-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TkugplRgCkfnaVvTcLhZk9zTegMKaRCqoUaowp2feCIloQiz3f0AuavC2f6oZXN0 Ydvrs8naNqoICx1BnGBxJw== 0000950135-96-002830.txt : 19960629 0000950135-96-002830.hdr.sgml : 19960629 ACCESSION NUMBER: 0000950135-96-002830 CONFORMED SUBMISSION TYPE: S-1 PUBLIC DOCUMENT COUNT: 7 FILED AS OF DATE: 19960627 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: PAREXEL INTERNATIONAL CORP CENTRAL INDEX KEY: 0000799729 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMMERCIAL PHYSICAL & BIOLOGICAL RESEARCH [8731] IRS NUMBER: 042776269 STATE OF INCORPORATION: MA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: S-1 SEC ACT: 1933 Act SEC FILE NUMBER: 333-06953 FILM NUMBER: 96586817 BUSINESS ADDRESS: STREET 1: 195 WEST ST CITY: WALTHAM STATE: MA ZIP: 02154 BUSINESS PHONE: 6174879900 MAIL ADDRESS: STREET 1: 195 WEST ST CITY: WALTHAM STATE: MA ZIP: 02154 S-1 1 PAREXEL INTERNATIONAL CORPORATION 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 27, 1996 REGISTRATION NO. 333- =============================================================================== SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 --------------------- FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 --------------------- PAREXEL INTERNATIONAL CORPORATION (Exact name of registrant as specified in its charter)
MASSACHUSETTS 8731 04-2776269 (State or other Jurisdiction (Primary Standard Industrial (I.R.S. Employer of Incorporation or Classification Code Number) Identification Number) Organization)
--------------------- 195 WEST STREET WALTHAM, MASSACHUSETTS 02154 (617) 487-9900 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) JOSEF H. VON RICKENBACH PRESIDENT, CHIEF EXECUTIVE OFFICER AND CHAIRMAN PAREXEL INTERNATIONAL CORPORATION 195 WEST STREET WALTHAM, MASSACHUSETTS 02154 (617) 487-9900 (Name, address, including zip code, and telephone number, including area code, of agent for service) COPY TO: WILLIAM J. SCHNOOR, JR. HEATHER M. STONE TESTA, HURWITZ & THIBEAULT, LLP HIGH STREET TOWER 125 HIGH STREET BOSTON, MASSACHUSETTS 02110 (617) 248-7000 --------------------- APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after this registration statement becomes effective. If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. /X/ If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. / / CALCULATION OF REGISTRATION FEE
===================================================================================== TITLE OF EACH CLASS OF PROPOSED MAXIMUM AMOUNT OF SECURITIES TO BE REGISTERED AGGREGATE OFFERING PRICE(1) REGISTRATION FEE - ------------------------------------------------------------------------------------- Common Stock, $.01 par value... $2,549,708 $880 ===================================================================================== - ----------- (1) Estimated solely for the purpose of calculating the registration fee pursuant to Rules 457(c) and 457(o).
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE. ================================================================================ 2 PAREXEL INTERNATIONAL CORPORATION CROSS-REFERENCE SHEET SHOWING LOCATION IN PROSPECTUS OF INFORMATION REQUIRED BY PART I OF FORM S-1
REGISTRATION STATEMENT ITEM AND CAPTION LOCATION OR HEADING IN PROSPECTUS - ----------------------- --------------------------------- 1. Forepart of the Registration Statement and Outside Front Cover Page of Prospectus..... Outside Front Cover 2. Inside Front and Outside Back Cover Page Prospectus................................. Inside Front and Outside Back Cover Pages 3. Summary Information, Risk Factors and Ratio of Earnings to Fixed Charges............... Summary; Risk Factors 4. Use of Proceeds.............................. Use of Proceeds 5. Determination of Offering Price.............. Outside Front Cover Page; Plan of Distribution 6. Dilution..................................... Not Applicable 7. Selling Security Holders..................... Principal Stockholders; Selling Stockholders 8. Plan of Distribution......................... Outside Front Cover Page; Plan of Distribution 9. Description of Securities to be Registered... Description of Capital Stock 10. Interests of Named Experts and Counsel....... Legal Matters 11. Information with Respect to the Registrant... Summary; Risk Factors; Use of Proceeds; Price Range of Common Stock and Dividend Policy; Capitalization; Selected Consolidated Financial Data; Management's Discussion and Analysis of Financial Condition and Results of Operations; Business; Management; Certain Transactions; Principal Stockholders; Selling Stockholders; Description of Capital Stock; Consolidated Financial Statements. 12. Disclosure of Commission Position on Indemnification for Securities Act Liabilities................................ Not Applicable
3 INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. SUBJECT TO COMPLETION, DATED JUNE 27, 1996 PROSPECTUS 56,818 SHARES [PAREXEL LOGO] COMMON STOCK This Prospectus relates to resale of 56,818 shares of Common Stock, $.01 par value per share (the "Common Stock") of PAREXEL International Corporation ("PAREXEL" or the "Company") which may be offered hereby from time to time by any or all of the selling stockholders named herein (collectively, the "Selling Stockholders"). See "Selling Stockholders" and "Plan of Distribution." The Company will not receive any of the proceeds from the resale of the shares by the Selling Stockholders. On May 26, 1996, the Company entered into a stock purchase agreement with the stockholders of Sitebase Clinical Systems, Inc. ("Sitebase") pursuant to which the Company purchased all outstanding shares of capital stock of Sitebase with shares of Common Stock of the Company. The shares of Common Stock offered hereby by the Selling Stockholders were acquired by such stockholders upon the closing of the acquisition of Sitebase. In connection with the issuance of the shares of Common Stock to the stockholders of Sitebase, each stockholder of Sitebase agreed not to sell or otherwise transfer such shares until the expiration of the pooling lockup period referred to herein, which is currently expected to expire in August 1996. See "Selling Stockholders." The Company's Common Stock is quoted on the Nasdaq National Market under the symbol "PRXL." The last sale price for the Common Stock on June 26, 1996, as reported on the Nasdaq National Market, was $44 per share. See "Price Range of Common Stock and Dividend Policy." SEE "RISK FACTORS" ON PAGE 6 FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED HEREBY. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THE DATE OF THIS PROSPECTUS IS , 1996 4 ADDITIONAL INFORMATION The Company has filed with the Securities and Exchange Commission (the "Commission"), a Registration Statement on Form S-1 (including all amendments thereto, the "Registration Statement") under the Securities Act of 1933, as amended, with respect to the Common Stock offered hereby. As permitted by the rules and regulations of the Commission, this Prospectus omits certain information contained in the Registration Statement. For further information with respect to the Company and the Common Stock offered hereby, reference is hereby made to the Registration Statement and to the exhibits and schedules filed therewith. Statements contained in this Prospectus regarding the contents of any agreement or other document filed as an exhibit to the Registration Statement are not necessarily complete, and in each instance reference is made to the copy of such agreement filed as an exhibit to the Registration Statement, each such statement being qualified in all respects by such reference. In addition, the Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files reports and other information with the Commission. The Registration Statement, including the exhibits and schedules thereto, as well as the Company's periodic reports, proxy statements and other information, may be inspected at the public reference facilities maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 and at the Commission's Regional Offices located at Seven World Trade Center, 13th Floor, New York, New York 10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of all or any part thereof may be obtained upon payment of the prescribed fees from the Public Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. In addition, the Commission maintains a Web site (http://www.sec.gov) that contains reports, proxy and information statements and other information regarding registrants that file electronically with the Commission. PAREXEL is a registered service mark of the Company. 2 5 - ------------------------------------------------------------------------------- SUMMARY The following summary is qualified in its entirety by the more detailed information, including Risk Factors and Consolidated Financial Statements and Notes thereto, appearing elsewhere in this Prospectus. This Prospectus contains certain "forward-looking" information, as that term is defined by (i) the Private Securities Litigation Reform Act of 1995 (the "Act") and (ii) releases made by the Securities and Exchange Commission. Such information involves risks and uncertainties. The Company's actual results may differ materially from the results discussed in the forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed in "Risk Factors." THE COMPANY PAREXEL International Corporation ("PAREXEL" or the "Company") is a leading contract research organization ("CRO"), providing clinical research and development services to the worldwide pharmaceutical and biotechnology industries. The Company believes it is the fourth largest CRO, based on estimated annual net revenue, and one of only a few CROs capable of providing a full range of clinical services on a global basis. The Company complements the research and development departments of pharmaceutical and biotechnology companies by offering high quality clinical research services to the client and reducing drug development time and cost. In addition, the Company's integrated services and extensive information technology capabilities, coupled with its broad experience and expertise in global drug development, provide clients with a variable cost alternative to the fixed costs associated with internal drug development. The Company offers a full complement of clinical research and development services, including designing, initiating and monitoring clinical trials, managing and analyzing clinical data and consulting on regulatory affairs. PAREXEL's integrated information systems and worldwide network of offices enable the Company to provide high-quality comprehensive services on a global basis. The Company has provided clinical research and development services in North America since 1985, in Europe since 1989, in Japan since May 1995 and in Australia since December 1995. The CRO industry derives substantially all of its revenue from the pharmaceutical and biotechnology industries. The Company believes that the following trends will cause the CRO industry to continue to grow: (i) many pharmaceutical companies, in response to margin pressures, are seeking to reduce the high fixed costs associated with peak-load staffing for drug development by relying on a combination of internal resources and CROs; (ii) pharmaceutical and biotechnology companies increasingly are attempting to maximize profits from a given drug by pursuing regulatory approvals in multiple countries in parallel, rather than sequentially, by outsourcing to CROs with global capabilities; (iii) as consolidation in the pharmaceutical industry continues, many pharmaceutical companies aggressively manage costs by reducing jobs and outsourcing to variable-cost CROs in an effort to reduce the fixed costs associated with internal drug development; (iv) as regulatory requirements in many jurisdictions have become more complex, the pharmaceutical and biotechnology industries are increasingly outsourcing to certain CROs to take advantage of their data management expertise and global presence; (v) the worldwide research and development expenditures for new drugs, including amounts spent on services of the type provided by CROs, have experienced substantial growth in recent years as a result of pressures to develop new drugs for an aging population and for the treatment of life threatening diseases and chronic disorders; and (vi) the growth of the biotechnology industry has increased the demand for expertise and services provided by outside sources, including CROs. There can be no assurance, however, that these trends will result in growth in the CRO industry. PAREXEL's objective is to maintain and enhance its position as a leading CRO by providing a full range of clinical services on a global basis. The Company addresses all aspects of clinical research and development with a flexible approach that allows its clients to use the Company's services on an individual or bundled basis. The Company believes its expertise in conducting scientifically demanding trials and its ability to coordinate complicated global trials are significant competitive strengths. PAREXEL has recently devoted significant resources to developing a state of the art information system designed to allow the Company to more effectively manage its business operations and deliver services to its clients. The Company will continue to - ------------------------------------------------------------------------------- 3 6 - ------------------------------------------------------------------------------- invest in improvements in information technology and will consider acquisitions of complementary businesses in order to enhance its competitive position and its level of service. Sitebase is a leading provider of remote data entry software and related services to the pharmaceutical and biotechnology industries. Remote data entry software facilitates the collection of clinical trials data on personal computers at investigational sites and the ongoing transmission of such data to trial sponsors for review and manufacturing. The Company was incorporated in The Commonwealth of Massachusetts in 1983. Unless the context otherwise requires, the terms "PAREXEL" and "the Company" refer to PAREXEL International Corporation and its subsidiaries. The Company's principal executive offices are located at 195 West Street, Waltham, Massachusetts 02154, and its telephone number is (617) 487-9900. THE OFFERING This Prospectus relates to the resale of 56,818 shares of Common Stock of the Company received by the Selling Stockholders on the closing of the acquisition of all outstanding shares of capital stock of Sitebase by the Company. Such shares may be offered hereby from time to time by any or all of the Selling Stockholders. The Company will not receive any of the proceeds from the resale of the shares of Common Stock by the Selling Stockholders. - ------------------------------------------------------------------------------- 4 7 SUMMARY CONSOLIDATED FINANCIAL INFORMATION (IN THOUSANDS, EXCEPT PER SHARE DATA)
NINE MONTHS ENDED FISCAL YEAR ENDED JUNE 30, MARCH 31, ------------------------------------------------ ----------------- 1991 1992 1993 1994 1995 1995 1996 ------- ------- ------- ------- -------- ------- ------- STATEMENT OF OPERATIONS DATA: Net revenue................. $23,263 $45,407 $54,000 $58,002 $ 58,573 $42,281 $61,096 ------- ------- ------- ------- -------- ------- ------- Costs and expenses: Direct costs.............. 15,711 29,772 36,106 38,244 42,140 30,803 42,027 Selling, general and administrative......... 5,015 10,164 11,831 13,631 13,294 9,762 13,079 Depreciation and amortization........... 1,251 2,299 2,511 2,435 2,251 1,809 1,649 Facility and other restructuring charges................ 1,278(1) -- 3,254(2) -- -- -- -- Impairment of long-lived assets................. -- -- -- -- 11,253(3) 11,253(3) -- ------- ------- ------- ------- -------- ------- ------- Total costs and expenses........ 23,255 42,235 53,702 54,310 68,938 53,627 56,755 ------- ------- ------- ------- -------- ------- ------- Income (loss) from operations................ 8 3,172 298 3,692 (10,365) (11,346) 4,341 Other income (expense), net....................... 310 138 (520) (196) 55 -- 642 ------- ------- ------- ------- -------- ------- ------- Income (loss) before provision for income taxes and cumulative effect of accounting change......... 318 3,310 (222) 3,496 (10,310) (11,346) 4,983 ======= ======= ======= ======= ======== ======= ======= Net income (loss)........... (664) 1,536 (2,157) 2,423 (10,630) (11,313) 2,995 ======= ======= ======= ======= ======== ======= ======= Net income (loss) per share..................... $ (0.97) $ 0.33 $ (2.97) $ 0.44 $ (12.61) $(13.44) $ 0.48 ======= ======= ======= ======= ======== ======= =======
MARCH 31, 1996 -------------- BALANCE SHEET DATA: Working capital............................................................. $53,514 Total assets................................................................ 96,975 Long-term debt, less current maturities..................................... 682 Stockholders' equity........................................................ 58,475 - --------------- (1) Represents a domestic facility restructuring charge related to the abandonment of a lease in connection with the relocation of the Company's headquarters. (2) Represents a charge incurred in connection with a restructuring of operations in Germany because of a decline in net revenue from those operations. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Note 4 of Notes to Consolidated Financial Statements of the Company. (3) Represents a non-cash charge primarily due to the write-down of intangible assets of the Company's German operations. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Note 3 of Notes to Consolidated Financial Statements of the Company.
5 8 RISK FACTORS In addition to the other information in this Prospectus, the following risk factors should be considered carefully in evaluating the Company and its business before purchasing the shares of Common Stock offered hereby. LOSS OR DELAY OF LARGE CONTRACTS Most of the Company's contracts are terminable upon 60 to 90 days' notice by the client. Clients terminate or delay contracts for a variety of reasons, including, among others, the failure of products being tested to satisfy safety requirements, unexpected or undesired clinical results of the product, the client's decision to forego a particular study, insufficient patient enrollment or investigator recruitment or production problems resulting in shortages of the drug. In addition, the Company believes that several factors, including the potential adverse impact of health care reform, have caused pharmaceutical companies to apply more stringent criteria to the decision to proceed with clinical trials and therefore may result in a greater willingness of these companies to cancel contracts with CROs. The loss or delay of a large contract or the loss or delay of multiple contracts could have a material adverse effect on the financial performance of the Company. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." VARIABILITY OF QUARTERLY OPERATING RESULTS The Company's quarterly operating results have been subject to variation, and will continue to be subject to variation, depending upon factors such as the initiation and progress of significant projects, exchange rate fluctuations, the mix of services offered, the opening of new offices, the costs associated with integrating acquisitions and the startup costs incurred in connection with the introduction of new products and services. In addition, during the third quarter of fiscal 1993 and 1995, the Company's results of operations were affected by a non-cash restructuring charge and a non-cash write-down due to the impairment of long-lived assets, respectively. See "Risks Associated with Acquisitions." Because a high percentage of the Company's operating costs are relatively fixed, variations in the initiation, completion, delay or loss of contracts, or in the progress of clinical trials can cause material adverse variations in quarterly operating results. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Quarterly Results." DEPENDENCE ON CERTAIN INDUSTRIES AND CLIENTS The Company's revenues are highly dependent on research and development expenditures by the pharmaceutical and biotechnology industries. The Company's operations could be materially and adversely affected by general economic downturns in its clients' industries, the impact of the current trend toward consolidation in these industries or any decrease in research and development expenditures. Furthermore, the Company has benefited to date from the increasing tendency of pharmaceutical and biotechnology companies to outsource large clinical research projects. A reversal or slowing of this trend would have a material adverse effect on the Company. The Company believes that concentrations of business in the CRO industry are not uncommon. The Company has experienced such concentration in the past and may experience such concentration in fiscal 1996 and in future years. In the year ended June 30, 1993 two clients accounted for approximately 12.9% and 11.3% of the Company's consolidated net revenue, respectively. No client accounted for 10% or more of consolidated net revenue in fiscal 1994 or 1995 or in the nine months ended March 31, 1996. In fiscal 1993, 1994 and 1995 and the nine months ended March 31, 1996, the Company's top five clients accounted for 44.4%, 29.8%, 25.2% and 26.2%, respectively, of the Company's consolidated net revenue. The loss of business from a significant client could have a material adverse effect on the Company. See "Business -- Industry Trends" and "-- Clients and Marketing." DEPENDENCE ON GOVERNMENT REGULATION The Company's business depends on the comprehensive government regulation of the drug development process. In the United States, the general trend has been in the direction of continued or increased regulation, although the FDA recently announced regulatory changes intended to streamline the approval process for 6 9 biotechnology products by applying the same standards as are in effect for conventional drugs. In Europe, the general trend has been toward coordination of common standards for clinical testing of new drugs, leading to changes in the various requirements currently imposed by each country. Changes in regulation, including a relaxation in regulatory requirements or the introduction of simplified drug approval procedures, as well as anticipated regulation, could materially and adversely affect the demand for the services offered by the Company. In addition, failure on the part of the Company to comply with applicable regulations could result in the termination of ongoing research or the disqualification of data, either of which could have a material adverse effect on the Company. See "Business -- Industry Overview" and "-- Government Regulation." POTENTIAL ADVERSE IMPACT OF HEALTH CARE REFORM Numerous governments have recently undertaken efforts to control growing health care costs through legislation, regulation and voluntary agreements with medical care providers and pharmaceutical companies. In the last several years, several comprehensive health care reform proposals were introduced in the U.S. Congress. The intent of the proposals was, generally, to expand health care coverage for the uninsured and reduce the growth of total health care expenditures. While none of the proposals was adopted, health care reform may again be addressed by the U.S. Congress. Implementation of government health care reform may adversely affect research and development expenditures by pharmaceutical and biotechnology companies, resulting in a decrease of the business opportunities available to the Company. Management is unable to predict the likelihood of health care reform proposals being enacted into law or the effect such law would have on the Company. See "Business -- Industry Overview." Many European governments have also reviewed or undertaken health care reform. For example, German health care reform legislation (the "Seehofer Gesetz"), which was implemented on January 1, 1993, contributed to an estimated 15% decline in German pharmaceutical industry sales in calendar 1993 and led several clients to cancel contracts with the Company. Subsequent to these events, in the third quarter of fiscal 1993, the Company restructured its German operations and incurred a restructuring charge of approximately $3.3 million. In addition, in the third quarter of fiscal 1995, the Company's results of operations were affected by a non-cash write-down due to the impairment of long-lived assets of PAREXEL GmbH, the Company's German subsidiary, of approximately $11.3 million. The Company cannot predict the impact that any pending or future health care reform proposals may have on the Company's business in Europe. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." COMPETITION; CRO INDUSTRY CONSOLIDATION The Company primarily competes against in-house departments of pharmaceutical companies, full service CROs and, to a lesser extent, universities and teaching hospitals. Some of these competitors have substantially greater capital, technical and other resources than the Company. CROs generally compete on the basis of previous experience, medical and scientific expertise in specific therapeutic areas, the quality of contract research, the ability to organize and manage large-scale trials on a global basis, the ability to manage large and complex medical databases, the ability to provide statistical and regulatory services, the ability to recruit investigators, the ability to integrate information technology with systems to improve the efficiency of contract research, an international presence with strategically located facilities, financial viability and price. There can be no assurance that the Company will be able to compete favorably in these areas. See "Business -- Competition." The CRO industry is highly fragmented, with participants ranging from several hundred small, limited-service providers to several large, full-service CROs with global operations. The trend toward CRO industry consolidation has resulted in heightened competition among the larger CROs for clients and acquisition candidates. In addition, consolidation within the pharmaceutical industry as well as a trend by pharmaceutical companies of outsourcing among fewer CROs has led to heightened competition for CRO contracts. RISKS ASSOCIATED WITH ACQUISITIONS The Company has made a number of acquisitions and will continue to review future acquisition opportunities. Revenue derived from acquired businesses has contributed significantly to the Company's growth. No assurances can be given that acquisition candidates will continue to be available on terms and 7 10 conditions acceptable to the Company. Acquisitions involve numerous risks, including, among other things, difficulties and expenses incurred in connection with the acquisitions and the subsequent assimilation of the operations and services or products of the acquired companies, the diversion of management's attention from other business concerns and the potential loss of key employees of the acquired company. Acquisitions of foreign companies also may involve the additional risks of assimilating differences in foreign business practices and overcoming language barriers. In the event that the operations of an acquired business do not live up to expectations, the Company may be required to restructure the acquired business or write-off the value of some or all of the assets of the acquired business. In fiscal 1993 and 1995, the Company's results of operations were materially and adversely affected by write-offs associated with the Company's acquired German operations. There can be no assurance that any acquisition will be successfully integrated into the Company's operations. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." MANAGEMENT OF BUSINESS EXPANSION; NEED FOR IMPROVED SYSTEMS; ASSIMILATION OF FOREIGN OPERATIONS The Company's business and operations have experienced substantial expansion over the past 10 years. The Company believes that such expansion places a strain on operational, human and financial resources. In order to manage such expansion, the Company must continue to improve its operating, administrative and information systems, accurately predict its future personnel and resource needs to meet client contract commitments, track the progress of ongoing client projects and attract and retain qualified management, professional, scientific and technical operating personnel. Expansion of foreign operations also may involve the additional risks of assimilating differences in foreign business practices, hiring and retaining qualified personnel, and overcoming language barriers. In the event that the operation of an acquired business does not live up to expectations, the Company may be required to restructure the acquired business or write-off the value of some or all of the assets of the acquired business. In fiscal 1993 and 1995, the Company's results of operations were materially and adversed affected by write-offs associated with the Company's acquired German operations. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Global Operations." Failure by the Company to meet the demands of and to manage expansion of its business and operations could have a material adverse effect on the Company's business. DEPENDENCE ON PERSONNEL The Company relies on a number of key executives, including Josef H. von Rickenbach, its President, Chief Executive Officer and Chairman, upon whom the Company maintains key man life insurance. Although the Company has entered into agreements containing non-competition restrictions with its senior officers, the Company does not have employment agreements with most of these persons and the loss of the services of any of the Company's key executives could have a material adverse effect on the Company. The Company's performance also depends on its ability to attract and retain qualified professional, scientific and technical operating staff. The level of competition among employers for skilled personnel, particularly those with M.D., Ph.D. or equivalent degrees, is high. There can be no assurance the Company will be able to continue to attract and retain qualified staff. See "Business -- Employees." POTENTIAL LIABILITY; POSSIBLE INSUFFICIENCY OF INSURANCE Clinical research services involve the testing of new drugs on human volunteers pursuant to a study protocol. Such testing involves a risk of liability for personal injury or death to patients due to, among other reasons, possible unforeseen adverse side effects or improper administration of the new drug. Many of these patients are already seriously ill and are at risk of further illness or death. The Company could be materially and adversely affected if it were required to pay damages or incur defense costs in connection with a claim that is outside the scope of an indemnity or insurance coverage, or if the indemnity, although applicable, is not performed in accordance with its terms or if the Company's liability exceeds the amount of applicable insurance. In addition, there can be no assurance that such insurance will continue to be available on terms acceptable to the Company. See "Business -- Potential Liability and Insurance." ADVERSE EFFECT OF EXCHANGE RATE FLUCTUATIONS Approximately 38.8%, 36.0%, 40.2% and 38.7% of the Company's net revenue for fiscal 1993, 1994 and 1995 and the nine months ended March 31, 1996, respectively, were derived from the Company's operations outside of North America. Since the revenue and expenses of the Company's foreign operations are generally 8 11 denominated in local currencies, exchange rate fluctuations between local currencies and the United States dollar will subject the Company to currency translation risk with respect to the results of its foreign operations. To the extent the Company is unable to shift to its clients the effects of currency fluctuations, these fluctuations could have a material adverse effect on the Company's results of operations. The Company does not currently hedge against the risk of exchange rate fluctuations. POTENTIAL VOLATILITY OF STOCK PRICE The market price of the Company's Common Stock could be subject to wide fluctuations in response to quarter-to-quarter variations in operating results, changes in earnings estimates by analysts, market conditions in the industry, prospects of health care reform, changes in government regulation and general economic conditions. In addition, the stock market has from time to time experienced significant price and volume fluctuations that have been unrelated to the operating performance of particular companies. These market fluctuations may adversely affect the market price of the Company's Common Stock. Because the Company's Common Stock currently trades at a relatively high price-earnings multiple, due in part to analysts' expectations of continued earnings growth, even a relatively small shortfall in earnings from, or a change in, analysts' expectations may cause an immediate and substantial decline in the Company's stock price. Investors in the Company's Common Stock must be willing to bear the risk of such fluctuations in earnings and stock price. ANTI-TAKEOVER PROVISIONS; POSSIBLE ISSUANCE OF PREFERRED STOCK The Company's Restated Articles of Organization and Restated By-Laws contain provisions that may make it more difficult for a third party to acquire, or may discourage a third party from acquiring, the Company. These provisions could limit the price that certain investors might be willing to pay in the future for shares of the Company's Common Stock. In addition, shares of the Company's Preferred Stock may be issued in the future without further stockholder approval and upon such terms and conditions, and having such rights, privileges and preferences, as the Board of Directors may determine. The rights of the holders of Common Stock will be subject to, and may be adversely affected by, the rights of any holders of Preferred Stock that may be issued in the future. The issuance of Preferred Stock, while providing desirable flexibility in connection with possible acquisitions and other corporate purposes, could adversely affect the market price of the Common Stock and could have the effect of making it more difficult for a third party to acquire, or discouraging a third party from acquiring, a majority of the outstanding voting stock of the Company. The Company has no present plans to issue any shares of Preferred Stock. See "Description of Capital Stock." 9 12 USE OF PROCEEDS The Company will not receive any proceeds from the resale of shares of Common Stock by the Selling Stockholders hereunder. See "Selling Stockholders" and "Plan of Distribution." The principal purpose of this offering is to effect an orderly disposition of the Selling Stockholders' shares. PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY The Company's Common Stock is quoted on the Nasdaq National Market under the symbol "PRXL." Public trading of the Common Stock commenced on November 22, 1995. Prior to that time, there was no public market for the Company's Common Stock. The following table sets forth the high and low sale prices for the Common Stock as reported by Nasdaq for the periods indicated:
HIGH LOW ---- --- FISCAL YEAR ENDED JUNE 30, 1996: Second quarter (from November 22).......................... $36 $18 3/4 Third quarter.............................................. 43 3/4 26 Fourth quarter (through June 26, 1996)..................... 55 3/4 37 1/2
On June 26, 1996, the last reported sale price of the Common Stock on the Nasdaq National Market was $44 per share. As of June 26, 1996, there were approximately 72 stockholders of record of the Common Stock. In November 1995, in connection with its initial public offering, the Company paid a cash dividend of approximately $940,000 on certain series of its Preferred Stock, which were subsequently converted into Common Stock. The Company has never paid or declared any dividends on its Common Stock and does not anticipate paying any cash dividends in the foreseeable future. The Company currently intends to retain future earnings to fund the development and growth of its business. 10 13 CAPITALIZATION The following table sets forth the capitalization of the Company as of March 31, 1996. This table should be read in conjunction with the Company's Consolidated Financial Statements and the Notes thereto included elsewhere in this Prospectus.
MARCH 31, 1996 -------------- (IN THOUSANDS) Long-term debt, excluding current maturities........................... $ 682 -------- Stockholders' equity: Preferred stock, $.01 par value, 5,000,000 shares authorized, no shares outstanding............................................. $ -- Common stock, $.01 par value, 25,000,000 shares authorized, 7,642,166 shares outstanding(1)................................... 77 Additional paid-in capital........................................... 64,961 Accumulated deficit.................................................. (6,771) Cumulative translation adjustment.................................... 208 -------- Total stockholders' equity................................... 58,475 -------- Total capitalization......................................... $ 59,154 ======== - --------------- (1) Outstanding shares excludes (i) 56,818 shares issued to the Selling Stockholders which are the subject of this Prospectus; (ii) 24,000 shares of the Company's Common Stock issued on June 28, 1996 in connection with the acquisition by the Company of all outstanding capital stock of Caspard Consultants; and (iii) 655,953 shares of Common Stock issuable as of March 31, 1996 upon exercise of stock options at a weighted average exercise price per share of $7.03. Since March 31, 1996, options to purchase 161,000 shares of Common Stock have been granted, including 39,000 shares to executive officers of the Company named in the Summary Compensation Table, and options to purchase 89,420 shares of Common Stock have been exercised at a weighted average exercise price of $1.15 per share. See "Management -- Options" and Note 12 of Notes to Consolidated Financial Statements of the Company.
11 14 SELECTED CONSOLIDATED FINANCIAL DATA The selected consolidated financial data set forth below at and for each of the years in the five-year period ended June 30, 1995 are derived from financial statements that have been audited by Price Waterhouse LLP, independent accountants. The audited balance sheet at June 30, 1994 and 1995 and the related statements of operations, of stockholders' equity, and of cash flows for each of the three years in the period ended June 30, 1995 and related notes thereto appear elsewhere in this Prospectus. The balance sheet data at March 31, 1996 and the statement of operations data for the nine months ended March 31, 1995 and 1996 are derived from unaudited financial statements. The unaudited financial statements include all adjustments, consisting only of normal recurring adjustments, that the Company considers necessary for a fair presentation of the financial position and results of operations for these periods. Operating results for the nine months ended March 31, 1996 are not necessarily indicative of the results that may be expected for the entire year ending June 30, 1996. The data set forth below should be read in conjunction with, and are qualified by reference to, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Company's financial statements and related notes included elsewhere in this Prospectus.
NINE MONTHS ENDED FISCAL YEAR ENDED JUNE 30, MARCH 31, ---------------------------------------------------- -------------------- 1991 1992 1993 1994 1995 1995 1996 ------- ------- -------- -------- -------- -------- -------- (IN THOUSANDS, EXCEPT PER SHARE DATA) STATEMENT OF OPERATIONS DATA: Revenue........................................... $25,652 $53,292 $ 65,294 $ 69,646 $ 79,928 $ 55,998 $ 84,797 Reimbursed costs.................................. (2,389) (7,885) (11,294) (11,644) (21,355) (13,717) (23,701) ------- ------- -------- -------- -------- -------- -------- Net revenue....................................... 23,263 45,407 54,000 58,002 58,573 42,281 61,096 ------- ------- -------- -------- -------- -------- -------- Costs and expenses: Direct costs.................................... 15,711 29,772 36,106 38,244 42,140 30,803 42,027 Selling, general and administrative............. 5,015 10,164 11,831 13,631 13,294 9,762 13,079 Depreciation and amortization................... 1,251 2,299 2,511 2,435 2,251 1,809 1,649 Facility and other restructuring charges........ 1,278(1) -- 3,254(2) -- -- -- -- Impairment of long-lived assets................. -- -- -- -- 11,253(3) 11,253(3) -- ------- ------- -------- -------- -------- -------- -------- Total costs and expenses.................. 23,255 42,235 53,702 54,310 68,938 53,627 56,755 ------- ------- -------- -------- -------- -------- -------- Income (loss) from operations..................... 8 3,172 298 3,692 (10,365) (11,346) 4,341 Other income (expense), net....................... 310 138 (520) (196) 55 -- 642 ------- ------- -------- -------- -------- -------- -------- Income (loss) before provision for income taxes and cumulative effect of accounting change...... 318 3,310 (222) 3,496 (10,310) (11,346) 4,983 Provision for income taxes........................ 982 1,774 1,935 1,573 320 (33) 1,988 ------- ------- -------- -------- -------- -------- -------- Net income (loss) before cumulative effect of accounting change............................... (664) 1,536 (2,157) 1,923 (10,630) (11,313) 2,995 Cumulative effect of change in method of accounting for income taxes..................... -- -- -- 500 -- -- -- ------- ------- -------- -------- -------- -------- -------- Net income (loss)................................. $ (664) $ 1,536 $ (2,157) $ 2,423 $(10,630) $(11,313) $ 2,995 ======= ======= ======== ======== ======== ======== ======== Net income (loss) per share....................... $ (0.97) $ 0.33 $ (2.97) $ 0.44 $ (12.61) $ (13.44) $ 0.48 ======= ======= ======== ======== ======== ======== ======== Weighted average common shares outstanding..................................... 683(4) 5,236 727(4) 5,747 843(4) 842(4) 6,272 ======= ======= ======== ======== ======== ======== ======== BALANCE SHEET DATA (AT PERIOD END): Working capital................................... $(2,134) $ 5,884 $ 7,161 $ 10,885 $ 11,574 $ 53,514 Total assets...................................... 30,073 44,390 45,457 45,936 43,250 96,975 Long-term debt, less current maturities........... 518 790 222 391 633 682 Stockholders' equity.............................. 11,294 21,807 21,847 25,236 15,524 58,475 - --------------- (1) Represents a domestic facility restructuring charge related to the abandonment of a lease in connection with the relocation of the Company's headquarters. (2) Represents a charge incurred in connection with a restructuring of operations in Germany because of a decline in revenues from those operations. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Note 4 of Notes to Consolidated Financial Statements of the Company. (3) Represents a non-cash charge primarily due to the write-down of intangible assets of the Company's German operations. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Note 3 of Notes to Consolidated Financial Statements of the Company. (4) For the years ended June 30, 1991, 1993 and 1995 and the nine months ended March 31, 1995 weighted average common shares outstanding exclude common share equivalents (primarily convertible preferred stock), the inclusion of which would have been anti-dilutive. See Note 2 of Notes to Consolidated Financial Statements of the Company.
12 15 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW The Company provides a full spectrum of clinical research and development services on a contract basis to the pharmaceutical and biotechnology industries. These services are provided to clients on a global basis and include: (i) designing, initiating and monitoring clinical trials; (ii) managing and analyzing clinical data; and (iii) regulatory consulting. The Company, founded in 1983 as a regulatory consulting firm, has built its business both through internal expansion and acquisitions. In 1988, the Company acquired Consulting Statisticians, Inc., a biostatistics and data management provider specializing in the healthcare industry. In 1989, the Company initiated its international expansion by acquiring the London-based McDonnell Douglas Clinical Trials Analysis Division, a division of McDonnell Douglas Informations Systems Ltd., which provided biostatistics and data management services in Europe. In 1990, PAREXEL acquired Barnett Associates, Inc. to expand the Company's Information Products Division, which offers a range of specialized clinical consulting and training services and related products. In 1991, the Company acquired AFB Arzneimittelforschung GmbH in Berlin, a European CRO based in Berlin with offices in Frankfurt and Paris. The Company is headquartered in Waltham, Massachusetts, and opened offices in San Diego in 1990, Raleigh-Durham in 1994, Milan, Kobe, Japan and Sydney, Australia in 1995 and Madrid in 1996. The Company's clinical research and development services contracts are generally fixed price, with some variable components, and range in duration from a few months to several years. A portion of the fee is typically required to be paid at the time the contract is entered into and the balance in installments over the contract's duration, in some cases on a milestone achievement basis. Revenue from the contracts is generally recognized on a percentage of completion basis as work is performed. Most of the Company's contracts are terminable upon 60 to 90 days' notice by the client. Clients terminate or delay contracts for a variety of reasons, including, among others, the failure of products being tested to satisfy safety requirements, unexpected or undesired clinical results of the product, the client's decision to forego a particular study, insufficient patient enrollment or investigator recruitment or production problems resulting in shortages of the drug. Although the Company typically is entitled to receive certain fees for winding down a study which is terminated or delayed and, in some cases, a termination fee, the loss or delay of a large contract or the loss or delay of multiple contracts could have a material adverse effect on the Company. The Company believes that several factors, including the potential adverse impact of health care reform, have caused pharmaceutical companies to apply more stringent criteria to the decision to proceed with clinical trials and therefore may have resulted in a greater willingness of these companies to cancel contracts with CROs. As is customary in the industry, the Company routinely subcontracts with third party investigators in connection with clinical trials and with other third party service providers for laboratory analysis and other specialized services. These and other reimbursable costs are paid by the Company and reimbursed by clients and, in accordance with industry practice, are included in revenue. Reimbursed costs vary from contract to contract. Accordingly, the Company views net revenue, which consists of revenue less reimbursed costs, as its primary measure of revenue growth. Direct costs consist of compensation and related fringe benefits for project-related employees, other project-related costs not reimbursed and allocated facilities and information systems costs. Selling, general and administrative expenses consist of compensation and related fringe benefits for selling and administrative employees, professional services and advertising costs, as well as allocated costs related to facilities and information systems. Since the Company conducts operations on a global basis, the Company's effective tax rate has depended and will depend on the geographic distribution of its revenue among locations with varying tax rates. The Company's results of operations will be affected by changes in the tax rates of the various jurisdictions. In particular, as the geographic mix of the Company's results of operations among various tax jurisdictions changes the Company's effective tax rate may vary significantly from period to period. 13 16 A key component of the Company's strategy is its investment in technology, both client-oriented and internal management-oriented. These systems provide increased standardization of operating processes and contract management throughout the Company's worldwide operations. Integral to the system are: (i) periodic monitoring and reviewing of contract progress; (ii) increased visibility and periodic reviewing of hourly billing by employees and utilization of project resources resulting in more efficient resource deployment; (iii) integrated revenue recognition and billing subsystems; (iv) proposal and budget generation; (v) management of clinical data; and (vi) forecasting of project revenues and resource requirements. GLOBAL OPERATIONS The following table sets forth, for the periods indicated, net revenue by geographic region as well as the percentage of total net revenue represented by such region.
