|
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10.
|
No Advice Regarding Grant
. The Company is not providing any tax, legal or financial advice, nor is the Company making any recommendations regarding the Participant’s participation in the Plan, or the Participant’s acquisition or sale of the underlying Shares. The Participant is hereby advised to consult with the Participant’s own personal tax, legal and financial advisors regarding the Participant’s participation in the Plan before taking any action related to the Plan.
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11.
|
Data Privacy
. The Participant hereby explicitly and unambiguously consents to the collection, use and transfer, in electronic or other form, of the Participant’s personal data as described in
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6 | 6-Aug-2015 (Executive)
this Agreement and any other Option grant materials by and among, as applicable, the Employer, the Company and its Subsidiaries for the exclusive purpose of implementing, administering and managing the Participant’s participation in the Plan.
The Participant understands that the Company and the Employer may hold certain personal information about the Participant, including, but not limited to, the Participant’s name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title, any shares of stock or directorships held in the Company, details of all Options or any other entitlement to shares of stock awarded, canceled, exercised, vested, unvested or outstanding in the Participant’s favor (“Data”), for the exclusive purpose of implementing, administering and managing the Plan.
The Participant understands that Data will be transferred to Fidelity Stock Plan Services, LLC or such other stock plan service provider as may be selected by the Company in the future, which is assisting the Company with the implementation, administration and management of the Plan. The Participant understands that the recipients of the Data may be located in the United States or elsewhere, and that the recipients’ country (e.g., the United States) may have different data privacy laws and protections than the Participant’s country. The Participant understands that the Participant may request a list with the names and addresses of any potential recipients of the Data by contacting the Participant’s local human resources representative. The Participant authorizes the Company, Fidelity Stock Plan Services, LLC and any other possible recipients which may assist the Company (presently or in the future) with implementing, administering and managing the Plan to receive, possess, use, retain and transfer the Data, in electronic or other form, for the sole purpose of implementing, administering and managing the Participant’s participation in the Plan. The Participant understands that Data will be held only as long as is necessary to implement, administer and manage the Participant’s participation in the Plan. The Participant understands that the Participant may, at any time, view Data, request additional information about the storage and processing of Data, require any necessary amendments to Data or refuse or withdraw the consents herein, in any case without cost, by contacting in writing the Participant’s local human resources representative. Further, the Participant understands that the Participant is providing the consents herein on a purely voluntary basis. If the Participant does not consent, or if the Participant later seeks to revoke the Participant’s consent, the Participant’s Service and career with the Employer will not be adversely affected; the only adverse consequence of refusing or withdrawing the Participant’s consent is that the Company would not be able to grant Options or other equity awards to the Participant or administer or maintain such awards. Therefore, the Participant understands that refusing or withdrawing the Participant’s consent may affect the Participant’s ability to participate in the Plan. For more information on the consequences of the Participant’s refusal to consent or withdrawal of consent, the Participant understands that the Participant may contact the Participant’s local human resources representative.
7 | 6-Aug-2015 (Executive)
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12.
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Language
. If the Participant has received this Agreement or any other document related to the Plan translated into a language other than English and if the meaning of the translated version is different than the English version, the English version will control.
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13.
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Electronic Delivery and Acceptance
. The Company may, in its sole discretion, decide to deliver any documents related to current or future participation in the Plan by electronic means. The Participant hereby consents to receive such documents by electronic delivery and agrees to participate in the Plan through an on-line or electronic system established and maintained by the Company or a third party designated by the Company.
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14.
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Imposition of Other Requirements
. The Company reserves the right to impose any other requirements on the Participant’s participation in the Plan, on the Option and on any shares acquired under the Plan, to the extent the Company determines it is necessary or advisable for legal or administrative reasons, and to require the Participant to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing.
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15.
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Appendix
. Notwithstanding any provisions in this Agreement, the Option grant shall be subject to any special terms and conditions set forth in the
Appendix B
for the Participant’s country. The
Appendix B
constitutes part of this Option Agreement.
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16.
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Insider Trading Restrictions/Market Abuse Laws
. The Participant acknowledges that, depending on his or her country, the Participant may be subject to insider trading restrictions and/or market abuse laws, which may affect his or her ability to acquire or sell Shares or rights to Shares (
e.g.
, Options) under the Plan during such times as the Participant is considered to have “inside information” regarding the Company (as defined by the laws in the Participant’s country). Any restrictions under these laws or regulations are separate from and in addition to any restrictions that may be imposed under any applicable Company insider trading policy. The Participant is responsible for ensuring compliance with any applicable restrictions and is advised to consult his or her personal legal advisor on this matter.
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17.
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Miscellaneous Provisions
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(a)
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Securities or Exchange Control Laws Requirements
. No Shares will be issued or transferred pursuant to this Agreement unless and until all then applicable requirements imposed by federal and state securities and other securities or exchange control laws, rules and regulations and by any regulatory agencies having jurisdiction, and by any exchanges upon which the Shares may be listed, have been fully met. As a condition precedent to the issuance of Shares pursuant to this Agreement, the Company may require the Participant to take any reasonable action to meet those requirements. The Committee may impose such conditions on any Shares issuable pursuant to this Agreement as it may deem advisable, including, without limitation, restrictions under the Securities Act of 1933, as amended, under the requirements of any exchange upon which shares of the same class are then listed and under any blue sky or other securities laws applicable to those Shares.
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8 | 6-Aug-2015 (Executive)
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(b)
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Rights of a Shareholder of the Company
. Neither the Participant nor the Participant’s representative will have any rights as a shareholder of the Company with respect to any Shares subject to the Option until the Participant or the Participant’s representative becomes entitled to receive those Shares by (i) filing a Notice of Exercise, (ii) paying the Purchase Price and Tax-Related Items withholding as provided in this Agreement, and the Company actually receiving those amounts, (iii) the Company issuing those Shares and entering the name of the Participant in the register of shareholders of the Company as the registered holder of those Shares and (iv) satisfying any other conditions as the Committee reasonably requires.
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(c)
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Transfer Restrictions
. The Shares purchased by exercise of the Option will be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the Plan or the rules, regulations and other requirements of the Securities and Exchange Commission, any stock exchange upon which such shares are listed, any applicable federal, state or local laws and any agreement with, or policy of, the Company or the Committee to which the Participant is a party or subject, and the Committee may cause orders or designations to be placed upon the books and records of the Company’s transfer agent to make appropriate reference to such restrictions.
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(d)
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No Right to Continued Service
. Nothing in this Agreement or the Plan confers upon the Participant any right to continue in Service for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Company (or any Subsidiary employing or retaining the Participant) or of the Participant, which rights are hereby expressly reserved by each, to terminate his or her Service at any time and for any reason, with or without Cause.
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(e)
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Notification
. Any notification required by the terms of this Agreement will be given by the Participant (i) in a writing addressed to the Company at its principal executive office and will be deemed effective upon actual receipt when delivered by personal delivery or by registered or certified mail, with postage and fees prepaid, or (ii) by electronic transmission to the Company’s e-mail address of the Company’s General Counsel and will be deemed effective upon actual receipt. Any notification required by the terms of this Agreement will be given by the Company (x) in a writing addressed to the address that the Participant most recently provided to the Company and will be deemed effective upon personal delivery or within three (3) days of deposit with the United States Postal Service, by registered or certified mail, with postage and fees prepaid, or (y) by facsimile or electronic transmission to the Participant’s primary work fax number or e-mail address (as applicable) and will be deemed effective upon confirmation of receipt by the sender of such transmission.
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(f)
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Entire Agreement
. This Agreement and the Plan constitute the entire agreement between the parties hereto with regard to the subject matter of this Agreement. This Agreement and the Plan supersede any other agreements, representations or understandings (whether
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9 | 6-Aug-2015 (Executive)
oral or written and whether express or implied) that relate to the subject matter of this Agreement.
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(g)
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Waiver
. No waiver of any breach or condition of this Agreement by the Participant or any other Participant will be deemed to be a waiver of any other or subsequent breach or condition whether of like or different nature.
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(h)
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Successors and Assigns
. The provisions of this Agreement will inure to the benefit of, and be binding upon, the Company and its successors and assigns and upon the Participant, the Participant’s executor, personal representative(s), distributees, administrator, permitted transferees, permitted assignees, beneficiaries, and legatee(s), as applicable, whether or not any such person will have become a party to this Agreement and have agreed in writing to be joined herein and be bound by the terms hereof.
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(i)
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Severability
. The provisions of this Agreement are severable, and if any one or more provisions are determined to be illegal or otherwise unenforceable, in whole or in part, then the remaining provisions will nevertheless be binding and enforceable.
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(j)
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Amendment
. Except as otherwise provided in the Plan, this Agreement will not be amended unless the amendment is agreed to in writing by both the Participant and the Company.
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(k)
|
Choice of Law; Jurisdiction
. This Agreement and all claims, causes of action or proceedings (whether in contract, in tort, at law or otherwise) that may be based upon, arise out of or relate to this Agreement will be governed by the internal laws of the State of Delaware, excluding any conflicts or choice-of-law rule or principle that might otherwise refer construction or interpretation of this Agreement to the substantive law of another jurisdiction. The Participant and each party to this Agreement agrees that it will bring all claims, causes of action and proceedings (whether in contract, in tort, at law or otherwise) that may be based upon, arise out of or be related to the Plan and this Agreement exclusively in the Delaware Court of Chancery or, in the event (but only in the event) that such court does not have subject matter jurisdiction over such claim, cause of action or proceeding, exclusively in the United States District Court for the District of Delaware (the “
Chosen Court
”), and hereby (i) irrevocably submits to the exclusive jurisdiction of the Chosen Court, (ii) waives any objection to laying venue in any such proceeding in the Chosen Court, (iii) waives any objection that the Chosen Court is an inconvenient forum or does not have jurisdiction over any party and (iv) agrees that service of process upon such party in any such claim or cause of action will be effective if notice is given in accordance with this Agreement.
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(l)
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Signature in Counterparts
. This Agreement may be signed in counterparts, manually or electronically, each of which will be an original, with the same effect as if the signatures to each were upon the same instrument.
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10 | 6-Aug-2015 (Executive)
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(m)
|
Acceptance
. The Participant hereby acknowledges receipt of a copy of the Plan and this Agreement. The Participant has read and understands the terms and provisions of the Plan and this Agreement, and accepts the Option subject to all of the terms and conditions of the Plan and this Agreement. In the event of a conflict between any term or provision contained in this Agreement and a term or provision of the Plan, the applicable term and provision of the Plan will govern and prevail.
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[Signature page follows.]
11 | 6-Aug-2015 (Executive)
IN WITNESS WHEREOF, the Company and the Participant have executed this Stock Option Award Agreement as of the date first written above.
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PARTICIPANT
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INC RESEARCH HOLDINGS, INC.
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PARTICIPANT
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INC RESEARCH HOLDINGS, INC.
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By:
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/s/ Duncan Jamie Macdonald
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Name:
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Duncan Jamie Macdonald
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Title:
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Chief Executive Officer
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[Electronic Signature]
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____________________
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Participant Signature
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Name:
[Participant Name]
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Acceptance Date:
[Acceptance Date]
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[Signature Page – Form – Stock Option Award Agreement for Non-U.S. Participants]
APPENDIX A
NOTICE OF EXERCISE
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INC Research Holdings, Inc.
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[Address 1]
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[Address 2]
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Attention: General Counsel
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Date of Exercise: _________________
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Ladies & Gentlemen:
1.
Exercise of Option
. This constitutes notice to INC Research Holdings, Inc. (the “
Company
”) that, pursuant to my INC Research Holdings, Inc. 2014 Equity Incentive Plan Stock Option Award Agreement, dated ___________, 20__ (the “
Award Agreement
”), I elect to purchase the number of Shares set forth below for the price set forth below. Capitalized terms used and not otherwise defined in this notice will have the meanings ascribed to those terms in the Award Agreement. By signing and delivering this notice to the Company, I hereby acknowledge that I am the holder of the Option exercised by this notice and have full power and authority to exercise the Option.
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Number of Shares as to which Option is exercised (“Optioned Shares”):
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Shares to be issued in name of:
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Date of Grant:
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Total Purchase Price:
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2.
Delivery of Payment
. With this notice, I hereby deliver to the Company the full exercise price of the Optioned Shares and any and all withholding Tax-Related Items due in connection with the exercise of my Option, subject to satisfaction of the Purchase Price any and all withholding Tax-Related Items in any other manner consistent with the Award Agreement and the Plan.
3.
Rights as Stockholder
. While the Company will endeavor to process this notice in a timely manner, I acknowledge that, until the issuance of the Optioned Shares (or, in the Committee’s discretion, in un-certificated form, upon the books of the Company’s transfer agent) and my satisfaction of any other conditions imposed by the Committee pursuant to the Plan or as set forth in the Award Agreement, no right to vote or receive dividends or any other rights as a stockholder
will exist with respect to the Optioned Shares, notwithstanding the exercise of my Option. No adjustment will be made for a dividend or other right for which the record date is prior to the date of issuance of the Optioned Shares.
4.
Interpretation
. Any dispute regarding the interpretation of this notice will be submitted promptly by me or by the Company to the Committee. The resolution of such a dispute by the Committee will be final and binding on all parties.
5.
Entire Agreement
. The Plan, the Award Agreement under which the Optioned Shares were granted are incorporated herein by reference and, together with this notice, constitute the entire agreement of the parties with respect to the subject matter of this notice.
Very truly yours,
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Very truly yours,
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Signature:
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Name:
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Address:
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APPENDIX B
INC RESEARCH HOLDINGS, INC.
2014 Equity Incentive Plan
Stock Option Award Agreement
Country-Specific Terms and Conditions
Capitalized terms used but not otherwise defined herein shall have the meaning given to such terms in the INC Research Holdings, Inc. 2014 Equity Incentive Plan (the “
Plan
”) and the Stock Option Award Agreement for Non-U.S. Participants (the “
Option Agreement
”). This Appendix constitutes part of the Option Agreement.
Terms and Conditions
This Appendix includes additional terms and conditions that govern the Option if the Participant is employed by an employing entity in a country listed below. If the Participant moves to another country after receiving the grant of the Option, the Company will, in its discretion, determine the extent to which the terms and conditions herein will be applicable to the Participant.
Notifications
This Appendix also includes information regarding exchange controls and certain other issues of which the Participant should be aware with respect to the Participant’s participation in the Plan. The information is based on the securities, exchange control and other laws in effect in the respective countries as of September 2014. Such laws are often complex and change frequently. As a result, the Company strongly recommends that the Participant not rely on the information in this Appendix as the only source of information relating to the consequences of the Participant’s participation in the Plan because the information may be out of date at the time that the Participant exercises the Option or sells Shares acquired under the Plan.
