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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
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(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
--------------- ---------------
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Commission File Number 0-27570
PHARMACEUTICAL PRODUCT
DEVELOPMENT, INC.
(Exact name of registrant as specified in its charter)
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<S> <C>
NORTH CAROLINA 56-1640186
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
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115 NORTH THIRD STREET
WILMINGTON, NORTH CAROLINA
(Address of principal executive offices)
28401
(Zip Code)
Registrant's telephone number, including area code (910) 251-0081
Indicate by checkmark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date: 21,575,253 shares of common
stock, par value $0.10 per share, as of November 12, 1996.
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<PAGE> 2
INDEX
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PAGE
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Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Statements of Operations for the Three- and Nine-Month
Periods Ended September 30, 1996, and 1995...................................... 3
Consolidated Condensed Balance Sheets as of September 30, 1996, and December 31,
1995............................................................................ 4
Consolidated Condensed Statements of Cash Flows for the Nine-Month Periods Ended
September 30, 1996, and 1995.................................................... 5
Notes to Consolidated Condensed Financial Statements............................. 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations....................................................................... 8
Part II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders......................... 12
Item 6. Exhibits and Reports on Form 8-K............................................ 12
SIGNATURES............................................................................ 14
</TABLE>
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PHARMACEUTICAL PRODUCT DEVELOPMENT, INC., AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
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<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ -------------------
1996 1995 1996 1995
-------- ------- -------- --------
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Life sciences revenues, net of reimbursed costs of
$8,373, $11,177, $31,727, and $39,877,
respectively......................................... $ 38,470 $40,943 $111,605 $121,075
Environmental sciences revenues, net of reimbursed
costs of $1,378, $1,820, $3,313, and $5,063,
respectively......................................... 11,033 12,184 34,444 37,331
-------- ------- -------- --------
49,503 53,127 146,049 158,406
-------- ------- -------- --------
Direct costs -- Life sciences.......................... 19,967 22,795 58,430 68,398
Direct costs -- Environmental sciences................. 7,588 7,920 23,875 24,653
Selling, general and administrative expenses........... 16,339 15,744 46,224 46,517
Depreciation and amortization.......................... 2,636 3,500 7,620 10,145
-------- ------- -------- --------
46,530 49,959 136,149 149,713
-------- ------- -------- --------
Income from operations................................. 2,973 3,168 9,900 8,693
Merger costs........................................... (16,960) -- (16,960) --
Interest income (expense), net......................... 389 (932) 1,111 (2,601)
Other income, net...................................... 173 547 130 883
-------- ------- -------- --------
Income (loss) before provision for income taxes........ (13,425) 2,783 (5,819) 6,975
Provision (benefit) for income taxes................... (1,468) 819 1,567 1,731
-------- ------- -------- --------
Net income (loss)...................................... $(11,957) $ 1,964 $ (7,386) $ 5,244
======== ======= ======== ========
Net income (loss) per share............................ $ (0.56) $ 0.10 $ (0.35) $ 0.28
======== ======= ======== ========
Weighted average number of common shares outstanding... 21,298 18,948 21,028 18,846
======== ======= ======== ========
Pro forma data:
Net income, as reported.............................. $ 1,964 $ 5,244
Pro forma additional income tax expense.............. 509 1,415
------- --------
Pro forma net income................................. $ 1,455 $ 3,829
======= ========
Pro forma net income per share....................... $ 0.08 $ 0.20
======= ========
Pro forma weighted average number of shares
outstanding....................................... 18,948 18,846
======= ========
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
3
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PHARMACEUTICAL PRODUCT DEVELOPMENT, INC., AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(IN THOUSANDS)
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SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- ------------
(UNAUDITED) (AUDITED)
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ASSETS
Current assets
Cash and cash equivalents........................................ $ 14,320 $ 2,640
Marketable securities............................................ 26,624 11,167
Accounts receivable and unbilled services, net................... 70,189 70,263
Investigator advances............................................ 1,821 2,960
Prepaid expenses and other current assets........................ 5,194 4,414
Deferred tax asset............................................... 6,255 4,756
-------- --------
Total current assets..................................... 124,403 96,200
Property and equipment, net........................................ 28,996 28,782
Goodwill, net...................................................... 14,973 12,990
Other assets....................................................... 3,883 4,689
-------- --------
Total assets............................................. $ 172,255 $142,661
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt............................. $ 4,407 $ 2,201
Accounts payable................................................. 6,418 9,080
Accrued merger costs............................................. 12,853 --
Payables to investigators........................................ 5,501 8,428
Other accrued expenses........................................... 16,863 24,289
Unearned income.................................................. 14,048 14,882
-------- --------
Total current liabilities................................ 60,090 58,880
-------- --------
Long-term debt, less current maturities............................ 424 3,471
-------- --------
Deferred rent...................................................... 2,813 3,010
-------- --------
Total liabilities........................................ 63,327 65,361
-------- --------
Stockholders' equity
Common stock..................................................... 2,157 1,920
Paid-in capital.................................................. 111,020 65,651
Retained earnings................................................ (4,242) 10,621
Unrealized gain on investments................................... 77 6
Cumulative translation adjustment................................ (84) (425)
Unearned compensation............................................ -- (473)
-------- --------
Total stockholders' equity............................... 108,928 77,300
-------- --------
Total liabilities and stockholders' equity............... $ 172,255 $142,661
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
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PHARMACEUTICAL PRODUCT DEVELOPMENT, INC., AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
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NINE MONTHS ENDED
SEPTEMBER 30,
---------------------
1996 1995
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Cash flows from operating activities:
Net income (loss).................................................... $ (7,386) $ 5,244
Adjustments to reconcile net income to net cash used in operating
activities:
Merger expenses................................................... 13,376 --
Depreciation and amortization..................................... 7,620 9,723
Other............................................................. (473) 862
Change in operating assets and liabilities........................ (12,439) (13,622)
-------- --------
Net cash provided by operating activities.................... 698 2,207
-------- --------
Cash flows from investing activities:
Purchases of investments, net of maturities.......................... (16,963) --
Purchases of property and equipment.................................. (8,091) (6,921)
Other................................................................ 448 11
-------- --------
Net cash used in investing activities........................ (24,606) (6,910)
-------- --------
Cash flows from financing activities:
Repayment of long-term debt, net..................................... (853) (68,776)
Other long-term borrowings........................................... 75 69,800
Proceeds from issuance of stock...................................... 41,957 --
Dividends paid....................................................... (5,937) (151)
Other................................................................ -- 4,057
-------- --------
Net cash provided by financing activities.................... 35,242 4,930
-------- --------
Effect of exchange rate changes on cash................................ 346 (1,415)
-------- --------
Net increase (decrease) in cash and cash equivalents................... 11,680 (1,188)
Cash and cash equivalents, beginning of the period..................... 2,640 9,581
-------- --------
Cash and cash equivalents, end of the period........................... $ 14,320 $ 8,393
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
5
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PHARMACEUTICAL PRODUCT DEVELOPMENT, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. ACCOUNTING POLICIES
The significant accounting policies followed by Pharmaceutical Product
Development, Inc. ("the Company") for interim financial reporting are consistent
with the accounting policies followed for annual financial reporting. These
unaudited consolidated condensed financial statements have been prepared in
accordance with Rule 10-01 of Regulation S-X, and in management's opinion, all
adjustments of a normal recurring nature necessary for a fair presentation have
been included. The accompanying financial statements do not purport to contain
all the necessary financial disclosures that might otherwise be necessary in the
circumstances and should be read in conjunction with the consolidated financial
statements and notes thereto in the Company's Annual Report for the year ended
December 31, 1995, and the Joint Proxy Statement/Prospectus dated August 20,
1996, contained in the Company's Registration Statement on Form S-4 (File No.
333-08207) with respect to the acquisition of Applied Bioscience International
Inc. ("APBI"). The results of operations for the three-month and nine-month
periods ended September 30, 1996, are not necessarily indicative of the results
to be expected for the full year or any other period.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Certain 1995 financial statement amounts have been reclassified to conform
with the 1996 presentation.
2. BASIS OF PRESENTATION
The accompanying unaudited consolidated condensed financial statements
include the accounts of Pharmaceutical Product Development, Inc., and its
subsidiaries, all of which are wholly-owned. All significant intercompany items
have been eliminated.
3. MERGER
On September 26, 1996, a wholly-owned subsidiary of the Company was merged
with and into APBI in a transaction accounted for as a pooling of interests. As
a result of the merger, APBI became a wholly-owned subsidiary of the Company.
Under the terms of the merger agreement, APBI shareholders received 0.4054 of a
share of the Company's common stock for each APBI share. As a result of the
merger, the Company issued 12,063,860 shares of its common stock in exchange for
all of the outstanding shares of common stock of APBI.
Holders of options to acquire APBI stock had the choice to receive either
shares of Company stock for the value of the options, or substituted options to
acquire Company common stock. As a result of the APBI option holders' choices,
202,967 additional shares of Company common stock were issued, and options to
purchase 600,513 shares of Company common stock were issued.