FISCAL YEAR ENDED JUNE 30, NINE MONTHS ENDED MARCH 31, ------------------------------------------------------------------ ------------------------------------------- 1993 % OF TOTAL 1994 % OF TOTAL 1995 % OF TOTAL 1995 % OF TOTAL 1996 % OF TOTAL ------- ---------- ------- ---------- ------- ---------- ------- ---------- ------- ---------- (DOLLARS IN THOUSANDS) Net revenue: North America.... $33,023 61.2% $37,111 64.0% $35,037 59.8% $25,165 59.5% $37,438 61.3% Europe....... 20,977 38.8 20,891 36.0 23,443 40.0 17,116 40.5 23,048 37.7 Asia......... -- -- -- -- 93 0.2 -- -- 610 1.0 ------- ----- ------- ----- ------- ----- ------- ----- ------- ----- Total... $54,000 100.0% $58,002 100.0% $58,573 100.0% $42,281 100.0% $61,096 100.0% ======= ===== ======= ===== ======= ===== ======= ===== ======= =====
Within Europe, between fiscal 1993 and fiscal 1995, net revenue from German operations decreased from $14.0 million, or 25.9% of consolidated net revenue, to $12.3 million, or 20.9% of consolidated net revenue while net revenue from other European operations increased from $7.0 million, or 13.0% of consolidated net revenue, to $11.2 million, or 19.1% of consolidated net revenue. The Company's foreign subsidiaries generally enter into contracts denominated in the local currency of the foreign subsidiary. Because the foreign subsidiary's expenses are generally paid in the local currency, such foreign subsidiaries' local currency earnings are not materially affected by fluctuations in exchange rates. However, changes in the exchange rates between these local currencies and the U.S. dollar will affect the translation of such subsidiaries' financial results into U.S. dollars for purposes of reporting the Company's consolidated financial results. In cases where the Company contracts for a multi-country clinical trial and a significant portion of the contract expenses are in a currency other than the contract currency, the Company seeks to contractually shift to its client the effect of fluctuations in the relative values of the contract currency and the currency in which the expenses are incurred. To the extent the Company is unable to shift to its clients the effects of currency fluctuations, these fluctuations could have a material effect on the Company's results of operations. The Company does not currently hedge against the risk of exchange rate fluctuations. Impact of German Operations The Company's results of operations from fiscal 1993 through fiscal 1995 were adversely affected by its German operations. German healthcare reform legislation, known as the Seehofer Gesetz, took effect on January 1, 1993, and was designed to limit the rate of increase of the cost of prescription medication in Germany and was largely responsible for an estimated 15% decline in German pharmaceutical industry sales in calendar 1993. In the wake of the uncertainties caused by the Seehofer Gesetz, the Company's German operation experienced a sudden decline in demand for services as well as the cancellation of several large contracts in Germany. These factors resulted in a 20.5% decline in net revenue attributable to German operations from the quarter ended December 31, 1992 to the quarter ended March 31, 1993. In response to this revenue decline, the Company consolidated certain facilities and reduced personnel costs in Germany and, as a result, incurred a $3.3 million restructuring charge in the quarter ended March 31, 1993, consisting of $2.4 million, $600,000 and $300,000 for facilities, wages and severance and other operating costs, respectively. As a result of the restructuring, the Company reduced annual facility, personnel and other operating costs by an estimated $1.0 million, $1.0 million and $150,000, respectively. While the fiscal 1993 restructuring served to temporarily improve operating margins during fiscal 1994, net revenues came under pressure in the first two quarters of fiscal 1995 and declined significantly in the third 14 17 quarter. During the third quarter, drug development regulations in Germany and Europe were modified, and further changes were being contemplated, all of which were expected to have a detrimental impact on PAREXEL GmbH's operations. As a result of this revenue decline, and in light of the past history of poor operating performance, the Company reassessed in the third quarter of fiscal 1995 the recoverability of long-lived assets acquired in the 1991 acquisition of PAREXEL GmbH. As a result of this reassessment, the Company determined that the net book value of these long-lived assets was impaired and recorded an $11.3 million non-cash charge reflecting the excess of the book value of the PAREXEL GmbH net assets over their fair value. Of the $11.3 million charge, $9.9 million consisted of goodwill and other intangible assets. This charge was effected under Statement of Financial Accounting Standards No. 121, which was issued in March 1995. See Note 3 of Notes to Consolidated Financial Statements of the Company. RESULTS OF OPERATIONS The following table sets forth for the periods indicated certain financial data as a percentage of net revenue and the percentage change in these items compared to the prior comparable period. The trends illustrated in the following table may not be indicative of future results.
PERCENTAGE OF NET REVENUE ---------------------------------------- PERCENTAGE INCREASE (DECREASE) NINE MONTHS ------------------------------- FISCAL YEAR ENDED NINE ENDED JUNE 30, MARCH 31, FISCAL FISCAL MONTHS ------------------------ ------------- 1993 TO 1994 TO 1995 TO 1993 1994 1995 1995 1996 1994 1995 1996 ---- ---- ---- ---- ---- ---- ---- ---- Net revenue.......................... 100.0% 100.0% 100.0% 100.0% 100.0% 7.4% 1.0% 44.5% Costs and expenses: Direct costs....................... 66.9 65.9 71.9 72.8 68.8 5.9 10.2 36.4 Selling, general and administrative................... 21.9 23.5 22.7 23.1 21.4 15.2 (2.5) 34.0 Depreciation and amortization...... 4.6 4.2 3.9 4.3 2.7 (3.0) (7.6) (8.8) Restructuring and impairment....... 6.0 -- 19.2 26.6 -- * * * ----- ----- ------ ----- ----- Income (loss) from operations......................... 0.6% 6.4% (17.7)% (26.8)% 7.1% * * * ===== ===== ====== ===== ===== - --------------- * not meaningful
Nine Months Ended March 31, 1996 Compared to Nine Months Ended March 31, 1995 Net revenue increased by $18.8 million, or 44.5%, from $42.3 million for the nine months ended March 31, 1995 to $61.1 million for the nine months ended March 31, 1996. This net revenue growth was primarily attributable to an increase in the number and average contract value of clinical research projects serviced by the Company. Direct costs increased by $11.2 million, or 36.4%, from $30.8 million for the nine months ended March 31, 1995 to $42.0 million for the nine months ended March 31, 1996. This increase in direct costs was due to the increase in the number of project-related personnel and facilities costs necessary to support the increased level of operations in North America and Europe. Direct costs as a percentage of net revenue decreased from 72.8% for the nine months ended March 31, 1995 to 68.8% for the nine months ended March 31, 1996, primarily due to improved workforce and facility utilization within North America and Europe. Selling, general and administrative expenses increased by $3.3 million, or 34.0%, from $9.8 million for the nine months ended March 31, 1995 to $13.1 million for the nine months ended March 31, 1996. This increase was primarily due to increased costs associated with additional administrative personnel, increased hiring and selling costs, and increased facilities necessary to support the Company's increased level of operations. Selling, general and administrative expenses as a percentage of net revenue decreased from 23.1% for the nine months ended March 31, 1995 to 21.4% for the nine months ended March 31, 1996 primarily due to efficiencies associated with higher revenue in North America. Depreciation and amortization expense decreased by $.2 million, or 8.8%, from $1.8 million for the nine months ended March 31, 1995 to $1.6 million for the nine months ended March 31, 1996. The change resulted from an increase in depreciation associated with increased capital expenditures of $400,000, offset by a 15 18 reduction of $600,000 in depreciation and amortization resulting from the write-down of impaired long-lived assets of the Company's German operations during the three months ended March 31, 1995. Income from operations for the nine months ended March 31, 1996 was $4.3 million, compared to a loss from operations of $11.3 million for the nine months ended March 31, 1995. Results for the nine months ended March 31, 1995 included an $11.3 million non-cash charge related to the write-down due to the impairment of long-lived assets of the Company's German operations. Loss from operations for the nine months ended March 31, 1995, excluding the impact of the write-down, was approximately $401,000. Other income (expense), net increased by $642,000 to $642,000 for the nine months ended March 31, 1996. This increase resulted from an increase in interest income achieved from higher average balances of cash, cash equivalents and short-term investments due primarily to proceeds from the Company's public offerings in November 1995 and March 1996. The Company's effective income tax rate was 39.9% for the nine months ended March 31, 1996. The effective income tax rate varies with changes in the mix of taxable income from the different jurisdictions in which the Company operates. Fiscal Year Ended June 30, 1995 Compared to Fiscal Year Ended June 30, 1994 Net revenue increased by $571,000, or 1.0%, from $58.0 million for fiscal 1994 to $58.6 million for fiscal 1995. This increase was due to an increase of $2.6 million in net revenue from European operations, offset by a decrease of $2.1 million in net revenue from North American operations. The increase in European net revenue was primarily due to the weakening of the dollar and, to a lesser extent, to an increase in clinical research contract volume in all areas in Europe other than Germany, which experienced a decline in net revenue. The decline in net revenue from North America was primarily due to a decline in net revenue from the Company's data management operation, which substantially completed work on a number of large contracts during fiscal 1994 that were not replaced in fiscal 1995. Direct costs increased by $3.9 million, or 10.2%, from $38.2 million for fiscal 1994 to $42.1 million for fiscal 1995. Substantially all of the increase in direct costs was due to increased expenses associated with European operations. The increase in direct costs in Europe was primarily due to the hiring of additional project-related personnel and expansion of facilities in the United Kingdom and France. The weakening of the dollar also contributed to the increase of direct costs in Europe. Direct costs as a percentage of net revenue increased from 65.9% in fiscal 1994 to 71.9% in fiscal 1995. This increase was primarily due to the increased costs incurred in Europe, where direct costs increased as a percentage of net revenue from 65.5% in fiscal 1994 to 75.4% in fiscal 1995 and to a decline in net revenue in North America, where direct costs remained flat against lower net revenue, resulting in an increase in direct costs as a percentage of net revenue from 66.2% in fiscal 1994 to 69.8% in fiscal 1995. Selling, general and administrative expenses decreased by $337,000, or 2.5%, from $13.6 million in fiscal 1994 to $13.3 million in fiscal 1995. The decrease in selling, general and administrative expenses was primarily due to savings in Europe as a result of a more effective deployment of employee and facility resources in the United Kingdom and Germany, partially offset by the weakness of the dollar. Due to these factors, selling, general and administrative expenses as a percentage of net revenue decreased from 23.5% for fiscal 1994 to 22.7% in fiscal 1995. Depreciation and amortization expenses decreased by $184,000, or 7.6%, from $2.4 million in fiscal 1994 to $2.3 million in fiscal 1995. This decrease was primarily due to a reduction in depreciation and amortization expense from fully amortized intangible assets and the write-down of impaired long-lived assets, offset in part by the weakness of the dollar. Fiscal 1995 includes only six months of depreciation and amortization, or approximately $588,000, resulting from the 1991 acquisition of PAREXEL GmbH. Due to the write-off of the long-lived assets of PAREXEL GmbH in the quarter ended March 31, 1995, there will be no depreciation or amortization attributable to these assets in future periods. During fiscal 1995, the Company incurred an approximate $11.3 million non-cash charge in connection with the write-down due to the impairment of long- 16 19 lived assets of the Company's German operations. See "Global Operations -- Impact of German Operations" and Note 3 of Notes to Consolidated Financial Statements of the Company. Other income (expense), net, including interest expense, changed from an expense of $196,000 in fiscal 1994 to income of $55,000 in fiscal 1995. The change was primarily due to the incurrence in fiscal 1994 of approximately $450,000 related to the Company's postponed fiscal 1994 initial public offering. The effective tax rate in fiscal 1994 was 45.0%. Excluding the effect of the $11.3 million non-cash, non-deductible write-down due to the impairment of long-lived assets, the effective income tax rate would have been 33.9% for fiscal 1995. In fiscal 1994, the Company adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." The cumulative effect of the change increased net income by $500,000 in fiscal 1994. See Notes 2 and 13 of Notes to Consolidated Financial Statements of the Company. Fiscal Year Ended June 30, 1994 Compared to Fiscal Year Ended June 30, 1993 Net revenue increased by $4.0 million, or 7.4%, from $54.0 million in fiscal 1993 to $58.0 million in fiscal 1994. This increase was primarily attributable to an increase in the volume of clinical research projects in North America. In Europe, an increase in the volume of clinical research projects in all areas other than Germany was offset by the strength of the dollar and a decline in net revenue from German operations. The Company believes the decline in net revenue from German operations was primarily due to the continuing impact of the German healthcare reform. Direct costs increased by $2.1 million, or 5.9%, from $36.1 million in fiscal 1993 to $38.2 million in fiscal 1994. The increase in direct costs was the result of additional employee and facility-related expenses in all regions other than Germany to accommodate increased levels of business, offset in part by a reduction in reported European costs due to the strength of the dollar as well as a decrease in personnel and facilities costs resulting from the restructuring of German operations in the third quarter of fiscal 1993. Direct costs as a percentage of net revenue decreased from 66.9% in fiscal 1993 to 65.9% in fiscal 1994. This decrease primarily reflected the improved workforce and facility utilization resulting from the German restructuring, offset in part by the increased number of project-related personnel and information systems costs associated with increasing capacity in North America. See "Global Operations -- Impact of German Operations." Selling, general and administrative expenses increased by $1.8 million, or 15.2%, from $11.8 million in fiscal 1993 to $13.6 million in fiscal 1994. The increase in selling, general and administrative expenses was primarily due to expansion of the Company's global sales and marketing organization, increased costs associated with an increase in North American administrative personnel, investments in information services and, to a lesser extent, the hiring of a President of European Operations. The increase was offset in part by a reduction in reported European costs due to the strengthening of the dollar. Due to these factors, selling, general and administrative expenses as a percentage of net revenue increased from 21.9% in fiscal 1993 to 23.5% in fiscal 1994. Depreciation and amortization expense decreased by $76,000, or 3.0%, from $2.5 million in fiscal 1993 to $2.4 million in fiscal 1994, primarily due to the strengthening of the dollar and reduced amortization expense, as certain intangible assets were fully amortized in fiscal 1993. During fiscal 1993, the Company recorded a $3.3 million charge in connection with a restructuring of its German operations. This restructuring primarily involved the physical consolidation of several operating groups into two facilities and a reduction in headcount, and accordingly, the charge reflects lease abandonment costs, write-offs of leasehold improvements, severance payments and other directly related expenses. See "Global Operations -- Impact of German Operations" and Note 4 of Notes to Consolidated Financial Statements of the Company. Other expense, net, including interest expense, decreased by $324,000, or 62.3%, from $520,000 in fiscal 1993 to $196,000 in fiscal 1994. This decrease was primarily due to the incurrence in fiscal 1993 of $775,000 of expenses associated with the fiscal 1993 postponed initial public offering, as compared to the incurrence in fiscal 1994 of $450,000 of expenses associated with the fiscal 1994 postponed initial public offering. 17 20 The effective tax rate in fiscal 1994 was 45.0%. Excluding the effects of the $3.3 million German operations restructuring charge, which was not currently deductible for income tax purposes, the Company's effective income tax rate in fiscal 1993 would have been 63.8%. See Note 13 of Notes to Consolidated Financial Statements of the Company. Quarterly Results The Company's quarterly operating results have been subject to variation, and will continue to be subject to variation, depending on factors such as the initiation and progress of significant projects, exchange rate fluctuations, the opening of new offices, the costs associated with integrating acquisitions and the start-up costs incurred in connection with the introduction of new products and services. In addition, during the third quarter of fiscal 1993 and 1995, the Company's results of operations were affected by a restructuring charge and a write-down due to the impairment of long-lived assets, respectively. Because a high percentage of the Company's operating costs are relatively fixed in the short term, variations in the initiation, completion, delay or loss of contracts or progress of clinical trials can cause material adverse variations in quarterly operating results. The following table presents unaudited quarterly operating results for the Company for each of the eleven most recent fiscal quarters in the period ended March 31, 1996. In the opinion of the Company, this information has been prepared on the same basis as the consolidated financial statements appearing elsewhere in this Prospectus and reflects all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of results for operations for those periods. This quarterly financial data should be read in conjunction with the Consolidated Financial Statements and Notes thereto appearing elsewhere in this Prospectus. The operating results for any quarter are not necessarily indicative of the results of any future period.
QUARTER ENDED ----------------------------------------------------------------------------------------------------------- SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, 1993 1993 1994 1994 1994 1994 1995 1995 1995 1995 1996 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- (IN THOUSANDS) Net revenue......... $12,880 $14,914 $15,036 $15,172 $13,176 $14,281 $14,824 $16,292 $17,973 $20,616 $22,507 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- Costs and expenses: Direct costs....... 8,801 9,639 9,581 10,223 10,573 10,000 10,230 11,337 12,465 14,409 15,154 Selling, general and administrative... 3,112 3,383 3,286 3,850 3,384 3,099 3,279 3,532 3,834 4,244 5,001 Depreciation and amortization..... 599 638 618 580 668 709 432 442 515 518 616 Impairment of long- lived assets..... -- -- -- -- -- -- 11,253 -- -- -- -- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- Total costs and expenses..... 12,512 13,660 13,485 14,653 14,625 13,808 25,194 15,311 16,814 19,171 20,771 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- Income (loss) from operations........ $ 368 $ 1,254 $ 1,551 $ 519 $(1,449) $ 473 $(10,370) $ 981 $ 1,159 $ 1,445 $ 1,736 ======= ======= ======= ======= ======= ====== ======== ======= ======= ======= ======= Net income (loss)... $ 726 $ 725 $ 877 $ 95 $ (971) $ 295 $(10,637) $ 683 $ 742 $ 956 $ 1,297 ======= ======= ======= ======= ======= ====== ======== ======= ======= ======= =======
Liquidity and Capital Resources Since its inception, the Company has primarily financed its operations and growth, including acquisitions, with cash flow from operations and the proceeds from the sale of equity securities. Investing activities have included several business acquisitions and capital expenditures have been primarily incurred for information systems improvements and upgrades. The Company's clinical research and development contracts are generally fixed price with some variable components, and range in duration from a few months to several years. The cash flows from contracts typically consists of a down payment required to be paid at the time the contract is entered into and the balance in installments over the contract's duration, in some cases on a milestone achievement basis. Revenue from contracts is generally recognized on a percentage completion basis as the work is performed. Accordingly, cash 18 21 receipts do not necessarily correspond to costs incurred and revenue recognized on contracts. The Company's cash flow is influenced by the changes in levels of billed and unbilled accounts receivable, net of amounts advance billed representing unearned revenue. As a result, the number of days outstanding in accounts receivable, net of advance billing, and the related dollar values of these accounts can vary due to the achievement of contractual milestones and the timing and size of cash receipts. The number of days revenue outstanding, net of advance billings, was 33 days at March 31, 1996, 44 days at December 31, 1995, 51 days at September 30, 1995 and 41 days at June 30, 1995. Accounts receivable, net of the allowance for doubtful accounts, increased from $24.7 million at June 30, 1995 to $35.2 million at March 31, 1996. Advance billings increased from $14.0 million at June 30, 1995 to $23.2 million at March 31, 1996 due to increased amounts billed to clients in advance of revenue earned. Unrestricted cash and cash equivalents decreased by $2.6 million during the nine months ended March 31, 1996 as a result of $5.2 million and $37.5 million in cash provided by operating and financing activities, respectively, offset by $45.2 million in cash used for investing activities. Net cash provided by operating activities resulted primarily from net income, excluding non-cash expenses, of $4.6 million and increases in advance billings, accounts payable and other current liabilities of $9.5 million, $900,000 and $2.9 million, respectively. Cash used by operating activities included an increase in billed and unbilled accounts receivable of $11.1 million. Financing activities consisted primarily of net proceeds of approximately $21.2 million from the Company's initial public offering of 1,600,000 shares of common stock in November 1995, and net proceeds of approximately $15.7 million from the Company's secondary public offering of 500,000 shares of common stock in March 1996. Investing activities consisted of net purchases of short-term investments of $43.1 million and $2.2 million in capital expenditures. Capital expenditures primarily relate to information system additions and upgrades. Unrestricted cash and cash equivalents increased by $2.9 million during fiscal 1995 as a result of $5.7 million provided by operating activities, offset by approximately $2.3 million and $629,000 in cash used by investing and net financing activities, respectively. The cash provided by the Company's operating activities during fiscal 1995 was provided primarily from an increase in advance contract billings. See Note 2 of Notes to Consolidated Financial Statements. Investing activities in fiscal 1995 consisted primarily of capital expenditures of $1.5 million and net purchases of short-term investments of $800,000. Financing activities primarily involved the reduction of $684,000 in the principal portion of long-term debt (capital leases). Accounts receivable, net of the allowance for doubtful accounts, increased from $23.3 million at June 30, 1994 to $24.7 million at June 30, 1995 primarily due to a weaker dollar offset by an increase in the allowance for doubtful accounts related to an increase in accounts for which collection was uncertain at June 30, 1995. Advance billings increased from $9.4 million at June 30, 1994 to $14.0 million at June 30, 1995 due to an increase in amounts billed to clients in advance of revenue being earned. The number of days revenue outstanding in accounts receivable, net of advance billings, was 65 days at June 30, 1994 and 41 days at June 30, 1995. This decrease was primarily due to the increase in advance billings. The Company has domestic and foreign line of credit arrangements with banks totalling approximately $6.4 million. The lines are collateralized by accounts receivable, are payable on demand and bear interest at the local bank's base rate or money market rate, plus 1% to 3% (for interest rates ranging from 5.8% to 9.25% at March 31, 1996). There were no borrowings outstanding under these lines of credit at either March 31, 1996 or June 30, 1995. The lines expire at various dates through November 1996 and are renewable. The Company has a $2.4 million capital lease line of credit with a U.S. bank for the financing of property and equipment. Borrowings under this line are payable over a three year term with interest fixed at the bank's five-year U.S. Treasury note rate plus 2.5% (for a total interest rate of approximately 8.3% at March 31, 1996) and are included in long-term debt. This line expires on November 30, 1996 and is renewable annually thereafter. Approximately $800,000 was available under this line at March 31, 1996. The Company's primary cash needs on both a short-term and long-term basis are for the payment of the salaries and fringe benefits, capital expenditures, facility-related expenses and travel expenditures. The Company has invested approximately $2.2 million in the nine months ended March 31, 1996 for capital expenditures related to facility expansion and investments in information technology, and currently 19 22 expects to invest approximately $5.0 million to $7.0 million in the next twelve months. The Company believes that its available cash and cash equivalents, together with cash flows from operations, borrowings under its existing lines of credit and net proceeds from the offering, will be sufficient to meet its foreseeable cash needs. In the future, the Company will consider acquiring businesses offering services similar or complementary to those offered by the Company. Any such acquisitions may require additional external financings, and the Company may from time to time seek to obtain funds from public or private issuances of equity or debt securities. There can be no assurance that such financings will be available on terms acceptable to the Company. The foregoing statements include forward-looking statements which involve risks and uncertainties. The Company's actual experience may differ materially from that discussed above. Factors that might cause such a difference include, but are not limited to, those discussed in "Risk Factors" as well as future events that have the effect of reducing the Company's available cash balances, such as unexpected operating losses or capital expenditures or cash expenditures related to possible future acquisitions. 20 23 BUSINESS PAREXEL is a leading contract research organization ("CRO"), providing clinical research and development services to the worldwide pharmaceutical and biotechnology industries. The Company believes it is the fourth largest CRO, based on estimated annual net revenue, and one of only a few CROs capable of providing a full range of clinical services on a global basis. The Company complements the research and development departments of pharmaceutical and biotechnology companies by offering high quality clinical research services to the client and reducing drug development time and cost. In addition, the Company's integrated services and extensive information technology capabilities coupled with its broad experience and expertise in global drug development provide clients with a variable cost alternative to the fixed costs associated with internal drug development. The Company offers a full complement of clinical research and development services, including designing, initiating and monitoring clinical trials, managing and analyzing clinical data and consulting on regulatory affairs. The Company, founded in 1983 as a regulatory consulting firm, has built its business both through internal expansion and acquisitions. In 1988, the Company acquired Consulting Statisticians Inc., a leading biostatistics and data management provider specializing in the healthcare industry. In 1989, the Company initiated its international expansion by acquiring the London-based McDonnell Douglas Clinical Trials Analysis Division, a division of McDonnell Douglas Informations Systems Ltd., which provided biostatistics and data management services in Europe. In 1990, the Company acquired Barnett Associates, Inc. to expand its Information Products Division, through which the Company offers a range of specialized clinical consulting and training services and related products. In 1991, the Company acquired AFB Arzneimittelforschung GmbH in Berlin, a European CRO based in Berlin, with offices in Frankfurt and Paris. The Company is headquartered in Waltham, Massachusetts and opened offices in San Diego in 1990, Raleigh-Durham in 1994, Milan, Kobe, Japan and Sydney, Australia in 1995 and Madrid in 1996. INDUSTRY OVERVIEW The CRO industry provides independent product development services for the pharmaceutical and biotechnology industries. Generally, CROs derive substantially all of their revenue from the research and development expenditures of pharmaceutical and biotechnology companies. The CRO industry has evolved from providing limited clinical services in the 1970s to an industry which currently offers a full range of services that encompass the clinical research process, including pre-clinical evaluations, study design, clinical trial management, data collection and biostatistical analysis and product registration support. All of these services are provided in accordance with regulations which govern clinical trials and the drug approval process. The CRO industry is highly fragmented, with participants ranging from several hundred small, limited-service providers to several large full-service CROs with global operations. Although there are few barriers to entry for small, limited-service providers, the Company believes there are significant barriers to becoming a full-service CRO with global capabilities. Some of these barriers include the development of broad therapeutic expertise and the infrastructure and experience necessary to serve the global demands of clients, the ability to simultaneously manage complex clinical trials in numerous countries, the expertise to prepare regulatory submissions in multiple countries, and the development and maintenance of the complex information technology systems required to integrate these capabilities. In recent years, the CRO industry has experienced consolidation due in part to the acquisition of smaller firms by larger full-service CROs. The CRO industry derives substantially all of its revenue from the pharmaceutical and biotechnology industries. The Company believes that the following trends will lead to further growth opportunities for full-service, global CROs, although there can be no assurance that this growth will materialize: - Cost Containment Pressures. Recently, drug companies have been focusing on more efficient ways of conducting business because of margin pressures stemming from patent expirations, market acceptance of generic drugs and impending regulatory pressures to reduce drug prices. The Company believes that the pharmaceutical industry is responding by consolidating and reducing jobs, centralizing the research and development process and outsourcing to variable cost CROs, thereby reducing the fixed costs associated with internal drug development. The CRO industry, by specializing in clinical trials 21 24 management, is often able to perform the needed services with a higher level of expertise or specialization, more quickly and at a lower cost than the client could perform the services internally. The Company believes that some large pharmaceutical companies, rather than utilizing multiple CRO service providers, are selecting one or two full-service, global CROs to serve as their primary CROs. - Globalization of Clinical Development and Regulatory Strategy. Pharmaceutical and biotechnology companies increasingly are attempting to maximize profits from a given drug by pursuing regulatory approvals in multiple countries in parallel rather than sequentially, as was the practice historically. The Company believes that the globalization of clinical research and development activities has increased the demand for CRO services. A pharmaceutical or biotechnology company seeking approvals in a country in which it lacks experience or internal resources will frequently turn to a CRO for assistance in interacting with regulators or in organizing and conducting clinical trials. In addition, a company may turn to a CRO in the belief that regulatory authorities who are not familiar with the company may have more confidence in the results from tests independently conducted by a CRO known to those authorities. - Consolidation in the Pharmaceutical Industry. The pharmaceutical industry is consolidating as pharmaceutical companies seek to obtain cost reduction synergies through business combinations. Recent announced consolidations include some of the largest multinational pharmaceutical companies in the world, such as Glaxo-Wellcome, American Home Products-American Cyanamid, Hoechst-Marion Merrill Dow, Upjohn-Pharmacia and Roche-Syntex. Once consolidated, many pharmaceutical companies aggressively manage costs by reducing headcount and outsourcing to variable-cost CROs in an effort to reduce the fixed costs associated with internal drug development. The Company believes that full-service global CROs will benefit from this trend. - Increasingly Complex and Stringent Regulation; Need for Technological Capabilities. Increasingly complex and stringent regulatory requirements throughout the world have increased the volume of data required for regulatory filings and escalated the demands on data collection and analysis during the drug development process. In recent years, the FDA and corresponding regulatory agencies of Canada, Japan and Western Europe commenced discussions to develop harmonized standards for preclinical and clinical studies and the format and content of applications for new drug approvals. Further, the FDA encourages the use of computer-assisted filings in an effort to expedite the approval process. As regulatory requirements have become more complex, the pharmaceutical and biotechnology industries are increasingly outsourcing to CROs to take advantage of their data management expertise, technological capabilities and global presence. - Drug Development Pressures. The Company believes that research and development expenditures have increased as a result of the constant pressure to develop a pipeline of products, and to respond to the demand for products for an aging population and for the treatment of chronic disorders and life-threatening conditions such as infectious diseases, including AIDS. The development of therapies for chronic disorders, such as Alzheimer's disease and arthritis, requires complex clinical trials to demonstrate the therapy's effectiveness and determine whether the drug causes any long-term side effects. - Biotechnology Industry Growth. The U.S. biotechnology industry has grown rapidly over the last ten years and is introducing significant numbers of new drug candidates which will require regulatory approval. Many biotechnology companies do not have the necessary experience or resources to conduct clinical trials. Accordingly, many of these companies have chosen to outsource to CROs rather than expend significant time and resources to develop an internal clinical development capability. In addition, as a result of recent product development setbacks encountered by some biotechnology companies, the Company believes that such companies are increasingly turning to CROs for sophisticated regulatory experience. Moreover, the biotechnology industry is rapidly expanding into and within Europe, providing significant growth opportunities for CROs with a global presence. 22 25 PAREXEL'S STRATEGY PAREXEL's objective is to maintain and enhance its position as a leading CRO by providing a full range of clinical services on a global basis. The Company addresses all aspects of clinical research and development with a flexible approach that allows its clients to use the Company's services on an individual or bundled basis. The Company believes its expertise in conducting scientifically demanding trials and its ability to coordinate complicated global trials are significant competitive strengths. The Company has recently devoted significant resources developing a state of the art information system designed to allow the Company to more effectively manage its business operations and deliver services to its clients. The Company will continue to invest in improvements in information technology and will consider acquisitions of complementary businesses in order to enhance its competitive position and its level of service. Serve the Global Model of New Drug Development The Company believes that its ability to conduct clinical trials worldwide enhances its ability to serve the increasingly global model of drug development. The Company has provided clinical research and development services to major North American, European and Japanese pharmaceutical companies. The Company has expanded geographically primarily through internal growth, supplemented by strategic acquisitions, with a goal of serving all major client markets worldwide and positioning the Company to serve developing markets. Since January 1, 1994, the Company has opened offices in Kobe, Milan, Raleigh-Durham, Sydney, Australia and Madrid. PAREXEL is conducting a number of multinational clinical studies designed to pursue concurrent regulatory approvals in multiple countries. The Company believes that the expertise developed by conducting multi-jurisdictional clinical trials is a competitive advantage as pharmaceutical companies increasingly pursue regulatory approvals in multiple jurisdictions in parallel. The Company believes that the efficient delivery of high-quality clinical services requires adherence to standardized procedures on a worldwide basis. The Company has devoted considerable resources to developing internal standard operating procedures. These procedures, together with the Company's information technology, enable the Company to reduce the time involved in preparing regulatory submissions by concurrently compiling and analyzing large volumes of data from multinational trials and preparing regulatory submissions for filings on a global basis. Address All Aspects of Clinical Research; Offer Flexible Menu of Services The Company offers a full range of services that encompasses the clinical research process. The Company believes that its knowledge and experience in all stages of clinical research enhance its credibility with prospective clients. The Company's full range of services and global experience complement the research and development departments of pharmaceutical and biotechnology companies. In order to meet the needs of specific clients, PAREXEL offers its services on either an individual or a bundled basis. This approach allows the Company to establish a relationship with a new client with the need for a particular service which may in turn lead to larger, more comprehensive projects. This flexibility allows PAREXEL to deliver its services by operating autonomously or by working in close collaboration with its clients. In some cases, the Company has taken advantage of the flexibility of its information technology systems to gain direct access to client data on client systems. In addition, the Company provides regulatory periodicals, training materials and seminars and other complementary information products and services designed to meet its clients' demands for increased productivity in clinical development. Conduct Scientifically Demanding Trials The Company provides its services in connection with scientifically and clinically demanding trials in a wide range of therapeutic areas, such as trials involving the testing of drugs developed by biotechnology companies and drugs addressing complex diseases such as AIDS, cancer and Alzheimer's. The Company's leadership in AIDS is evidenced by the selection of PAREXEL as the CRO for the Intercompany Collaborative for AIDS Drug Development, a consortium including 18 global leaders in AIDS research. Other therapeutic categories in which the Company has expertise include neurology, oncology, gastroenterology, 23 26 endocrinology, cardiology, hematology, immunology, rheumatology and the study of pulmonary, reproductive and infectious diseases. The Company believes that as trials involve increasingly complex therapeutic areas, CROs with a broad range of experience have a competitive advantage over other companies with more limited capabilities. Continue Investment in Information Technology The Company believes that superior information technology is essential to enable a CRO to provide project services concurrently in multiple countries, expand its geographic operations to meet the global needs of the pharmaceutical and biotechnology industries and provide innovative services designed to expedite the clinical trials process. The Company has an extensive and effective global information technology network and believes that its information technology provides it with a significant competitive advantage. The Company's information technology supports its global organizational structure by enabling all offices to exchange information with each other so that several offices worldwide can work simultaneously on a project. The global information technology network also allows the Company to track the progress of ongoing client projects and predict more accurately and quickly its future personnel needs to meet client contract commitments. In addition, the Company's open and flexible information technology system can be adapted to the multiple needs of different clients and regulatory systems. For example, the system enables the Company to reduce the time involved in preparing regulatory submissions by concurrently compiling and analyzing large volumes of data from multinational trials and preparing regulatory submissions for filings on a global basis. This system also enables the Company to respond quickly to client inquires on the progress of projects and, in some cases, to gain direct access to client data on client systems. SERVICES The Company provides a full range of clinical research and development services, including clinical trials management, clinical data management, biostatistical analysis, study design and regulatory affairs services, including product registrations with regulatory authorities for its clients. The Company provides services individually or as an integrated package of two or more services. The Company's full range of services and global experience complement the research and development departments of the Company's clients. In addition, the Company's Information Products Division ("IPD") offers specialized clinical consulting and training services and related products. Clinical Trials Management Services PAREXEL offers complete services for the design, initiation and management of clinical trial programs, a critical element in obtaining regulatory approval for drugs. The Company has performed services in connection with trials in most therapeutic areas, including neurology, oncology, gastroenterology, endocrinology, cardiology, hematology, immunology, rheumatology and the study of pulmonary, reproductive and infectious diseases. PAREXEL's multi-disciplinary clinical trials group examines a product's existing preclinical and clinical data to design clinical trials to provide evidence of the product's safety and efficacy. PAREXEL can manage every aspect of clinical trials, including design, placement, initiation, monitoring, report preparation and strategy development. See "Government Regulation -- New Drug Development-An Overview." Most of the Company's clinical trials management projects involve Phase II or III clinical trials, which are generally much larger and more complex than Phase I trials. Clinical trials are monitored for and with strict adherence to good clinical practices ("GCP"). The design of efficient Case Report Forms ("CRF"), detailed operations manuals and site visits by PAREXEL's clinical research associates ensure that clinical investigators and their staffs follow the established protocols of the studies. The Company has adopted standard operating procedures which are intended to satisfy regulatory requirements and serve as a tool for controlling and enhancing the quality of PAREXEL's worldwide clinical services. Clinical trials represent one of the most expensive and time-consuming parts of the overall drug development process. The information generated during these trials is critical for gaining marketing approval 24 27 from the FDA or other regulatory agencies. PAREXEL's clinical trials management group assists clients with one or more of the following steps: - Study Protocol Design. The protocol defines the medical issues the study seeks to examine and the statistical tests that will be conducted. Accordingly, the protocol defines the frequency and type of laboratory and clinical measures that are to be tracked and analyzed. The protocol also defines the number of patients required to produce a statistically valid result, the period of time over which they must be tracked and the frequency and dosage of drug administration. The study's success depends on the protocol's ability to predict correctly the requirements of the regulatory authority. - Case Report Forms Design. Once the study protocol has been finalized, CRFs must be developed. The CRF may change at different stages of a trial. The CRFs for one patient in a given study may consist of 100 or more pages. - Site and Investigator Recruitment. The drug is administered to patients by physicians, referred to as investigators, at hospitals, clinics or other locations, referred to as sites. Potential investigators may be identified by the drug sponsor or the CRO. The CRO generally solicits the investigators' participation in the study. The trial's success depends on the successful identification and recruitment of investigators with an adequate base of patients who satisfy the requirements of the study protocol. The Company has access to several thousand investigators who have conducted clinical trials for the Company. - Patient Enrollment. The investigators find and enroll patients suitable for the study. The speed with which trials can be completed is significantly affected by the rate at which patients are enrolled. Prospective patients are required to review information about the drug and its possible side effects, and sign an informed consent form to record their knowledge and acceptance of potential side effects. Patients also undergo a medical examination to determine whether they meet the requirements of the study protocol. Patients then receive the drug and are examined by the investigator as specified by the study protocol. - Study Monitoring and Data Collection. As patients are examined and tests are conducted in accordance with the study protocol, data are recorded on CRFs and laboratory reports. The data are collected from study sites by specially trained persons known as monitors. Monitors visit sites regularly to ensure that the CRFs are completed correctly and that all data specified in the protocol are collected. The monitors take completed CRFs to the study coordinating site, where the CRFs are reviewed for consistency and accuracy before their data is entered into an electronic database. The Company's study monitoring and data collection services comply with the FDA's adverse events reporting guidelines. - Report Writing. The findings of statistical analysis of data collected during the trial together with other clinical data are included in a final report generated for inclusion in a regulatory document. - Medical Services. Throughout the course of a clinical trial, PAREXEL's physicians can provide a wide range of medical research and consulting services, including medical monitoring of clinical trials. Clinical Data Management and Biostatistical Services PAREXEL's data management professionals assist in the design of CRFs, as well as training manuals for investigators, to ensure that data are collected in an organized and consistent format. Databases are designed according to the analytical specifications of the project and the particular needs of the client. Prior to data entry, PAREXEL personnel screen the data to detect errors, omissions and other deficiencies in completed CRFs. The Company provides clients with data abstraction, data review and coding, data entry, database verification and editing and problem data resolution. The Company has extensive experience in the United States and Europe in the creation of scientific databases for all phases of the drug development process, including the creation of customized databases to meet client-specific formats, integrated databases to support New Drug Application submissions and 25 28 databases in strict accordance with FDA and European specifications. For example, the Company recently completed, in support of a New Drug Application filing, an expanded access program with over 2,000 investigators enrolling over 11,000 patients at sites located in 26 countries, including 17 in Europe, five in South America, two in Central America, the United States and Australia. Over 300,000 pages of CRF data were collected from these sites and merged into one integrated database. PAREXEL's biostatistics professionals assist clients with all phases of drug development, including biostatistical consulting, database design, data analysis and statistical reporting. These professionals develop and review protocols, design appropriate analysis plans and design report formats to address the objectives of the study protocol as well as the client's individual objectives. Working with the programming staff, biostatisticians perform appropriate analyses and produce tables, graphs, listings and other applicable displays of results according to the analysis plan. Frequently, biostatisticians represent clients during panel hearings at the FDA. Regulatory Affairs Services PAREXEL provides comprehensive regulatory product registration services for pharmaceutical and biotechnology products in major jurisdictions in Europe and North America, including regulatory strategy formulation, document preparation and liaison with the FDA and other regulatory agencies. In addition, the Company provides the services of qualified experts to assist with good manufacturing practices ("GMP") compliance in existing manufacturing plants and to assure that new facilities are built to conform to GMP. PAREXEL's staff provides on-site GMP training sessions and conducts internal and external quality control and quality assurance audits. PAREXEL works closely with clients to devise regulatory strategies and comprehensive product development programs. The Company's regulatory affairs experts review existing published literature, assess the scientific background of a product, assess the competitive and regulatory environment, identify deficiencies and define the steps necessary to obtain registration in the most expeditious manner. Through this service, the Company helps its clients determine the feasibility of developing a particular product or product line. Information Products Division The Company's Information Products Division offers a range of specialized clinical consulting and training services and related products through Barnett International Corporation, a subsidiary of the Company, and through IPD's publications group. Barnett International Corporation is a leader in providing training, conferences, education and management consulting services to the worldwide clinical research community, with extensive experience in organization structure, curriculum design and human resource management in clinical research. The publications group produces several publications covering regulatory issues, including the monthly U.S. Regulatory Reporter (launched in 1984), books such as New Drug Development: A Regulatory Overview and Biologics Development: A Regulatory Overview, and reports such as CANDA: A Regulatory, Technology, and Strategy Report and GCPs in the U.S., E.C., and Nordic Council: An International Comparative Report. INFORMATION SYSTEMS The Company is committed to investing in information technology designed to help the Company provide high quality services in a cost effective manner and to manage its internal resources. The Company believes it is one of a few CROs that has an extensive and effective global information technology network. The Company has built on its network by developing a number of proprietary information systems that address critical aspects of its business. These systems track all aspects of the Company's projects utilizing: - PROGEN[Trademark] -- A dynamic proposal and budget generation system first developed and implemented globally in fiscal 1991. PROGEN generates accurate and timely resource budgets in response to client requests for proposals and also enables the Company to efficiently project staffing requirements. 