<PAGE> 1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
---------------------
FORM 10-Q
<TABLE>
<S> <S>
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____________ TO ____________.
</TABLE>
COMMISSION FILE NUMBER 0-27570
PHARMACEUTICAL PRODUCT
DEVELOPMENT, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<C> <C>
NORTH CAROLINA 56-1640186
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
3151 SEVENTEENTH STREET EXTENSION 28412
WILMINGTON, NORTH CAROLINA (Zip Code)
(Address of principal executive offices)
</TABLE>
Registrant's telephone number, including area code (910) 251-0081
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date: 22,528,090 shares of common
stock, par value $0.10 per share, as of July 31, 1997.
================================================================================
<PAGE> 2
INDEX
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<CAPTION>
PAGE
----
<S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Condensed Statements of Operations for the
Three and Six Months Ended June 30, 1997 and 1996
(unaudited)............................................ 3
Consolidated Condensed Balance Sheets as of June 30, 1997
(unaudited) and December 31, 1996...................... 4
Consolidated Condensed Statements of Cash Flows for the
Six Months Ended June 30, 1997 and 1996 (unaudited).... 5
Notes to Consolidated Condensed Financial Statements...... 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS................ 9
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS................................................... 13
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K................... 14
SIGNATURES.................................................. 15
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------- -------------------
1997 1996 1997 1996
-------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Life sciences revenues, net of subcontractor costs of
$16,037, $10,274, $34,784 and $23,354, respectively... $47,929 $37,894 $ 93,894 $ 73,135
Environmental sciences revenues, net of subcontractor
costs of $1,549, $1,053, $3,075 and $1,935,
respectively.......................................... 12,123 11,577 23,832 23,411
Discovery sciences revenues............................. 13 -- 17 --
------- ------- -------- --------
Net revenue................................... 60,065 49,471 117,743 96,546
------- ------- -------- --------
Direct costs -- Life sciences........................... 24,113 19,875 48,227 38,463
Direct costs -- Environmental sciences.................. 8,294 7,833 16,632 16,287
Direct costs -- Discovery sciences...................... 323 -- 480 --
Selling, general and administrative expenses............ 17,677 15,515 34,294 29,885
Depreciation and amortization........................... 3,065 2,535 5,807 4,984
Merger costs............................................ 69 -- 512 --
Acquired in-process research and development............ 9,112 -- 9,112 --
------- ------- -------- --------
62,653 45,758 115,064 89,619
------- ------- -------- --------
Operating income (loss)....................... (2,588) 3,713 2,679 6,927
Interest income, net.................................... 271 358 616 722
Other income (expense), net............................. 93 (3) 52 (43)
------- ------- -------- --------
Income (loss) before income taxes....................... (2,224) 4,068 3,347 7,606
Provision (benefit) for income taxes.................... (878) 1,644 1,350 3,035
------- ------- -------- --------
Net income (loss)............................. $(1,346) $ 2,424 $ 1,997 $ 4,571
======= ======= ======== ========
Net income (loss) per common share...................... $ (0.06) $ 0.11 $ 0.09 $ 0.22
======= ======= ======== ========
Weighted average number of common shares................ 22,490 21,462 22,464 21,087
======= ======= ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
3
<PAGE> 4
PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
----------- ------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents................................. $ 13,243 $ 21,838
Marketable securities..................................... 8,000 14,210
Accounts receivable and unbilled services, net............ 94,413 76,237
Investigator advances..................................... 1,375 5,280
Prepaid expenses and other current assets................. 6,122 5,752
Deferred tax asset........................................ 3,289 4,955
-------- --------
Total current assets.............................. 126,442 128,272
Property, plant and equipment, net........................ 33,629 31,479
Goodwill, net............................................. 18,859 18,397
Other assets, net......................................... 6,745 3,309
-------- --------
Total assets...................................... $185,675 $181,457
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt...................... $ 4,504 $ 4,221
Accounts payable.......................................... 6,445 7,051
Payables to investigators................................. 4,931 5,429
Other accrued expenses.................................... 24,719 26,263
Unearned income........................................... 21,383 18,705
-------- --------
Total current liabilities......................... 61,982 61,669
Long-term debt, less current maturities................... 1,758 1,428
Deferred rent and other................................... 2,816 3,054
-------- --------
Total liabilities................................. 66,556 66,151
-------- --------
Shareholders' equity
Common stock.............................................. 2,251 2,163
Paid-in capital........................................... 114,852 112,606
Unrealized gain on investments............................ 154 232
Cumulative translation adjustment......................... (639) 668
Retained earnings (accumulated deficit)................... 2,501 (363)
-------- --------
Total shareholders' equity........................ 119,119 115,306
-------- --------
Total liabilities and shareholders' equity........ $185,675 $181,457
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
4
<PAGE> 5
PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
---------------------
1997 1996
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Cash flows from operating activities:
Net income................................................ $ 1,997 $ 4,571
Adjustments to reconcile net income to net cash used in
operating activities:
Depreciation and amortization.......................... 5,807 4,984
Acquired in-process research and development........... 9,112 --
Other.................................................. (20) 1,153
Change in accrued merger expense....................... (6,253) --
Change in other operating assets and liabilities....... (10,868) (19,879)
-------- --------
Net cash used in operating activities............. (225) (9,171)
-------- --------
Cash flows from investing activities:
Maturities (purchases) of investments, net................ 6,268 (22,385)
Purchases of property and equipment....................... (6,351) (5,614)
Sale of investments....................................... -- 244
Cash paid for acquisitions, net........................... (8,121) --
Other..................................................... 174 (132)
-------- --------
Net cash used in investing activities............. (8,030) (27,887)
-------- --------
Cash flows from financing activities:
Repayment of long-term debt, net.......................... (201) (669)
Proceeds from issuance of common stock.................... 1,634 39,952
Distributions to shareholders............................. (430) (5,937)
-------- --------
Net cash provided by financing activities......... 1,003 33,346
-------- --------
Effect of exchange rate changes on cash..................... (1,343) 104
-------- --------
Net decrease in cash and cash equivalents................... (8,595) (3,608)
Cash and cash equivalents, beginning of the period.......... 21,838 13,565
-------- --------
Cash and cash equivalents, end of the period................ $ 13,243 $ 9,957
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
5
<PAGE> 6
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 audited consolidated
financial statements and notes thereto in the Company's Annual Report for the
year ended December 31, 1996. The results of operations for the three month and
six month periods ended June 30, 1997 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.
Reclassifications
Certain 1996 financial statement amounts have been reclassified to conform
with the 1997 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 AND ACQUISITIONS
In September 1996, a wholly-owned subsidiary of the Company was merged with
and into Applied Bioscience International Inc. ("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 condensed financial statements have been restated to reflect the
combination using APBI's financial statements for the three month and six month
period ended June 30, 1996.
In a January 1997 transaction accounted for as a purchase, the Company
acquired Technical Assessment Systems, Inc. for $490,000 cash, a note for
approximately $300,000 and the potential to earn an additional amount depending
on their profitability for a certain period after the acquisition.
6
<PAGE> 7
PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)
In February 1997, the Company acquired Belmont Research, Inc. ("Belmont")
in a transaction accounted for as a pooling-of-interests. The consideration for
Belmont consisted of 502,384 shares of the Company's common stock plus options
to purchase approximately 115,000 shares of Company common stock. Financial data
for 1996 has not been restated to include Belmont, as its results of operations
prior to the date of acquisition are not material to the Company.
In June 1997, the Company acquired SARCO, Inc. ("SARCO") in a transaction
accounted for as a pooling-of-interests. The consideration for SARCO consisted
of 263,158 shares of the Company's common stock. Financial data for 1996 has not
been restated to include SARCO, as its results of operations prior to the date
of acquisition are not material to the Company. Also in June 1997, the Company
acquired the GSX System, a functional genomics platform technology. The GSX
System was purchased for approximately $8.7 million in cash.
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. NEW ACCOUNTING PRONOUNCEMENTS
The Company will adopt Statement of Financial Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related Information" ("SFAS No.
131"), on December 31, 1997. SFAS No. 131 requires the Company to report
selected information about operating segments in interim financial reports
issued to shareholders. It also establishes standards for related disclosures
about products and services, geographic areas and major customers. The Company
has yet to determine the impact, if any, of adoption of this new pronouncement.
The Company will adopt Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income" ("SFAS No. 130"), on December 31, 1997. SFAS
No. 130 requires the Company to display an amount representing total
comprehensive income for the period in a financial statement which is displayed
with the same prominence as other financial statements. Upon adoption, all prior
period data presented will be restated to conform to the provisions of SFAS No.
130. The Company has yet to determine the impact, if any, of adoption of this
new pronouncement.
The Company will adopt Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" ("SFAS No. 128"), on December 31, 1997. SFAS No. 128
requires the Company to change its method of computing, presenting and
disclosing earnings per share information. Upon adoption, all prior period data
presented will be restated to conform to the provisions of SFAS No. 128.
7
<PAGE> 8
PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)
If the Company had adopted SFAS No. 128 for the period ended June 30, 1997,
the following computation would have been used to arrive at basic income per
common share and diluted income per common share that would have been presented
on the consolidated condensed statements of operations:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------- -----------------
1997 1996 1997 1996
-------- -------- ------- -------
<S> <C> <C> <C> <C>
Basic income (loss) per common share:
Net income (loss)............................... $(1,346) $ 2,424 $ 1,997 $ 4,571
======= ======= ======= =======
Weighted average shares:
Common shares outstanding.................... 22,490 21,462 22,464 21,087
======= ======= ======= =======
Basic income (loss) per common share............ $ (0.06) $ 0.11 $ 0.09 $ 0.22
======= ======= ======= =======
Diluted income (loss) per common share:
Net income (loss)............................... $(1,346) $ 2,424 $ 1,997 $ 4,571
======= ======= ======= =======
Weighted average shares:
Common shares outstanding.................... 22,490 21,462 22,464 21,087
Dilutive effect of stock options............. 74 630 74 630
------- ------- ------- -------
Total shares............................ 22,564 22,092 22,538 21,717
======= ======= ======= =======
Diluted income (loss) per common share............ $ (0.06) $ 0.11 $ 0.09 $ 0.21
======= ======= ======= =======
</TABLE>
8
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
COMPANY OVERVIEW
Pharmaceutical Product Development, Inc. ("PPDI" or "the Company") provides
a broad range of research and consulting services in the life, environmental and
discovery sciences. The Company's life sciences subsidiaries include PPD
Pharmaco, Inc. and Clinix International Inc. PPD Pharmaco is a leading contract
research organization ("CRO") providing integrated product development services
on a global basis to complement the research and development activities of
companies in the pharmaceutical and biotechnology industries. Through its
environmental sciences subsidiary, APBI Environmental Sciences Group, Inc.,
operating under the trade name ENVIRON, the Company provides assessment and
management of chemical and environmental health risk. The Company's discovery
research segment includes SARCO, Inc., a combinatorial chemistry company, and
the GSX System, a functional genomics platform technology.
In September 1996, a wholly-owned subsidiary of the Company was merged with
and into Applied Bioscience International Inc. ("APBI") pursuant to which APBI
became a wholly-owned subsidiary of the Company. Under the terms of the merger
agreement, APBI stockholders 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. The Company's financial results have been restated to
reflect the transaction as if it had occurred at the beginning of the periods
presented. Subsequent to the merger, the Company believes it is the third
largest CRO in the world. The Company's CRO operations (formerly doing business
as Pharmaceutical Product Development, Inc., or PPD) and APBI's CRO business
(formerly doing business as Pharmaco International) have been integrated and now
operate under the trade name PPD Pharmaco. For more detailed information on the
Company's Life Sciences Group, see the Company's 1996 Annual Report and December
31, 1996 Form 10-K.
ENVIRON is a multidisciplinary environmental and health sciences consulting
firm that provides a broad range of services relating to the presence of
hazardous substances in the environment, in drugs and medical devices, in
consumer products and in the workplace. Services provided by ENVIRON are
concentrated in the assessment and management of chemical risk and are
characterized by engagements supporting private sector clients with complex,
potentially high-liability concerns. For more detailed information on the
Company's Environmental Sciences Group, see the Company's 1996 Annual Report and
December 31, 1996 Form 10-K.
Statements in this Management's Discussion and Analysis that are not
descriptions of historical facts are forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995 reflecting
management's current view with respect to certain future events and financial
performance that are subject to risks and uncertainties. Although the Company
has attempted to be accurate in making those forward-looking statements, it is
possible that the assumptions made by management may not materialize. In
addition, other important factors which could cause results to differ materially
include the following: economic conditions in the pharmaceutical and
biotechnology industries, outsourcing trends in the pharmaceutical and
biotechnology industries; risks associated with acquisitions; loss of large
contracts; competition within the CRO industry; continued success in sales
growth; the ability to attract and retain key personnel; and the other risk
factors set forth from time to time in the Company's other SEC filings, copies
of which are available upon request from PPDI's investor relations department.
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
results.
RESULTS OF OPERATIONS
General
In January 1997, the Environmental Sciences Group acquired Technical
Assessment Systems, Inc. for $490,000 cash, a note for approximately $300,000
and the potential to earn an additional amount depending on their profitability
for a certain period after the acquisition. In February 1997, the Life Sciences
Group acquired Belmont Research, Inc. ("Belmont") in a transaction accounted for
as a pooling-of-interests. The consideration for Belmont consisted of 502,384
shares of the Company's common stock plus options to purchase approximately
115,000 shares of Company common stock. In June 1997, the Company completed
9
<PAGE> 10
the acquisitions of SARCO, Inc. and the GSX System. These acquisitions form the
basis of PPD Discovery, Inc., a new wholly-owned subsidiary focused on the
discovery segment of the research and development outsourcing market. The
acquisition of SARCO, Inc. was accounted for as a pooling-of-interest. The
consideration for SARCO, Inc. consisted of 263,158 shares of the Company's
common stock. The GSX System was purchased with approximately $8.7 million in
cash by the Company. The excess purchase price over fair value of net assets
acquired was $9.1 million, and was allocated to acquired in-process research and
development, which was charged to operations upon acquisition. Financial data
for 1996 has not been restated to include Belmont or SARCO, Inc., as their
results of operations prior to the date of acquisition are not material to the
Company.
During the second quarter of 1997, net income, excluding $9.2 million in
costs relating to the acquisition of SARCO, Inc. and the GSX System, increased
75.0% to $4.2 million, or $0.19 per share, from $2.4 million, or $0.11 per
share, for the same period in 1996. Operating income increased by 78.4% to $6.6
million from $3.7 million a year earlier. If the acquisition costs are included,
the Company had a net loss of $1.4 million or $(0.06) per share.
Three Months Ended June 30, 1997 Versus Three Months Ended June 30, 1996
Net revenue increased $10.6 million, or 21.4%, to $60.1 million in 1997
from $49.5 million for the same period last year. The Life Sciences Group
operations accounted for 79.8% of the Company's net revenue for 1997. PPD
Pharmaco generated net revenue of $47.9 million, up $10.0 million, or 26.5%,
from last year. The growth in PPD Pharmaco operations was due in part to an
increase in the size, scope and number of contracts in the clinical development
and biostatistics business. The acquisitions since June 30, 1996 contributed net
revenue of $4.3 million for the three months ended June 30, 1997. The Company's
Environmental Sciences Group generated 20.2% of the Company's net revenue for
the second quarter 1997, or $12.1 million, compared with $11.6 million in 1996.
Total direct costs increased 18.1% to $32.7 million from $27.7 million last
year but declined as a percentage of net revenue to 54.4% from 56.0% last year.
