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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-Q
(MARK ONE)
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[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 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
--------------- -------------
Commission File Number 0-27570
</TABLE>
PHARMACEUTICAL PRODUCT
DEVELOPMENT, INC.
(Exact name of registrant as specified in its charter)
NORTH CAROLINA 56-1640186
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
3151 SEVENTEENTH STREET EXTENSION
WILMINGTON, NORTH CAROLINA
(Address of principal executive offices)
28412
(Zip Code)
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 of 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: 22,546,999 shares of common
stock, par value $0.10 per share, as of October 31, 1997.
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<PAGE> 2
INDEX
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PAGE
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Statements of Operations for the
Three and Nine Months Ended September 30, 1997 and 1996
(unaudited)............................................ 3
Consolidated Condensed Balance Sheets as of September 30,
1997 (unaudited) and December 31, 1996................. 4
Consolidated Condensed Statements of Cash Flows for the
Nine Months Ended September 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 6. Exhibits and Reports on Form 8-K.................... 14
SIGNATURES.................................................. 15
</TABLE>
2
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PART I.
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
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THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ -------------------
1997 1996 1997 1996
------- -------- -------- --------
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Life sciences revenues, net of subcontractor costs of
$15,658, $8,373, $54,097 and $31,727, respectively... $46,145 $ 38,470 $140,039 $111,605
Environmental sciences revenues, net of subcontractor
costs of $1,398, $1,378, $4,473 and $3,313,
respectively......................................... 12,030 11,033 35,862 34,444
Discovery sciences revenues............................ 98 -- 115 --
------- -------- -------- --------
Net revenue.................................. 58,273 49,503 176,016 146,049
------- -------- -------- --------
Direct costs -- Life sciences.......................... 22,720 19,967 70,947 58,430
Direct costs -- Environmental sciences................. 8,422 7,588 25,054 23,875
Direct costs -- Discovery sciences..................... 583 -- 1,063 --
Selling, general and administrative expenses........... 16,704 16,339 50,998 46,224
Depreciation and amortization.......................... 3,179 2,636 8,986 7,620
Merger costs........................................... -- 16,960 512 16,960
Acquired in-process research and development........... -- -- 9,112 --
------- -------- -------- --------
51,608 63,490 166,672 153,109
------- -------- -------- --------
Operating income (loss)................................ 6,665 (13,987) 9,344 (7,060)
Interest income, net................................... 154 389 770 1,111
Other income (expense), net............................ 146 173 198 130
------- -------- -------- --------
Income (loss) before income taxes...................... 6,965 (13,425) 10,312 (5,819)
Provision (benefit) for income taxes................... 2,751 (1,468) 4,101 1,567
------- -------- -------- --------
Net income (loss)............................ $ 4,214 $(11,957) $ 6,211 $ (7,386)
======= ======== ======== ========
Net income (loss) per common share..................... $ 0.19 $ (0.56) $ 0.28 $ (0.35)
======= ======== ======== ========
Weighted average number of common shares............... 22,533 21,298 22,487 21,028
======= ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
3
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PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(IN THOUSANDS)
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SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
(UNAUDITED)
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ASSETS
Current assets
Cash and cash equivalents................................. $ 12,776 $ 21,838
Marketable securities..................................... 8,000 14,210
Accounts receivable and unbilled services, net............ 95,530 76,237
Investigator advances..................................... 1,027 5,280
Prepaid expenses and other current assets................. 6,146 5,752
Deferred tax asset........................................ 3,276 4,955
-------- --------
Total current assets.............................. 126,755 128,272
Property, plant and equipment, net........................ 34,870 31,479
Goodwill, net............................................. 18,720 18,397
Other assets, net......................................... 7,866 3,309
-------- --------
Total assets...................................... $188,211 $181,457
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt...................... $ 4,797 $ 4,221
Accounts payable.......................................... 6,963 7,051
Payables to investigators................................. 4,074 5,429
Other accrued expenses.................................... 25,179 26,263
Unearned income........................................... 19,757 18,705
-------- --------
Total current liabilities......................... 60,770 61,669
Long-term debt, less current maturities................... 1,218 1,428
Deferred rent and other................................... 2,841 3,054
-------- --------
Total liabilities................................. 64,829 66,151
-------- --------
Shareholders' equity
Common stock.............................................. 2,254 2,163
Paid-in capital........................................... 115,367 112,606
Unrealized gain (loss) on investments..................... (227) 232
Cumulative translation adjustment......................... (734) 668
Retained earnings (accumulated deficit)................... 6,722 (363)
-------- --------
Total shareholders' equity........................ 123,382 115,306
-------- --------
Total liabilities and shareholders' equity........ $188,211 $181,457
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
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PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
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NINE MONTHS ENDED
SEPTEMBER 30,
-------------------
1997 1996
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Cash flows from operating activities:
Net income (loss)......................................... $ 6,211 $ (7,386)
Adjustments to reconcile net income to net cash used in
operating activities:
Depreciation and amortization.......................... 8,986 7,620
Acquired in-process research and development........... 9,112 --
Merger expenses........................................ -- 13,376
Other.................................................. (401) (473)
Change in accrued merger expense....................... (8,143) --
Change in other operating assets and liabilities....... (12,470) (12,439)
-------- --------
Net cash provided by operating activities......... 3,295 698
-------- --------
Cash flows from investing activities:
Maturities (purchases) of investments, net............. 6,268 (16,963)
Purchases of property and equipment.................... (10,635) (8,091)
Cash paid for acquisitions, net........................ (8,121) --
Other.................................................. 174 448
-------- --------
Net cash used in investing activities............. (12,314) (24,606)
-------- --------
Cash flows from financing activities:
Repayment of long-term debt, net....................... (530) (853)
Other long-term borrowings............................. 138 75
Proceeds from issuance of common stock................. 2,152 41,957
Dividends paid......................................... -- (5,937)
Distributions to shareholders.......................... (430) --
-------- --------
Net cash provided by financing activities......... 1,330 35,242
-------- --------
Effect of exchange rate changes on cash..................... (1,373) 346
-------- --------
Net increase (decrease) in cash and cash equivalents ....... (9,062) 11,680
Cash and cash equivalents, beginning of the period.......... 21,838 2,640
-------- --------
Cash and cash equivalents, end of the period................ $ 12,776 $ 14,320
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
5
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PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. ACCOUNTING POLICIES
The significant accounting policies followed by Pharmaceutical Product
Development, Inc. (the "Company") for interim financial reporting are consistent
with the accounting policies followed for annual financial reporting. These
unaudited consolidated condensed financial statements have been prepared in
accordance with Rule 10-01 of Regulation S-X, and in management's opinion, all
adjustments of a normal recurring nature necessary for a fair presentation have
been included. The accompanying financial statements do not purport to contain
all the necessary financial disclosures that might otherwise be necessary in the
circumstances and should be read in conjunction with the 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
nine month periods ended September 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.