26 29 - TIMS[Trademark] -- An on-line time information management system, implemented in North America in January 1994 and globally in January 1995. TIMS records and tracks all hours spent by employees and enables managers to compare such information with the PROGEN resource budget. - FORE[Trademark] -- An on-line revenue and resource forecasting system implemented in January 1995 in North America and in June 1995 in Europe. FORE tracks actual resource utilization for and progress of client projects and allows management to efficiently deploy future resources to match the progress of each project. - CIMS[Trademark] -- An on-line clinical information management system introduced in fiscal 1993 in North America and in fiscal 1995 in Europe. CIMS allows each clinical project manager to monitor and control the progress of an entire clinical trial, including providing real-time access to information on site recruitment, tracking of patient information, monitor information, investigator payments and drug shipments, as well as participate in a Company-wide integrated reporting system. - DEMS[Trademark] -- A flexible, multi-user clinical trials data-entry and data management system implemented in March 1995 in North America and August 1995 in Europe. DEMS encompasses data-entry, verification and validation and provides for real-time CRF tracking and coding of clinical data and promotes standardization of clinical data management processes at all of the Company's worldwide locations. Although the Company began to implement its information systems in 1990, the Company's current information systems were not completely adopted until fiscal 1995. The Company's information systems group has 45 employees responsible for technology procurement, applications development and management of the Company's worldwide computer network. The wide area network links ten local area networks, interconnecting approximately 1,300 computers worldwide. The Company's information systems are designed to work in support of and reinforce the Company's standard operating procedures. The Company's information technology system is open and flexible, allowing it to be adapted to the multiple needs of different clients and regulatory systems. This system also enables the Company to respond quickly to client inquiries on the progress of projects and, in some cases, to gain direct access to client data on client systems. SALES AND MARKETING PAREXEL's marketing strategy is to focus on prospective clients whose clinical development projects are large and complex and to develop close relationships with key decision-makers throughout its clients' drug development organizations. The Company's client relations professionals, senior executives and project team leaders all share responsibility for the maintenance of key client relationships and business development activities. The Company believes that its emphasis on developing close relationships with its clients leaves it well positioned to benefit from the trend among pharmaceutical companies to concentrate their outsourcing among fewer CROs. The Company's core marketing activities are complemented by the industry conferences and publications offered by the Company's IPD. Although the IPD activities are conducted as independent business activities, the Company believes that the IPD offerings enhance the Company's market position in the drug development community. The Company's marketing activities are coordinated by PAREXEL's client service executives in each of the Company's U.S. locations as well as the Company's locations in France, Germany, Italy, Japan and the United Kingdom. Most of the Company's business development personnel have technical or scientific backgrounds and many are physicians, pharmacologists, statisticians and regulatory affairs professionals. The Company coordinates its worldwide marketing efforts through a computerized system that is integrated into each of the Company's locations. CLIENTS PAREXEL has served most of the leading U.S., European and Japanese pharmaceutical companies. PAREXEL's clients also include companies which develop biotechnology and other emerging technologies. 27 30 The Company has in the past derived, and may in the future derive, a significant portion of its net revenue from a relatively limited number of major projects or clients. Concentrations of business in the CRO industry are not uncommon and the Company is likely to experience such concentration in fiscal 1996 and in future years. In fiscal 1993, two clients accounted for approximately 12.9% and 11.3%, respectively, of the Company's consolidated net revenue. In fiscal 1994 and 1995 and the nine months ended March 31, 1996, no single customer accounted for more than 10% of consolidated net revenue. In fiscal 1993, 1994 and 1995 and the nine months ended March 31, 1996, the Company's top five customers accounted for 44.4%, 29.8%, 25.2% and 26.2%, respectively, of the Company's consolidated net revenue. The loss of business from a significant client could materially and adversely affect the Company's net revenue. COMPETITION The Company primarily competes against in-house departments of pharmaceutical companies, full service CROs, and, to a lesser extent, universities and teaching hospitals. Some of these competitors have substantially greater capital, technical and other resources than the Company. CROs generally compete on the basis of previous experience, medical and scientific expertise in specific therapeutic areas, the quality of contract research, the ability to organize and manage large-scale trials on a global basis, the ability to manage large and complex medical databases, the ability to provide statistical and regulatory services, the ability to recruit investigators, the ability to integrate information technology with systems to improve the efficiency of contract research, an international presence with strategically located facilities, financial viability and price. PAREXEL believes that it competes favorably in these areas. The CRO industry is highly fragmented, with participants ranging from several hundred small, limited-service providers to several large, full-service CROs with global operations. PAREXEL believes that it is the fourth largest full-service CRO, based on estimated annual net revenue. The three largest CROs are Corning Lab Services, Inc., a subsidiary of Corning, Inc., Applied Bioscience International, Inc. and Quintiles Transnational Corporation. In addition, the fifth largest CRO is ClinTrials Research, Inc. The trend toward CRO industry consolidation has resulted in heightened competition among the larger CROs for clients and acquisition candidates. In addition, consolidation within the pharmaceutical industry as well as a trend toward the concentration by pharmaceutical companies of outsourcing among fewer CROs has led to heightened competition for CRO contracts. GOVERNMENT REGULATION New Drug Development -- An Overview Before a new drug may be marketed in North America or Europe, the drug must undergo extensive testing and regulatory review in order to determine that the drug is safe and effective. The stages of this development process are as follows: - Preclinical Research (1 to 3.5 years). In vitro ("test tube") and animal studies to establish the relative toxicity of the drug over a wide range of doses and to detect any potential to cause birth defects or cancer. If results warrant continuing development of the drug, the manufacturer will file for an IND (Investigational New Drug Application), upon which the FDA may grant permission to begin human trials. - Clinical Trials (3.5 to 6 years) - Phase I (6 months to 1 year). Basic safety and pharmacology testing in 20 to 80 human subjects, usually healthy volunteers, includes studies to determine how the drug works, how it is affected by other drugs, where it goes in the body, how long it remains active, and how it is broken down and eliminated from the body. - Phase II (1 to 2 years). Basic efficacy (effectiveness) and dose-range testing in 100 to 200 afflicted volunteers to help determine the best effective dose, confirm that the drug works as expected, and provide additional safety data. 28 31 - Phase III (2 to 3 years). Efficacy and safety studies in hundreds or thousands of patients at many investigational sites (hospitals and clinics) can be placebo-controlled trials, in which the new drug is compared with a "sugar pill," or studies comparing the new drug with one or more drugs with established safety and efficacy profiles in the same therapeutic category. - TIND (May span late Phase II, Phase III, and FDA review). When results from Phase II or Phase III show special promise in the treatment of a serious condition for which existing therapeutic options are limited or of minimal value, the FDA may allow the manufacturer to make the new drug available to a larger number of patients through the regulated mechanism of a TIND (Treatment Investigational New Drug). Although less scientifically rigorous than a controlled clinical trial, a TIND may enroll and collect a substantial amount of data from tens of thousands of patients. - NDA Preparation and Submission. Upon completion of Phase III trials, the manufacturer assembles the statistically analyzed data from all phases of development into a single large document, the New Drug Application (NDA), which today comprises, on average, roughly 100,000 pages. - FDA Review & Approval (1 to 1.5 years). Careful scrutiny of data from all phases of development (including a TIND) to confirm that the manufacturer has complied with regulations and that the drug is safe and effective from the specific use (or "indication") under study. - Post-Marketing Surveillance and Phase IV Studies. Federal regulation requires the manufacturer to collect and periodically report to FDA additional safety and efficacy data on the drug for as long as the manufacturer markets the drug (post-marketing surveillance). If the drug is marketed outside the U.S., these reports must include data from all countries in which the drug is sold. Additional studies (Phase IV) may be undertaken after initial approval to find new uses for the drug, to test new dosage formulations, or to confirm selected non-clinical benefits, e.g., increased cost-effectiveness or improved quality of life. The FDA's regulatory requirements have served as the model for much of the regulation for new drug development worldwide. As a result, similar regulatory requirements exist in the other countries in which the Company operates. The Company's regulatory capabilities include knowledge of the specific regulatory requirements in various countries, and the Company has managed simultaneous regulatory submissions in more than one country for a number of drug sponsors. Beginning in 1991, the FDA and corresponding regulatory agencies of Canada, Japan and Western Europe commenced discussions to develop harmonized standards for preclinical and clinical studies and the format and content of applications for new drug approvals. Data from multinational studies adhering to GCP are now generally acceptable to the FDA, Canadian and Western European regulators. The clinical investigation of new drugs is highly regulated by government agencies. The standard for the conduct of clinical research and development studies comprises GCP, which stipulates procedures designed to ensure the quality and integrity of data obtained from clinical testing and to protect the rights and safety of clinical subjects. While GCP has not been formally adopted by the FDA nor, with certain exceptions, by similar regulatory authorities in other countries, some provisions of GCP have been included in regulations adopted by the FDA. Furthermore, in practice, the FDA and many other regulatory authorities require that study results submitted to such authorities be based on studies conducted in accordance with GCP. The services provided by PAREXEL are ultimately subject to FDA regulation in the U.S. and comparable agencies in other countries. The Company is obligated to comply with FDA requirements governing such activities as obtaining patient informed consents, verifying qualifications of investigators, reporting patients' adverse reactions to drugs and maintaining thorough and accurate records. The Company must maintain source documents for each study for specified periods, and such documents may be reviewed by the study sponsor and the FDA during audits. Non-compliance with GCP can result in the disqualification of data collected during a clinical trial. 29 32 POTENTIAL LIABILITY AND INSURANCE PAREXEL's clinical research services center on the testing of new drugs on human volunteers pursuant to a study protocol. Clinical research involves a risk of liability for personal injury or death to patients due, among other reasons, to possible unforeseen adverse side effects or improper administration of the new drug. Many of these patients are already seriously ill and are at risk of further illness or death. The Company has not experienced any claims to date arising out of any clinical trial managed or monitored by it. The Company believes that the risk of liability to patients in clinical trials is mitigated by various regulatory requirements, including the role of institutional review boards ("IRBs") and the need to obtain each patient's informed consent. The FDA requires each human clinical trial to be reviewed and approved by the IRB at each study site. An IRB is an independent committee that includes both medical and non-medical personnel and is obligated to protect the interests of patients enrolled in the trial. After the trial begins, the IRB monitors the protocol and measures designed to protect patients, such as the requirement to obtain informed consent. To reduce its potential liability, PAREXEL seeks to obtain indemnity provisions in its contracts with clients and with investigators hired by the Company on behalf of its clients. These indemnities generally do not, however, protect PAREXEL against certain of its own actions such as those involving negligence. Moreover, these indemnities are contractual arrangements that are subject to negotiation with individual clients, and the terms and scope of such indemnities can vary from client to client and from study to study. Finally, the financial performance of these indemnities is not secured, so that the Company bears the risk that an indemnifying party may not have the financial ability to fulfill its indemnification obligations. PAREXEL could be materially and adversely affected if it were required to pay damages or incur defense costs in connection with a claim that is outside the scope of an indemnity or where the indemnity, although applicable, is not performed in accordance with its terms. The Company currently maintains an errors and omissions professional liability insurance policy. There can be no assurance that this insurance coverage will be adequate, or that insurance coverage will continue to be available on terms acceptable to the Company. INTELLECTUAL PROPERTY The Company believes that factors such as its ability to attract and retain highly-skilled professional and technical employees and its project management skills and experience are significantly more important to its business than are any intellectual property rights developed by it. PAREXEL has developed certain computer software and related methodologies that the Company has sought to protect through a combination of contracts, copyrights and trade secrets; however, the Company does not consider the loss of exclusive rights to any of this software or methodology to be material to the Company's business. EMPLOYEES As of March 31, 1996, the Company had approximately 1,150 employees, of which over 100 hold Ph.D. or M.D. degrees and over 225 others hold masters degrees. Approximately 62% of the full-time employees are located in North America and 37% are located in Europe. The Company believes that its relations with its employees are good. The success of the Company's business depends on its ability to attract and retain a qualified professional, scientific and technical staff. The level of competition among employers for skilled personnel, particularly those with Ph.D., M.D. or equivalent degrees, is high. The Company believes that its multinational presence, which allows for international transfers, is an advantage in attracting employees. In addition, the Company believes that the wide range of clinical trials in which it participates allows the Company to offer a broad experience to clinical researchers. While the Company has not experienced any significant difficulties in attracting or retaining qualified staff to date, there can be no assurance the Company will be able to avoid such difficulties in the future. 30 33 FACILITIES PAREXEL leases all of its facilities. The Company's principal executive offices are located in Waltham, Massachusetts, where it leases approximately 83,000 square feet under leases that expire in August 2001. The Company also maintains North American offices in Philadelphia, Raleigh-Durham and San Diego. The Company's European subsidiaries maintain offices in Berlin, Frankfurt, London, Milan, Paris and Madrid. The Company's Japanese subsidiary is located in Kobe. The Company's Australian subsidiary is located in Sydney. LEGAL PROCEEDINGS The Company is a defendant in a proceeding initiated by a former shareholder of a business which was subsequently acquired by the Company captioned Tallon v. Harwood, Barnett, Barnett Associates, Inc. and PAREXEL International Corporation, 92-3496. The proceeding was filed on March 3, 1992 in the Court of Common Pleas, Delaware County, Pennsylvania. The plaintiff, whose shares were acquired by the other two shareholders of the acquired business approximately three months prior to the acquisition of the business by PAREXEL, is seeking unspecified monetary damages based on a claim that his shares were purchased at an unfairly low price. The Company has filed an answer specifically denying the material allegations raised in the plaintiff's complaint and raising various affirmative defenses. The Company believes that resolution of this matter will not have a material adverse effect on the financial position, results of operations or business of the Company. The Company is not a party to, and is not aware of, any proceeding involving any material claims arising out of any clinical trial that it managed or monitored. 31 34 MANAGEMENT EXECUTIVE OFFICERS AND DIRECTORS The executive officers and directors of the Company are as follows:
NAME AGE POSITIONS --------------------------------------- --- --------------------------------------- Josef H. von Rickenbach(1)............. 41 President, Chief Executive Officer, Chairman of the Board and Director William T. Sobo, Jr. .................. 39 Senior Vice President, Chief Financial Officer, Treasurer and Clerk Barry R. Philpott...................... 47 President, European Operations Veronica G.H. Jordan, Ph.D. ........... 46 Senior Vice President John G. Lee, Ph.D. .................... 62 Senior Vice President R. Adrian Otte, M.D. .................. 40 Senior Vice President Taylor J. Crouch....................... 36 Senior Vice President Paule Dapres, M.D. .................... 51 Senior Vice President A. Dana Callow, Jr.(1)(2)(3)........... 44 Director James L. Currie(1)(2)(3)............... 59 Director Patrick J. Fortune..................... 49 Director Prof. Dr. med. Werner M. Herrmann...... 55 Director and Chief Scientific Officer Peter Barton Hutt...................... 61 Director James A. Saalfield(2)(3)............... 49 Director - --------------- (1) Member of Compensation Committee. (2) Member of Audit Committee. (3) Member of Stock Option Committee.
JOSEF H. VON RICKENBACH co-founded PAREXEL in 1983 and has served as a director since then. Prior to his involvement with PAREXEL, he was European Area Manager with ERCO (now ENSECO), Inc., a diversified testing and technical consulting company. Mr. von Rickenbach has worked for Schering-Plough, Inc., and 3M (East), a division of Minnesota Mining and Manufacturing, Inc. Mr. von Rickenbach received an M.B.A. from the Harvard University Graduate School of Business Administration and has an undergraduate degree from the Lucerne College of Economics and Administration. WILLIAM T. SOBO, JR. is responsible for all financial and administrative activities of the Company. Prior to joining PAREXEL in 1987, Mr. Sobo was a supervisor at Coopers & Lybrand in the emerging business/ middle market group and also served as the controller for a regional financial consulting firm. Mr. Sobo is a Certified Public Accountant and received an M.B.A. from Boston University and a B.S. from the Wharton School at the University of Pennsylvania. BARRY R. PHILPOTT is responsible for the general management of PAREXEL's European operations, based in London, England. Prior to joining PAREXEL in 1993, Mr. Philpott served in several senior management positions with EG&G Inc., a diversified technology company based in Massachusetts, most recently as General Manager of its Worldwide Optical & Analytical Division. Previous to this position he was the President and Managing Director of EG&G Applied Research Corp. VERONICA G.H. JORDAN, PH.D., is responsible for client relations and marketing activities at PAREXEL. Before joining PAREXEL in 1987, Dr. Jordan was Director of Marketing and Business Development at Biogen, Inc. Previously, Dr. Jordan worked at Clinical Assays, a division of Baxter Travenol. Dr. Jordan has a Ph.D. from Oxford University and a B.S. from Cambridge University. JOHN G. LEE, PH.D., is the head of worldwide statistical activities of the Company. Prior to joining PAREXEL in 1988, Dr. Lee worked at The Upjohn Company for over 20 years in positions of increasing responsibility in the biostatistical area and most recently as Director of Statistics for the Medical Affairs Division for eight years. Dr. Lee received a Ph.D. and an M.S. from the University of Minnesota. 32 35 R. ADRIAN OTTE, M.D., is responsible for the Company's medical monitoring and medical writing services for ongoing clinical trials. Prior to joining PAREXEL's operation in Germany as Vice President, Clinical Research Europe and General Manager of PAREXEL's Central European Region, Dr. Otte served in several senior management positions, most recently as Head of Clinical Research, at Duphar BV, Holland. Dr. Otte received his medical degree at the Welsh National School of Medicine and is a Fellow of the Faculty of Pharmaceutical Medicine. TAYLOR J. CROUCH is responsible for the Company's client relations activities, including proposal preparation, contract negotiations and account management, and is responsible for the Company's worldwide marketing activities. Prior to joining PAREXEL's operation in Germany as Vice President, Client Relations and Marketing in 1991, Mr. Crouch served in several senior management positions, most recently as Marketing Operations Manager, at Schering-Plough, Inc. in Germany. Mr. Crouch received an M.B.A. from the University of Chicago. PAULE DAPRES, M.D. is responsible for the Company's European clinical operations. Prior to joining PAREXEL in 1992, Dr. Dapres served in several senior management positions at Schering Plough, Inc. Dr. Dapres received her M.D. degree from the University of Paris. A. DANA CALLOW, JR. was elected a director of the Company in June 1986. Since December 1982, Mr. Callow has been a general partner of the general partner of several of Boston Capital Ventures' limited partnerships including Boston Capital Ventures International Limited Partnership, Boston Capital Ventures Limited Partnership, Boston Capital Ventures II Limited Partnership and Boston Capital Ventures III, Limited Partnership. Mr. Callow is a director of a number of privately held companies, including Tektagen Incorporated and ILEX Oncology, Inc. JAMES L. CURRIE was elected a director of the Company in June 1986. In 1986, Mr. Currie formed the predecessor to Essex Venture Partners and has served as a managing general partner since that time. Mr. Currie is also a director of Ethical Holdings, Ltd. PATRICK J. FORTUNE, PH.D. was elected a director of the Company in June 1996. Mr. Fortune is Vice President, Information Technology and Chief Information Officer of Monsanto Company. From 1994 to October 1995, Mr. Fortune was President and Chief Operating Officer, Chief Information Officer and a member of the Board of Directors of Coram Healthcare Corporation. From 1991 to 1994, Mr. Fortune was Corporate Vice President, Information Management at Bristol-Myers Squibb. Prior to that, Mr. Fortune was Senior Vice President and General Manager of Packaging Corporation of America, a subsidiary of Tenneco and held several management positions with Baxter International Inc., including Corporate Vice President, Vice President, Research and Development and Vice President, Information Services. Mr. Fortune has been named as a party in four class action or derivative lawsuits, generally alleging violations of certain anti-fraud provisions of federal securities law, filed in late 1995 against Coram Healthcare Corporation and its other officers and directors. These actions are currently pending and no determination can be made regarding their outcome. PROF. DR. MED. WERNER M. HERRMANN is Chief Scientific Officer for PAREXEL and was elected a director of the Company in April 1991. Dr. Herrmann founded a Berlin-based provider of clinical and biostatistical and clinical data management services in 1982, which was acquired by PAREXEL and renamed PAREXEL GmbH Independent Pharmaceutical Research Organization ("PAREXEL GmbH"). Prior to 1982, Dr. Herrmann was head of the Psychiatry and Neurology Branch, Department of Experimental and Clinical Pharmacology, Institute for Drugs, Federal Health Office, Berlin, Germany, from 1979 to 1982. Dr. Herrmann is a Full Professor at the Department of Psychiatry, Free University of Berlin. PETER BARTON HUTT was elected a director of the Company in March 1989. Mr. Hutt is a partner in the Washington, D.C. law firm of Covington & Burling, specializing in food and drug law and in government regulation of health and safety. He is a director of several pharmaceutical and drug development companies, including IDEC Pharmaceuticals, Inc., Emisphere Technologies, Inc., Interneuron Pharmaceuticals, Inc., Vivus, Inc., Sparta, Inc. and Cell Genesys, Inc. From 1971 to 1975, Mr. Hutt was Chief Counsel for the FDA. JAMES A. SAALFIELD was elected a director of the Company in January 1993. Mr. Saalfield is a retired general partner of Fleet Venture Partners I, II, III and IV and managing general partner of Dean's Hill L.P. and President of The Still River Management Company. Mr. Saalfield served as the senior vice president of 33 36 Fleet Venture Resources, Inc. and senior vice president of Fleet Growth Resources, Inc. from 1985 to 1993. Mr. Saalfield is a director of a number of privately held companies, including KVH Industries and Bioshelters. Each director holds office until that director's successor has been duly elected and qualified. Upon the closing of the Company's initial public offering, the Company's Board of Directors was divided into three classes, with staggered three-year terms. Messrs. Herrmann, Fortune and Saalfield serve in the class whose term expires in 1996; Messrs. Currie and Hutt serve in the class whose term expires in 1997; and Messrs. von Rickenbach and Callow serve in the class whose term expires in 1998. Upon the expiration of the term of each class of directors, persons comprising such class of persons will be elected for a three-year term at the next succeeding annual meeting of stockholders. Mr. Callow, a director, was granted a non-qualified option to purchase 100,000 shares of Common Stock in March 1989 at an exercise price of $0.75 per share. This option was exercised in full in March 1994 and the shares transferred to Boston Capital Ventures International Limited Partnership and Boston Capital Ventures Limited Partnership. Mr. Hutt, a director, was granted a non-qualified option to purchase 17,500 shares of Common Stock in March 1989 at an exercise price of $0.75 per share and a non-qualified option to purchase 10,000 shares of Common Stock in March 1994 at an exercise price of $12.50 per share. Messrs. Callow, Saalfield and Currie, current non-employee directors of the Company, were each granted a non-qualified option to purchase 10,000 shares of Common Stock in May 1994 at an exercise price of $12.50 per share. Mr. Hutt's March 1994 option was initially exercisable as to 3,333 shares, with the remaining shares vesting in two installments in March 1995 and March 1996, subject to specified meeting attendance requirements. The May 1994 options granted to Messrs. Callow, Saalfield and Currie become exercisable in three equal annual installments, beginning on the first anniversary of the date of grant, subject to specified meeting attendance requirements. The Company's 1995 Non-Employee Director Stock Option Plan (the "Director Plan") provides for the grant of options to purchase a maximum of 300,000 shares of Common Stock of the Company to non-employee directors of the Company. Under the Director Plan, each non-employee director who was a member of the Board of Directors on the effective date of the Company's initial public offering received options under the Director Plan. In addition, each non-employee director first elected to the Board of Directors after the effective date of the Company's initial public offering will receive an option for 10,000 shares on the date of his or her election. The Director Plan further provides for an automatic grant of an option for 10,000 shares on the first business day of July of each year, beginning in July 1996, to each non-employee director who has continuously served for the lesser of (i) the previous full year or (ii) since the last annual meeting of stockholders at which directors were elected. The exercise price per share for all options granted under the Director Plan will be equal to the market price of the Common Stock as of the date of grant. The options will become exercisable in three equal annual installments beginning on the first anniversary of the date of grant, subject to specified meeting attendance requirements. Options to purchase an aggregate of 96,500 shares of Common Stock have been granted to date under the Director Plan. The only cash compensation payable to non-employee directors is $1,500 per day of Board or committee meetings (with not more than one $1,500 payment being made for any one day). Outside directors are reimbursed for their reasonable out-of-pocket expenses incurred in attending meetings of the Board of Directors and Board committees. Executive officers of the Company are elected by the Board of Directors on an annual basis and serve until their successors have been duly elected and qualified. There are no family relationships among any of the executive officers or directors of the Company. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION Mr. von Rickenbach, the President, Chief Executive Officer, and Chairman of the Company, serves as a member of the Compensation Committee of the Board of Directors. Mr. Currie, a member of the Compensation Committee of the Board of Directors, is managing general partner of Essex Venture Partners, L.P. Fund I. Essex Venture Partners, L.P. Fund I and its affiliates own an interest in excess of 10% in Argus Pharmaceuticals, Inc. ("Argus"), one of the Company's customers. During 34 37 fiscal 1993, 1994 and 1995, the Company recognized $25,710, $200,400 and $76,836 respectively, in net revenue from Argus. During the nine months ended March 31, 1996, the Company did not recognize any net revenue from Argus. The Company negotiated all transactions with Argus on an arm's-length basis, on terms substantially similar to terms provided to similar customers. EXECUTIVE COMPENSATION The following table summarizes the compensation paid or accrued by the Company for services rendered for fiscal 1995 to each of the Company's executive officers or former executive officers whose total salary and bonus exceeded $100,000 during fiscal 1995. The Company did not grant any restricted stock awards or stock appreciation rights or make any long-term incentive plan payouts during that fiscal year. The Company does not have a defined benefit or actuarial plan. SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION ---------------------------- FISCAL OTHER ANNUAL ALL OTHER NAME AND PRINCIPAL POSITION YEAR SALARY(1) BONUS COMPENSATION COMPENSATION(2) --------------------------- ---- --------- ----- ------------- --------------- Josef H. von Rickenbach............. 1995 $183,545 $ 0 $26,973(3) $ 3,450 President, Chief Executive Officer and Chairman Steven D. Reich, M.D.(4)............ 1995 164,822 16,666 -- 912 Senior Vice President Barry R. Philpott................... 1995 146,300 0 -- 11,704 President, European Operations John G. Lee, Ph. D.................. 1995 139,135 0 -- 2,964 Senior Vice President Veronica G.H. Jordan, Ph.D.......... 1995 116,833 25,063 -- 3,446 Senior Vice President - --------------- (1) Includes commissions. (2) Contributions to defined contribution plans. (3) Includes $11,084 automobile allowance and $15,889 related to interest on stock subscriptions receivable. (4) In a letter dated September 27, 1995, Dr. Reich resigned as an employee of the Company effective December 1, 1995.
OPTIONS No options or stock appreciation rights were granted during the year ended June 30, 1995 to the executives named in the Summary Compensation Table above. Since June 30, 1995, options to purchase 84,000 shares have been granted to the executives named in the Summary Compensation Table above, including options to purchase 50,000, 15,000 and 10,000 shares to Messrs. von Rickenbach, Philpott and Lee, respectively, and 9,000 shares to Ms. Jordan. The following table sets forth information concerning the value of unexercised options as of June 30, 1995 held by the executives named in the Summary Compensation Table above. No options were exercised during the year ended June 30, 1995 by such executives. AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
VALUE OF UNEXERCISED NUMBER OF UNEXERCISED IN-THE-MONEY SHARES OPTIONS AT JUNE 30, 1995 OPTIONS AT JUNE 30, 1995(1) ACQUIRED VALUE --------------------------- --------------------------- NAME ON EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE ---- ------------- ---------- ----------- ------------- ----------- ------------- Josef H. von Rickenbach............. -- -- 60,000 0 $864,000 $ 0 Steven D. Reich, M.D.(2)................ -- -- 30,000 0 437,000 0 Barry R. Philpott........ -- -- 2,000 8,000 5,000 20,000 John G. Lee, Ph.D........ -- -- 60,000 0 864,000 0 Veronica G.H. Jordan, Ph.D................... -- -- 10,000 0 146,500 0
35 38 - --------------- (1) Value based on the Company's initial public offering price per share of $15.00. (2) In a letter dated September 27, 1995, Dr. Reich resigned as an employee of the Company effective December 1, 1995. In September 1995, the Company adopted its 1995 Stock Plan which provides for the issuance of a maximum of 500,000 shares of Common Stock pursuant to the grant of incentive stock options to officers and other employees and the grant of non-qualified stock options or stock awards to employees, consultants, directors and officers of the Company. Options to purchase 315,000 shares have been granted under the 1995 Stock Plan at a weighted average exercise price of $30.19. In September 1995, the Company adopted its 1995 Employee Stock Purchase Plan (the "1995 Purchase Plan") which provides for the issuance of a maximum of 300,000 shares of Common Stock pursuant to the exercise of nontransferable options granted to participating employees. All employees of the Company, except employees who by participating would own five percent or more of the Company's Common Stock, whose customary employment is more than 20 hours per week and more than five months in any calendar year are eligible to participate in the 1995 Purchase Plan. To participate in the 1995 Purchase Plan, an employee must authorize the Company to deduct an amount (not less than one percent nor more than ten percent of a participant's total compensation) from his or her pay during six-month periods commencing on September 1 and March 1 of each year (each a "Plan Period"), but in no case shall an employee be entitled to purchase more than 500 shares in any Plan Period. The exercise price for the option for each Plan Period is 85% of the lesser of the average market price of the Common Stock on the first or last business day of the Plan Period. If an employee is not a participant on the last business day of the Plan Period, such employee is not entitled to exercise his or her option, and the amount of his or her accumulated payroll deductions will be refunded without interest. An employee's rights under the 1995 Purchase Plan terminate upon his or her voluntary withdrawal from the plan at any time or upon termination of employment. As of June 26, 1996, 336 employees were enrolled in the 1995 Purchase Plan. EMPLOYMENT AGREEMENTS The Company is party to an employment agreement dated July 2, 1987 with Dr. Veronica G.H. Jordan. Currently, Dr. Jordan is paid an annual base salary of $80,000. The employment agreement with Dr. Jordan may be terminated for cause upon the unanimous action of the Company's Board of Directors. The Company and Barry R. Philpott are parties to a letter agreement of employment dated July 6, 1993. Mr. Philpott's current annual base salary is L95,000 (approximately $150,000). The Company may terminate Mr. Philpott's employment upon two months' notice and upon payment of severance benefits equal to one month's base salary per full year of service, with a maximum payment equal to six months' base salary. The executive officers of the Company are bound by the terms of a Key Employee Confidentiality and Invention Agreement, pursuant to which confidential information proprietary to the Company obtained during the term of employment by the Company may not be disclosed by the employee during or subsequent to such term of employment, and pursuant to which the employee agrees not to compete with the business of the Company during and for one year subsequent to the term of employment. In connection with the acquisition by the Company of PAREXEL GmbH, Dr. Herrmann entered into an employment agreement with PAREXEL GmbH, dated March 11, 1991. The employment agreement was amended as of June 30, 1993. Dr. Herrmann also entered into an employment agreement with the Company on June 30, 1993. The employment agreements provide for a monthly base salary of approximately DM 11,400 (approximately $6,900). The employment agreements with Dr. Herrmann continue until June 30, 1996. 36 39 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS CERTAIN STOCK TRANSACTIONS In February and March 1991, the Company issued pursuant to venture capital financings 468,332 shares and warrants to purchase an additional 92,887 shares of its Series F Convertible Preferred Stock (the "Series F Warrants"). The Company also sold at that time 141,300 shares and a warrant to purchase 90,000 additional shares of its Series G Non-Voting Convertible Preferred Stock. The purchase price per share and exercise price per share was in each case $10.00. Each share of Series F Convertible Preferred Stock and Series G Non-Voting Convertible Preferred Stock automatically converted into one share of Common Stock upon the closing of the Company's initial public offering in November 1995. Series F Convertible Preferred Stock was purchased by the following executive officers: Veronica G.H. Jordan (2,500 shares), John G. Lee (2,500 shares) and William T. Sobo, Jr. (500 shares). The following executive officers were purchasers of Series F Warrants: Veronica G.H. Jordan (750 shares), John G. Lee (750 shares) and William T. Sobo, Jr. (150 shares). In April 1992, the Company sold an aggregate of 508,334 shares of Series I Convertible Preferred Stock and warrants to purchase 151,516 shares of Series J Convertible Preferred Stock (the "Series J Warrants"). The shares of Series I Convertible Preferred Stock were sold at a price of $15.00 per share and the Series J Warrants were issued with an exercise price of $16.50 per share. Josef H. von Rickenbach purchased 2,000 shares of Series I Convertible Preferred Stock. All of the Series J Warrants were exercised in December 1992. All shares of Series I and Series J Convertible Preferred Stock automatically converted into Common Stock on the closing of the Company's initial public offering in November 1995. In August 1993, all Series D Convertible Preferred Stock Warrants were exercised by their respective holders. Upon the closing of the Company's initial public offering in November 1995, 226,700 shares of Common Stock were issued upon the automatic conversion of such shares of Series D Convertible Preferred Stock. The purchasers of the Series A Convertible Preferred Stock, the Series B Convertible Preferred Stock, the Series C Convertible Preferred Stock, the Series D Convertible Preferred Stock, the Series F Convertible Preferred Stock, the Series F Warrants, the Series G Non-Voting Convertible Preferred Stock, the Series G Warrants, the Series I Convertible Preferred Stock and the Series J Convertible Preferred Stock (collectively, the "Rightsholders") are entitled to require the Company to register under the Act up to a total of approximately 3,067,525 shares of outstanding Common Stock and Common Stock issuable upon exercise of certain outstanding options (the "Registrable Shares") under the terms of certain agreements among the Company and the Rightsholders (the "Registration Agreements"). The Registration Agreements provide that in the event the Company proposes to register any of its securities under the Act at any time or times, the Rightsholders, subject to certain exceptions, shall be entitled to include Registrable Shares in such registration. However, the managing underwriter of any such offering may exclude for marketing reasons some or all of such Registrable Shares from such registration. Substantially all of the Rightsholders have, subject to certain conditions and limitations, additional rights to require the Company to prepare and file a registration statement under the Act with respect to their Registrable Shares if Rightsholders holding at least 40% of the Registrable Shares held by all such Rightsholders so request. The Company is generally required to bear the expenses of all such registrations, except underwriting discounts and commissions. ACQUISITION OF PAREXEL GmbH In March 1991, the Company entered into a sales contract with Dr. Werner M. Herrmann to acquire Dr. Herrmann's majority stockholder interest in AFB Arzneimittelforschung GmbH in Berlin, a German corporation, for a purchase price of DM 3,000,000 (approximately $1.8 million) and 128,493 shares of the Company's Series H Preferred Stock. A Stock Purchase, Restriction and Registration Rights Agreement dated March 11, 1991 between the Company and Dr. Herrmann governs the rights and preferences of the Series H Convertible Preferred Stock, including certain registration rights. Each share of Series H Convertible Preferred Stock owned by Dr. Herrmann will automatically convert into one share of Common Stock upon the closing of the offering. See Note 3 of Notes to Consolidated Financial Statements of the Company. 37 40 In connection with the acquisition, Dr. Herrmann entered into an employment agreement with PAREXEL GmbH, dated March 11, 1991. The employment agreement was amended as of June 30, 1993. Dr. Herrmann also entered into an employment agreement with the Company on June 30, 1993. The employment agreements provide for a monthly base salary of approximately DM 11,400 (approximately $6,900). See "Management -- Employment Agreements." On January 1, 1992, PAREXEL GmbH entered into a promissory note in favor of Dr. Herrmann in the principal amount of DM 2,000,000 (approximately $1.2 million), representing amounts Dr. Herrmann loaned PAREXEL GmbH during the first six months of fiscal year 1991. Repayment was made in twelve equal monthly installments of DM 166,667, plus accrued interest, beginning September 1, 1992. The note was fully repaid in September 1993. OTHER TRANSACTIONS On June 9, 1989, the Company loaned $33,500 to Josef H. von Rickenbach for the purchase of 8,375 shares of the Company's Series C Convertible Preferred Stock and a warrant for 6,700 shares of the Company's Series D Convertible Preferred Stock. The principal amount of the loan, plus interest accruing at a rate of 9.34% from the date thereof, was paid in full upon the closing of the Company's initial public offering in November 1995. On August 27, 1990, the Company loaned $33,500 to Mr. von Rickenbach for the purchase of 6,700 shares of the Company's Series D Convertible Preferred Stock. The principal amount of the loan, plus interest accruing at a rate of 8.66% from the date thereof, was paid in full upon the closing of the Company's initial public offering in November 1995. On April 8, 1992, the Company loaned Mr. von Rickenbach an additional $30,000 to purchase 2,000 shares of the Company's Series I Convertible Preferred Stock. The principal amount of the loan, plus interest accruing at a rate of 6.69% from the date thereof, was paid in full upon the closing of the Company's initial public offering in November 1995. On September 1, 1993, the Company loaned $33,500 to Mr. von Rickenbach for the purchase of 6,700 shares of the Company's Series D Convertible Preferred Stock. The principal amount of the loan, plus interest accruing at a rate of 5.32% from the date thereof, was paid in full upon the closing of the Company's initial public offering in November 1995. James L. Currie, a director of the Company, is managing general partner of Essex Venture Partners, L.P. Fund I and of its affiliate, Essex Venture Management, L.P. Essex Venture Partners, L.P. Fund I owns, together with its affiliates, an interest in excess of 10% in Argus Pharmaceuticals, Inc., one of the Company's customers. During fiscal 1993, 1994 and 1995, the Company recognized $25,710, $200,400 and $76,836, respectively, in net revenue from Argus. During the nine months ended March 31, 1996, the Company did not recognize any net revenue from Argus. The Company negotiated all transactions with such customer on an arm's-length basis, on terms substantially similar to terms provided to similar customers. Patrick J. Fortune, a director of the Company, is Vice President, Information Technology and Chief Information Officer of Monsanto Company. Monsanto Company is the parent company of G.D. Searle & Co., one of the Company's customers. During the fiscal year ended June 30, 1995 and the nine months ended March 31, 1996, the Company recognized $2,085,712 and $4,561,741, respectively, in net revenue from Searle. Peter Barton Hutt, a director of the Company, became a director of Interneuron Pharmaceuticals, Inc. ("IPI") in April 1994 and is a director of Vivus, Inc. During the fiscal years ended June 30, 1994 and 1995 and the nine months ended March 31, 1996, the Company recognized $828,185, $860,398 and $1,016,965 in net revenue from IPI, respectively. During the fiscal years ended June 30, 1994 and 1995, the Company recognized $7,220 and $8,082 in net revenue from Vivus, respectively. During the nine months ended March 31, 1996, the Company did not recognize any net revenue from Vivus. The Company negotiated all transactions with IPI and Vivus on an arm's-length basis, on terms substantially similar to terms provided to similar customers. The Company has adopted a policy whereby all future transactions between the Company and its officers, directors and affiliates will be on terms no less favorable to the Company than could be obtained from unrelated third parties and will be approved by a majority of the disinterested members of the Company's Board of Directors. 38 41 PRINCIPAL STOCKHOLDERS The following table sets forth certain information regarding beneficial ownership of the Company's Common Stock as of June 26, 1996 (i) by each person who is known by the Company to own beneficially more than 5% of the outstanding shares of Common Stock, (ii) by each director and each executive officer or former executive officer of the Company named in the Summary Compensation Table and (iii) by all directors and executive officers of the Company as a group. Unless otherwise indicated below, to the knowledge of the Company, all persons listed below have sole voting and investment power with respect to their shares of Common Stock, except to the extent authority is shared by spouses under applicable law.