In accordance with the pooling-of-interests method of accounting, the
consolidated financial statements have been restated to reflect the combination
using APBI's financial statements for the three- and nine-month periods ended
September 30, 1996 and 1995, respectively.
During the three months ended September 30, 1996, the Company recorded
$16,960,093 in merger costs associated with the merger with APBI. After
associated tax benefits, this charge reduced net income by $14,077,876 or $0.66
per share in those three months. These costs relate primarily to investment
banking, legal
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PHARMACEUTICAL PRODUCT DEVELOPMENT, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)
and accounting fees incurred in connection with the merger and the estimated
costs of facility consolidation and employee severance.
4. EARNINGS PER COMMON SHARE
Earnings per share are calculated by dividing net income by the weighted
average number of shares outstanding during the period. All common share and per
share amounts have been adjusted to give effect to the pooling-of-interests
transaction with APBI.
5. PRO FORMA NET INCOME AND NET INCOME PER SHARE
Prior to January 1996, the Company had elected to be treated as an S
corporation for income tax purposes and accordingly did not incur any expense or
liability for corporate income taxes. Effective January 1, 1996, the Company
revoked its S corporation election and began reporting as a C corporation. For
the three-and nine-month periods ended September 30, 1995, the Statement of
Operations includes a pro forma income tax provision as well as a pro forma
earnings per share computation. Pro forma weighted average shares outstanding
assumes the issuance of sufficient shares at the net per share proceeds of the
Company's initial public offering in January 1996 ($16.18) to repay the
indebtedness ($5.5 million) incurred by the Company in making the final S
corporation distribution.
7
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
GENERAL
In the third quarter of 1996, the Company reported a net loss of $12.0
million, or $(0.56) per share, compared to pro forma net income of $1.5 million,
or $0.08 per share, in the third quarter of 1995. The Company's loss is
attributable to the $17.0 million of costs recorded in the third quarter that
were associated with the Company's merger with APBI.
On September 26, 1996, a wholly-owned subsidiary of the Company was merged
with and into APBI in a pooling-of-interests transaction. As a result, APBI
became a wholly-owned subsidiary of the Company. Under the terms of the merger
agreement, APBI shareholders received 0.4054 of a share of the Company's common
stock for each APBI share, which resulted in the Company issuing 12,063,860
shares of its common stock in exchange for all of the outstanding shares of
common stock of APBI.
THREE MONTHS ENDED SEPTEMBER 30, 1996 VERSUS THREE MONTHS ENDED SEPTEMBER 30,
1995
Total net revenues decreased $3.6 million, or 6.8%, to $49.5 million in
1996 from $53.1 million last year. The Company's Life Sciences Group, which
includes the Company, Pharmaco, and Clinix International Inc. (operating under
the trade name Chicago Center for Clinical Research ["CCCR"]), generated 77.7%
of the Company's net revenues in the quarter. The Life Sciences Group generated
net revenues of $38.5 million, down $2.5 million, or 6.0%, from the same period
last year. Net revenues from ENVIRON, the Company's environmental consulting
organization, representing 22.3% of the Company's net revenues in the quarter,
were $11.0 million, compared with $12.2 million in 1995, a decrease of 9.4% or
$1.2 million.
After elimination of the net revenues from APBI's former toxicology
operations, which were sold in November, 1995 ($10.5 million in the third
quarter last year), total net revenues increased 16.1% as compared to 1995.
Results of operations which exclude the results of the divested businesses are
considered the results of the Company's ongoing operations.
Net revenues for the third quarter of 1996 from the ongoing Life Sciences
Group operations of $38.5 million reflect an increase of 26.3% from 1995. The
growth in the Company's ongoing Life Sciences Group was due in part to an
increase in the size, scope, and number of contracts in the North America
clinical development and biostatistics business. The acquisitions of CCCR and
the Phase I facility in Leicester, England, both completed in the second half of
1995, contributed net revenues of $3.0 million in the third quarter of 1996,
representing an increase over last year of $2.4 million.
The Company believes that the decrease in net revenues at ENVIRON, the
Company's environmental consulting business and the sole ongoing operation in
the Environmental Sciences Group, is due principally to an overall weakness in
the environmental services market.
Direct costs decreased 10.3% to $27.6 million from $30.7 million last year
and declined as a percentage of net revenues to 55.7% from 57.8%. In the Life
Sciences Group, direct costs decreased as a percentage of related net revenues
to 51.9% from 55.7%. The decrease in direct costs is principally due to the
divestiture of APBI's toxicology business in the fourth quarter last year. In
the third quarter of 1995, the worldwide toxicology business reported direct
costs of $7.6 million or 72.5% of related net revenues. In the Environmental
Sciences Group, direct costs as a percentage of related net revenues increased
to 68.8% from 65.0% last year. The increase in direct costs as a percentage of
related net revenues is attributable to lower consultant utilization. In the
third quarter, ENVIRON's consultant utilization of 69% was nine percentage
points below the 78% utilization last year.
Selling, general, and administrative ("SG&A") expenses increased 3.8% to
$16.3 million from $15.7 million in 1995. As a percentage of net revenues, SG&A
expenses increased to 33.0% from 29.6% last year. After factoring out the SG&A
expenses associated with the divested toxicology business last year ($1.8
million), consolidated SG&A expenses increased approximately 16.4%, or $2.3
million, in the third quarter
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this year as compared to the third quarter of 1995. SG&A expenses from CCCR and
the Leicester Phase I laboratory comprise $0.8 million of the increase, and the
Company has incurred incremental rent expense of $0.3 million associated with
the sale-leaseback of its real estate in Austin, Texas (this increase is
partially offset by lower interest expense). The remaining increase of $1.2
million is primarily attributable to the investment in the Company's business
development and marketing organization and in the area of information
technology, as well as higher litigation costs incurred associated with
ENVIRON's air quality practice.
Total depreciation and amortization expense of $2.6 million was $0.9
million, or 24.7%, lower than last year. After adjusting out the depreciation
for the divested toxicology business ($1.3 million), total depreciation and
amortization increased $0.4 million, or 17.3%, versus last year. The increase
was related to the Company's growth as well as the ongoing capital reinvestment
in the Company's base business.
Operating income decreased $0.2 million (6.2%) to $3.0 million in the third
quarter of 1996, as compared to $3.2 million for the third quarter of 1995. As a
percentage of net revenues, the third quarter operating income of 6.0% remained
even with the same period last year.
Interest income (expense) improved by $1.3 million, increasing to $0.4
million in interest income for the quarter as compared to $0.9 million in
interest expense last year. The favorable change is attributable to funds
received in connection with the initial public offering and the significant
change in the Company's debt structure this year versus last year.
The Company recognized one-time merger costs of $17.0 million in the third
quarter. These costs are primarily current and future cash expenses such as
investment banking fees and legal and accounting fees as well as severance
provisions as a result of the integration of the administrative functions of PPD
and APBI.
The net loss of $12.0 million represents an unfavorable variance of $13.4
million. The net loss per share of $0.56 compares to pro forma net income per
share of $0.08 last year. Excluding the impact of the merger costs on the
current quarter, the Company's net income of $2.1 million is 46% higher than
last year's pro forma net income of $1.5 million. On an earnings-per-share
basis, excluding merger costs, the net income per share of $0.10 compares to
$0.08 for the same period last year computed on 2.4 million less shares
outstanding.
NINE MONTHS ENDED SEPTEMBER 30, 1996 VERSUS NINE MONTHS ENDED SEPTEMBER 30, 1995
Total net revenues decreased $12.4 million, or 7.8%, to $146.0 million in
1996 from $158.4 million last year. The Company's Life Sciences Group generated
76.4% of the Company's net revenues in the first nine months, equating to net
revenues of $111.6 million, down $9.5 million or 7.8% from the same period last
year. Net revenues from ENVIRON, representing 23.6% of the Company's net
revenues in the first nine months, were $34.4 million, compared with $37.3
million in 1995, a decrease of 7.7% or $2.9 million.
After elimination of the net revenues from APBI's former toxicology
operations ($32.9 million in the first nine months last year), total net
revenues increased 16.4% as compared to 1995.
Year-to-date 1996 net revenues from the ongoing Life Sciences Group were
$111.6 million, an increase of 26.6% from 1995. The growth in the Company's
ongoing Life Sciences Group was due in part to an increase in the size, scope,
and number of contracts in the North America clinical development and
biostatistics business. The acquisitions of CCCR and the Phase I facility in
Leicester, England, both completed in the second half of 1995, contributed net
revenues of $7.7 million over the first nine months, representing an increase
over last year of $7.1 million.
The Company believes that the decrease in net revenues of ENVIRON is due
principally to an overall weakness in the environmental services market.