2. BASIS OF PRESENTATION
The accompanying unaudited consolidated condensed financial statements
include the accounts of the Company 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 nine month
period ended September 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.
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.
6
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PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
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"), for the year ended December 31, 1998. 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"), for the year ended December
31, 1998. 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.
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PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
If the Company had adopted SFAS No. 128 for the period ended September 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:
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THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ -----------------
1997 1996 1997 1996
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Basic income (loss) per common share:
Net income (loss).............................. $ 4,214 $(11,957) $ 6,211 $(7,386)
======= ======== ======= =======
Weighted average shares:
Common shares outstanding................... 22,533 21,298 22,487 21,028
======= ======== ======= =======
Basic income (loss) per common share........... $ 0.19 $ (0.56) $ 0.28 $ (0.35)
======= ======== ======= =======
Diluted income (loss) per common share:
Net income (loss).............................. $ 4,214 $(11,957) $ 6,211 $(7,386)
======= ======== ======= =======
Weighted average shares:
Common shares outstanding................... 22,533 21,298 22,487 21,028
Dilutive effect of stock options............ 88 -- 93 --
------- -------- ------- -------
Total shares........................... 22,621 21,298 22,580 21,028
======= ======== ======= =======
Diluted income (loss) per common share......... $ 0.19 $ (0.56) $ 0.28 $ (0.35)
======= ======== ======= =======
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PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES
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. (the "Life Sciences Group"). 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. (the "Environmental Sciences Group"),
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 Annual Report on Form 10-K for
the year ended December 31, 1996.
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 Annual Report on Form
10-K for the year ended December 31, 1996.
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
9
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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 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 third quarter of 1997, net income increased 98.7% to $4.2
million, or $0.19 per share, from $2.1 million, or $0.10 per share, for the same
period in 1996, excluding 1996 merger costs. Operating income increased by
124.2% to $6.7 million from $3.0 million a year earlier, excluding 1996 merger
costs.
Three Months Ended September 30, 1997 Versus Three Months Ended September 30,
1996
Net revenue increased $8.8 million, or 17.7%, to $58.3 million in 1997 from
$49.5 million for the same period last year. The Life Sciences Group operations
accounted for 79.2% of the Company's net revenue for 1997. The Life Sciences
Group generated net revenue of $46.2 million, up $7.7 million, or 20.0%, from
last year. The growth in the Life Sciences Group's 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 September 30,
1996 contributed net revenue of $3.3 million for the three months ended
September 30, 1997. The Company's Environmental Sciences Group generated 20.6%
of the Company's net revenue for the third quarter 1997, or $12.0 million,
compared with $11.0 million in 1996.
Total direct costs increased 15.1% to $31.7 million from $27.6 million last
year and declined as a percentage of net revenue to 54.4% from 55.7% last year.
The Life Sciences Group's direct costs as a percentage of related net revenue of
49.2% compares favorably to 51.9% last year. This decrease is due primarily 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 70.0% from 68.8% last year. This
increase in direct costs as a percentage of net revenues is primarily
attributable to lower consultant utilization.
Selling, general and administrative ("SG&A") expenses increased 2.2% to
$16.7 million from $16.3 million in 1996. As a percentage of net revenue, SG&A
expenses decreased to 28.7% from 33.0% last year. 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 $3.2 million was $0.5
million, or 20.6%, 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 increased $20.7 million to $6.7 million for the three
months ended September 30, 1997, as compared to an operating loss of $14.0
million for the three months ended September 30, 1996. Excluding 1996 merger
costs, operating income increased $3.7 million, or 124.2%, to $6.7 million in
the third quarter of 1997 compared to $3.0 million for the same period last
year. As a percentage of net revenue, excluding the 1996 merger costs, the
quarterly operating income of 11.4% represents an improvement from the operating
income of 6.0% of net revenue for the same period last year.
The net income of $4.2 million represents a increase of $16.2 million over
the same quarter a year ago. The net income per share of $0.19 compares to a net
loss per share of $(0.56) for the same period last year. Excluding the impact of
the 1996 merger costs, the Company's net income of $4.2 million is 98.7% higher
10
<PAGE> 11
than last year's net income of $2.1 million. On an equivalent earnings-per-share
basis the net income per share of $0.19 compares to $0.10 for the same period
last year computed on 1.2 million less shares outstanding.
Nine Months Ended September 30, 1997 Versus Nine Months Ended September 30,
1996
Total net revenues increased $30.0 million, or 20.5%, to $176.0 million in
1997 from $146.0 million last year. The Company's Life Sciences Group generated
79.6% of the Company's net revenues in the first nine months, equating to net
revenues of $140.0 million, up $28.4 million or 25.5% 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 September 30, 1996 contributed net revenues of $9.4 million during the
first nine months of 1997. Net revenues from the Environmental Sciences Group,
representing 20.4% of the Company's net revenues in the first nine months, were
$35.8 million, compared with $34.4 million in 1996, a increase of 4.1% or $1.4
million.
Total direct costs increased 17.9% to $97.1 million last year and declined
as a percentage of net revenues to 55.2% from 56.4%. In the Life Sciences Group,
direct costs decreased as a percentage of related net revenues to 50.7% from
52.4%. 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 69.9% from a year ago level of 69.3%.
SG&A expenses increased 10.3% to $51.0 million from $46.2 million in 1996.
As a percentage of net revenues, SG&A expenses decreased to 29.0% from 31.7%
last year. Incremental SG&A expenses from acquisitions completed since September
30, 1996 comprise $3.6 million of the increase. The remaining increase of $1.2
million is primarily attributable to increases in business development expenses
in Austin and Wilmington, administrative staffing at the executive and
middle-management levels, and the number of employees in finance, human
resources and other administrative areas, reflecting the continued growth of the
Company.
Total depreciation and amortization expense of $9.0 million was $1.4
million, or 17.9%, 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.
Operating income increased $16.4 million, or 232.4%, to $9.3 million in the
first nine months of 1997 as compared to a operating loss of $7.1 million for
the same period last year. Excluding one-time costs (merger costs and acquired
in-process research and development costs), operating income increased $9.1
million, or 91.6%, to $19.0 million in the first nine months of 1997 compared to
$9.9 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 10.8%
in 1997 compared to 6.8% in 1996.
The net income of $6.2 million increased $13.6 million as compared to last
year's net loss of $7.4 million. The net income per share of $0.28 compares to a
net loss per share of $0.35 last year. Excluding the impact of the one-time
costs on the nine month results, the Company's net income of $12.0 million is
78.5% higher than last year's net income of $6.7 million. On an
earnings-per-share basis, excluding one-time costs, the net income per share of
$0.53 compares to $0.32 for the same period last year computed on 1.5 million
less shares outstanding.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1997, the Company had $12.8 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.