SHARES BENEFICIALLY OWNED PRIOR TO THIS OFFERING(1) ------------------- DIRECTORS, EXECUTIVE OFFICERS AND 5% STOCKHOLDERS NUMBER PERCENT - --------------------------------------------------------------------------- --------- ------- Josef H. von Rickenbach(2)................................................. 432,390 5.6 A. Dana Callow(3).......................................................... 83,348 1.1 c/o Boston Capital Ventures Limited Partnership 45 School Street Boston, MA 02108 James L. Currie(4)......................................................... 34,666 * Patrick J. Fortune......................................................... 0 * Werner M. Herrmann......................................................... 88,493 1.1 Peter Barton Hutt(5)....................................................... 39,500 * James A. Saalfield(6)...................................................... 22,174 * Veronica G.H. Jordan(7).................................................... 76,250 * John G. Lee(8)............................................................. 53,250 * Barry R. Philpott(9)....................................................... 7,000 * Steven D. Reich(11)........................................................ 27,850 * All executive officers and directors as a group (14 persons)(12)........... 888,671 11.0 - --------------- * Less than 1% of the outstanding Common Stock. (1) The number of shares of Common Stock deemed outstanding includes: (i) 7,731,586 shares of Common Stock outstanding as of June 26, 1996; and (ii) shares issuable pursuant to options held by the respective person or group which may be exercised within 60 days after June 26, 1996 ("presently exercisable" stock options), as set forth below. (2) Includes 321,183 shares of Common Stock owned by The Josef H. von Rickenbach GRAT dated November 17, 1995. Includes 50,000 shares of Common Stock issuable pursuant to presently exercisable stock options. (3) Includes 44,166 shares of Common Stock issuable pursuant to presently exercisable stock options. (4) Includes 33,666 shares of Common Stock issuable pursuant to presently exercisable stock options. (5) Includes 39,500 shares of Common Stock issuable pursuant to presently exercisable stock options. (6) Includes 16,666 shares of Common Stock issuable pursuant to presently exercisable stock options. (7) Includes 10,000 shares of Common Stock issuable pursuant to presently exercisable stock options. (8) Includes 50,000 shares of Common Stock issuable pursuant to presently exercisable stock options. (9) Includes 6,000 shares of Common Stock issuable pursuant to presently exercisable stock options. (10) Includes 50,000 shares of Common Stock issuable pursuant to presently exercisable stock options. (11) In a letter dated September 27, 1995, Dr. Reich resigned as an employee of the Company effective December 1, 1995. (12) Includes 310,798 shares of Common Stock issuable pursuant to presently exercisable stock options.
39 42 SELLING STOCKHOLDERS
SHARES OWNED PRIOR TO THIS OFFERING SHARES TO BE ------------------ OFFERED PURSUANT SELLING STOCKHOLDERS NUMBER PERCENT TO THIS PROSPECTUS -------------------- ------ ------- ------------------ Raymond A. Konisky....................................... 28,409 * 28,409 3 Rosemarie Lane Georgetown, MA 01833 Karen A. Konisky......................................... 28,409 * 28,409 3 Rosemarie Lane Georgetown, MA 01833 - --------------- * Less than 1% of the outstanding Common Stock.
Raymond A. Konisky and Karen A. Konisky acquired their shares in connection with the sale of all the outstanding stock of Sitebase Clinical Systems, Inc. ("Sitebase") to the Company pursuant to a Stock Purchase Agreement (the "Purchase Agreement") dated May 24, 1996. Approximately 5,682 of the shares of Common Stock issued pursuant to the Purchase Agreement have been placed in escrow until the earlier of (i) September 30, 1996 or (ii) the issuance of the audit report relating to the Company's financial statements for the fiscal year ended June 30, 1996. The shares that have been placed in escrow will be used to satisfy any indemnification claims brought by PAREXEL based on a breach of any of the representations or warranties of Sitebase or the Selling Stockholders set forth in the Purchase Agreement. Mr. Konisky and Ms. Konisky were each officers mand directors of Sitebase until they resigned such positions on the closing of the acquisition. Mr. Konisky is currently an employee of the Company. In the Purchase Agreement, the Company agreed to bear all expenses in connection with the registration and sale of the Mr. Konisky's and Ms. Konisky's shares (other than underwriting discounts and selling commissions). See "Plan of Distribution." Each of Mr. Konisky and Ms. Konisky represented in the Purchase Agreement, and Registration Rights Agreement referenced therein, that he or she was purchasing the shares from the Company without any present intention of effecting a distribution of those shares. The acquisition is to be accounted for as a pooling of interests. Mr. and Ms. Konisky each agreed not to sell or otherwise transfer such shares until the expiration of the pooling lockup period, which is currently expected to expire in August 1996. In recognition of the fact, however, that investors may want to be able to sell their shares when they consider appropriate, the Company has filed with the Commission a registration statement on Form S-1 (of which this Prospectus is a part) with respect to the resale of the shares by the Selling Stockholders from time to time on the Nasdaq National Market. The Company will prepare and file such amendments and supplements to the registration statement as may be necessary to keep it effective until the earlier of the sale of all shares pursuant to the registration statement or 90 days after the registration statement is declared effective (the "Distribution Period"). The Distribution Period will be extended, in accordance with the terms of the Registration Rights Agreement, by one day for each day during which resales under the registration statement are suspended by the Company pursuant to the Company's suspension rights as set forth in the Registration Rights Agreement. The Registration Rights Agreement entered into by the Company and the Selling Stockholders provides that the Company will indemnify the Selling Stockholders for any losses incurred by them in connection with actions arising from any untrue statement of a material fact in the Registration Statement or any omission of a material fact required to be stated therein, unless such statement or omission was made in reliance upon written information furnished to the Company by the Selling Stockholders. Similarly, the Registration Rights Agreement provides that each Selling Stockholder will indemnify the Company and its officers and directors for any losses incurred by them in connection with any action arising from any untrue statement of material fact in the Registration Statement or any omission of a material fact required to be stated therein, if such statement or omission was made in reliance on written information furnished to the Company by such Selling Stockholders. 40 43 DESCRIPTION OF CAPITAL STOCK The authorized capital stock of the Company is 25,000,000 shares of Common Stock, par value $.01 per share, and 5,000,000 shares of Preferred Stock, par value $.01 per share. COMMON STOCK As of June 26, 1996, there were 7,731,586 shares of Common Stock outstanding and held of record by 72 stockholders. Holders of Common Stock are entitled to one vote for each share held on all matters submitted to a vote of stockholders. Holders of Common Stock do not have cumulative voting rights. Accordingly, holders of a majority of the shares of Common Stock entitled to vote in any election of directors may elect all of the directors standing for election. Holders of Common Stock are entitled to receive ratably such dividends, if any, as may be declared by the Board of Directors out of funds legally available therefor, subject to any preferential dividend rights of any outstanding Preferred Stock. Upon the liquidation, dissolution or winding up of the Company, the holders of Common Stock are entitled to receive ratably the net assets of the Company available after the payment of all debts and other liabilities and subject to the prior rights of any outstanding Preferred Stock. Holders of the Common Stock have no preemptive, subscription, redemption or conversion rights. The outstanding shares of Common Stock are, and the shares offered by the Company in this offering will be, when issued and paid for, fully paid and nonassessable. The rights, preferences and privileges of holders of Common Stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of Preferred Stock which the Company may designate and issue in the future. There are no shares of Preferred Stock outstanding. PREFERRED STOCK The Board of Directors is authorized, subject to certain limitations prescribed by law, without further stockholder approval, to issue from time to time up to an aggregate of 5,000,000 shares of Preferred Stock in one or more series and to fix or alter the designations, preferences, rights and any qualifications, limitations or restrictions of the shares of each such series thereof, including the dividend rights, dividend rates, conversion rights, voting rights, terms of redemption (including sinking fund provisions), redemption price or prices, liquidation preferences and the number of shares constituting any series or designations of such series. The issuance of Preferred Stock may have the effect of delaying, deferring or preventing a change of control of the Company. The Company has no present plans to issue any shares of Preferred Stock. MASSACHUSETTS LAW AND CERTAIN PROVISIONS OF THE COMPANY'S RESTATED ARTICLES OF ORGANIZATION AND BY-LAWS The Company believes that it has more than 200 stockholders, thus making it subject to Chapter 110F of the Massachusetts General Laws, an anti-takeover law. In general, this statute prohibits a publicly held Massachusetts corporation from engaging in a "business combination" with an "interested stockholder" for a period of three years after the date of the transaction in which the person becomes an interested stockholder, unless (i) the interested stockholder obtains the approval of the board of directors prior to becoming an interested stockholder, (ii) the interested stockholder acquires 90% of the outstanding voting stock of the corporation (excluding shares held by certain affiliates of the corporation) at the time it becomes an interested stockholder, or (iii) the business combination is approved by both the board of directors and the holders of two-thirds of the outstanding voting stock of the corporation (excluding shares held by the interested stockholder). An "interested stockholder" is a person who, together with its affiliates and associates, owns (or at any time within the prior three years did own) 5% or more of the outstanding voting stock of the corporation. A "business combination" includes a merger, a stock or asset sale, and certain other transactions resulting in a financial benefit to the interested stockholder. The Company may at any time elect not to be governed by Chapter 110F by vote of a majority of its stockholders, but such an amendment would not be effective for twelve months and would not apply to a business combination with any person who became an interested stockholder prior to the adoption of the amendment. 41 44 The Massachusetts Business Corporation Law generally requires that publicly-held Massachusetts corporations have a classified board of directors consisting of three classes as nearly equal in size as possible, unless those corporations elect to opt out of the statute's coverage. By vote of the Board of Directors, the Company has elected to opt out of the classified board provisions of this statute and has adopted separate classified Board provisions in its Restated Articles of Organization. See "Management -- Executive Officers and Directors." The Company's By-Laws include a provision that excludes the Company from the applicability of Massachusetts General Laws Chapter 110D, entitled "Regulation of Control Share Acquisitions." In general, this statute provides that any stockholder of a corporation subject to this statute who acquires 20% or more of the outstanding voting stock of a corporation may not vote such stock unless the stockholders of the corporation so authorize. The Board of Directors may amend the Company's By-Laws at any time to subject the Company to this statute prospectively. The Company's By-Laws require that nominations for the Board of Directors made by a stockholder comply with certain notice procedures. A notice by a stockholder of a planned nomination must be given not less than 60 and not more than 90 days prior to a scheduled meeting, provided that if less than 70 days' notice is given of the date of the meeting, a stockholder will have ten days within which to give such notice. The stockholder's notice of nomination must include particular information about the stockholder, the nominee and any beneficial owner on whose behalf the nomination is made. The Company may require any proposed nominee to provide such additional information as is reasonably required to determine the eligibility of the proposed nominee. The By-Laws also require that a stockholder seeking to have any business conducted at a meeting of stockholders give notice to the Company not less than 60 and not more than 90 days prior to the scheduled meeting, provided that if less than 70 days' notice is given of the date of the meeting, a stockholder will have ten days within which to give such notice. The notice from the stockholder must describe the proposed business to be brought before the meeting and include information about the stockholder making the proposal, any beneficial owner on whose behalf the proposal is made, and any other stockholder known to be supporting the proposal. The By-Laws require the Company to call a special stockholders' meeting at the request of stockholders holding at least 33 1/3% of the voting power of the Company. The Company's Restated Articles of Organization include provisions eliminating the personal liability of the Company's directors for monetary damages resulting from breaches of their fiduciary duty to the extent permitted by the Massachusetts Business Corporation Law. Additionally, the Company's Restated Articles of Organization provide that the Company shall indemnify each person who is or was a director or officer of the Company, and each person who is or was serving or has agreed to serve at the request of the Company as a director or officer of, or in a similar capacity with, another organization or in any capacity with respect to any employee benefit plan of the Company, against all liabilities, costs and expenses reasonably incurred by any such persons in connection with the defense or disposition of or otherwise in connection with or resulting from any action, suit or other proceeding in which they may be involved by reason of being or having been such a director or officer, or by reason of any action taken or not taken in such capacity, except with respect to any matter as to which such person shall have been finally adjudicated by a court of competent jurisdiction not to have acted in good faith in the reasonable belief that his or her action was in the best interests of the Company or, to the extent such matter relates to service with respect to an employee benefit plan, in the best interests of the participants or beneficiaries of such employee benefit plan. The Restated Articles of Organization provide that certain transactions, such as the sale, lease or exchange of all or substantially all of the Company's property and assets and the merger or consolidation of the Company into or with any other corporation, may be authorized by the approval of the holders of a majority of the shares of each class of stock entitled to vote thereon, rather than by two-thirds as otherwise provided by statute, provided that the transactions have been authorized by a majority of the members of the Board of Directors and the requirements of any other applicable provisions of the Restated Articles of Organization have been met. 42 45 Certain of the provisions of the Restated Articles of Organization and By-Laws discussed above would discourage or make more difficult a proxy contest or the assumption of control by a holder of a substantial block of the Company's stock. Such provisions could also have the effect of discouraging a third party from making a tender offer or otherwise attempting to obtain control of the Company, even though such an attempt might be beneficial to the Company and its stockholders. In addition, since the Restated Articles of Organization and By-Laws are designed to discourage accumulations of large blocks of the Company's stock by purchasers whose objective is to have stock repurchased by the Company at a premium, such provisions could tend to reduce the temporary fluctuations in the market price of the Company's stock which are caused by such accumulations. Accordingly, stockholders could be deprived of certain opportunities to sell their stock at a temporarily higher market price. TRANSFER AGENT AND REGISTRAR The transfer agent and registrar for the Common Stock is Boston EquiServe LP. PLAN OF DISTRIBUTION The shares offered hereby may be resold from time to time by the Selling Stockholders for their own accounts. The Company will receive none of the proceeds from this offering. The Selling Stockholders will pay or assume brokerage commissions or other charges and expenses incurred in the resale of the shares. Resales of the shares by the Selling Stockholders is not subject to any underwriting agreement. The shares covered by this Prospectus may be resold by the Selling Stockholders or by pledgees, donees, transferees or other successors in interest. The shares offered by each Selling Stockholder may be resold from time to time at market prices prevailing at the time of sale, at prices relating to such prevailing market prices or at negotiated prices. In addition, the Selling Stockholders may resell their shares covered by this Prospectus through customary brokerage channels, either through broker-dealers acting as agents or brokers, or through broker-dealers acting as principals, who may then resell the shares, or at private sales or otherwise, at market prices prevailing at the time of sale, at prices related to such prevailing market prices or at negotiated prices. The Selling Stockholders may effect such transactions by selling shares to or through broker-dealers, and such broker-dealers may receive compensation in the form of underwriting discounts, concessions, commissions, or fees from the Selling Stockholders and/or purchasers of the shares for whom such broker-dealers may act as agent or to whom they sell as principal, or both (which compensation to a particular broker-dealer might be in excess of customary commissions). Any broker-dealers that participate with the Selling Stockholders in the distribution of the shares may be deemed to be underwriters and any commissions received by them and any profit on the resale of the shares positioned by them might be deemed to be underwriting discounts and commissions, within the meaning of the Securities Act, in connection with such sales. The Company will inform the Selling Stockholders that the antimanipulation rules under the Securities Exchange Act of 1934 (Rule 10b-5 and 10b-6) may apply to sales in the market and will furnish the Selling Stockholders upon request with a copy of these Rules. The Company will also inform the Selling Stockholders of the need for delivery of copies of this Prospectus. Any shares covered by the Prospectus that qualify for resale pursuant to Rule 144 under the Securities Act may be resold under Rule 144 rather than pursuant to this Prospectus. The Common Stock is quoted on the Nasdaq National Market under the symbol "PRXL." LEGAL MATTERS The validity of the shares of Common Stock offered hereby will be passed upon for the Selling Stockholders by Testa, Hurwitz & Thibeault, LLP, Boston, Massachusetts. 43 46 EXPERTS The consolidated financial statements as of June 30, 1994 and 1995 and for each of the three years in the period ended June 30, 1995 included in this Prospectus and the financial statement schedule included in the Registration Statement have been so included in reliance on the report of Price Waterhouse LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting. 44 47 PAREXEL INTERNATIONAL CORPORATION INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Accountants..................................................... F-2 Consolidated statement of operations for the three years ended June 30, 1995 and unaudited for the nine months ended March 31, 1995 and 1996......................... F-3 Consolidated balance sheet at June 30, 1994 and 1995 and unaudited at March 31, 1996................................................................................ F-4 Consolidated statement of stockholders' equity for the three years ended June 30, 1995 and unaudited for the nine months ended March 31, 1995 and 1996..................... F-5 Consolidated statement of cash flows for the three years ended June 30, 1995 and unaudited for the nine months ended March 31, 1995 and 1996......................... F-6 Notes to consolidated financial statements............................................ F-7
F-1 48 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholders of PAREXEL International Corporation In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of operations, of stockholders' equity and of cash flows present fairly, in all material respects, the financial position of PAREXEL International Corporation and its subsidiaries at June 30, 1994 and 1995, and the results of their operations and their cash flows for each of the three years in the period ended June 30, 1995, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. As discussed in Note 2 of the consolidated financial statements, the Company changed its method of accounting for income taxes in fiscal 1994. PRICE WATERHOUSE LLP Boston, Massachusetts September 25, 1995 F-2 49 PAREXEL INTERNATIONAL CORPORATION CONSOLIDATED STATEMENT OF OPERATIONS (in thousands, except per share data)
NINE MONTHS ENDED FOR THE YEAR ENDED JUNE 30, MARCH 31, ---------------------------------- --------------------- 1993 1994 1995 1995 1996 -------- -------- -------- -------- -------- (UNAUDITED) Revenue............................. $ 65,294 $ 69,646 $ 79,928 $ 55,998 $ 84,797 Reimbursed costs.................... (11,294) (11,644) (21,355) (13,717) (23,701) -------- -------- -------- -------- -------- Net revenue......................... 54,000 58,002 58,573 42,281 61,096 -------- -------- -------- -------- -------- Costs and expenses: Direct costs................... 36,106 38,244 42,140 30,803 42,027 Selling, general and administrative............... 11,831 13,631 13,294 9,762 13,079 Depreciation and amortization................. 2,511 2,435 2,251 1,809 1,649 Restructuring charge........... 3,254 -- -- -- -- Impairment of long-lived assets....................... -- -- 11,253 11,253 -- -------- -------- -------- -------- -------- 53,702 54,310 68,938 53,627 56,755 -------- -------- -------- -------- -------- Income (loss) from operations....... 298 3,692 (10,365) (11,346) 4,341 Interest income (expense)........... (181) (71) (172) (16) 623 Other income (expense), net......... (339) (125) 227 16 19 -------- -------- -------- -------- -------- Income (loss) before provision (benefit) for income taxes and cumulative effect of accounting change............................ (222) 3,496 (10,310) (11,346) 4,983 Provision (benefit) for income taxes............................. 1,935 1,573 320 (33) 1,988 -------- -------- -------- -------- -------- Net income (loss) before cumulative effect of accounting change....... (2,157) 1,923 (10,630) (11,313) 2,995 Cumulative effect of change in method of accounting for income taxes............................. -- 500 -- -- -- -------- -------- -------- -------- -------- Net income (loss)................... $ (2,157) $ 2,423 $(10,630) $(11,313) $ 2,995 ======== ======== ======== ======== ======== Net income (loss) per share: Before cumulative effect of accounting change............ $ (2.97) $ 0.35 $ (12.61) $ (13.44) $ 0.48 Cumulative effect of change in method of accounting for income taxes................. -- 0.09 -- -- -- -------- -------- -------- -------- -------- Net income (loss) per share......... $ (2.97) $ 0.44 $ (12.61) $ (13.44) $ 0.48 ======== ======== ======== ======== ======== Weighted average common shares outstanding....................... 727 5,747 843 842 6,272 ======== ======== ======== ======== ========
The accompanying notes are an integral part of the consolidated financial statements. F-3 50 PAREXEL INTERNATIONAL CORPORATION CONSOLIDATED BALANCE SHEET (in thousands, except share data)
JUNE 30 ------------------- MARCH 31, 1994 1995 1996 ------- ------- ----------- (UNAUDITED) ASSETS Current assets: Cash and cash equivalents: Unrestricted.......................................... $ 2,366 $ 5,315 $ 2,666 Restricted............................................ 431 1,360 902 Short-term investments................................... 700 1,500 44,581 Accounts receivable, net................................. 23,322 24,675 35,201 Other current assets..................................... 2,576 4,003 6,237 ------- ------- ------- Total current assets............................. 29,395 36,853 89,587 Property and equipment, net................................ 4,902 4,671 5,958 Intangible assets, net..................................... 10,559 605 439 Other assets............................................... 1,080 1,121 991 ------- ------- ------- $45,936 $43,250 $96,975 ======= ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current maturities of long-term debt..................... $ 364 $ 692 $ 665 Accounts payable......................................... 2,020 2,466 3,333 Advance billings......................................... 9,440 14,032 23,175 Other current liabilities................................ 6,686 8,089 8,900 ------- ------- ------- Total current liabilities........................ 18,510 25,279 36,073 Long-term debt............................................. 391 633 682 Other liabilities.......................................... 1,799 1,814 1,745 ------- ------- ------- Total liabilities................................ 20,700 27,726 38,500 ------- ------- ------- Commitments and contingencies (Note 16) Stockholders' equity: Convertible preferred stock.............................. 23,683 23,683 -- Common stock -- $.01 par value; shares authorized: 6,684,077 at June 30, 1994 and 1995 and 25,000,000 at March 31, 1996; shares issued: 836,378 at June 30, 1994, 858,364 at June 30, 1995 and 7,656,872 at March 31, 1996; shares outstanding: 823,045 at June 30, 1994, 843,658 at June 30, 1995 and 7,642,166 at March 31, 1996;............................................. 8 9 77 Additional paid-in capital............................... 358 406 64,961 Retained earnings (accumulated deficit).................. 1,804 (8,826) (6,771) Stock subscriptions receivable........................... (163) (157) -- Cumulative translation adjustment........................ (454) 409 208 ------- ------- ------- Total stockholders' equity....................... 25,236 15,524 58,475 ------- ------- ------- $45,936 $43,250 $96,975 ======= ======= =======
The accompanying notes are an integral part of the consolidated financial statements. F-4 51 PAREXEL INTERNATIONAL CORPORATION CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (in thousands, except number of shares)
CONVERTIBLE COMMON STOCK PREFERRED STOCK ------------------------------ RETAINED ----------------------- ADDITIONAL EARNINGS STOCK NUMBER ISSUANCE NUMBER PAR PAID-IN (ACCUMULATED SUBSCRIPTIONS OF SHARES PRICE, NET OF SHARES VALUE CAPITAL DEFICIT) RECEIVABLE ---------- ---------- --------- ----- ---------- ------------ ------------- BALANCE AT JUNE 30, 1992......... 1,946,195 $ 19,950 723,878 $ 7 $ 314 $ 1,538 $(148) Issuance of common stock upon exercise of stock options...... 10,500 23 Issuance of Series B convertible preferred stock upon exercise of warrants.................... 3,333 100 Issuance of Series J convertible preferred stock upon exercise of warrants.................... 151,516 2,500 Forfeiture and repurchase of restricted shares.............. (13,333) (134) Foreign currency translation..... Net loss......................... (2,157) ---------- ---------- --------- --- -------- --------- ----- BALANCE AT JUNE 30, 1993......... 2,101,044 22,550 721,045 7 203 (619) (148) Issuance of Series D convertible preferred stock upon exercise of warrants.................... 226,700 1,133 (33) Issuance of common stock upon exercise of stock options...... 102,000 1 75 Income tax benefit from exercise of stock options............... 80 Proceeds from stock subscriptions receivable..................... 18 Foreign currency translation..... Net income....................... 2,423 ---------- ---------- --------- --- -------- --------- ----- BALANCE AT JUNE 30, 1994......... 2,327,744 23,683 823,045 8 358 1,804 (163) Issuance of common stock upon exercise of stock options...... 21,986 1 65 Repurchase of common shares...... (1,373) (17) Proceeds from stock subscriptions receivable..................... 6 Foreign currency translation..... Net loss......................... (10,630) ---------- ---------- --------- --- -------- --------- ----- BALANCE AT JUNE 30, 1995......... 2,327,744 23,683 843,658 9 406 (8,826) (157) Issuance of Series F and G preferred stock upon exercise of warrants (unaudited)........ 176,887 1,769 Proceeds from stock subscriptions receivable (unaudited)......... 157 Conversion of preferred stock into common upon initial public offering (unaudited).... (2,504,631) (25,452) 4,478,008 45 25,408 Payment of accrued preferred stock dividends (unaudited).... (940) Net proceeds from initial public offering of common stock (unaudited).................... 1,600,000 16 21,204 Net proceeds from follow-on public offering (unaudited).... 500,000 5 15,645 Issuance of common stock upon exercise of stock options (unaudited).................... 220,500 2 306 Income tax benefit from exercise of stock options (unaudited)... 1,992 Foreign currency translation (unaudited).................... Net income (unaudited)........... 2,995 --------- --------- --------- --- -------- ---------- ----- BALANCE AT MARCH 31, 1996 (UNAUDITED).................... -- -- 7,642,166 $77 $ 64,961 $ (6,771) $ -- ========= ========= ========= === ======== ========== ===== CUMULATIVE TOTAL DEFERRED TRANSLATION STOCKHOLDERS' COMPENSATION ADJUSTMENT EQUITY ------------ ----------- ------------ BALANCE AT JUNE 30, 1992......... $ (128) $ 274 $ 21,807 Issuance of common stock upon exercise of stock options...... 23 Issuance of Series B convertible preferred stock upon exercise of warrants.................... 100 Issuance of Series J convertible preferred stock upon exercise of warrants.................... 2,500 Forfeiture and repurchase of restricted shares.............. 128 (6) Foreign currency translation..... (420) (420) Net loss......................... (2,157) ------ ---- ------------ BALANCE AT JUNE 30, 1993......... -- (146) 21,847 Issuance of Series D convertible preferred stock upon exercise of warrants.................... 1,100 Issuance of common stock upon exercise of stock options...... 76 Income tax benefit from exercise of stock options............... 80 Proceeds from stock subscriptions receivable..................... 18 Foreign currency translation..... (308) (308) Net income....................... 2,423 ------ ----- ------- BALANCE AT JUNE 30, 1994......... -- (454) 25,236 Issuance of common stock upon exercise of stock options...... 66 Repurchase of common shares...... (17) Proceeds from stock subscriptions receivable..................... 6 Foreign currency translation..... 863 863 Net loss......................... (10,630) ------ ---- -------- BALANCE AT JUNE 30, 1995......... -- 409 15,524 Issuance of Series F and G preferred stock upon exercise of warrants (unaudited)........ 1,769 Proceeds from stock subscriptions receivable (unaudited)......... 157 Conversion of preferred stock into common upon initial public offering (unaudited).... -- Payment of accrued preferred stock dividends (unaudited).... (940) Net proceeds from initial public offering of common stock (unaudited).................... 21,220 Net proceeds from follow-on public offering (unaudited).... 15,650 Issuance of common stock upon exercise of stock options (unaudited).................... 309 Income tax benefit from exercise of stock options (unaudited)... 1,992 Foreign currency translation (unaudited).................... (201) (201) Net income (unaudited)........... 2,995 ------ ----- -------- BALANCE AT MARCH 31, 1996 (UNAUDITED).................... $ -- $ 208 $ 58,475 ====== ===== ========
The accompanying notes are an integral part of the consolidated financial statements. F-5 52 PAREXEL INTERNATIONAL CORPORATION CONSOLIDATED STATEMENT OF CASH FLOWS (in thousands) Increase (Decrease) in Cash and Cash Equivalents
NINE MONTHS ENDED FOR THE YEAR ENDED JUNE 30, MARCH 31, ------------------------------ -------------------- 1993 1994 1995 1995 1996 ------- ------- -------- -------- -------- (UNAUDITED) Cash flows from operating activities: Net income (loss)................................. $(2,157) $ 2,423 $(10,630) $(11,313) $ 2,995 Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities: Depreciation and amortization................... 2,511 2,435 2,251 1,809 1,649 Restructuring transactions...................... 3,273 (1,959) (683) (527) (110) Impairment of long-lived assets................. -- -- 11,253 11,253 -- Change in assets and liabilities: Restricted cash............................... 429 (282) (929) (787) 458 Accounts receivable, net...................... (4,436) (6,309) (281) (2,246) (11,052) Other current assets.......................... (624) (366) (1,395) 11 (2,319) Other assets.................................. 299 (531) (79) (70) 254 Accounts payable.............................. 479 (1,573) 256 227 928 Advance billings.............................. 18 350 3,953 7,730 9,465 Other current liabilities..................... (886) 1,867 1,932 148 2,857 Other liabilities............................. 83 (239) 56 41 36 ------- ------- -------- -------- -------- Net cash provided (used) by operating activities.... (1,011) (4,184) 5,704 6,276 5,161 ------- ------- -------- -------- -------- Cash flows from investing activities: Purchases of short-term investments............... (8,015) (2,787) (3,510) (2,500) (146,600) Proceeds from sale of short-term investments...... 9,807 4,303 2,710 700 103,519 Purchase of property and equipment................ (1,699) (1,979) (1,460) (1,106) (2,161) Payments for business acquisition................. (100) (100) -- -- -- ------- ------- -------- -------- -------- Net cash used by investing activities............... (7) (563) (2,260) (2,906) (45,242) ------- ------- -------- -------- -------- Cash flows from financing activities: Proceeds from issuance of preferred stock......... 2,600 1,100 -- -- 1,769 Proceeds from issuance of common stock............ 23 76 66 66 37,179 Cash received from stock subscriptions............ -- 18 6 6 157 Payments to acquire treasury stock................ -- -- (17) (17) -- Repayments of long-term debt...................... (1,821) (510) (684) (476) (665) Dividends on preferred stock...................... -- -- -- -- (940) Repayments under lines of credit, net............. -- -- -- -- -- ------- ------- -------- -------- -------- Net cash provided (used) by financing activities.... 802 684 (629) (421) 37,500 ------- ------- -------- -------- -------- Effect of exchange rate changes on unrestricted cash and cash equivalents.............................. (454) (24) 134 178 (68) ------- ------- -------- -------- -------- Net increase (decrease) in unrestricted cash and cash equivalents.................................. (670) (4,087) 2,949 3,127 (2,649) Unrestricted cash and cash equivalents at beginning of period......................................... 7,123 6,453 2,366 2,366 5,315 ------- ------- -------- -------- -------- Unrestricted cash and cash equivalents at end of period............................................ $ 6,453 $ 2,366 $ 5,315 $ 5,493 $ 2,666 ======= ======= ======== ======== ======== Supplemental disclosures of cash flow information: Cash paid during the year for: Interest........................................ $ 172 $ 83 $ 179 $ 150 $ 105 Income taxes.................................... $ 2,621 $ 1,237 $ 565 $ 377 $ 1,225 Supplemental disclosure of noncash financing activities: Property and equipment acquired under capital lease obligations............................... $ 166 $ 666 $ 1,265 $ 1,143 $ 686
The accompanying notes are an integral part of the consolidated financial statements. F-6 53 PAREXEL INTERNATIONAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 -- DESCRIPTION OF THE BUSINESS PAREXEL International Corporation (the "Company"), is a leading contract research organization ("CRO"), providing clinical research and development services to the worldwide pharmaceutical and biotechnology industries. The Company designs, initiates and monitors clinical trials, manages and analyzes clinical data, assists with regulatory affairs and offers other related services and products. NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation The consolidated financial statements include the accounts of PAREXEL International Corporation and its wholly-owned domestic and foreign subsidiaries. The Company's German and French subsidiaries operate on a fiscal year which ends May 31. All significant intercompany accounts and transactions have been eliminated. Revenue Fixed price contract revenue is recognized using the percentage of completion method based on the ratio that costs incurred to date bear to estimated total costs at completion. Revenue from other contracts is recognized as services are provided. Revenue related to contract modifications is recognized when realization is assured and the amounts are reasonably determinable. Adjustments to contract cost estimates are made in the periods in which the facts which require the revisions become known. When the revised estimate indicates a loss, such loss is provided for currently in its entirety. "Unbilled accounts receivable" represents revenue recognized in excess of amounts billed. "Advance billings" represents amounts billed in excess of revenue recognized. Investigator Fees Investigator fees are accrued based on investigator services rendered. Investigator fee payments are made based on predetermined contractual arrangements, which may differ from the accrual of the expense. Payments to investigators in excess of the accrued expense are classified as prepaid expenses and accrued expense in excess of amounts paid is classified as other current liabilities. Cash, Cash Equivalents, Short-Term Investments and Financial Instruments The Company invests excess cash in overnight repurchase agreements and debt securities of government municipalities. These investments are subject to minimal credit and market risk. For the purpose of the statement of cash flows, the Company considers all highly liquid debt instruments purchased with original maturities of three months or less to be cash equivalents. Short-term investments include securities purchased with original maturities of greater than three months. Restricted cash consists of advances and deposits from customers subject to certain restrictions. Effective July 1, 1994, the Company adopted Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities" ("FAS 115") on a prospective basis. Under this standard, the Company is required to classify its marketable securities into one or more of the following categories: held-to-maturity, trading or available-for-sale. At June 30, 1995, all of the Company's short-term investments are classified as available-for-sale. In accordance with FAS 115, securities available-for-sale are recorded at fair market value and any unrealized gains or losses are recorded as part of stockholders' equity. At June 30, 1995 the fair market value of available-for-sale securities approximated cost. The debt securities held by the Company had average maturities of 16 years. These securities include seven day put options which allow the Company to sell the underlying securities in seven days at par value. As such, there were no realized gains or losses associated with the disposition of these securities. The Company F-7 54 PAREXEL INTERNATIONAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS uses these derivative financial instruments on a limited basis to shorten contractual maturity dates, thereby managing interest rate risk. Premiums paid for purchased options are amortized to interest income in the consolidated statement of operations. Costs of securities sold is determined on a specific identification method. Concentration of Credit Risk Financial instruments which potentially expose the Company to concentrations of credit risk include trade accounts receivable. However, this risk is limited due to the large number of clients and the international dispersion of the Company's client base. Collateral is not required on these transactions. In addition, the Company maintains reserves for potential credit losses and such losses, in the aggregate, have not exceeded management expectations. Property and Equipment Property and equipment is stated at cost. Depreciation is provided on the straight-line method over the estimated useful lives of the assets ranging from three to five years. Leasehold improvements are amortized over the lesser of the estimated useful lives of the improvements or the remaining lease term. Repair and maintenance costs are charged to expense as incurred. Intangible Assets Intangible assets comprise principally goodwill, customer lists, covenants not to compete, the value of an assembled workforce, and other intangible assets attributable to businesses acquired. Goodwill represents the excess of the cost of businesses acquired over the fair value of the related net assets at the date of acquisition, and is amortized using the straight-line method over five to twenty-five years. Other intangible assets are amortized using the straight-line method over five to ten years. Impairment of Long-Lived Assets The Company periodically assesses the recoverability of the carrying amount of long-lived assets, including intangible assets. A loss is recognized when expected future cash flows (undiscounted and without interest) are less than the carrying amount of the asset. The amount of the impairment loss is determined as the difference by which the carrying amount of the asset exceeds the fair value of the asset. Income Taxes Prior to July 1, 1993, deferred income taxes were recorded by the Company using the liability method as established by Statement of Financial Accounting Standards No. 96, "Accounting for Income Taxes" ("FAS 96"). This method gave consideration to future tax consequences associated with differences between financial accounting and tax bases of assets and liabilities subject to significant restrictions on the recognition of deferred tax assets. Effective July 1, 1993, the Company adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("FAS 109") prospectively. FAS 109 requires the recognition of deferred tax assets (representing future tax benefits) attributable to deductible temporary differences between financial statement and income tax bases of assets and liabilities and to operating loss carryforwards to the extent that realization of these benefits is more likely than not. The cumulative effect of the adoption of FAS 109 increased net income by $500,000 for the year ended June 30, 1994 and primarily related to the future tax benefit of currently not deductible temporary differences within the North American operations. F-8 55 PAREXEL INTERNATIONAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Foreign Currency Assets and liabilities of the Company's international operations are translated into U.S. dollars at exchange rates in effect at the balance sheet date. Income and expense items are translated at average exchange rates for the period. Accumulated net translation adjustments are included in stockholders' equity. Realized gains and losses recorded in the statement of operations were not material. Net Income (Loss) Per Share Net income (loss) per share is determined by dividing net income (loss) applicable to common stock by the weighted average number of common shares and common share equivalents outstanding during the year. Common share equivalents consist of convertible preferred stock (Note 11) and common stock which may be issuable upon exercise of outstanding common stock options and warrants to purchase convertible preferred stock, when dilutive. Net income (loss) applicable to common stock consists of net income (loss) adjusted by a combination of the elimination of interest expense and additional interest income, net of income taxes, assuming the Company used the proceeds from the exercise of common stock options and convertible preferred stock warrants granted more than one year prior to the offering date to (1) repurchase 20% of the outstanding common stock at market value, (2) eliminate all outstanding long-term debt and (3) invest in government securities. Pursuant to Securities and Exchange Commission Staff Accounting Bulletin No. 83, common stock options granted by the Company during the twelve months preceding the offering date have been included in the calculation of common and common share equivalents outstanding as if they were outstanding for all periods presented using the treasury stock method and an assumed public offering price of $14 per share. Interim Financial Data (Unaudited) The interim financial data at March 31, 1996 and for the nine months ended March 31, 1995 and 1996 included in the accompanying consolidated financial statements is unaudited; however, in the opinion of the Company, the interim financial data include all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the results for the interim periods. The interim financial data are not necessarily indicative of the results of operations for a full fiscal year. NOTE 3 -- IMPAIRMENT OF LONG-LIVED ASSETS In fiscal 1991, PAREXEL acquired AFB Arzneimittelforschung GmbH, in Berlin (which was subsequently renamed PAREXEL GmbH), a contract research organization headquartered in Germany in exchange for $3.9 million of cash, Series H Convertible Preferred Stock then valued at $1.3 million and the assumption of $16.1 million of liabilities. Since it was acquired, PAREXEL GmbH's financial performance has fallen below management's expectations and has experienced a continued declining revenue base. In response, management implemented a restructuring effort in fiscal 1993 (Note 4) and continued to budget positive operating results that supported the realization of the related net assets. However, in the third quarter of fiscal 1995, PAREXEL GmbH's operations suffered a further decline in net revenue resulting in a net loss for the period. Also during the third quarter, drug development regulations in Germany and Europe were modified, and further changes were being contemplated, all of which were expected to have a detrimental impact on PAREXEL GmbH's operations. Considering the cumulative impact of the above-described factors, management updated its assessment of the realizability of the long-lived assets of PAREXEL GmbH as of the third quarter of fiscal 1995. In accordance with its accounting policy for impaired long-lived assets, management prepared a forecast of PAREXEL GmbH's expected future cash flows on an undiscounted basis and without interest charges. This forecast was based on assumptions developed by management using PAREXEL GmbH's historical F-9 56 PAREXEL INTERNATIONAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS experience as well as the best estimate of future trends and events. In the short-term, management has forecasted declining revenue in certain of PAREXEL GmbH's operations in recognition of the current business environment within Germany. In the longer-term, management's assumptions reflect a stabilization of the revenue base, followed by a period of moderate revenue and expense growth (approximately 4% annually). The sum of the forecasted cash flows from management's model was less than the carrying amount of PAREXEL's investment in PAREXEL GmbH. To assess the fair value of PAREXEL GmbH, the company retained a valuation expert. A discounted cash flow valuation technique was utilized with a discount rate of approximately 19.5% based upon PAREXEL GmbH's calculated cost of capital. The results of this calculation indicated a de minimus valuation and accordingly, in the third quarter of fiscal 1995, the Company recorded an impairment loss on long-lived assets of $11.3 million; comprising $8.7 million in goodwill, $1.4 million in fixed assets and $1.2 million in identifiable intangible assets. NOTE 4 -- RESTRUCTURING CHARGE In fiscal 1993, the Company recorded a charge aggregating $3,254,000 with respect to a plan to restructure its German operations. The plan primarily involved the physical consolidation of several operating groups within two facilities and a reduction in employee headcount. The charge included lease abandonment costs, write-offs of leasehold improvements, severance payments and other expenses directly associated with the restructuring plan. The remaining liability associated with this restructuring was $596,000 at June 30, 1994 and primarily related to remaining lease payments on duplicative facilities. Charges against this reserve during fiscal 1995 were $443,000. The remaining liability at June 30, 1995 of $153,000 is expected to be utilized by the end of fiscal 1997. There were no material changes in estimates included in this restructuring liability during fiscal 1995. NOTE 5 -- ACCOUNTS RECEIVABLE Accounts receivable at June 30, 1994 and 1995 consisted of the following (in thousands):