In addition, the information contained herein is general in nature and may not apply to the Participant’s particular situation and the Company is not in a position to assure the Participant of a particular result. Accordingly, the Participant should seek appropriate professional advice as to how the relevant laws in the Participant’s country may apply to the Participant’s situation.
SINGAPORE
Notifications
Securities Law Notification
. The grant of the Option is being made pursuant to the “Qualifying Person” exemption under section 273(1)(f) of the Securities and Futures Act (Chapter 289, 2006 Ed.) (“SFA”). The Plan has not been lodged or registered as a prospectus with the Monetary Authority of Singapore. The Participant should note that the grant of the Option is subject to section 257 of the SFA and the Participant will not be able to make (i) any subsequent sale of the Shares in Singapore or (ii) any offer of such subsequent sale of the Shares in Singapore, unless such sale or offer is made pursuant to the exemptions under Part XIII Division 1 Subdivision (4) (other than section 280) of the SFA. The Company’s shares are traded on the NASDAQ Global Select Market, which is located outside of Singapore, under the ticker symbol “INCR” and the Shares acquired under the Plan may be sold through this exchange.
Director Notification Requirement
. If the Participant is a director, associate director or shadow director
1
of a Singapore Subsidiary, the Participant is subject to certain notification requirements under the Singapore Companies Act, regardless of whether the Participant is a Singapore resident or employed in Singapore. Among these requirements is the obligation to notify the Singapore Subsidiary in writing when the Participant receives or disposes of an interest (
e.g.
, Options, Shares) in the Company or a Subsidiary. These notifications must be made within two (2) business days of acquiring or disposing of any interest in the Company or any Subsidiary or within two (2) business days of becoming a director, associate director or shadow director if such an interest exists at that time.
UNITED KINGDOM
Terms and Conditions
Responsibility for Taxes
. The following provisions supplement Section 6 of the Option Agreement:
If payment or withholding of the income tax due is not made within ninety (90) days of the end of the tax year in which the event giving rise to the liability occurs or such other period specified in Section 222(1)(c) of the U.K. Income Tax (Earnings and Pensions) Act 2003 (the “Due Date”), the amount of any uncollected income tax will constitute a loan owed by the Participant to the Company or the Employer, effective on the Due Date. The Participant agrees that the loan will bear interest at the then-current Official Rate of Her Majesty’s Revenue and Customs (“HMRC”), it will be immediately due and repayable, and the Company or the Employer may recover it at any time thereafter by any of the means referred to in the Plan or in Section 6 of the Option Agreement.
_______________________
1
A shadow director is an individual who is not on the board of directors of the Singapore Subsidiary but who has sufficient control such that the board of directors of the Singapore Subsidiary acts in accordance with the directions or instructions of the individual.
Notwithstanding the foregoing, if the Participant is a director or executive officer of the Company (within the meaning of Section 13(k) of the Exchange Act), he or she will not be eligible for such a loan to cover the income tax due as described above. In the event that the Participant is such a director or executive officer and the income tax is not collected from or paid by the Participant by the Due Date, the amount of any uncollected income tax may constitute a benefit to the Participant on which additional income tax and national insurance contributions may be payable. The Participant is responsible for reporting and paying any income tax due on this additional benefit directly to HMRC under the self-assessment regime. The Participant is responsible for reimbursing the Company or the Employer (as applicable) for the value of any employee national insurance contributions due on this additional benefit and acknowledges that the Company or the Employer may recover such amount from him or her by any of the means referred to in Plan or in Section 6 of the Option Agreement.
Joint Election
. As a condition of the Participant’s participation in the Plan, the Participant agrees to accept any liability for secondary Class 1 national insurance contributions which may be payable by the Company and/or the Employer in connection with the Option and any event giving rise to Tax-Related Items (the “Employer’s NICs”). Without limitation to the foregoing, the Participant agrees to enter into a joint election with the Company (the “Joint Election”), the form of such Joint Election being formally approved by HMRC, and to execute any other consents or elections required to accomplish the transfer of the Employer’s NICs to the Participant. The Participant further agrees to execute such other joint elections as may be required between the Participant and any successor to the Company and/or the Employer. The Participant further agrees that the Company and/or the Employer may collect the Employer’s NICs from him or her by any of the means set forth in Plan or in Section 6 of the Option Agreement.
If the Participant does not enter into a Joint Election, or if approval of the Joint Election has been withdrawn by HMRC, the Company, in its sole discretion and without any liability to the Company or the Employer, may choose not to issue or deliver any Shares to the Participant upon exercise of the Option.
INC RESEARCH HOLDINGS, INC.
2014 Equity Incentive Plan
Stock Option Award Agreement for U.S. Participants
This Stock Option Award Agreement for U.S. Participants (this “
Agreement
”) is made by and between INC Research Holdings, Inc., a Delaware corporation (the “
Company
”), and [●] (the “
Participant
”), effective as of [●] (the “
Date of Grant
”).
RECITALS
WHEREAS
, the Company has adopted the INC Research Holdings, Inc. 2014 Equity Incentive Plan (as the same may be amended and/or amended and restated from time to time, the “
Plan
”), which Plan is incorporated herein by reference and made a part of this Agreement, and capitalized terms not otherwise defined in this Agreement will have the meanings ascribed to those terms in the Plan
; and
WHEREAS
, the Committee has authorized and approved the grant of an Award to the Participant of a Stock Option to purchase shares of Common Stock (“
Shares
”), subject to the terms and conditions set forth in the Plan and this Agreement.
NOW THEREFORE
, in consideration of the premises and mutual covenants set forth in this Agreement, the parties agree as follows:
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1.
|
Grant of Stock Option Award
. The Company has granted to the Participant, effective as of the Date of Grant, the right and option to purchase, on the terms and conditions set forth in the Plan and this Agreement, all or any part of an aggregate of
[●]
Shares, subject to adjustment as set forth in the Plan (the “
Option
”). The Option is intended to be a Nonqualified Stock Option.
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2.
|
Exercise Price
. The exercise price of the Option is $
[●]
per Share, subject to adjustment as set forth in the Plan (the “
Exercise Price
”).
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3.
|
Vesting of Option
. Subject to the terms and conditions set forth in the Plan and this Agreement, the Option will vest as follows:
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|
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(a)
|
General
. Except as otherwise provided in Sections 3(b) and 4, the Option will vest in equal annual installments of 25% of the Shares over a four year period on each anniversary of the Date of Grant, subject to the Participant’s continued Service through each applicable vesting date.
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(b)
|
Change in Control
. The Option will become fully vested immediately upon the Participant’s termination of Service in the event that the Participant’s Service is terminated by the Company without Cause (as defined in the Plan) or if Participant resigns for Good Reason at the time of, or within 6 months following, the consummation of a Change in Control occurring after the Date of Grant.
|
As used in this Agreement, “
Good Reason
” shall mean the occurrence, without Participant’s express written consent, of any of the following events: (i) a material reduction in Participant’s base salary or Target Bonus percentage under the INC Research, LLC Management Incentive Plan, if applicable; (ii) a material adverse change to Participant’s authority, job duties or responsibilities as compared to Participant’s authority, job duties or responsibilities immediately prior to the Change in Control; (iii) a requirement that Participant relocate to a principal place of employment more than fifty (50) miles from the Company’s offices at 3201 Beechleaf Court, in Raleigh, North Carolina or Participant’s assigned principal office location with any Subsidiary as of immediately prior to the occurrence of the Change in Control; or (iv) if Participant has an effective employment agreement, service agreement, or other similar agreement with the Company or any Subsidiary, a material breach of such agreement, provided, that, any event described in clauses (i), (ii), (iii) and (iv) above shall constitute Good Reason only if the Participant provides the Company with written notice of the basis for the Participant’s Good Reason within forty-five (45) days of the initial actions or inactions of the Company or any Subsidiary giving rise to such Good Reason and the Company or applicable Subsidiary has not cured the identified actions or inactions within thirty (30) days of such notice and provided further that Participant terminates his or her Service within thirty (30) days following the Company or applicable Subsidiary’s failure to cure within the thirty (30) day cure period.”
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4.
|
Forfeiture; Expiration
.
|
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(a)
|
Termination of Service
. Notwithstanding the Change in Control vesting as stated in Section 3(b) above, any unvested portion of the Option will be forfeited immediately, automatically and without consideration upon a termination of the Participant’s Service for any reason. In the event the Participant’s Service is terminated for Cause, the vested portion of the Option will also be forfeited immediately, automatically and without consideration upon that termination for Cause. Without limiting the generality of the foregoing, the Option and the Shares (and any resulting proceeds) will continue to be subject to Section 13 of the Plan.
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(b)
|
Expiration
. Any unexercised portion of the Option will expire on the tenth anniversary of the Date of Grant (the “
Expiration Date
”), or earlier as provided in this Agreement (including Section 5) or the Plan.
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5.
|
Period of Exercise
. Subject to the provisions of the Plan and this Agreement, the Participant may exercise all or any part of the vested portion of the Option at any time prior to the earliest to occur of:
|
|
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|
|
(b)
|
the date that is one (1) year following termination of the Participant’s Service due to death or Disability;
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|
|
|
(c)
|
the date that is ninety (90) days following termination of the Participant’s Service without Cause or, to the extent applicable, for Good Reason;
|
|
|
|
|
(d)
|
the date of termination of the Participant’s Service for Cause; or
|
|
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|
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(e)
|
the date that is forty-five (45) days following the termination of the Participant’s Service for any reason other than pursuant to Sections 5(b), 5(c) or 5(d) above.
|
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|
|
(a)
|
Notice of Exercise
. Subject to Section 4 and 5, the Participant or, in the case of the Participant’s death or Disability, the Participant’s representative may exercise all or any part of the vested portion of the Option by delivering to the Company at its principal office a written notice of exercise in the form of the attached as shown on
Appendix A
or any other form that the Committee may permit (such notice, a “
Notice of Exercise
”). The Notice of Exercise will be signed by the person exercising the Option. In the event that the Option is being exercised by the Participant’s representative, the Notice of Exercise will be accompanied by proof (satisfactory to the Committee) of the representative’s right to exercise the Option. The Participant or the Participant’s representative will deliver to the Committee, at the time of giving the Notice of Exercise, payment in a form permissible under Section 7 for the full amount of the Purchase Price and applicable Tax-Related Items withholding as provided below.
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|
(b)
|
Issuance of Common Stock
. After all requirements with respect to the exercise of the Option have been satisfied, including, any Tax-Related Items withholding, the Committee will cause to be issued the Shares as to which the Option has been exercised (or, in the Committee’s discretion, in un-certificated form, upon the books of the Company’s transfer agent), registered in the name of the person exercising the Option (or in the names of such person and his or her spouse as community property or as joint tenants with right of survivorship). Neither the Company nor the Committee will be liable to the Participant or any other Person for damages relating to any delays in issuing the Shares or any mistakes or errors in the issuance of the Shares.
|
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|
(c)
|
Withholding Requirements
. The Company will have the power and the right to deduct or withhold automatically from any Shares deliverable under this Agreement, or to require the Participant or the Participant’s representative to remit to the Company, the minimum statutory amount necessary to satisfy federal, state and local Tax-Related Items, domestic or foreign, required by law or regulation to be withheld with respect to any taxable event arising as a result of this Agreement (collectively, “
Withheld Taxes
”); provided that any obligations to pay Withheld Taxes may be satisfied in the manner in which the Purchase Price is permitted to be paid under Section 7 or any other manner permitted by the Plan.
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7.
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Payment for Shares
. The “
Purchase Price
” will be the Exercise Price multiplied by the number of Shares with respect to which the Option is being exercised. All or part of the Purchase Price and any Withheld Taxes may be paid as follows:
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(a)
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Cash or Check
. In cash or by bank certified check.
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(b)
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Brokered Cashless Exercise
. To the extent permitted by applicable law and unless otherwise provided by the Committee, from the proceeds of a sale through a broker on the date of exercise of some or all of the Shares to which the exercise relates. In that case, the Participant will provide the Company a properly executed Notice of Exercise, together with a copy of irrevocable instructions to a broker to deliver promptly to the Company the amount of sale proceeds to pay the aggregate purchase price and/or Withheld Taxes, as applicable. To facilitate the foregoing, the Company may, to the extent permitted by applicable law, enter into agreements or coordinate procedures with one or more brokerage firms.
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(c)
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Net Exercise
. By reducing the number of Shares otherwise deliverable upon the exercise of the Option by the number of Shares having a Fair Market Value equal to the amount of the Purchase Price and/or Withheld Taxes, as applicable.
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(d)
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Surrender of Stock
. In each instance, at the sole discretion of the Committee, by surrendering, or attesting to the ownership of, Shares that are already owned by the Participant free and clear of any restriction or limitation, unless the Committee specifically agrees to accept such Shares subject to such restriction or limitation. Such Shares will be surrendered to the Company in good form for transfer and will be valued by the Company at their Fair Market Value on the date of the applicable exercise of the Option, or to the extent applicable, on the date the Withheld Taxes is to be determined. The Participant will not surrender, or attest to the ownership of, Shares in payment of the Purchase Price (or Withheld Taxes) if such action would cause the Company to recognize compensation expense (or additional compensation expense) with respect to this Option for financial reporting purposes that otherwise would not have occurred.
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8.
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Adjustment to Option
. In the event of any change with respect to the outstanding shares of Common Stock contemplated by Section 4.5 of the Plan, the Option may be adjusted in accordance with Section 4.5 of the Plan.
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9.
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Restrictive Covenants
. Participant acknowledges and recognizes the highly competitive nature of the businesses of the Company and its Affiliates and accordingly agrees to the provisions of
Appendix B
to this Agreement (the “Restrictive Covenants”). For the avoidance of doubt, the Restrictive Covenants contained in this Agreement are in addition to, and not in lieu of, any other restrictive covenants or similar covenants between the Participant and the Company or any of its Affiliates.
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10.
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Electronic Delivery and Acceptance
. The Company may, in its sole discretion, decide to deliver any documents related to current or future participation in the Plan by electronic means. The Participant hereby consents to receive such documents by electronic delivery
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and agrees to participate in the Plan through an on-line or electronic system established and maintained by the Company or a third party designated by the Company.
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11.
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Miscellaneous Provisions
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(a)
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Securities Laws Requirements
. No Shares will be issued or transferred pursuant to this Agreement unless and until all then applicable requirements imposed by federal and state securities and other laws, rules and regulations and by any regulatory agencies having jurisdiction, and by any exchanges upon which the Shares may be listed, have been fully met. As a condition precedent to the issuance of Shares pursuant to this Agreement, the Company may require the Participant to take any reasonable action to meet those requirements. The Committee may impose such conditions on any Shares issuable pursuant to this Agreement as it may deem advisable, including, without limitation, restrictions under the Securities Act of 1933, as amended, under the requirements of any exchange upon which shares of the same class are then listed and under any blue sky or other securities laws applicable to those Shares.
