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1.
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Will the annual equity grant be issued in February 2015?
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The LabCorp acquisition is expected to close in 1st quarter 2015. As a result, we do not expect any annual grants to be issued in February 2015. LabCorp is committed, for a period of one year following the closing as we integrate our businesses, to providing employees with comparable aggregate compensation (including annual base compensation, annual target cash incentives, and, for 2015, long term incentive awards).
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2.
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Will LabCorp be issuing LabCorp equity grants to Covance employees after the closing date?
There has not been any decision related to grants after the closing date.
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3.
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What happens to new hire equity grants with commitments already in offer letters, however, the grant(s) not yet issued?
Any new hire grants with commitments already in offer letters will be granted as per the offer letter. These grants are scheduled to occur with the next quarterly new hire grant date on December 15, 2014. As these grants will be issued after the November 3, 2014 announcement of the LabCorp acquisition, the grants issued on this date will not vest immediately upon closing. Instead, these grants will be converted to a LabCorp equity grant at closing and will remain subject to original vesting terms.
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4.
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I am a recent new hire. My offer letter stated that I would be eligible for the February 2015 annual grant. Based on the recent developments, how will this impact my 2015 equity grant from Covance?
Covance will not issue any February 2015 equity grants.
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5.
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What happens to the CVD stock symbol after the closing date?
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The CVD stock symbol will be delisted from the NYSE as of the closing date.
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6.
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What happens to my unvested equity grants if I terminate Covance employment prior to the closing date?
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In the event of any termination of employment prior to the date of closing, all unvested equity grants will be treated according to the terms set forth in the award agreement.
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7.
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If I do not exercise my vested stock options prior to the closing date, will they be forfeited if not exercised by time of closing?
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No. Vested CVD stock options will remain exercisable until the closing date. All vested stock options not exercised by time of closing will be converted into a cash payment equal to the number of vested stock options multiplied by the difference between the value of the merger consideration, which is $75.76 in cash and 0.2686 LabCorp shares for each Covance share, and the aggregate original exercise prices. This amount will be paid to the holder as soon as administratively practicable following closing (but no later than 10 business days after the closing), less applicable taxes and deductions. For purposes of calculating the value of the merger consideration, the price of each LabCorp share will equal the average of the volume weighted average trading prices of LabCorp shares on each of the 10 consecutive trading days ending on (and including) the third trading day before the closing date.
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8.
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What would I receive at closing if I was previously granted 1,000 stock options at a price of $60 which were either vested and not yet exercised, or unvested prior to closing?
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It is not possible to calculate the amount you will receive at closing at this time. The cash payment you will receive in respect of each stock option will be equal to the difference between the value of the merger consideration, which is $75.76 in cash and 0.2686 LabCorp shares for each Covance share, and the original exercise price of the stock option. For purposes of calculating the value of the merger consideration, the price of each LabCorp share will equal the average of the volume weighted average trading prices of LabCorp shares on each of the 10 consecutive trading days ending on (and including) the third trading day before the closing date.
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A higher average trading price for LabCorp shares prior to the closing date will result in higher total merger consideration. The actual Covance stock price on or prior to the closing date will not impact the total merger consideration you will receive.
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Assuming, for illustrative purposes only, that the applicable price of LabCorp shares (as determined in accordance with the merger agreement) is $100, for 1,000 stock options you would be entitled to receive:
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| ■ | 1,000 stock options x $75.76 cash = $75,760 | |||
| ■ | 1,000 stock options x 0.2686 LabCorp shares x $100 per LabCorp share = $26,860 | |||
| ■ | Total = $75,760 + $26,860 = $102,620 | |||
| ■ | 1,000 stock options x $60 exercise price = $60,000 | |||
| ■ | Total cash payment for the stock options = $42,620, less applicable taxes and withholdings. This amount is determined based on $102,620 – $60,000. |
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9.
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What happens to all of my restricted share grants that have already vested or will be vesting prior to the closing date?
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At time of vesting, all restricted shares are automatically free from any further limitations on sale or transfer. As a result, the net shares remaining after applicable taxes and withholdings are distributed and owned outright by you upon normal vesting schedules. These shares will be treated as regular shares of Covance common stock in connection with the LabCorp acquisition.
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10.
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What happens to any unvested restricted shares at time of closing?