The Life Sciences Group's direct costs as a percentage of related net revenue of
50.3% compares favorably to 52.4% last year. This decrease is due to higher
labor utilization and a focused effort to control costs across all business
segments. The Environmental Sciences Group's direct costs as a percentage of
related net revenue increased to 68.4% from 67.7% last year. This increase in
direct costs as a percentage of net revenues is attributable to lower consultant
utilization.
Selling, general and administrative ("SG&A") expenses increased 13.9% to
$17.7 million from $15.5 million in 1996. As a percentage of net revenue, SG&A
expenses decreased to 29.4% from 31.4% last year. SG&A expenses from
acquisitions since June 30, 1996 comprise $1.6 million of the increase. SG&A
decreased as a percentage of net revenue primarily due to the leveraging of
administrative functions over a larger revenue base.
Total depreciation and amortization expense of $3.1 million was $0.6
million, or 20.9%, higher than last year. The increase was related to the
Company's growth as well as the ongoing capital investment in the Company's base
business.
The Company recorded one-time merger costs of 69,000 in the second quarter
of 1997. These costs are primarily current cash expenses, such as legal and
accounting fees, relating to the SARCO pooling transaction.
The Company also recorded acquired in-process research and development
costs of $9.1 million in the second quarter. These costs were charged to
operations upon the acquisition of the GSX System. A valuation was performed by
an independent consultant to determine the fair value of the acquired in-process
research and development. The immediate expensing of the acquired in-process
research and development was due to the fact that the technology has no
alternative future use and the technology has not yet reached technological
feasibility.
Operating income decreased $6.3 million to an operating loss of $2.6
million for the three months ended June 30, 1997, as compared to an operating
income of $3.7 million for the three months ended June 30, 1996.
10
<PAGE> 11
Excluding one-time costs (merger costs and acquired in-process research and
development costs), operating income increased $2.9 million, or 78.4%, to $6.6
million in the second quarter of 1997 compared to $3.7 million for the same
period last year. As a percentage of net revenue, excluding the one-time costs,
the quarterly operating income of 11.0% represents an improvement from the
operating income of 7.5% of net revenue for the same period last year.
The net loss of $1.4 million represents a decrease of $3.8 million over the
same quarter a year ago. The net loss per share of $(0.06) compares to net
income per share of $0.11 for the same period last year. Excluding the impact of
the one-time costs on both periods, the Company's net income of $4.2 million is
75.0% higher than last year's net income of $2.4 million. On an equivalent
earnings-per-share basis the net income per share of $0.19 compares to $0.11 for
the same period last year computed on 1.0 million less shares outstanding.
Six Months Ended June 30, 1997 Versus Six Months Ended June 30, 1996
Total net revenues increased $21.2 million, or 22.0%, to $117.7 million in
1997 from $96.6 million last year. The Company's Life Sciences Group generated
79.7% of the Company's net revenues in the first six months, equating to net
revenues of $93.9 million, up $20.8 million or 28.4% from the same period last
year. 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 completed
since June 30, 1996 contributed net revenues of $8.5 million during the first
six months of 1997. Net revenues from the Environmental Sciences Group,
representing 20.2% of the Company's net revenues in the first six months were
$23.8 million, compared with $23.4 million in 1996, a increase of 1.8% or $0.4
million.
Total direct costs increased 19.3% to $65.3 million last year and declined
as a percentage of net revenues to 55.5% from 56.7%. In the Life Sciences Group,
direct costs decreased as a percentage of related net revenues to 51.4% from
52.6%. The decrease in direct costs as a percentage of revenues is principally
due to higher labor utilization, the mix of business within the group, and a
focused effort to reduce costs throughout the entire Company. In the
Environmental Sciences Group, direct costs as a percentage of related net
revenues remained basically unchanged at 69.8% from a year ago level of 69.6%.
SG&A expenses increased 14.7% to $34.3 million from $29.9 million in 1996.
As a percentage of net revenues, SG&A expenses decreased to 29.1% from 31.0%
last year. Incremental SG&A expenses from acquisitions completed since June 30,
1996 comprise $2.6 million of the increase. The remaining increase of $1.8
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 $5.8 million was $0.8
million, or 16.5%, higher than last year. The increase was related to the
Company's growth as well as the ongoing capital investment in the Company's base
business.
Operating income decreased $4.2 million, or 61.3%, to $2.7 million in the
first six months of 1997 as compared to $6.9 million for the same period last
year. Excluding one-time costs, operating income increased $5.4 million, or
78.3%, to $12.3 million in the first six months of 1997 compared to $6.9 million
for the same period last year. As a percentage of net revenues, excluding
one-time costs, the year-to-date operating income increased to 10.4% in 1997
compared to 7.2% in 1996.
The net income of $2.0 million declined $2.6 million as compared to last
year's net income of $4.6. The net income per share of $0.09 compares to a net
income per share of $0.22 last year. Excluding the impact of the one-time costs
on the six month results, the Company's net income of $7.8 million is 69.6%
higher than last year's net income of $4.6 million. On an earnings-per-share
basis, excluding one-time costs, the net income per share of $0.35 compares to
$0.22 for the same period last year computed on 1.4 million less shares
outstanding.
11
<PAGE> 12
Liquidity and Capital Resources
As of June 30, 1997, the Company had $13.2 million of cash and cash
equivalents on hand and $8.0 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,
PPDI 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.
For the six months ended June 30, 1997, the Company experienced a net
decrease in cash from operating activities of $0.2 million. For the period, net
income of $2.0 million, depreciation and amortization of $5.8 million and the
acquired in-process research and development of $9.1 million were offset
primarily by the increase in billed and unbilled receivables of $17.1 million
and the cash disbursements related to previously accrued merger expense of $6.3
million and a net change in other assets and liabilities of $6.2 million. For
the six months ended June 30, 1997, the Company used net cash of $8.0 million in
investing activities, as capital expenditures of $6.4 million and the $8.1
million cash paid for acquisitions, net, were only partially offset by $6.3
million in cash provided by maturities of investments, net.
For the six months ended June 30, 1997, the Company's financing activities
provided $1.0 million in cash, as net proceeds from stock options exercises of
$1.6 million was partially offset by $0.4 million in cash used to pay premerger
distributions to shareholders of Belmont.
In June 1997, the Company obtained a $50.0 million revolving credit
facility with First Union National Bank of North Carolina which accrues interest
on amounts borrowed at a floating rate currently equal to the LIBOR Rate plus
.75% per year. Indebtedness is subject to certain covenants relating to
financial ratios and tangible net worth. The unused portion of the loan is
available to provide working capital and for general corporate purposes. As of
June 30, 1997, the Company has no amounts outstanding under this facility.
In August 1997, the Company renegotiated a new credit facility for $50.0
million with Wachovia Bank of North Carolina, N.A Indebtedness under the line is
unsecured and subject to certain covenants relating to financial ratios and
tangible net worth. The unused portion of the loan is available to provide
working capital and for general corporate purposes. As of June 30, 1997, the
Company had $3.3 million outstanding under this facility.
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 facilities. The Company believes that such
sources of cash will be sufficient to fund the Company's current operations for
at least the next 12 months. The Company is currently evaluating a number of
acquisitions and other growth opportunities which may require additional
external financing, and the Company may from time to time seek to obtain funds
from public and private issuances of equity or debt securities.
Inflation
The Company believes the effects of inflation have not had a material
adverse effect on its results of operations or financial condition.
Potential Volatility of Quarterly Operating Results and Stock Price
The Company's quarterly operating results are subject to volatility due to
such factors as the commencement, completion or cancellation of large contracts,
progress of ongoing contracts, acquisitions, the timing of start-up expenses for
new offices, management of growth 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 or other factors beyond the Company's
control, such as changes in earnings estimates by analysts, market conditions in
the CRO, environmental, pharmaceutical and biotechnology industries and general
economic conditions could affect the market price of the Common Stock in a
manner unrelated to the longer-term operating performance of the Company.
12
<PAGE> 13
PART II
OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The 1997 Annual Meeting of Shareholders of the Company was held on May 15,
1997.
At the Annual Meeting, the following proposals were voted upon:
A proposal to amend the Company's 1995 Equity Compensation Plan to increase
the number of shares of the Company's Common Stock reserved for issuance
thereunder from 1,500,000 shares to 2,500,000 shares was approved by the
following vote:
<TABLE>
<CAPTION>
FOR AGAINST BROKER NON-VOTES
- ---------------------- ---------------------- ----------------------
<C> <C> <C>
12,073,208 1,706,009 2,210,811
</TABLE>
A proposal to amend the Company's 1995 Stock Option Plan for Non-Employee
Directors providing for the grant of an option to purchase 4,000 shares of
Common Stock of the Company to each non-employee director on each date on which
the director is elected or reelected to the Board of Directors was approved by
the following vote:
<TABLE>
<CAPTION>
FOR AGAINST BROKER NON-VOTES
- ---------------------- ---------------------- ----------------------
<C> <C> <C>
15,484,835 365,955 2,210,811
</TABLE>
A proposal to adopt the Pharmaceutical Product Development, Inc. Employee
Stock Purchase Plan, including the reservation of 500,000 shares of the
Company's Common Stock for issuance thereunder was approved by the following
vote:
<TABLE>
<CAPTION>
FOR AGAINST BROKER NON-VOTES
- ---------------------- ---------------------- ----------------------
<C> <C> <C>
12,224,784 1,554,433 2,210,811
</TABLE>
The following directors were elected to office for the ensuing year and
were approved by the following votes:
<TABLE>
<CAPTION>
FOR AGAINST
---------- ---------
<S> <C> <C>
Ernest Mario................................... 15,789,784 200,244
Fredric N. Eshelman............................ 15,789,934 200,094
John A. McNeill, Jr............................ 15,790,054 199,974
Stuart Bondurant............................... 15,789,842 200,186
Frederick Frank................................ 15,789,792 200,236
Frank E. Loy................................... 15,789,433 200,595
Kirby L. Cramer................................ 15,790,054 199,974
Thomas D'Alonzo................................ 15,790,054 199,974
</TABLE>
13
<PAGE> 14
ITEM 6. EXHIBITS AND REPORTS ON FORM 8K
<TABLE>
<S> <C> <C>
(a) Exhibit 10.84 Employment Agreement, dated June 4, 1997, by and between the
Registrant and Mark E. Furth.
Exhibit 10.85 Note and Loan Agreement, dated June 25, 1997, made by the
Registrant for the benefit of First Union National Bank of
North Carolina.
Exhibit 10.86 Pharmaceutical Product Development, Inc. Employee Stock
Purchase Plan, dated May 15, 1997.
Exhibit 10.87 Amendment to Employee Stock Purchase Plan, dated June 21,
1997.
Exhibit 10.88 Amendment to Stock Option Plan for Non-Employee Directors,
dated May 15, 1997.
Exhibit 10.89 Amendment to Equity Compensation Plan, dated May 15, 1997.
Exhibit 27 Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended June 30, 1997.
</TABLE>
14
<PAGE> 15
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/ RUDY C. HOWARD
--------------------------------------------
Chief Financial Officer and
Vice President, Finance and Treasurer
(Principal Financial Officer)
Date: August 14, 1997
15
<PAGE> 1
EXHIBIT 10.84
EMPLOYMENT AGREEMENT
THIS AGREEMENT (hereinafter the "Agreement"), made this 4th day of
June, 1997, by and between Holding Company No. 1, Inc. on (hereinafter
"Company"), and Mark E. Furth (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, Company desires to employ Employee upon the terms and
conditions herein stated; and
WHEREAS, Employee and Company 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. Company hereby employs Employee and Employee hereby
accepts such employment on a full time basis as Senior Vice President of
Research upon the terms and conditions hereinafter set forth.
2. Term. The term of this Agreement shall be for one year, beginning
June 9, 1997, and ending June 8, 1998, 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 90 days prior to the expiration of the
one-year term then in effect.
3. Salary. For all services rendered by Employee under this Agreement,
Company shall pay to employee an annual salary of $205,000 for the initial
one-year term hereof. Salary for any successive one-year terms shall be agreed
upon not less than 120 days before commencement of each one-year term unless
such a requirement is waived by the parties; provided, however, that the salary
offered by the Company for any renewal term shall not be less than the salary
for the one-year term then in effect.
4. Stock Options. Employee has been granted as of the term commencement
date (the "Grant Date") options to purchase 40,000 shares of common
<PAGE> 2
stock of Pharmaceutical Product Development, Inc. ("PPD") at a purchase price
equal to 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 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) 13,334
of the share options may only be exercised one year after the Grant Date, (b)
13,333 of the share options may only be exercised two years after the Grant
Date, (c) the remaining 13,333 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 Company; provided, however, that if
Company assigns this Agreement as permitted in paragraph 19 below or terminates
Employee without cause as permitted in paragraph 8 below during the initial
one-year term hereof, the one-year period specified in clause (a) above shall be
deemed to have been satisfied on the day immediately prior to the effective date
of said assignment or termination, whichever is applicable. In addition, if
Company terminates Employee without cause as permitted in paragraph 8 below
during any second or third year term of this Agreement, the two-year and
three-year periods specified in the above clauses (b) and (c), respectively,
shall be deemed to have been satisfied on the day immediately prior to the
effective date of said termination.
5. Duties. Employee shall have overall responsibility for and decision
making authority necessary to fulfill his duties as Senior Vice President of
Research. Employee's duties shall include but not be limited to developing a
discovery research capability involving the GSX System, combinatorial chemistry
and other functions as agreed upon time to time. Employee shall carry out his
duties and responsibilities under the general supervision of the Chief Executive
Officer of PPD or, in the discretion of the Chief Executive Officer, the Chief
Operating Officer of PPD. Employee shall not be required to relocate from the
Research Triangle Park, North Carolina area in the performance of his duties
hereunder. Employee shall undertake such travel as 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 Company. Nothing herein shall be construed to prevent Employee from
serving as a director of one or more companies, provided such directorship does
not interfere with Employee's regular performance of his duties and
responsibilities hereunder and the directorship has been approved in advance by
Company. Further, Employee may engage in charitable and community affairs and
attend to his passive investments, provided such activities do not interfere
with the regular performance of his duties and responsibilities hereunder.
6. Working Facilities. Company shall furnish Employee with office
space, equipment, technical, secretarial and clerical assistance and such other
facilities, services, support and supplies in the Research Triangle Park, North
Carolina area as may
2
<PAGE> 3
be reasonably needed to perform the duties herein prescribed in an efficient and
professional manner.
7. Non-Compete. During the term of this Agreement, 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 except as provided herein, (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 Company 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 Company 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,
Company may terminate Employee's employment hereunder upon the occurrence of any
of the following events:
a. Death of Employee.
b. A determination by the Chief Executive Officer of PPD,
acting in good faith and made after consultation with PPD's Board of
Directors, but made in the sole discretion of said Chief Executive
officer, that Employee has failed to substantially perform his duties
under this Agreement.
c. A determination by the Chief Executive Officer of PPD,
acting in good faith but made in the sole discretion of said 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; provided, that unless cure of such
breach is not possible, Company shall give Employee written notice of
the breach and Employee shall have 10 days to cure same; (iii) has
demonstrated gross misconduct, or wrongful actions or omissions in the
execution of his duties, or (iv) has been convicted of a felony.