1994 1995 ------- ------- Billed........................................................... $10,896 $14,081 Unbilled......................................................... 13,006 11,868 Allowance for doubtful accounts.................................. (580) (1,274) ------- ------- $23,322 $24,675 ======= =======
NOTE 6 -- PROPERTY AND EQUIPMENT Property and equipment at June 30, 1994 and 1995 consisted of the following (in thousands):
1994 1995 ------ ------- Computer and office equipment..................................... $6,065 $ 6,807 Computer software................................................. 1,030 1,061 Furniture and fixtures............................................ 1,896 2,117 Motor vehicles.................................................... 57 23 Leasehold improvements............................................ 681 371 ------ ------- 9,729 10,379 Less accumulated depreciation and amortization.................... 4,827 5,708 ------ ------- $4,902 $ 4,671 ====== =======
F-10 57 PAREXEL INTERNATIONAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Included in the above amounts is property and equipment acquired under capital lease obligations of approximately $1,777,000 and $3,036,000 at June 30, 1994 and 1995, respectively. Accumulated depreciation on property and equipment under capital leases totalled approximately $858,000 and $1,285,000 at June 30, 1994 and 1995, respectively. Depreciation and amortization expense relating to property and equipment was approximately $1,398,000, $1,463,000 and $1,689,000 for the years ended June 30, 1993, 1994 and 1995, respectively, of which $247,000, $286,000 and $427,000 related to amortization of property and equipment under capital leases. NOTE 7 -- INTANGIBLE ASSETS Intangible assets at June 30, 1994 and 1995 consisted of the following (in thousands):
1994 1995 ------- ------ Goodwill..................................................... $11,353 $1,588 Other........................................................ 3,020 831 ------- ------ 14,373 2,419 Less accumulated amortization: Goodwill..................................................... 2,186 1,057 Other........................................................ 1,628 757 ------- ------ $10,559 $ 605 ======= ======
NOTE 8 -- OTHER CURRENT LIABILITIES Other current liabilities at June 30, 1994 and 1995 consisted of the following (in thousands):
1994 1995 ------ ------ Accrued compensation and withholdings.............................. $1,999 $2,068 Accrued investigator fees.......................................... 266 1,608 Estimated contract completion costs in excess of revenue........... 163 210 Accrued restructuring charges...................................... 596 153 Income taxes payable............................................... 601 720 Other.............................................................. 3,061 3,330 ------ ------ $6,686 $8,089 ====== ======
NOTE 9 -- LINES OF CREDIT The Company has domestic and foreign line of credit arrangements with banks totalling approximately $6.4 million. The lines are collateralized by accounts receivable, are payable on demand and bear interest at the local bank base or money market rate, plus 1% to 3% (resulting in interest rates ranging from 9.4% to 10.0% at June 30, 1995). There were no borrowings outstanding under these lines of credit at either June 30, 1994 or June 30, 1995. The lines expire at various dates through November 1996 and are renewable. The Company has a $2,350,000 capital lease line of credit with a U.S. bank for the financing of property and equipment. This line is collateralized by property and equipment. Borrowings under this line are payable over a three year term with interest fixed at the five year U.S. Treasury note rate plus 2.5% (for a total interest rate of 8.3% at June 30, 1995) and are included in long-term debt (see Note 10). This line of credit expires on November 30, 1996 and is renewable annually. Approximately $470,000 was available under this line at June 30, 1995. F-11 58 PAREXEL INTERNATIONAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 10 -- LONG-TERM DEBT Long-Term Debt Long-term debt at June 30, 1994 and 1995 consisted of the following (in thousands):
1994 1995 ---- ------ Obligations under capital leases..................................... $755 $1,325 Less current maturities.............................................. 364 692 ---- ------ $391 $ 633 ==== ======
The Company leases certain property and equipment under its capital lease line of credit (see Note 9) and other capital lease agreements. Aggregate lease obligations bear a weighted average interest rate of approximately 11% at June 30, 1995. Long-term debt matures as follows: $691,892 in fiscal 1996, $536,268 in fiscal 1997 and $97,077 in fiscal 1998. NOTE 11 -- STOCKHOLDERS' EQUITY Public Offerings (Unaudited) On November 22, 1995, 1,600,000 shares of the Company's common stock were sold by the Company to the public in the Company's initial public offering at a price of $15 per share. Proceeds to the Company, net of offering expenses, amounted to $21.2 million. Upon closing of the initial public offering, the Company received $157,000 in repayment of stock subscriptions receivable, $1.8 million of proceeds from the exercise of preferred stock warrants and all of the preferred stock automatically converted into a total of 4,478,008 shares of common stock. In addition, the Company paid cumulative dividends to Series A and B preferred stockholders of approximately $940,000. On March 1, 1996, an additional 500,000 shares of the Company's common stock were sold to the public at a price per share of $33.75. Proceeds to the Company, net of offering expenses, amounted to approximately $15.7 million. Convertible Preferred Stock Convertible preferred stock at June 30, 1994 and 1995 consisted of the following (in order of liquidation preference) (dollars in thousands, except par value):
Series A, $0.01 par value; 40,000 shares authorized, 35,495 shares issued and outstanding......................................................... $ 558 Series B, $0.01 par value, 95,000 shares authorized, 65,000 shares issued and outstanding......................................................... 1,904 Series C, $0.01 par value, 295,874 shares authorized, issued and outstanding............................................................. 1,151 Series D, $0.01 par value, 473,400 shares authorized, issued and outstanding............................................................. 2,363 Series F, $0.01 par value, 819,000 shares authorized, 468,332 shares issued and outstanding.................................................. 4,635 Series G, $0.01 par value, 819,000 shares authorized, 141,300 shares issued and outstanding.................................................. 1,398 Series I, $0.01 par value, 508,334 shares authorized, issued and outstanding............................................................. 7,389 Series J, $0.01 par value, 151,516 shares authorized, issued and outstanding............................................................. 2,500 Series E, $0.01 par value, 60,000 shares authorized, issued and outstanding............................................................. 500 Series H, $0.01 par value, 145,000 shares authorized, 128,493 shares issued and outstanding.................................................. 1,285 ------- $23,683 =======
F-12 59 PAREXEL INTERNATIONAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS All preferred stock is convertible at any time into shares of common stock at the option of the holder according to specified conversion rates (twenty-for-one for Series A and B, and one-for-one for all other preferred stock). In addition, Series G preferred stock is convertible into Series F preferred stock at any time. Series F preferred stock is also convertible into Series G preferred stock at any time. Each series of preferred stock includes antidilution and conversion price adjustment provisions that may increase the conversion ratio for these shares in the event of a sale by the Company of additional shares of common stock at a price below the conversion price for such series. Automatic conversion all preferred stock occurs upon the closings of an initial public offering provided certain defined minimum proceeds and per share requirements are met. The conversion of preferred stock into a total of 4,301,121 shares of common stock is reflected in the unaudited consolidated balance sheet at December 31, 1995 at the initial public offering price of $15.00 per share. All preferred stockholders are entitled to dividend and voting rights afforded common stockholders, except Series G which is non-voting, in proportion to the number of common shares into which their preferred shares are convertible. In addition, the holders of preferred stock have certain antidilutive rights, rights to representation on the Company's Board of Directors and certain required registration privileges. Series A and B preferred stock accrue dividends cumulatively at a rate of $1.35 and $2.40 per share per annum, respectively. Such dividends may only be paid at the discretion of the Board of Directors and are payable upon conversion of the related shares into common stock upon the closing of an initial public offering, out of legally available funds. Preferred Stock Warrants At June 30, 1995, the Company had outstanding warrants to purchase 92,887 and 90,000 shares of Series F and Series G convertible preferred stock, respectively, at an exercise price of $10.00 per share. These warrants were issued in conjunction with the issuance of the same respective series of convertible preferred stock and expire on December 31, 1996. The warrants are subject to early expiration in the event of an initial public offering where certain defined minimum proceeds and per share requirements are met, and are automatically converted into proportional equivalent common stock warrants upon the redemption, cancellation or conversion of all outstanding shares of the related series of preferred stock. Reserved Shares At June 30, 1995, the Company had reserved 705,874 shares of common stock for the exercise of common stock options and 4,237,149 and 182,887 shares of common stock for the conversion of outstanding shares of preferred stock and shares of preferred stock issuable upon the exercise of outstanding warrants, respectively. In addition, shares of the various series of preferred stock are reserved for the exercise of preferred stock warrants and preferred stock conversions. Treasury Stock At June 30, 1994, the Company held 13,333 shares of common stock in treasury, at a cost per share of $0.01. During the year ended June 30, 1995, 1,373 common shares were repurchased at a cost per share of $12.50. There were 14,706 shares of common stock held in treasury at June 30, 1995. NOTE 12 -- STOCK AND EMPLOYEE BENEFIT PLANS Common Stock Options The Company's 1986 Incentive Stock Option Plan, 1987 Stock Plan and 1989 Stock Plan (collectively, the "Plans") provide for the granting of incentive and non-qualified stock options for the purchase of shares of common stock, and awards and sales of common stock, to directors, officers, employees and consultants, F-13 60 PAREXEL INTERNATIONAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS depending upon the provisions of the plan. An aggregate of 638,000 shares of common stock was originally reserved for issuance under the Plans. In September 1995 the Company adopted the 1995 Stock Plan (the "1995 Plan"). The 1995 Plan provides for the issuance of up to 500,000 stock options to key employees, officers, consultants and advisors of the Company. The Company granted options to purchase 89,500 shares of conversion stock under the 1995 Plan contingent upon the effectiveness of the Company's initial public offering. These options have an exercise price equal to the initial public offering price. The Company's Board of Directors determines the type of grant, option exercise price per share, the vesting period (generally four to five years), and the expiration date at the date of grant. In September 1995 the Company adopted the 1995 Non-Employee Director Stock Option Plan ("Director Plan"). The Director Plan provides for the grant of options to purchase up to 300,000 shares of common stock of the Company. Options totalling 86,500 will be automatically granted upon the effective date of the initial public offering by the Company at an exercise price equal to the initial public offering price and will become exercisable on the first succeeding June 30th after the effective date. All other options become exercisable in three equal annual installments beginning on the first anniversary of the date of grant, subject to specified meeting attendance requirements. No options have been granted to date under the Director Plan. In addition to plan options granted, the Company granted options to purchase an aggregate of 86,300 shares of common stock not pursuant to any plan at various dates prior to 1989, which options remain outstanding at June 30, 1995. These options are exercisable at any time at prices ranging from $0.35 to $0.75 per share. During the year ended June 30, 1994, the Company granted additional options to purchase 40,000 shares of common stock not pursuant to any plan. These options vest over a three year period and have an exercise price of $12.50 per share. Aggregate stock option activity during fiscal 1993, 1994 and 1995 was as follows:
SHARES EXERCISE PRICE -------- --------------- Outstanding at June 30, 1992..................................... 761,206 $ 0.25 -- $10.00 Granted..................................................... 19,000 10.00 -- 12.50 Canceled.................................................... (28,684) 0.60 -- 12.50 Exercised................................................... (10,500) 0.60 -- 6.00 -------- Outstanding at June 30, 1993..................................... 741,022 0.25 -- 12.50 Granted..................................................... 95,300 12.50 Canceled.................................................... (11,500) 0.60 -- 12.50 Exercised................................................... (102,000) 0.60 -- 0.75 -------- Outstanding at June 30, 1994..................................... 722,822 0.25 -- 12.50 Granted..................................................... 12,000 12.50 Canceled.................................................... (75,383) 3.00 -- 12.50 Exercised................................................... (21,986) 3.00 -------- Outstanding at June 30, 1995..................................... 637,453 0.25 -- 12.50 ======== Exercisable at June 30, 1995..................................... 556,644 0.25 -- 12.50 ======== Available for future grant at June 30, 1995...................... 68,421 ========
All of the foregoing options were granted with an exercise price equal to fair market value at the time of grant, as determined by the Board of Directors. F-14 61 PAREXEL INTERNATIONAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Employee Stock Purchase Plan In September 1995 the Company adopted the 1995 Employee Stock Purchase Plan (the "Purchase Plan"). Under the Purchase Plan, employees may be granted the opportunity to purchase common stock at 85% of the average market value on the first or last day of the plan period (as defined by the Purchase Plan), whichever is lower. An aggregate of 300,000 shares may be issued under the Purchase Plan. 401(k) Plan The Company sponsors an employee savings plan (the "Plan") as defined by Section 401(k) of the Internal Revenue Code of 1986, as amended. The Plan covers substantially all employees in the U.S. who elect to participate. Participants have the opportunity to invest on a pre-tax basis in a variety of mutual fund options. Effective July 1, 1992, the Company matches 100% of each participants' voluntary contributions up to 3% of gross salary per payroll period. Company contributions vest to the participants in 20% increments for each year of employment and become fully vested after five years of continued employment. Company contributions to the Plan were $376,000 and $327,000 for the years ended June 30, 1994 and 1995, respectively. NOTE 13 -- INCOME TAXES Domestic and foreign income (loss) before income taxes for the years ended June 30, 1993, 1994 and 1995 are as follows (in thousands):
1993 1994 1995 ------- ------ -------- Domestic................................................. $ 3,588 $2,702 $ 350 Foreign.................................................. (3,810) 794 (10,660) ------- ------ -------- $ (222) $3,496 $(10,310) ======= ====== ========
The following table summarizes the provision for income taxes for the year ended June 30, 1993 under FAS 96 and for the years ended June 30, 1994 and 1995 under FAS 109 (in thousands):
1993 1994 1995 ------ ------ ----- Current: Federal............................................ $1,209 $ 881 $ 274 State.............................................. 494 421 192 Foreign............................................ 80 361 78 ------ ------ ----- 1,783 1,663 544 ------ ------ ----- Deferred: Federal............................................ 138 (55) (164) State.............................................. (6) (18) (55) Foreign............................................ -- (17) (5) ------ ------ ----- 132 (90) (224) ------ ------ ----- Benefit of acquired loss carryforwards to reduce goodwill.............................................. 20 -- -- ------ ------ ----- $1,935 $1,573 $ 320 ====== ====== =====
F-15 62 PAREXEL INTERNATIONAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Income taxes are greater than the amount of income tax determined by applying the applicable U.S. federal statutory income tax rate to income before income taxes as a result of the following differences (in thousands):
1993 1994 1995 ------ ------ ------- Income tax expense (benefit) at the 34% federal statutory rate....................................... $ (76) $1,189 $(3,505) State income taxes, net of federal benefit............. 322 282 92 Foreign rate differential.............................. (3) 105 (108) Non-deductible amortization of intangible assets....... 349 305 169 Non-deductible impairment of assets.................... -- -- 3,348 Foreign operating losses without current benefit....... 23 -- 334 Temporary items without current benefit (reversals).... 1,302 (341) -- Other.................................................. 18 33 (10) ------ ------ ------- $1,935 $1,573 $ 320 ====== ====== =======
Temporary items without current benefit relate primarily to book and tax differences between the deductibility of restructuring charges (see Note 4). Provision has not been made for U.S. or additional foreign taxes on undistributed earnings of foreign subsidiaries as those earnings have been permanently reinvested. Such taxes, if any, are not expected to be significant. Significant components of the Company's net deferred tax asset as of June 30, 1994 and 1995 are as follows (in thousands):
1994 1995 ------- ------- Deferred tax assets: Foreign loss carryforwards.................................. $ 6,440 $ 6,891 Facility and other restructuring costs...................... 857 763 Accrued expenses............................................ 364 445 Property and equipment...................................... -- 703 Allowance for doubtful accounts............................. 162 417 Other....................................................... -- 118 ------- ------- Gross deferred tax assets................................... 7,823 9,337 Deferred tax asset valuation allowance...................... (6,071) (7,491) ------- ------- Total deferred tax assets.............................. 1,752 1,846 ------- ------- Deferred tax liabilities: Deferred foreign contract profit............................ (754) (463) Other....................................................... (148) (289) ------- ------- Total deferred tax liabilities......................... (902) (752) ------- ------- $ 850 $ 1,094 ======= =======
The net deferred tax asset includes the tax effect of approximately $13,900,000 of pre-acquisition and post-acquisition foreign tax loss carryforwards available to offset future liabilities for foreign income tax. Substantially all of the foreign tax losses are carried forward indefinitely, subject to certain limitations. A valuation allowance has been established for the future foreign income tax benefits primarily related to income tax loss carryforwards and temporary differences. The ultimate realization of these loss carryforwards is primarily dependent upon the generation of sufficient taxable income in respective foreign jurisdictions, primarily Germany. F-16 63 PAREXEL INTERNATIONAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The sources of the components comprising the deferred income tax expense (benefit) are as follows for the year ended June 30, 1993 as recorded under FAS 96 (in thousands):
1993 ---- Depreciation...................................................... 37 Accounts receivable............................................... (16) Compensation costs................................................ (44) Facility restructuring............................................ 156 Other............................................................. (1) ---- $132 ====
NOTE 14 -- OTHER INCOME (EXPENSE), NET Other income (expense), net includes interest income of $370,000, $250,000 and $213,000 for the years ended June 30, 1993, 1994, and 1995, respectively. In addition, expenses from postponed initial public offerings of $775,000 and $450,000 are included for the years ended June 30, 1993 and 1994, respectively. NOTE 15 -- GEOGRAPHIC INFORMATION The Company's operations involve a single industry segment providing clinical research and development services. The principal financial information by geographic area is as follows (in thousands):
FOR THE YEAR ENDED JUNE 30, -------------------------------- 1993 1994 1995 ------- ------- -------- Net revenue North America........................................... $33,023 $37,111 $ 35,037 Europe.................................................. 20,977 20,891 23,443 Asia.................................................... -- -- 93 ------- ------- -------- $54,000 $58,002 $ 58,573 ======= ======= ======== Income (loss) from operations North America........................................... $ 4,127 $ 3,096 $ 376 Europe.................................................. (3,829) 596 (10,741) Asia.................................................... -- -- 0 ------- ------- -------- $ 298 $ 3,692 $(10,365) ======= ======= ======== Identifiable assets North America........................................... $20,199 $21,349 $ 25,288 Europe.................................................. 25,258 24,587 17,927 Asia.................................................... -- -- 35 ------- ------- -------- $45,457 $45,936 $ 43,250 ======= ======= ========
Significant Customers For the year ended June 30, 1993, two customers accounted for 12.9% and 11.3% of the Company's consolidated net revenue. No single customer accounted for more than 10% of the Company's consolidated net revenue for the year ended June 30, 1994 or 1995. F-17 64 PAREXEL INTERNATIONAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 16 -- COMMITMENTS The Company leases its facilities under operating leases which include renewal and escalation clauses. Total rent expense was approximately $3,323,000, $3,722,000 and $4,258,000 for years ended June 30, 1993, 1994 and 1995, respectively. Future minimum lease commitments due under non-cancelable operating leases and capital lease obligations at each fiscal year end are as follows (in thousands):
CAPITAL OPERATING LEASES LEASES ------- --------- 1996.......................................................... $ 774 $ 3,999 1997.......................................................... 567 3,592 1998.......................................................... 99 3,041 1999.......................................................... -- 2,557 2000.......................................................... -- 2,275 Thereafter.................................................... -- 3,551 ------ ------- Total obligations............................................. 1,440 $19,015 ======= Less amount representing interest............................. 115 ------ $1,325 ======
NOTE 17 -- RELATED PARTY TRANSACTIONS Certain of the Company's Directors are affiliated with certain of the Company's customers. Net revenue recognized from these customers was $26,000, $1,029,000 and $937,000 in fiscal 1993, 1994 and 1995, respectively. Amounts included in accounts receivable at June 30, 1994 and 1995 were $464,000 and $161,000, respectively. Related party amounts included in accounts receivable are on standard terms and manner of settlement. F-18 65 ================================================================================ NO DEALER, SALES REPRESENTATIVE OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OF THE SELLING STOCKHOLDERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY OF THE SECURITIES OFFERED HEREBY BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF THE PROSPECTUS. --------------------- TABLE OF CONTENTS
PAGE ---- Additional Information................ 2 Summary............................... 3 Risk Factors.......................... 6 Use of Proceeds....................... 10 Price Range of Common Stock and Dividend Policy..................... 10 Capitalization........................ 11 Selected Consolidated Financial Data................................ 12 Management's Discussion and Analysis of Financial Condition and Results of Operations....................... 13 Business.............................. 21 Management............................ 32 Certain Relationships and Related Transactions........................ 37 Principal Stockholders................ 39 Selling Stockholders.................. 40 Description of Capital Stock.......... 41 Plan of Distribution.................. 43 Legal Matters......................... 43 Experts............................... 44 Index to Consolidated Financial Statements.......................... F-1
================================================================================ ================================================================================ 56,818 SHARES [PAREXEL LOGO] COMMON STOCK ------------------------------ PROSPECTUS , 1996 ------------------------------ ================================================================================ 66 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. Estimated expenses (other than underwriting discounts and commissions) payable in connection with the sale of the Common Stock offered hereby are as follows: Registration fee........................................................... $ 880 Nasdaq Additional Listing fee.............................................. 1,616 Printing and engraving expenses............................................ 15,000 Legal fees and expenses.................................................... 10,000 Accounting fees and expenses............................................... 10,000 Blue Sky fees and expenses (including legal fees).......................... 1,500 Miscellaneous.............................................................. 11,004 ------- Total............................................................ $50,000 =======
The Company will bear all expenses shown above. ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Article 6 of the Company's Restated Articles of Organization provides that the Company shall indemnify each person who is or was a director or officer of the Company, and each person who is or was serving or has agreed to serve at the request of the Company as a director or officer of, or in a similar capacity with, another organization against all liabilities, costs and expenses reasonably incurred by any such persons in connection with the defense or disposition of or otherwise in connection with or resulting from any action, suit or other proceeding in which they may be involved by reason of being or having been such a director or officer or by reason of any action taken or not taken in such capacity, except with respect to any matter as to which such person shall have been finally adjudicated by a court of competent jurisdiction not to have acted in good faith in the reasonable belief that his or her action was in the best interests of the Company. Section 67 of Chapter 156B of the Massachusetts Business Corporation Law authorizes a corporation to indemnify its directors, officers, employees and other agents unless such person shall have been adjudicated in any proceeding not to have acted in good faith in the reasonable belief that such action was in the best interests of the corporation. Reference is hereby made to Section 9 of the Registration Rights Agreement among the Company and the Selling Stockholders, filed as Exhibit 10.25 of this Registration Statement, for a description of indemnification arrangements between the Company and the Selling Stockholders, pursuant to which the Selling Stockholders are obligated, under certain circumstances, to indemnify directors, officers and controlling persons of the Company against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the "Act"). ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES. In the three years preceding the filing of this registration statement, the Company has issued the following securities that were not registered under the Act: In August 1993, all Series D Convertible Preferred Stock Warrants were exercised by their respective holders. Upon the closing of the Company's initial public offering in November 1995, 226,700 shares of Common Stock were issued upon the automatic conversion of such shares of Series D Convertible Preferred Stock. Since July 1, 1992 and through the date prior to the effective date, the Company has issued options to purchase an aggregate of 527,300 shares of Common Stock exercisable at a weighted average price of $22.90. Since July 1, 1992, options to purchase an aggregate of 342,406 shares of Common Stock have been exercised. II-1 67 No underwriter was engaged in connection with the foregoing sales of securities. Sales of Common Stock to directors, officers and employees were made in reliance upon Section 4(2) of the Act as transactions not involving any public offering or in reliance upon Rule 701 under the Act or Regulation S under the Act. Sales of the shares of Convertible Preferred Stock and Warrants were made in reliance upon Section 4(2) of the Act as a transaction not involving any public offering, Rule 506 of Regulation D under the Act, or Regulation S under the Act. The Company has reason to believe that all of the foregoing purchasers were familiar with or had access to information concerning the operations and financial condition of the Company, and all of those individuals acquired the shares for investment and not with a view to the distribution thereof. At the time of issuance, all of the foregoing securities were deemed to be restricted securities for the purposes of the Act and the certificates representing such securities bore legends to that effect. ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE. (a) Exhibits.
EXHIBIT NO. DESCRIPTION - ----------- ----------- 2.1 -- Stock Purchase Agreement dated as of May 24, 1996 between the Company, Sitebase Clinical Systems, Inc., Raymond A. Konisky and Karen A. Konisky. 3.1 -- Amended and Restated Articles of Organization of the Company (filed as exhibit 3.1 to the Registrant's Registration Statement on Form S-1 (File No. 333-1188) and incorporated herein by this reference). 3.2 -- Amended and Restated By-laws of the Company (filed as exhibit 3.2 to the Registrant's Registration Statement on Form S-1 (File No. 333-1188) and incorporated herein by this reference). 4.1 -- Specimen certificate representing the Common Stock of the Company (filed as exhibit 4.1 to the Registrant's Registration Statement on Form S-1 (File No. 33-97406) and incorporated herein by this reference). 5.1 -- Opinion of Testa, Hurwitz & Thibeault, LLP. 10.1 -- Stock Restriction and Registration Rights Agreement dated as of June 15, 1990 among the Company and Samuel T. Barnett and Frederic Harwood (filed as exhibit 10.1 to the Registrant's Registration Statement on Form S-1 (File No. 33-97406) and incorporated herein by this reference). 10.2 -- Stock Purchase, Restriction and Registration Rights Agreement dated as of March 11, 1991 between the Company and Prof. Dr. Werner M. Herrmann (filed as exhibit 10.2 to the Registrant's Registration Statement on Form S-1 (File No. 33-97406) and incorporated herein by this reference). 10.3 -- Investment Agreement dated as of December 26, 1990 among the Company and the stockholders named therein (filed as exhibit 10.3 to the Registrant's Registration Statement on Form S-1 (File No. 33-97406) and incorporated herein by this reference). 10.4 -- Investment Agreement dated as of March 31, 1992 among the Company and the stockholders named therein (filed as exhibit 10.4 to the Registrant's Registration Statement on Form S-1 (File No. 33-97406) and incorporated herein by this reference). 10.5 -- Sales Contract dated March 11, 1991 among Prof. Dr. Werner M. Herrmann, Josef H. von Rickenbach and William T. Sobo with respect to the sale by Prof. Dr. Herrmann of a majority interest in AFB Arzneimittelforschung GmbH (filed as exhibit 10.5 to the Registrant's Registration Statement on Form S-1 (File No. 33-97406) and incorporated herein by this reference). 10.6 -- Employment Agreement dated June 30, 1993 between AFB-PAREXEL GmbH Independent Pharmaceutical Research Organization and Prof. Dr. med. Werner M. Herrmann (filed as exhibit 10.6 to the Registrant's Registration Statement on Form S-1 (File No. 33-97406) and incorporated herein by this reference).
II-2 68
EXHIBIT NO. DESCRIPTION - ----------- ----------- 10.7 -- Letter Agreement dated June 30, 1993 between the Company and Prof. Dr. Werner M. Herrmann (filed as exhibit 10.7 to the Registrant's Registration Statement on Form S-1 (File No. 33-97406) and incorporated herein by this reference). 10.8 -- Employment Agreement dated July 2, 1987 between Dr. Veronica G.H. Jordan and the Company (filed as exhibit 10.8 to the Registrant's Registration Statement on Form S-1 (File No. 33-97406) and incorporated herein by this reference). 10.9 -- Form of Stock Option Agreement of the Company (filed as exhibit 10.9 to the Registrant's Registration Statement on Form S-1 (File No. 333-1188) and incorporated herein by this reference). 10.10 -- 1986 Incentive Stock Option Plan of the Company (filed as exhibit 10.10 to the Registrant's Registration Statement on Form S-1 (File No. 33-97406) and incorporated herein by this reference). 10.11 -- 1987 Stock Plan of the Company (filed as exhibit 10.11 to the Registrant's Registration Statement on Form S-1 (File No. 33-97406) and incorporated herein by this reference). 10.12 -- 1989 Stock Plan of the Company (filed as exhibit 10.12 to the Registrant's Registration Statement on Form S-1 (File No. 33-97406) and incorporated herein by this reference). 10.13 -- 1995 Stock Plan of the Company (filed as exhibit 10.13 to the Registrant's Registration Statement on Form S-1 (File No. 33-97406) and incorporated herein by this reference). 10.14 -- 1995 Non-Employee Director Stock Option Plan of the Company (filed as exhibit 10.14 to the Registrant's Registration Statement on Form S-1 (File No. 33-97406) and incorporated herein by this reference). 10.15 -- 1995 Employee Stock Purchase Plan of the Company (filed as exhibit 10.15 to the Registrant's Registration Statement on Form S-1 (File No. 33-97406) and incorporated herein by this reference). 10.16 -- Corporate Plan for Retirement of the Company (filed as exhibit 10.16 to the Registrant's Registration Statement on Form S-1 (File No. 33-97406) and incorporated herein by this reference). 10.17 -- Loan and Security Agreement dated as of July 31, 1992 between the Company, Barnett International Corporation and The First National Bank of Boston, as amended (filed as exhibit 10.23 to the Registrant's Registration Statement on Form S-1 (File No. 33-97406) and incorporated herein by this reference). 10.18 -- Line of Credit Agreement between PAREXEL GmbH and Deutsche Bank Berlin, dated January 23, 1995 (filed as exhibit 10.24 to the Registrant's Registration Statement on Form S-1 (File No. 33-97406) and incorporated herein by this reference). 10.19 -- First Amendment dated as of January 3, 1992 to the Lease dated June 14, 1991 between 200 West Street Limited Partnership and the Company (filed as exhibit 10.25 to the Registrant's Registration Statement on Form S-1 (File No. 33-97406) and incorporated herein by this reference). 10.20 -- Second Amendment dated as of June 28, 1993 to the lease dated June 14, 1991 between 200 West Street Limited Partnership and the Company (filed as exhibit 10.28 to the Registrant's Registration Statement on Form S-1 (File No. 33-97406) and incorporated herein by this reference). 10.21 -- Letter of employment dated July 6, 1993 between Barry R. Philpott and the Company (filed as exhibit 10.29 to the Registrant's Registration Statement on Form S-1 (File No. 33-97406) and incorporated herein by this reference). 10.22 -- Credit Agreement dated December 30, 1994 between PAREXEL GmbH and The First National Bank of Boston (filed as exhibit 10.30 to the Registrant's Registration Statement on Form S-1 (File No. 33-97406) and incorporated herein by this reference).