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For the nine months ended September 30, 1997, the Company experienced a net
increase in cash from operating activities of $3.3 million. For the period, net
income of $6.2 million, depreciation and amortization of $9.0 million and the
acquired in-process research and development of $9.1 million were offset
primarily by the net decrease of $12.5 million in other assets and liabilities
(which includes an $18.3 million increase in billed and unbilled receivables),
as well as, cash disbursements of $8.1 million related to previously accrued
merger expense.
For the nine months ended September 30, 1997, the Company used net cash of
$12.3 million in investing activities, as capital expenditures $10.6 million and
the $8.1 million net cash paid for acquisitions were only partially offset by
$6.3 million in cash provided by net maturities of investments.
For the nine months ended September 30, 1997, the Company's financing
activities provided $1.3 million in cash, as net proceeds from stock option
exercises of $2.2 million was partially offset by $0.5 million in net repayment
of long-term debt and $0.4 million in cash used to pay premerger distributions
to stockholders of Belmont.
In June 1997, the Company obtained a $50.0 million revolving credit
facility with First Union National Bank which accrues interest on amounts
borrowed at a floating rate currently equal to the LIBOR Rate plus 0.75% per
year. 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 September 30, 1997, the Company had no amounts outstanding under this
facility.
In August 1997, the Company renegotiated a new credit facility for $50.0
million with Wachovia Bank, N.A. which accrues interest on amounts borrowed at a
floating rate currently equal to the LIBOR Rate plus 0.70% per year.
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 September 30, 1997, the Company had $3.3 million outstanding under this
facility.
The Company currently participates in only a small number of transactions
involving multiple currencies. In most of those situations, contractual
provisions either limit or reduce the translation risk. Financial statement
translation has not, to date, been material to the Company's balance sheet. The
reasons for this are that the majority of international operations are located
in the United Kingdom, which traditionally has had a relatively stable currency,
and that international operations have not accounted for a significant portion
of total operations (less than 15%). It is anticipated that those conditions
will persist for at least the following year.
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.
12
<PAGE> 13
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.
13
<PAGE> 14
PART II.
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
<TABLE>
<S> <C> <C>
(a) Exhibit 10.90 Employment Agreement, effective July 1, 1997, between the
Registrant and Fredric N. Eshelman.
Exhibit 10.91 Note and Loan Agreement, dated August 7, 1997, between the
Registrant and Wachovia Bank, N.A.
Exhibit 10.92 First Amendment to Loan Agreement dated August 11, 1997,
between the Registrant and First Union National Bank.
Exhibit 10.93 Lease Agreement dated July 9, 1997, between Weeks Realty,
Inc. and PPD Pharmaco, Inc.
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 September 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
---------------------------------------------
Rudy C. Howard
Chief Financial Officer and Vice President,
Finance and Treasurer
(Principal Financial Officer)
Date: November 13, 1997
15
<PAGE> 1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (hereinafter the "Agreement"), made
this 17th day of June, 1997, by and between Pharmaceutical Product Development,
Inc., a North Carolina corporation (hereinafter "PPD"), and Fredric N. Eshelman
(hereinafter "Employee").
RECITALS:
A. Employee desires employment upon the terms and conditions
herein stated.
B. PPD desires to employ Employee upon the terms and
conditions herein stated.
C. Employee and PPD desire to embody in writing the terms and
conditions of such employment in this Agreement.
NOW, THEREFORE, in consideration of the mutual promises,
covenants and considerations contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:
1. Employment. PPD hereby employs Employee and Employee hereby
accepts such employment on a full time basis as Chief Executive Officer of PPD
upon the terms and conditions hereinafter set forth.
2. Term. The term of this Agreement shall be for one year,
beginning July 1, 1997, and ending June 30, 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 9 below,
unless either party gives notice as herein provided to the other of said party's
intent not renew this Agreement not less than 60 days prior to the expiration of
the one-year term then in effect.
3. Salary. For all services rendered by Employee under this
Agreement, PPD shall pay to employee an annual salary of $425,000.00 for the
initial one-year term hereof. Salary for any successive one-year terms shall be
agreed upon not less than 75 days before commencement of each one-year term
unless such a requirement is waived by the parties.
4. Duties. Employee shall have overall responsibility for and
decision making authority necessary to fulfill his duties as Chief Executive
Officer. Employee's duties shall include but not be limited to (a) formulation
and implementation of PPD's policy and business strategy and (b) such other
duties as may be reasonably assigned
<PAGE> 2
from time to time by PPD's Board of Directors. Employee shall carry out his
duties and responsibilities under the general supervision of PPD's Board of
Directors. 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 PPD.
5. Working Facilities. PPD shall furnish Employee with office
space, equipment, technical, secretarial and clerical assistance and such other
facilities, services, support and supplies as may be reasonably needed to
perform the duties herein prescribed in an efficient and professional manner.
6. Non-Compete. During the term of this Agreement, Employee
hereby agrees that without the consent of PPD's Board of Directors he shall not
(a) become an officer, employee, director, agent, representative, member,
associate or consultant of or to a corporation, partnership or other business
entity or person, (b) directly or indirectly acquire a proprietary interest in a
corporation, partnership or other business entity or person, or (c) directly or
indirectly own any stock in a corporation (other than a publicly traded
corporation of which Employee owns less than five percent (5%) of the
outstanding stock) which is engaged in the business of managing clinical
research programs for pharmaceutical and medical products companies or firms, or
in any other business in which PPD is engaged or develops during the term of
this Agreement. The parties agree that the business and operations of PPD are
international in scope. For that reason, the parties agree that a geographical
limitation on the foregoing covenant is not appropriate.
7. Termination. Notwithstanding any other provision of this
Agreement, PPD may terminate Employee's employment hereunder upon the occurrence
of any of the following events:
a. Death of Employee.
b. A determination by the Board of Directors of PPD, acting in
good faith but made in the sole discretion of the Board of Directors, that
Employee has failed to substantially perform his duties under this Agreement.
c. A determination by the Board of Directors of PPD, acting in
good faith but made in the sole discretion of the Board of Directors, that
Employee (i) has become physically or mentally incapacitated and is unable to
perform his duties under this Agreement as a result of such disability, which
inability continues for a period of sixty (60) consecutive calendar days, (ii)
has breached any of the material terms of this Agreement, (iii) has demonstrated
gross negligence or willful misconduct in the execution of his duties, or (iv)
has been convicted of a felony.
Employee may voluntarily terminate this Agreement upon thirty
(30) days written notice if his duties hereunder are substantially reduced or
his compensation is
2
<PAGE> 3
significantly reduced, in which case he shall be paid his base salary for a
period of twelve months after the date of termination.