Upon termination of any of the foregoing, Employee shall be entitled to
his salary through the date of termination and to any accrued and unpaid bonus
which Employee shall have earned under the terms of any bonus plan in which
Employee is a participant. Further, if Employee's employment hereunder is
terminated pursuant to subsections a. or c.(i) above, the Company shall continue
to pay Employee his monthly salary for six months from the date of termination.
3
<PAGE> 4
In addition to the grounds for termination of Employee's employment set
forth in subsections a. through c. above, either Employee or the Company may
terminate Employee's employment at any time, for any reason, without cause. As
used herein, termination "without cause" means termination for any reason not
provided for in subsections a. through c. of this paragraph 8, including without
limitation constructive termination. "Constructive termination" as used herein
means (x) a substantial reduction by Company of Employee's duties and
responsibilities, (y) Employee's resignation from employment due to Company's
material breach of this Agreement; provided, that unless cure of such breach is
not possible, Employee shall give Company written notice of the breach and
Company shall have 10 days to cure same; and (z) if Company is a wholly owned
subsidiary of PPD, PPD sustains change of control and Employee elects to
terminate this Agreement. "Change of control" as used herein shall mean (i) any
merger, sale of assets or other business reorganization after which PPD is not
the surviving company other than a reincorporation to change domicile of PPD, or
(ii) a change of control of a nature that would be required to be reported in
response to Item 5(e) of Schedule 14A of Regulation 14A promulgated under the
Securities Exchange Act of 1934, as amended ("Exchange Act"), provided that 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 PPD representing
50% or more of the combined voting power of PPD's then outstanding securities.
If the Company terminates Employee without cause before the expiration of the
initial one-year term hereof, the Company will continue to pay Employee his
monthly salary for six months from the date of termination. If the Company
terminates Employee without cause during any one-year term hereof after the
initial one-year term above, Company will continue to pay Employee his monthly
salary for twelve months from the date of termination, reduced by the
compensation received by Employee from any other employment during said
twelve-month period. If Company gives notice of its intent to not renew this
Agreement as provided for in paragraph 2 above, Company will continue to pay
Employee his monthly salary for six months from the date of termination, reduced
by the compensation received by Employee from any other employment during said
six-month period.
9. Disclosure of Information; Company's Property. Employee shall
execute the Company's Proprietary Information and Inventions Agreement, attached
as Exhibit A hereto, effective the commencement date hereof.
10. Benefits. During the term thereof, Employee shall be entitled to
participate in all benefits provided by Company 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 Company,
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
4
<PAGE> 5
provided for herein in connection with Employee's duties and performance as an
executive employee. Employee shall be entitled to four weeks paid vacation
during each one-year term hereof.
11. Expenses. Company shall pay all expenses of Employee which are
directly related to Employee's duties hereunder.
12. Remedies. In the event of Employee's breach of the provisions of
paragraph 7 of this Agreement, Company shall be entitled to a temporary
restraining order and/or permanent injunction restraining Employee from such
breach. Nothing herein shall be construed as preventing Company 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.
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 had 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 Company, 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. Arbitration. Any dispute, controversy or claim arising out of or
relating to this Agreement, including but not limited to any breach, or as to
its existence, validity, interpretation, performance or non-performance, breach
or damages, including claims in tort, shall be decided by a single neutral
arbitrator in Wilmington, North Carolina in binding arbitration pursuant to the
rules and regulations of the American Arbitration Association then in effect.
The parties to any such arbitration shall be limited to the parties to this
Agreement or any successor thereof. The written decision of the arbitrator shall
be final and binding, and may be entered and enforced in any court of competent
jurisdiction and each party specifically acknowledges and agrees to waive any
5
<PAGE> 6
right to a jury trial in any such forum. Each party to the arbitration shall pay
its fees and expenses, unless otherwise determined by the arbitrator.
19. Assignment. Neither party hereto may assign said party's rights or
obligations hereunder without the prior written consent of the other, except
that Company shall have the right without Employee's prior written consent to
assign this Agreement to PPD's designated research entity, without regard to
PPD's ownership interest therein.
20. Notice. Any notice required or permitted hereunder shall be
delivered in person or mailed certified mail, return receipt requested, to
either party at Company's principal office in Wilmington, North Carolina and
shall be deemed received when actually received. Any notice from Employee to
Company shall be addressed to the Chief Executive Officer or General Counsel of
PPD.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the date first hereinabove set forth.
COMPANY HOLDING COMPANY NO. 1, INC.
By: /s/ Fred N. Eshelman
---------------------------------
Title: President
---------------------------------
EMPLOYEE /s/ Mark E. Furth
------------------------------ (SEAL)
Mark E. Furth
Pharmaceutical Product Development, Inc. hereby guarantees payment and
performance of all of the obligations of under this Employment Agreement.
PHARMACEUTICAL PRODUCT DEVELOPMENT, INC.
By: /s/ Fred N. Eshelman
---------------------------------
Title: Chief Executive Officer
---------------------------------
6
<PAGE> 1
EXHIBIT 10.85
LOAN AGREEMENT
LOAN AGREEMENT dated June 25, 1997 (the "Loan Agreement" or this
"Agreement") by and among PHARMACEUTICAL PRODUCT DEVELOPMENT, INC., a North
Carolina corporation (the "Borrower"), the subsidiaries and affiliates
identified on the signature pages hereto or hereafter joined as a Guarantor
hereunder (the "Guarantors", and together with the Borrower, the "Credit
Parties") and FIRST UNION NATIONAL BANK OF NORTH CAROLINA (the "Bank").
W I T N E S S E T H
WHEREAS, the Borrower has requested a $50 million revolving credit
facility for the purposes hereinafter set forth;
WHEREAS, the Bank has agreed to make the requested credit facility
available to the Borrower on the terms and conditions hereinafter set forth;
NOW, THEREFORE, IN CONSIDERATION of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
SECTION 1. DEFINITIONS.
"Bankruptcy Code" means the Bankruptcy Code in Title 11 of the United
States Code, as amended, modified, succeeded or replaced from time to time.
"Business Day" means a day other than a Saturday, Sunday or other day
on which commercial banks in Charlotte, North Carolina are authorized or
required by law to close; provided, however, that when used in connection with a
rate determination, borrowing or payment in respect of a LIBOR Rate Loan, the
term "Business Day" shall also exclude any day on which banks in London, England
are not open for dealings in U.S. dollar deposits in the London interbank
market.
"Closing Date" means the date hereof.
"Commitment Period" means the period from and including the date hereof
to but excluding the earlier of (i) the Termination Date, or (ii) the date on
which the commitments hereunder shall have been terminated in accordance with
the provisions hereof.
"Consolidated Debt to Total Capitalization Ratio" means, as of any day,
the ratio of Consolidated Funded Debt to Consolidated Total Capitalization.
"Consolidated Fixed Charge Coverage Ratio" means, as of the last day of
any fiscal quarter for the Borrower and its subsidiaries on a consolidated
basis, the ratio of Consolidated Income Available for Fixed Charges to
Consolidated Fixed Charges.
"Consolidated Fixed Charges" means, for the applicable period for the
Borrower and its subsidiaries on a consolidated basis, the sum of Consolidated
Interest Expense plus rental and lease expense, in each case as determined in
accordance with GAAP applied on a consistent basis. Except as expressly provided
otherwise, the applicable period shall be for the four consecutive fiscal
quarters ending as of the date of determination.
"Consolidated Funded Debt" means Funded Debt of the Borrowers and its
subsidiaries on a consolidated basis determined in accordance with GAAP.
"Consolidated Income Available for Fixed Charges" means, for any period
for the Borrower and its subsidiaries on a consolidated basis, the sum of
Consolidated Net Income plus Consolidated
<PAGE> 2
Interest Expense plus federal, state and local income taxes paid plus rental and
lease expense, in each case determined in accordance with GAAP applied on a
consistent basis. Except as expressly provided otherwise, the applicable period
shall be for the four consecutive fiscal quarters ending as of the date of
determination.
"Consolidated Interest Expense" means, for any period for the Borrower
and its subsidiaries on a consolidated basis, all interest expense, including
the amortization of debt discount and premium, the interest component under
capital leases and the implied interest component under securitization
transactions, expense, in each case determined in accordance with GAAP applied
on a consistent basis. Except as expressly provided otherwise, the applicable
period shall be for the four consecutive fiscal quarters ending as of the date
of determination.
"Consolidated Net Income" means, for any period for the Borrower and
its subsidiaries on a consolidated basis, net income as determined in accordance
with GAAP applied on a consistent basis, but excluding for purposes of
determining the Fixed Charge Coverage Ratio, (i) extraordinary gains or losses,
and any taxes on such excluded gains and any tax deductions or credits on
account of any such excluded losses, and (ii) one-time non-recurring charges
associated with mergers and acquisitions permitted hereunder. Except as
expressly provided otherwise, the applicable period shall be for the four
consecutive fiscal quarters ending as of the date of determination.
"Consolidated Net Worth" means, on any day for the Borrower and its
subsidiaries on a on a consolidated basis, shareholders' equity as determined in
accordance with GAAP applied on a consistent basis.
"Consolidated Tangible Net Worth" means, on any day Consolidated Net
Worth minus the aggregate amount of goodwill, franchises, licenses, patents,
trademarks, trade names, copyrights, service marks, brand names, organizational
and developmental expenses, covenants not to compete and other intangible
assets, in each case as determined in accordance with GAAP applied on a
consistent basis.
"Consolidated Total Capitalization" means, on any day for the Borrower
and its subsidiaries on a consolidated basis, the sum of Consolidated Funded
Debt plus Consolidated Net Worth.
"Credit Documents" means, collectively, this Agreement and the Note.
"Eurodollar Reserve Percentage" means for any day, the percentage
(expressed as a decimal and rounded upwards, if necessary, to the next higher
1/100th of 1%) which is in effect for such day as prescribed by the Federal
Reserve Board (or any successor) for determining the maximum reserve requirement
(including without limitation any basic, supplemental or emergency reserves) in
respect of Eurocurrency liabilities, as defined in Regulation D of such Board as
in effect from time to time, or any similar category of liabilities for a member
bank of the Federal Reserve System in New York City.
"Funded Debt" means, as of any day for the Borrower, without
duplication, (i) all indebtedness for borrowed money, (ii) all indebtedness and
obligations evidenced by bonds, debentures, notes or other similar instruments,
(iii) all obligations to pay the deferred purchase price of property or services
(other than trade accounts payable arising in the ordinary course of business),
(iv) all obligations as lessee under capital leases, (v) all obligations of
reimbursement relating to letters of credit, bankers' acceptances or other
similar instruments (whether or not then drawn and owing), (vi) all Guaranty
Obligations, (vii) the attributed principal amount of any securitization
transaction and (viii) all obligations under any synthetic lease, tax retention
operating lease, off-balance sheet loan or other similar off-balance sheet
financing product where the product is considered borrowed money indebtedness
for tax purposes, but is classified as an operating lease for purposes of GAAP.
"GAAP" means generally accepted accounting principles in the United
States applied on a consistent basis.
2
<PAGE> 3
"Governmental Authority" means any federal, state, local or foreign
court or governmental agency, authority, instrumentality or regulatory body.
"Guaranteed Obligations" means:
(a) All unpaid principal of and interest on (including,
without limitation, interest accruing at the then applicable rate
provided in this Agreement after the maturity of the Loans and other
obligations owing under this Agreement and interest accruing at the
then applicable rate provided in this Agreement after the filing of
any petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, relating to the Borrower, whether
or not a claim for post-filing or post-petition interest is allowed in
such proceeding) the Loans and all other obligations and liabilities
of the Borrower to the Bank, whether direct or indirect, absolute or
contingent, due or to become due, or now existing or hereafter
incurred, which may arise under, out of, or in connection with, this
Agreement, the Note or any other document relating hereto, in each
case whether on account of principal, interest, reimbursement
obligations, fees, indemnities, costs, expenses or otherwise
(including, without limitation, all fees and disbursements of counsel
to the Bank that are required to be paid by the Borrower pursuant to
the terms of this Agreement); and
(b) all other indebtedness, liabilities and obligations of any
kind or nature, now existing or hereafter arising, owing by the
Borrower to the Bank, arising under any interest rate protection
agreement, currency agreement or other agreement or arrangement,
whether primary, secondary, direct, contingent, or joint and several.
"Guaranty Obligation" means any obligation, contingent or otherwise,
directly or indirectly guaranteeing the indebtedness or other obligation of
another Person, including without limitation, (i) an agreement to purchase or
pay (or to supply or advance funds for the purchase or payment of) any such
indebtedness or other obligation (whether by way of partnership agreement,
keep-well agreement, comfort letter, maintenance agreement or the like), or (ii)
any arrangement entered into for the purpose of assuring payment of the
indebtedness or other obligation of another Person or otherwise protecting a
party from loss in respect thereof; provided that such term shall not include
endorsements for collection or deposit in the ordinary course of business.
"Interest Payment Date" means (a) as to any Prime Loan, the last
Business Day of each March, June, September and December to occur while such
Loan is outstanding, (b) as to any LIBOR Rate Loan having an Interest Period of
three months or less, the last day of such Interest Period and (c) as to any
LIBOR Rate Loan having an Interest Period longer than three months, each day
which is three months after the first day of such Interest Period and the last
day of such Interest Period.
"Interest Period" means with respect to any LIBOR Rate Loan,
(i) initially, the period commencing on the date of borrowing
or conversion date, as the case may be, with respect to such LIBOR Rate
Loan and ending one, two or three months thereafter, as selected by the
Borrower in the notice of borrowing or notice of conversion given with
respect thereto; and
(ii) thereafter, each period commencing on the last day of the
immediately preceding Interest Period applicable to such LIBOR Rate
Loan and ending one, two or three months thereafter, as selected by the
Borrower by irrevocable notice to the Bank not less than three Business
Days prior to the last day of the then current Interest Period with
respect thereto;
provided that the foregoing provisions are subject to the
following:
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(A) if any Interest Period pertaining to a LIBOR Rate
Loan would otherwise end on a day that is not a Business Day, such
Interest Period shall be extended to the next succeeding Business Day
unless the result of such extension would be to carry such Interest
Period into another calendar month in which event such Interest Period
shall end on the immediately preceding Business Day;
(B) any Interest Period pertaining to a LIBOR Rate
Loan that begins on the last Business Day of a calendar month (or on a
day for which there is no numerically corresponding day in the calendar
month at the end of such Interest Period) shall end on the last
Business Day of the relevant calendar month;
(C) if the Borrower shall fail to give notice as
provided above, the Borrower shall be deemed to have selected a Prime
Loan to replace the affected LIBOR Rate Loan as provided herein;
(D) any Interest Period that would otherwise extend
beyond the Termination Date shall end on the Termination Date; and
(E) no more than 6 LIBOR Rate Loans may be in effect
at any time. For purposes hereof, LIBOR Rate Loans with different
Interest Periods shall be considered as separate LIBOR Rate Loans, even
if they shall begin on the same date and have the same duration,
although borrowings, extensions and conversions may, in accordance with
the provisions hereof, be combined at the end of existing Interest
Periods to constitute a new LIBOR Rate Loan with a single Interest
Period.
"LIBOR" means the arithmetic mean (rounded to the nearest 1/100th of
1%) of the offered rates for deposits in U.S. dollars for a period equal to the
Interest Period selected which appears on the Telerate Page 3750 at
approximately 11:00 A.M. London time, two (2) Business Days prior to the
commencement of the applicable Interest Period. If, for any reason, such rate is
not available, then "LIBOR" shall mean the rate per annum at which, as
determined by the Bank, U.S. dollars in the amount of $5,000,000 are being
offered to leading banks at approximately 11:00 A.M. London time, two (2)
Business Days prior to the commencement of the applicable Interest Period for
settlement in immediately available funds by leading banks in the London
interbank market for a period equal to the Interest Period selected.