Direct costs decreased 11.5% to $82.3 million from $93.1 million last year
and declined as a percentage of net revenues to 56.3% from 58.7%. In the Life
Sciences Group, direct costs decreased as a percentage of related net revenues
to 52.4% from 56.5%. The decrease in direct costs is principally due to the
divestiture of the toxicology business in the fourth quarter last year. In the
first nine months of 1995, the worldwide toxicology business reported direct
costs of $23.3 million or 70.7% of related net revenues. In the Environmental
Sciences Group, direct costs as a percentage of related net revenues increased
to 69.3% from
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66.0% last year. The increase in direct costs as a percentage of related net
revenues is attributable to lower consultant utilization. Year-to-date,
ENVIRON's consultant utilization of 71% was seven percentage points below the
78% utilization last year.
SG&A expenses decreased 0.6% to $46.2 million from $46.5 million in 1995.
As a percentage of net revenues, SG&A expenses increased to 31.6% from 29.4%
last year. After factoring out the SG&A expenses associated with the divested
toxicology business last year ($5.3 million), consolidated SG&A expenses
increased approximately 12.0%, or $5.0 million, in the first nine months this
year as compared to the same period in 1995. Incremental SG&A expenses from CCCR
and the Leicester Phase I laboratory comprise $1.9 million of the increase, and
the Company has incurred incremental rent expense of $0.9 million associated
with the sale-leaseback of its real estate in Austin, Texas (this increase is
partially offset by lower interest expense). The remaining increase of $2.2
million is primarily attributable to increases in business development expenses
in Austin and Wilmington, administrative staffing at the executive and
middle-management levels and the number of employees in finance, human resources
and other administrative areas, reflecting the continued growth of the Company.
Total depreciation and amortization expense of $7.6 million was $2.5
million, or 24.9%, lower than last year. After adjusting out the depreciation
for the divested toxicology business ($3.8 million), total depreciation and
amortization increased $1.2 million, or 19.2%, versus last year. The increase
was related to the significant increases in the Company's operations and
amortization of goodwill related to acquisitions.
Operating income increased $1.2 million, or 13.9%, to $9.9 million in the
first nine months of 1996 as compared to $8.7 million for the same period last
year. As a percentage of net revenues, the year-to-date operating income
increased to 6.8% in 1996 compared to 5.5% in 1995.
Interest income (expense) improved by $3.7 million, increasing to $1.1
million in interest income for the nine months as compared to $2.6 million in
interest expense last year. The favorable change is attributable to funds
received in connection with the initial public offering and the significant
change in the Company's debt structure this year versus last year.
The net loss of $7.4 million represents an unfavorable variance of $11.2
million as compared to last year's pro forma net income. The net loss per share
of $0.35 compares to pro forma net income per share of $0.20 last year.
Excluding the impact of the merger costs on the nine months results, the
Company's net income of $6.7 million is 75% higher than last year's pro forma
net income of $3.8 million. On an earnings-per-share basis, excluding merger
costs, the net income per share of $0.32 compares to $0.20 for the same period
last year computed on 2.2 million less shares outstanding.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1996, the Company has $14.3 million of cash and cash
equivalents on hand and $26.6 million invested in marketable securities. The
Company has historically funded its operations and growth, including
acquisitions, with cash flow from operations and borrowings. In January 1996,
the Company completed an initial public offering of its common stock. Proceeds
of the offering, after expenses, were approximately $37.2 million and a portion
thereof was used to repay a $5.5 million loan.
During the nine months ended September 30, 1996, the Company experienced a
net increase in cash from operating activities of $0.7 million. Capital
expenditures totaled $8.1 million. Proceeds from the Company's initial public
offering, combined with proceeds from stock option exercises, totaled $42.0
million. The Company used $5.9 million in cash to pay dividends declared in
connection with the Company's revocation of its S corporation election,
effective January 1, 1996, and used $17.0 million of cash to increase its
holdings of marketable securities.
In February 1996, the Company renegotiated a new credit facility with
Wachovia Bank of North Carolina, N.A. The new facility consists of a $10.0
million line of credit with an additional discretionary line of credit for $20
million. Terms on the $10.0 million line are for one year, with interest at
LIBOR plus 120 basis points, or the Banks' Prime rate, at the Company's option
with interest payable quarterly. Indebtedness under
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the line is unsecured and subject to certain covenants relating to financial
ratios and tangible net worth. As of September 30, 1996, the Company had
borrowed $3.3 million under this facility.
In February 1995, APBI arranged a $3.0 million master lease agreement to
provide a means to lease rather than acquire certain equipment for use in the
United States without drawing on its principal credit facility.
The Company completed a sale-leaseback transaction involving Pharmaco's
owned real estate in Austin, Texas, on November 13, 1995. Total gross proceeds
from the transaction were $12.0 million. The facilities are leased to the
Company as a bond-type net lease with all responsibility of operations and
maintenance residing with the Company. The initial term of the operating lease
is fifteen years followed by four five-year renewal options. The future minimum
annual rent is $1.3 million with renewals at the then current market value. The
net proceeds from the sale/leaseback transaction were used to repay the
remaining mortgage balance on the referenced properties and the remaining cash
was applied to APBI's revolving line of credit (which has since terminated).
The Company expects to continue expanding its operations through internal
growth and strategic acquisitions. The Company expects such activities will be
funded from existing cash and marketable securities, cash flow from operations,
and borrowings under its credit facility. The Company believes that such sources
of cash will be sufficient to fund the Company's current operations for the
foreseeable future. The Company is currently evaluating a number of acquisition
and other growth opportunities which may require additional external financing,
and the Company may from time to time seek to obtain funds from public or
private issuances of equity or debt securities.
INFLATION
The Company believes the effects of inflation do not have a material
adverse effect on its results of operations or financial condition.
FACTORS AFFECTING FUTURE RESULTS
The foregoing discussion includes certain forward-looking statements. The
actual results of the Company are subject to volatility and might differ
materially from those projected in the forward-looking statements due to a
variety of factors, including the commencement, completion or cancellation of
large contracts, progress of ongoing contracts, acquisitions, the timing of
start-up expenses for new offices, potential liability associated with the
Company's lines of business, dependence on certain industries and clients, and
changes in the mix of services. Since a large percentage of the Company's
operating costs are relatively fixed, variations in the timing and progress of
large contracts can materially affect quarterly results. To the extent the
Company's international business increases, exchange rate fluctuations may also
influence these results. The Company believes that comparisons of its quarterly
financial results are not necessarily meaningful and should not be relied upon
as an indication of future performance. However, fluctuations in quarterly
results could affect the market price of the common stock in a manner unrelated
to the longer term operating performance of the Company. Additional information
regarding factors that could cause actual results to differ materially from
those projected in the forward-looking statements contained herein is contained
in certain of the Company's other SEC filings, including the Joint Proxy
Statement/Prospectus dated August 20, 1996, included in its Registration
Statement on Form S-4 (File No. 333-08209) with respect to the APBI transaction,
copies of which are available from the Company upon request.
11
<PAGE> 12
PART II OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS --
(a) A Special Meeting for Shareholders of Pharmaceutical Product
Development, Inc. ("PPD") was held on September 25, 1996.
At the PPD Special Meeting, the following proposals were voted upon:
A proposal to complete a pooling-of-interests merger with Applied
Bioscience International Inc. was approved by the following vote:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
- ---------- ------- -------
<S> <C> <C>
8,586,017 7,400 426
</TABLE>
A proposal to amend the Company's Articles of Incorporation to increase the
number of authorized shares of PPD common stock from 30,000,000 to 95,000,000
was approved by the following vote:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
- ---------- ------- -------
<S> <C> <C>
8,513,025 102,220 426
</TABLE>
A proposal to increase the number of directors from eight to nine was
approved by the following vote:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
- ---------- ------- -------
<S> <C> <C>
8,612,880 2,365 426
</TABLE>
A proposal to amend the Company's Bylaws to provide for the annual election
of directors was approved by the following vote:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
- ---------- ------- -------
<S> <C> <C>
8,593,357 460 26
</TABLE>
A proposal to amend the Company's 1995 Equity Compensation Plan to increase
the number of shares of PPD common stock reserved for issuance thereunder from
750,000 shares to 1,500,000 shares was approved by the following vote:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
- ---------- ------- -------
<S> <C> <C>
8,455,350 138,367 126
</TABLE>
A proposal to amend the Company's 1995 Stock Option Plan for Non-Employee
Directors to increase the number of shares of PPD common stock reserved for
issuance thereunder from 50,000 to 100,000 was approved by the following vote:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
- ---------- ------- -------
<S> <C> <C>
8,506,020 87,697 126
</TABLE>
(b) At Applied Bioscience International Inc.'s Special Meeting, the
following proposal was voted upon:
A proposal to complete a pooling-of-interests merger with Pharmaceutical
Product Development, Inc. was approved by the following vote:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
- ---------- ------- -------
<S> <C> <C>
22,099,960 82,890 51,895
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
<TABLE>
<C> <S> <C> <C>
(a) Exhibit 10.62 -- Form of Agreement, dated as of June 20, 1996, by and between Applied
Bioscience International Inc. and each of Joseph H. Highland, Robert
M. Wenger, Robert H. Harris and Joseph V. Rodricks.
</TABLE>
12
<PAGE> 13
<TABLE>
<C> <S> <C> <C>
Exhibit 10.63 -- Agreement, dated as of September 6, 1996, by and between Applied
Bioscience International Inc. and John H. Timoney.