8. Disclosure of Information; PPD's Property. Employee
recognizes and acknowledges that all of PPD's licenses, permits, data, affairs,
confidential information, trade secrets, inventions, know how, discoveries,
plans, development of work in progress, customer and supplier information, cost
information, contractual provisions, employee capabilities, business methods,
opportunities and the like (collectively, the "Proprietary Information"), are
valuable and unique assets of PPD's business, regardless of whether PPD has
obtained patents on patentable devices and techniques or copyrights on any
material subject to copyright. employee covenants and agrees that during the
term of this Agreement and thereafter he will not disclose the Proprietary
Information to any other corporation, partnership, business entity or person for
any reason (and without regard as to whether same shall have been originated,
discovered or developed by Employee); provided, however, that such Proprietary
Information which already is in the public domain shall not give rise to a
breach hereunder by Employee for his disclosure thereof.
9. Benefits. During the term thereof, Employee shall be
entitled to participate in all benefits provided by PPD to its employees
generally, including but not limited to health insurance, disability insurance
and retirement plans, all of which are currently provided to employees of PPD,
subject to the eligibility requirements of any plan (s) establishing same.
Employee shall be subject to PPD's policies applicable to other executive
employees of PPD with respect to periodic reviews and increases in salary, and
shall be considered for and eligible to participate in benefits, if any,
provided generally by PPD to its executive employees, including but not limited
to issuance of stock options, cash bonuses, etc., to the extent such bonuses,
etc., are not otherwise provided for herein in connection with Employee's duties
and performance as an executive employee. Employee shall be entitled to six
weeks paid vacation during each one-year term hereof.
10. Expenses. PPD shall pay all expenses of Employee which are
directly related to Employee's duties hereunder.
11. Remedies. In the event of Employee's actual or threatened
breach of the provisions of paragraph 6 and/or 8 of this Agreement, PPD shall be
entitled to a temporary restraining order and/or permanent injunction
restraining Employee from such breach. Nothing herein shall be construed as
preventing PPD from pursuing any other available remedies for such breach or
threatened breach, including recovery of damages from Employee and from any
corporation, partnership or other business entity or person with which the
Employee has entered or attempted to enter into a relationship or to which
Employee has disclosed Proprietary Information.
3
<PAGE> 4
12. 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.
13. Waiver of 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.
14. Severability. If any portion of this Agreement shall be
declared invalid by a court of competent jurisdiction, the remaining portion
shall continue in full force and effect as if this Agreement has been executed
with the invalid portion eliminated and this Agreement shall be so construed.
15. Benefit. This Agreement shall inure to the benefit of and
be binding upon PPD, its successors and assigns, and Employee, his heirs,
successors, assigns and personal representatives.
16. Applicable Law. This Agreement shall be governed by the
laws of the State of North Carolina.
17. Assignment. Neither party hereto may assign said party's
rights or obligations hereunder without the prior written consent of the other.
18. Notice. Any notice required or permitted hereunder shall
be delivered in person or mailed certified mail, return receipt requested, to
either party at PPD's principal office in Wilmington, North Carolina and shall
be deemed received when actually received. Any notice from Employee to PPD shall
be addressed to the Chairman of the Board of Directors, with a copy to the
General Counsel of PPD.
19. 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 commercial Arbitration Rules 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 arbitration shall be conducted
in accordance with the procedural laws of the United States Federal Arbitration
Act, as amended. 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 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.
4
<PAGE> 5
20. Amendment; Modification. No amendment or modification of
this Agreement and no waiver by any party of the breach of any covenant
contained herein shall be binding unless executed in writing by party against
whom enforcement of such amendment, modification or waiver is sought. No waiver
shall be deemed a continuing waiver or a waiver in respect of any subsequent
breach or deferral, either of a similar or different nature, unless expressly so
stated in writing.
21. Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original and all of which taken
together shall constitute one and the same Agreement.
22. Descriptive Headings: Interpretation. The descriptive
headings in this Agreement are inserted for convenience of reference only and
are not intended to be part of or to affect the meaning or interpretation of
this Agreement.
[THE NEXT PAGE IS THE SIGNATURE PAGE]
5
<PAGE> 6
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed as of the date first hereinabove set forth.
PPD PHARMACEUTICAL PRODUCT DEVELOPMENT, INC.
By: /s/ Ernest Mario
----------------
[CORPORATE SEAL] Title: Chairman
ATTEST:
/s/ Fred B. Davenport, Jr.
- --------------------------
Title: Secretary
EMPLOYEE /s/ Fredric N. Eshelman (SEAL)
-----------------------
Fredric N. Eshelman
WITNESS:
/s/ Fred B. Davenport, Jr.
- -------------------------
6
<PAGE> 1
LOAN AGREEMENT
<PAGE> 2
LOAN AGREEMENT dated August 7, 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 WACHOVIA BANK, N.A. (together with its endorsees, successors and
assigns, the "Bank").
W I T N E S S E T H
WHEREAS, the Borrower has requested a FIFTY MILLION ($50,000,000.00)
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.
"Base Rate" means for any Base Rate Loan for any day, the rate per
annum equal to the higher as of such day of (i) the Prime Rate, and (ii)
one-half of one percent above the Federal Funds Rate for such day. For purposes
of determining the Base Rate for any day, changes in the Prime Rate shall be
effective on the date of each such change.
"Base Rate Loan" means Loans hereunder bearing interest at a rate
determined by reference to the Base Rate.
"Business Day" means a day other than a Saturday, Sunday or other day
on which commercial banks in Winston-Salem, 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 dealings in U.S. dollar
deposits are not carried out in the London interbank market.
"CERCLA" means the Comprehensive Environmental Response Compensation
and Liability Act.
<PAGE> 3
"CERCLIS" means the Comprehensive Environmental Response Compensation
and Liability Inventory System established pursuant to CERCLA.
"Closing Date" means the date of this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended, or any
successor Federal tax code.
"Commitment" shall have the meaning assigned to it in Section 2.1
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 Commitment hereunder shall have been terminated in accordance with the
provisions hereof.
"Consolidated EBITDA" means, without duplication, for any fiscal period
for the Borrower and its subsidiaries on a consolidated basis, the sum of the
amounts for such fiscal period of: (i) Consolidated Net Income, (ii)
Consolidated Interest Expense, (iii) taxes based on income of the Borrower and
its consolidated subsidiaries and actually paid by the Borrower and such
subsidiaries during such period, (iv) the sum of all depreciation expenses of
the Borrower and its consolidated subsidiaries for such period, and (v)
amortization expense, all as determined and computed in accordance with GAAP
applied on a consistent basis.
"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 Borrower 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 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.
<PAGE> 4
"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, 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 Consolidated Fixed Charge Coverage Ratio and the Consolidated
Funded Debt to Consolidated EBITDA 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 Operating Profits" means, for any period, the Operating
Profits of the Borrower and its subsidiaries on a consolidated basis.