"LIBOR Rate" means a rate per annum (rounded upwards, if necessary, to
the next higher 1/100th of 1%) determined by the Bank pursuant to the following
formula:
LIBOR Rate = LIBOR
------------------------------------
1.00 - Eurodollar Reserve Percentage
"LIBOR Rate Loan" means Loans hereunder bearing interest at a rate
determined by reference to the LIBOR Rate.
"Lien" means any mortgage, pledge, hypothecation, assignment, security
interest, encumbrance, lien, preference or priority of any kind.
"Loan" shall have the meaning given to such term in Section 2.1 hereof.
"Person" means any individual, partnership, joint venture, firm,
corporation, limited liability company, association, trust or other enterprise
(whether or not incorporated) or any Governmental Authority.
"Prime Loan" means Loans hereunder bearing interest at a rate
determined by reference to the Prime Rate.
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"Prime Rate" means the rate of interest per annum publicly announced
from time to time by the Bank as its prime rate in effect at its principal
office in Charlotte, North Carolina, with each change in the Prime Rate being
effective on the date such change is publicly announced as effective (it being
understood and agreed that the Prime Rate is a reference rate used by the Bank
in determining interest rates on certain loans and is not intended to be the
lowest rate of interest charged on any extension of credit by the Bank to any
debtor).
"Pro Forma Basis" means, with respect to any transaction, that such
transaction shall be deemed to have occurred as of the first day of the four
fiscal quarter period ending as of the most recent fiscal quarter end preceding
the date of such transaction with respect to which the Bank has received annual
or quarterly financial statements and accompanying officer's certificate.
"Requirement of Law" means, as to any Person, the certificate of
incorporation and by-laws or other organizational or governing documents of such
Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
or any of its material property is subject.
"Termination Date" means the date 364 days following the date of this
Note, or such later date not more than 364 days following the then applicable
Termination Date as to which the Bank may agree in its sole discretion.
SECTION 2. LOAN.
2.1 Loan. During the Commitment Period, subject to the terms and
conditions hereof, the Bank agrees to make revolving loans to the Borrower upon
request up to an aggregate principal amount of FIFTY MILLION DOLLARS
($50,000,000) at any time outstanding. The loans hereunder may consist of Prime
Loans or LIBOR Rate Loans, or a combination thereof. The obligation of the Bank
to make loans hereunder and to extend, or convert loans into, LIBOR Rate Loans
is subject to the condition that the Representations and Warranties set forth
herein are true and correct in all material respects.
2.2 Notices. Requests by the Borrower for loans hereunder, and for
extensions or conversions of loans hereunder, shall be made by written notice
(or telephone notice promptly confirmed in writing) by 12:00 Noon Charlotte,
North Carolina time on the Business Day of the requested borrowing, extension or
conversion. Each request shall be in a minimum principal amount of $1,000,000 in
the case of LIBOR Rate Loans and $100,000 in the case of Prime Loans and, in
each case, integral multiples of $100,000 in excess thereof, and shall specify
the date of the requested borrowing, extension or conversion, the aggregate
amount to be borrowed, extended or converted and if an extension of conversion,
the loan which is being extended or converted, and whether the borrowing,
extension or conversion shall consist of LIBOR Rate Loans, Prime Loans or
combination thereof. If the Borrower shall fail to specify (A) the type of Loan
requested for a borrowing, the request shall be deemed a request for a LIBOR
Rate Loan with an Interest Period of one month, (B) the duration of the
applicable Interest Period in the case of LIBOR Rate Loans, the request shall be
deemed to be a request for an Interest Period of one month. Each request for a
borrowing, extension or conversion hereunder shall be deemed a reaffirmation
that the Representations and Warranties set forth herein are true and correct in
all material respects as of such date. Unless extended in accordance with the
provisions hereof, LIBOR Rate Loans shall be converted to Prime Loans at the end
of the applicable Interest Period.
2.3 Interest Rate. Loans outstanding hereunder shall bear interest at a
per annum rate equal to (i) the LIBOR Rate plus three-quarters of one percent
(.75%) or (ii) the Prime Rate, as the Borrower may elect; provided that after
the occurrence and during the continuance of an Event of Default, the principal
and, to the extent permitted by law, interest on the Loan and any other amounts
owing hereunder shall bear interest, payable on demand, at a rate equal to the
Prime Rate plus three percent (3%). Interest will be payable in arrears on each
Interest Payment Date.
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2.4 Repayment. Unless sooner paid, the Loan shall be due and payable in
full on the Termination Date.
2.5 Note. The Loan shall be evidenced by a promissory note of the
Borrower dated as of the Closing Date, in the form of Annex A hereto (as
amended, modified, extended, renewed or replaced, the "Note").
2.6 Facility Fee. In consideration of the commitments hereunder, the
Borrower agrees to pay to the Bank a facility fee (the "Facility Fee") equal to
ten basis points (.10%) per annum on the average daily unused portion of the
commitment for the applicable period. The Facility Fee shall be payable
quarterly in arrears on the 15th day following the last day of each calendar
quarter for the immediately preceding quarter (or portion thereof) beginning
with the first such date to occur after the date hereof.
2.7 Prepayments. The Loans may be prepaid in whole or in part without
premium or penalty. LIBOR Rate Loans may not be prepaid in whole or in part
prior to the end of the applicable Interest Period. Amounts prepaid may, subject
to the terms and conditions hereof, be reborrowed.
2.8 Capital Adequacy. If the Bank shall have reasonably determined that
the adoption of or any change in any Requirement of Law regarding capital
adequacy or in the interpretation or application thereof as a consequence of its
obligations hereunder or compliance by the Bank or any corporation controlling
the Bank with any request or directive regarding capital adequacy (whether or
not having the force of law) from any central bank or Governmental Authority
made subsequent to the date hereof as a consequence of its obligations hereunder
does or shall have the effect of reducing the rate of return on the Bank's or
such corporation's capital as a consequence of its obligations hereunder to a
level below that which the Bank or such corporation could have achieved but for
such adoption, change or compliance (taking into consideration the Bank's or
such corporation's policies with respect to capital adequacy) by an amount
reasonably deemed by the Bank to be material, then from time to time, within 15
days after demand by the Bank, the Borrower shall pay to the Bank such
additional amount as shall be certified by the Bank as being required to
compensate it for such reduction. Such a certificate as to any additional
amounts payable under this subsection submitted by the Bank (which certificate
shall include a description in reasonable detail of the basis for the
computation) to the Borrower shall be conclusive absent manifest error.
2.9 Inability to Determine Interest Rate. Notwithstanding any other
provision of this Agreement, if (i) the Bank shall reasonably determine (which
determination shall be conclusive and binding absent manifest error) that, by
reason of circumstances affecting the relevant market, reasonable and adequate
means do not exist for ascertaining LIBOR for such Interest Period, or (ii) the
Bank shall reasonably determine (which determination shall be conclusive and
binding absent manifest error) that the LIBOR Rate does not adequately and
fairly reflect the cost of funding LIBOR Rate Loans, the Bank shall forthwith
give telephone notice of such determination, confirmed in writing, to the
Borrower, and thereafter the right to request and continue Loans as LIBOR Rate
Loans shall be suspended until such time as the conditions giving rise to such
notice shall no longer exist. In the event LIBOR Rate Loans are not available on
account of operation of this Section, the Bank will endeavor to provide an
alternative index or reference rate.
2.10 Illegality. Notwithstanding any other provision of this Agreement,
if the adoption of or any change in any Requirement of Law or in the
interpretation or application thereof, in each case occurring after the Closing
Date, by the relevant Governmental Authority shall make it unlawful for the Bank
to make or maintain LIBOR Rate Loans as contemplated by this Agreement or to
obtain in the interbank eurodollar market through its LIBOR Lending Office the
funds with which to make such Loans, (a) the Bank shall promptly notify the
Borrower thereof, (b) the commitment of the Bank hereunder to make LIBOR Rate
Loans or continue LIBOR Rate Loans as such shall forthwith be suspended until
the Bank shall give notice that the condition or situation which gave
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rise to the suspension shall no longer exist, and (c) Loans then outstanding as
LIBOR Rate Loans, if any, shall be converted on the last day of the Interest
Period for such Loans or within such earlier period as required by law to Prime
Loans. The Borrower hereby agrees promptly to pay the Bank, upon its demand,
any additional amounts necessary to compensate the Bank for actual and direct
costs (but not including anticipated profits) reasonably incurred in making any
repayment in accordance with this subsection including, but not limited to, any
interest or fees payable by the Bank to lenders of funds obtained by it in
order to make or maintain its LIBOR Rate Loans hereunder. A certificate as to
any additional amounts payable pursuant to this subsection submitted by the
Bank, to the Borrower shall be conclusive in the absence of manifest error.
2.11 Requirements of Law. If the adoption of or any change in any
Requirement of Law or in the interpretation or application thereof or
compliance by the Bank with any request or directive (whether or not having the
force of law) from any central bank or other Governmental Authority, in each
case made subsequent to the date hereof:
(i) shall subject the Bank to any tax of any kind whatsoever
with respect to any LIBOR Rate Loan made by it, or change the basis of
taxation of payments to the Bank in respect thereof (except for changes
in the rate of tax on the net income or franchise tax applicable to the
Bank);
(ii) shall impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar requirement against assets
held by, deposits or other liabilities in or for the account of,
advances, loans or other extensions of credit by, or any other
acquisition of funds by, any office of the Bank which is not otherwise
included in the determination of the LIBOR Rate hereunder; or
(iii) shall impose on the Bank any other condition (excluding
any tax of any kind whatsoever);
and the result of any of the foregoing is to increase the cost to the Bank of
making or maintaining LIBOR Loans or to reduce any amount receivable hereunder
or under the Note, then, in any such case, the Borrower shall promptly pay the
Bank, within 15 days after its demand, any additional amounts necessary to
compensate the Bank for such additional cost or reduced amount receivable as
determined by the Bank with respect to its LIBOR Rate Loans. A certificate as to
any additional amounts payable pursuant to this subsection submitted by the
Bank, describing in reasonable detail the nature of such event and a reasonably
detailed explanation of the calculation thereof, to the Borrower shall be
conclusive in the absence of manifest error.
2.12 Indemnity. The Borrower hereby agree to indemnify the Bank and to
hold the Bank harmless from any funding loss or expense which the Bank may
sustain or incur (other than as a result of and to the extent the Bank's gross
negligence or willful misconduct) as a consequence of (a) default by the
Borrower in payment of the principal amount of or interest on any LIBOR Rate
Loan by the Bank in accordance with the terms hereof, (b) default by the
Borrower in accepting a LIBOR Rate Loan after the Borrower have given a notice
in accordance with the terms hereof, (c) default by the Borrower in making any
prepayment of a LIBOR Rate Loan after the Borrower have given a notice in
accordance with the terms hereof, and/or (d) the making by the Borrower of a
prepayment of a LIBOR Rate Loan, or the conversion thereof, on a day which is
not the last day of the Interest Period with respect thereto, in each case equal
to (i) the amount of interest which would have accrued on the amount so prepaid,
or not so paid, borrowed, converted or continued, for the period from the date
of such prepayment or of such failure to borrow, convert or continue to the last
day of such Interest Period (or, in the case of a failure to pay, borrow,
convert or continue, the Interest Period that would have commenced on the date
of such failure), in each case at the applicable rate of interest for such Loans
provided for herein (exclusive of any margin), over (ii) the amount of interest
(as reasonably determined by the Bank) which would have accrued to the Bank on
such amount by placing such amount on deposit for a comparable period with
leading banks in the interbank eurodollar market. A certificate as to any
additional amounts payable
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pursuant to this subsection submitted by the Bank, to the Borrower shall be
conclusive in the absence of manifest error
2.13 Taxes. All payments made by the Borrower hereunder or under any
Note will be made free and clear of, and without deduction or withholding for,
any present or future taxes, levies, imposts, duties, fees, assessments or other
charges of whatever nature now or hereafter imposed by any Governmental
Authority or by any political subdivision or taxing authority thereof or therein
with respect to such payments (but excluding (i) any tax imposed on or measured
by the net income or profits of a Lender pursuant to the laws of the
jurisdiction in which it is organized or the jurisdiction in which the principal
office or applicable lending office of the Bank is located or any subdivision
thereof or therein and (ii) any franchise taxes, branch taxes, taxes on doing
business or taxes on the overall capital or net worth of the Bank pursuant to
the laws of the jurisdiction in which it is organized or the jurisdiction in
which the principal office or its applicable lending office is located or any
subdivision thereof or therein) and all interest, penalties or similar
liabilities with respect thereto (all such non-excluded taxes, levies, imposts,
duties, fees, assessments or other charges being referred to collectively as
"Taxes"). If any Taxes are so levied or imposed, the Borrower agrees to pay the
full amount of such Taxes, and such additional amounts as may be necessary so
that every payment of all amounts due under this Agreement or under any Note,
after withholding or deduction for or on account of any such Taxes, will not be
less than the amount provided for herein or in such Note. The Borrower will
furnish to the Bank as soon as practicable after the date the payment of any
Taxes is due pursuant to applicable law certified copies (to the extent
reasonably available and required by law) of tax receipts evidencing such
payment by the Borrower. The Borrower agrees to indemnify and hold harmless, and
reimburse, the Bank upon its written request, for the amount of any Taxes so
levied or imposed and paid by the Bank. The agreements in this subsection shall
survive termination of this Agreement and payment of the Notes and all other
amounts payable hereunder.
2.14 Payments and Computations. Payments shall be made hereunder in
U.S. dollars in immediately available funds, without offset, deduction,
counterclaim or withholding of any kind at the offices of the Bank provided in
the notice section hereof. Payments received after 2:00 P.M. (Charlotte, North
Carolina time) will be given credit the next following Business Day.
Computations of interest hereunder shall be made on the basis of actual number
of days elapsed over a year of 360 days.
SECTION 3. GUARANTY
3.1 Guaranty. Each of the Guarantors hereby jointly and severally
guarantees to the Bank as hereinafter provided the prompt payment of the
Guaranteed Obligations in full when due (whether at stated maturity, as a
mandatory prepayment, by acceleration or otherwise and after giving effect to
any grace periods) strictly in accordance with the terms hereof. Each of the
Guarantors hereby further agrees that if any of the Guaranteed Obligations are
not paid in full when due (whether at stated maturity, as a mandatory
prepayment, by acceleration or otherwise and after giving effect to any grace
periods), the Guarantor will promptly pay the same, without any demand or notice
whatsoever, and that in the case of any extension of time of payment or renewal
of any of the Guaranteed Obligations, the same will be promptly paid in full
when due (whether at extended maturity, as a mandatory prepayment, by
acceleration or otherwise and after giving effect to any grace periods) in
accordance with the terms of such extension or renewal. This is a guaranty of
payment and not of collection.
Notwithstanding any provision to the contrary contained herein or in
any other of the Credit Documents, to the extent the obligations of any
Guarantor as guarantor hereunder shall be adjudicated to be invalid or
unenforceable for any reason (including, without limitation, because of any
applicable state or federal law relating to fraudulent conveyances or transfers)
then the obligations of such Guarantor hereunder shall be limited to the maximum
amount that is permissible under applicable law (whether federal or state and
including, without limitation, the Bankruptcy Code).