Exhibit 10.64 -- Agreement, dated as of September 25, 1996, by and between Applied
Bioscience International Inc. and Kenneth H. Harper.
Exhibit 10.65 -- Severance Compensation Agreement, dated as of September 25, 1996, by
and between Applied Bioscience International Inc. and John D. Bryer.
Exhibit 10.66 -- Consulting Agreement, dated as of October 1, 1996, by and between
Applied Bioscience International Inc. and John D. Bryer.
Exhibit 10.67 -- Employment Agreement, dated as of October 5, 1996, by and between
Pharmaceutical Product Development, Inc. and Thomas D'Alonzo.
Exhibit 27 -- Financial Data Schedule
(b) Reports on Form 8-K -- On October 10, 1996, the Company filed a Current Report on Form
8-K, reporting the acquisition of Applied Bioscience International Inc. The financial
statements required by Item 7 of Form 8-K were incorporated therein by reference to prior
Company filings.
</TABLE>
13
<PAGE> 14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PHARMACEUTICAL PRODUCT DEVELOPMENT, INC.
-----------------------------------------
(Registrant)
By /s/ DR. FRED N. ESHELMAN
-------------------------------------
President
(Chief Executive Officer)
By /s/ RUDY C. HOWARD
-------------------------------------
Chief Financial Officer
(Chief Accounting Officer)
Date: November 14, 1996
14
<PAGE> 15
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- ------
<S> <C> <C>
10.62 -- Form of Agreement -- Joseph H. Highland, Robert M. Wenger, Robert H.
Harris and Joseph V. Rodricks
10.63 -- Agreement -- John H. Timoney
10.64 -- Agreement -- Kenneth H. Harper
10.65 -- Severance Compensation Agreement -- John D. Bryer
10.66 -- Consulting Agreement -- John D. Bryer
10.67 -- Employment Agreement -- Thomas D'Alonzo
27 -- Financial Data Schedule
</TABLE>
15
<PAGE> 1
EXHIBIT 10.62
June 20, 1996
Dear:
APPLIED BIOSCIENCE INTERNATIONAL INC. ("APBI or the "Company") considers
the continuing maintenance of a sound and vital management to be essential to
protecting and enhancing the best interests of the Company and its shareholders.
In this connection, the Company recognizes that, as is the case with many
publicly held corporations, the uncertainty and questions which a potential
change of control may raise among management may result in the departure or
distraction of management personnel to the detriment of the Company and its
shareholders. The Company further recognizes that in your role as a key
executive of the ENVIRON Division of the APBI Environmental Sciences Group, Inc.
("ENVIRON"), you will have increased duties and responsibilities in responding
to a change of control, particularly during the transition period prior to the
consummation of any change of control. Accordingly, the Company's Board of
Directors has determined that given the intent of the Board of Directors to
pursue a sale or merger of the Company, it is imperative that the Company and
the Board of Directors be able to rely upon you to remain in your position
during the transition period and to provide assistance and advice, if requested,
in conjunction with the proposed acquisition of the Company by Pharmaceutical
Product Development, Inc. ("PPD").
This letter agreement sets forth the additional benefits which the Company
agrees will be provided to you in the event of a "change in control of the
Company" (as defined in Section 1 hereof) or under the circumstances described
below.
1. CHANGE IN CONTROL. For purposes of this Agreement, a "change in control
of the Company" shall mean the merger of the Company with and into Wilmington
Merger Corp., a wholly-owned subsidiary of PPD, pursuant to the terms of the
Agreement and Plan of Reorganization by and among the Company, Wilmington Merger
Corp., and PPD, dated June 20, 1996.
2. DUTIES DURING TRANSITION. From the date of the announcement of the
proposed change in control of the Company through the date on which the change
in control occurs, you agree to use your best efforts to promote the change in
control of the Company to ENVIRON employees, to foster morale among ENVIRON
employees, to discuss the proposed change in control of the Company with
analysts, as requested by the Company, and to assist PPD in developing a
business plan for ENVIRON following the change in control of the Company.
3. COMPENSATION UPON CHANGE IN CONTROL. If you are employed by ENVIRON upon
the occurrence of a change in control of the Company, the Company shall make a
lump sum payment to you of $185,000. This payment shall be made no later than
ten (10) days following the change in control of the Company.
4. COMPENSATION UPON TERMINATION OF EMPLOYMENT. Upon your termination of
employment by ENVIRON (other than for "cause" as defined herein) prior to the
change in control of the Company, the Company shall make a lump sum payment to
you equal to $185,000. This payment shall be made no later than ten (10) days
following your termination of employment. For purposes of this agreement,
"cause" shall mean an act or acts involving fraud, embezzlement or theft from
the Company, or your willful and repeated failure to follow the directions of
the Board of Directors that continues for at least ten (10) days following
written notice from the Board of Directors of such failure to follow directions.
5. LAPSE. Should you voluntarily leave employment with ENVIRON prior to a
change in control of the Company or if you are terminated for cause prior to a
change in control of the Company, this Agreement shall lapse and be of no other
force and effect and no compensation will be payable to you hereunder. This
Agreement shall lapse and be of no further force or effect if the change of
control of the Company does not occur prior to December 31, 1996.
6. SUCCESSORS; BINDING AGREEMENT. (a) The Company will require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company, to expressly assume and agree to perform this Agreement in the same
<PAGE> 2
manner and to the same extent that the Company would be required to perform it
if no such succession had taken place.
(b) This Agreement shall inure to the benefit of and be enforceable by your
personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees.
7. NOTICE. For the purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by registered mail,
return receipt requested, postage prepaid, addressed to the respective addresses
set forth on the first page of this Agreement, provided that all notices to the
Company shall be directed to the attention of the Chief Executive Officer of the
Company with a copy of the Secretary of the Company, or to such other address as
either party may have furnished to the other in writing in accordance herewith,
except that notices of change of address shall be effective only upon receipt.
8. MISCELLANEOUS. No provisions of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to in
writing signed by you and such officer as may be specifically designated by the
Board of Directors of the Company. No waiver by either party hereto at any time
of any breach by the party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time. No agreement or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either party which are not set forth expressly in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of Delaware.
9. VALIDITY. The invalidity or unenforceability of any provisions of this
Agreement shall not effect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
10. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
If this letter correctly sets forth our agreement on the subject matter
hereof, kindly sign and return to the Company the enclosed copy of this letter
which will then constitute our agreement on this subject.
Sincerely,
APPLIED BIOSCIENCE INTERNATIONAL INC.
By:
----------------------------------------
Stephen L. Waechter
Senior Vice President and Chief
Financial Officer
AGREED TO SO AS TO BE
EFFECTIVE JUNE 20, 1996
By:
- ------------------------------------
2
<PAGE> 1
EXHIBIT 10.63
September 6, 1996
Mr. John H. Timoney
Senior Vice President
Applied Bioscience International Inc.
117 Leabrook Lane
Princeton, New Jersey 08540
Dear John:
APPLIED BIOSCIENCE INTERNATIONAL INC. ("APBI" or the "Company") considers
the continuing maintenance of a sound and vital management to be essential to
protecting and enhancing the best interests of the Company and its shareholders.
In this connection, the Company recognizes that, as is the case with many
publicly held corporations, the uncertainty and questions which a potential
change of control may raise among management may result in the departure or
distraction of management personnel to the detriment of the Company and its
shareholders. The Company further recognizes that in your role as a Senior Vice
President of the Company and an officer of APBI Investor Relations, Inc., you
will have increased duties and responsibilities in responding to a change of
control. Accordingly, the Company's Board of Directors has determined that given
the pending merger agreement between the Company and a wholly-owned subsidiary
of Pharmaceutical Product Development, Inc., it is imperative that the Company
and the Board of Directors be able to rely upon you to remain in your position
and to provide advice, if requested, as to the best interests of the Company.
In order to induce you to remain in the employ of the Company and to
provide the Company with additional flexibility regarding your employment, this
letter agreement sets forth the terms of your continued employment and the
severance benefits which the Company agrees will be provided to you in the event
of your termination of full-time employment following a "change in control of
the Company" (as defined in Section 2 hereof) or under the circumstances
described below.
1. NON-RENEWAL OF EXISTING EMPLOYMENT AGREEMENT; TERMS OF CONTINUED
EMPLOYMENT. (a) You acknowledge and agree that your existing employment
agreement will not be renewed by the Company on September 6, 1996. Thereafter,
you will continue to be employed by the Company as a Senior Vice President at an
annual salary of $180,000, but you shall be considered an "at-will" employee of
the Company for purposes of full-time employment with the Company. You will be
subject to the direction of the Chief Executive Officer of the Company and will
perform such duties as may be assigned to you by the Chief Executive Officer of
the Company, consistent with your position as a Senior Vice President of the
Company. Your services will be performed primarily at the offices of the Company
in Princeton, New Jersey, or such other location as you and the Company may
mutually agree. You will not be obligated to relocate your personal residence in
connection with the perform of your duties hereunder. You will be entitled to
the severance payments set forth in Section 3 upon your termination of your
full-time employment, subject to the provisions of Section 3.