II-3 69
EXHIBIT NO. DESCRIPTION - ----------- ----------- 10.23 -- Collateral Agreement dated December 30, 1994 between PAREXEL GmbH and The First National Bank of Boston (filed as exhibit 10.31 to the Registrant's Registration Statement on Form S-1 (File No. 33-97406) and incorporated herein by this reference). 10.24 -- Registration Rights Agreement dated as of June 28, 1996 between the Company, Raymond A. Konisky and Karen A. Konisky. 11.1 -- Statement re computation of per share earnings. 21.1 -- List of subsidiaries of the Company. 23.1 -- Consent of Price Waterhouse LLP. 23.2 -- Consent of Testa, Hurwitz & Thibeault, LLP (contained in Exhibit 5.1). 24.1 -- Powers of Attorney (see page II-7). - --------------- (b) Financial Statement Schedule for the three years ended June 30, 1995:
PAGE NUMBER ------ Schedule II -- Valuation and Qualifying Accounts and Reserves.......... S-1 All other schedules are omitted because they are not applicable or the required information is shown in the consolidated financial statements or the notes thereto. ITEM 17. UNDERTAKINGS. Insofar as indemnification for liabilities arising under the Act may be permitted to directors, officers and controlling persons of the registrant pursuant to provisions described in Item 14 above, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. The undersigned registrant hereby undertakes (1) to file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement to include any prospectus required by Section 10(a)(3) of the Securities Act of 1933, to reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement or to include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; (2) that, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof; (3) to remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering; and (4) that for purposes of determining any liability under the Act, the information omitted from the form of prospectus filed as part of a registration statement in reliance upon Rule 430A and contained in the form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Act shall be deemed to be part of this registration statement as of the time it was declared effective. II-4 70 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Form S-1 to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Waltham, Massachusetts, on the 26th day of June, 1996. PAREXEL INTERNATIONAL CORPORATION By: /S/ JOSEF H. VON RICKENBACH ------------------------------ Josef H. von Rickenbach President, Chief Executive Officer and Chairman POWER OF ATTORNEY AND SIGNATURES We, the undersigned officers and directors of PAREXEL International Corporation, hereby severally constitute and appoint Josef H. von Rickenbach, William T. Sobo, Jr. and William J. Schnoor, Jr., and each of them singly, as true and lawful attorneys, with full power to them and each of them singly, to sign for us in our names in the capacities indicated below, all pre-effective and post-effective amendments to this registration statement, and generally to do all things in our names and on our behalf in such capacities to enable PAREXEL International Corporation to comply with the provisions of the Securities Act of 1933, as amended, and all requirements of the Securities and Exchange Commission. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated. SIGNATURES TITLE(S) DATE ---------- -------- ---- /S/ JOSEF H. VON RICKENBACH President, Chief Executive June 26, 1996 - ----------------------------- Officer and Chairman (principal Josef H. von Rickenbach executive officer) /S/ WILLIAM T. SOBO, JR. Senior Vice President and June 26, 1996 - ----------------------------- Treasurer (principal financial William T. Sobo, Jr. and accounting officer) /S/ A. DANA CALLOW Director June 26, 1996 - ----------------------------- A. Dana Callow /S/ JAMES L. CURRIE Director - ----------------------------- James L. Currie /S/ PATRICK J. FORTUNE Director June 26, 1996 - ----------------------------- Patrick J. Fortune /S/ WERNER M. HERRMANN Director June 26, 1996 - ----------------------------- Werner M. Herrmann /S/ PETER BARTON HUTT Director June 26, 1996 - ----------------------------- Peter Barton Hutt /S/ JAMES SAALFIELD Director June 26, 1996 - ----------------------------- James Saalfield II-5 EX-2.1 2 STOCK PURCHASE AGREEMENT 1 STOCK PURCHASE AGREEMENT AMONG SITEBASE CLINICAL SYSTEMS, INC., RAYMOND A. KONISKY, KAREN A. KONISKY AND PAREXEL INTERNATIONAL CORPORATION Dated as of May 24, 1996 2 TABLE OF CONTENTS PAGE ---- ARTICLE I....................................................................1 DEFINITIONS..................................................................1 1.01. Definitions.........................................................1 ARTICLE II...................................................................4 PURCHASE AND SALE............................................................4 2.01. Purchase and Sale...................................................4 2.02. Closing.............................................................4 2.03. Certificates for Buyer Stock........................................4 2.04. Transfer Taxes......................................................5 2.05. Books and Records...................................................5 2.06. Resignations........................................................5 2.07. No Fractional Shares................................................5 ARTICLE III..................................................................5 REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND SELLERS....................5 3.01. Corporate Existence and Power.......................................5 3.02. Corporate Authorization.............................................6 3.03. Governmental Authorization; Consents................................6 3.04. Non-Contravention...................................................6 3.05. Capitalization......................................................6 3.06. Subsidiaries........................................................7 3.07. Financial Statements................................................7 3.08. Absence of Certain Changes..........................................7 3.09. Property and Equipment..............................................9 3.10. No Undisclosed Material Liabilities.................................9 3.11. Litigation..........................................................9 3.12. Material Contracts..................................................9 3.13. Insurance Coverage.................................................11 3.14. Compliance with Laws; No Defaults..................................11 3.15. Finders, Fees......................................................11 3.16. Intellectual Property..............................................11 3.17. Inventories........................................................14 3.18. Receivables........................................................14 3.19. Taxes..............................................................14 3.20. Environmental Compliance...........................................15 3.21. Customers..........................................................16 3.22. Transactions with Affiliates.......................................16 3.23. Other Information..................................................16 3.24. Intercompany Arrangements..........................................16 3.25. Representations....................................................16 3 -ii- PAGE ---- ARTICLE IV..................................................................16 ADDITIONAL REPRESENTATIONS OF SELLERS.......................................16 4.01. Title to and Validity of Shares....................................16 4.02. Authority..........................................................17 4.03. Purchase for Investment............................................17 ARTICLE V...................................................................17 REPRESENTATIONS AND WARRANTIES OF BUYER.....................................17 5.01. Organization and Existence.........................................17 5.02. Corporate Authorization............................................17 5.03. Governmental Authorization.........................................17 5.04. Non-Contravention..................................................18 5.05. Finders' Fees......................................................18 5.06. Litigation.........................................................18 5.07. Reports and Financial Statements...................................18 ARTICLE VI..................................................................18 COVENANTS OF THE COMPANY AND SELLERS........................................18 6.01. Conduct of the Company.............................................18 6.02. Access to Information..............................................19 6.03. Notices of Certain Events..........................................19 6.04. Resignations.......................................................20 6.05. Noncompetition.....................................................20 6.06. No Negotiations with Third Parties.................................21 6.07. Confidentiality....................................................21 6.08. Continuing Disclosure..............................................22 6.09. Affiliate Agreements...............................................22 ARTICLE VII.................................................................22 COVENANTS OF BUYER..........................................................22 7.01. Confidentiality....................................................22 7.02. Resale Registration Statement......................................23 7.03. Access.............................................................23 7.05. Annual Report on Form 10-K; Earnings Release.......................23 7.05. Affiliate Agreements...............................................23 7.06. Consents and Approvals.............................................24 ARTICLE VIII................................................................24 COVENANTS OF ALL PARTIES....................................................24 8.01. Best Efforts.......................................................24 8.02. Certain Filings....................................................24 8.03. Public Announcements...............................................24 8.04. Pooling............................................................24 4 -iii- PAGE ---- ARTICLE IX..................................................................24 EMPLOYEE BENEFITS...........................................................25 9.01. Employee Benefits Definitions......................................25 9.02. ERISA Representations..............................................25 9.03. No Third Party Beneficiaries.......................................26 ARTICLE X...................................................................26 CONDITIONS TO CLOSING.......................................................26 10.01. Conditions to the Obligations of Each Party.......................26 10.02. Conditions to Obligation of Buyer.................................26 10.03. Conditions to Obligation of Sellers...............................28 ARTICLE XI..................................................................29 SURVIVAL; INDEMNIFICATION...................................................29 11.01. Survival..........................................................29 11.02. Indemnification...................................................29 11.03. Procedures........................................................29 11.04. Holdback..........................................................30 11.05. Holdback Termination..............................................30 ARTICLE XII.................................................................30 TERMINATION.................................................................30 12.01. Grounds for Termination...........................................30 12.02. Effect of Termination.............................................31 ARTICLE XIII................................................................31 MISCELLANEOUS...............................................................31 13.01. Notices...........................................................31 13.02. Amendments; No Waivers............................................32 13.03. Expenses..........................................................33 13.04. Successors and Assigns............................................33 13.05. Further Assurances................................................33 13.06. Governing Law.....................................................33 13.07. Counterparts; Effectiveness.......................................33 13.08. Entire Agreement..................................................33 13.09. Captions..........................................................33 13.10. Jurisdiction......................................................34 Schedules - --------- Schedule 2.01 List of Stockholders Schedule 3.03 Required Consents 5 -iv- PAGE ---- Schedule 3.04 Defaults Schedule 3.07 Financial Statements Schedule 3.08 Certain Changes Schedule 3.10 Liabilities Schedule 3.12 Material Contracts Schedule 3.14 Permits Schedule 3.16 Intellectual Property Schedule 3.19 Taxes Schedule 5.03 Governmental Authorization Schedule 9.02 Employee Plans Exhibits - -------- Exhibit A Registration Rights Agreement Exhibit B Letter Agreement between Buyer and Raymond A. Konisky Exhibit C Affiliate Agreement of Sitebase Affiliates Exhibit D Affiliate Agreement of PAREXEL Affiliates Exhibit E Opinion of Gordon & Wise 6 -1- STOCK PURCHASE AGREEMENT AGREEMENT dated as of May 24, 1996 between and among Sitebase Clinical Systems, Inc., a Massachusetts corporation (the "COMPANY"); Raymond A. Konisky and Karen A. Konisky (collectively, the "SELLERS"); and PAREXEL International Corporation, a Massachusetts corporation ("BUYER"). W I T N E S S E T H : WHEREAS, Buyer desires to acquire from Sellers all of the outstanding shares of capital stock of the Company (the "SHARES"); and WHEREAS, each Seller desires to sell to Buyer all of the Shares owned by such Seller; NOW, THEREFORE, the parties hereto agree as follows: ARTICLE I DEFINITIONS 1.01. DEFINITIONS. (a) The following terms, as used herein, have the following meanings: "AFFILIATE" means, with respect to any Person, any Person directly or indirectly controlling, controlled by, or under common control with such Person. "ANCILLARY AGREEMENTS" Means the Registration Rights Agreement attached hereto as EXHIBIT A, the Letter Agreement attached hereto as EXHIBIT B and the Affiliate Agreement attached hereto as EXHIBIT C. "BALANCE SHEET" means the balance sheet of the Company as of December 31, 1995 referred to in Section 3.07. "BALANCE SHEET DATE" means December 31, 1995. "BUYER" means PAREXEL International Corporation, a Massachusetts corporation. "BUYER STOCK" means the number of shares of Common Stock, $.01 par value per share, of Buyer as is determined by dividing $2,500,000 by the lesser of (i) the last reported sale price of Buyer's Common Stock on the Nasdaq National Market on the second business day preceding the Closing Date, or (ii) $50 (subject to appropriate adjustment in the event of a stock split or reverse stock split). 7 -2- "BUYER'S COUNSEL" means the law firm of Testa, Hurwitz & Thibeault, Boston, Massachusetts. "CLOSING DATE" means the date of the Closing. "COMPANY" means Sitebase Clinical Systems, Inc., a Massachusetts corporation. "CONVERSION RATIO" means Buyer Stock divided by the total number of Shares outstanding on the Closing Date. "INTELLECTUAL PROPERTY RIGHT" means any trademark, trade name, trade dress, service mark, service name, logo, and corporate name, registration thereof or application for registration therefor; invention, patent, patent application, patent disclosure and any related continuation, continuation-in-part, divisional, reissue, re-examination, utility, model, certificate of invention and design patent, patent application, registration and application for registration; mask work and registration and application for registration thereof; computer software, data and documentation; trade secret, know-how, and confidential business information, whether patentable or nonpatentable and whether or not reduced to practice, know-how, manufacturing and product processes and techniques, research and development information, copyrightable works, financial, marketing and business data, pricing and cost information, business and marketing plans and customer and supplier lists and information; copyright, copyright registration, application for copyright registration; or any other similar type of proprietary intellectual property right, (including without limitation associated goodwill and remedies against infringements thereof and rights of protection of an interest therein under the laws of all jurisdictions) in each case which is owned or licensed by Seller or any Affiliate of Seller and used or held for use by the Company. "LIEN" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest, restriction or encumbrance of any kind in respect of such asset. "MATERIAL ADVERSE CHANGE" means a material adverse change in the business, assets, condition (financial or otherwise), results of operations or prospects of the Company. "MATERIAL ADVERSE EFFECT" means a material adverse effect on the business, assets, condition (financial or otherwise), results of operations or prospects of the Company. "1934 ACT" means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder. "PERSON" means an individual, corporation, partnership, association, trust or other entity or organization, including a government or political subdivision or an agency or instrumentality thereof. "REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement between Sellers and Buyer in the form set forth in EXHIBIT A. 8 -3- "SELLERS" means the stockholders of the Company listed on the signature pages hereto. "SELLERS' COUNSEL" means the law firm of Gordon & Wise, Boston, Massachusetts. "SHARES" means all outstanding capital stock of the Company. "SUBSIDIARY" means any entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are owned directly or indirectly by the Company. (b) Each of the following terms is defined in the Section set forth opposite such term: Term Section ---- ------- Affiliate Agreements 6.09 Benefit Arrangement 9.01 Business 6.05 Buyer Affiliate 7.05 Buyer Group 11.02 CERCLA 3.22 Claims 11.02 Closing 2.02 Code 3.19 Company Affiliate 6.09 Company Securities 3.05 Damages 11.02 Employee Plans 9.01 Environmental Laws 3.22 Environmental Liabilities 3.22 ERISA 9.01 Federal Taxes 8.01 Final Determination 8.01 Financial Statements 3.07 Hazardous Substance 3.22 Holdback Shares 11.04 Indemnified Party 11.02 Indemnifying Party 11.02 Indemnities 13.01 Loss 8.10 Permit 3.14 Purchase Price 2.01 Regulated Activity 3.22 9 -4- Release 3.22 Reports 5.07 Return 3.19 Returns 3.19 Permit 3.14 Tax 3.19 Taxes 3.19 ARTICLE II PURCHASE AND SALE 2.01. PURCHASE AND SALE. Upon the terms and subject to the conditions of this Agreement, each Seller, severally but not jointly, shall sell to Buyer, and Buyer shall purchase from each such Seller, at the Closing, that number of Shares as is set forth opposite such Seller's name on SCHEDULE 2.01. The aggregate purchase price for each Seller, to be paid in shares of Buyer Stock, shall be equal to the number Shares owned by such Seller multiplied by the Conversion Ratio (such shares of Buyer Stock being referred to as the "PURCHASE PRICE"). The Purchase Price shall be paid as provided in Section 2.02. 2.02. CLOSING. The closing (the "CLOSING") of the purchase and sale of the Shares hereunder shall take place at the offices of Buyer's Counsel in Boston, Massachusetts as soon as possible after satisfaction of the conditions set forth in Article X, but in no event later than 11:59 p.m., Boston time, on June 28, 1996, or at such other time or place as Buyer and Sellers may agree. At the Closing, (a) Buyer shall deliver to each Seller certificates for an aggregate of the number of shares of Buyer Stock, duly endorsed by the Buyer's transfer agent and registered in the names of such Seller, equal to the number of Shares held by such Seller (as set forth on SCHEDULE 2.01) multiplied by the Conversion Ratio (rounded in each case down the largest whole number of Buyer Shares pursuant to Section 2.07 below). (b) Each Seller shall deliver to Buyer certificates for the Shares owned by such Seller duly endorsed and signature guaranteed, accompanied by stock powers duly endorsed and signature guaranteed in blank, with any required transfer stamps affixed thereto. (c) The Company and Sellers shall deliver to Buyer revised schedules to this Agreement updating the information shown thereon to the Closing Date. 2.03. CERTIFICATES FOR BUYER STOCK. Certificates for Buyer Stock. Each certificate for Buyer Stock issued to any Seller as part of the Purchase Price shall bear the following legend: "The securities represented hereby have not been registered under the Securities Act of 1933, as amended, and may not be sold, transferred or otherwise disposed of except in accordance with the 10 -5- terms thereof and unless registered with the Securities and Exchange Commission of the United States and the securities regulatory authorities of certain states or unless an exception from such registration is available." 2.04. TRANSFER TAXES. Buyer shall pay any and all sales, documentary, use, filing, transfer and other taxes payable as a result of the transfer of the Shares to the Buyer (including any such state taxes that may be imposed on the Company by reason of a deemed transfer of assets). 2.05. BOOKS AND RECORDS. On the Closing Date, Sellers shall deliver to Buyer, or its representatives, all minutes books, stock record books and corporate seals of the Company, and the original copies of all books of account, leases, other agreements, securities, customer lists, files and other documents, instruments and papers of any kind or nature belonging to or relating to the Company or its business. 2.06. RESIGNATIONS. The Company will deliver to Buyer the resignations of all officers and directors of the Company from their positions with the Company at or prior to the Closing Date, unless otherwise specified by Buyer. 2.07. NO FRACTIONAL SHARES. No certificates or scrip for fractional shares of Buyer Stock will be issued, no Buyer stock split or dividend shall be paid in respect of any fractional share interest, and no such fractional shares interest shall entitle the owner thereof to vote or to any rights of or as a stockholder of Buyer. In lieu of such fractional shares, any holder of shares of Common Stock of the Company who would otherwise be entitled to a fraction of a share of Buyer Stock (after aggregating all fractional shares of Buyer Stock to be received by such holder) will be paid the cash value of such fraction, which shall be equal to the fraction multiplied by the last sale price of Buyer's Common Stock on the Nasdaq National Market on the second business day preceding the Closing Date. ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND SELLERS The Company and each Seller hereby jointly and severally represent and warrant to Buyer as of the date hereof and as of the Closing Date that: 3.01. CORPORATE EXISTENCE AND POWER. The Company is a corporation duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation, and has all corporate powers and all governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted. The Company is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction in the United States where the character of the property owned or leased by it or the nature of its activities make such qualification necessary, except for those jurisdictions where failure to be so qualified would not, individually or in the aggregate, have a Material Adverse Effect. The Company has heretofore 11 -6- delivered to Buyer true and complete copies of the corporate charter and bylaws of the Company as currently in effect. 3.02. CORPORATE AUTHORIZATION3. The execution, delivery and performance by the Company of this Agreement and the consummation by the Company of the transactions contemplated hereby are within the Company's corporate powers and have been duly authorized by all necessary corporate action on the part of the Company. This Agreement constitutes a valid and binding agreement of the Company. 3.03. Governmental Authorization; Consents. ------------------------------------ (a) The execution and delivery of this Agreement by Sellers, and the performance by the Company and Sellers of their obligations under this Agreement, require no action by or in respect of, or filing with, any governmental body, agency, official or authority or any other Person. (b) Except as set forth on SCHEDULE 3.03, no consent, approval, waiver or other action by any Person under any contract, agreement, indenture, lease, instrument or other document to which the Company is a party or by which it is bound is required or necessary for the execution and delivery of this Agreement by Sellers, the performance by the Company and Sellers of their obligations under this Agreement or the consummation of the transactions contemplated hereby. 3.04. NON-CONTRAVENTION. The execution and delivery of this Agreement by Sellers, the performance by the Company and Sellers of their obligations under this Agreement and the consummation of the transactions contemplated hereby do not and will not (i) contravene or conflict with the corporate charter or bylaws of the Company, (ii) contravene or conflict with or constitute a violation of any provision of any law, regulation, judgment, injunction, order or decree binding upon or applicable to the Company; (iii) except as set forth on SCHEDULE 3.04, constitute a default under or give rise to any right of termination, cancellation or acceleration of any right or obligation of the Company or to a loss of any benefit to which the Company is entitled under any provision of any agreement, contract or other instrument binding upon the Company or any permit held by the Company or (iv) assuming the receipt of all required consents result in the creation or imposition of any Lien on any asset of the Company. 3.05. CAPITALIZATION. The authorized capital stock of the Company consists of 200,000 shares of common stock, no par value. As of the date hereof, there were outstanding 100 shares of common stock. All outstanding shares of capital stock of the Company have been duly authorized and validly issued and are fully paid and are owned by Sellers as shown on SCHEDULE 2.01. Except as set forth in this Section 3.05, there are no outstanding (i) shares of capital stock, other securities or phantom or other equity interests of the Company, (ii) securities of the Company convertible into or exchangeable for shares of capital stock or other securities of the Company or (iii) options or other rights to acquire from the Company any capital stock, other securities or phantom or other equity interests of the Company (the items in clauses (i), (ii) and (iii) being referred to collectively as the "COMPANY SECURITIES"). There are no outstanding 12 -7- obligations of the Company, actual or contingent, to issue or deliver or to repurchase, redeem or otherwise acquire any Company Securities. 3.06. SUBSIDIARIES. The Company does not have and never has had any Subsidiaries or any ownership or equity interest in or control of (direct or indirect) any other person. 3.07. FINANCIAL STATEMENTS. The Company has previously furnished Buyer with a true and complete copy of (i) the balance sheets of the Company as of December 31, 1993, 1994 and 1995 and the statements of operations of the Company for the respective fiscal years then ended (as included in the Company's federal Returns for each such period) (collectively, the "FINANCIAL STATEMENTS" which are attached hereto as SCHEDULE 3.07). To the Company's or Sellers' knowledge, each of the consolidated balance sheets included in the Financial Statements fairly presents in all material respects the financial position of the Company as of its date, and the other statements included in the Financial Statements fairly present in all material respects the results of operations of the Company for the periods therein set forth. To the Company's or Sellers' knowledge, the Financial Statements were prepared in accordance with the books and records of the Company and were prepared in accordance with the comprehensive basis of accounting for cash receipts and disbursements, consistently applied. 3.08. ABSENCE OF CERTAIN CHANGES. Since the Balance Sheet Date, the Company has conducted its business in the ordinary course consistent with past practices and, except as set forth on SCHEDULE 3.08, there has not been: (a) any Material Adverse Change or any event, occurrence, development or state of circumstances or facts which could reasonably be expected to result in a Material Adverse Change; (b) any declaration, setting aside or payment of any dividend or other distribution with respect to any Company Securities or any repurchase, redemption or other acquisition by the Company of any outstanding shares of capital stock or other securities of, or other ownership interests in, the Company; (c) any amendment of any outstanding security of the Company; (d) any incurrence, assumption or guarantee by the Company of any indebtedness for borrowed money other than in the ordinary course of business and in amounts and on terms consistent with past practices; (e) any creation or assumption by the Company of any Lien on any asset; (f) any making of any loan, advance or capital contributions to or investment in any Person; 13 -8- (g) any damage, destruction or other casualty loss (whether or not covered by insurance) affecting the business or assets of the Company which, individually or in the aggregate, has had or would reasonably be expected to have a Material Adverse Effect; (h) except as set forth on SCHEDULE 3.08, any transaction or commitment made, or any contract or agreement entered into, by the Company relating to its assets or business (including the acquisition or disposition of any assets) or any relinquishment by the Company of any contract or other right, in either case, material to the Company, other than transactions and commitments in the ordinary course of business consistent with past practices and those contemplated by this Agreement; (i) any change in any method of accounting or accounting practice by the Company; (j) any (i) grant of any severance or termination pay to any director, officer or employee of the Company, (ii) entering into of any employment, deferred compensation or other similar agreement (or any amendment to any such existing agreement) with any director, officer or employee of the Company, (iii) change in benefits payable under existing severance or termination pay policies or employment agreements or (iv) change in compensation, bonus or other benefits payable to directors, officers or employees of the Company; (k) any change in the business or operations or in the manner of conducting the business or operations of the Company other than changes in ordinary course of business; (l) any mortgage, pledge or subjection of any properties or assets to any claim, Lien or liability, except claims, Liens or liabilities for taxes not yet due; (m) any write-down of the value of any inventory, or write-off of any notes or accounts receivable or any portion thereof as uncollectible, other than valuation reserves established for inventory and receivables; (n) any cancellation or release of any other debts or claims, or waivers of any rights; (o) except as set forth on SCHEDULE 3.08, any sale, transfer or conveyance of any property or assets, except in the ordinary course of business consistent with past practice; (p) any disposition of, or lapse, or other failure to preserve the exclusive rights of the Company to any Intellectual Property Right; (q) any payments, loans or advances of any amount to or in respect of, or sale, transfer or lease of any properties or assets to, or the entering into of any agreement, arrangement or transaction with, any Seller, any of the officers or director of the Company, any Affiliate or associate of any Seller, the Company or any officer or director of the Company, or any business or entity in which any Seller or the Company, or any Affiliate or associate of any such person, 14 -9- has any direct or material indirect interest, except for compensation to the officers and employees of the Company other than this Agreement; (r) any lease of real or personal property or any capital expenditures or commitments for additions to property, plant, equipment or capital assets; or (s) any agreement, whether in writing or otherwise, to take any action described in this Section 3.08. 3.09. PROPERTY AND EQUIPMENT. The Company has good title to, or in the case of leased property have valid leasehold interests in, all property and assets (whether real or personal, tangible or intangible) reflected on the Balance Sheet or acquired after the Balance Sheet Date. None of such properties or assets is subject to any Liens, except Liens for taxes not yet due or being contested in good faith (and for which adequate accruals or reserves have been established on the Balance Sheet), Liens disclosed on the Balance Sheet or Liens which do not materially detract from the value of such property or assets as now used, or materially interfere with any present or intended use of such property or assets. 3.10. NO UNDISCLOSED MATERIAL LIABILITIES. To the Company's or Sellers' knowledge, except as set forth in SCHEDULE 3.10, there are no liabilities of the Company of any kind whatsoever, whether accrued, contingent, absolute, determined, determinable or otherwise, and there is no existing condition, situation or set of circumstances which could reasonably be expected to result in such a liability, other than: (i) liabilities disclosed in any other Schedule hereto or provided for in the Balance Sheet; and (ii) liabilities incurred in the ordinary course of business consistent with past practice since the Balance Sheet Date, which in the aggregate are not material to the Company. 3.11. LITIGATION. There is no action, suit, investigation or proceeding pending against, or to the knowledge of Sellers overtly threatened against or affecting, the Company or any of its properties or the transactions contemplated hereby before any court or arbitrator or any governmental body, agency, official or authority. 3.12. Material Contracts. ------------------ (a) Except for agreements, contracts, plans, leases, arrangements or commitments disclosed in SCHEDULE 3.12 or any other Schedule hereto, the Company is not a party to or subject to: (i) any lease providing for annual rentals of $15,000 or more; 15 -10- (ii) any contract for the purchase of materials, supplies, goods, services, equipment or other assets providing for annual payments by the Company of $15,000 or more; (iii) any partnership, joint venture or other similar arrangement or agreement or any license agreement under which the Company is the licensee, or any agency, distributor, dealer, franchise, sales representative or other similar contract or commitment; (iv) except for trade indebtedness incurred in the ordinary course of business, any loan or credit agreements or any instrument evidencing or related in any way to indebtedness incurred in the acquisition of any asset, business, company or other entity or indebtedness for borrowed money by way of direct loan, sale of debt securities, purchase money obligation, conditional sale, guarantee, or otherwise, or agreement relating to the mortgaging, pledging or otherwise placing a lien on any assets of the Company or any guaranty of indebtedness or performance of others by the Company; (v) any contract or other document that limits the freedom of the Company to compete in any line of business or with any Person or in any area or which would so limit the freedom of the Company after the Closing Date; (vi) any guarantees; (vii) except as set forth on SCHEDULE 3.12, any contract for personal services or employment (including without limitation contracts with directors, officers, employees, agents, consultants, advisors, salesmen, sales representatives, distributors or dealers); (viii) except as set forth on SCHEDULE 3.12, any agreement or arrangement providing for the sale of any of the assets, properties or rights of the Company (other than in the ordinary course of business) or for the grant of a preferential right to purchase any of the Company's assets, properties or rights or which required the consent of any third party to the transfer and assignment of any of its assets, properties or rights; and (ix) any other agreements, contracts, leases, licenses or commitments to which the Company is a party (or under which the Company may be obligated or which the Company or any of its rights, properties or assets may be subject or bound) and which is material to the financial condition, results of operations, business, property or prospects of the Company or is not made in the ordinary course of business that is material to the Company. (x) any contract relating to indebtedness for borrowed money or the deferred purchase price of property (whether incurred, assumed, guaranteed or secured by any asset), except contracts relating to indebtedness incurred in the ordinary course of business in an amount not exceeding $15,000; 16 -11- (b) Each agreement, contract, plan, lease, arrangement and commitment disclosed in any schedule to this Agreement or required to be disclosed pursuant to Section 3.12(a) is a valid and binding agreement of the Company and is in full force and effect, and neither the Company, nor, to the knowledge of the Company and Sellers, any other party thereto is in default in any material respect under the terms of any such agreement, contract, plan, lease, arrangement or commitment. 3.13. INSURANCE COVERAGE. The Company has furnished to Buyer a list of, and true and complete copies of, all insurance policies covering the assets, business, equipment, properties, operations, employees, officers and directors of the Company. There is no claim by the Company pending under any of such policies as to which coverage has been questioned, denied or disputed by the underwriters of such policies. All premiums payable under all such policies have been paid and the Company is otherwise in full compliance with the terms and conditions of all such policies. Such policies are of the type and in amounts customarily carried by Persons conducting businesses similar to those of the Company. 3.14. Compliance With Laws; No Defaults. --------------------------------- (a) The Company is not currently in violation of, and since January 1, 1995 has not violated, any applicable provisions of any laws, statutes, ordinances or regulations except for violations that have not had and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. (b) SCHEDULE 3.14 correctly describes each license and permit (a "PERMIT") material to the business of the Company, together with the name of the governmental agency or entity issuing such license or permit. Such licenses and permits are valid and in full force in accordance with their terms and effect and none of such licenses or permits will be terminated or impaired or become terminable as a result of the transactions contemplated hereby. (c) The Company is not in default under, and no condition exists that with notice or lapse of time or both would constitute a default under, (i) any mortgage, loan agreement, indenture or evidence of indebtedness for borrowed money to which the Company is a party or by which the Company or any material amount of its assets is bound or (ii) any judgment, order or injunction of any court, arbitrator or governmental body, agency, official or authority which defaults or potential defaults individually or in the aggregate would reasonably be expected to have a Material Adverse Effect. 3.15. FINDERS, FEES. There is no investment banker, broker, finder or other intermediary which has been retained by or is authorized to act on behalf of Sellers or the Company who might be entitled to any fee or commission from Buyer, the Company or any of their respective Affiliates upon consummation of the transactions contemplated by this Agreement. 3.16. Intellectual Property. --------------------- 17 -12- (a) SCHEDULE 3.16 includes a list of all Intellectual Property Rights specifying as to each, as applicable: (i) the nature of such Intellectual Property Right; (ii) the owner of such Intellectual Property Right; (iii) the jurisdictions by or in which such Intellectual Property Right is recognized without regard to registration or has been issued or registered or in which an application for such issuance or registration has been filed, including the respective registration or application numbers; and (iv) licenses, sublicenses and other agreements as to which the Company or any of its Affiliates is a party and pursuant to which any Person is authorized to use such Intellectual Property Right, including the identity of all parties thereto, a description of the nature and subject matter thereof, the applicable royalty and the term thereof. (b) Except as set forth on SCHEDULE 3.16, no such Intellectual Property Rights have been registered with any governmental authority. (c) Except as set forth on SCHEDULE 3.16 and except for licenses to use the Company's products granted by the Company in the ordinary course of its business to third parties, the Company owns or has the exclusive right to use, sell, license or dispose of, and has the exclusive right to bring actions for the infringement of, all Intellectual Property Rights necessary or required for the conduct of its business as presently conducted. (d) The Company has licensed each of its products solely pursuant to executed license agreements substantially in the form attached to SCHEDULE 3.16. (e) The Company has no continuing support or maintenance obligations with regard to any of its products, except as disclosed on SCHEDULE 3.16. (f) The execution, delivery and performance of this Agreement and the consummation of the other transactions contemplated hereby will not breach, violate or conflict with any instrument or agreement governing any Intellectual Property Right, will not cause the forfeiture or termination or give rise to a right of forfeiture or termination of any Intellectual Property Right or in any way impair the right of the Company to sue, sell, license or dispose of, or to bring any action for other infringement of, any Intellectual Property Right or portion thereof. (g) Except as disclosed on SCHEDULE 3.16, there are no royalties, honoraria, fees or other payments payable by the Company to any Person by reason of the ownership, use, license, sale or disposition of the Intellectual Property Rights. (h) The Company's manufacture, marketing, license, sale or use of any product presently licensed or sold by the Company or proposed to be licensed or sold by the Company will not violate any license or agreement with any third party or (i) infringe any Intellectual Property Right (other than Intellectual Property Rights embodied in patents) of any other party or (ii) to the Company's or the Sellers' knowledge, infringe any Intellectual Property Rights embodied in any patent of any other party. 18 -13- (i) There is no pending or, to the knowledge of the Company and Sellers, threatened claim or litigation against the Company or Sellers, contesting the validity, ownership or right to use, sell, license or dispose of any Intellectual Property Right nor, to the knowledge of the Company or Sellers, is there any basis that may reasonably be expected to give rise to any such claims, nor has either Sellers or the Company received any notice asserting that the proposed use, sale, license or disposition of any of the Company's products conflicts or will conflict with the rights of any other party, nor is there, to the knowledge of Sellers or the Company, any basis that may reasonably be expected to give rise to any such assertion. (j) The Company has not during the three years preceding the date of this Agreement been charged in writing with or been a defendant in any claim, suit, action or proceeding relating to its business that has not been finally terminated prior to the date hereof and that involves a claim of infringement of any patents, trademarks, service marks or copyrights. No Intellectual Property Right is subject to any outstanding order, judgment, decree, stipulation or agreement restricting the use thereof by the Company or restricting the licensing thereof by the Company to any Person. Except as set forth on SCHEDULE 3.16, the Company has not entered into any agreement to indemnify any other Person against any charge of infringement of any patent, trademark, service mark or copyright. (k) The Company and Sellers, without any independent investigation, have no knowledge of any continuing infringement by any other Person of any Intellectual Property Rights of the Company. (l) None of the Intellectual Property Rights of the Company, the value of which to the Company is contingent upon maintenance of the confidentiality thereof, has been disclosed by the Company, any employee of the Company or any Seller to any Person other than employees, representatives and agents of the Company who are parties to confidentiality agreements with the Company. (m) To the knowledge of the Company and Sellers, no third party has asserted any claim, or has any reasonable basis to assert any valid claim, against the Company with respect to (i) the continued employment by, or association with, the Company of any of the present officers, employees of or consultants to the Company or (ii) the use by the Company or any of such Persons in connection with their activities for or on behalf of the Company of any information which the Company or any of such Persons would be prohibited from using under any prior agreements or arrangements or any laws applicable to unfair competition, trade secrets or proprietary information. (n) None of the former or present employees, officers, directors, consultants or contractors of the Company holds any right, title or interest, directly or indirectly, in whole or in part, in or to any of the Intellectual Property Rights which the Company is currently using or the use of which is necessary for the business of the Company as presently conducted or as proposed to be conducted. To the knowledge of the Company and Sellers, no employee of the Company is in violation of any term of any employment contract, patent disclosure agreement or any other contract or agreement relating to the relationship of any such employee with the 19 -14- Company or any other party because of the nature of the business conducted or to be conducted by the Company. No person has any so-called "moral rights," including any right to identification of authorship, rights of approval of modifications or limitations on subsequent modifications, in or to any of the Intellectual Property Rights owned by the Company. Nothing prohibits the Company from (i) modifying, changing, altering, adapting, revising, translating, adding to or subtracting from any of the Intellectual Property Rights owned by the Company, (ii) doing any of the foregoing without obligation to name the author of any of the Intellectual Property Rights owned by the Company or to give credit to any person in connection therewith or (iii) leasing, licensing, distributing or marketing any of the Intellectual Property Rights owned by the Company without the consent of any person. 3.17. INVENTORIES. The Company has no inventories. 3.18. RECEIVABLES. All accounts, notes receivable and other receivables (other than receivables collected since the Balance Sheet Date) reflected on the Balance Sheet are, and all accounts and notes receivable of the Company at the Closing Date will be, valid, genuine and fully collectible (using commercially reasonable collection efforts) within ninety (90) days in the aggregate amount thereof, subject to normal and customary trade discounts, less any reserves for doubtful accounts recorded on the Balance Sheet. All accounts, notes receivable and other receivables of the Company at the Balance Sheet Date have been included in the Balance Sheet. 3.19. Taxes. ----- (a) The term "TAXES" as used herein means all federal, state, local, foreign and other net income, gross income, gross receipts, sales, use, ad valorem, transfer, franchise, profits, license, lease, service, service use, withholding, payroll, employment, excise, severance, stamp, occupation, premium, property, windfall profits, customs duties, or other Taxes, fees, assessments or other charges of any kind whatever, together with any interest and any penalties, additions to Tax or additional amounts with respect thereto, and the term "TAX" means any one of the foregoing taxes. The term "RETURNS" as used herein, means all returns, declarations, reports, statements and other documents required to be filed in respect of Taxes, and "RETURN" means any one of the foregoing Returns. The term "CODE" means the Internal Revenue Code of 1986, as amended. All citations to the Code, or the Treasury regulations promulgated thereunder, shall include any amendments or any substitute or successor provisions thereto. (b) The Company has filed all Returns required to be filed by the due date for such Return and has paid all Taxes owed (whether or not shown as due on such returns), including, without limitation, all Taxes which the Company is obligated to withhold for amounts owing to employees, creditors and third parties. All Returns have been filed completely and correctly. All Taxes with respect to which the Company has become obligated pursuant to elections made by it in accordance with generally accepted practice have been paid and adequate reserves have been established for all Taxes accrued but not yet payable. The Company has not received and Sellers have not received any written notices or inquiries from any taxing authority in connection with any of the Returns. No waivers of statutes of limitation with respect to any of the Returns have been given by or requested from the Company. All deficiencies asserted or 20 -15- assessments made as a result of any examinations have been fully paid, or are fully reflected as a liability in the financial statements of the Company, or are being contested and an adequate reserve therefor has been established and is fully reflected in the financial statements of the Company. There are no liens for Taxes (other than for current taxes not yet due and payable) upon the assets of the Company. All material elections with respect to Taxes affecting the Company, as of the date hereof, are set forth in the financial statements of the Company, or are set forth on SCHEDULE 3.19. The Company has not agreed to make any adjustment under Section 481(a) of the Code by reason of a change in accounting method or otherwise. The Company does not have and has not had a permanent establishment in any foreign country, as defined in any applicable Tax treaty or convention between the United States of America and such foreign country. (c) Neither the Company nor any Seller has ever filed a consent pursuant to Section 341(f) of the Code, relating to collapsible corporations. The Company and Sellers made a valid election for the Company to be treated as an "S corporation", as that term is defined in Section 1361(a) of the Code. The Company has been an S corporation since inception through the date hereof. Neither the Company nor any Seller has taken any action that would result in the termination of the S corporation status of the Company, other than pursuant to this Agreement. (d) Sellers have timely filed all Returns with respect to Taxes required to be paid by them attributable to items of income, gain, deductions, losses and credits of the Company, and have timely paid all such Taxes (whether or not shown on such Returns). There has not been any audit of any Return filed by a Seller with respect to, or which may relate to, items of income, gain, deduction, loss or credit of the Company; and no such audit of any Seller is in progress and such Sellers have not received notice from any Tax authority that any such audit is contemplated or pending. 