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(b)
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Rights of a Shareholder of the Company
. Neither the Participant nor the Participant’s representative will have any rights as a shareholder of the Company with respect to any Shares subject to the Option until the Participant or the Participant’s representative becomes entitled to receive those Shares by (i) filing a Notice of Exercise, (ii) paying the Purchase Price and Withheld Taxes as provided in this Agreement, and the Company actually receiving those amounts, (iii) the Company issuing those Shares and entering the name of the Participant in the register of shareholders of the Company as the registered holder of those Shares and (iv) satisfying any other conditions as the Committee reasonably requires.
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(c)
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Transfer Restrictions
. The Shares purchased by exercise of the Option will be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the Plan or the rules, regulations and other requirements of the Securities and Exchange Commission, any stock exchange upon which such shares are listed, any applicable federal or state laws and any agreement with, or policy of, the Company or the Committee to which the Participant is a party or subject, and the Committee may cause orders or designations to be placed upon the books and records of the Company’s transfer agent to make appropriate reference to such restrictions.
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(d)
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No Right to Continued Service
. Nothing in this Agreement or the Plan confers upon the Participant any right to continue in Service for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Company (or any Subsidiary employing or retaining the Participant) or of the Participant, which rights are hereby expressly reserved by each, to terminate his or her Service at any time and for any reason, with or without Cause.
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(e)
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Notification
. Any notification required by the terms of this Agreement will be given by the Participant (i) in a writing addressed to the Company at its principal executive office and will be deemed effective upon actual receipt when delivered by personal delivery or by registered or certified mail, with postage and fees prepaid, or (ii) by electronic transmission to the Company’s e-mail address of the Company’s General Counsel and will be deemed effective upon actual receipt. Any notification required by the terms of this Agreement will be given by the Company (x) in a writing addressed to the address that the Participant most recently provided to the Company and will be deemed effective upon personal delivery or within three (3) days of deposit with the United States Postal Service, by registered or certified mail, with postage and fees prepaid, or (y) by facsimile or electronic transmission to the Participant’s primary work fax number or e-mail address (as applicable) and will be deemed effective upon confirmation of receipt by the sender of such transmission.
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(f)
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Entire Agreement
. This Agreement and the Plan constitute the entire agreement between the parties hereto with regard to the subject matter of this Agreement. This Agreement and the Plan supersede any other agreements, representations or understandings (whether oral or written and whether express or implied) that relate to the subject matter of this Agreement.
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(g)
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Waiver
. No waiver of any breach or condition of this Agreement will be deemed to be a waiver of any other or subsequent breach or condition whether of like or different nature.
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(h)
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Successors and Assigns
. The provisions of this Agreement will inure to the benefit of, and be binding upon, the Company and its successors and assigns and upon the Participant, the Participant’s executor, personal representative(s), distributees, administrator, permitted transferees, permitted assignees, beneficiaries, and legatee(s), as applicable, whether or not any such person will have become a party to this Agreement and have agreed in writing to be joined herein and be bound by the terms hereof.
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(i)
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Severability
. The provisions of this Agreement are severable, and if any one or more provisions are determined to be illegal or otherwise unenforceable, in whole or in part, then the remaining provisions will nevertheless be binding and enforceable.
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(j)
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Amendment
. Except as otherwise provided in the Plan, this Agreement will not be amended unless the amendment is agreed to in writing by both the Participant and the Company.
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(k)
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Choice of Law; Jurisdiction
. Notwithstanding the Restrictive Covenants Agreement in the attached
Appendix B
, this Agreement and all claims, causes of action or proceedings (whether in contract, in tort, at law or otherwise) that may be based upon, arise out of or relate to this Agreement will be governed by the internal laws of the State of Delaware, excluding any conflicts or choice-of-law rule or principle
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that might otherwise refer construction or interpretation of this Agreement to the substantive law of another jurisdiction. The Participant and each party to this Agreement agrees that it will bring all claims, causes of action and proceedings (whether in contract, in tort, at law or otherwise) that may be based upon, arise out of or be related to the Plan and this Agreement exclusively in the Delaware Court of Chancery or, in the event (but only in the event) that such court does not have subject matter jurisdiction over such claim, cause of action or proceeding, exclusively in the United States District Court for the District of Delaware (the “
Chosen Court
”), and hereby (i) irrevocably submits to the exclusive jurisdiction of the Chosen Court, (ii) waives any objection to laying venue in any such proceeding in the Chosen Court, (iii) waives any objection that the Chosen Court is an inconvenient forum or does not have jurisdiction over any party and (iv) agrees that service of process upon such party in any such claim or cause of action will be effective if notice is given in accordance with this Agreement.
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(l)
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Signature in Counterparts
. This Agreement may be signed in counterparts, manually or electronically, each of which will be an original, with the same effect as if the signatures to each were upon the same instrument.
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(m)
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Acceptance
. The Participant hereby acknowledges receipt of a copy of the Plan and this Agreement. The Participant has read and understands the terms and provisions of the Plan and this Agreement, and accepts the Option subject to all of the terms and conditions of the Plan and this Agreement. In the event of a conflict between any term or provision contained in this Agreement and a term or provision of the Plan, the applicable term and provision of the Plan will govern and prevail.
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[Signature page follows.]
IN WITNESS WHEREOF, the Company and the Participant have executed this Stock Option Award Agreement as of the date first written above.
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PARTICIPANT
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INC RESEARCH HOLDINGS, INC.
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By:
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/s/ Duncan Jamie Macdonald
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Name:
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Duncan Jamie Macdonald
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Title:
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Chief Executive Officer
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[Electronic Signature]
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____________________
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Participant Signature
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Name:
[Participant Name]
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Acceptance Date:
[Acceptance Date]
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[Signature Page – Form – Stock Option Award Agreement for U.S. Participants]
APPENDIX A
NOTICE OF EXERCISE
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INC Research Holdings, Inc.
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[Address 1]
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[Address 2]
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Attention: General Counsel
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Date of Exercise: _________________
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Ladies & Gentlemen:
1.
Exercise of Option
. This constitutes notice to INC Research Holdings, Inc. (the “
Company
”) that, pursuant to my INC Research Holdings, Inc. 2014 Equity Incentive Plan Stock Option Award Agreement, dated ___________, 20__ (the “
Award Agreement
”), I elect to purchase the number of Shares set forth below for the price set forth below. Capitalized terms used and not otherwise defined in this notice will have the meanings ascribed to those terms in the Award Agreement. By signing and delivering this notice to the Company, I hereby acknowledge that I am the holder of the Option exercised by this notice and have full power and authority to exercise the Option.
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Number of Shares as to which Option is exercised (“Optioned Shares”):
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Shares to be issued in name of:
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Date of Grant:
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Total Purchase Price:
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2.
Delivery of Payment
. With this notice, I hereby deliver to the Company the full exercise price of the Optioned Shares and any and all Tax-Related Items withholding due in connection with the exercise of my Option, subject to satisfaction of the Purchase Price any and all Tax-Related Items withholding in any other manner consistent with the Award Agreement and the Plan.
3.
Rights as Stockholder
. While the Company will endeavor to process this notice in a timely manner, I acknowledge that, until the issuance of the Optioned Shares (or, in the Committee’s discretion, in un-certificated form, upon the books of the Company’s transfer agent) and my satisfaction of any other conditions imposed by the Committee pursuant to the Plan or as set forth in the Award Agreement, no right to vote or receive dividends or any other rights as a stockholder will exist with respect to the Optioned Shares, notwithstanding the exercise of my Option. No
adjustment will be made for a dividend or other right for which the record date is prior to the date of issuance of the Optioned Shares.
4.
Interpretation
. Any dispute regarding the interpretation of this notice will be submitted promptly by me or by the Company to the Committee. The resolution of such a dispute by the Committee will be final and binding on all parties.
5.
Entire Agreement
. The Plan, the Award Agreement under which the Optioned Shares were granted are incorporated herein by reference and, together with this notice, constitute the entire agreement of the parties with respect to the subject matter of this notice.
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Very truly yours,
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Signature:
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Name:
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Address:
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Social Security Number:
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APPENDIX B
RESTRICTIVE COVENANTS AGREEMENT
1.
Definitions
. Capitalized terms not otherwise defined in below this Restrictive Covenant Agreement (“RCA”) shall have the same meanings as set forth in the above Agreement. The following terms shall have the following meanings for the purposes of this RCA:
(a) The “Termination Date” means the last day of Participant’s employment by the Company or any of its Subsidiaries.
(b) The “Non-Solicit Restricted Period” means the period commencing on the Termination Date and ending twelve (12) months after the Termination Date.
(c) The “Non-Compete Restricted Period” means the period commencing on the Termination Date and ending six (6) months after the Termination Date.
(d) “Company Customer” means a person or entity for whom the Company or any of its Subsidiaries was providing services either at the time of, or at any time within the twelve (12) months preceding the Termination Date, and for whom Participant carried out or oversaw a material business responsibility during said twelve (12) month period or about whom Participant had exposure to or received Confidential Information as a result of Participant’s employment with the Company or an of its Subsidiaries that if disclosed or used by Participant or any person or entity Competitive with the Company (as defined below) would provide an unfair competitive advantage with respect to the business of the Company.
(e) “Prospective Customer” means a person or entity (i) that Participant contacted for the purpose of soliciting business on behalf of the Company or any of its Subsidiaries during the twelve (12) months preceding the Termination Date; or (ii) to which the Company or any of its Subsidiaries had submitted a bid or proposal for services during the twelve (12) months preceding the Termination Date, and in which bid or proposal Participant was involved in any material respect.
(f) The term “Company Employee” means any person who is an employee of or consultant to the Company or any of its Subsidiaries as of the Termination Date.
(g) “Competitive with the Company” means engaged in the business of providing contract research organization (CRO) services to pharmaceutical, biotechnology, or biomedical companies.
(h) “Restricted Services” means services that are the same or substantially similar to the services Participant provided to the Company or any of its Subsidiaries at the time of, or in the twelve (12) months preceding, the Termination Date.
(i) The “Restricted Area” means the following geographical areas: (i) any city, metropolitan area, county (or similar political subdivision in foreign countries) in which Participant personally provided material services in-person (not by telephone or internet) on behalf of the Company during the twelve (12) months prior to the Termination Date; (ii) within a 60-mile radius of the location(s) where the Participant had an office during the twelve (12) months prior to the Termination Date; (iii) within a 60 mile radius of Raleigh, North Carolina; and (iv) any city, metropolitan area, county (or similar political subdivision in foreign countries) in which the Company on any of its Subsidiaries is located or does or did business, during the twelve (12) months prior to the Termination Date.
(j) “Confidential Information” means any confidential or proprietary information belonging to the Company or of its Subsidiaries, including, but not limited to, all trade secrets, patent applications, scientific data, formulation information, inventions, processes, formulas, systems, computer programs, plans, programs, studies, techniques, critical business information such as drug products in development, business strategies and models, product launch plans, CRO relationships, regulatory submissions, technology used by or the therapeutic focus of the Company or any of its Subsidiaries, clinical information, methodologies, standard operating procedures, operational documents (such as batch records), technology used by the Company or any of its Subsidiaries, marketing and certain financial information calculations, budgets, bids, internal policies and procedures, organization, business plans, analysis, forecasts, billing practices, pricing information and strategies, promotional material, service offering strategies, marketing plans and ideas, the identities or other information about customers, sponsor, customer or client lists, suppliers and business partners (current and prospective), the terms of current and pending deals, sales data, and sales projections, research, research proposals, study protocols, coding devices, unpublished results and reports, meeting minutes and notes, monthly and other periodic reports, contact and other information regarding suppliers, vendors and consultants, and regulatory and legal correspondence, whether or not patentable or copyrightable and whether in tangible or other form, including all documents and records, whether printed, typed, handwritten, videotaped, transmitted or transcribed on data files or on any other type of media, whether or not labeled or identified as confidential and proprietary. Notwithstanding the foregoing, the term “Confidential Information” shall not include information which (i) is already known to Participant prior to its disclosure to Participant by the Company; (ii) is or becomes generally available to the public through no wrongful act of any person; (iii) is at the time of disclosure part of the public knowledge or literature through no wrongful action by Participant; or (iv) is received by Participant from a third party without restriction and without any wrongful conduct on the part of such third party relating to such disclosure. Participant acknowledges and agrees that the Confidential Information he/she obtains or becomes aware of as a result of his/her employment with the Company or any of its Subsidiaries is not generally known or available to the general public, but has been developed, compiled or acquired by the Company at its great effort and expense and that Participant is required to protect and not disclose such information.
(l) “Subsidiaries” means any corporation, partnership, limited liability company, joint venture, association, public or private limited company or other business entity at least 50% of the outstanding voting stock or voting interests of which is at the time owned or controlled, directly or indirectly, by the Company.
2.
Non-Solicitation of Customers and Employees
. Participant hereby agrees that so long as he or she is employed by the Company or any of its Subsidiaries, and during the Non-Solicit Restricted Period, Participant will not, on Participant’s own behalf, nor as an officer, director, stockholder, partner, associate, employee, owner, executive, consultant or otherwise on behalf of any person, firm, partnership, corporation, or other entity:
(a) Solicit, induce, influence or attempt to solicit, induce or influence any Company Customer to (i) cease doing business in whole or in part with the Company or any of its Subsidiaries, or (ii) do business with any other person or entity that is Competitive with the Company;
(b) Solicit, induce, or attempt to induce any Prospective Customer to (i) not begin doing business with the Company or any of its Affiliates, (ii) cease doing business in whole or in part with the Company or any of its Affiliates, or (iii) do business with any person or entity that is Competitive with the Company;
(c) Interfere with, disrupt or attempt to interfere with or disrupt the relationship, contractual or otherwise, between the Company or any of its Subsidiaries and any supplier, vendor, distributor, lessor, lessee, or licensor that transacts business with the Company of any of its Subsidiaries; or
(d) Encourage, entice, induce or suggest that any Company Employee terminate or alter his/her employment or relationship with the Company or any of its Subsidiaries for the benefit of any person or entity other than the Company.
3.
Non-Competition.
(a) Participant hereby agrees that so long as he or she is employed by the Company or any of its Subsidiaries, and during the Non-Compete Restricted Period, within the Restricted Area, Participant will not for Participant’s own behalf or for any other person or entity provide the Restricted Services for any person or entity that is Competitive with the Company.
(b) Notwithstanding the foregoing, Participant’s ownership, directly or indirectly, of not more than one percent (1%) of the issued and outstanding stock of a corporation the shares of which are regularly traded on a national securities exchange or in the over-the-counter market shall not violate this Section.
4.
Business Opportunities
. Participant, while he or she is employed by the Company and its Subsidiaries, agrees to offer or otherwise make known or available to the Company or any Subsidiary, as directed by the Company and without additional compensation or consideration, any business prospects, contracts or other business opportunities that he or she may discover, find, develop or otherwise have available to him or her in any field in which the Company or any of its Subsidiaries is engaged, and further agrees that any such prospects, contracts or other business opportunities shall be the property of the Company.