(b) Upon termination of your full-time employment with the Company, you
will be employed by the Company as a part-time employee pursuant to the terms of
the April 30, 1993 extension letter between you and the Company (the "Extension
Letter"), a copy of which is attached hereto as Exhibit A. The "Extension
Period" as defined in Section 2 of the Extension Letter shall commence as of the
last day of your full-time employment with the Company.
2. CHANGE IN CONTROL. For purposes of this Agreement, a "change in control
of the Company" shall mean a change in control of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of Regulation
14A promulgated under the Securities Exchange Act of 1934, as amended ("Exchange
Act"); provided that, without limitation, such a change in control shall be
deemed to have occurred if any "person" (as such term is used in Sections 13(d)
and 14(d)(2) of the Exchange Act) is or
<PAGE> 2
becomes the beneficial owner, directly or indirectly, of securities of the
Company representing fifty percent (50%) or more of the combined voting power of
the Company's then outstanding securities.
3. COMPENSATION UPON TERMINATION OF FULL-TIME EMPLOYMENT. Upon your
involuntary termination of full-time employment by the Company (other than for
"cause" as defined herein) within three (3) months prior to a change in control,
or upon your voluntary or involuntary termination of full-time employment (other
than for "cause" as defined herein) within six (6) months following a change in
control, the Company shall make a lump sum payment to you equal to six (6)
months base salary, based upon the salary rate in effect for you as of the date
of your termination of full-time employment. This lump sum payment shall be made
no later than ten (10) days following the termination of your full-time
employment with the Company. In addition, you shall be entitled to receive
employer-provided health and dental benefits for six (6) months following your
termination of full-time employment. The six (6) months of employer-provided
benefits shall be counted against your eighteen (18) months of COBRA coverage.
The lump sum payment and benefits provided under this Agreement shall be in lieu
of any severance payment to which you may be entitled under an "employee benefit
plan" maintained by the Company or a subsidiary For purposes of this agreement,
"cause" shall mean an act or acts involving fraud, embezzlement or theft from
the Company, or your willful and repeated failure to follow the lawful
directions of the Board of Directors consistent with your position with the
Company that continues for at least ten (10) days following written notice from
the Board of Directors of such failure to follow such directions.
4. LAPSE. Should you voluntarily leave employment prior to a change in
control or if you are terminated for cause either prior to or after to a change
in control, this Agreement shall lapse and be of no other force and effect and
no compensation will be payable to you hereunder.
5. SUCCESSORS; BINDING AGREEMENT. (a) The Company will require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company, to expressly assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform it
if no such succession had taken place.
(b) This Agreement shall inure to the benefit of and be enforceable by your
personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees.
6. NOTICE. For the purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by registered mail,
return receipt requested, postage prepaid, addressed to the respective addresses
set forth on the first page of this Agreement, provided that all notices to the
Company shall be directed to the attention of the Chief Executive Officer of the
Company with a copy of the Secretary of the Company, or to such other address as
either party may have furnished to the other in writing in accordance herewith,
except that notices of change of address shall be effective only upon receipt.
7. MISCELLANEOUS. No provisions of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to in
writing signed by you and such officer as may be specifically designated by the
Board of Directors of the Company. No waiver by either party hereto at any time
of any breach by the party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time. No agreement or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either party which are not set forth expressly in this Agreement. This Agreement
supersedes and replaces in its entirety that certain letter agreement between
the Company and you dated September 1, 1995. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of Delaware.
8. VALIDITY. The invalidity or unenforceability of any provisions of this
Agreement shall not effect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
2
<PAGE> 3
9. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
If this letter correctly sets forth our agreement on the subject matter
hereof, kindly sign and return to the Company the enclosed copy of this letter
which will then constitute our agreement on this subject.
Sincerely,
APPLIED BIOSCIENCE INTERNATIONAL INC.
By: /s/ KENNETH H. HARPER
-------------------------------------
Kenneth H. Harper
Chief Executive Officer
AGREED TO THIS 6TH DAY OF
SEPTEMBER, 1996
By: /s/ JOHN H. TIMONEY
----------------------------------
John H. Timoney
3
<PAGE> 1
EXHIBIT 10.64
September 25, 1996
Dr. Kenneth H. Harper
Brookside, Roman Road
Ingatestone
Essex CMR 9PE
England
Dear Ken:
APPLIED BIOSCIENCE INTERNATIONAL INC. ("APBI" or the "Company") considers
the continuing maintenance of a sound and vital management to be essential to
protecting and enhancing the best interests of the Company and its shareholders.
In this connection, the Company recognizes that, as is the case with many
publicly held corporations, the uncertainty and questions which a potential
change of control may raise among management may result in the departure or
distraction of management personnel to the detriment of the Company and its
shareholders. The Company further recognizes that in your role as Chairman,
Chief Executive Officer and President of the Company, you will have increased
duties and responsibilities in responding to a change of control. Accordingly,
the Company's Board of Directors has determined that given the pending merger
agreement between the Company and Pharmaceutical Product Development, Inc.
("PPD"), it is imperative that the Company and the Board of Directors be able to
rely upon you to remain in your position and to provide advice, if requested, as
to the best interests of the Company.
In order to induce you to remain in the employ of the Company and to
provide the Company with additional flexibility regarding your employment, this
letter agreement sets forth the terms of your continued employment and the
severance benefits which the Company agrees will be provided to you in the event
of your termination of full-time employment following a "change in control of
the Company" (as defined in Section 2 hereof) or under the circumstances
described below.
1. EXISTING EMPLOYMENT AGREEMENT; TERMS OF CONTINUED EMPLOYMENT. (a) You
acknowledge and agree that your existing employment agreement is hereby renewed
through December 31, 1996. During such renewal period, you will continue to be
employed by the Company at an annual salary of $250,000. Prior to a change in
control of the Company, you will continue to serve as Chairman, Chief Executive
Officer and President of the Company and subsequent to a change of control you
will serve as a senior executive officer of the Company, with a title to be
agreed upon. You will be subject to the direction of the Board of Directors of
the Company (or the Board of Directors of PPD subsequent to a change in control
of the Company) and will perform such duties as may be assigned to you by the
Board of the Company or PPD, consistent with your position or former position as
Chairman, Chief Executive Officer and President of the Company. Your services
will be performed primarily from your residence at Brookside, Roman Road,
Ingatestone, Essex CMR 9PE, England or such other location as you and the
Company may mutually agree. You will not be obligated to relocate your personal
residence in connection with the perform of your duties hereunder. In the event
your full-time employment is terminated prior to December 31, 1996, you will be
entitled to the severance payments set forth in Section 3.
(b) Upon termination of your full-time employment with the Company, you
will be employed by the Company as a part-time employee pursuant to the terms of
the April 30, 1993 extension letter between you and the Company (the "Extension
Letter") a copy of which is attached hereto as Exhibit A. The "Extension Period"
as defined in Section 2 of the Extension Letter shall commence as of the last
day of your full-time employment with the Company.
2. CHANGE IN CONTROL. For purposes of this Agreement, a "change in control
of the Company" shall mean a change in control of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of Regulation
14A promulgated under the Securities Exchange Act of 1934, as amended ("Exchange
Act"); provided that, without limitation, such a change in control shall be
deemed to have occurred if any "person" (as such term is used in Sections 13(d)
and 14(d)(2) of the Exchange Act) is or becomes the beneficial owner, directly
or indirectly, of securities of the Company representing fifty percent (50%) or
more of the combined voting power of the Company's then outstanding securities.
<PAGE> 2
3. COMPENSATION UPON TERMINATION OF FULL-TIME EMPLOYMENT. (a) Upon your
involuntary termination of full-time employment by the Company (other than for
"cause" as defined herein) within three (3) months prior to a change in control,
or upon your voluntary or involuntary termination of full-time employment (other
than for "cause" as defined herein) following a change in control (but prior to
December 31, 1996), the Company shall make a lump sum payment to you equal to
the base salary you otherwise would have earned for the period from the date of
your termination through December 31, 1996, based upon the salary rate in effect
for you as of the date of your termination of full-time employment. This lump
sum payment shall be made no later than ten (10) days following the termination
of your full-time employment with the Company. In addition, you shall be
entitled to receive employer-provided health and dental benefits through
December 31, 1996. Such months of employer-provided benefits shall be counted
against your eighteen (18) months of COBRA coverage. The lump sum payment and
benefits provided under this Agreement shall be in lieu of any severance payment
to which you may be entitled under an "employee benefit plan" maintained by the
Company or a subsidiary For purposes of this agreement, "cause" shall mean an
act or acts involving fraud, embezzlement or theft from the Company, or your
willful and repeated failure to follow the lawful directions of the Board of
Directors consistent with your position with the Company that continues for at
least ten (10) days following written notice from the Board of Directors of such
failure to follow such directions.
(b) In connection with the termination of your full-time employment
agreement with the Company, you shall also be entitled to receive the benefits
set forth in that certain letter dated July 8, 1996 from you to Dr. Fred
Eshelman, a copy of which is attached as Exhibit B.