3.20. Environmental Compliance. ------------------------ (i) Sellers and the Company have complied with all federal, state and local laws (including without limitation case law, rules, regulations, orders, judgments, decrees, permits, licenses and governmental approvals) which are intended to protect the environment and/or human health or safety (collectively, "Environmental Laws"); (ii) neither Sellers nor the Company have handled, generated, used, stored, transported or disposed of any substance or waste which is regulated by Environmental Laws, except for reasonable amounts of ordinary office and/or office-cleaning supplies which have been used in compliance with Environmental Laws; and (iii) there are no "Environmental Liabilities". For purposes of this Agreement, "Environmental Liabilities" are any liabilities which (y) arise out of or in any way relate to the Company or any real estate at any time owned, used or leased by the Company, or the Company's or Sellers' use or ownership thereof, whether vested or unvested, contingent or fixed, actual or potential, and (z) arise from or relate to actions occurring (including any failure to act) or conditions existing on or before the Closing Date. 21 -16- 3.21. CUSTOMERS. The Company and Sellers have not received notice from or otherwise have knowledge that any group of customers who are under common ownership or control and who accounted as a group for a material percentage of the aggregate products and services furnished by the Company during the past 18 months has stopped or intends to stop purchasing the Company's products or services. 3.22. TRANSACTIONS WITH AFFILIATES. There are no loans, leases, royalty agreements or other continuing transactions between the Company and any Seller, any Affiliate of any Seller, or any member of any Seller's family. To the knowledge of the Company and Sellers, none of the officers or directors of the Company or Sellers (a) has any material direct or indirect interest in any entity which does business with the Company; (b) has any direct or indirect interest in any property, asset or right which is used by the Company in the conduct of its business; or (c) has any contractual relationship with the Company other than such relationships which occur from being an officer, director or stockholder of the Company. 3.23. OTHER INFORMATION. None of the documents or information delivered to Buyer in connection with the transactions contemplated by this Agreement contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained therein not misleading. 3.24. INTERCOMPANY ARRANGEMENTS. The Company does not own any note, bond, debenture or other indebtedness, or is otherwise a creditor, of any Seller or any of its Affiliates. Since the Balance Sheet Date there has not been any payment by the Company to Seller or any of its Affiliates, charge by Seller or any of its Affiliates to the Company or other transaction between the Company and Seller and any of its Affiliates, except in any such case in the ordinary course of business of the Company consistent with past practice. 3.25. REPRESENTATIONS. The joint representations and warranties of the Company and Sellers contained in this Agreement, disregarding all individual qualifications and exceptions contained therein relating to materiality or Material Adverse Effect, are true and correct with only such exceptions as would not in the aggregate reasonably be expected to have a Material Adverse Effect. ARTICLE IVARTICLE IV ADDITIONAL REPRESENTATIONS AND WARRANTIES OF SELLERS Each Seller, severally but not jointly, represents and warrants to, and agrees with, Buyer as follows: 4.01.TITLE TO AND VALIDITY OF SHARES. Such Seller now has, and on the Closing Date will have, good and marketable title to and unrestricted power to vote and sell the Shares designated as owned by such Seller opposite such Seller's name on SCHEDULE 2.01, free and clear of any Lien 22 -17- and, upon purchase and payment therefor and delivery to Buyer thereof in accordance with the terms of this Agreement, Buyer will obtain good and marketable title to such Shares free and clear of any Lien. All Shares owned by such Seller have been duly authorized and validly issued and are fully paid and non-assessable. All Shares to be sold by such Seller are registered in the name of such Seller. 4.02. AUTHORITY. Such Seller has the legal power, right and authority to enter into and perform this Agreement, and to perform each of his or her obligations hereunder. The execution, delivery and performance of this Agreement by such Seller does not contravene, or constitute a default under, any provision of applicable law or regulation or of any agreement, judgment, injunction, order, decree or any other instrument binding upon such Seller. This Agreement has been duly executed and delivered by such Seller and constitutes a valid and binding obligation of such Seller, enforceable in accordance with its terms. 4.03. PURCHASE FOR INVESTMENT. Each Seller is acquiring the shares of Buyer Stock for investment for his or her own account and not with a view to, or for sale in connection with, any distribution thereof. Each Seller agrees that the shares of Buyer Stock acquired by such Seller may not be sold, transferred or otherwise disposed of unless such shares are registered with the Securities and Exchange Commission and the securities regulatory authorities of certain states or unless an exemption from such registration is available. ARTICLE V REPRESENTATIONS AND WARRANTIES OF BUYER Buyer hereby represents and warrants to the Company and Sellers that: 5.01. ORGANIZATION AND EXISTENCE. Buyer is a corporation duly incorporated, validly existing and in good standing under the laws of the Commonwealth of Massachusetts and has all corporate powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted. Buyer is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction where the character of the property owned or leased by it or the nature of its activities make such qualification necessary, except for those jurisdictions where failure to be so qualified would not, individually or in the aggregate, have a Material Adverse Effect. Buyer has heretofore delivered to Buyer true and complete copies of the corporate charter and bylaws of Buyer as currently in effect. 5.02. CORPORATE AUTHORIZATION. The execution, delivery and performance by Buyer of this Agreement and the consummation by Buyer of the transactions contemplated hereby are within the corporate powers of Buyer and have been duly authorized by all necessary corporate action on the part of Buyer. This Agreement constitutes a valid and binding agreement of Buyer. 5.03. GOVERNMENTAL AUTHORIZATION. Except as set forth on SCHEDULE 5.03, the execution, delivery and performance by Buyer of this Agreement require no action by or in respect of, or filing with, any governmental body, agency, official or authority. Except as set forth on 23 -18- SCHEDULE 5.03, no consent, approval, waiver or other action by any Person under any contract, agreement, indenture, lease, instrument or other document to which Buyer is party or by which it is bound is required or necessary for the execution, delivery and performance of this Agreement by Buyer or the consummation of the transactions contemplated hereby. 5.04. NON-CONTRAVENTION. The execution, delivery and performance by Buyer of this Agreement do not and will not (i) contravene or conflict with the corporate charter or bylaws of Buyer or (ii) assuming compliance with the matters referred to in SCHEDULE 5.03, contravene or conflict with any material provision of any material law, regulation, judgment, injunction, order or decree binding upon Buyer; (iii) constitute a material default under or give rise to any right of termination, cancellation or acceleration of any right or obligation of Buyer or to a loss of any material benefit to which Buyer is entitled under any provision of any material agreement, contract or other instrument binding upon Buyer or any material permit held by Buyer or (iv) assuming the receipt of all required consents or approvals in SCHEDULE 5.03, result in the creation or imposition of any material Lien on any material asset of Buyer. 5.05. FINDERS' FEES. There is no investment banker, broker, finder or other intermediary which has been retained by or is authorized to act on behalf of Buyer who might be entitled to any fee or commission from the Company, any Seller or any or any Affiliate thereof upon consummation of the transactions contemplated by this Agreement. 5.06. LITIGATION. There is no action, suit, investigation or proceeding pending against, or to the knowledge of Buyer overtly threatened against, Buyer before any court or arbitrator or any governmental body, agency or official which in any manner challenges or seeks to prevent, enjoin, alter or materially delay the transactions contemplated hereby. 5.07. REPORTS AND FINANCIAL STATEMENTS. Buyer has previously furnished to the Company and the Sellers copies of its (i) Quarterly Report on Form 10-Q for the quarter ended December 31, 1995; (ii) Prospectus dated March 1, 1996; and (iii) Quarterly Report on Form 10-Q for the quarter ended March 31, 1996 (collectively, the "REPORTS"). No Report contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained therein not misleading. ARTICLE VI COVENANTS OF THE COMPANY AND SELLERS The Company and each Seller agree that: 6.01. CONDUCT OF THE COMPANY. From the date hereof until the Closing Date, Sellers shall cause the Company to conduct its business in the ordinary course consistent with past practices and to use its best efforts to preserve intact its business organization and relationships with third parties and to keep available the services of its present officers and employees. Without limiting the generality of the foregoing, from the date hereof until the Closing Date, Sellers will not permit the Company to: 24 -19- (a) adopt or propose any change in its corporate charter or by laws; (b) merge or consolidate with any other Person or acquire a material amount of assets of any other Person; (c) sell, lease, license or otherwise dispose of any material assets or property except (i) pursuant to existing contracts or commitments and (ii) in the ordinary course consistent with past practices; (d) effect any direct or indirect redemption, purchase or other acquisition of any Company Securities, or declare, set aside or pay any dividend or make any other distribution of assets of any kind whatsoever with respect to any Company Securities, except that Sellers may continue to receive monthly distributions in the ordinary course consistent with past practices, not to exceed an aggregate of $155,000 between March 29, 1996 and the Closing Date, so long as Sellers give Buyer five (5) business day's notice of a distribution and, after such distribution, the Company retains adequate cash and accounts receivable to fund its business operations beyond the Closing Date, in the ordinary course consistent with past practices, without cash advances from Buyer; (e) issue any Securities; or (f) agree or commit to do any of the foregoing. 6.02. ACCESS TO INFORMATION. From the date hereof until the Closing Date, the Company (a) will give Buyer, its counsel, financial advisors, financing sources, auditors and other authorized representatives full access to the offices, properties, books and records of the Company (b) will furnish, and will cause the Company to furnish Buyer, its counsel, financial advisors, auditors and other authorized representatives such financial and operating data and other information relating to the Company, and reasonably available to the Company or Sellers, as such Persons may reasonably request and (c) will instruct the employees, counsel and financial advisors of the Company to cooperate with Buyer in its investigation of the Company. 6.03. Notices of Certain Events. The Company will promptly notify Buyer of: ------------------------- (a) any notice or other communication received by Sellers or the Company from any Person alleging that the consent of such Person is or may be required in connection with the transactions contemplated by this Agreement; (b) any notice or other communication received by Sellers or the Company from any governmental or regulatory agency or authority in connection with the transactions contemplated by this Agreement; and 25 -20- (c) any actions, suits, claims, investigations or proceedings commenced or, to Sellers' or the Company's knowledge overtly threatened against, relating to, involving or otherwise affecting Sellers or the Company disclosed pursuant to Section 3.11 or that relate to the consummation of the transactions contemplated by this Agreement. 6.04. RESIGNATIONS. The Company will deliver to Buyer the resignations of all officers and directors of the Company from their positions with the Company at or prior to the Closing Date, unless otherwise specified by Buyer. 6.05. Noncompetition. -------------- (a) Ms. Konisky agrees that for a period of five (5) full years from the Closing Date, she, nor any of her Affiliates, shall: (i) engage, directly or indirectly, alone or as a partner, joint venturer, officer, director, employee, consultant, agent, independent contractor, unpaid volunteer or stockholder of any company or business, in any business activity which is in competition with any of the products or services developed, marketed, licensed, distributed, planned, sold or otherwise provided by the Company (the "BUSINESS") as it exists on the Closing Date. Notwithstanding the foregoing, it is understood and agreed that Ms. Konisky may engage in the business activities of clinical research monitoring, clinical research managing, clinical research data review, clinical research training and professional education instruction and clinical research regulatory audits. In addition, the ownership by Ms. Konisky of not more than one percent of the shares of stock of any corporation having a class of equity securities actively traded on a national securities exchange or on Nasdaq shall not be deemed, in and of itself, to violate the prohibitions of this paragraph. (ii) solicit, divert or take away, directly or indirectly, whether alone or as a sole proprietor, partner, officer, director, consultant, employee, joint venturer, agent, representative, unpaid volunteer or independent contractor, whether for her own interest or for the interest of any other person or entity, customers or business of the Company existing on the Closing Date or, directly or indirectly, whether for her own interest or for the interest of any other person or entity, solicit, receive or accept the performance of services by, or discuss with any current employee of the Company the employment of such Person by, any company, business organization or any other entity, subsidiary or affiliate thereof that develops, licenses, produces or manufactures any product or provides services that compete with those developed, produced, licensed, manufactured or marketed by the Company on the Closing Date. (b) If any provision contained in this Section shall for any reason be held invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Section, but this Section shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein. It is the intention of the parties that if any of the restrictions or covenants contained herein is held to cover a geographic area or to be for a length of time which is not permitted by applicable law, or in any 26 -21- way construed to be too broad or to any extent invalid, such provision shall not construed to be null, void and of no effect, but to the extent such provision would be valid or enforceable under applicable law, a court of competent jurisdiction shall construe and interpret or reform this Section to provide for a covenant having the maximum enforceable geographic area, time period and other provisions (not greater than those contained herein) as shall be valid and enforceable under such applicable law. Sellers acknowledge that Buyer would be irreparably harmed by any breach of this Section and that there would be no adequate remedy at law or in damages to compensate Buyer for any such breach. Sellers agree that Buyer shall be entitled to injunctive relief requiring specific performance by Sellers of this Section, and Sellers consent to the entry thereof. 6.06. NO NEGOTIATIONS WITH THIRD PARTIES. From the date hereof until the earlier of the Closing Date or the date on which this Agreement is terminated, the Company and each Seller agrees not to, directly or indirectly, through any agent, representative, stockholder or otherwise, (a) solicit or entertain offers from, negotiate with or in any manner encourage, discuss, accept or consider any proposal of any other person relating to an investment in the Company or the acquisition of the Company, its capital stock, its assets or its business, in whole or in part, whether through direct purchase, merger, consolidation or other business combination; (b) disclose to any third party any non-published information concerning the Company, its business or financial condition in connection with an acquisition or investment in the Company; or (c) withdraw its intention to engage in a transaction with Buyer. If the Company, any Seller, or any of the Company's employees, stockholders, agents or representatives receives any unsolicited inquiry (however preliminary), offer or proposal, the Company and the Sellers shall promptly notify Buyer and promptly provide, or cause its employees, stockholders, agents or representatives to promptly provide, a copy of any written letter or other material constituting or accompanying such inquiry, offer or proposal to Buyer. 6.07. CONFIDENTIALITY. Sellers and their Affiliates will hold, and will use their best efforts to cause their respective officers, directors, employees, accountants, counsel, consultants, advisors and agents to hold, in confidence, unless compelled to disclose by judicial or administrative process or by other requirements of law, all confidential documents and information concerning Buyer furnished to Sellers or their Affiliates in connection with the transactions contemplated by this Agreement, and (after the Closing Date) all confidential documents and information concerning the Company, except to the extent that such information can be shown to have been (i) previously known on a nonconfidential basis by Sellers, (ii) in the public domain through no fault of Sellers or (iii) later lawfully acquired by Sellers from sources other than the Company or Buyer; PROVIDED that Sellers may disclose such information to their respective officers, directors, employees, accountants, counsel, consultants, advisors and agents in connection with the transactions contemplated by this Agreement so long as such persons are informed by Sellers of the confidential nature of such information and are directed by Sellers to treat such information confidentially. The obligation of Sellers and their Affiliates to hold any such information in confidence shall be satisfied if they exercise the same care with respect to such information as they would take to preserve the confidentiality of their own similar information. If this Agreement is terminated, Sellers and their Affiliates will, and will use their best efforts to cause their respective officers, directors, employees, accountants, counsel, 27 -22- consultants, advisors and agents to, destroy or deliver to Buyer, upon request, all documents and other materials, and all copies thereof, obtained by Sellers or their Affiliates or on their behalf from Buyer in connection with this Agreement that are subject to such confidence. 6.08. CONTINUING DISCLOSURE. Until the Closing, the Company and Sellers shall have the continuing obligation promptly to advise Buyer with respect to any matter hereafter arising or discovered that, if existing or known at the date of this Agreement, would have been required to be set forth or described in a schedule to this Agreement, or that constitutes a breach or prospective breach of this Agreement by the Company or a Seller. The delivery of any such notice shall not affect Buyer's remedies hereunder. 6.09. AFFILIATE AGREEMENTS. The Company shall deliver to Buyer on or prior to the date of this Agreement a letter from Seller's Counsel, satisfactory in form and substance to Buyer's Counsel, which, based upon discussion with the Company and such inquiries as such firm deems necessary, shall identify all persons who, at the date of this Agreement, such firm believes may be deemed to be "affiliates" of the Company as such term is used in and for the purposes of Accounting Series Releases 130 and 135, as amended, of the Securities and Exchange Commission, and defined in Rule 144(a)(1) of the Securities Act of 1933, as amended, and who will become the beneficial owners of shares of Buyer Stock pursuant to the transactions contemplated by this Agreement (each such person being referred to as a "COMPANY AFFILIATE"). The Company shall deliver to Buyer on or prior to the Closing Date a letter from Seller's Counsel, satisfactory in form and substance to Buyer's Counsel, which shall identify all Company Affiliates as of the Closing Date. The Company shall use its best efforts to cause each of the Company Affiliates to execute and deliver to Buyer (i) on the date of this Agreement and (ii) on the Closing Date, a written agreement (the "AFFILIATE AGREEMENT") satisfactory to Buyer and substantially in the form of EXHIBIT C hereto, including provisions indicating that such Company Affiliate (i) has not offered to sell, sold or otherwise disposed of any Shares in the 30 day period prior to the date hereof, (ii) will not offer to sell, sell or otherwise dispose of any Shares from the date hereof through the Closing Date, (iii) will not offer to sell, sell or otherwise dispose of any shares of Buyer Stock, except pursuant to an effective registration statement or in compliance with an available exemption from the registration requirements of the Securities Act (for which such Seller shall provide Buyer with an opinion of counsel satisfactory to Buyer that the securities being sold thereby may be publicly sold without registration under the Securities Act), and (iv) will not offer to sell, sell or otherwise dispose of any shares of Buyer Stock until Buyer shall have publicly released financial results covering a period of at least 30 days of combined operations of Buyer and the Company. ARTICLE VII COVENANTS OF BUYER Buyer agrees that: 7.01. CONFIDENTIALITY. Prior to the Closing Date and after any termination of this Agreement, Buyer and its Affiliates will hold, and will use their best efforts to cause their 28 -23- respective officers, directors, employees, accountants, counsel, consultants, advisors and agents to hold, in confidence, unless compelled to disclose by judicial or administrative process or by other requirements of law, all documents and information concerning the Company furnished to Buyer or its Affiliates in connection with the transactions contemplated by this Agreement, except to the extent that such information can be shown to have been (i) previously known on a nonconfidential basis by Buyer, (ii) in the public domain through no fault of Buyer or (iii) later lawfully acquired by Buyer from sources other than the Company; PROVIDED that Buyer may disclose such information to its officers, directors, employees, accountants, counsel, consultants, advisors and agents in connection with the transactions contemplated by this Agreement so long as such Persons are informed by Buyer of the confidential nature of such information and are directed by Buyer to treat such information confidentially. The obligation of Buyer and its Affiliates to hold any such information in confidence shall be satisfied if the exercise the same care with respect to such information as they would take to preserve the confidentiality of their own similar information. If this Agreement is terminated, Buyer and its Affiliates will, and will use their best efforts to cause their respective officers, directors, employees, accountants, counsel, consultants, advisors and agents to, destroy or deliver to Seller, upon request, all documents and other materials, and all copies thereof, obtained by Buyer or its Affiliates or on their behalf from a Seller or the Company in connection with this Agreement that are subject to such confidence. 7.02. RESALE REGISTRATION STATEMENT. Buyer agrees to cause a registration statement under the Securities Act on an appropriate form relating to the resale of the Shares to be filed pursuant to the Registration Rights Agreement on or prior to the Closing Date and agrees to use commercially reasonable efforts to have such registration statement declared effective as soon after the Closing as practicable; provided, however, that Buyer shall not be required to take any action to cause such registration statement to be declared effective by the Securities and Exchange Commission at any time prior to the publication by Buyer of financial results including at least thirty (30) days' post-closing combined operating results of Buyer and the Company. 7.03. ACCESS. After the Closing Date, Buyer agrees to give Sellers reasonable access to the books and records provided by Sellers to Buyer pursuant to Section 2.05 hereof to enable Sellers to make required filings with, and respond to any inquiries from, state or federal tax or other regulatory authorities. 7.04. ANNUAL REPORT ON FORM 10-K; EARNINGS RELEASE. Buyer agrees to file in a timely manner all reports and other documents required of the Company under the Securities Exchange Act of 1934, including, without limitation, its Annual Report on Form 10-K for the fiscal year ended June 30, 1996. In addition, Buyer agrees to publish post-closing combined results of operations of the Company and Buyer for the period July 1, 1996 through July 31, 1996 as soon as practicable after July 31, 1996 and in any event not later than Buyer publishes results of operations of Buyer for the fiscal year ended June 30, 1996. 7.05. AFFILIATE AGREEMENTS. Buyer shall use its best efforts to cause each person who, at the date of this Agreement, Buyer believes may be deemed to be "affiliates" of Buyer as such 29 -24- term is used in and for the purposes of Accounting Series Releases 130 and 135, as amended, of the Securities and Exchange Commission, and defined in Rule 144(a)(1) of the Securities Act of 1933, as amended (each, a "Buyer Affiliate"), to execute and deliver (i) on the date of this Agreement and (ii) on the Closing Date, an Affiliate Agreement substantially in the form of EXHIBIT C hereto. 7.06. CONSENTS AND APPROVALS. Buyer agrees to obtain the consents and approvals set forth on SCHEDULE 5.03 prior to the Closing. ARTICLE VIII COVENANTS OF ALL PARTIES The parties hereto agree that: 8.01. BEST EFFORTS. Subject to the terms and conditions of this Agreement, each party will use commercially reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary or desirable under applicable laws and regulations to consummate the transactions contemplated by this Agreement. Seller and Buyer each agree, and Seller, prior to the Closing, and Buyer, after the Closing, agree to cause the Company, to execute and deliver such other documents, certificates, agreements and other writings and to take such other actions as may be necessary or desirable in order to consummate or implement expeditiously the transactions contemplated by this Agreement. 8.02. CERTAIN FILINGS. The Company, Sellers and Buyer shall cooperate with each other (a) in determining whether any action by or in respect of, or filing with, any governmental body, agency, official or authority is required, or any actions, consents, approvals or waivers are required to be obtained from parties to any material contracts, in connection with the consummation of the transactions contemplated by this Agreement and (b) in taking such actions or making any such filings, furnishing information required in connection therewith and seeking timely to obtain any such actions, consents, approvals or waivers. 8.03. PUBLIC ANNOUNCEMENTS. The parties agree to consult with each other before issuing any press release or making any public statement with respect to this Agreement or the transactions contemplated hereby and, except as may be required by applicable law or any listing agreement with any national securities exchange, will not issue any such press release or make any such public statement prior to such consultation. 8.04. POOLING. Sellers, the Company and the Buyer shall use commercially reasonable efforts and shall cooperate fully to allow the transactions contemplated by this Agreement to be accounted for as a "pooling of interests" in accordance with generally accepted accounting principles which shall be acceptable to the U.S. Securities and Exchange Commission. ARTICLE IX 30 -25- EMPLOYEE BENEFITS 9.01. EMPLOYEE BENEFITS. DEFINITIONS. The following terms, as used herein, having the following meanings: "BENEFIT ARRANGEMENT" means each employment, severance or other similar contract, arrangement or policy (written or oral) and each plan or arrangement (written or oral) providing for severance benefits, insurance coverage (including any self-insured arrangements), workers' compensation, disability benefits, supplemental unemployment benefits, vacation benefits, retirement benefits or for deferred compensation, profit-sharing, bonuses, stock options, stock appreciation rights or other forms of incentive compensation or post-retirement insurance, compensation or benefits which (i) is not an Employee Plan, (ii) is entered into, maintained or contributed to, as the case may be, by Sellers or any of their Affiliates and (iii) covers any employee or former employee of the Company. "EMPLOYEE PLANS" means each "employee benefit plan", as such term is defined in Section 3(3) of ERISA, that (i) is subject to any provision of ERISA and (ii) is maintained or contributed to by the Company or any of its ERISA Affiliates, as the case may be. "ERISA" means the Employment Retirement Income Security Act of 1974, as amended. 9.02. ERISA REPRESENTATIONS. The Company and each Seller, jointly and severally, hereby represent and warrant to Buyer that: (a) SCHEDULE 9.02 lists each Employee Plan that covers any employee of the Company, copies or descriptions of all of which have previously been made available or furnished to Buyer. With respect to each Employee Plan, the Company has provided the most recently filed Form 5500 and an accurate summary description of such plan. The Company has provided Buyer with complete age, salary, service and related data as of the most recent practicable date for employees of the Company. (b) SCHEDULE 9.02 also includes a list of each Benefit Arrangement which (i) is not an Employee Plan, (ii) is entered into, maintained or contributed to by Sellers and (iii) covers any employee or former employee of the Company. Copies or descriptions of all Benefit Arrangements have been made available or furnished previously to Buyer. (c) No Employee Plan is a Multiemployer Plan (as defined in ERISA) and no Employee Plan is a pension plan that is subject to Title IV of ERISA. The Company has not incurred any liability under Title IV or ERISA arising in connection with the termination of any plan covered or previously covered by Title IV of ERISA. (d) Each Employee Plan has been maintained in compliance with its terms and with the requirements prescribed by any and all statutes, orders, rules and regulations, including but not limited to ERISA and the Code, which are applicable to such plan. Each Benefit Arrangement has been maintained in substantial compliance with its terms and with the 31 -26- requirements prescribed by any and all statutes, orders, rules and regulations which are applicable to such Benefit Arrangement. (e) With respect to the employees and former employees of the Company, there are no employee post-retirement medical or health plans in effect. (f) No employee of the Company will become entitled to any bonus, retirement, severance or similar benefit or enhanced benefit solely as a result of the transactions contemplated hereby. 9.03. NO THIRD PARTY BENEFICIARIES. No provision of this Article IX shall create any third party beneficiary or other rights in any employee or former employee (including any beneficiary or dependent thereof) of the Company in respect of continued employment (or resumed employment) with the Company and no provision of this Article IX shall create any such rights in any such Persons in respect of any benefits that may be provided, directly or indirectly, under any Employee Plan or Benefit Arrangement or any plan or arrangement that may be established by Buyer or any of its Affiliates. No provision of this Agreement shall constitute a limitation on rights to amend, modify or terminate after the Closing Date any Employee Plan or Benefit Arrangement. ARTICLE X CONDITIONS TO CLOSING 10.01. CONDITIONS TO THE OBLIGATIONS OF EACH PARTY. The obligations of Buyer, the Company and Sellers to consummate the Closing are subject to the satisfaction or waiver of the following conditions: (a) No proceeding challenging this Agreement or the transactions contemplated hereby or seeking to prohibit, alter, prevent or materially delay the Closing shall have been instituted by any Person before any court, arbitrator or governmental body, agency or official and be pending. (b) All actions by or in respect of or filings with any governmental body, agency, official or authority required to permit the consummation of the Closing shall have been obtained. 10.02. CONDITIONS TO OBLIGATION OF BUYER. The obligation of Buyer to consummate the Closing is subject to the satisfaction or waiver of the following further conditions: (a)(i) the Company and each Seller shall have performed in all material respects all of his, her or its obligations hereunder required to be performed on or prior to the Closing Date, (ii) the representations and warranties of the Company and each Seller contained in this Agreement at the time of its execution and delivery and in any certificate or other writing delivered by the Company or a Seller pursuant hereto, disregarding all qualifications and 32 -27- exceptions contained therein relating to materiality or Material Adverse Effect, shall be true at and as of the Closing Date, as if made at and as of such date with only such exceptions as would not in the aggregate reasonably be expected to have a Material Adverse Effect and (iii) Buyer shall have received a certificate signed by (A) the President of the Company and (B) each Seller to the foregoing effect. (b) No court, arbitrator or governmental body, agency or official shall have issued any order, and there shall not be any statute, rule or regulation, restraining the effective operation by Buyer of the business of the Company after the Closing Date, and no proceeding challenging this Agreement or the transactions contemplated hereby or seeking to prohibit, alter, prevent or materially delay the Closing shall have been instituted by any Person before any court, arbitrator or governmental body, agency or official and be pending. (c) Buyer shall have received an opinion of Sellers' Counsel, dated the Closing Date, as to the matters set forth on EXHIBIT E. (d) Each of the Sellers and the Company, shall have executed and delivered each of the Ancillary Agreements to be entered into by them or it at the Closing, in each case substantially in the form attached as an exhibit to this Agreement. (e) Buyer shall have received all other closing documents specified in Section 2.02 of this Agreement and all other closing documents that it may reasonably request, all in form and substance reasonably satisfactory to Buyer. (f) Price Waterhouse LLP shall have delivered to Buyer its written opinion that it has no basis for believing that the transactions contemplated by this Agreement shall not be accounted for as a "pooling of interests" in accordance with generally accepted accounting principles, and Buyer shall have no reason to believe that such accounting treatment will not be accepted by the Securities and Exchange Commission. (g) The Company shall deliver to Buyer a properly executed statement in a form reasonably requested by Buyer for purposes of satisfying Buyer's obligations under Treasury Regulation [Sections]1.1445-2(c)(3). (h) Buyer shall have received, on the third business day prior to the Closing Date, a statement from the Company, certified by the principal accounting officer of the Company, setting forth the "working capital" of the Company on such date and the components thereof. Such working capital shall be at least $50,000. For the purposes of this Section 10.02(i), "working capital" shall be understood to mean the Company's cash and cash equivalents (on hand or in bank accounts), plus accounts receivable (net of any allowance for doubtful accounts), minus trade payables, all as determined as of the close of business on the fourth business day prior to the Closing Date. 33 -28- (i) Buyer shall have received evidence satisfactory to it of Sellers' payment of all costs and expenses incurred by the Company in connection with this Agreement, other than up to an aggregate of $15,000 of legal fees and disbursements of Sellers' Counsel. (j) Buyer shall have obtained key man life insurance on the life of Raymond A. Konisky in the amount of $2,500,000. (k) Buyer shall have received a written waiver of notice of issuance from William Blair & Company LLC under the provisions of that certain Underwriting Agreement dated as of February 29, 1996 between Buyer and the other parties named therein. 10.03. CONDITIONS TO OBLIGATION OF SELLERS. The obligation of Sellers to consummate the Closing is subject to the satisfaction of the following further conditions: (a)(i) Buyer shall have performed in all material respects all of its obligations hereunder required to be performed by it at or prior to the Closing Date, (ii) the representations and warranties of Buyer contained in this Agreement at the time of its execution and delivery and in any certificate or other writing delivered by Buyer pursuant hereto shall be true in all material respects at and as of the Closing Date, as if made at and as of such date and (iii) Sellers shall have received a certificate signed by the Chief Financial Officer of Buyer to the foregoing effect. (b) No proceeding challenging this Agreement or the transactions contemplated hereby or seeking to prohibit, alter, prevent or materially delay the Closing shall have been instituted by any Person before any court, arbitrator or governmental body, agency or official and be pending. (c) Sellers shall have received an opinion of Buyer's Counsel, dated the Closing Date, to the effect specified in Sections 5.01 through 5.04 and 5.06 and with respect to such other matters as Sellers shall reasonably request. In rendering such opinion, such counsel may rely upon certificates of public officers, as to matters governed by the laws of jurisdictions other than the Commonwealth of Massachusetts or the federal laws of the United States of America, upon opinions of counsel reasonably satisfactory to Seller, copies of which shall be contemporaneously delivered to Seller, and as to matters of fact, upon certificates of officers of Buyer. (d) Buyer shall have executed and delivered each of the Ancillary Agreements to be entered into by it at the Closing, in each case substantially in the form attached as an exhibit to this Agreement. (e) Buyer shall have caused a registration statement under the Securities Act on an appropriate form relating to the resale of the Shares to be filed pursuant to the Registration Rights Agreement. 34 -29- (f) Sellers shall have received all items specified in Section 2.02 of this Agreement and all other closing documents that they may reasonably request, all in form and substance reasonably satisfactory to them. ARTICLE XI SURVIVAL; INDEMNIFICATION 11.01. SURVIVAL. The covenants contained in this Agreement shall survive the Closing and continue until the date set forth in each such covenant. The agreements, representations and warranties contained in this Agreement shall survive the Closing until the earlier of (i) the delivery by Price Waterhouse LLP of its report on Buyer's financial statements for the fiscal year ended June 30, 1996, or (ii) September 30, 1996. 11.02. INDEMNIFICATION (a) Each Seller hereby indemnifies Buyer, its subsidiaries and its directors, officers, agents and affiliates and, effective at the Closing, without duplication, the Company (collectively, the "BUYER GROUP") against and agrees to defend and hold them harmless from any and all damage, loss, liability and expense (including without limitation reasonable expenses of investigation and reasonable attorneys' fees and expenses in connection with any action, suit or proceeding) ("DAMAGES") incurred or suffered by Buyer or the Company arising out of (i) any inaccuracy in or breach or alleged breach of any agreement, representation or warranty of any Seller contained in or made pursuant to this Agreement or any certificate or other writing delivered pursuant hereto or in connection herewith, (ii) any failure by Sellers or the Company to perform any of their obligations or covenants as set forth in this Agreement or any certificate or other writing delivered pursuant hereto or in connection herewith and (iii) any and all actions, suits, litigation, arbitrations, proceedings, investigations or claims arising out of any of the foregoing and based on facts that have occurred on or prior to the Closing Date even though such action, suit, litigation, arbitration, proceeding, investigation or claim may not be filed or come to light until after the Closing Date (collectively, the "CLAIMS"); provided that (i) Sellers shall not be liable under this Section 11.02(a) unless the aggregate amount of Damages with respect to all matters referred to in this Section 11.02(a) exceeds $25,000, and then only to the extent of such excess. (b) Sellers shall have no right of indemnification, contribution or subrogation against the Company with respect to any indemnification by any Seller or Sellers under this Section 11.02 if the transactions contemplated by this Agreement are consummated. 11.03. PROCEDURES. The party seeking indemnification under Section 11.02 (the "INDEMNIFIED PARTY") agrees to give prompt notice to the party against whom indemnity is sought (the "INDEMNIFYING PARTY") of the assertion of any claim, or the commencement of any suit, action or proceeding in respect of which indemnity may be sought under such Section. The Indemnifying Party may, and at the request of the Indemnified Party shall, participate in and control the defense of any third party suit, action or proceeding at its own expense. The 35 -30- Indemnifying Party shall not be liable under Section 11.02 for any settlement effected without its consent of any claim, litigation or proceeding in respect of which indemnity may be sought hereunder. 11.04. HOLDBACK. At the Closing, each Seller shall be deemed to have directed Buyer to withhold from delivery ten percent (10%) of the shares of Buyer Stock issued to such Seller. The shares of Buyer Stock withheld are herein referred to as the "HOLDBACK SHARES." The Holdback Shares shall be issued to Sellers but held in escrow by Buyer subject to the terms and conditions hereinafter set forth. Holdback Shares shall be considered issued and outstanding shares of capital stock of Buyer and each Seller shall be entitled to vote such shares and receive any and all dividends or distributions payable with respect to such shares. 11.05. HOLDBACK TERMINATION. The Holdback Shares shall be distributed to Sellers as follows: (a) Promptly after the earlier to occur of (i) the delivery by Price Waterhouse LLP of its report on Buyer's financial statements for the fiscal year ended June 30, 1996, or (ii) September 30, 1996, the Holdback Shares shall be distributed to the Sellers, except that the portion of the Holdback Shares having a fair market value as of the Closing Date most nearly equal to the Damages incurred by the Buyer as to which a Claim shall have been previously and duly delivered to Sellers, shall continue to be withheld in escrow. The amount of such Damages shall be based upon a written certification of the Chief Executive Officer of Buyer to Sellers as to the amount of Damages incurred, together with supporting documentation. If Sellers disagree with the amount of Damages set forth in such certificate, and if Sellers and Buyer cannot reach a mutually satisfactory understanding with regard to the amount of Damages within five (5) business days after delivery of the certificate to Sellers, the matter shall be promptly submitted to binding arbitration in Boston, Massachusetts in accordance with the rules of the American Arbitration Association. The balance of the Holdback Shares not so withheld shall be distributed to Sellers. (b) The Holdback Shares not so distributed to Sellers pursuant to subsection 11.05(a) shall be retained by Buyer in escrow until such pending Claims are resolved; provided, however, that upon the disposition of any such Claim prior to the disposition of all such Claims, Buyer shall distribute to Sellers that amount of the Holdback Shares having a value as of the Closing Date in excess of 100% of the aggregate amounts of the remaining Damages incurred as determined above. ARTICLE XII TERMINATION 12.01. GROUNDS FOR TERMINATION. This Agreement may be terminated at any time prior to the Closing: (i) by written agreement of Sellers and Buyer; 36 -31- (ii) by either Sellers or Buyer if the Closing shall not have been consummated on or before 11:59 p.m., Boston time, on June 28, 1996; or (iii) by either Sellers or Buyer if there shall be any law or regulation that makes consummation of the transactions contemplated hereby illegal or otherwise prohibited or if consummation of the transactions contemplated hereby would violate any nonappealable final order, decree or judgment of any court or governmental body having competent jurisdiction. The party desiring to terminate this Agreement pursuant to clauses (ii) or (iii) shall give notice of such termination to the other parties. 12.02. EFFECT OF TERMINATION. If this Agreement is terminated as permitted by Section 12.01, such termination shall be without liability of either party (or any shareholder, director, officer, employee, agent, consultant or representative of such party) to the other party to this Agreement; PROVIDED that if such termination shall result from the willful failure of any party to use good faith efforts to fulfill a condition to the performance of the obligations of another party or to perform a covenant of this Agreement or from a willful breach by any party to this Agreement, such party shall be fully liable for any and all Damages incurred or suffered by the other party as a result of such failure or breach. The provisions of Sections 7.01 and 12.03 shall survive any termination hereof pursuant to Section 12.01. ARTICLE XIII MISCELLANEOUS 13.01. NOTICES. All notices and other communications which by any provision of this Agreement are required or permitted to be given shall be given in writing and shall be (a) mailed by first-class or express mail, postage prepaid, (b) sent by telex, telegram, telecopy or other form of rapid transmission, confirmed by mailing (by first class or express mail, postage prepaid) written confirmation at substantially the same time as such rapid transmission, or (c) personally delivered to the receiving party (which if other than an individual shall be an officer or other responsible party of the receiving party). All such notices and communications shall be mailed, sent or delivered as follows: if to Buyer, to: PAREXEL International Corporation 195 West Street Waltham, MA 02154 Attn: William T. Sobo, Jr. with a copy to: 37 -32- William J. Schnoor, Jr. Testa, Hurwitz & Thibeault, LLP High Street Tower 125 High Street Boston, MA 02110 Telecopy: (617) 248-7100 if to the Company, to: Sitebase Clinical Systems, Inc. 100 Conifer Hill Drive, Suite 511 Danvers, MA 01923 Telecopy: (508) 774-4655 with a copy to: Richard L. Wise Gordon & Wise 101 Federal Street Boston, MA 02110 Telecopy: (617) 542-0100 if to a Seller: at his address shown in SCHEDULE 2.01 Notices shall be deemed duly delivered three business days after being sent by first class mail, postage prepaid, or one business day after being sent via a reputable nationwide express mail service. Notices delivered via any other means shall be deemed duly delivered upon actual receipt by the individual for whom such notice is intended. Any notice sent to a party hereto shall be sent simultaneously, by the same means, to such party's counsel, as set forth above. 