"Consolidated Total Assets" means, at any time, the total assets of the
Borrower and its subsidiaries determined on a consolidated basis, as set forth
or reflected on the most recent consolidated balance sheet of the Borrower and
its subsidiaries on a consolidated basis, prepared in accordance with GAAP.
"Controlled Group" means all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with the Borrower, are treated as a single
employer under Section 414 of the Code.
"Credit Documents" means, collectively, this Agreement and the Note,
and all amendments and supplements thereto, modifications, extensions and
renewals thereof and replacements therefor.
"Environmental Authorizations" means all licenses, permits, orders,
approvals, notices, registrations or other legal prerequisites for conducting
the business of the Borrower required by any Environmental Requirement.
"Environmental Authority" means any foreign, federal, state, local or
regional government that exercises any form of jurisdiction or authority under
any Environmental Requirement.
<PAGE> 5
"Environmental Judgments and Orders" means all judgments, decrees or
orders arising from or in any way associated with any Environmental
Requirements, whether or not entered upon consent or written agreements with an
Environmental Authority or other entity arising from or in any way associated
with any Environmental Requirement, whether or not incorporated in a judgment,
decree or order.
"Environmental Liabilities" means any liabilities, whether accrued,
contingent or otherwise, arising from and in any way associated with any
Environmental Requirements.
"Environmental Notices" means notice from any Environmental Authority
or by any other person or entity, of possible or alleged noncompliance with any
Environmental Requirement, including without limitation any complaints,
citations, demands or requests from any Environmental Authority or from any
other person or entity for correction of any violation of any Environmental
Requirement or any investigations concerning any violation of any Environmental
Requirement.
"Environmental Proceedings" means any judicial or administrative
proceedings arising from or in any way associated with any Environmental
Requirement.
"Environmental Releases" means releases as defined in CERCLA or under
any applicable state or local environmental law or regulation.
"Environmental Requirements" means any legal requirement relating to
health, safety or the environment and applicable to the Borrower, any subsidiary
or the Properties, including but not limited to any such requirement under
CERCLA or similar state legislation.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, or any successor law, including any rules or
regulations promulgated thereunder. Any reference to any provision of ERISA
shall also be deemed to be a reference to any successor provision or provisions
thereof.
"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.
"Event of Default" shall have the meaning assigned to such term in
Section 7.1.
"Federal Funds Rate" means, for any day, the rate per annum (rounded
upward, if necessary, to the next higher 1/100th of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System
<PAGE> 6
arranged by Federal funds brokers on such day, as published by the Federal
Reserve Bank of New York on the Business Day next succeeding such day, provided
that (i) if the day for which such rate is to be determined is not a Business
Day, the Federal Funds Rate for such day shall be such rate on such transactions
on the next preceding Business Day as so published on the next succeeding
Business Day, and (ii) if such rate is not so published for any day, the Federal
Funds Rate for such day shall be the average rate charged to Wachovia Bank, N.A.
on such day on such transactions.
"Funded Debt" means, as of any day for any Person, 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.
"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
<PAGE> 7
(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.
"Hazardous Materials" includes, without limitation, (a) solid or
hazardous waste, as defined in the Resource Conservation and Recovery Act of
1980, or in any applicable state or local law or regulation, (b) hazardous
substances, as defined in CERCLA, or in any applicable state or local law or
regulation, (c) gasoline, or any other petroleum product or by-product, (d)
toxic substances, as defined in the Toxic Substances Control Act of 1976, or in
any applicable state or local law or regulation or (e) insecticides, fungicides,
or rodenticides, as defined in the Federal Insecticide, Fungicide, and
Rodenticide Act of 1975, or in any applicable state or local law or regulation,
as each such Act, statute or regulation may be amended from time to time.
"Interest Payment Date" means (a) as to any Base Rate Loan, the last
Business Day of each March, June, September and December to occur while such
Loan is outstanding, and (b) as to any LIBOR Rate Loan, 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 two 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:
<PAGE> 8
(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 Base Rate 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 12 Loans may be in effect at any time, and of
those 12 Loans, no more than 6 shall be LIBOR Rate Loans. 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" applicable to any LIBOR Rate Loan means for the Interest Period
of such Loan the rate per annum determined on the basis of the rate for deposits
in U.S. dollars of amounts equal or comparable to the principal amount of such
Loan offered for a term comparable to such Interest Period, which rate appears
on the display designated as Page "3750" of the Telerate Service (or such other
page as may replace page 3750 of that service or such other service or services
as may be nominated by the British Bankers' Association for the purpose of
displaying London interbank offered rates for U.S. dollar deposits), determined
as of 1:00 p.m. (New York time), 2 Euro-Dollar Business Days prior to the first
day of such Interest Period.
"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.
<PAGE> 9
"Lien" means any mortgage, pledge, hypothecation, assignment, security
interest, encumbrance, lien, preference or priority of any kind.
"Loan" means any loan or advance by the Bank under the Commitment.
"Material Subsidiary" means each subsidiary of the Borrower with either
a ten percent (10%) or greater revenue contribution to the total revenue of the
Borrower and its subsidiaries determined on a consolidated basis or control or
ownership of ten percent (10%) or more of the total assets of the Borrower and
its subsidiaries determined on a consolidated basis. All Material Subsidiaries
existing on the date of this Agreement are listed on Schedule I attached hereto.
"Multiemployer Plan" shall have the meaning set forth in Section
4001(a)(3) of ERISA.
"Note" shall have the meaning given to such term in Section 2.5 hereof.
"Operating Profits" means, as applied to any Person for any period, the
operating income of such Person for such period, as determined in accordance
with GAAP.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"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.
"Plan" means at any time an employee pension benefit plan which is
covered by Title IV of ERISA or subject to the minimum funding standards under
Section 412 of the Code and is either (i) maintained by a member of the
Controlled Group for employees of any member of the Controlled Group or (ii)
maintained pursuant to a collective bargaining agreement or any other
arrangement under which more than one employer makes contributions and to which
a member of the Controlled Group is then making or accruing an obligation to
make contributions or has within the preceding five plan years made
contributions.
"Prime Rate"refers to that interest rate so denominated and set by the
Bank from time to time as an interest rate basis for borrowings. The Prime Rate
is but one of several interest rate bases used by the Bank and the Bank lends at
interest rates above and below the Prime Rate. A change in the Prime Rate shall
be effective on the date of such change.
"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
<PAGE> 10
respect to which the Bank has received annual or quarterly financial statements
and accompanying officer's certificate.
"Properties" means all real property owned, leased or otherwise used or
occupied by the Borrower or any subsidiary, wherever located.
"Requirement of Law" means, as to any Person, the certificate of
incorporation and bylaws 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
to any such Person or to which any of its material property is subject.
"Termination Date" means the date 364 days following the date of this
Agreement, 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. LOANS.