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3.2 Obligations Unconditional. The obligations of the Guarantors under
Section 3.1 hereof are absolute and unconditional, irrespective of the value,
genuineness, validity, regularity or enforceability of this Agreement or the
Note, or any other agreement or instrument referred to herein or therein or
relating hereto or thereto, or any substitution, release or exchange of any
other guarantee of or security for any of the Guaranteed Obligations, and, to
the fullest extent permitted by applicable law, irrespective of any other
circumstance whatsoever which might otherwise constitute a legal or equitable
discharge or defense of a surety or guarantor, it being the intent of this
Section 3.2 that the obligations of the Guarantors hereunder shall be absolute
and unconditional under any and all circumstances. Each of the Guarantors agrees
that it shall have no right of subrogation, indemnity, reimbursement or
contribution against the Borrower or any other guarantor for amounts paid under
this Guaranty until such time as the Bank has been paid in full, all
commitments, if any, have been terminated and no Person or Governmental
Authority shall have any right to request any return or reimbursement of funds
from the Bank in connection with monies received under the Credit Documents.
Without limiting the generality of the foregoing, it is agreed that, to the
fullest extent permitted by law, the occurrence of any one or more of the
following shall not alter or impair the liability of the Guarantors hereunder
which shall remain absolute and unconditional as described above:
(i) at any time or from time to time, without notice to the
Guarantors, the time for any performance of or compliance with any of
the Guaranteed Obligations shall be extended, or such performance or
compliance shall be waived;
(ii) any of the acts mentioned in any of the provisions of
this Agreement or the Note or any other agreement or instrument
referred to herein or therein or relating hereto or thereto shall be
done or omitted;
(iii) the maturity of any of the Guaranteed Obligations shall
be accelerated, or any of the Guaranteed Obligations shall be modified,
supplemented or amended in any respect, or any right under any of the
Credit Documents or any other agreement or instrument referred to in
the Credit Documents shall be waived or any other guarantee of any of
the Guaranteed Obligations or any security therefor shall be released
or exchanged in whole or in part or otherwise dealt with;
(iv) any Lien granted to, or in favor of, the Bank as security
for any of the Guaranteed Obligations shall fail to attach or be
perfected or shall be released or discharged in whole or in part; or
(v) any of the Guaranteed Obligations shall be determined to
be void or voidable (including, without limitation, for the benefit of
any creditor of any Guarantor or any other guarantor) or shall be
subordinated to the claims of any Person (including, without
limitation, any creditor of any guarantor).
With respect to its obligations hereunder, each of the Guarantors hereby
expressly waives diligence, presentment, demand of payment, protest and all
notices whatsoever, and any requirement that the Bank exhaust any right, power
or remedy or proceed against any Person under this Agreement or the Note or any
other agreement or instrument referred to herein or therein or relating hereto
or thereto, or against any other Person under any other guarantee of, or
security for, any of the Guaranteed Obligations.
3.3 Reinstatement. The obligations of the Guarantors under this Section
3 shall be automatically reinstated if and to the extent that for any reason any
payment by or on behalf of any Person in respect of the Guaranteed Obligations
is rescinded or must be otherwise restored by any holder of any of the
Guaranteed Obligations, whether as a result of any proceedings in bankruptcy or
reorganization or otherwise, and each of the Guarantors agrees that it will
indemnify the Bank on demand for all reasonable costs and expenses (including,
without limitation, fees and expenses of counsel) incurred by the Bank in
connection with such rescission or restoration, including any such
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costs and expenses incurred in defending against any claim alleging that such
payment constituted a preference, fraudulent transfer or similar payment under
any bankruptcy, insolvency or similar law.
3.4 Certain Additional Waivers. Without limiting the generality of the
provisions of this Section 3, each of the Guarantors hereby specifically waives
the benefits of N.C. Gen. Stat. Sec. 26-7 through 26-9, inclusive. Each of the
Guarantors agrees that it shall have no right of recourse to security for the
Guaranteed Obligations, except through the exercise of the rights of subrogation
pursuant to Section 3.2.
3.5 Remedies. Each of the Guarantors agrees that, to the fullest extent
permitted by law, as between the Guarantors, on the one hand, and the Bank, on
the other hand, the Guaranteed Obligations may be declared to be forthwith due
and payable as provided in Section 7.2 hereof (and shall be deemed to have
become automatically due and payable in the circumstances provided in said
Section 7.2) for purposes of Section 3.1 hereof notwithstanding any stay,
injunction or other prohibition preventing such declaration (or preventing the
Guaranteed Obligations from becoming automatically due and payable) as against
any other Person and that, in the event of such declaration (or the Guaranteed
Obligations being deemed to have become automatically due and payable), the
Guaranteed Obligations (whether or not due and payable by any other Person)
shall forthwith become due and payable by the Guarantors for purposes of said
Section 3.1.
3.6 Continuing Guarantee. The guarantee in this Section 3 is a
continuing guarantee, and shall apply to all Guaranteed Obligations whenever
arising.
3.7 Rights of Contribution. The Guarantors hereby agree, as among
themselves, that if any Guarantor shall become an Excess Funding Guarantor (as
defined below), each other Guarantor shall, on demand of such Excess Funding
Guarantor (but subject to the succeeding provisions of this Section), pay to
such Excess Funding Guarantor an amount equal to such Guarantor's Pro Rata Share
(as defined below and determined, for this purpose, without reference to the
properties, assets, liabilities and debts of such Excess Funding Guarantor) of
such Excess Payment (as defined below). The payment obligation of any Guarantor
to any Excess Funding Guarantor under this Section shall be subordinate and
subject in right of payment to the prior payment in full of the obligations of
such Guarantor under the other provisions of this Section 3, and such Excess
Funding Guarantor shall not exercise any right or remedy with respect to such
excess until payment and satisfaction in full of all of such obligations. For
purposes hereof, (i) "Excess Funding Guarantor" shall mean, in respect of any
obligations arising under the other provisions of this Section 3 (hereafter, the
"Guarantied Obligations"), a Guarantor that has paid an amount in excess of its
Pro Rata Share of the Guarantied Obligations; (ii) "Excess Payment" shall mean,
in respect of any Guarantied Obligations, the amount paid by an Excess Funding
Guarantor in excess of its Pro Rata Share of such Guarantied Obligations; and
(iii) "Pro Rata Share", for the purposes of this Section, shall mean, for any
Guarantor, the ratio (expressed as a percentage) of (a) the amount by which the
aggregate present fair saleable value of all of its assets and properties
exceeds the amount of all debts and liabilities of such Guarantor (including
contingent, subordinated, unmatured, and unliquidated liabilities, but excluding
the obligations of such Guarantor hereunder) to (b) the amount by which the
aggregate present fair saleable value of all assets and other properties of the
Borrower and all of the Guarantors exceeds the amount of all of the debts and
liabilities (including contingent, subordinated, unmatured, and unliquidated
liabilities, but excluding the obligations of the Borrower and the Guarantors
hereunder) of the Borrower and all of the Guarantors, all as of the Closing Date
(if any Guarantor becomes a party hereto subsequent to the Closing Date, then
for the purposes of this Section such subsequent Guarantor shall be deemed to
have been a Guarantor as of the Closing Date and the information pertaining to,
and only pertaining to, such Guarantor as of the date such Guarantor became a
Guarantor shall be deemed true as of the Closing Date).
3.8 Joinder of Additional Guarantors. The Borrower may join additional
subsidiaries as Guarantors hereunder by way of execution of a Joinder Agreement,
a form of which is attached as Annex C.
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SECTION 4 CONDITIONS TO CLOSING
4.1 Conditions. The effectiveness of this Agreement and extension of
the Loan hereunder are conditioned upon satisfaction of the following:
(a) Receipt of multiple executed counterparts of this
Agreement and the Note, in form and substance satisfactory to the Bank.
(b) Receipt of opinions of the general counsel for the
Borrower and the Guarantors in the form attached as Annex D hereto.
(c) Receipt of corporate documentation for the Credit Parties,
including resolutions, bylaws, articles of incorporation, certificates of good
standing and certificates of incumbency.
SECTION 5 REPRESENTATIONS AND WARRANTIES
5.1 Financial Condition. The consolidated balance sheet of the Borrower
and its consolidated subsidiaries dated as of December 31, 1996 together with
related consolidated statements of income and cash flows, are complete and
correct in all material respects and present fairly the financial condition and
results from operations of the entities and for the periods specified, subject
in the case of interim company-prepared statements to normal year-end
adjustments.
5.2 No Change. Since the date of the financial statements identified
above, there have been no developments or events which have had, or are likely
to have, a material adverse effect on the Borrower or on the condition
(financial or otherwise), operations, business or prospects of the Borrower and
its subsidiaries taken as a whole.
5.3 Corporate Organization. Each of the Credit Parties is a corporation
duly organized, validly existing and in good standing under the laws of the
State of its incorporation, is qualified to do business in each jurisdiction
where failure to so qualify would have a material adverse effect on the Borrower
and its subsidiaries taken as a whole and is in compliance with all Requirements
of Law except to the extent that failure to be in compliance would not have a
material adverse effect on the Borrower and its subsidiaries taken as a whole.
5.4 Enforceable Obligation. Each of the Credit Parties has the power
and authority and legal right to enter into, deliver and perform under this
Agreement and has taken all necessary action to authorize the execution,
delivery and performance by them of this Agreement. This Agreement constitutes a
legal, valid and binding obligation of each of the Credit Parties enforceable
against them in accordance with its terms except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights generally or by
general equitable principles (whether enforcement is sought by proceedings in
equity or at law).
5.5 Legal Proceedings. No claim, litigation or proceeding before any
arbitrator or Governmental Authority is pending, or to the knowledge of the
Credit Parties, threatened which if adversely determined would reasonably be
expected to have a material adverse effect on the Borrower and its subsidiaries
taken as a whole.
5.6 No Default. No Event of Default or event or condition which with
notice or lapse of time, or both, would constitute an Event of Default,
presently exists.
5.7 Federal Regulations. No part of the proceeds of the Loan hereunder
will be used, directly or indirectly, for any purpose in violation of Regulation
U of the Board of Governors of the Federal Reserve System, as amended, modified
or replaced.
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<PAGE> 12
SECTION 6 COVENANTS
The Borrower and the Guarantors covenant and agree to:
6.1 Financial Statements. Furnish, or cause to be furnished, to the
Bank:
(a) Annual Audited Statements. As soon as available, but in
any event within 90 days after the end of each fiscal year, audited
consolidated and company-prepared consolidating balance sheets of the
Borrower and its subsidiaries and related statements audited
consolidated and company-prepared consolidating statements of income,
retained earnings and cash flows, audited by Coopers & Lybrand, or
other independent public accounting firm reasonably acceptable to the
Bank, setting forth comparative information for the previous year, and
reported without a "going concern" or like qualification or exception,
or qualification indicating limitation of the scope of the audit; and
(b) Quarterly Statements. As soon as available, and in any
event within 45 days after the end of each fiscal quarter, a
company-prepared consolidated and consolidating balance sheet of the
Borrower and its subsidiaries and related company-prepared consolidated
and consolidating statements of income, retained earnings and cash
flows for the quarter and for the portion of the year with comparative
information for the corresponding periods for the previous year.
All such financial statements to be complete and correct in all material
respects (subject, in the case of interim statements, to normal recurring
year-end audit adjustments) and to be prepared in reasonable detail and in
accordance with GAAP throughout the periods reflected therein (except as
approved by such accountants and disclosed therein) and further accompanied by a
description of, and an estimation of the effect on the financial statements on
account of, a change in the application of accounting principles from a prior
period.
(c) Other Information. Promptly upon request, such additional
financial and other information as the Bank may reasonably request from
time to time.
6.2 Certificates and Notices. Furnish, or cause to be furnished, and
give notice to the Bank:
(a) Officer's Certificate. Concurrently with the annual and
quarterly financial statements referenced above, a certificate of a
responsible officer of the Borrower stating that to the best of his
knowledge and belief, (i) the financial statements fairly present in
all material respects the financial condition of the parties to which
such statements relate and (ii) the Borrower and the Guarantors are in
compliance with the provisions of this Agreement in all material
respects and no Event of Default, or event or condition which with
notice or lapse of time, or both, would constitute an Event of Default
exists hereunder (together with a financial covenant calculation
worksheet demonstrating compliance therewith in reasonable detail).
(b) Public and Other Information. Copies of reports and
information which the Borrower or its subsidiaries sends to its
stockholders or files with the Securities and Exchange Commission, and
any other financial or other information as the Bank may reasonably
request.
(c) Notice of Default. Promptly, upon becoming aware thereof,
notice of the occurrence of an Event of Default hereunder.
6.3 Compliance with Laws. Comply will all Requirements of Law
applicable to them except to the extent that failure to comply therewith would
not have a material adverse effect on the Borrower and its subsidiaries taken as
a whole.
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<PAGE> 13
6.4 Books and Records. The Credit Parties will keep proper books and
records in conformity with GAAP and all Requirements of Law and permit the Bank
upon reasonable notice to visit and inspect such books and records.
6.5 Financial Covenants.
(a) Consolidated Tangible Net Worth. Consolidated Tangible Net
Worth shall not at any time be less than the sum of $75 million plus at
the end of each fiscal quarter occurring after March 31, 1997, 50% of
Consolidated Net Income (but not less than zero) for the fiscal quarter
then ended, such increases to be cumulative.
(b) Consolidated Fixed Charge Coverage Ratio. As of the last
day of each fiscal quarter, the Consolidated Fixed Charge Coverage
Ratio shall be not less than 2.0:1.0.
(c) Consolidated Debt to Total Capitalization Ratio. The
Consolidated Debt to Total Capitalization Ratio shall not at any time
be greater than .45:1.0.
6.6 Incurrence of Funded Debt. The Borrower will not, nor will it
permit any of its subsidiaries to, create, assume, incur or suffer to exist any
Funded Debt except:
(a) capital lease obligations and Funded Debt incurred to
provide all or a portion of the purchase price or cost of construction
of an asset, provided that (i) such Debt when incurred will not exceed
the purchase price or cost of construction of the asset , and (ii) no
such Debt shall be refinanced for a principal amount in excess of the
principal balance outstanding thereon at the time of such refinancing;
and
(b) other Funded Debt of the Borrower not to exceed
$50,000,000.
6.7 Restriction on Liens. The Borrower will not, nor will it permit any
of its subsidiaries to, create, assume, incur or suffer to exist any Lien on any
property or asset of any kind, real or personal, tangible or intangible, now
owned or hereafter acquired by it or assign or subordinate any present or future
right to receive assets except:
(a) Liens securing capital lease obligations and other
purchase money Funded Debt permitted under Section 6.6(a);
(b) Liens securing taxes, assessments or governmental charges
or levies or the claims or demands of materialmen, mechanics, carriers,
warehousemen, landlords and other like persons; provided that (A) with
respect to Liens securing state and local taxes, such taxes are not yet
payable, (b) with respect to Liens securing claims or demands of
materialmen, mechanics, carriers, warehousemen, landlords and the like,
such liens are unfiled and no other action has been taken to enforce
the same, or (C) with respect to taxes, assessments or governmental
charges or levies or claims or demand secured by such Liens, payment is
not at the time required;
(c) Liens not securing indebtedness which are incurred in the
ordinary course of business in connection with workmen's compensation,
unemployment insurance, unemployment insurance, social security and
other like laws;
(d) any Lien arising pursuant to any order of attachment,
distraint or similar legal process arising in connection with court
proceedings so long as the execution or other enforcement thereof is
effectively stayed and the claims secured thereto are being contested
in good faith by appropriate proceedings; and
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<PAGE> 14
(e) zoning restrictions, easements, licenses, reservations,
covenants, conditions, waivers, restrictions on the use of property or
other minor encumbrances or irregularities of title which do not
materially impair the use of any property in the operation or business
of the Borrower or such subsidiary or the value of such property for
the purpose of such business.