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Each unvested restricted share granted prior to the November 3, 2014 announcement of the LabCorp acquisition will vest immediately upon closing and will be converted into the merger consideration, which is $75.76 in cash and 0.2686 LabCorp shares for each Covance share. This amount will be paid to the holder as soon as administratively practicable following closing (but no later than 10 business days after the closing), less applicable taxes and deductions.
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Each unvested restricted share granted after the November 3, 2014 announcement of the LabCorp acquisition will not vest immediately upon closing. Instead, these restricted shares will be converted to a LabCorp equity grant (or, in certain circumstances, cash) at the closing and will remain subject to the original vesting terms.
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11.
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For the portion of unvested restricted shares converted to LabCorp stock at time of closing, will I have the ability to immediately sell the LabCorp shares?
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Yes, subject to insider trading policies applicable to such sales.
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12.
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What would I receive at closing if I was previously granted 100 restricted shares which remain unvested at closing?
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It is not possible to calculate the exact amount you will receive at closing at this time. Following the closing you will receive the merger consideration for each restricted share, which is $75.76 in cash and 0.2686 LabCorp shares, less applicable withholding amounts. You will receive a cash payment in lieu of any fractional shares, less applicable withholding amounts. The price of LabCorp shares and the total cash payment in respect of fractional shares will only be known on the closing date. The total cash payment in respect of fractional shares will equal the average of the volume weighted average trading prices of LabCorp shares on each of the 10 consecutive trading days ending on (and including) the third trading day before the closing date.
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A higher average trading price for LabCorp shares prior to the closing date will result in higher total merger consideration. The actual Covance stock price on or prior to the closing date will not impact the value of the merger consideration you will receive.
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Assuming, for illustrative purposes only, that the applicable price of LabCorp shares is $100 (as determined in accordance with the merger agreement), the value of the amounts received for your 100 restricted shares would be:
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■ Cash payment equal to 100 restricted shares x $75.76 = $7,576
■ 100 restricted shares x 0.2686 LabCorp shares = 26.86 LabCorp shares
■ You will only be issued whole LabCorp shares, or 26 LabCorp shares
■ In lieu of 0.86 LabCorp shares, you will receive a cash payment equal to 0.86 LabCorp shares x $100 per LabCorp share = $86
■ Total cash payment = $7,662, less applicable taxes and withholdings. This amount is determined based on $7,576 + $86.
■ Total LabCorp shares issued = 26
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13.
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How will cash payments be distributed to employees?
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Covance’s intent is for all cash payments to be distributed as a “live” check (not electronic deposit) to the employee, less applicable taxes and deductions, which will be sent to the employee’s home address. There may be locations where a “live” check is not possible. We will provide further updates as we continue to finalize these logistics. Please make sure Covance has your current mailing address, and notify Covance of any changes to your mailing address as soon as possible.
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14.
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How will I be taxed for any cash distributions related to equity at time of closing?
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Location-specific tax rates will apply for all cash distributions. Please consult your tax advisor for any questions related to tax implications.
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15.
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As Covance employees were not anticipating the tax implications related to these distributions, will there be any flexibility in timing of payments to offset the unexpected tax obligations?
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No. Each recipient of cash payments will be responsible for the tax liabilities related to the payments at the normal time, based on when the payments are scheduled.
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16.
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Will I still have access to UBS (Covance’s stock price plan administrator website) after the closing date?
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UBS access will continue after the closing date. As LabCorp does not utilize UBS as their stock plan administrator, the timeframe for continuation of UBS access remains to be determined.
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17.
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Who should I contact regarding my current equity grant portfolio?
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UBS is available to address questions regarding your current equity grant portfolio. Telephone: 800-597-6956 (from within the U.S.) If you are calling from outside the United States please use your local access number plus 201-272-7665. E-mail: cvdstock@ubs.com
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18.
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Does all of the above apply for all unvested equity grants even if I maintain employment with LabCorp?
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Generally, we expect all unvested equity grants will be treated as described above regardless of your employment status with the combined company following the closing.
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19.
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What happens to Covance stock purchased as part of the former Employee Stock Purchase Plan (ESPP)?
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All Covance shares purchased as part of the ESPP are owned outright by the holder and will be treated as such in connection with the LabCorp acquisition
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