5.
Confidentiality
. Participant acknowledges that during his or her employment with the Company, he or she has and will necessarily become informed of, and have access to, the Confidential Information of the Company, and that the Confidential Information, even though it may be contributed, developed or acquired in whole or in part by the Participant is the Company’s exclusive property to be held by the Participant in trust and solely for the Company’s benefit. Accordingly, except as required by law, the Participant shall not, at any time, either during or subsequent to his or her employment, as applicable, use, reveal, report, publish, copy, transcribe, transfer or otherwise disclose to any person, corporation or other entity, any of the Confidential Information without the prior written consent of the Company, except to responsible officers and employees of the Company and its Subsidiaries and other responsible persons who are in a contractual or fiduciary relationship with the Company or one of its Subsidiaries and except for information that legally and legitimately is or becomes of general public knowledge from authorized sources other than the Participant. Participant also agrees and understands that Participant’s duties and obligations under any confidentiality and non-disclosure agreement signed in connection with Participant’s employment with the Company, including the Confidentiality and Non-Solicitation Agreement, (collectively, the “Confidentiality Agreement”) will remain in full force and effect in accordance with its terms, and that a breach of the Confidentiality Agreement will also constitute a breach of this present RCA. To the extent the terms of the Confidentiality Agreement are inconsistent with the terms of this RCA, the provisions of this RCA will control.
6.
Termination
. Either party may terminate the employment relationship for any reason at any time upon giving the other party thirty (30) days prior written notice. The Company may, in its discretion, relieve Participant of some or all of his/her duties during all or a part of such notice period. Subject to the forgoing notice obligation, Participant’s employment with the Company shall remain at will.
7.
Return of Company Property
. By no later than the Termination Date, the Participant shall promptly deliver to the Company all property and possessions of the Company and its Subsidiaries, including all drawings, manuals, letters, notes, notebooks, reports, copies, deliverables containing Confidential Information and all other materials relating to the Company and any of its Subsidiaries’ business that are in the Participant’s possession or control.
8.
Governing Law, Forum and Jury Waiver
. This RCA and all disputes, claims or controversies arising out of or related to this RCA, shall be governed by the laws of the State of North Carolina without regard for reference to any choice or conflict of law principles of any jurisdiction. The parties agree that any action or proceeding with respect to this RCA or Participant’s employment with the Company shall be brought exclusively in the state or federal courts in the State of North Carolina, and Participant voluntarily submits to the exclusive jurisdiction over Participant’s person by a court of competent jurisdiction located within the State of North Carolina. The parties hereby irrevocably waive any objection they may now or hereafter have to the laying of venue of any such action in the State of North Carolina, and further irrevocably waive any claim they may now or hereafter have that any such action brought in said court(s) has been brought in
an inconvenient forum. The parties hereby knowingly and expressly waive their right to a jury trial for any claim relating to his/her/its rights or obligations under this RCA.
9.
Amendment, Modification or Waiver
. This RCA may not be changed orally, and no provision of this RCA may be amended or modified unless such amendment or modification is in writing, signed by Participant and by a duly authorized officer of the Company. No act or failure to act by the Company will waive any right, condition or provision contained herein. Any waiver by the Company must be in writing and signed by a duly authorized officer of the Company to be effective.
10.
Severability
. In case any one or more of the provisions contained in this RCA shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this RCA, but this RCA shall be construed as if such invalid, illegal, or other unenforceable provision had never been contained herein. If, moreover, any one or more of the provisions contained in this RCA shall for any reason be held to be excessively broad as to duration, geographical scope or subject, it shall be construed by limiting it and reducing it so as to be enforceable to the extent compatible with applicable law as it shall then appear.
11.
Miscellaneous.
(a) Participant’s and the Company’s obligations hereunder shall continue in full force and effect in the event that Participant’s job title, responsibilities, work location or other conditions of his/her employment with the Company change subsequent to the execution of the RCA, without the need to execute a new RCA.
(b) In the event that Participant breaches any of the provisions of Sections 2 or 3 of this RCA, to the extent permitted by law, the Non-Compete or Non-Solicit Restricted Period (as applicable) shall be tolled until such breach has been duly cured, it being the intent of the parties that such period shall be extended by any period of time in which Participant is in violation of such sections.
(c) Participant agrees to provide a copy of Section 1 through 5 of this RCA to any subsequent employers or prospective employers during the applicable period of restriction (including but not limited to the Non-Solicit Restricted Period and the Non-Compete Restricted Period). Participant specifically authorizes the Company to notify any subsequent employers or prospective employers of Participant of the restrictions on Participant contained in this RCA and of any concerns the Company may have about actual or possible conduct by Participant that may be in breach of this RCA Participant agrees to promptly notify the Company of any offers to perform services, any engagements to provide services, and/or actual work of any kind, whether as an individual, proprietor, partner, stockholder, officer, employee, director, consultant, joint venturer, investor, lender, or in any other capacity whatsoever during the period of his/her employment by the Company or any of its Subsidiaries and during the Non-Solicit Restricted Period and the Non-
Compete Restricted Period. Such notice must be provided prior to the commencement of any such services or work.
(d) The rights and remedies of the parties under this RCA are cumulative (not alternative) and in addition to all other rights and remedies available to such parties at law, in equity, by contract or otherwise.
INC RESEARCH HOLDINGS, INC.
2014 Equity Incentive Plan
Restricted Stock Unit Award Agreement
This Restricted Stock Unit Award Agreement (this “
Agreement
”) is made by and between INC Research Holdings, Inc., a Delaware corporation (the “
Company
”), and Name of Employee (the “
Participant
”), effective as of INSERT EFFECTIVE DATE OF GRANT (the “
Date of Grant
”).
RECITALS
WHEREAS
, the Company has adopted the INC Research Holdings, Inc. 2014 Equity Incentive Plan (as the same may be amended and/or amended and restated from time to time, the “
Plan
”), which Plan is incorporated herein by reference and made a part of this Agreement, and capitalized terms not otherwise defined in this Agreement will have the meanings ascribed to those terms in the Plan; and
WHEREAS
, the Committee has authorized and approved the grant of an Award to the Participant of Restricted Stock Units payable in shares of Common Stock (the “
Shares
”), subject to the terms and conditions set forth in the Plan and this Agreement.
NOW THEREFORE
, in consideration of the premises and mutual covenants set forth in this Agreement, the parties agree as follows:
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1.
|
Grant of Restricted Stock Units
. The Company has granted to the Participant, effective as of the Date of Grant, XXXX Restricted Stock Units, on the terms and conditions set forth in the Plan and this Agreement, subject to adjustment as set forth in the Plan (the “
RSUs
”).
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2.
|
Vesting of RSUs
. Subject to the terms and conditions set forth in the Plan and this Agreement, the RSUs will vest as follows:
|
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(a)
|
General
. Except as otherwise provided in Sections 2(b) and 4, the RSUs will vest in equal annual installments of 25% of the Shares over a four-year period on each anniversary of the Date of Grant, subject to the Participant’s continued Service through each applicable vesting date.
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(b)
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Change in Control
. The RSUs will become fully vested immediately upon the Participant’s termination of Service in the event that the Participant’s Service is terminated by the Company without Cause (as defined in the Plan) or if Participant resigns for Good Reason at the time of, or within 12 months following, the consummation of a Change in Control occurring after the Date of Grant.
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As used in this Agreement, “
Good Reason
” shall mean the occurrence, without Participant’s express written consent, of any of the following events: (i) a material
1 | 6-Aug-2015 (Executive)
reduction in Participant’s base salary or Target Bonus percentage under the INC Research, LLC Management Incentive Plan, if applicable; (ii) a material adverse change to Participant’s authority, job duties or responsibilities as compared to Participant’s authority, job duties or responsibilities immediately prior to the Change in Control; (iii) a requirement that Participant relocate to a principal place of employment more than fifty (50) miles from the Company’s offices at 3201 Beechleaf Court, in Raleigh, North Carolina or Participant’s assigned principal office location with any Subsidiary as of immediately prior to the occurrence of the Change in Control; or (iv) if Participant has an effective employment agreement, service agreement, or other similar agreement with the Company or any Subsidiary, a material breach of such agreement, provided, that, any event described in clauses (i), (ii), (iii) and (iv) above shall constitute Good Reason only if the Participant provides the Company with written notice of the basis for the Participant’s Good Reason within forty-five (45) days of the initial actions or inactions of the Company or any Subsidiary giving rise to such Good Reason and the Company or applicable Subsidiary has not cured the identified actions or inactions within thirty (30) days of such notice and provided further that Participant terminates his or her Service within thirty (30) days following the Company or applicable Subsidiary’s failure to cure within the thirty (30) day cure period.”
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3.
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Settlement of RSUs Upon Vesting.
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(a)
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Settlement in Stock
. RSUs vested as described in Section 2 above will be settled by delivering to Participant a number of Shares equal to the number of vested RSUs on the date on which the RSUs vest. The stock price used for vesting of RSU’s will be the closing price on INC Research shares on the date of vesting. If the vesting is a non-trading day, the vesting will be deemed to occur on the first trading day preceding the vesting date.
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(b)
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BookEntry Registration of the Shares; Delivery of Shares
. As soon as practical after the Payment Date, the Company will, at its election, either: (i) issue a certificate representing the Shares payable pursuant to this Agreement; or (ii) not issue any certificate representing the Shares payable pursuant to this Agreement and instead document the Participant’s interest in the Shares by registering such Shares with the Company’s transfer agent (or another custodian selected by the Company) in bookentry form in the Participant’s name. In any case, the Company may provide a reasonable delay in the issuance or delivery of the Shares to address TaxRelated Items, withholding, and other administrative matters. Neither the Company nor the Committee will be liable to the Participant or any other Person for damages relating to any delays in issuing the Shares or any mistakes or errors in the issuance of the Shares.
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2 | 6-Aug-2015 (Executive)
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(c)
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Shareholder Rights
. The Participant will not have any rights of a stockholder with respect to the Shares subject to the RSUs, including voting and dividend rights, unless and until the Shares are delivered as described in Section 3(b) above.
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(d)
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Withholding Requirements
. In connection with the delivery of Shares as described in Section 3(b) above, the Participant agrees to make adequate arrangements satisfactory to the Company to meet the minimum statutory amount necessary to satisfy any applicable federal, state and local taxes, domestic or foreign, required by law or regulation to be withheld by one or a combination of the following: (1) cash payment by the Participant to the Company prior to the day of vesting of an amount that the Company will apply to the required withholding; (2) withholding from proceeds of the sale of Shares acquired upon vesting/settlement of the RSUs either through a voluntary sale or through a mandatory sale arranged by the Company (on the Participant’s behalf pursuant to this authorization); (3) withholding from the Participant’s wages or other cash compensation paid to the Participant by the Company; or (4) to the extent not in violation of any shareholder agreement, and to the extent allowed by the Company in its discretion, withholding of Shares that would otherwise be delivered as described in Section 3(b) above. For the purposes of alternative (4) above, any Shares withheld shall be credited for purposes of the withholding requirements at the stock price for the vesting of RSU’s as set forth in Section 3(a) above. In the absence of an arrangement by the Participant that is acceptable to the Company for payment of withholding obligations, the Company at its discretion shall establish the method of withholding from alternatives (2) through (4) above. However, notwithstanding the preceding provisions of this Section 3(d) if the Participant is a Section 16 officer of the Company under the Exchange Act and as approved by the Board of Directors, then the Committee (as constituted in accordance with Rule 16b-3 under the Exchange Act) shall establish the method of withholding from alternatives (2) thorough (4) above.
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4.
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Forfeiture
. Notwithstanding the Change in Control vesting as stated in Section 2(b) above, any unvested RSUs will be forfeited immediately, automatically and without consideration upon a termination of the Participant’s Service for any reason. Without limiting the generality of the foregoing, the RSUs and the Shares (and any resulting proceeds) will continue to be subject to Section 13 of the Plan.
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5.
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Adjustment to RSUs
. In the event of any change with respect to the outstanding shares of Common Stock contemplated by Section 4.5 of the Plan, the RSUs may be adjusted in accordance with Section 4.5 of the Plan.
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6.
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Electronic Delivery and Acceptance
. The Company may, in its sole discretion, decide to deliver any documents related to current or future participation in the Plan by electronic means. The Participant hereby consents to receive such documents by electronic delivery and agrees to participate in the Plan through an on-line or electronic system established and maintained by the Company or a third party designated by the Company.
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3 | 6-Aug-2015 (Executive)
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7.
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Miscellaneous Provisions
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(a)
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Securities Laws Requirements
. No Shares will be issued or transferred pursuant to this Agreement unless and until all then applicable requirements imposed by federal and state securities and other laws, rules and regulations and by any regulatory agencies having jurisdiction, and by any exchanges upon which the Shares may be listed, have been fully met. As a condition precedent to the issuance of Shares pursuant to this Agreement, the Company may require the Participant to take any reasonable action to meet those requirements. The Committee may impose such conditions on any Shares issuable pursuant to this Agreement as it may deem advisable, including, without limitation, restrictions under the Securities Act of 1933, as amended, under the requirements of any exchange upon which shares of the same class are then listed and under any blue sky or other securities laws applicable to those Shares.
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(b)
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NonTransferability
. The RSUs and the rights and privileges conferred thereby shall be non-transferrable except as provided by Section 15.3 of the Plan. Any shares of Common Stock delivered hereunder will be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the Plan or the rules, regulations and other requirements of the Securities and Exchange Commission, any stock exchange upon which such shares are listed, any applicable federal or state laws and any agreement with, or policy of, the Company or the Committee to which the Participant is a party or subject, and the Committee may cause orders or designations to be placed upon any certificate(s) or other document(s) delivered to the Participant, or on the books and records of the Company’s transfer agent, to make appropriate reference to such restrictions.
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(c)
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No Right to Continued Service
. Nothing in this Agreement or the Plan confers upon the Participant any right to continue in Service for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Company (or any Subsidiary employing or retaining the Participant) or of the Participant, which rights are hereby expressly reserved by each, to terminate his or her Service at any time and for any reason, with or without Cause.
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(d)
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Notification
. Any notification required by the terms of this Agreement will be given by the Participant (i) in a writing addressed to the Company at its principal executive office and will be deemed effective upon actual receipt when delivered by personal delivery or by registered or certified mail, with postage and fees prepaid, or (ii) by electronic transmission to the Company’s e-mail address of the Company’s General Counsel and will be deemed effective upon actual receipt. Any notification required by the terms of this Agreement will be given by the Company (x) in a writing addressed to the address that the Participant most recently provided to the Company and will be deemed effective upon personal delivery or within three (3) days of deposit with the United States Postal Service, by registered or certified mail, with postage and fees prepaid, or (y) by facsimile or electronic transmission to the
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4 | 6-Aug-2015 (Executive)
Participant’s primary work fax number or e-mail address (as applicable) and will be deemed effective upon confirmation of receipt by the sender of such transmission.