6.8 Mergers and Acquisitions. The Borrower will not, nor will it permit
any of its subsidiaries to, enter into a transaction of merger or consolidation,
nor will it acquire all or substantially all of the capital stock (or other
equity interest) or assets of any other Person, except:
(a) in the case of transactions of mergers and consolidation,
(i) if a Credit Party is a party to the transaction, it shall be the
surviving corporation, (ii) if the Borrower is a party to the
transaction, it shall be the surviving corporation, and (iii) if the
transaction is with a Person other than the Borrower or any of its
subsidiaries, the Borrower shall demonstrate compliance with the
financial covenants on a Pro Forma Basis; and
(b) in all other cases, the Borrower shall demonstrate
compliance with the financial covenants on a Pro Forma Basis.
6.9 Investments. The Borrower will not, nor will it permit any of its
subsidiaries to, make loans or advances or otherwise make an investment in or
capital contribution to, (collectively, an "Investment") any other Person,
except:
(a) cash and cash equivalents and other publicly traded equity
and debt instruments reasonably acceptable to the Bank;
(b) loans and advances to officers, directors, employees and
shareholders not to exceed $2,000,000;
(c) Investments in and to a Credit Party; and
(d) other Investments in an aggregate principal amount (on a
cost basis) at any time of up to $5,000,000.
SECTION 7 EVENTS OF DEFAULT
7.1 Event of Default. Each of the following shall constitute an "Event
of Default" hereunder: (i) the failure to make any payment of principal,
interest, fees or other amounts owing hereunder when due, (ii) any
representation or warranty made herein or in connection herewith shall prove to
be false or incorrect in any material respect, (iii) failure to observe or
comply with any covenants or provisions contained herein, (iv), the occurrence
and continuance of an event of default under any other note or agreement
relating to indebtedness for borrowed money owing by the Borrower or any
Guarantor which results in, or would permit, acceleration of such indebtedness,
or would otherwise cause such indebtedness to become due prior to its stated
maturity, (v) the filing of an action in bankruptcy or insolvency by the
Borrower or any Guarantor, (vi) the filing of an action in bankruptcy or
insolvency against the Borrower or any Guarantor and (vii) the Borrower or any
Guarantor shall fail within 30 days of the due date to pay bond or otherwise
discharge any judgment, settlement or order.
7.2 Remedies. Upon the occurrence of an Event of Default, and at any
time thereafter, the Bank may by notice to the Borrower (i) declare the unpaid
principal of, and any accrued interest owing on, the Loan and all other
indebtedness or obligations owing hereunder or under any of the other Credit
Documents or in connection herewith or therewith, immediately due and payable,
whereupon the same shall be immediately due and payable without presentment,
demand, protest or other notice of any kind, all of which are hereby waived by
the Borrower, and (ii) enforce any other rights and interests available under
the Credit Documents or at law, including rights of set off.
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<PAGE> 15
Notwithstanding the foregoing, in the case of an Event of Default described in
clauses (v) or (vi) of Section 7.1 relating to bankruptcy and insolvency, the
Loan and all accrued interest and all other indebtedness and other amounts owing
hereunder or under any of the other Credit Documents owing to the Bank shall
become immediately due and payable without presentment, demand, protest or the
giving of any notice or other action by the Bank, all of which are hereby waived
by the Borrower.
SECTION 8 MISCELLANEOUS
8.1 Notices. Notices and other communications shall be effective, and
duly given, (i) when received, (ii) when transmitted by telecopy or other
facsimile device to the numbers set out below if transmitted before 5:00 p.m. on
a Business Day, or otherwise on the next following Business Day, (iii) the day
following the day on which delivered prepaid to a reputable national overnight
air courier service, or (iv) the third Business Day following the day sent by
certified or registered mail postage prepaid, in each case to the parties at the
address shown below, or at such other address as may be specified by written
notice to the other parties:
Borrower: Pharmaceutical Product Development, Inc.
3151 17th Street Extension
Wilmington, North Carolina 28412
Attn: Rudy Howard
Phone: (910) 772-6860
Fax: (910) 772-7056
Bank: FIRST UNION NATIONAL BANK OF NORTH CAROLINA
Corporate Banking, 6th Floor
150 Fayetteville Street Mall
Raleigh, North Carolina 27601
Attn: Mendel Lay
Phone: (919) 829-6064
Fax: (919) 829-6067
8.2 Right of Set-Off. In addition to other rights now or hereafter
available to the Bank under the Credit Documents or under applicable law, the
Bank may, after the occurrence of an Event of Default, exercise rights of
set-off and may appropriate and apply any and all deposits (general and
specific) or other amounts held or owing by the Bank to the Loan and other
amounts owing by the Borrower or any Guarantor hereunder or under the other
Credit Documents, regardless of whether the Loan or such other amounts are
contingent or unmatured, without presentment, demand, protest or notice of any
kind (any such rights of presentment, demand, protest or notice being hereby
waived).
8.3 Benefit of Agreement. This Agreement shall be binding upon, and
shall inure to the benefit of, successors and assigns of the parties hereto;
provided that neither the Borrower nor any Guarantor may assign or transfer any
its obligations or interests without prior written consent of the Bank.
8.4 No Waiver. No failure or delay on the part of the Bank in
exercising any right, power or privilege hereunder or under any other Credit
Document and no course of dealing between the Bank, on the one hand, and the
Credit Parties, on the other hand, shall operate as a waiver thereof; nor shall
any single or partial exercise of any right, power or privilege hereunder or
under any other Credit Document preclude any other or further exercise thereof
or the exercise of any other right, power or privilege hereunder or thereunder.
The rights and remedies provided herein are cumulative and not exclusive of any
rights or remedies which the Bank would otherwise have.
8.5 Payment of Expenses. The Borrower agrees to: (i) pay all reasonable
out-of-pocket costs and expenses of the Bank in connection with (A) negotiation,
preparation, execution and
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<PAGE> 16
delivery of the Credit Documents (including reasonable fees and expenses of Bank
counsel, Moore & Van Allen, PLLC) and any amendments, waivers or consents
relating to the Credit Documents and (B) enforcement of the Credit Documents and
the documents and instruments referred to therein (including, without
limitation, in connection with any such enforcement, the reasonable fees and
disbursements of counsel for the Bank); (ii) pay and hold the Bank harmless from
and against any and all present and future stamp and other similar taxes with
respect to the foregoing matters and save the Bank harmless from and against any
and all liabilities with respect to or resulting from any delay or omission
(other than to the extent attributable to the Bank) to pay such taxes; and (iv)
indemnify the Bank, its officers, directors, employees and representatives from
and hold each of them harmless against any and all losses, liabilities, claims,
damages or expenses incurred by any of them as a result of, or arising out of,
or in any way related to, or by reason of any investigation, litigation or other
proceeding (whether or not the Bank is a party thereto) related to the entering
into and/or performance of any Credit Document or the use of proceeds of the
Loan (including other extensions of credit) hereunder or the consummation of any
other transactions contemplated in any Credit Document, including, without
limitation, the reasonable fees and disbursements of counsel incurred in
connection with any such investigation, litigation or other proceeding (but
excluding any such losses, liabilities, claims, damages or expenses to the
extent incurred by reason of gross negligence or willful misconduct on the part
of the Person to be indemnified).
8.6 Amendments. Neither this Agreement nor any of the other Credit
Documents may be amended or modified, nor shall consents or waivers be effective
except with the written consent of the parties hereto.
8.7 Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be an original,
but all of which shall constitute one and the same agreement. It shall not be
necessary in making proof of this Agreement to produce or account for more than
one such counterpart.
8.8 Headings. The headings of the sections and subsections hereof are
provided for convenience only and shall not in any way affect the meaning or
construction of any provision of this Agreement.
8.9 Survival. The indemnities and payment obligations hereunder,
including those set out in Sections 2.8, 2.9, 2.10, 2.11, 2.12, 2.13 and 8.5,
and the representations and warranties made herein or in connection herewith
shall survive the making and repayment of the Loan and termination of
commitments hereunder.
8.10 Governing Law. This Agreement and the rights and obligations of
the parties hereunder shall be governed by and construed in accordance with the
laws of the State of North Carolina.
8.11. Arbitration; Consent to Jurisdiction and Service of Process.
(a) UPON DEMAND OF ANY PARTY HERETO, WHETHER MADE BEFORE OR AFTER
INSTITUTION OF ANY JUDICIAL ACTION, ANY DISPUTE, CLAIM OR CONTROVERSY ARISING
OUT OF OR CONNECTED HEREWITH OR WITH THE CREDIT DOCUMENTS ("DISPUTES") SHALL BE
RESOLVED BY BINDING ARBITRATION AS PROVIDED HEREIN. DISPUTES MAY INCLUDE,
WITHOUT LIMITATION, TORT CLAIMS, COUNTERCLAIMS, CLAIMS BROUGHT AS CLASS ACTIONS
AND CLAIMS ARISING HEREFROM OR FROM CREDIT DOCUMENTS EXECUTED IN THE FUTURE.
ARBITRATION SHALL BE CONDUCTED UNDER THE COMMERCIAL FINANCIAL DISPUTES
ARBITRATION RULES (THE "ARBITRATION RULES") OF THE AMERICAN ARBITRATION
ASSOCIATION AND TITLE 9 OF THE U.S. CODE. ALL ARBITRATION HEARINGS SHALL BE
CONDUCTED IN CHARLOTTE, MECKLENBURG COUNTY, NORTH CAROLINA, OR SUCH OTHER PLACE
AS AGREED TO IN WRITING BY THE PARTIES. A JUDGMENT UPON THE AWARD MAY BE ENTERED
IN ANY COURT HAVING JURISDICTION, AND ALL DECISIONS SHALL BE IN WRITING. THE
PANEL FROM WHICH ALL ARBITRATORS ARE SELECTED SHALL BE COMPRISED OF
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<PAGE> 17
LICENSED ATTORNEYS HAVING AT LEAST TEN YEARS' EXPERIENCE REPRESENTING PARTIES IN
SECURED LENDING TRANSACTIONS. NOTWITHSTANDING THE FOREGOING, THIS ARBITRATION
PROVISION DOES NOT APPLY TO DISPUTES UNDER OR RELATED TO INTEREST PROTECTION
AGREEMENTS.
(b) Notwithstanding the preceding binding arbitration provision, the
Bank preserves certain remedies that may be exercised during a Dispute. The Bank
shall have the right to proceed in any court of proper jurisdiction or by self
help to exercise or prosecute the following remedies, as applicable: (i) all
rights to foreclose against any real or personal property or other security by
exercising a power of sale granted in the Credit Documents or under applicable
law, (ii) all rights of self help including peaceful occupation of real property
and collection of rents, set-off and peaceful possession of personal property,
(iii) obtaining provisional or ancillary remedies including injunctive relief,
sequestration, garnishment, attachment and appointment of receiver, (iv) when
applicable, a judgment by confession of judgment and (v) other remedies.
Preservation of these remedies does not limit the power of an arbitrator to
grant similar remedies that may be requested by a party in a Dispute.
(c) BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE PARTIES
HERETO ACCEPTS, FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND
UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION RELATING TO ANY ARBITRATION
PROCEEDINGS CONDUCTED UNDER THE ARBITRATION RULES IN CHARLOTTE, MECKLENBURG
COUNTY, NORTH CAROLINA AND IRREVOCABLY AGREES TO BE BOUND BY ANY FINAL JUDGMENT
RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT FROM WHICH NO APPEAL HAS BEEN
TAKEN OR IS AVAILABLE. Each of the parties hereto irrevocably agrees that all
process in any such arbitration proceedings or otherwise may be effected by
mailing a copy thereof by registered or certified mail (or any substantially
similar form of mail), postage prepaid, to it at its address set forth in
Section 8.1 or at such other address of which such party shall have been
notified pursuant thereto, such service being hereby acknowledged by each party
hereto to be effective and binding service in every respect. Each party hereto
irrevocably waives any objection, including, without limitation, any objection
to the laying of venue or based on the grounds of forum non conveniens which it
may now or hereafter have to the bringing of any such arbitration proceeding in
any jurisdiction. Nothing herein shall affect the right to serve process in any
other manner permitted by law or shall limit the right of any party to bring
proceedings against the Borrower or any party hereto in any court or pursuant to
arbitration proceedings in any other jurisdiction.
[Remainder of Page Intentionally Left Blank]
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<PAGE> 18
IN WITNESS WHEREOF, this Loan Agreement has been executed this day by
duly authorized officers of the undersigned parties.
BORROWER: PHARMACEUTICAL PRODUCT DEVELOPMENT, INC.,
a North Carolina corporation
By: /s/ Rudy C. Howard
-----------------------------
Name: Rudy C. Howard
Title: Chief Financial Officer
GUARANTORS: PPD PHARMACO, INC.,
a Texas corporation
By: /s/ Rudy C. Howard
-----------------------------
Name: Rudy C. Howard
Title: Vice President
APBI ENVIRONMENTAL SCIENCES GROUP, INC.,
a Virginia corporation
By: /s/ Rudy C. Howard
-----------------------------
Name: Rudy C. Howard
Title: Vice President
BANK: FIRST UNION NATIONAL BANK OF NORTH
CAROLINA
By: /s/ Shannon S. Townsend
-----------------------------
Name: Shannon S. Townsend
Title: Vice President
<PAGE> 19
Promissory Note
$50,000,000 June 25, 1997
PHARMACEUTICAL PRODUCT DEVELOPMENT, INC., a North Carolina corporation
(the "Borrower"), promises to pay to the order of FIRST UNION NATIONAL BANK OF
NORTH CAROLINA, its successor and assigns (the "Bank") on or before the
Termination Date the principal sum of FIFTY MILLION DOLLARS ($50,000,000) or, if
less, the aggregate unpaid principal amount of all Loans made by the Bank to the
Borrower, in lawful money of the United States in immediately available funds at
the office of the Bank as provided in the Loan Agreement referenced below or as
otherwise directed by the Bank pursuant to the terms of the Loan Agreement,
together with interest, in like money and funds, on the unpaid principal amount
hereof at the rates and on the dates as set forth in the Loan Agreement.
This Note is issued pursuant to, and is entitled to the benefits of,
the Loan Agreement dated as of the date hereof (as the same may be amended or
modified and in effect from time to time, the "Loan Agreement") among the
Borrower, the Guarantors identified therein and the Bank, to which Loan
Agreement reference is hereby made for a statement of the terms and conditions
under which this Note may be prepaid or its maturity date accelerated.
Capitalized terms used herein and not otherwise defined herein are used with the
meanings attributed to them in the Loan Agreement.
In the event payment of amounts due hereunder are accelerated under the
terms of the Loan Agreement, all such amounts shall become immediately due and
payable, without presentment, demand, protest or notice of any kind, all of
which are hereby waived. Further, in the event this Note is not paid when due at
any stated or accelerated maturity, the Borrower agrees to pay, in addition to
principal and interest, all costs of collection, including reasonable attorneys'
fees.
This Note shall be governed by and construed in accordance with the
laws of the State of North Carolina.