4. LAPSE. Should you voluntarily leave employment prior to a change in
control or if you are terminated for cause either prior to or after to a change
in control, this Agreement shall lapse and be of no other force and effect and
no compensation will be payable to you hereunder.
5. SUCCESSORS; BINDING AGREEMENT. (a) The Company will require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company, to expressly assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform it
if no such succession had taken place.
(b) This Agreement shall inure to the benefit of and be enforceable by your
personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees.
6. NOTICE. For the purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by registered mail,
return receipt requested, postage prepaid, addressed to the respective addresses
set forth on the first page of this Agreement, provided that all notices to the
Company shall be directed to the attention of the Chief Financial Officer of the
Company with a copy of the Secretary of the Company, or to such other address as
either party may have furnished to the other in writing in accordance herewith,
except that notices of change of address shall be effective only upon receipt.
7. MISCELLANEOUS. No provisions of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to in
writing signed by you and such officer as may be specifically designated by the
Board of Directors of the Company. No waiver by either party hereto at any time
of any breach by the party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time. No agreement or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either party which are not set forth expressly in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of Delaware.
8. VALIDITY. The invalidity or unenforceability of any provisions of this
Agreement shall not effect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
2
<PAGE> 3
9. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
If this letter correctly sets forth our agreement on the subject matter
hereof, kindly sign and return to the Company the enclosed copy of this letter
which will then constitute our agreement on this subject.
Sincerely,
APPLIED BIOSCIENCE INTERNATIONAL INC.
By: /s/ Stephen L. Waechter
-----------------------------------
Mr. Stephen L. Waechter
Senior Vice President, Chief
Financial Officer
AGREED TO EFFECTIVE AS OF
THE 25TH DAY OF SEPTEMBER,
1996
By: /s/ Dr. Kenneth H. Harper
----------------------------------
Dr. Kenneth H. Harper
3
<PAGE> 1
EXHIBIT 10.65
September 25, 1996
John D. Bryer
3220-B Windsor Road
Austin, Texas 78703
Re: Severance Compensation Agreement
Dear John:
APPLIED BIOSCIENCE INTERNATIONAL INC. ("APBI" or the "Company") considers
the continuing maintenance of a sound and vital management to be essential to
protecting and enhancing the best interests of the Company and its shareholders.
In this connection, the Company recognizes that, as is the case with many
publicly held corporations, the uncertainty and questions which a potential
change of control may raise among management may result in the departure or
distraction of management personnel to the detriment of the Company and its
shareholders. The Company's Board of Directors has determined that given the
pending merger agreement between the Company and Pharmaceutical Product
Development, Inc. ("PPD"), it is imperative that the Company and the Board of
Directors be able to rely upon you to remain in your position and to provide
advice, if requested, as to the best interests of the Company.
Accordingly, in order to induce you to remain in the employ of the
Company's subsidiary, Pharmaco International Inc. ("Pharmaco"), this letter
agreement sets forth the terms of your continued employment and the severance
benefits which the Company and Pharmaco agree will be provided to you in the
event of the termination of your employment following a "change in control of
the Company" (as defined in Section 3 hereof).
1. EMPLOYMENT. Pharmaco shall continue to employ you as an executive of
Pharmaco or one of its affiliates for the Term of this Agreement. Subject to the
provisions of this Agreement, you confirm your present intention to remain in
the employ of the Pharmaco during such Term, and agree, at all times during the
Term of this Agreement to give the Company and Pharmaco at least one month prior
notice of any termination of your employment.
2. TERM. (a) The Term of this Agreement shall be for the one-year period
commencing on the date hereof and ending on September 25, 1997.
(b) In addition, the Term of your employment hereunder will automatically
end upon the occurrence of any of the following events;
(i) You die or receive a notice of termination due to Disability; or
(ii) At any time during the initial six-month period of this
Agreement, you give notice to the Company based on Good Reason; or
(iii) At any time subsequent to the initial six-month period of this
Agreement, you provide notice to the Company that you wish to terminate
your employment with Pharmaco or any successor entity for any or no reason;
or
(iv) At any time subsequent to the initial six-month period of this
agreement, the Company or PPD provides notice to you that it desires to
terminate your employment with Pharmaco or any successor entity.
(c) "Good Reason" shall mean:
(i) A change in your position as president and chief executive officer
of Pharmaco, without your express written consent; or
(ii) The assignment to you, without your express written consent, of
any duties substantially inconsistent with your position, duties and
responsibilities with Pharmaco immediately prior to a change in control; or
<PAGE> 2
(iii) A reduction by Pharmaco in your base salary in effect on the
date hereof or as the same as may be increased from time to time; or
(iv) The relocation of your primary work location to a location that
is more than forty (40) miles from your primary work location immediately
prior to the change in control; or.
2. CHANGE IN CONTROL. For purposes of this Agreement, a "change in control
of the Company" shall mean the Merger of APBI with PPD or any affiliate or
subsidiary of PPD.
3. TERMINATION FOLLOWING CHANGE IN CONTROL. (a) If a change in control of
the Company occurs, you shall be entitled, upon the subsequent termination of
your employment pursuant to paragraphs 2(b)(ii), (iii) or (iv) of this Agreement
or your termination by the Company for any other reason (other than for Cause or
because of your death) during the Term of this Agreement (any of the foregoing
being referred to as "Termination"), to the Severance Pay, bonus and other
benefits described in Paragraph 5. Any Termination of your employment, except
because of your death, shall be made by written notice of termination to the
other party.
(b) "Cause" shall mean (i) the willful and continued failure by you
substantially to perform your duties with the Company or Pharmaco (other than
any such failure resulting from your Disability), following written notice from
the Company or Pharmaco, or (ii) the willful engaging by you in gross misconduct
or any acts involving fraud, embezzlement or theft from Pharmaco or the Company;
or
(c) "Disability" shall mean that, as a result of your incapacity due to
physical or mental illness, you shall be unable to perform your duties with
Pharmaco for a period of three (3) months.
4. COMPENSATION. (a) In the event of your Termination for any reason
except those set forth in Paragraph 2(b)(i), the Company and/or Pharmaco shall
pay you as Severance Pay, your full base salary for a period of one year;
provided that if your termination occurs within the initial six-month period of
this Agreement, your Severance Pay shall equal your full base salary for the
period from the date of your termination through March 31, 1998. Pharmaco will
have the option to make such payment either in accordance with Pharmaco's normal
payroll practices or in a lump sum to be delivered on the thirtieth day
following the Termination.
(b) In the event of your Termination for any reason except those set forth
in Paragraph 2(b)(i), the Company and/or Pharmaco shall pay you your EVA
(Economic Value Added) bonus (or any bonus under any successor plan), if any,
earned through the date of your Termination. The calculation of your bonus, if
any, will be based on Pharmaco's (or such successor entity's) full year
performance pro rated through the date of Termination. To the extent any EVA or
other bonus is earned, you would receive such bonus at the same time as bonuses
are generally paid to Pharmaco's (or such successor entity's) officers and
employees.
(c) In addition, in the event of your Termination for any reason except
those set forth in Paragraph 2(b)(i), the Company shall maintain in full force
and effect for a period of one year, all employee benefits which you are
receiving as of the date of your Termination, including all life insurance,
health (medical, dental, vision and wellness), accidental death and
dismemberment, and disability benefit plans and programs; provided that if your
termination occurs within the initial six-month period of this Agreement, your
benefits will be continued for the period from the date of your termination
through March 31, 1998. The Company's and Pharmaco's obligations under this
Paragraph 5(c) shall terminate with respect to any Company or Pharmaco Program
on the date that you first become eligible, after your Date of Termination, for
the same type of coverage under another employer's plan.
(d) The Company shall pay the reasonable costs of a nationally recognized
outplacement service until you are employed on a full-time basis (but in no
event to exceed a one-year period).
5. LAPSE. Should you voluntarily leave employment prior to a change in
control or if you are terminated for cause either prior to or after to a change
in control, this Agreement shall lapse and be of no other force and effect and
no compensation will be payable to you hereunder.
2
<PAGE> 3
6. SUCCESSORS; BINDING AGREEMENT. This Agreement shall inure to the
benefit of and be enforceable by your personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees and
legatees.
7. NOTICE. For the purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by registered mail,
return receipt requested, postage prepaid, addressed to the respective addresses
set forth on the first page of this Agreement, provided that all notices to the
Company shall be directed to the attention of the Chief Executive Officer of the
Company with a copy to the Secretary of the Company, or to such other address as
either party may have furnished to the other in writing in accordance herewith,
except that notices of change of address shall be effective only upon receipt.
8. MISCELLANEOUS. No provisions of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to in
writing signed by you and such officer as may be specifically designated by the
Board of Directors of the Company. No waiver by either party hereto at any time
of any breach by the party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time. No agreement or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either party which are not set forth expressly in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the Commonwealth of Virginia.