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(e)
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Entire Agreement
. This Agreement and the Plan constitute the entire agreement between the parties hereto with regard to the subject matter of this Agreement. This Agreement and the Plan supersede any other agreements, representations or understandings (whether oral or written and whether express or implied) that relate to the subject matter of this Agreement.
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(f)
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Waiver
. No waiver of any breach or condition of this Agreement will be deemed to be a waiver of any other or subsequent breach or condition whether of like or different nature.
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(g)
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Successors and Assigns
. The provisions of this Agreement will inure to the benefit of, and be binding upon, the Company and its successors and assigns and upon the Participant, the Participant’s executor, personal representative(s), distributees, administrator, permitted transferees, permitted assignees, beneficiaries, and legatee(s), as applicable, whether or not any such person will have become a party to this Agreement and have agreed in writing to be joined herein and be bound by the terms hereof.
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(h)
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Severability
. The provisions of this Agreement are severable, and if any one or more provisions are determined to be illegal or otherwise unenforceable, in whole or in part, then the remaining provisions will nevertheless be binding and enforceable.
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(i)
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Amendment
. Except as otherwise provided in the Plan, this Agreement will not be amended unless the amendment is agreed to in writing by both the Participant and the Company.
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(j)
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Choice of Law; Jurisdiction
. This Agreement and all claims, causes of action or proceedings (whether in contract, in tort, at law or otherwise) that may be based upon, arise out of or relate to this Agreement will be governed by the internal laws of the State of Delaware, excluding any conflicts or choice-of-law rule or principle that might otherwise refer construction or interpretation of this Agreement to the substantive law of another jurisdiction. The Participant and each party to this Agreement agrees that it will bring all claims, causes of action and proceedings (whether in contract, in tort, at law or otherwise) that may be based upon, arise out of or be related to the Plan and this Agreement exclusively in the Delaware Court of Chancery or, in the event (but only in the event) that such court does not have subject matter jurisdiction over such claim, cause of action or proceeding, exclusively in the United States District Court for the District of Delaware (the “
Chosen Court
”), and hereby (i) irrevocably submits to the exclusive jurisdiction of the Chosen Court, (ii) waives any objection to laying venue in any such proceeding in the Chosen Court, (iii) waives any objection that the Chosen Court is an inconvenient forum or does not have jurisdiction over any party and (iv) agrees that service of process upon such
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5 | 6-Aug-2015 (Executive)
party in any such claim or cause of action will be effective if notice is given in accordance with this Agreement.
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(k)
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Signature in Counterparts
. This Agreement may be signed in counterparts, manually or electronically, each of which will be an original, with the same effect as if the signatures to each were upon the same instrument.
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(l)
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Acceptance
. The Participant hereby acknowledges receipt of a copy of the Plan and this Agreement. The Participant has read and understands the terms and provisions of the Plan and this Agreement, and accepts the RSUs subject to all of the terms and conditions of the Plan and this Agreement. In the event of a conflict between any term or provision contained in this Agreement and a term or provision of the Plan, the applicable term and provision of the Plan will govern and prevail.
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[Signature page follows.]
6 | 6-Aug-2015 (Executive)
IN WITNESS WHEREOF, the Company and the Participant have executed this Stock RSUs Award Agreement as of the date first written above.
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PARTICIPANT
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INC RESEARCH HOLDINGS, INC.
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By:
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/s/ Duncan Jamie Macdonald
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Name:
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Duncan Jamie Macdonald
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Title:
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Chief Executive Officer
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[Electronic Signature]
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____________________
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Participant Signature
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Name:
[Participant Name]
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Acceptance Date:
[Acceptance Date]
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[Signature Page – Restricted Stock Unit Award Agreement]
INC RESEARCH HOLDINGS, INC.
2014 Equity Incentive Plan
Restricted Stock Unit Award Agreement for Non-U.S. Participants
This Restricted Stock Unit Award Agreement for Non-U.S. Participants (the “
Restricted Stock Unit Agreement
”), including any special terms and conditions for the Participant’s country set forth in
the appendix attached hereto (the “Appendix”) ( the Restricted Stock Unit Agreement and Appendix, together, the “
Agreement
”) is made by and between INC Research Holdings, Inc., a Delaware corporation (the “
Company
”), and [Name of Employee] (the “
Participant
”), effective as of INSERT EFFECTIVE DATE OF GRANT (the “
Date of Grant
”).
RECITALS
WHEREAS
, the Company has adopted the INC Research Holdings, Inc. 2014 Equity Incentive Plan (as the same may be amended and/or amended and restated from time to time, the “
Plan
”), which Plan is incorporated herein by reference and made a part of this Agreement, and capitalized terms not otherwise defined in this Agreement will have the meanings ascribed to those terms in the Plan; and
WHEREAS
, the Committee has authorized and approved the grant of an Award to the Participant of Restricted Stock Units payable in shares of Common Stock (the “
Shares
”), subject to the terms and conditions set forth in the Plan and this Agreement (including the Appendix).
NOW THEREFORE
, in consideration of the premises and mutual covenants set forth in this Agreement, the parties agree as follows:
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1.
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Grant of Restricted Stock Units
. The Company has granted to the Participant, effective as of the Date of Grant, XXXX Restricted Stock Units, on the terms and conditions set forth in the Plan and this Agreement, subject to adjustment as set forth in the Plan (the “
RSUs
”).
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2.
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Vesting of RSUs
. Subject to the terms and conditions set forth in the Plan and this Agreement, the RSUs will vest as follows:
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(a)
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General
. Except as otherwise provided in Sections 2(b) and 4, the RSUs will vest in equal annual installments of 33 and 1/3% of the Shares over a three-year period on each anniversary of the Date of Grant, subject to the Participant’s continued Service through each applicable vesting date.
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(b)
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Change in Control
. The RSUs will become fully vested immediately upon the Participant’s termination of Service in the event that the Participant’s Service is terminated by the Company without Cause (as defined in the Plan) or if Participant resigns for Good Reason at the time of, or within 12 months following, the consummation of a Change in Control occurring after the Date of Grant.
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1 | 6-Aug-2015 (Executive)
As used in this Agreement, “
Good Reason
” shall mean the occurrence, without Participant’s express written consent, of any of the following events: (i) a material reduction in Participant’s base salary or Target Bonus percentage under the INC Research, LLC Management Incentive Plan, if applicable; (ii) a material adverse change to Participant’s authority, job duties or responsibilities as compared to Participant’s authority, job duties or responsibilities immediately prior to the Change in Control; (iii) a requirement that Participant relocate to a principal place of employment more than fifty (50) miles from the Company’s offices at 3201 Beechleaf Court, in Raleigh, North Carolina or Participant’s assigned principal office location with any Subsidiary as of immediately prior to the occurrence of the Change in Control; or (iv) if Participant has an effective employment agreement, service agreement, or other similar agreement with the Company or any Subsidiary, a material breach of such agreement, provided, that, any event described in clauses (i), (ii), (iii) and (iv) above shall constitute Good Reason only if the Participant provides the Company with written notice of the basis for the Participant’s Good Reason within forty-five (45) days of the initial actions or inactions of the Company or any Subsidiary giving rise to such Good Reason and the Company or applicable Subsidiary has not cured the identified actions or inactions within thirty (30) days of such notice and provided further that Participant terminates his or her Service within thirty (30) days following the Company or applicable Subsidiary’s failure to cure within the thirty (30) day cure period.”
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3.
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Settlement of RSUs Upon Vesting.
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(a)
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Settlement in Stock
. RSUs vested as described in Section 2 above will be settled by delivering to the Participant a number of Shares equal to the number of vested RSUs on the date on which the RSUs vest, subject to the terms of this Agreement and payment of any Tax-Related Items. The stock price used for vesting of RSU’s will be the closing price on INC Research shares on the date of vesting. If the vesting is a non-trading day, the vesting will be deemed to occur on the first trading day preceding the vesting date.
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(b)
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BookEntry Registration of the Shares; Delivery of Shares
. As soon as practical after the Payment Date, the Company will, at its election, either: (i) issue a certificate representing the Shares payable pursuant to this Agreement; or (ii) not issue any certificate representing the Shares payable pursuant to this Agreement and instead document the Participant’s interest in the Shares by registering such Shares with the Company’s transfer agent (or another custodian selected by the Company) in bookentry form in the Participant’s name. In any case, the Company may provide a reasonable delay in the issuance or delivery of the Shares to address TaxRelated Items, withholding, and other administrative matters. Neither the Company nor the Committee will be liable to the Participant or any other Person for damages relating to any delays in issuing the Shares or any mistakes or errors in the issuance of the Shares.
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2 | 6-Aug-2015 (Executive)
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(c)
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Shareholder Rights
. The Participant will not have any rights of a stockholder with respect to the Shares subject to the RSUs, including voting and dividend rights, unless and until the Shares are delivered as described in Section 3(b) above.
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(d)
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Responsibility for Taxes
. The Participant acknowledges that, regardless of any action taken by the Company or, if different, the Subsidiary employing or retaining the Participant (the “
Employer
”), the ultimate liability for all Tax-Related Items is and remains the Participant’s responsibility and may exceed the amount actually withheld by the Company or the Employer. The Participant further acknowledges that the Company and/or the Employer (1) make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the RSUs, including, but not limited to, the grant or vesting of the RSUs, the subsequent sale of Shares acquired pursuant to such vesting and the receipt of any dividends and/or dividend equivalents; and (2) do not commit to and are under no obligation to structure the terms of the grant or any aspect of the RSUs to reduce or eliminate the Participant’s liability for Tax-Related Items or achieve any particular tax result. Further, if the Participant is subject to Tax-Related Items in more than one jurisdiction, the Participant acknowledges that the Company and/or the Employer (or former Employer, as applicable) may be required to withhold or account for Tax-Related Items in more than one jurisdiction.
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(e)
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Withholding Requirements
. Prior to any relevant taxable or tax withholding event, as applicable, the Participant agrees to make adequate arrangements satisfactory to the Company and/or the Employer to satisfy all Tax-Related Items. In this regard, the Participant authorizes the Company and/or the Employer, or their respective agents, at the Company’s and/or the Employer’s discretion, to satisfy the obligations with regard to all Tax-Related Items by one or a combination of the following: (1) withholding from the Participant’s wages or other cash compensation paid to the Participant by the Company and/or the Employer; (2) withholding from proceeds of the sale of Shares acquired upon vesting/settlement of the RSUs either through a voluntary sale or through a mandatory sale arranged by the Company
(on the Participant’s behalf pursuant to this authorization); or (3) withholding in Shares to be issued upon settlement of the RSUs; provided, however that if the Participant is a Section 16 officer of the Company under the Exchange Act and as approved by the Board of Directors, then the Committee (as constituted in accordance with Rule 16b-3 under the Exchange Act) shall establish the method of withholding from alternatives (1)-(3) herein and, if the Committee does not exercise its discretion prior to the Tax-Related Items withholding event, then the Participant shall be entitled to elect the method of withholding from the alternatives above.
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Depending on the withholding method, the Company may withhold or account for Tax-Related Items by considering applicable minimum statutory withholding rates or other applicable withholding rates, including maximum applicable rates, in which case the Participant will receive a refund of any over-withheld amount in cash and will have no entitlement to the Common Stock equivalent. If the obligation for Tax-
3 | 6-Aug-2015 (Executive)
Related Items is satisfied by withholding in Shares, for tax purposes, the Participant is deemed to have been issued the full number of Shares subject to the vested RSUs, notwithstanding that a number of the Shares is held back solely for the purpose of paying the Tax-Related Items.
Finally, the Participant agrees to pay to the Company or the Employer, including through withholding from the Participant’s wages or other cash compensation paid to the Participant by the Company and/or the Employer, any amount of Tax-Related Items that the Company or the Employer may be required to withhold or account for as a result of the Participant’s participation in the Plan that cannot be satisfied by the means previously described. The Company may refuse to issue or deliver the Shares or the proceeds of the sale of Shares, if the Participant fails to comply with the Participant’s obligations in connection with the Tax-Related Items.
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4.
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Forfeiture
. Notwithstanding the Change in Control vesting as stated in Section 2(b) above, any unvested RSUs will be forfeited immediately, automatically and without consideration upon a termination of the Participant’s Service (regardless of the reason for such termination and whether or not later to be found invalid or in breach of employment laws in the jurisdiction where the Participant is employed or the terms of the Participant’s employment agreement, if any). Without limiting the generality of the foregoing, the RSUs and the Shares (and any resulting proceeds) will continue to be subject to Section 13 of the Plan.
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5.
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Adjustment to RSUs
. In the event of any change with respect to the outstanding Shares contemplated by Section 4.5 of the Plan, the RSUs may be adjusted in accordance with Section 4.5 of the Plan.
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6.
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Nature of Grant
. In accepting the RSUs, the Participant acknowledges, understands and agrees that:
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(a)
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the Plan is established voluntarily by the Company, it is discretionary in nature and it may be modified, amended, suspended or terminated by the Company at any time, to the extent permitted by the Plan;
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(b)
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the grant of the RSUs is voluntary and occasional and does not create any contractual or other right to receive future grants of RSUs, or benefits in lieu of RSUs, even if RSUs have been granted in the past;
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(c)
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all decisions with respect to future RSUs or other grants, if any, will be at the sole discretion of the Company;
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(d)
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the RSUs and the Participant’s participation in the Plan shall not be interpreted as forming an employment or services contract with the Company or any Subsidiary;
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(e)
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the Participant is voluntarily participating in the Plan;
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4 | 6-Aug-2015 (Executive)
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(f)
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the RSUs and the Shares subject to the RSUs are not intended to replace any pension rights or compensation;
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(g)
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the RSUs and the Shares subject to the RSUs, and the income and value of same, are not part of normal or expected compensation for purposes of calculating any severance, resignation, termination, redundancy, dismissal, end-of-service payments, bonuses, holiday pay, long-service awards, pension or retirement or welfare benefits or similar payments;
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(h)
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the future value of the underlying Shares is unknown, indeterminable and cannot be predicted with certainty;
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(i)
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no claim or entitlement to compensation or damages shall arise from forfeiture of the RSUs resulting from the termination of the Participant’s Service (for any reason whatsoever whether or not later found to be invalid or in breach of employment laws in the jurisdiction where the Participant is employed or the terms of the Participant’s employment agreement, if any), and in consideration of the grant of the RSUs to which the Participant is otherwise not entitled, the Participant irrevocably agrees never to institute any claim against the Company or any of its Subsidiaries, waives his or her ability, if any, to bring any such claim, and releases the Company and its Subsidiaries from any such claim; if, notwithstanding the foregoing, any such claim is allowed by a court of competent jurisdiction, then, by participating in the Plan, the Participant shall be deemed irrevocably to have agreed not to pursue such claim and agrees to execute any and all documents necessary to request dismissal or withdrawal of such claim;
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(j)
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neither the Company nor any Subsidiary shall be liable for any foreign exchange rate fluctuation between the Participant’s local currency and the United States Dollar that may affect the value of the RSUs or of any amounts due to the Participant pursuant to the settlement of the RSUs or the subsequent sale of any Shares acquired upon settlement.