PHARMACEUTICAL PRODUCT DEVELOPMENT, INC.,
a North Carolina corporation
By: /s/ Rudy C. Howard
Name: Rudy C. Howard
Title: Chief Financial Officer
<PAGE> 1
EXHIBIT 10.86
PHARMACEUTICAL PRODUCT DEVELOPMENT, INC.
EMPLOYEE STOCK PURCHASE PLAN
THIS INSTRUMENT is executed as of the 15th day of May, 1997 by
PHARMACEUTICAL PRODUCT DEVELOPMENT, INC., a North Carolina corporation (the
"Company").
Statement of Purpose
The Company desires to establish the Pharmaceutical Product
Development, Inc. Employee Stock Purchase Plan in order to provide eligible
employees with the opportunity to purchase shares of the common stock of the
Company and to thereby share in the continued growth and success of the Company.
NOW, THEREFORE, the Company hereby establishes the PHARMACEUTICAL
PRODUCT DEVELOPMENT, Inc. Employee Stock Purchase Plan effective as of July 1,
1997, consisting of the following Articles I through VIII:
ARTICLE I
NAME, PURPOSE, CONSTRUCTION AND DEFINITIONS
Section 1.1. Name. The Plan shall be known as the "Pharmaceutical
Product Development, Inc. Employee Stock Purchase Plan."
Section 1.2. Purpose. The purpose of the Plan is to provide
Participants in the Plan with an opportunity to purchase Common Stock in the
Company through payroll deductions and other contributions, thereby encouraging
Participants to share in the economic growth and success of the Company through
stock ownership.
Section 1.3. Construction. Article, Section and paragraph headings have
been inserted in the Plan for convenience of reference only and are to be
ignored in any construction of the provi-
<PAGE> 2
sions hereof. If any provision of the Plan shall be invalid or unenforceable the
remaining provisions shall nevertheless be valid, enforceable and fully
effective. It is the intent that the Plan shall at all times constitute an
"employee stock purchase plan" within the meaning of Section 423(b) of the Code,
and the Plan shall be construed and interpreted to remain such. The Plan shall
be construed, administered, regulated and governed by the laws of the United
States to the extent applicable, and to the extent such laws are not applicable,
by the laws of the State of North Carolina.
Section 1.4. Definitions. Whenever used in the Plan, unless the context
clearly indicates otherwise, the following terms shall have the following
meanings:
(a) Beneficiary, with respect to a Participant, means such
Participant's "Beneficiary" under the group term life insurance plan
maintained by the Company.
(b) Board or Board of Directors means the Board of Directors
of the Company or any Committee or Committees of said Board of
Directors of the Company to which, and to the extent, said Board of
Directors of the Company has delegated some or all of its power,
authority, duties or responsibilities with respect to the Plan.
(c) Code means the Internal Revenue Code of 1986, as the same
may be amended from time to time, and references thereto shall include
the valid Treasury regulations issued thereunder.
(d) Committee means the "Committee" as defined under the
Retirement Savings Plan which is responsible for the
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<PAGE> 3
administration of the Plan in accordance with Article VI hereof.
(e) Common Stock means shares of the $0.10 par value common
stock of the Company and any other stock or securities resulting from
the adjustment thereof or substitution therefor as described in Section
3.4.
(f) Company means Pharmaceutical Product Development, Inc., a
North Carolina corporation.
(g) Compensation means "Contribution Compensation" as defined
under the Retirement Savings Plan, except that Compensation under the
Plan shall not be limited by Section 401(a)(17) of the Code.
(h) Effective Date means July 1, 1997.
(i) Employee means a person employed by the Company.
(j) Fair Market Value, with respect to a share of Common Stock
from time to time, means (i) if the Common Stock is traded on the
National Market System, the closing price of the Common Stock for the
applicable date, as published in the NASDAQ National Market Issues
report in the Eastern Edition of The Wall Street Journal, (ii) if the
Common Stock is not traded on the National Market System but such
Common Stock is listed on a national securities exchange, the mean
between the highest price and the lowest price at which the Common
Stock shall have been sold regular way on a national securities
exchange on the applicable date during an Offering Period or, if there
are no sales on said date, then on the next preceding date on which
there were sales of Common Stock, (iii) if the Common Stock is not
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<PAGE> 4
traded on the National Market System or listed on a national securities
exchange, the mean between the bid and asked prices last reported by
the National Association of Securities Dealers, Inc. for the
over-the-counter market on the applicable date during an Offering
Period or, if no bid and asked prices are reported on said date, then
on the next preceding date on which there were such quotations, or (iv)
if the Common Stock is not traded on the National Market System or
listed on a national securities exchange and quotations for the Common
Stock are not reported by the National Association of Securities
Dealers, Inc., the fair market value determined by the Committee on the
basis of available prices for the Common Stock or in such manner as the
Committee shall agree.
(k) Offering means the offering of shares of Common Stock to
Participants pursuant to this Plan that occurs on each Offering Date.
(l) Offering Date means July 1, 1997 and each succeeding
January 1 and July 1.
(m) Offering Period means the period from an Offering Date
through the immediately succeeding Offering Date.
(n) Participant means an Employee who has become a Participant
pursuant to Section 2.2 of the Plan.
(o) Plan means the Pharmaceutical Product Development, Inc.
Employee Stock Purchase Plan, as set forth herein, together with any
and all amendments thereto.
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<PAGE> 5
(p) Retirement Savings Plan means The Pharmaceutical Products
Development, Inc. Retirement Savings Plan as in effect from time to
time.
(q) Stock Purchase Account, with respect to a Participant,
means the account established on the books and records of the Company
for such Participant representing the payroll deductions credited to
such account in accordance with the provisions of the Plan.
ARTICLE II
PARTICIPATION
Section 2.1. General. No person shall become a Participant unless or
until such person is or becomes an Employee and upon or following satisfaction
of the eligibility requirement set forth in the Plan. In addition, in no event
shall any person be eligible to participate in the Plan before the Effective
Date.
Section 2.2. Participation Requirements.
(a) Eligibility Requirement. An Employee shall satisfy the eligibility
requirement for the Plan on the date the Employee is first employed by the
Company, subject to the provisions of Section 2.2(c) below.
(b) Commencement of Participation. Each person who satisfies the
eligibility requirement of Section 2.2(a) on or before the Effective Date shall
become a Participant in the Plan:
(1) on the Offering Date coinciding with the Effective Date,
if such person is an Employee on such Offering Date; or
(2) if such person is not an Employee on such Offering Date,
then on the first Offering Date coinciding with or
5
<PAGE> 6
next following the date (if any) on which such person again becomes an
Employee after the Effective Date.
Each person who satisfies the eligibility requirement of Section 2.2(a) after
the Effective Date shall become a Participant in the Plan:
(1) on the first Offering Date after such person satisfies the
eligibility requirement, if such person is an Employee on such Offering
Date; or
(2) if such person is not an Employee on such Offering Date,
then on the first Offering Date coinciding with or next following the
date (if any) on which such person again becomes an Employee.
(c) Exclusions. Notwithstanding any provision of the Plan to the
contrary, in no event shall the following persons be eligible to participate in
the Plan:
(1) Any Employee whose customary employment with the Company
is twenty (20) hours or less per week; or
(2) Any Employee whose customary employment with the Company
is for not more than five (5) months in any calendar year.
Section 2.3. Eligibility of Former Participants. If a person terminates
employment with the Company after becoming a Participant and subsequently
resumes employment with the Company, such person shall again become a
Participant on the Offering Date coinciding with or next following such
resumption of employment with the Company without having to satisfy again the
eligibility requirement of Section 2.2(a).
6
<PAGE> 7
ARTICLE III
OFFERING OF COMMON STOCK
Section 3.1. Reservation of Common Stock. The Board of Directors shall
reserve five hundred thousand (500,000) shares of Common Stock for the Plan,
subject to adjustment in accordance with Section 3.4. The aggregate number of
shares of Common Stock which may be purchased under the Plan by Participants
shall not exceed five hundred thousand (500,000) shares, subject to adjustment
in accordance with Section 3.4.
Section 3.2. Offering of Common Stock.
(a) General. Subject to Section 3.2(b), each Participant in the Plan on
an Offering Date shall be entitled to purchase shares of Common Stock on the
last day of the Offering Period beginning with such Offering Date with the
amounts deducted from such Participant's Compensation or otherwise contributed
during such Offering Period pursuant to Article IV. The purchase price for such
shares of Common Stock shall be determined under Section 3.3.
(b) Limitations. Notwithstanding Section 3.2(a), the maximum number of
shares of Common Stock a Participant may purchase pursuant to an Offering under
Section 3.2(a) shall be subject to the following limitations:
(1) If as of the Offering Date for such Offering such
Participant owns (including stock which such Participant is considered
to own under Section 425(d) of the Code) stock (including the Common
Stock such Participant would be entitled to purchase pursuant to an
Offering) possessing five percent (5%) or more of the total combined
voting power or value of all classes of stock of the Company, then the
maximum number of shares of Common Stock such Participant may purchase
pursuant to such Offering shall be reduced so
7
<PAGE> 8
that the number of shares of Common Stock such Participant may purchase
pursuant to such Offering when added to the number of shares of stock
of the Company such Participant owns (including stock which such
Participant is considered to own under Section 425(d) of the Code)
(excluding the Common Stock such Participant would be entitled to
purchase pursuant to such Offering) is less than five percent (5%) of
the total combined voting power or value of all classes of stock of the
Company; and
(2) If such Participant could acquire within the same calendar
year as an Offering shares of stock of the Company under all "employee
stock ownership plans" within the meaning of Section 423(b) of the Code
sponsored by the Company (including the Common Stock such Participant
would be entitled to purchase pursuant to such Offering) having a total
fair market value (determined as of the date of such Offering) which
exceeds Twenty-Five Thousand Dollars ($25,000), then the maximum number
of shares such Participant may purchase pursuant to such Offering shall
be reduced so that such total fair market value does not exceed
Twenty-Five Thousand Dollars ($25,000).
Section 3.3. Determination of Purchase Price for Offered Common Stock.
The purchase price per share of the shares of Common Stock offered to
Participants pursuant to an Offering shall be equal to eighty-five percent (85%)
of the lesser of:
(a) the Fair Market Value of a share of Common Stock as of the
first day of the Offering Period for such Offering; or
(b) the Fair Market Value of a share of Common Stock as of the
last day of the Offering Period for such Offering; provided, however,
that in no event shall the purchase price be less than the par value of
a share of Common Stock.
8
<PAGE> 9
Section 3.4. Effect of Certain Transactions. The number of shares of
Common Stock reserved for the Plan pursuant to Section 3.1 and the determination
under Section 3.3 of the purchase price per share of the shares of Common Stock
offered to Participants pursuant to an Offering shall be appropriately adjusted
to reflect any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, a consolidation of shares, the payment of a
stock dividend or any other capital adjustment affecting the number of issued
shares of Common Stock. In the event that the outstanding shares of Common Stock
shall be changed into or exchanged for a different number or kind of shares of
stock or other securities of the Company or another corporation, whether through
reorganization, recapitalization, merger, consolidation or otherwise, then there
shall be substituted for each share of Common Stock reserved for issuance under
the Plan but not yet purchased by Participants, the number and kind of shares of
stock or other securities into which each outstanding share of Common Stock
shall be so changed or for which each such share shall be exchanged.
ARTICLE IV
PAYROLL DEDUCTIONS
Section 4.1. Payroll Deduction Elections. A Participant in the Plan (or
a person who will become a Participant in the Plan on the next Offering Date if
such person is an Employee on such Offering Date) who wishes to purchase shares
of Common Stock to be offered to such Participant on the next Offering Date
shall elect to have the Company deduct from the Compensation payable to such
Participant during the Offering Period beginning on such
9
<PAGE> 10
Offering Date any amount between one percent (1%) and fifteen percent (15%) of
such Participant's Compensation, in whole multiples of one percent (1%). Such
election shall be made by delivering to the Committee during the forty-five (45)
day period preceding such Offering Date a written direction to make such
deductions. Such election shall become effective as of the first day of such
Participant's first pay period that begins on or after such Offering Date and
shall remain effective for each successive pay period until changed or
terminated pursuant to this Article IV. In addition, at any time during an
Offering Period, a Participant may make additional contributions from the
Participant's own funds towards the purchase of Common Stock under the Plan for
such Offering Period. Such additional contributions must be made in cash or its
equivalent under procedures established from time to time by the Committee.
Section 4.2. Election to Increase or Decrease Payroll Deductions.
Subject to Section 4.5, a Participant who has a payroll deduction election in
effect under Section 4.1 may prospectively increase or decrease during an
Offering Period the percentage amount of the deductions being made by the
Company from such Participant's Compensation (including a decrease to zero (0))
by delivering to the Committee a written direction to make such change. Such
change shall become effective as soon as practical after the Committee's receipt
of such written direction and shall remain in effect until changed or terminated
pursuant to this Article IV.
Section 4.3. Termination of Election Upon Termination of Employment.
The termination of employment of a Participant with
10
<PAGE> 11
the Company for any reason shall automatically terminate the election (if any)
of such Participant to have amounts deducted from such Participant's
Compensation pursuant to this Article IV that is then in effect. Such
termination shall be effective immediately following the pay period during which
such termination of employment occurs, but shall not affect the deduction from
Compensation for that pay period.
Section 4.4. Change or Termination Not Retroactively Effective. Neither
the change nor the termination of any election to have amounts deducted from
Compensation under this Article IV shall increase, decrease or otherwise affect
the deduction from the Compensation of a Participant for any pay period ending
prior to the effective date of such change or termination.
Section 4.5. Form, Timing and Frequency of Elections. Any written
direction by any Participant with respect to any deductions from Compensation
pursuant to this Article IV shall be on a form furnished by the Committee for
such purpose and shall be made by such Participant's completing, signing and
filing such form with the Committee in the manner prescribed from time to time
by the Committee. A Participant shall be permitted to increase or decrease the
percentage amount of the deductions being made by the Company from such
Participant's Compensation only once during an Offering Period; provided,
however, a Participant may terminate the deductions being made by the Company
from such Participant's Compensation at any time during an Offering Period
notwithstanding any prior change in the amount
11
<PAGE> 12
of such Participant's Compensation deductions during such Offering Period.
ARTICLE V
STOCK PURCHASE ACCOUNTS AND PURCHASE OF COMMON STOCK
Section 5.1. Stock Purchase Accounts. A Stock Purchase Account shall be
established and maintained on the books and records of the Company for each
Participant. Amounts deducted from a Participant's Compensation or otherwise
contributed by the Participant pursuant to Article IV shall be credited to such
Participant's Stock Purchase Account. No interest or other increment shall
accrue or be payable to any Participant with respect to any amounts credited to
such Stock Purchase Accounts. All amounts credited to such Stock Purchase
Accounts shall be withdrawn, paid or applied toward the purchase of Common Stock
pursuant to the provisions of this Article V.
Section 5.2. Purchase of Common Stock.
(a) General. As of the last day of each Offering Period, the amount to
the credit of a Participant in such Participant's Stock Purchase Account shall
be used to purchase from the Company on such Participant's behalf the largest
number of whole shares of Common Stock which can be purchased at the price
determined under Section 3.3 with the amount then credited to such Participant's
Stock Purchase Account subject to the limitations set forth in Article III on
the maximum number of shares of Common Stock such Participant may purchase. As
of such date, such Participant's Stock Purchase Account shall be charged with
the aggregate purchase price of the shares of Common Stock purchased on such
Participant's behalf. The remaining balance
12
<PAGE> 13
(if any) credited to such Participant's Stock Purchase Account shall be credited
to such Participant's Stock Purchase Account for the immediately succeeding
Offering; provided, however, if such Participant has withdrawn from the Plan
pursuant to Section 5.3, such remaining balance shall be distributed to such
Participant as soon as administratively practical.