9. VALIDITY. The invalidity or unenforceability of any provisions of this
Agreement shall not effect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
3
<PAGE> 4
10. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
If this letter correctly sets forth our agreement on the subject matter
hereof, kindly sign and return to the Company the enclosed copy of this letter
which will then constitute our agreement on this subject.
Sincerely,
APPLIED BIOSCIENCE INTERNATIONAL INC.
By: /s/ Stephen L. Waechter
------------------------------------
Stephen L. Waechter
Senior Vice President and Chief
Financial Officer
PHARMACO INTERNATIONAL INC.
By: /s/ Dr. Kenneth H. Harper
------------------------------------
Dr. Kenneth H. Harper
Chairman
AGREED TO THIS 25th DAY OF
SEPTEMBER, 1996
By: /s/ John D. Bryer
- --------------------------------------
John D. Bryer
4
<PAGE> 1
EXHIBIT 10.66
APPLIED BIOSCIENCE INTERNATIONAL INC.
4350 Fairfax Drive
Arlington, VA 22203
October 1, 1996
John D. Bryer
3220-B Windsor Road
Austin, Texas 78703
Re: Consulting Agreement
Dear John:
APPLIED BIOSCIENCE INTERNATIONAL, INC. ("APBI" or the
"Company") and PHARMACO INTERNATIONAL INC. ("Pharmaco") desire to have you
available for a period of up to six months to provide advisory and consulting
services in connection with the transition of the business following the merger
with Pharmaceutical Product Development, Inc. ("PPD"). Accordingly, the
Company and Pharmaco desire to enter into this letter agreement to set forth the
terms of your continued consulting relationship with the Company and Pharmaco.
1. CONSULTING SERVICES. Pharmaco may continue to use you as a
consultant to Pharmaco or one of its affiliates for the term of this Agreement.
During the term hereof but in no event more than five (5) days per month, you
agree to render to the Company and/or Pharmaco such services of an advisory or
consultative nature as either the Company or Pharmaco may reasonably request
from time to time and to be available for advice and counsel to the officers and
directors of the Company and/or Pharmaco at reasonable times by telephone,
letter or in person. The Company agrees to provide reasonable notice in
arranging for any consulting services required hereunder.
2. TERM. Unless sooner terminated as hereinafter provided, the
Term of this Agreement shall be for the six-month period commencing on the date
hereof and ending on March 31, 1997. Either you or the Company may voluntarily
terminate this Agreement for any reason or no reason at any time by giving five
(5) days' prior notice in writing to the other. In no event may this Agreement
be terminated prior to November 1, 1996.
3. TERMINATION OF OTHER AGREEMENTS. This Agreement supersedes
and replaces any and all other employment or similar agreements, whether written
or oral, which you may have with the Company, Pharmaco or any affiliate or
subsidiary of either of them. This Agreement sets forth the exclusive rights and
benefits which you shall have upon termination of your relationships with the
Company, Pharmaco and any of their respective affiliates or
<PAGE> 2
John D. Bryer
Page 2
subsidiaries, except that you shall have 90 days from the date of termination of
this Agreement to exercise any stock options which are vested as of the date of
such termination in accordance with the terms and conditions of the option
agreements related to such options.
4. RESIGNATION AS AN OFFICER AND DIRECTOR. By signing
this Agreement, you hereby resign effective immediately as a
director of PPD and resign all positions as a director and/or an
officer of the Company, Pharmaco and any of their respective
affiliates and subsidiaries.
5. COMPENSATION.
a. During the term of this Agreement, you will
receive as compensation for your consulting services your current base salary of
$18,750 per month (prorated for any portion of a month for which payment is to
be made) and other benefits (e.g., retirement benefits, health, life insurance,
etc.) you currently receive from Pharmaco and/or the Company. During the term of
this Agreement, the Company will reimburse you for reasonable and necessary
actual out-of-pocket expenses incurred by you in performance of the consulting
services hereunder to the extent such expenses have been pre-approved by the
Company and upon presentation of the necessary documentation in accordance with
the Company policy.
b. Upon termination of this Agreement, the Company
and/or Pharmaco shall pay you as severance pay, your current base salary of
$18,750 per month (prorated for any portion of a month for which payment is to
be made) for the period from the date of your termination through March 31,
1998. Pharmaco will have the option to make such payment either in accordance
with Pharmaco's normal payroll practices or in a lump sum to be delivered on the
thirtieth day following the termination.
c. Upon termination of this Agreement, the Company
and/or Pharmaco shall pay you your EVA (Economic Value Added) bonus (or any
bonus under any successor plan), if any, earned through the date of your
termination. The calculation of your bonus, if any, will be based on Pharmaco's
(or such successor entity's) full year performance pro rated through the date of
termination. To the extent any EVA or other bonus is earned, you would receive
such bonus at the same time as bonuses are generally paid to Pharmaco's (or such
successor entity's) officers and employees.
d. Upon termination of this Agreement, the Company
shall continue to pay for and provide the existing employee welfare benefits
which you are receiving as of the date of your termination through March 31,
1998. Such benefits include life insurance, health, medical, dental, vision and
wellness, accidental death and
<PAGE> 3
John D. Bryer
Page 3
dismemberment, and disability benefits, and shall be subject to the terms and
conditions of any plans or program related to such benefits. The Company's and
Pharmaco's obligations under this Paragraph 5(d) shall terminate with respect to
any Company or Pharmaco Program on the date that you first become eligible,
after your date of termination, for the same type of coverage under another
employer's plan.
e. The Company shall pay the reasonable costs of a
nationally recognized outplacement service approved by the Company until you are
employed on a full-time basis, but in no event to exceed a one-year period from
the date of your termination.
f. You may retain your lap top computer, a personal
fax machine and other miscellaneous office supplies, provided that you properly
identify these items to the Company's satisfaction within ten (10) days after
execution of this Agreement.
g. Upon termination of this Agreement the Company
shall continue to pay for and provide you with use of the Company vehicle
currently in your possession through March 31, 1998.
6. SUCCESSORS; BINDING AGREEMENT. This Agreement shall
inure to the benefit of and be binding upon your personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. This Agreement shall inure to the benefit of and be
binding upon APBI, Pharmaco, and their respective successors and assigns.
7. NOTICE. For the purposes of this Agreement, notices
and all other communications provided for in the Agreement shall be in writing
and shall be deemed to have been duly given when delivered or mailed by
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth on the first page of this Agreement, provided
that all notices to the Company shall be directed to the attention of the Chief
Executive Officer of the Company with a copy to the Secretary of the Company, or
to such other address as either party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall be
effective only upon receipt.
8. NO DISPARAGING REMARKS. Each party agrees to
refrain from making disparaging or negative remarks about the other
party or their affiliates.
9. MISCELLANEOUS. No provisions of this Agreement may
be modified, waived or discharged unless such waiver, modification
<PAGE> 4
John D. Bryer
Page 4
or discharge is agreed to in writing signed by you and such officer as may be
specifically designated by the Board of Directors of the Company. No waiver by
either party at any time of any breach by the party hereto of, or compliance
with, any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or conditions
at the same or at any prior to subsequent time. No agreement or representations,
oral or otherwise, express or implied, with respect to the subject matter hereof
have been made by either party which are not set forth expressly in this
Agreement. The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of North Carolina.
10. VALIDITY. The invalidity or enforceability of any
provisions of this Agreement shall not effect the validity or
enforceability of any other provision of this Agreement, which
shall remain in full force and effect.
11. COUNTERPARTS. This Agreement may be executed in one
or more counterparts, each of which shall be deemed to be an
original but all of which together will constitute one and the same
instrument.
If this letter correctly sets forth our agreement on the
subject matter hereof, kindly sign and return to the Company the enclosed copy
of this letter which will then constitute our agreement on this subject.
Sincerely,
APPLIED BIOSCIENCE INTERNATIONAL
INC.
By: Fred N. Eshelman
---------------------------------------
Fred N. Eshelman, Chief Executive
Officer
PHARMACO INTERNATIONAL INC.
By: /s/ David Boone
---------------------------------------
Its:
-------------------------------------
AGREED TO AS OF THIS 21ST DAY
OF OCTOBER, 1996.
By: /s/ John D. Bryer
--------------------------
John D. Bryer
<PAGE> 1
EXHIBIT 10.67
EMPLOYMENT AGREEMENT
THIS AGREEMENT (hereinafter the "Agreement"), made this 5th day of
October, 1996, by and between Pharmaceutical Product Development, Inc., a North
Carolina corporation (hereinafter "PPD"), and Thomas D'Alonzo (hereinafter
"Employee").
W I T N E S S E T H:
WHEREAS, Employee desires employment upon the terms and conditions herein
stated; and
WHEREAS, PPD desires to employ Employee upon the terms and conditions
herein stated; and
WHEREAS, Employee and PPD desire to embody in writing the terms and
conditions of such employment in this Agreement.
NOW, THEREFORE, in consideration of the mutual promises, covenants and
considerations contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:
1. Employment. PPD hereby employs Employee and Employee hereby accepts
such employment on a full time basis as President and Chief Operating Officer
of PPD upon the terms and conditions hereinafter set forth.