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7.
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No Advice Regarding Grant
. The Company is not providing any tax, legal or financial advice, nor is the Company making any recommendations regarding the Participant’s participation in the Plan, or the Participant’s acquisition or sale of the underlying Shares. The Participant is hereby advised to consult with the Participant’s own personal tax, legal and financial advisors regarding the Participant’s participation in the Plan before taking any action related to the Plan.
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8.
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Data Privacy
. The Participant hereby explicitly and unambiguously consents to the collection, use and transfer, in electronic or other form, of the Participant’s personal data as described in this Agreement and any other RSU grant materials by and among, as applicable, the Employer, the Company and its Subsidiaries for the exclusive purpose of implementing, administering and managing the Participant’s participation in the Plan.
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5 | 6-Aug-2015 (Executive)
The Participant understands that the Company and the Employer may hold certain personal information about the Participant, including, but not limited to, the Participant’s name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title, any shares of stock or directorships held in the Company, details of all RSUs or any other entitlement to shares of stock awarded, canceled, exercised, vested, unvested or outstanding in the Participant’s favor (“Data”), for the exclusive purpose of implementing, administering and managing the Plan.
The Participant understands that Data will be transferred to Fidelity Stock Plan Services, LLC or any other broker selected by the Company, or such other stock plan service provider as may be selected by the Company in the future, which is assisting the Company with the implementation, administration and management of the Plan. The Participant understands that the recipients of the Data may be located in the United States or elsewhere, and that the recipients’ country (e.g., the United States) may have different data privacy laws and protections than the Participant’s country. The Participant understands that the Participant may request a list with the names and addresses of any potential recipients of the Data by contacting the Participant’s local human resources representative. The Participant authorizes the Company, Fidelity Stock Plan Services, LLC or any other broker selected by the Company and any other possible recipients which may assist the Company (presently or in the future) with implementing, administering and managing the Plan to receive, possess, use, retain and transfer the Data, in electronic or other form, for the sole purpose of implementing, administering and managing the Participant’s participation in the Plan. The Participant understands that Data will be held only as long as is necessary to implement, administer and manage the Participant’s participation in the Plan. The Participant understands that the Participant may, at any time, view Data, request additional information about the storage and processing of Data, require any necessary amendments to Data or refuse or withdraw the consents herein, in any case without cost, by contacting in writing the Participant’s local human resources representative. Further, the Participant understands that the Participant is providing the consents herein on a purely voluntary basis. If the Participant does not consent, or if the Participant later seeks to revoke the Participant’s consent, the Participant’s Service and career with the Employer will not be adversely affected; the only consequence of refusing or withdrawing the Participant’s consent is that the Company would not be able to grant RSUs or other equity awards to the Participant or administer or maintain such awards. Therefore, the Participant understands that refusing or withdrawing the Participant’s consent may affect the Participant’s ability to participate in the Plan. For more information on the consequences of the Participant’s refusal to consent or withdrawal of consent, the Participant understands that the Participant may contact the Participant’s local human resources representative.
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9.
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Language
. If the Participant has received this Agreement or any other document related to the Plan translated into a language other than English and if the meaning of the translated version is different than the English version, the English version will control.
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6 | 6-Aug-2015 (Executive)
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10.
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Electronic Delivery and Acceptance
. The Company may, in its sole discretion, decide to deliver any documents related to current or future participation in the Plan by electronic means. The Participant hereby consents to receive such documents by electronic delivery and agrees to participate in the Plan through an on-line or electronic system established and maintained by the Company or a third party designated by the Company.
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11.
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Imposition of Other Requirements
. The Company reserves the right to impose any other requirements on the Participant’s participation in the Plan, on the RSUs and on any Shares acquired under the Plan, to the extent the Company determines it is necessary or advisable for legal or administrative reasons, and to require the Participant to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing.
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12.
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Appendix
. Notwithstanding any provisions in this Agreement, the RSUs shall be subject to any special terms and conditions set forth in the Appendix for the Participant’s country. The Appendix constitutes part of this Restricted Stock Unit Agreement.
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13.
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Insider Trading Restrictions/Market Abuse Laws
. The Participant acknowledges that, depending on his or her country, the Participant may be subject to insider trading restrictions and/or market abuse laws, which may affect his or her ability to acquire or sell Shares or rights to Shares (
e.g
., RSUs) under the Plan during such times as the Participant is considered to have “inside information” regarding the Company (as defined by the laws in the Participant’s country). Any restrictions under these laws or regulations are separate from and in addition to any restrictions that may be imposed under any applicable Company insider trading policy. The Participant is responsible for ensuring compliance with any applicable restrictions and is advised to consult his or her personal legal advisor on this matter.
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14.
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Miscellaneous Provisions
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(a)
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Securities or Exchange Control Laws Requirements
. No Shares will be issued or transferred pursuant to this Agreement unless and until all then applicable requirements imposed by federal and state securities and other securities or exchange control laws, rules and regulations and by any regulatory agencies having jurisdiction, and by any exchanges upon which the Shares may be listed, have been fully met. As a condition precedent to the issuance of Shares pursuant to this Agreement, the Company may require the Participant to take any reasonable action to meet those requirements. The Committee may impose such conditions on any Shares issuable pursuant to this Agreement as it may deem advisable, including, without limitation, restrictions under the Securities Act of 1933, as amended, under the requirements of any exchange upon which shares of the same class are then listed and under any blue sky or other securities laws applicable to those Shares.
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(b)
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NonTransferability
. The RSUs and the rights and privileges conferred thereby shall be non-transferrable except as provided by Section 15.3 of the Plan. Any Shares
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7 | 6-Aug-2015 (Executive)
delivered hereunder will be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the Plan or the rules, regulations and other requirements of the Securities and Exchange Commission, any stock exchange upon which such shares are listed, any applicable federal, state or local laws and any agreement with, or policy of, the Company or the Committee to which the Participant is a party or subject, and the Committee may cause orders or designations to be placed upon any certificate(s) or other document(s) delivered to the Participant, or on the books and records of the Company’s transfer agent, to make appropriate reference to such restrictions.
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(c)
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No Right to Continued Service
. Nothing in this Agreement or the Plan confers upon the Participant any right to continue in Service for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Company (or any Subsidiary employing or retaining the Participant) or of the Participant, which rights are hereby expressly reserved by each, to terminate his or her Service at any time and for any reason, with or without Cause.
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(d)
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Notification
. Any notification required by the terms of this Agreement will be given by the Participant (i) in a writing addressed to the Company at its principal executive office and will be deemed effective upon actual receipt when delivered by personal delivery or by registered or certified mail, with postage and fees prepaid, or (ii) by electronic transmission to the Company’s e-mail address of the Company’s General Counsel and will be deemed effective upon actual receipt. Any notification required by the terms of this Agreement will be given by the Company (x) in a writing addressed to the address that the Participant most recently provided to the Company and will be deemed effective upon personal delivery or within three (3) days of deposit with the United States Postal Service, by registered or certified mail, with postage and fees prepaid, or (y) by facsimile or electronic transmission to the Participant’s primary work fax number or e-mail address (as applicable) and will be deemed effective upon confirmation of receipt by the sender of such transmission.
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(e)
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Entire Agreement
. This Agreement and the Plan constitute the entire agreement between the parties hereto with regard to the subject matter of this Agreement. This Agreement and the Plan supersede any other agreements, representations or understandings (whether oral or written and whether express or implied) that relate to the subject matter of this Agreement.
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(f)
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Waiver
. No waiver of any breach or condition of this Agreement by the Participant or any other Participant will be deemed to be a waiver of any other or subsequent breach or condition whether of like or different nature.
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(g)
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Successors and Assigns
. The provisions of this Agreement will inure to the benefit of, and be binding upon, the Company and its successors and assigns and upon the Participant, the Participant’s executor, personal representative(s), distributees, administrator, permitted transferees, permitted assignees, beneficiaries, and legatee(s), as applicable, whether or not any such person will have become a party to this
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8 | 6-Aug-2015 (Executive)
Agreement and have agreed in writing to be joined herein and be bound by the terms hereof.
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(h)
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Severability
. The provisions of this Agreement are severable, and if any one or more provisions are determined to be illegal or otherwise unenforceable, in whole or in part, then the remaining provisions will nevertheless be binding and enforceable.
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(i)
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Amendment
. Except as otherwise provided in the Plan, this Agreement will not be amended unless the amendment is agreed to in writing by both the Participant and the Company.
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(j)
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Choice of Law; Jurisdiction
. This Agreement and all claims, causes of action or proceedings (whether in contract, in tort, at law or otherwise) that may be based upon, arise out of or relate to this Agreement will be governed by the internal laws of the State of Delaware, excluding any conflicts or choice-of-law rule or principle that might otherwise refer construction or interpretation of this Agreement to the substantive law of another jurisdiction. The Participant and each party to this Agreement agrees that it will bring all claims, causes of action and proceedings (whether in contract, in tort, at law or otherwise) that may be based upon, arise out of or be related to the Plan and this Agreement exclusively in the Delaware Court of Chancery or, in the event (but only in the event) that such court does not have subject matter jurisdiction over such claim, cause of action or proceeding, exclusively in the United States District Court for the District of Delaware (the “
Chosen Court
”), and hereby (i) irrevocably submits to the exclusive jurisdiction of the Chosen Court, (ii) waives any objection to laying venue in any such proceeding in the Chosen Court, (iii) waives any objection that the Chosen Court is an inconvenient forum or does not have jurisdiction over any party and (iv) agrees that service of process upon such party in any such claim or cause of action will be effective if notice is given in accordance with this Agreement.
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(k)
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Signature in Counterparts
. This Agreement may be signed in counterparts, manually or electronically, each of which will be an original, with the same effect as if the signatures to each were upon the same instrument.
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(l)
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Acceptance
. The Participant hereby acknowledges receipt of a copy of the Plan and this Agreement. The Participant has read and understands the terms and provisions of the Plan and this Agreement, and accepts the RSUs subject to all of the terms and conditions of the Plan and this Agreement. In the event of a conflict between any term or provision contained in this Agreement and a term or provision of the Plan, the applicable term and provision of the Plan will govern and prevail.
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[Signature page follows.]
9 | 6-Aug-2015 (Executive)
IN WITNESS WHEREOF, the Company and the Participant have executed this Stock RSUs Award Agreement as of the date first written above.
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PARTICIPANT
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INC RESEARCH HOLDINGS, INC.
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By:
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/s/ Duncan Jamie Macdonald
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Name:
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Duncan Jamie Macdonald
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Title:
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Chief Executive Officer
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[Electronic Signature]
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____________________
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Participant Signature
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Name:
[Participant Name]
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Acceptance Date:
[Acceptance Date]
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APPENDIX A
INC RESEARCH HOLDINGS, INC.
2014 Equity Incentive Plan
Restricted Stock Unit Award Agreement
Country-Specific Terms and Conditions
Capitalized terms used but not otherwise defined herein shall have the meaning given to such terms in the INC Research Holdings, Inc. 2014 Equity Incentive Plan (the “
Plan
”) and the Restricted Stock Unit Award Agreement for Non-U.S. Participants (the “
Restricted Stock Unit Agreement
”). This Appendix constitutes part of the Restricted Stock Unit.
Terms and Conditions
This Appendix includes additional terms and conditions that govern the restricted stock units (“RSUs”) to the Participant if Participant is employed by an employing entity in a country listed below. If the Participant moves to another country after receiving the grant of the RSUs, the Company will, in its discretion, determine the extent to which the terms and conditions herein will be applicable to the Participant.
Notifications
This Appendix also includes information regarding exchange controls and certain other issues of which the Participant should be aware with respect to the Participant’s participation in the Plan. The information is based on the securities, exchange control and other laws in effect in the respective countries as of July 2015. Such laws are often complex and change frequently. As a result, the Company strongly recommends that the Participant not rely on the information in this Appendix as the only source of information relating to the consequences of the Participant’s participation in the Plan because the information may be out of date at the time that the RSUs vests or Participant sells shares under the Plan.
In addition, the information contained herein is general in nature and may not apply to the Participant’s particular situation and the Company is not in a position to assure the Participant of a particular result. Accordingly, the Participant should seek appropriate professional advice as to how the relevant laws in the Participant’s country may apply to the Participant’s situation.
Finally, if you are a citizen or resident of a country other than the one in which you are currently working, the information contained herein may not be applicable to you.
2 | 6-Aug-2015 (Executive)
SINGAPORE
Notifications
Securities Law Notification
. The grant of the Restricted Stock Unit is being made pursuant to the “Qualifying Person” exemption under section 273(1)(f) of the Securities and Futures Act (Chapter 289, 2006 Ed.) (“SFA”). The Plan has not been lodged or registered as a prospectus with the Monetary Authority of Singapore. The Participant should note that the grant of the Restricted Stock Unit is subject to section 257 of the SFA and the Participant will not be able to make (i) any subsequent sale of the Shares in Singapore or (ii) any offer of such subsequent sale of the Shares in Singapore, unless such sale or offer is made pursuant to the exemptions under Part XIII Division 1 Subdivision (4) (other than section 280) of the SFA. The Company’s shares are traded on the NASDAQ Global Select Market, which is located outside of Singapore, under the ticker symbol “INCR” and the Shares acquired under the Plan may be sold through this exchange.
Director Notification Requirement
. If the Participant is a director, associate director or shadow director
1
of a Singapore Subsidiary, the Participant is subject to certain notification requirements under the Singapore Companies Act, regardless of whether the Participant is a Singapore resident or employed in Singapore. Among these requirements is the obligation to notify the Singapore Subsidiary in writing when the Participant receives or disposes of an interest (
e.g.
, Options, Shares) in the Company or a Subsidiary. These notifications must be made within two (2) business days of acquiring or disposing of any interest in the Company or any Subsidiary or within two (2) business days of becoming a director, associate director or shadow director if such an interest exists at that time.