(b) Issuance of Common Stock. The shares of Common Stock purchased for
a Participant on the last day of an Offering Period shall be deemed to have been
issued by the Company for all purposes as of the close of business on such date.
Prior to such date, none of the rights and privileges of a shareholder of the
Company shall exist with respect to such shares of Common Stock. As soon as
practicable after such date, the Company shall issue and deliver, or shall cause
its stock transfer agent to issue and deliver, a certificate for the number of
shares of Common Stock purchased for a Participant on such date, which such
certificate shall be issued in the Participant's name.
(c) Insufficient Common Stock Available. If as of the last day of any
Offering Period, the aggregate Stock Purchase Accounts available for the
purchase of shares of Common Stock pursuant to Section 5.2(a) would purchase a
number of shares of Common Stock in excess of the number of shares of Common
Stock then available for purchase under the Plan, (i) the number of shares of
Common Stock which would otherwise be purchased for each Participant on such
date shall be reduced proportionately to the extent necessary to eliminate such
excess, (ii) the remaining balance to the credit of each Participant in each
such Participant's Stock Purchase Account shall be distributed to each such
Participant
13
<PAGE> 14
and (iii) the Plan shall terminate automatically upon the distribution of the
remaining balance in such Stock Purchase Accounts.
Section 5.3. Withdrawal From Plan Prior to Purchase of Common Stock. In
the event (i) a Participant terminates employment with the Company for any
reason during an Offering Period, or (ii) a Participant terminates deductions
from such Participant's Compensation pursuant to Article IV during an Offering
Period and such Participant elects to withdraw in writing from the Plan, then
the entire amount to the credit of such Participant in such Participant's Stock
Purchase Account shall be distributed to such Participant (or if such
Participant is deceased, to such Participant's Beneficiary) as soon as
administratively practicable after such termination of employment or withdrawal
(as the case may be). If a Participant terminates deductions from such
Participant's Compensation pursuant to Article IV during an Offering Period but
such Participant does not elect to withdraw in writing from the Plan, the amount
to the credit of such Participant in such Participant's Stock Purchase Account
shall be used to purchase shares of Common Stock for such Participant as of the
last day of such Offering Period to the extent provided in Section 5.2(a) and
the remaining balance in such Participant's Stock Purchase Account shall be
distributed to such Participant as soon as administratively practicable.
Notwithstanding the preceding sentence, if a Participant terminates deductions
from such Participant's Compensation pursuant to Article IV during an Offering
Period and the amount to the credit of such Participant in such Participant's
Stock Purchase Account upon such termination of Compensation deductions
14
<PAGE> 15
does not exceed One Hundred Dollars ($100.00), then such Participant shall be
deemed to have withdrawn from the Plan upon such termination of Compensation
deductions for purposes of this Section 5.3.
ARTICLE VI
COMMITTEE
Section 6.1. Organization of Committee. The Committee for purposes of
the Plan shall be the "Committee" as defined under the Retirement Savings Plan.
The Committee may appoint such agents, who need not be members of the Committee,
as it may deem necessary for the effective performance of its duties, and may
delegate to such agents such powers and duties, whether administerial or
discretionary, as the Committee may deem expedient or appropriate. The Committee
shall act by majority vote and may adopt such bylaws, rules and regulations as
it deems desirable for the conduct of its affairs.
Section 6.2. Powers of Committee. The Committee shall administer the
Plan. The Committee shall have all powers necessary to enable it to carry out
its duties under the Plan properly. Not in limitation of the foregoing, the
Committee shall have the power to construe and interpret the Plan and to
determine all questions that shall arise thereunder. It shall decide all
questions relating to eligibility to participate in the Plan and to purchase
Common Stock under the Plan. The Committee shall have such other and further
specified duties, powers, authority and discretion as are elsewhere in the Plan
either expressly or by necessary implication conferred upon it. The decision of
the Committee upon all matters within the scope
15
<PAGE> 16
of its authority shall be final and conclusive on all persons, except to the
extent otherwise provided by law.
Section 6.3. Expenses of Committee. The reasonable expenses of the
Committee incurred by the Committee in the performance of its duties under the
Plan, including without limitation reasonable counsel fees and the expenses of
other agents, shall be paid by the Company.
Section 6.4. Indemnification of Committee. To the extent permitted by
applicable law, the Company shall indemnify and hold harmless each member of the
Committee from and against any and all liability, claims, demands, costs and
expenses (including the costs and expenses of attorneys incurred in connection
with the investigation or defense of claims) in any manner connected with or
arising out of any actions or inactions in connection with the administration of
the Plan except for such actions or inactions which are not in good faith or
which constitute willful misconduct.
ARTICLE VII
AMENDMENT AND TERMINATION
Section 7.1. Amendment of Plan. The Company expressly reserve the
right, at any time and from time to time, to amend in whole or in part any of
the terms and provisions of the Plan for whatever reason(s) the Company may deem
appropriate; provided, however, no amendment may without the approval of the
shareholders of the Company (i) increase the number of shares of Common Stock
reserved under the Plan, (ii) change the method of determining the purchase
price for shares of Common Stock, (iii) materially increase the benefits
accruing to Participants, or
16
<PAGE> 17
(iv) materially change the eligibility requirement for participation of the
Plan.
Section 7.2. Termination of Plan. The Company expressly reserves the
right, at any time and for whatever reason it deems appropriate, to terminate
the Plan. Upon any termination of the Plan, the entire amount credited to the
Stock Purchase Account of each Participant shall be distributed to each such
Participant.
Section 7.3. Effective Date and Procedure for Amendment or Termination.
Any amendment to the Plan or termination of the Plan may be retroactive to the
extent not prohibited by applicable law. Any amendment to the Plan or
termination of the Plan shall be made by the Company by resolution of the Board
of Directors and shall not require the approval or consent of any Participant or
Beneficiary in order to be effective.
ARTICLE VIII
MISCELLANEOUS
Section 8.1. Transferability of Rights. To the extent permitted by law,
rights to purchase shares of Common Stock are exercisable only by the
Participant to whom such rights are granted and are not transferable by such
Participant other than by will or the laws of descent and distribution.
Section 8.2. No Employment Rights. Participation in the Plan shall not
give any employee of the Company any right to remain in the employ of the
Company or upon termination of employment, any right or interest in the Plan
except as expressly provided herein.
Section 8.3. Compliance with Law. No shares of Common Stock shall be
issued under the Plan prior to compliance by the
17
<PAGE> 18
Company to the satisfaction of its counsel with any applicable laws.
Section 8.4. Repurchase of Common Stock. The Company shall not be
required to repurchase from any Participant any shares of Common Stock which
such Participant acquires under this Plan.
Section 8.5. Approval of Plan. The effectiveness of this Plan is
subject to its approval by the shareholders of the Company at the annual meeting
of the shareholders of the Company scheduled for May 1997. In the event that
this Plan is not approved in accordance with the preceding sentence, all amounts
deducted from the Compensation of Participants and credited to each
Participant's Stock Purchase Account shall be refunded to each such Participant
without interest as soon as administratively practicable.
IN WITNESS WHEREOF, the Company have caused this Instrument to be
executed by its duly authorized officer as of the day and year first above
written.
PHARMACEUTICAL PRODUCT DEVELOPMENT, INC.
By: /s/ Fredric N. Eshelman
-------------------------------------
Name: Fredric N. Eshelman
-----------------------------------
Title: Chief Executive Officer
----------------------------------
"Company"
18
<PAGE> 1
EXHIBIT 10.87
PHARMACEUTICAL PRODUCT DEVELOPMENT, INC.
EMPLOYEE STOCK PURCHASE PLAN
Instrument of Amendment
THIS INSTRUMENT OF AMENDMENT (the "Instrument") is executed this 21st
day of June, 1997 by PHARMACEUTICAL PRODUCT DEVELOPMENT, INC., a North Carolina
corporation (the "Company").
Statement of Purpose
The Company sponsors the Pharmaceutical Product Development, Inc.
Employee Stock Purchase Plan (the "Plan"). The Company desires to amend the Plan
to (i) make it clear that the employees of designated subsidiaries may
participate in the Plan and (ii) permit the purchase of fractional shares under
the Plan. In Section 7.1 of the Plan, the Company has reserved the right to
amend the Plan at any time for any reason.
NOW, THEREFORE, the Plan is hereby amended as follows effective as of
July 1, 1997:
1. The following sentence is added to the end of Section 1.4(i)
of the Plan:
"In addition, the employees of the Company's subsidiaries
which the Company designates in its sole and exclusive
discretion as participating subsidiaries for purposes of the
Plan shall also be considered Employees for purposes of this
Plan.
2. Section 5.2(a) of the Plan is amended by (i) adding the words
"and fractional" after the word "whole" in the first sentence
thereof and (ii) deleting the last sentence thereof ("The
remaining balance . . . as administratively practical.") in
its entirety.
IN WITNESS WHEREOF, this Instrument is executed by the undersigned duly
authorized officer of the Company as of the day and year first above written.
PHARMACEUTICAL PRODUCT DEVELOPMENT, INC.
By: /s/ Fred N. Eshelman
-----------------------------------
Name: Fred N. Eshelman
-----------------------------------
Title: Chief Executive Officer
-----------------------------------
"Company"
<PAGE> 1
EXHIBIT 10.88
SECRETARY'S CERTIFICATE
The undersigned Secretary of Pharmaceutical Product Development, Inc.
(hereinafter referred to as the "Company") hereby certifies that the following
resolution to amend the 1995 Stock Option Plan for Non-Employee Directors was
duly adopted by the shareholders of the Company at the Annual Meeting of
Shareholders held on May 15, 1997:
"Amendment to 1995 Stock Option Plan for Non-Employee Directors. The
amendment to the 1995 Stock Option Plan for Non-Employee Directors as
described in the Proxy Statement and as presented to the shareholders
at this meeting is approved effective this 15th day of May, 1997."
A copy of the amendment as presented to and adopted by the shareholders is
attached hereto as Exhibit A.
WITNESS the hand of the undersigned Secretary and the seal of the
Corporation as of this the 15th day of May, 1997.
/s/ Fred B. Davenport, Jr.
---------------------------------
Fred B. Davenport, Jr., Secretary
[CORPORATE SEAL]
<PAGE> 2
EXHIBIT A
AMENDMENT TO STOCK OPTION PLAN
FOR NON-EMPLOYEE DIRECTORS
RESOLVED, that, Article I of the Pharmaceutical Product
Development, Inc. Stock Option Plan for Non-Employee Directors (the "Plan")
entitled "Purpose" is hereby rewritten in its entirety as follows:
ARTICLE I
PURPOSE
This Stock Option Plan for Non-Employee Directors (the "Plan") is
designed to advance the interest of Pharmaceutical Product Development,
Inc. (the "Company") and its shareholders by providing an incentive to
each member of the Board of Directors of the Company (the "Board"), who
is not a full-time or part-time employee of the Company or its parent
or subsidiary corporations ("Non-Employee Director"), to continue in
the service of the company and by creating a direct interest of the
Non-Employee Directors in the future success of the Company's
operations by granting to such persons options to acquire shares of the
common stock of the Company, par value $.10 per share (the "Common
Stock"). As used herein, "parent" shall mean a "parent corporation" as
defined in Section 424(e) of the Internal Revenue Code of 1986, as
amended (the "Code"), and "subsidiary" shall mean a "subsidiary
corporation" as defined in Section 424(f) of the Code.
RESOLVED, that the first paragraph of Article V of the Plan
entitled "Awards" is hereby rewritten in its entirety as follows:
ARTICLE V
AWARDS
Each Non-Employee Director shall be granted an Option to purchase 4,000
shares of Common Stock, subject to adjustment as provided in Article X
below (an "Award"), on the following date or dates: (i) the date on
which the Non-Employee Director initially is elected as a member of the
Board of Directors of the Company, provided that the individual
continues to serve as a Non-Employee Director immediately following
such meeting; and (ii) each date on which the Non-Employee Director is
re-elected as a member of the Board of Directors of the Company,
provided that the individual continues to serve as a Non-Employee
Director immediately following each such meeting. In no event shall a
Non-Employee Director receive an annual grant of an Option to purchase
<PAGE> 3
in excess of 4,000 shares of Common Stock pursuant to this Plan. In the
event that the number of shares of Common Stock available for grants
under the Plan is insufficient to grant the number of Options
determined as provided above, Options for the remaining number of
shares of Common Stock available for grant under the Plan shall be
granted in full to the then eligible Non-Employee Director, or in equal
amounts to each then eligible Non-Employee Director if there is more
than one. Any Non-Employee Director who elects to decline an Award will
receive no compensation in lieu of such Award (either at the time of
such election or at any time thereafter).
RESOLVED FURTHER, that the officers of the Corporation be, and
each of them hereby is, authorized and empowered, in the name and on behalf of
the Corporation to make or cause to be made, and to execute and deliver, all
such additional agreements, documents, instruments and certifications, and to do
or cause to be done all such acts and things, and to take all such steps, and to
make all such payments and remittances, as any one or more of such officers may
at any time or times deem necessary or desirable in connection with, or in
furtherance of, the foregoing resolution; and
RESOLVED FURTHER, that all prior actions taken by the officers
or directors on behalf of the Corporation in connection with the foregoing
resolutions are hereby ratified as the actions of the Corporation, effective as
of the date each such action was taken.
<PAGE> 1
EXHIBIT 10.89
SECRETARY'S CERTIFICATE
The undersigned Secretary of Pharmaceutical Product Development, Inc.
(hereinafter referred to as the "Company") hereby certifies that the Amendment
to the 1995 Equity Compensation Plan of the Company attached hereto as Exhibit I
was duly adopted by the directors of the Company at the Annual Meeting of
Directors held on May 15, 1997.
WITNESS the hand of the undersigned Secretary and the seal of the
Corporation as of this the 15th day of May, 1997
/s/ Fred B. Davenport, Jr.
--------------------------
Fred B. Davenport, Jr.
[CORPORATE SEAL]
<PAGE> 2
Exhibit I
FIRST AMENDMENT TO THE
PHARMACEUTICAL PRODUCT DEVELOPMENT, INC.
1995 EQUITY COMPENSATION PLAN
The Pharmaceutical Product Development, Inc. 1995 Equity Compensation
Plan (the "Plan") is amended as follows:
1. The references in Sections 2.7 and 2.14 of the Plan to
"Disinterested Person" are changed to "Non-Employee Director".
2. Section 2.12 of the Plan is revised to read as follows:
"`Non-Employee Director' shall have the meaning set forth in Rule 16b-3 under
the Act."
3. The last sentence of Section 2.29 of the Plan is deleted.
4. The second sentence of Section 15.5 of the Plan is rewritten as
follows:
"In addition to any other restrictions upon transferability herein, Incentive
Stock Options shall be subject to such further restrictions as required by
Federal or state securities and tax laws or provided by the Committee or in an
Award Agreement."
The Plan, as herein amended, shall continue in full force and effect.
This First Amendment has been adopted by the Board of Directors of
Pharmaceutical Product Development, Inc., upon recommendation of the
Compensation Committee of the Board of Directors, on this 15th day of May, 1997.
/s/ Fred B. Davenport, Jr.
---------------------------------
Fred B. Davenport, Jr., Secretary
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<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
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