13.02. AMENDMENTS; NO WAIVERS. (a) Any provision of this Agreement may be amended or waived prior to the Closing Date if, and only if, such amendment or waiver is in writing and signed by Buyer, the Company and Sellers. Notwithstanding the foregoing, consummation of the transactions contemplated hereby shall be deemed to waive all conditions to the obligations of the Sellers and the Company (other than the condition set forth in Section 10.03(a)(ii)), on the one hand, and Buyer (other than the condition set forth in Section 10.02(a)(ii)), on the other hand, as of the Closing. Any amendment, waiver or action of Sellers hereunder must be taken by all Sellers. (b) No failure or delay by either party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise 38 -33- thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. 13.03. EXPENSES. All costs and expenses incurred in connection with this Agreement shall be paid by the party incurring such cost or expense; provided, however, that if the Closing shall occur all such costs and expenses incurred by the Company, other than up to an aggregate of $15,000 in legal fees and expenses incurred by Sellers' Counsel, shall be paid or reimbursed by Sellers. 13.04. SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns; PROVIDED that no party may assign, delegate or otherwise transfer any of his or its rights or obligations under this Agreement without the consent of the other parties hereto, except that Buyer may transfer or assign, in whole or from time to time in part, to one or more of its Affiliates, the right to purchase all or a portion of the Shares, but no such transfer or assignment will relieve Buyer of its obligations hereunder. 13.05. FURTHER ASSURANCES. From time to time after the Closing, at the request of Buyer and without further consideration, Sellers will execute and deliver to Buyer such other documents, and take such other action, at Buyer's cost and expense, as Buyer may reasonably request in order to consummate more effectively the transactions contemplated hereby and to vest in Buyer good, valid and marketable title to the Shares. 13.06. GOVERNING LAW. This Agreement shall be construed in accordance with and governed by the law of the Commonwealth of Massachusetts, without regard to the conflicts of law rules of such state. 13.07. COUNTERPARTS; EFFECTIVENESS. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement shall become effective when each party hereto shall have received a counterpart hereof signed by the other parties hereto. 13.08. ENTIRE AGREEMENT. This Agreement (including the exhibits and schedules hereto) constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements, understandings and negotiations, whether written or oral, between the parties with respect to the subject matter hereof. No representation, inducement, promise, understanding, condition or warranty not set forth herein has been made or relied upon by either party hereto. Neither this Agreement nor any provision hereof is intended to confer upon any Person other than the parties hereto any rights or remedies hereunder. 13.09. CAPTIONS. The captions herein are included for convenience of reference only and shall be ignored in the construction or interpretation hereof. 39 -34- 13.10. JURISDICTION. Any action or proceeding seeking to enforce any provision of, or based on any right arising out of, this Agreement may be brought against any of the parties in the courts of the Commonwealth of Massachusetts, and each of the parties hereby consents to the jurisdiction of such courts (and of the appropriate appellate courts) in any such action or proceeding and waives any obligation to venue laid therein. Process in any such action or proceeding may be served on any party anywhere in the world, whether within or without the Commonwealth of Massachusetts. 40 IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written. PAREXEL INTERNATIONAL CORPORATION By: /s/ Josef H. von Rickenbach ---------------------------------------- Name: Josef H. von Rickenbach -------------------------------------- Title: Chairman and Chief Executive Officer ------------------------------------- SITEBASE CLINICAL SYSTEMS, INC. By: /s/ Raymond A. Konisky ---------------------------------------- Raymond A. Konisky Name: Raymond A. Konisky ------------------------------------- Title: President ------------------------------------- By: /s/ Karen A. Konisky ---------------------------------------- Karen A. Konisky EX-5.1 3 OPINION OF TESTA,HURWITZ & THIBEAULT, LLP 1 Exhibit 5.1 June 27, 1996 PAREXEL International Corporation 195 West Street Waltham, MA 02154 Re: Registration Statement on Form S-1 Relating to 56,818 Shares of Common Stock Dear Sir or Madam: This opinion relates to an aggregate of 56,818 shares of Common Stock, par value $.01 per share (the "Common Stock"), of PAREXEL International Corporation (the "Company"), which are the subject matter of a Registration Statement on Form S-1 filed with the Securities and Exchange Commission on June 27, 1996 (the "Registration Statement"). The 56,818 shares of Common Stock covered by Registration Statement are being resold by certain stockholders (the "Selling Stockholders") of the Company. Based upon such investigation as we have deemed necessary, we are of the opinion that when the shares of Common Stock to be resold by the Selling Stockholders pursuant to the Prospectus have been resold and paid for in accordance with the terms described in the Prospectus (the "Prospectus") included in the Registration Statement, such shares of Common Stock will be fully paid and nonassessable. We hereby consent to the filing of this opinion as Exhibit 5.1 to the Registration Statement and to the reference to our firm in the Prospectus under the caption "Legal Matters." Very truly yours, TESTA, HURWITZ & THIBEAULT, LLP EX-10.24 4 REGISTRATION RIGHTS AGREEMENT 1 Exhibit 10.24 EXHIBIT A TO STOCK PURCHASE AGREEMENT --------------------------- REGISTRATION RIGHTS AGREEMENT AGREEMENT dated as of June 28, 1996 among PAREXEL International Corporation, a Massachusetts corporation (the "COMPANY")and Raymond A. Konisky and Karen A. Konisky (individually, a "STOCKHOLDER" and collectively, the "STOCKHOLDERS"). W I T N E S S E T H : WHEREAS, pursuant to the Stock Purchase Agreement dated as of May 24, 1996 (the "PURCHASE AGREEMENT"), among the Company, Sitebase Clinical Systems, Inc., a Massachusetts corporation ("SITEBASE") and the other parties named herein, the Company is acquiring all of the issued and outstanding shares of capital stock of Sitebase; WHEREAS, in connection therewith, each Stockholder is acquiring unregistered shares of Common Stock of the Company (the "SHARES"); and WHEREAS, the Company and the Stockholders wish to set forth certain rights and obligations with regard to the registration of the Shares; NOW, THEREFORE, the parties hereto agree as follows: 1. CERTAIN DEFINITIONS. As used in this Agreement, the following terms shall have the following respective meanings: "COMMISSION" shall mean the Securities and Exchange Commission, or any other federal agency at the time administering the Securities Act. "SHARES" shall mean the shares of Common Stock of the Company issued to the Stockholders on even date herewith pursuant to the Purchase Agreement. "COMMON STOCK" shall mean the Common Stock, $.01 par value, of the Company, as constituted as of the date of this Agreement. "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. "REGISTRATION EXPENSES" shall mean the expenses so described in Section 10. 2 -2- "SECURITIES ACT" shall mean the Securities Act of 1933, as amended, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. "SELLING EXPENSES" shall mean the expenses so described in Section 10. 2. COMPLIANCE WITH SECURITIES LAWS. Each Stockholder represents and warrants that he or she: (a) has paid no brokerage or similar commissions in connection with the acquisition of such Shares. (b) is acquiring such Shares solely for his or her own account. (c) has provided such information as may reasonably have been requested by the Company in order for the Company or its counsel to evaluate the availability of an exemption under the Securities Act for the issuance of the Shares to such Stockholder. 3. SECURITIES ACT MATTERS. Each Stockholder acknowledges and agrees that the Shares have not been registered under the Securities Act or under the securities laws of any state, in reliance upon certain exemptive provisions of such statutes. Each Stockholder recognizes and acknowledges that such claims of exemption are based, in part, upon each Stockholder's representations contained in this Agreement. Each Stockholder further recognizes and acknowledges that, because the Shares are unregistered under federal and state laws, they are not presently eligible for public resale, and may only be resold in the future pursuant to an effective registration statement under the Securities Act and any applicable state securities laws, or pursuant to a valid exemption from such registration requirements. Each Stockholder recognizes and acknowledges that Rule 144 or any other exemption promulgated under the Securities Act (which facilitates routine sales of securities in accordance with the terms and conditions of that Rule, including a holding period requirement) is not now available for resale of the Shares, and each Stockholder recognizes and acknowledges that, in the absence of the availability of Rule 144 or any other exemption under the Securities Act, a sale pursuant to a claim of exemption from registration under the Securities Act would require compliance with some other exemption under the Securities Act, none of which may be available for resale of the Shares. Each Stockholder recognizes and acknowledges that, except as set forth in this Agreement, the Company is under no obligation to register the Shares, either pursuant to the Securities Act or the securities laws of any state. 4. RESTRICTIVE LEGEND. Each certificate representing Shares shall, except as otherwise provided in this Section 4 or in Section 5, be stamped or otherwise imprinted with a legend substantially in the following form: "The Securities represented hereby have not been registered under the Securities Act of 1933, as amended, and may not be sold, transferred or otherwise disposed of except in accordance with the terms thereof and unless registered with 3 -3- the Securities and Exchange Commission of the United States and the securities regulatory authorities of certain states or unless an exemption from such registration is available." Such certificates shall not bear such legend if in the opinion of counsel satisfactory to the Company the securities being sold thereby may be publicly sold without registration under the Securities Act or if such securities have been sold pursuant to Rule 144, any other exemption under the Securities Act or an effective registration statement. 5. NOTICE OF PROPOSED TRANSFER. Prior to any proposed transfer of any Shares, each Stockholder shall give written notice to the Company of his or her intention to effect such transfer. Prior to the S-1 Registration Statement or the S-3 Registration Statement becoming effective, each such notice shall describe the manner of the proposed transfer and, if requested by the Company, shall be accompanied by an opinion of counsel satisfactory to the Company to the effect that the proposed transfer may be effected without registration under the Securities Act, whereupon the Stockholder shall be entitled to transfer such security in accordance with the terms of his or her notice. Each certificate for Shares transferred as above provided shall bear the legend set forth in Section 4, except that such certificate shall not bear such legend if (i) such transfer is in accordance with the provisions of Rule 144 (or any other rule permitting public sale without registration under the Securities Act) or (ii) the opinion of counsel referred to above is to the further effect that the transferee and any subsequent transferee (other than an affiliate of the Company) would be entitled to transfer such securities in a public sale without registration under the Securities Act. 6. REQUIRED REGISTRATION. The Company agrees to use commercially reasonable efforts to (i) cause a registration statement on Form S-1 under the Securities Act relating to the resale of the Shares to be filed on or prior to the closing of the transactions contemplated by the Purchase Agreement (the "S-1 REGISTRATION STATEMENT"); and (ii) cause the S-1 Registration Statement to become effective on or after the Pooling Restricted Period and thereafter remain effective until the earlier of (A) midnight on the 90th day thereafter (the "DISTRIBUTION PERIOD") or (B) the sale of all Shares covered thereby. The Distribution Period shall be extended by one day for each day during which resales under the S-1 Registration Statement are suspended pursuant to Section 9, below. Anything to the contrary herein notwithstanding, the Company shall not be required to take any action to cause the S-1 Registration Statement to be declared effective by the Commission at any time prior to the publication by the Company of financial results including at least thirty (30) days' post-closing combined operating results of the Company and Sitebase (the "POOLING RESTRICTED PERIOD"), and PROVIDED FURTHER, HOWEVER, that the Company may suspend sales at any time under the S-1 Registration Statement immediately upon notice to each of the Stockholders at their last known addresses, for any of the reasons and for the time periods set forth in Section 9; 7. REGISTRATION ON FORM S-3. After the Distribution Period, the Stockholders may request in writing that the Company file a registration statement on Form S-3 or any successor thereto for a public offering of all (but not less than all) of the Shares then held by the Stockholders. Provided that the Company is a registrant entitled to use Form S-3 or any 4 -4- successor thereto to register such Shares, upon receipt of such notice the Company shall use commercially reasonable efforts to promptly register under the Securities Act on Form S-3 or any successor thereto, for public sale in accordance with the method of disposition specified in such notice, the Shares then held by the Stockholders (the "S-3 REGISTRATION STATEMENT"). The Company will use commercially reasonable efforts to cause the S-3 Registration Statement to remain effective until the earlier of (i) two years after the Closing Date (as defined in the Purchase Agreement) or (ii) the sale of all Shares covered thereby. Anything to the contrary herein notwithstanding, the Company may suspend sales at any time under the S-3 Registration Statement immediately upon notice to each of the Stockholders at their last known addresses, for any of the reasons and for the time periods set forth in Section 9; 8. REGISTRATION PROCEDURES. If and whenever the Company is required by the provisions of Sections 6 or 7 to use commercially reasonable efforts to effect the registration of any Shares under the Securities Act, the Company will, as expeditiously as possible: (a) prepare and file with the Commission such amendments and supplements to the S-1 Registration Statement or the S-3 Registration Statement, and the prospectuses used in connection therewith, as may be necessary to comply with the Securities Act; (b) furnish to each Stockholder such number of copies of the S-1 Registration Statement or the S-3 Registration Statement and each such amendment and supplement thereto (in each case including exhibits) and the prospectus included therein (including each preliminary prospectus) as such persons reasonably may request in order to facilitate the public sale or other disposition of the Shares covered by the S-1 Registration Statement or the S-3 Registration Statement; (c) register or qualify the Shares covered by the S-1 Registration Statement or the S-3 Registration Statement under the securities or "blue sky" laws of the jurisdictions where the Company is currently registered or qualified, provided, however, that the Company shall not for any such purpose be required to qualify generally to transact business as a foreign corporation in any jurisdiction where it is not so qualified or to consent to general service of process in any such jurisdiction; (d) have the Shares covered by the S-1 Registration Statement or the S-3 Registration Statement subject to quotation on the Nasdaq National Market; and (e) promptly notify each Stockholder (at their last known addresses) (i) of the effective date of the S-1 Registration Statement or the S-3 Registration Statement and the date when any post-effective amendment to the S-1 Registration Statement or the S-3 Registration Statement becomes effective, (ii) of any stop order or notification from the Commission or any other jurisdiction as to the suspension of the effectiveness of the S-1 Registration Statement or the S-3 Registration Statement, or (iii) of the end of any suspension under Section 9. 9. SUSPENSION. 5 -5- (a) The rights of the Stockholders to distribute the Shares pursuant to this Agreement and the S-1 Registration Statement or the S-3 Registration Statement may be suspended by the Company on the occurrence of any of the following events: (i) the Company has made an initial determination to conduct a public offering; (ii) the Company is about to make a normal course disclosure containing information of a material nature; (iii) there then exists material, non-public information relating to the Company which, in the good faith determination of its Board of Directors, would not be appropriate for disclosure during that time; or (iv) the Company is engaged in any activity at any time that, in the good faith determination of its Board of Directors, would be adversely affected by the continued compliance with this Agreement or the continued distribution of the Shares by the Stockholders. (b) The Company shall use commercially reasonable efforts to minimize the length of any suspension: (i) under Section 9(a)(i), to a period of thirty (30) days, more or less, beginning on the day that notice of a suspension is given to the Stockholders and ending on the earlier of: (A) the date of disclosure of the public offering, or (B) the date which is 30 days after the beginning of the suspension, provided that during such suspension, the Company will proceed with commercially reasonable efforts to file the appropriate documentation in respect of, and otherwise complete, such public offering as expeditiously as practicable; (ii) under Section 9(a)(ii), to a period of three (3) business days, more or less; (iii) under Section 9(a)(iii) or 9(a)(iv), if the activity is a prospective acquisition by the Company, to a period beginning when the notice of suspension is given to the Stockholders and ending on the earlier of: (A) the closing of the transaction and the making of all required filings under the Securities Act or Exchange Act, or (B) the date on which discussions regarding the acquisition are terminated; and (iv) under Section 9(a)(iii) or 9(a)(iv), for any reason other than a prospective acquisition by the Company, to a period beginning when the notice of suspension is given to the Stockholders and ending on the earlier of: (A) the disclosure of the activity, or (B) the reason is no longer operative. (c) The Distribution Period shall be extended by the length of any suspensions under Section 9(b). 6 -6- 10. EXPENSES. All expenses incurred by the Company in complying with Sections 6 and 7, including, without limitation, all registration and filing fees, printing expenses, fees and disbursements of counsel and independent public accountants for the Company, fees and expenses incurred in connection with complying with state securities or "blue sky" laws, fees of the National Association of Securities Dealers, Inc., transfer taxes, fees of transfer agents and registrars, and costs of issuance, but excluding any Selling Expenses, are called "REGISTRATION EXPENSES". All underwriting discounts (if any) and selling commissions applicable to the sale of the Shares covered by the S-1 Registration Statement or the S-3 Registration Statement, as well as all professional service fees incurred by the Stockholders, are called "SELLING EXPENSES". The Company will pay all Registration Expenses in connection with the preparation and filing of the S-1 Registration Statement or the S-3 Registration Statement. All Selling Expenses shall be borne by the Stockholders in proportion to the number of Shares sold by each. The Company shall not be obligated to pay any Registration Expenses in connection with the preparation and filing of the S-1 Registration Statement or the S-3 Registration Statement if such registration statement is withdrawn, delayed or abandoned for any reason by the Stockholders. 11. INDEMNIFICATION AND CONTRIBUTION. (a) In connection with the registration of the Shares under the Securities Act pursuant to Section 6 or Section 7, the Company will indemnify and hold harmless each Stockholder, each underwriter of such Shares thereunder and each other person, if any, who controls such Stockholder or underwriter within the meaning of the Securities Act, against any losses, claims, damages or liabilities, joint or several, to which such Stockholder, underwriter or controlling person may become subject under the Securities Act, Exchange Act, state securities laws or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon (i) any untrue statement or alleged untrue statement of material fact contained in the registration statement under which such Shares were registered under the Securities Act pursuant to Section 6 or Section 7, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereto, (ii) the omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading or (iii) any violation by the Company or its agents of any rule or regulation promulgated under the Securities Act, Exchange Act or state securities laws applicable to the Company or its agents and relating to action or inaction required of the Company in connection with such registration, and the Company will reimburse each such Stockholder, each such underwriter and each such controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action, PROVIDED, HOWEVER, that the Company will not be liable in any such case if any to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission so made based upon information furnished by any such Stockholder, any such underwriter or any such controlling person. 7 -7- (b) In connection with the registration of the Shares under the Securities Act pursuant to Section 6 or Section 7, each Stockholder, severally and not jointly, will indemnify and hold harmless the Company, each person, if any, who controls the Company within the meaning of the Securities Act, each officer of the Company who signs such registration statement, each director of the Company, each underwriter and each person who controls any underwriter within the meaning of the Securities Act, against all losses, claims, damages or liabilities, joint or several, to which the Company or such officer, director, underwriter or controlling person may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon (i) the failure of such Stockholder to comply with the provisions of Section 14 herein or (ii) any untrue statement or alleged untrue statement of any material fact contained in the registration statement, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse the Company and each such officer, director, underwriter and controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action, PROVIDED, HOWEVER, that such Stockholder will be liable hereunder in any such case if and only to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in reliance upon and based upon information pertaining to such Stockholder, furnished by or for such Stockholder. (c) Promptly after receipt by an indemnified party hereunder of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party hereunder, notify the indemnifying party in writing thereof, but the omission so to notify the indemnifying party shall not relieve it from any liability which it may have to such indemnified party other than under this Section 11 and shall only relieve it from any liability which it may have to such indemnified party under this Section 11 if and to the extent the indemnifying party is prejudiced by such omission. In case any such action shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate in and, to the extent it shall wish, to assume and undertake the defense thereof with counsel satisfactory to such indemnified party, and, after notice from the indemnifying party to such indemnified party of its election so to assume and undertake the defense thereof and the approval by the indemnified party of the counsel chosen by the indemnifying party, the indemnifying party shall not be liable to such indemnified party under this Section 11 for any legal expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation and of liaison with counsel so selected, PROVIDED, HOWEVER, that, if the defendants in any such action include both the indemnified party and the indemnifying party and if the interests of the indemnified party reasonably may be deemed to conflict with the interests of the indemnifying party, the indemnified party shall have the right to select a separate counsel and to assume such legal defenses and otherwise to participate in the defense of such action, with the expenses and fees of such separate counsel and other expenses related to such participation to be reimbursed by the indemnifying party as incurred. 8 -8- (d) In order to provide for just and equitable contribution to joint liability in any case in which either (i) any Stockholder exercising rights under this Agreement makes a claim for indemnification pursuant to this Section 11 but it is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case notwithstanding the fact that this Section 11 provides for indemnification in such case, or (ii) contribution under the Securities Act may be required on the part of any such Stockholder in circumstances for which indemnification is provided under this Section 11; then, and in each such case, the Company and such Stockholder will contribute to the aggregate losses, claims, damages or liabilities to which they may be subject (after contribution from others) in proportion to the relative fault of the Company, on the one hand, and each Stockholder, severally, on the other hand; PROVIDED, HOWEVER, that, in any such case, no person or entity guilty of fraudulent misrepresentation (within the meaning of Section 10(f) of the Securities Act) will be entitled to contribution from any person or entity who was not guilty of such fraudulent misrepresentation. (e) The indemnities provided in this Section 11 shall survive the transfer of any Shares by such Stockholder. 12. REPORTS UNDER SECURITIES EXCHANGE ACT OF 1934. With a view to making available to the Stockholders the benefits of Rule 144 promulgated under the Securities Act and any other rule or regulation thereunder that may at any time permit a Stockholder to sell securities of the Company to the public without registration, the Company agrees to: (a) make and keep public information available, as those terms are understood and defined in Rule 144; (b) maintain registration of its Common Stock under Section 12 of the Exchange Act; (c) file in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act; and (d) furnish to any Stockholder, so long as the Stockholder owns any Shares, forthwith upon request: (i) a written statement by the Company that it has complied with the reporting requirements of Rule 144, (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company; and (iii) such other information as may be reasonably requested in availing any Stockholder of any rule or regulation under the Securities Act which permits the selling of any such securities without registration or pursuant to such form. 13. CHANGES IN COMMON STOCK. If, and as often as, there is any change in the Common Stock by way of a stock split, stock dividend, combination or reclassification, or through a merger, consolidation, reorganization or recapitalization, or by any other means, appropriate adjustment shall be made in the provisions hereof so that the rights and privileges granted hereby shall continue with respect to the Shares as so changed. 9 -9- 14. STOCKHOLDERS' CONDUCT. With respect to any sale of Shares covered by the S-1 Registration Statement or the S-3 Registration Statement, each Stockholder understands and agrees as follows: (a) Each Stockholder will carefully review the information concerning him or her contained in the S-1 Registration Statement or the S-3 Registration Statement and will promptly notify the Company if such information is not complete and accurate in all respects, including having properly disclosed any position, office or other material relationship within the past three years with the Company or its affiliates; (b) Each Stockholder agrees to sell Shares only in the manner set forth in (i) the S-1 Registration Statement or the S-3 Registration Statement (or in compliance with Section 5 hereof), (ii) the Affiliate Agreement (as defined in the Purchase Agreement) and (iii) Section 15; (c) Each Stockholder agrees to comply with the anti-manipulation rules under the Exchange Act in connection with purchases and sales of securities of the Company during the time the S-1 Registration Statement or the S-3 Registration Statement remains effective; (d) Each Stockholder agrees to only sell Shares in a jurisdiction after counsel for the Company has advised that such sale is permissible under the applicable state securities or "Blue Sky" laws; (e) Each Stockholder agrees to comply with the prospectus delivery requirements of the Exchange Act; (f) Each Stockholder agrees to promptly notify the Company of any and all planned sales and completed sales of Shares; and (g) Each Stockholder agrees to suspend sales during the periods when sales are to be suspended pursuant to Section 9. (h) In connection with the registration of the Shares, each Stockholder will furnish to the Company in writing such information requested by the Company with respect to themselves and the proposed distribution by them as shall be necessary in order to assure compliance with federal and applicable state securities laws. (i) Each Stockholder hereby agrees that he or she will not sell, exchange, transfer, pledge, dispose or otherwise reduce his or her risk relative to any Shares owned by him or her during the period which begins on the date hereof and ends at such time as the Company publicly announces financial results covering at least thirty days of combined operations of the Company and Sitebase. The Company, at its discretion, may cause stop transfer orders to be placed with its transfer agent with respect to the certificates representing the Shares, provided that such stop transfer orders are consistent with the other provisions of the Agreement. 10 -10- 15. SELLING PROCEDURES. (a) Each Stockholder will notify the Company of his or her intention to sell Shares under either the S-1 Registration Statement or the S-3 Registration Statement not less than five (5) business days prior to the expected date of such sale by faxing the "Takedown Request" attached hereto as EXHIBIT A to: Testa, Hurwitz & Thibeault, LLP 125 High Street High Street Tower Boston, Massachusetts 02110 Attn: Heather M. Stone Phone: (617) 248-7238 Facsimile: (617) 248-7100 During this period, the Company will review the prospectus to determine if a suspension pursuant to Section 9 is necessary or appropriate. If the Company does not notify the Stockholder of a suspension pursuant to Section 9, the Stockholder may conclude the proposed sale, on the proposed date of sale, strictly in accordance with the Takedown Request. (b) Each Stockholder will notify the Company of each sale under either the S-1 Registration Statement or the S-3 Registration Statement in accordance with the Takedown Request within 24 hours of the sale by faxing the "Notification of Sale" attached hereto as EXHIBIT B to: Testa, Hurwitz & Thibeault, LLP 125 High Street High Street Tower Boston, Massachusetts 02110 Attn: Heather M. Stone Phone: (617) 248-7238 Facsimile: (617) 248-7100 Based on the information set forth on the Notification of Sale, the Company will prepare or cause to be prepared the appropriate notifications to its Transfer Agent to remove the legend described in Section 4 from the Shares so sold. 16. REPRESENTATIONS AND COVENANTS. Each Stockholder hereby represents and warrants to the Company as follows: (a) EACH STOCKHOLDER UNDERSTANDS THAT HIS OR HER INVESTMENT IN THE SHARES INVOLVES RISK. 11 -11- (b) EACH STOCKHOLDER HAS CONSULTED HIS OR HER OWN ATTORNEY, ACCOUNTANT OR INVESTMENT ADVISOR WITH RESPECT TO THE INVESTMENT CONTEMPLATED HEREBY AND ITS SUITABILITY FOR SUCH STOCKHOLDER. ANY SPECIFIC ACKNOWLEDGMENT SET FORTH BELOW WITH RESPECT TO ANY STATEMENT OR INFORMATION FURNISHED TO THE STOCKHOLDERS SHALL NOT BE DEEMED TO LIMIT THE GENERALITY OF THIS REPRESENTATION AND WARRANTY. (c) The Company has made available to each Stockholder, during the course of this transaction and prior to the acquisition of the Shares, the opportunity to ask questions of and receive complete and correct answers from representatives of the Company concerning the terms and conditions of the Shares and to obtain any additional information relating to the financial condition and business of the Company. (d) Each Stockholder understands that he or she must bear the economic risk of this investment until such time as the Shares are registered; that the Shares are not currently registered under the Securities Act, and, therefore, cannot be resold unless they are subsequently registered under the Securities Act or unless an exemption from such registration is available; that such Stockholder is purchasing the Shares with no present view toward resale or other distribution thereof; and that each Stockholder agrees not to resell or otherwise dispose of all or any part of the Shares, except as permitted by law, including, without limitation, any and all applicable provisions of the Purchase Agreement and this Agreement and any regulations under the Securities Act and applicable state securities laws. (e) Each Stockholder has adequate means of providing for his or her current needs and personal contingencies and has no need for liquidity in connection with this investment in the Shares. (f) Each Stockholder has reviewed the representations and warranties of the Company set forth in the Purchase Agreement, as well as the information provided to such Stockholder by the Company pursuant to Section 4.07 of the Purchase Agreement and has consulted with his or her personal legal and financial advisors in evaluating the merits and risks of the investment in the Shares. (h) Each Stockholder received an offer concerning the Shares and first learned of this investment in the state or other jurisdiction listed in such Stockholder's residence address on the signature page hereto, and intend that the state securities laws of that state or other jurisdiction alone govern this transaction. (i) Each Stockholder hereby acknowledges receipt of the documents described in Section 5.07 of the Purchase Agreement, which documents each Stockholder has reviewed. Each Stockholder further acknowledges and warrants that, prior to the execution of this Agreement, he or she has had the opportunity to ask questions and receive answers from the Company and Sitebase concerning the terms and conditions of the transactions contemplated by the Purchase Agreement and the issuance of the Shares, and concerning any of the documents 12 -12- identified above, and to obtain such additional further information from the Company and Sitebase as he or she has deemed necessary to verify the accuracy of the information contained in the documents identified above or any other information furnished to the Stockholders. (j) Each Stockholder has been advised that, as of the date hereof, he or she may be deemed to be an "affiliate" of Sitebase, as the term "affiliate" is used in and for purposes of Accounting Series Releases 130 and 135, as amended, of the Commission. (k) Each Stockholder understands that the representations, warranties and covenants set forth herein will be relied upon by Sitebase, other stockholders of Sitebase, the Company, the stockholders of the Company and their respective counsel and accounting firms. (l) Each Stockholder hereby represents and warrants that he or she has not sold, exchanged, transferred, pledged, disposed or otherwise reduced his or her risk relative to any shares of Sitebase common stock owned by him or her during the 30 day period preceding the date hereof. 17. MISCELLANEOUS. (a) All covenants and agreements contained in this Agreement by or on behalf of any of the parties hereto shall bind and inure to the benefit of the respective successors and assigns of the parties hereto (including without limitation transferees of any Shares, PROVIDED, that such transferee executes a counterpart signature page to this Agreement), whether so expressed or not. (b) All notices and other communications which by any provision of this Agreement are required or permitted to be given shall be given in writing and shall be (a) mailed by first-class or express mail, postage prepaid, (b) sent by telex, telegram, telecopy or other form of rapid transmission, confirmed by mailing (by first class or express mail, postage prepaid) written confirmation at substantially the same time as such rapid transmission, or (c) personally delivered to the receiving party (which if other than an individual shall be an officer or other responsible party of the receiving party). All such notices and communications shall be mailed, sent or delivered as follows: if to the Company, at 195 West Street, Waltham, Massachusetts 02154, Attention: William T. Sobo, Jr., Chief Financial Officer, with a copy to Testa, Hurwitz & Thibeault, LLP, 125 High Street , High Street Tower, Boston, Massachusetts 02110, Attn: William J. Schnoor, Jr.; if to any other party hereto, at the address of such party set forth on the signature page hereto, with a copy to Gordon & Wise, 100 Federal Street, Boston, Massachusetts 02110, Attn: Richard L. Wise; if to any subsequent Stockholder of Shares, to it at such address as may have been furnished to the Company in writing by such Stockholder; 13 -13- or, in any case, at such other address or addresses as shall have been furnished in writing to the Company (in the case of a Stockholder) or to the Stockholders (in the case of the Company) in accordance with the provisions of this paragraph. Notices shall be deemed duly delivered three business days after being sent by first class mail, postage prepaid, or one business day after being sent via a reputable nationwide express mail service. Notices delivered via any other means shall be deemed duly delivered upon actual receipt by the individual for whom such notice is intended. Any notice delivered to a party hereunder shall be sent simultaneously, by the same means, to such party's counsel as set forth above. (c) This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts. (d) This Agreement may be amended or modified, and provisions hereof may be waived, with the written consent of the Company and the holders of at least a majority of the outstanding Shares. (e) This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. (f) If any provision of this Agreement shall be held to be illegal, invalid or unenforceable, such illegality, invalidity or unenforceability shall attach only to such provision and shall not in any manner affect or render illegal, invalid or unenforceable any other provision of this Agreement, and this Agreement shall be carried out as if any such illegal, invalid or unenforceable provision were not contained herein. 14 -14- IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written. PAREXEL INTERNATIONAL CORPORATION By: /s/ Josef H. von Rickenbach ---------------------------------------- Name: Josef H. von Rickenbach ------------------------------------- Title: Chairman and Chief Exeuctive Officer ------------------------------------ /s/ Raymond A. Konisky ------------------------------------------- Raymond A. Konisky /s/ Karen A. Konisky ------------------------------------------- Karen A. Konisky [You MUST complete pages 11-12 of this Agreement] 15 -15- Principal Residence Address: - --------------------------- Note: Non-principal residence addresses and post office boxes cannot be accepted. - ----------------------------------------------- (Number and Street) - ----------------------------------------------- (City, State) (Zip Code) - ----------------------------------------------- (Residence Telephone) Mailing Address (if different from above): - ----------------------------------------- - ----------------------------------------------- (Number and Street) - ----------------------------------------------- (City, State) (Zip Code) Citizenship: ----------------------------------- Social Security or Taxpayer I.D. No.: ---------- 16 -16- If the Stockholder is a natural person and is an accredited investor described by category 12 or 13 (or both) set forth on the attached EXHIBIT C, please check this box. / / If the Stockholder has not checked the box above, please check this box if at least one of the categories set forth on the attached EXHIBIT C describes you. / / 17 -17- Exhibit A to Registration Rights Agreement -------------------------------- TAKEDOWN REQUEST The undersigned Stockholder intends to offer and sell to the public Shares of PAREXEL International Corporation registered under a certain Registration Statement on Form S-1, File No. 333-_______.
- ---------------------------------------------------------------------------------------------------- Name, Address, Telephone Number and Name, Address, Telephone Facsimile Number of Number of Number of Proposed Number and Facsimile Agent, Broker-Dealer or Shares Shares to Date Number of Stockholder Underwriter Owned be Sold of Sale* - ---------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------- * MUST BE AT LEAST FIVE (5) BUSINESS DAYS AFTER THE DATE HEREOF.
Other Information: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- The undersigned Stockholder agrees to provide all information and materials and to take all actions as may be required in order for PAREXEL International Corporation to comply with all applicable securities laws. ---------------------------------------- Signature of Stockholder ---------------------------------------- Print Name ---------------------------------------- Date ALL TAKEDOWN REQUESTS SHOULD BE FORWARDED BY FACSIMILE TO: TESTA, HURWITZ & THIBEAULT, LLP 125 HIGH STREET HIGH STREET TOWER BOSTON, MASSACHUSETTS 02110 ATTN: HEATHER M. STONE PHONE: (617) 248-7238 FACSIMILE: (617) 248-7100 AT LEAST FIVE (5) BUSINESS DAYS PRIOR TO A PROPOSED SALE 18 -18- Exhibit B to Registration Rights Agreement -------------------------------- NOTIFICATION OF SALE The undersigned Stockholder sold to the public Shares of PAREXEL International Corporation registered under a certain Registration Statement on Form S-1, File No. 333-_______, as follows.
- ---------------------------------------------------------------------------------------------------- Name, Address, Telephone Number and Name, Address, Telephone Facsimile Number of Number of Number of Number and Facsimile Agent, Broker-Dealer or Shares Shares Date Number of Stockholder Underwriter Owned Sold of Sale - ---------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------
Other Information: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ---------------------------------------- Signature of Stockholder ---------------------------------------- Print Name ---------------------------------------- Date ALL NOTIFICATIONS OF SALE SHOULD BE FORWARDED BY FACSIMILE TO: TESTA, HURWITZ & THIBEAULT, LLP 125 HIGH STREET HIGH STREET TOWER BOSTON, MASSACHUSETTS 02110 ATTN: HEATHER M. STONE PHONE: (617) 248-7238 FACSIMILE: (617) 248-7100 WITHIN 24 HOURS FOLLOWING A SALE 19 -19- Exhibit C to Registration Rights Agreement -------------------------------- 1. A bank (as defined in Section 3(a)(2) of the Securities Act) or a savings and loan association or other institution (as defined in Section 3(a)(5)(A) of the Securities Act), whether acting in regard to this investment in its individual or a fiduciary capacity. 2. A broker or dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934. 3. An insurance company (as defined in Section 2(13) of the Securities Act). 4. An investment company registered under the Investment Company Act. 5. A business development company (as defined in Section 2(a)(48) of the Investment Company Act). 6. A Small Business Investment Company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958. 7. A plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees, if the plan has total assets in excess of $5,000,000. 8. An employee benefit plan within the meaning of Title I of the Employee Retirement Income Security Act of 1974 (an "ERISA Plan") whose decision to purchase the Interest was made by a plan fiduciary (as defined in Section 3(21) of ERISA), which is either a bank, savings and loan association, insurance company or registered investment adviser. 9. An ERISA Plan with total assets in excess of $5,000,000 or, if a self-directed ERISA Plan, with investment decisions made solely by persons that are "accredited investors." 10. A private business development company (as defined in Section 202(a)(22) of the Investment Advisers Act of 1940). 11. An organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended, corporation, Massachusetts or similar business trust or partnership, not formed for the specific purpose of acquiring the Interest, with total assets in excess of $5,000,000. 12. A natural person whose net worth (either individually or jointly with such person's spouse) at the time of the Closing exceeds $1,000,000. 13. A natural person who had an individual income in excess of $200,000 or joint income with such person's spouse in excess of $300,000 in each of the last two calendar years and who reasonably expects to reach the same income level in the current calendar year. 14. A trust, with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the Interest, whose purchase of the Interest is directed by a sophisticated person as described in Rule 506(b)(2)(ii) under the Securities Act. 15. An entity in which all of the equity owners fit into at least one of the categories listed under paragraphs 1-14 above. EX-11.1 5 STATEMENT RE COMPUTATION EARNINGS PER SHARE 1 EXHIBIT 11.1 PAREXEL INTERNATIONAL CORPORATION STATEMENT RE COMPUTATION OF NET INCOME (LOSS) PER COMMON SHARE
NINE MONTHS ENDED YEAR ENDED JUNE 30, MARCH 31, --------------------------- ------------------- 1993 1994 1995 1995 1996 ------- ------ -------- -------- ------ (IN THOUSANDS, EXCEPT PER SHARE DATA) Net income (loss).............................. $(2,157) $2,423 $(10,630) $(11,313) $2,995 Net interest income pursuant to APB 15, paragraph 38(b).............................. -- 123 -- -- -- ------- ------ -------- -------- ------ Net income (loss) attributable to common shares....................................... $(2,157) $2,546 $(10,630) $(11,313) $2,995 ======= ====== ======== ======== ====== Weighted average common shares outstanding: a. Shares attributable to common stock outstanding............................... 726 750 842 841 6,034 b. Shares attributable to convertible preferred stock outstanding............... -- 4,200 -- -- -- c. Shares attributable to common stock options and preferred stock warrants pursuant to APB 15........................ -- 796 -- -- 238 d. Shares attributable to common stock options pursuant to SAB 83................ 1 1 1 1 -- ------- ------ -------- -------- ------ Weighted average common shares outstanding..... 727 5,747 843 842 6,272 ======= ====== ======== ======== ====== Net income (loss) per share.................... $ (2.97) $ 0.44 $ (12.61) $ (13.44) $ 0.48 ======= ====== ======== ======== ======
EX-21.1 6 LIST OF SUBSIDIARIES 1 EXHIBIT 21.1 PAREXEL INTERNATIONAL CORPORATION LIST OF SUBSIDIARIES OF THE COMPANY
PAREXEL OWNERSHIP(1) ------------ Barnett International Corporation, a Massachusetts corporation. ................ 100% PAREXEL International Holding Corporation, a Delaware corporation. ............. 100% PAREXEL International Securities Corporation, a Massachusetts corporation. ..... 100% PAREXEL International Inc., a Delaware corporation. ............................ PAREXEL Unternehmens beteilung GmbH, a corporation organized under the laws of Germany. ..................................................................... 100% PAREXEL GmbH Independent Pharmaceutical Research Organization, a corporation organized under the laws of Germany. ......................................... 100% PAREXEL International Limited, a corporation organized under the laws of the United Kingdom. .............................................................. 100% AFB CLINLAB Laborleistungs -- Organisationgesellschaft mbH, a corporation organized under the laws of Germany. ......................................... 100% PAREXEL, International, a corporation organized under the laws of France. ...... 100% PAREXEL International SRL, a corporation organized under the laws of Italy. .... 100% PAREXEL International Pty Ltd, a corporation organized under the laws of Australia. ................................................................... 100% PAREXEL International, S.L., a corporation organized under the laws of Spain. ....................................................................... 100%
- --------------- (1) Direct and indirect EX-23.1 7 CONSENT OF PRICE WATERHOUSE LLP 1 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the use in the prospectus constituting part of this Registration Statement on Form S-1 of our report dated September 25, 1995 relating to the financial statements of PAREXEL International Corporation, which appears in such Prospectus. We also consent to the application of such report to the Financial Statement Schedule for the three years ended June 30, 1995 listed under Item 16(b) of this Registration Statement when such schedule is read in conjunction with the financial statements referred to in our report. The audits referred to in such report also included this schedule. We also consent to the references to us under the headings "Experts" and "Selected Consolidated Financial Data" in such Prospectus. However, it should be noted that Price Waterhouse LLP has not prepared or certified such "Selected Consolidated Financial Data." PRICE WATERHOUSE LLP Boston, Massachusetts June 27, 1996 -----END PRIVACY-ENHANCED MESSAGE-----