UNITED KINGDOM
Terms and Conditions
Responsibility for Taxes
. The following provisions supplement Section 3 of the Restricted Stock Unit Agreement:
If payment or withholding of the income tax due is not made within ninety (90) days of the end of the tax year in which the event giving rise to the liability occurs or such other period specified in Section 222(1)(c) of the U.K. Income Tax (Earnings and Pensions) Act 2003 (the “Due Date”), the amount of any uncollected income tax will constitute a loan owed by the Participant to the Company or the Employer, effective on the Due Date. The Participant agrees that the loan will bear interest at the then-current Official Rate of Her Majesty’s Revenue and Customs (“HMRC”), it will be immediately due and repayable, and the Company or the Employer may recover it at any time thereafter by any of the means referred to in the Plan or in Section 3 of the Restricted Stock Unit Agreement.
_______________________
1
A shadow director is an individual who is not on the board of directors of the Singapore Subsidiary but who has sufficient control such that the board of directors of the Singapore Subsidiary acts in accordance with the directions or instructions of the individual.
Notwithstanding the foregoing, if the Participant is a director or executive officer of the Company (within the meaning of Section 13(k) of the Exchange Act), he or she will not be eligible for such a loan to cover the income tax due as described above. In the event that the Participant is such a director or executive officer and the income tax is not collected from or paid by the Participant by the Due Date, the amount of any uncollected income tax may constitute a benefit to the Participant on which additional income tax and national insurance contributions may be payable. The Participant is responsible for reporting and paying any income tax due on this additional benefit directly to HMRC under the self-assessment regime. The Participant is responsible for reimbursing the Company or the Employer (as applicable) for the value of any employee national insurance contributions due on this additional benefit and acknowledges that the Company or the Employer may recover such amount from him or her by any of the means referred to in Plan or in Section 3 of the Restricted Stock Unit Agreement.
Joint Election
. As a condition of the Participant’s participation in the Plan, the Participant agrees to accept any liability for secondary Class 1 national insurance contributions which may be payable by the Company and/or the Employer in connection with the Restricted Stock Unit and any event giving rise to Tax-Related Items (the “Employer’s NICs”). Without limitation to the foregoing, the Participant agrees to enter into a joint election with the Company (the “Joint Election”), the form of such Joint Election being formally approved by HMRC, and to execute any other consents or elections required to accomplish the transfer of the Employer’s NICs to the Participant. The Participant further agrees to execute such other joint elections as may be required between the Participant and any successor to the Company and/or the Employer. The Participant further agrees that the Company and/or the Employer may collect the Employer’s NICs from him or her by any of the means set forth in Plan or in Section 3 of the Restricted Stock Unit Agreement.
If the Participant does not enter into a Joint Election, or if approval of the Joint Election has been withdrawn by HMRC, the Company, in its sole discretion and without any liability to the Company or the Employer, may choose not to issue or deliver any Shares to the Participant upon vesting of the Restricted Stock Unit.
2 | 6-Aug-2015 (Executive)
INC RESEARCH HOLDINGS, INC.
2014 Equity Incentive Plan
Restricted Stock Unit Award Agreement
This Restricted Stock Unit Award Agreement (this “
Agreement
”) is made by and between INC Research Holdings, Inc., a Delaware corporation (the “
Company
”), and Name of Employee (the “
Participant
”), effective as of INSERT EFFECTIVE DATE OF GRANT (the “
Date of Grant
”).
RECITALS
WHEREAS
, the Company has adopted the INC Research Holdings, Inc. 2014 Equity Incentive Plan (as the same may be amended and/or amended and restated from time to time, the “
Plan
”), which Plan is incorporated herein by reference and made a part of this Agreement, and capitalized terms not otherwise defined in this Agreement will have the meanings ascribed to those terms in the Plan; and
WHEREAS
, the Committee has authorized and approved the grant of an Award to the Participant of Restricted Stock Units payable in shares of Common Stock (the “
Shares
”), subject to the terms and conditions set forth in the Plan and this Agreement.
NOW THEREFORE
, in consideration of the premises and mutual covenants set forth in this Agreement, the parties agree as follows:
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1.
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Grant of Restricted Stock Units
. The Company has granted to the Participant, effective as of the Date of Grant, XXXX Restricted Stock Units, on the terms and conditions set forth in the Plan and this Agreement, subject to adjustment as set forth in the Plan (the “
RSUs
”).
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2.
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Vesting of RSUs
. Subject to the terms and conditions set forth in the Plan and this Agreement, the RSUs will vest as follows:
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(a)
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General
. Except as otherwise provided in Sections 2(b) and 4, the RSUs will vest in equal annual installments of 25% of the Shares over a four-year period on each anniversary of the Date of Grant, subject to the Participant’s continued Service through each applicable vesting date.
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(b)
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Change in Control
. The RSUs will become fully vested immediately upon the Participant’s termination of Service in the event that the Participant’s Service is terminated by the Company without Cause (as defined in the Plan) or if Participant resigns for Good Reason at the time of, or within 6 months following, the consummation of a Change in Control occurring after the Date of Grant.
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As used in this Agreement, “
Good Reason
” shall mean the occurrence, without Participant’s express written consent, of any of the following events: (i) a material reduction in Participant’s base salary or Target Bonus percentage under the INC
Research, LLC Management Incentive Plan, if applicable; (ii) a material adverse change to Participant’s authority, job duties or responsibilities as compared to Participant’s authority, job duties or responsibilities immediately prior to the Change in Control; (iii) a requirement that Participant relocate to a principal place of employment more than fifty (50) miles from the Company’s offices at 3201 Beechleaf Court, in Raleigh, North Carolina or Participant’s assigned principal office location with any Subsidiary as of immediately prior to the occurrence of the Change in Control; or (iv) if Participant has an effective employment agreement, service agreement, or other similar agreement with the Company or any Subsidiary, a material breach of such agreement, provided, that, any event described in clauses (i), (ii), (iii) and (iv) above shall constitute Good Reason only if the Participant provides the Company with written notice of the basis for the Participant’s Good Reason within forty-five (45) days of the initial actions or inactions of the Company or any Subsidiary giving rise to such Good Reason and the Company or applicable Subsidiary has not cured the identified actions or inactions within thirty (30) days of such notice and provided further that Participant terminates his or her Service within thirty (30) days following the Company or applicable Subsidiary’s failure to cure within the thirty (30) day cure period.”
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3.
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Settlement of RSUs Upon Vesting.
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(a)
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Settlement in Stock
. RSUs vested as described in Section 2 above will be settled by delivering to Participant a number of Shares equal to the number of vested RSUs on the date on which the RSUs vest. The stock price used for vesting of RSU’s will be the closing price on INC Research shares on the date of vesting. If the vesting is a non-trading day, the vesting will be deemed to occur on the first trading day preceding the vesting date.
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(b)
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BookEntry Registration of the Shares; Delivery of Shares
. As soon as practical after the Payment Date, the Company will, at its election, either: (i) issue a certificate representing the Shares payable pursuant to this Agreement; or (ii) not issue any certificate representing the Shares payable pursuant to this Agreement and instead document the Participant’s interest in the Shares by registering such Shares with the Company’s transfer agent (or another custodian selected by the Company) in bookentry form in the Participant’s name. In any case, the Company may provide a reasonable delay in the issuance or delivery of the Shares to address TaxRelated Items, withholding, and other administrative matters. Neither the Company nor the Committee will be liable to the Participant or any other Person for damages relating to any delays in issuing the Shares or any mistakes or errors in the issuance of the Shares.
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(c)
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Shareholder Rights
. The Participant will not have any rights of a stockholder with respect to the Shares subject to the RSUs, including voting and dividend rights, unless and until the Shares are delivered as described in Section 3(b) above.
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(d)
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Withholding Requirements
. In connection with the delivery of Shares as described in Section 3(b) above, the Participant agrees to make adequate arrangements satisfactory to the Company to meet the minimum statutory amount necessary to satisfy any applicable federal, state and local taxes, domestic or foreign, required by law or regulation to be withheld by one or a combination of the following: (1) cash payment by the Participant to the Company prior to the day of vesting of an amount that the Company will apply to the required withholding; (2) withholding from proceeds of the sale of Shares acquired upon vesting/settlement of the RSUs either through a voluntary sale or through a mandatory sale arranged by the Company (on the Participant’s behalf pursuant to this authorization); (3) withholding from the Participant’s wages or other cash compensation paid to the Participant by the Company; or (4) to the extent not in violation of any shareholder agreement, and to the extent allowed by the Company in its discretion, withholding of Shares that would otherwise be delivered as described in Section 3(b) above. For the purposes of alternative (4) above, any Shares withheld shall be credited for purposes of the withholding requirements at the stock price for the vesting of RSU’s as set forth in Section 3(a) above. In the absence of an arrangement by the Participant that is acceptable to the Company for payment of withholding obligations, the Company at its discretion shall establish the method of withholding from alternatives (2) through (4) above. However, notwithstanding the preceding provisions of this Section 3(d) if the Participant is a Section 16 officer of the Company under the Exchange Act, then the Committee (as constituted in accordance with Rule 16b-3 under the Exchange Act) shall establish the method of withholding from alternatives (2) thorough (4) above.
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4.
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Forfeiture
. Notwithstanding the Change in Control vesting as stated in Section 2(b) above, any unvested RSUs will be forfeited immediately, automatically and without consideration upon a termination of the Participant’s Service for any reason. Without limiting the generality of the foregoing, the RSUs and the Shares (and any resulting proceeds) will continue to be subject to Section 13 of the Plan.
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5.
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Adjustment to RSUs
. In the event of any change with respect to the outstanding shares of Common Stock contemplated by Section 4.5 of the Plan, the RSUs may be adjusted in accordance with Section 4.5 of the Plan.
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6.
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Restrictive Covenants
. Participant acknowledges and recognizes the highly competitive nature of the businesses of the Company and its Affiliates and accordingly agrees to the provisions of
Appendix A
to this Agreement (the “Restrictive Covenants”). For the avoidance of doubt, the Restrictive Covenants contained in this Agreement are in addition to, and not
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in lieu of, any other restrictive covenants or similar covenants between the Participant and the Company or any of its Affiliates.
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7.
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Electronic Delivery and Acceptance
. The Company may, in its sole discretion, decide to deliver any documents related to current or future participation in the Plan by electronic means. The Participant hereby consents to receive such documents by electronic delivery and agrees to participate in the Plan through an on-line or electronic system established and maintained by the Company or a third party designated by the Company.
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8.
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Miscellaneous Provisions
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(a)
|
Securities Laws Requirements
. No Shares will be issued or transferred pursuant to this Agreement unless and until all then applicable requirements imposed by federal and state securities and other laws, rules and regulations and by any regulatory agencies having jurisdiction, and by any exchanges upon which the Shares may be listed, have been fully met. As a condition precedent to the issuance of Shares pursuant to this Agreement, the Company may require the Participant to take any reasonable action to meet those requirements. The Committee may impose such conditions on any Shares issuable pursuant to this Agreement as it may deem advisable, including, without limitation, restrictions under the Securities Act of 1933, as amended, under the requirements of any exchange upon which shares of the same class are then listed and under any blue sky or other securities laws applicable to those Shares.
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(b)
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NonTransferability
. The RSUs and the rights and privileges conferred thereby shall be non-transferrable except as provided by Section 15.3 of the Plan. Any shares of Common Stock delivered hereunder will be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the Plan or the rules, regulations and other requirements of the Securities and Exchange Commission, any stock exchange upon which such shares are listed, any applicable federal or state laws and any agreement with, or policy of, the Company or the Committee to which the Participant is a party or subject, and the Committee may cause orders or designations to be placed upon any certificate(s) or other document(s) delivered to the Participant, or on the books and records of the Company’s transfer agent, to make appropriate reference to such restrictions.
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(c)
|
No Right to Continued Service
. Nothing in this Agreement or the Plan confers upon the Participant any right to continue in Service for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Company (or any Subsidiary employing or retaining the Participant) or of the Participant, which rights are hereby expressly reserved by each, to terminate his or her Service at any time and for any reason, with or without Cause.
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(d)
|
Notification
. Any notification required by the terms of this Agreement will be given by the Participant (i) in a writing addressed to the Company at its principal executive office and will be deemed effective upon actual receipt when delivered by personal
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delivery or by registered or certified mail, with postage and fees prepaid, or (ii) by electronic transmission to the Company’s e-mail address of the Company’s General Counsel and will be deemed effective upon actual receipt. Any notification required by the terms of this Agreement will be given by the Company (x) in a writing addressed to the address that the Participant most recently provided to the Company and will be deemed effective upon personal delivery or within three (3) days of deposit with the United States Postal Service, by registered or certified mail, with postage and fees prepaid, or (y) by facsimile or electronic transmission to the Participant’s primary work fax number or e-mail address (as applicable) and will be deemed effective upon confirmation of receipt by the sender of such transmission.
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(e)
|
Entire Agreement
. This Agreement and the Plan constitute the entire agreement between the parties hereto with regard to the subject matter of this Agreement. This Agreement and the Plan supersede any other agreements, representations or understandings (whether oral or written and whether express or implied) that relate to the subject matter of this Agreement.
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(f)
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Waiver
. No waiver of any breach or condition of this Agreement will be deemed to be a waiver of any other or subsequent breach or condition whether of like or different nature.
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(g)
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Successors and Assigns
. The provisions of this Agreement will inure to the benefit of, and be binding upon, the Company and its successors and assigns and upon the Participant, the Participant’s executor, personal representative(s), distributees, administrator, permitted transferees, permitted assignees, beneficiaries, and legatee(s), as applicable, whether or not any such person will have become a party to this Agreement and have agreed in writing to be joined herein and be bound by the terms hereof.
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(h)
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Severability
. The provisions of this Agreement are severable, and if any one or more provisions are determined to be illegal or otherwise unenforceable, in whole or in part, then the remaining provisions will nevertheless be binding and enforceable.
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(i)
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Amendment
. Except as otherwise provided in the Plan, this Agreement will not be amended unless the amendment is agreed to in writing by both the Participant and the Company.
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(j)
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Choice of Law; Jurisdiction
. Notwithstanding the Restrictive Covenants Agreement in the attached
Appendix A
, this Agreement and all claims, causes of action or proceedings (whether in contract, in tort, at law or otherwise) that may be based upon, arise out of or relate to this Agreement will be governed by the internal laws of the State of Delaware, excluding any conflicts or choice-of-law rule or principle that might otherwise refer construction or interpretation of this Agreement to the substantive law of another jurisdiction. The Participant and each party to this Agreement agrees that it will bring all claims, causes of action and proceedings
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(whether in contract, in tort, at law or otherwise) that may be based upon, arise out of or be related to the Plan and this Agreement exclusively in the Delaware Court of Chancery or, in the event (but only in the event) that such court does not have subject matter jurisdiction over such claim, cause of action or proceeding, exclusively in the United States District Court for the District of Delaware (the “
Chosen Court
”), and hereby (i) irrevocably submits to the exclusive jurisdiction of the Chosen Court, (ii) waives any objection to laying venue in any such proceeding in the Chosen Court, (iii) waives any objection that the Chosen Court is an inconvenient forum or does not have jurisdiction over any party and (iv) agrees that service of process upon such party in any such claim or cause of action will be effective if notice is given in accordance with this Agreement.