2.1 Loans. During the Commitment Period, subject to the terms and
conditions hereof, the Bank agrees to make Loans to the Borrower from time to
time upon request of the Borrower; provided that immediately after each such
Loan is made, the aggregate principal amount of all outstanding Loans shall not
exceed FIFTY MILLION DOLLARS ($50,000,000) (the "Commitment"). The Loans
hereunder may consist of Base Rate 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. Within the limits set forth herein and in the Note, the
Borrower may borrow under this Section, repay or, to the extent permitted by
Section 2.7, prepay Loans and reborrow under this Section at any time during the
Commitment Period. The Bank shall have no obligation to advance funds in excess
of the amount of the Commitment.
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 11:00 a.m.,
Winston-Salem, North Carolina time on the Business Day of the requested Base
Rate borrowing, extension or conversion and at least two Business Days before
the requested LIBOR Rate 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 Base Rate 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 or conversion, the Loan
which is being extended or converted, and whether the borrowing, extension or
conversion shall consist of LIBOR Rate Loans, Base Rate Loans or combination
thereof. If the Borrower shall fail to specify (A) the type of Loan requested
for a borrowing, the
<PAGE> 11
request shall be deemed a request for a LIBOR Rate Loan with an Interest Period
of one month, or (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 Base Rate Loans at the end of the applicable
Interest Period. Notwithstanding anything to the contrary contained in this
Agreement, no LIBOR Rate Loan, or extension or conversion thereof, may be made
if there shall have occurred any condition or event which constitutes an Event
of Default or which with the giving or notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
2.3 Interest Rate. Loans outstanding hereunder shall bear interest at a
per annum rate equal to (i) the LIBOR Rate plus seven tenths percent (.70%) or
(ii) the Base 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 Loans and any other amounts
owing hereunder shall bear interest, payable on demand, at a rate equal to the
Base Rate plus three percent (3%). Interest will be payable in arrears on each
Interest Payment Date.
2.4 Repayment. Unless sooner paid, the principal amount of all Loans
outstanding hereunder and all accrued and unpaid interest thereon shall be due
and payable in full upon the first of the following dates or events to occur:
(i) acceleration of the maturity of the Note in accordance with the remedies
contained in Section 7.2; or (ii) upon the expiration of the Commitment on the
Termination Date. From and after the date of such termination, no Loans shall be
made.
2.5 Note. The Loans shall be evidenced by a single promissory note of
the Borrower dated the Closing Date, payable to the order of the Bank in an
amount equal to the Commitment, in the form of Annex A hereto (as amended,
modified, extended, supplemented, renewed or replaced, the "Note").
2.6 Facility Fee. In consideration of the commitments hereunder, the
Borrower agrees from and after the date hereof to and including the Termination
Date, to pay to the Bank a facility fee (the "Facility Fee") equal to ten basis
points (.10%) per annum (calculated from the date hereof on the basis of a year
of 360 days and payable for the actual number of days elapsed) on the average
daily unused portion of the Commitment. The Facility Fee shall be payable by the
Borrower quarterly in arrears on the last day of each March, June, September and
December, commencing September 30, 1997, and on the Termination Date (provided
that should the Commitment be terminated at any time prior to the Termination
Date, the entire accrued and unpaid Facility Fee shall be paid on the date of
such termination).
<PAGE> 12
2.7 Prepayments. Base Rate Loans may be prepaid in whole or in part at
any time 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 administration thereof 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 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. A certificate as to any additional amounts payable under this Section
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 on or prior to the first day of any Interest
Period (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 notice of such
determination to the Borrower, whereupon until the Bank notifies the Borrower
that the circumstances giving rise to such suspension no longer exist, the
obligations of the Bank to make or maintain LIBOR Rate Loans shall be suspended.
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 or
impossible 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, and (b) the obligations of the Bank to
make or maintain LIBOR Rate Loans shall forthwith be suspended until the Bank
shall give notice that the condition or situation which gave rise
<PAGE> 13
to the suspension shall no longer exist. If the Bank shall determine that it may
not lawfully continue to maintain and fund any of its outstanding LIBOR Rate
Loans to maturity and shall so specify in its notice to the Borrower, then the
Borrower shall immediately prepay in full the then outstanding principal amount
of all LIBOR Rate Loans, together with accrued interest thereon, and
concurrently with prepaying each such LIBOR Rate Loan, the Borrower shall borrow
a Loan as a Base Rate Loan in an equal principal amount from the Bank and the
Bank shall make such Loan. 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 or prepayment in accordance with this Section,
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 Section 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, duty or other charge of
any kind whatsoever with respect to any LIBOR Rate Loan made by it, or
its obligation to make or maintain LIBOR Rate Loans, or change the
basis of taxation of payments to the Bank in respect thereof or its
obligation to make or maintain LIBOR Rate Loans (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 received or receivable
by the Bank 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 increased 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
Section submitted by the Bank (which certificate shall include a
<PAGE> 14
description in reasonable detail of the basis for the computation) 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, and to pay to the Bank such amounts as shall
compensate the Bank for, 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 has 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 has 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 pay, 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, 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 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 the
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 the 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 the Note. The
<PAGE> 15
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 Note 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. (Winston-Salem,
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. Whenever any payment of principal of,
or interest on, the Loans or of the Facility Fee shall be due on a day which is
not a Business Day, the date for payment thereof shall be extended to the next
succeeding Business Day, except in the case of any payment of principal of, or
interest on, LIBOR Rate Loans, if the next succeeding Business Day falls in
another calendar month, the date for payment thereof shall be the next preceding
Business Day. If the date for any payment of principal is extended by operation
of law or otherwise, interest thereon shall be payable for such extended time.
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).
<PAGE> 16
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 under the Credit
Documents, the Commitment has 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 changed or 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,
impaired, substituted, surrendered 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;
(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
<PAGE> 17
Guarantor or any other guarantor) or shall be subordinated to the
claims of any Person (including, without limitation, any creditor of
any guarantor);
(vi) the Borrower may be granted indulgences generally;
(vii) any party liable for the payment of the Guaranteed
Obligations (including but not being limited to any Guarantor) may be
granted indulgences or released; or
(viii) the death, termination of existence, bankruptcy,
incapacity, lack of authority or disability of the Borrower or any one
or more of the Guarantors, and no claim need be asserted against the
personal representative, guardian, custodian, trustee or debtor in
bankruptcy or receiver of any deceased, incompetent, bankrupt or
insolvent Guarantor.
It is agreed that the Bank may release, discharge, compromise, or enter into any
accord and satisfaction with respect to any collateral or security for the
Guaranteed Obligations, or the liability of the Borrower or any of the
Guarantors, or any liability of any other person primarily or secondarily liable
on any of the Guaranteed Obligations, all without notice to or further assent by
the Guarantors, who shall remain bound hereon, notwithstanding any such
exchange, compromise, surrender, extension, renewal, acceleration, modification,
indulgence, release, discharge or accord and satisfaction.