2. Term. The term of this Agreement shall be for one year, beginning
October 21, 1996, and ending October 20, 1997, unless sooner terminated as
provided herein. Thereafter, this Agreement shall be automatically renewed for
successive one-year terms upon the terms and conditions herein set forth and
subject to salary adjustments as provided for in paragraphs 3 and 10 below,
unless either party gives notice as herein provided to the other of said
party's intent not renew this Agreement not less than 60 days prior to the
expiration of the one-year term then in effect.
3. Salary. For all services rendered by Employee under this Agreement,
PPD shall pay to Employee an annual salary of $225,000.00 for the initial
one-year term hereof. Salary for any successive one-year terms shall be agreed
upon not less than 75 days before commencement of each one-year term unless
such a requirement is waived by the parties.
4. Stock Options. PPD has granted to Employee as of October 4, 1996 (the
"Grant Date") options to purchase 75,000 shares of PPD's common stock at a
purchase price equal to the NASDAQ market close price on the Grant Date. Said
share options have been granted under the terms of PPD's Equity Compensation
Plan (the "Plan") and are subject to all of the terms and conditions of the
Plan as more specifically evidenced by that certain Stock Award
<PAGE> 2
Agreement entered into by the parties as of the Grant Date, which Stock Award
Agreement is in a form substantially similar to that generally provided to Plan
participants except that (a) 25,000 of the share options may only be exercised
one year after the Grant Date, (b) an additional 25,000 of the share options
may only be exercised two years after the Grant Date, (c) the remaining 25,000
share options may only be exercised three years after the Grant Date and (d)
any unvested share options, i.e., share options which cannot be exercised under
the terms hereof, shall be forfeited upon Employee's termination of employment
with PPD.
5. Duties. Employee shall have overall responsibility for the operating
performance of the clinical research organization and environmental units of
PPD and its subsidiaries. Employee also shall perform such other duties as
reasonably assigned to him by the Chief Executive Officer of PPD, including but
not limited to assistance with mergers and acquisitions and participation in
personnel development. Employee shall carry out his duties and
responsibilities under the general supervision of the Chief Executive Officer
of PPD. Employee shall undertake such travel as may be required to perform the
duties prescribed herein. During the term of this Agreement, Employee shall
devote substantially all of his working time, attention and energies to the
business of PPD.
6. Working Facilities. PPD shall furnish Employee with office space,
equipment, technical, secretarial and clerical assistance and such other
facilities, services, support and supplies as may be reasonably needed to
perform the duties herein prescribed in an efficient and professional manner.
7. Non-Compete. During the term of this Agreement and for one year
thereafter, Employee hereby agrees that he shall not (a) become an officer,
employee, director, agent, representative, member, associate or consultant of or
to a corporation, partnership or other business entity or person, (b) directly
or indirectly acquire a proprietary interest in a corporation, partnership or
other business entity or person, or (c) directly or indirectly own any stock in
a corporation (other than a publicly traded corporation of which Employee owns
less than five percent (5%) of the outstanding stock) which is engaged in the
business of managing clinical research programs for pharmaceutical and medical
products or in any other business which is developed by PPD during the term of
this Agreement anywhere in the United States (whether or not such business is
physically located within the United States). The parties agree that the
business and operations of PPD are national in scope. For that reason, the
parties agree that a geographical limitation on the foregoing covenant is not
appropriate.
8. Termination. Notwithstanding any other provision of this Agreement,
PPD may terminate Employee's employment hereunder upon the occurrence of any of
the following events:
2
<PAGE> 3
a. Death of Employee.
b. A determination by the Chief Executive Officer of PPD, acting in
good faith but made in the sole discretion of the Chief Executive Officer, that
Employee has failed to substantially perform his duties under this Agreement.
c. A determination by the Chief Executive Office of PPD, acting in
good faith but made in the sole discretion of the Chief Executive Officer, that
Employee (i) has become physically or mentally incapacitated and is unable to
perform his duties under this Agreement as a result of such disability, which
inability continues for a period of sixty (60) consecutive calendar days,
(ii) has breached any of the material terms of this Agreement, (iii) has
demonstrated gross negligence or willful misconduct in the execution of his
duties, or (iv) has been convicted of a felony.
9. Disclosure of Information; PPD's Property. Employee recognizes and
acknowledges that all of PPD's licenses, permits, data, affairs, confidential
information, trade secrets, inventions, know how, discoveries, plans,
development of work in progress, customer and supplier information, cost
information, contractual provisions, employee capabilities, business methods,
opportunities and the like (collectively, the "Proprietary Information"), are
valuable and unique assets of PPD's business, regardless of whether PPD has
obtained patents on patentable devices and techniques or copyrights on any
material subject to copyright. Employee covenants and agrees that during the
term of this Agreement and thereafter he will not disclose the Proprietary
Information to any other corporation, partnership, business entity or person
for any reason (and without regard as to whether same shall have been
originated, discovered or developed by Employee); provided, however, that such
Proprietary Information which already is in the public domain shall not give
rise to a breach hereunder by Employee for his disclosure thereof.
10. Benefits. During the term hereof, Employee shall be entitled to
participate in all benefits provided by PPD to its employees generally,
including but not limited to health insurance, disability insurance and
retirement plans, all of which are currently provided to employees of PPD,
subject to the eligibility requirements of any plan(s) establishing same.
Employee shall be subject to PPD's policies applicable to other executive
employees of PPD with respect to periodic reviews and increases in salary, and
shall be considered for and eligible to participate in benefits, if any,
provided generally by PPD to its executive employees, including but not limited
to issuance of stock options, cash bonuses, etc., to the extent such bonuses,
etc., are not otherwise provided for herein in connection with Employee's
duties and performance as an executive employee. Employee shall be entitled to
five weeks paid vacation during each one-year term
3
<PAGE> 4
hereof.
11. Expenses. PPD shall pay all expenses of Employee which are directly
related to Employee's duties hereunder.
12. Remedies. In the event of Employee's actual or threatened breach of
the provisions of paragraph 7 and/or 9 of this Agreement, PPD shall be entitled
to a temporary restraining order and/or permanent injunction restraining
Employee from such breach. Nothing herein shall be construed as preventing PPD
from pursuing any other available remedies for such breach or threatened
breach, including recovery of damages from Employee and from any corporation,
partnership or other business entity or person with which the Employee has
entered or attempted to enter into a relationship or to which Employee has
disclosed Proprietary Information.
13. Entire Agreement. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof and may not be
altered or amended except by agreement in writing signed by the parties.
14. Waiver or Breach. Waiver by either party of a breach of any
provision of this Agreement by the other party shall not operate as a waiver of
any subsequent breach by the other party. No waiver shall be valid unless in
writing and signed by the party against whom the waiver is sought.
15. Severability. If any portion of this Agreement shall be declared
invalid by a court of competent jurisdiction, the remaining portion shall
continue in full force and effect as if this Agreement has been executed with
the invalid portion eliminated and this Agreement shall be so construed.
16. Benefit. This Agreement shall inure to the benefit of and be binding
upon PPD, its successors and assigns, and Employee, his heirs, successors,
assigns and personal representatives.
17. Applicable Law. This Agreement shall be governed by the laws of the
State of North Carolina.
18. Assignment. Neither party hereto may assign said party's rights or
obligations hereunder without the prior written consent of the other.
19. Notice. Any notice required or permitted hereunder shall be
delivered in person or mailed certified mail, return receipt requested, to
either party at PPD's principal office in Wilmington, North Carolina and shall
be deemed received when actually received. Any notice from Employee to PPD
shall be addressed to the Chief Executive Officer.
4
<PAGE> 5
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as of the date first hereinabove set forth.
PPD PHARMACEUTICAL PRODUCT DEVELOPMENT, INC.
By: /s/ Fred Eshelman
------------------------------------
[CORPORATE SEAL] Title: CEO
-----------------------------
ATTEST:
/s/ Rudy Howard
- -----------------------------
Title: Secretary
EMPLOYEE /s/ Thomas D'Alonzo
-------------------------------(SEAL)
Thomas D'Alonzo
WITNESS:
/s/ Rachel L. D'Alonzo
- -------------------------------
5
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF PHARMACEUTICAL PRODUCT DEVELOPMENT FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 14,320
<SECURITIES> 26,624
<RECEIVABLES> 70,189
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 124,403
<PP&E> 28,996
<DEPRECIATION> 0
<TOTAL-ASSETS> 172,255
<CURRENT-LIABILITIES> 60,090
<BONDS> 424
0
0
<COMMON> 2,157
<OTHER-SE> 106,771
<TOTAL-LIABILITY-AND-EQUITY> 172,255
<SALES> 0
<TOTAL-REVENUES> 146,049
<CGS> 0
<TOTAL-COSTS> 82,305
<OTHER-EXPENSES> (130)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (1,111)
<INCOME-PRETAX> (5,819)
<INCOME-TAX> 1,567
<INCOME-CONTINUING> (7,386)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,386)
<EPS-PRIMARY> (.35)
<EPS-DILUTED> (.35)
</TABLE>