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(k)
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Signature in Counterparts
. This Agreement may be signed in counterparts, manually or electronically, each of which will be an original, with the same effect as if the signatures to each were upon the same instrument.
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(l)
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Acceptance
. The Participant hereby acknowledges receipt of a copy of the Plan and this Agreement. The Participant has read and understands the terms and provisions of the Plan and this Agreement, and accepts the RSUs subject to all of the terms and conditions of the Plan and this Agreement. In the event of a conflict between any term or provision contained in this Agreement and a term or provision of the Plan, the applicable term and provision of the Plan will govern and prevail.
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[Signature page follows.]
IN WITNESS WHEREOF, the Company and the Participant have executed this Stock RSUs Award Agreement as of the date first written above.
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PARTICIPANT
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INC RESEARCH HOLDINGS, INC.
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By:
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/s/ Duncan Jamie Macdonald
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Name:
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Duncan Jamie Macdonald
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Title:
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Chief Executive Officer
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[Electronic Signature]
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____________________
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Participant Signature
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Name:
[Participant Name]
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Acceptance Date:
[Acceptance Date]
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[Signature Page – Restricted Stock Unit Award Agreement]
APPENDIX A
RESTRICTIVE COVENANTS AGREEMENT
1.
Definitions
. Capitalized terms not otherwise defined in below this Restrictive Covenant Agreement (“RCA”) shall have the same meanings as set forth in the above Agreement. The following terms shall have the following meanings for the purposes of this RCA:
(a) The “Termination Date” means the last day of Participant’s employment by the Company or any of its Subsidiaries.
(b) The “Non-Solicit Restricted Period” means the period commencing on the Termination Date and ending twelve (12) months after the Termination Date.
(c) The “Non-Compete Restricted Period” means the period commencing on the Termination Date and ending six (6) months after the Termination Date.
(d) “Company Customer” means a person or entity for whom the Company or any of its Subsidiaries was providing services either at the time of, or at any time within the twelve (12) months preceding the Termination Date, and for whom Participant carried out or oversaw a material business responsibility during said twelve (12) month period or about whom Participant had exposure to or received Confidential Information as a result of Participant’s employment with the Company or an of its Subsidiaries that if disclosed or used by Participant or any person or entity Competitive with the Company (as defined below) would provide an unfair competitive advantage with respect to the business of the Company.
(e) “Prospective Customer” means a person or entity (i) that Participant contacted for the purpose of soliciting business on behalf of the Company or any of its Subsidiaries during the twelve (12) months preceding the Termination Date; or (ii) to which the Company or any of its Subsidiaries had submitted a bid or proposal for services during the twelve (12) months preceding the Termination Date, and in which bid or proposal Participant was involved in any material respect.
(f) The term “Company Employee” means any person who is an employee of or consultant to the Company or any of its Subsidiaries as of the Termination Date.
(g) “Competitive with the Company” means engaged in the business of providing contract research organization (CRO) services to pharmaceutical, biotechnology, or biomedical companies.
(h) “Restricted Services” means services that are the same or substantially similar to the services Participant provided to the Company or any of its Subsidiaries at the time of, or in the twelve (12) months preceding, the Termination Date.
(i) The “Restricted Area” means the following geographical areas: (i) any city, metropolitan area, county (or similar political subdivision in foreign countries) in which Participant personally provided material services in-person (not by telephone or internet) on behalf of the Company during the twelve (12) months prior to the Termination Date; (ii) within a 60-mile radius of the location(s) where the Participant had an office during the twelve (12) months prior to the Termination Date; (iii) within a 60 mile radius of Raleigh, North Carolina; and (iv) any city, metropolitan area, county (or similar political subdivision in foreign countries) in which the Company on any of its Subsidiaries is located or does or did business, during the twelve (12) months prior to the Termination Date.
(j) “Confidential Information” means any confidential or proprietary information belonging to the Company or of its Subsidiaries, including, but not limited to, all trade secrets, patent applications, scientific data, formulation information, inventions, processes, formulas, systems, computer programs, plans, programs, studies, techniques, critical business information such as drug products in development, business strategies and models, product launch plans, CRO relationships, regulatory submissions, technology used by or the therapeutic focus of the Company or any of its Subsidiaries, clinical information, methodologies, standard operating procedures, operational documents (such as batch records), technology used by the Company or any of its Subsidiaries, marketing and certain financial information calculations, budgets, bids, internal policies and procedures, organization, business plans, analysis, forecasts, billing practices, pricing information and strategies, promotional material, service offering strategies, marketing plans and ideas, the identities or other information about customers, sponsor, customer or client lists, suppliers and business partners (current and prospective), the terms of current and pending deals, sales data, and sales projections, research, research proposals, study protocols, coding devices, unpublished results and reports, meeting minutes and notes, monthly and other periodic reports, contact and other information regarding suppliers, vendors and consultants, and regulatory and legal correspondence, whether or not patentable or copyrightable and whether in tangible or other form, including all documents and records, whether printed, typed, handwritten, videotaped, transmitted or transcribed on data files or on any other type of media, whether or not labeled or identified as confidential and proprietary. Notwithstanding the foregoing, the term “Confidential Information” shall not include information which (i) is already known to Participant prior to its disclosure to Participant by the Company; (ii) is or becomes generally available to the public through no wrongful act of any person; (iii) is at the time of disclosure part of the public knowledge or literature through no wrongful action by Participant; or (iv) is received by Participant from a third party without restriction and without any wrongful conduct on the part of such third party relating to such disclosure. Participant acknowledges and agrees that the Confidential Information he/she obtains or becomes aware of as a result of his/her employment with the Company or any of its Subsidiaries is not generally known or available to the general public, but has been developed, compiled or acquired by the Company at its great effort and expense and that Participant is required to protect and not disclose such information.
(l) “Subsidiaries” means any corporation, partnership, limited liability company, joint venture, association, public or private limited company or other business entity at least 50% of the outstanding voting stock or voting interests of which is at the time owned or controlled, directly or indirectly, by the Company.
2.
Non-Solicitation of Customers and Employees
. Participant hereby agrees that so long as he or she is employed by the Company or any of its Subsidiaries, and during the Non-Solicit Restricted Period, Participant will not, on Participant’s own behalf, nor as an officer, director, stockholder, partner, associate, employee, owner, executive, consultant or otherwise on behalf of any person, firm, partnership, corporation, or other entity:
(a) Solicit, induce, influence or attempt to solicit, induce or influence any Company Customer to (i) cease doing business in whole or in part with the Company or any of its Subsidiaries, or (ii) do business with any other person or entity that is Competitive with the Company;
(b) Solicit, induce, or attempt to induce any Prospective Customer to (i) not begin doing business with the Company or any of its Affiliates, (ii) cease doing business in whole or in part with the Company or any of its Affiliates, or (iii) do business with any person or entity that is Competitive with the Company;
(c) Interfere with, disrupt or attempt to interfere with or disrupt the relationship, contractual or otherwise, between the Company or any of its Subsidiaries and any supplier, vendor, distributor, lessor, lessee, or licensor that transacts business with the Company of any of its Subsidiaries; or
(d) Encourage, entice, induce or suggest that any Company Employee terminate or alter his/her employment or relationship with the Company or any of its Subsidiaries for the benefit of any person or entity other than the Company.
3.
Non-Competition.
(a) Participant hereby agrees that so long as he or she is employed by the Company or any of its Subsidiaries, and during the Non-Compete Restricted Period, within the Restricted Area, Participant will not for Participant’s own behalf or for any other person or entity provide the Restricted Services for any person or entity that is Competitive with the Company.
(b) Notwithstanding the foregoing, Participant’s ownership, directly or indirectly, of not more than one percent (1%) of the issued and outstanding stock of a corporation the shares of which are regularly traded on a national securities exchange or in the over-the-counter market shall not violate this Section.
4.
Business Opportunities
. Participant, while he or she is employed by the Company and its Subsidiaries, agrees to offer or otherwise make known or available to the Company or any Subsidiary, as directed by the Company and without additional compensation or consideration, any business prospects, contracts or other business opportunities that he or she may discover, find, develop or otherwise have available to him or her in any field in which the Company or any of its Subsidiaries is engaged, and further agrees that any such prospects, contracts or other business opportunities shall be the property of the Company.
5.
Confidentiality
. Participant acknowledges that during his or her employment with the Company, he or she has and will necessarily become informed of, and have access to, the Confidential Information of the Company, and that the Confidential Information, even though it may be contributed, developed or acquired in whole or in part by the Participant is the Company’s exclusive property to be held by the Participant in trust and solely for the Company’s benefit. Accordingly, except as required by law, the Participant shall not, at any time, either during or subsequent to his or her employment, as applicable, use, reveal, report, publish, copy, transcribe, transfer or otherwise disclose to any person, corporation or other entity, any of the Confidential Information without the prior written consent of the Company, except to responsible officers and employees of the Company and its Subsidiaries and other responsible persons who are in a contractual or fiduciary relationship with the Company or one of its Subsidiaries and except for information that legally and legitimately is or becomes of general public knowledge from authorized sources other than the Participant. Participant also agrees and understands that Participant’s duties and obligations under any confidentiality and non-disclosure agreement signed in connection with Participant’s employment with the Company, including the Confidentiality and Non-Solicitation Agreement, (collectively, the “Confidentiality Agreement”) will remain in full force and effect in accordance with its terms, and that a breach of the Confidentiality Agreement will also constitute a breach of this present RCA. To the extent the terms of the Confidentiality Agreement are inconsistent with the terms of this RCA, the provisions of this RCA will control.
6.
Termination
. Either party may terminate the employment relationship for any reason at any time upon giving the other party thirty (30) days prior written notice. The Company may, in its discretion, relieve Participant of some or all of his/her duties during all or a part of such notice period. Subject to the forgoing notice obligation, Participant’s employment with the Company shall remain at will.
7.
Return of Company Property
. By no later than the Termination Date, the Participant shall promptly deliver to the Company all property and possessions of the Company and its Subsidiaries, including all drawings, manuals, letters, notes, notebooks, reports, copies, deliverables containing Confidential Information and all other materials relating to the Company and any of its Subsidiaries’ business that are in the Participant’s possession or control.
8.
Governing Law, Forum and Jury Waiver
. This RCA and all disputes, claims or controversies arising out of or related to this RCA, shall be governed by the laws of the State of North Carolina without regard for reference to any choice or conflict of law principles of any jurisdiction. The parties agree that any action or proceeding with respect to this RCA or Participant’s employment with the Company shall be brought exclusively in the state or federal courts in the State of North Carolina, and Participant voluntarily submits to the exclusive jurisdiction over Participant’s person by a court of competent jurisdiction located within the State of North Carolina. The parties hereby irrevocably waive any objection they may now or hereafter have to the laying of venue of any such action in the State of North Carolina, and further irrevocably waive any claim they may now or hereafter have that any such action brought in said court(s) has been brought in an inconvenient forum. The parties hereby knowingly and expressly waive their right to a jury trial for any claim relating to his/her/its rights or obligations under this RCA.
9.
Amendment, Modification or Waiver
. This RCA may not be changed orally, and no provision of this RCA may be amended or modified unless such amendment or modification is in writing, signed by Participant and by a duly authorized officer of the Company. No act or failure to act by the Company will waive any right, condition or provision contained herein. Any waiver by the Company must be in writing and signed by a duly authorized officer of the Company to be effective.
10.
Severability
. In case any one or more of the provisions contained in this RCA shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this RCA, but this RCA shall be construed as if such invalid, illegal, or other unenforceable provision had never been contained herein. If, moreover, any one or more of the provisions contained in this RCA shall for any reason be held to be excessively broad as to duration, geographical scope or subject, it shall be construed by limiting it and reducing it so as to be enforceable to the extent compatible with applicable law as it shall then appear.
11.
Miscellaneous.
(a) Participant’s and the Company’s obligations hereunder shall continue in full force and effect in the event that Participant’s job title, responsibilities, work location or other conditions of his/her employment with the Company change subsequent to the execution of the RCA, without the need to execute a new RCA.
(b) In the event that Participant breaches any of the provisions of Sections 2 or 3 of this RCA, to the extent permitted by law, the Non-Compete or Non-Solicit Restricted Period (as applicable) shall be tolled until such breach has been duly cured, it being the intent of the parties that such period shall be extended by any period of time in which Participant is in violation of such sections.
(c) Participant agrees to provide a copy of Section 1 through 5 of this RCA to any subsequent employers or prospective employers during the applicable period of restriction (including but not limited to the Non-Solicit Restricted Period and the Non-Compete Restricted Period). Participant specifically authorizes the Company to notify any subsequent employers or prospective employers of Participant of the restrictions on Participant contained in this RCA and of any concerns the Company may have about actual or possible conduct by Participant that may be in breach of this RCA Participant agrees to promptly notify the Company of any offers to perform services, any engagements to provide services, and/or actual work of any kind, whether as an individual, proprietor, partner, stockholder, officer, employee, director, consultant, joint venturer, investor, lender, or in any other capacity whatsoever during the period of his/her employment by the Company or any of its Subsidiaries and during the Non-Solicit Restricted Period and the Non-Compete Restricted Period. Such notice must be provided prior to the commencement of any such services or work.
(d) The rights and remedies of the parties under this RCA are cumulative (not alternative) and in addition to all other rights and remedies available to such parties at law, in equity, by contract or otherwise.
Exhibit 31.1
CERTIFICATION PURSUANT TO SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
I, D. Jamie Macdonald, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of INC Research Holdings, 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)) 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) (Paragraph omitted pursuant to SEC Release Nos. 33-8238/34-47986 and 33-8392/34-49313)
(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, 2015
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/s/ D. Jamie Macdonald
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D. Jamie Macdonald
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Chief Executive Officer
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(Principal Executive Officer)
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Exhibit 31.2
CERTIFICATION PURSUANT TO SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
I, Gregory S. Rush, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of INC Research Holdings, 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)) 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) (Paragraph omitted pursuant to SEC Release Nos. 33-8238/34-47986 and 33-8392/34-49313)
(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, 2015
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/s/ Gregory S. Rush
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Gregory S. Rush
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Executive Vice President and Chief Financial Officer
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(Principal Financial Officer)
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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, D. Jamie Macdonald, Chief Executive Officer of INC Research Holdings, 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, 2015
(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, 2015
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/s/ D. Jamie Macdonald
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D. Jamie Macdonald
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Chief Executive Officer
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(Principal Executive Officer)
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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, Gregory S. Rush, Executive Vice President and Chief Financial Officer of INC Research Holdings, 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, 2015
(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, 2015
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/s/ Gregory S. Rush
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Gregory S. Rush
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Executive Vice President and Chief Financial Officer
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(Principal Financial Officer)
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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.