With respect to its obligations hereunder, each of the Guarantors hereby
expressly waives (a) notice of acceptance of this Guaranty and of all extensions
or renewals of credit or other financial accommodations to the Borrower; (b)
diligence, presentment, demand for payment, protest, notice of dishonor and of
default and any and all other notices whatsoever which the Guarantors might
otherwise be entitled; (c) 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; (d) any invalidity or
disability in whole or in part at the time of the acceptance of, or at any time
with respect to, any security for the Guaranteed Obligations or with respect to
any party primarily or secondarily liable for the payment of the Guaranteed
Obligations to the Bank; (e) the fact that any security for the Guaranteed
Obligations may at any time or from time to time be in default or be
inaccurately estimated or may deteriorate in value for any cause whatsoever; and
(f) demand for payment under this Guaranty.
3.3 Reinstatement. The obligations of the Guarantors under 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
<PAGE> 18
expenses (including, without limitation, fees and expenses of counsel) incurred
by the Bank in connection with such rescission or restoration, including any
such 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, or any
similar or subsequent law. 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 (and as set forth
in Section 3.2, each Guarantor has agreed that it has no right of subrogation
until such time as the Bank has been paid in full under the Credit Documents,
the Commitment has 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).
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
<PAGE> 19
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).
The provisions of this Section 3.7 are included in this Agreement
solely for the benefit of the Guarantors and shall not be effective until such
time as the Bank has been paid in full under the Credit Documents, the
Commitment has 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.
3.8 Joinder of Additional Guarantors. The Borrower shall, from time to
time after the date hereof, join all Material Subsidiaries (who are not already
listed as Guarantors hereunder) as Guarantors hereunder by causing each such
Material Subsidiary to execute in favor of the Bank a Joinder Agreement in the
form attached as Annex B.
SECTION 4. CONDITIONS
4.1 Conditions to Closing. The effectiveness of this Agreement is
conditioned upon satisfaction of the following:
(a) Receipt of a duly executed counterpart of this Agreement
signed by the Borrower and the duly executed 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 C hereto; and
<PAGE> 20
(c) Receipt of corporate documentation for the Credit Parties,
including resolutions, bylaws, articles of incorporation, certificates
of good standing and certificates of incumbency.
4.2 Conditions to First Loan and All Subsequent Loans. The obligation
of the Bank to make the first Loan and any subsequent Loans hereunder is subject
to the satisfaction of the following conditions:
(a) Receipt of notice of borrowing;
(b) The fact that the Representations and Warranties set forth
herein are true on and as of the date such Loan is made;
(c) The fact that, immediately after such Loan is made, the
aggregate outstanding principal amount of all Loans will not exceed the
amount of the Commitment; and
(d) As to the first Loan hereunder, receipt of a certificate,
dated the date of the first Loan, signed by a principal financial
officer of the Borrower to the effect that (i) no condition or event
which constitutes an Event of Default or which with the giving or
notice or lapse of time or both would, unless cured or waived, become
an Event of Default has occurred and is continuing on the date of the
first Loan and (ii) the Representations and Warranties set forth herein
are true on and as of the date of the first Loan hereunder.
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
<PAGE> 21
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 Loans 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.
5.8 Compliance with ERISA. (a) The Borrower and each member of the
Controlled Group have fulfilled their obligations under the minimum funding
standards of ERISA and the Code with respect to each Plan and are in compliance
in all material respects with the presently applicable provisions of ERISA and
the Code, and have not incurred any liability to the PBGC or a Plan under Title
IV of ERISA.
(b) Neither the Borrower nor any member of the Controlled
Group is or ever has been obligated to contribute to any Multiemployer Plan.
5.9 Taxes. There have been filed on behalf of the Borrower and its
subsidiaries all Federal, state and local income, excise, property and other tax
returns which are required to be filed by them and all taxes due pursuant to
such returns or pursuant to any assessment received by or on behalf of the
Borrower or any subsidiary have been paid. The charges, accruals and reserves on
the books of the Borrower and its subsidiaries in respect of taxes or other
governmental charges are, in the opinion of the Borrower, adequate. United
States income tax returns of the Borrower and its subsidiaries have been
examined and closed through the fiscal year ended December 31, 1995.
5.10 Environmental Matters. (a) Neither the Borrower nor any subsidiary
is subject to any Environmental Liability which is likely to have a material
adverse effect on
<PAGE> 22
the business, financial position, results of operations or prospects of the
Borrower or any of its subsidiaries and neither the Borrower nor any subsidiary
has been designated as a potentially responsible party under CERCLA or under
any state statute similar to CERCLA. None of the Properties have been
identified on any current or proposed (i) National Priorities List under
40 C.F.R. Section 300, (ii) CERCLIS list or (iii) any list arising from a state
statute similar to CERCLA.
(b) No Hazardous Materials have been or are being used,
produced, manufactured, processed, generated, stored, disposed of, managed at,
or shipped or transported to or from the Properties or are otherwise present at,
on, in or under the Properties, or, to the best of the knowledge of the
Borrower, at or from any adjacent site or facility, except for Hazardous
Materials, such as cleaning solvents, pesticides and other materials used,
produced, manufactured, processed, generated, stored, disposed of, and managed
in the ordinary course of business in compliance with all applicable
Environmental Requirements.
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
<PAGE> 23
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 and a
complete listing of all of the Borrower's Material Subsidiaries or a
statement that since submission of the previous financial statements
there has been no change to the Borrower's Material Subsidiaries).
(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; Payment of Taxes. The Borrower will, and will
cause each of its subsidiaries and each member of the Controlled Group to,
comply with applicable laws (including but not limited to ERISA), regulations
and similar requirements of governmental authorities (including but not limited
to PBGC), except where the necessity of such compliance is being contested in
good faith through appropriate proceedings. The Borrower will, and will cause
each of its subsidiaries to, pay promptly when due all taxes, assessments,
governmental charges, claims for labor, supplies, rent and other obligations
which, if unpaid, might become a lien against the property of the Borrower or
any subsidiary, except liabilities being contested in good faith and against
which, if requested by the Bank, the Borrower will set up reserves satisfactory
to the Bank.
<PAGE> 24
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) Ratio of Consolidated Funded Debt to Consolidated EBITDA.
As of the last day of each fiscal quarter, the ratio of Consolidated
Funded Debt to Consolidated EBITDA for such fiscal quarter and the
immediately preceding three fiscal quarters (on a rolling four fiscal
quarter basis), will not exceed 3.0 to 1.0.
(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.
6.6 Incurrence of Consolidated Funded Debt. The Borrower will not, nor
will it permit any of its subsidiaries to, create, assume, incur or suffer to
exist any Consolidated Funded Debt except:
(a) capital lease obligations and Consolidated Funded Debt
incurred to provide all or a portion of the purchase price or cost of
construction of an asset, provided that (i) such Funded Debt when
incurred will not exceed the purchase price or cost of construction of
the asset, and (ii) no such Funded 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 Consolidated Funded Debt 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
<PAGE> 25
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
(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 in the aggregate $2,000,000;
(c) Investments in and to a Credit Party or any wholly-owned
subsidiary of the Borrower; and
<PAGE> 26
(d) other Investments in an aggregate principal amount (on a
cost basis) at any time of up to $5,000,000.
6.10 Sales of Assets. The Borrower will not, nor will it permit any
subsidiary to, sell, lease or otherwise transfer all or any substantial part of
its assets to, any other Person, or discontinue or eliminate any business line
or segment, provided that the foregoing limitation shall not prohibit, during
any fiscal quarter, a transfer of assets or the discontinuance or elimination of
a business line or segment (in a single transaction or in a series of related
transactions) unless the aggregate assets to be so transferred or utilized in a
business line or segment to be so discontinued, when combined with all other
assets transferred, and all other assets utilized in all other business lines or
segments discontinued, during such fiscal quarter and the immediately preceding
seven fiscal quarters, either (x) constituted more than 20% of Consolidated
Total Assets at the end of the eighth fiscal quarter immediately preceding such
fiscal quarter, or (y) contributed more than 20% of Consolidated Operating
Profits during the eight fiscal quarters immediately preceding such fiscal
quarter.
6.11 Maintenance of Existence. The Borrower shall, and shall cause each
subsidiary to, maintain its corporate existence and carry on its business in
substantially the same manner and in substantially the same fields as such
business is now carried on and maintained.
6.12 Use of Proceeds. The proceeds of the Loans will be used by the
Borrower for general working capital purposes and acquisitions.
SECTION 7. EVENTS OF DEFAULT
7.1 Event of Default. The occurrence of any one or more of the
following events shall constitute an "Event of Default" under this Agreement:
(a) the Borrower shall fail to pay when due any principal of
any Loan or shall fail to pay any interest on any Loan within five
Business Days after such interest shall become due, or shall fail to
pay any fee or other amount payable hereunder within five Business Days
after such fee or other amount becomes due; or
(b) the Borrower or any Guarantor shall fail to observe or
perform any covenant or agreement contained in this Agreement (other
than those covered by clause (a) above); or
(c) any representation, warranty, certification or statement
made by the Credit Parties in Section 5 or in any certificate,
financial statement or other document delivered pursuant to this
Agreement shall prove to
<PAGE> 27
have been incorrect in any material respect when made (or deemed made);
or
(d) the Borrower, any Guarantor or any subsidiary shall fail
to make any payment in respect of Funded Debt outstanding (other than
the Note) when due or within any applicable grace period; or
(e) any event or condition shall occur which results in the
acceleration of the maturity of Funded Debt outstanding of the
Borrower, any Guarantor or any subsidiary or the purchase of such
Funded Debt by the Borrower (or its designee) or such Guarantor (or its
designee) or such subsidiary (or its designee) prior to the scheduled
maturity thereof or enables (or, with the giving of notice or lapse of
time or both, would enable) the holders of such Funded Debt or any
Person acting on such holders' behalf to accelerate the maturity
thereof or require the purchase thereof by the Borrower (or its
designee) or such Guarantor (or its designee) or such subsidiary (or
its designee) prior to the scheduled maturity thereof, without regard
to whether such holders or other Person shall have exercised or waived
their right to do so;
(f) the Borrower or any Guarantor or any subsidiary shall
commence a voluntary case or other proceeding seeking liquidation,
reorganization or other relief with respect to itself or its debts
under any bankruptcy, insolvency or other similar law now or hereafter
in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any
substantial part of its property, or shall consent to any such relief
or to the appointment of or taking possession by any such official in
an involuntary case or other proceeding commenced against it, or shall
make a general assignment for the benefit of creditors, or shall fail
generally to pay its debts as they become due, or shall take any
corporate action to authorize any of the foregoing; or
(g) an involuntary case or other proceeding shall be commenced
against the Borrower or any Guarantor or any subsidiary seeking
liquidation, reorganization or other relief with respect to it or its
debts under any bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any
substantial part of its property, and such involuntary case or other
proceeding shall remain undismissed and unstayed for a period of 60
days; or an order for relief shall be entered against the Borrower or
any Guarantor or any subsidiary under the federal bankruptcy laws as
now or hereafter in effect; or
(h) the Borrower or any member of the Controlled Group shall
fail to pay when due any material amount which it shall have become
liable to
<PAGE> 28
pay to the PBGC or to a Plan under Title IV of ERISA; or the PBGC shall
institute proceedings under Title IV of ERISA to terminate or to cause
a trustee to be appointed to administer any such Plan or Plans or a
proceeding shall be instituted by a fiduciary of any such Plan or Plans
to enforce Section 515 or 4219(c)(5) of ERISA and such proceeding shall
not have been dismissed within 30 days thereafter; or a condition shall
exist by reason of which the PBGC would be entitled to obtain a decree
adjudicating that any such Plan or Plans must be terminated; or the
Borrower or any other member of the Controlled Group shall enter into,
contribute or be obligated to contribute to, terminate or incur any
withdrawal liability with respect to, a Multiemployer Plan; or
(i) one or more judgments or orders for the payment of money
in an aggregate amount in excess of $1,000,000.00 shall be rendered
against the Borrower or any Guarantor or any subsidiary and such
judgment or order shall continue unsatisfied and unstayed for a period
of 30 days; or
(j) a federal tax lien in excess of $100,000.00 shall be filed
against the Borrower under Section 6323 of the Code or a lien of the
PBGC shall be filed against the Borrower under Section 4068 of ERISA
and in either case such lien shall remain undischarged for a period of
25 days after the date of filing; or
(k) (i) any Person or two or more Persons acting in concert
shall have acquired beneficial ownership (within the meaning of Rule
13d-3 of the Securities and Exchange Commission under the Securities
Exchange Act of 1934) of 20% or more of the outstanding shares of the
voting stock of the Borrower; or (ii) as of any date a majority of the
Board of Directors of the Borrower consists of individuals who were not
either (A) directors of the Borrower as of the corresponding date of
the previous year, (B) selected or nominated to become directors by the
Board of Directors of the Borrower of which a majority consisted of
individuals described in clause (A), or (C) selected or nominated to
become directors by the Board of Directors of the Borrower of which a
majority consisted of individuals described in clause (A) and
individuals described in clause (B).
7.2 Remedies. Upon the occurrence of an Event of Default, and at any
time thereafter, the Bank may immediately terminate the Commitment which shall
thereupon terminate, and by notice to the Borrower (i) declare the unpaid
principal of the Note, together with any accrued and unpaid interest owing
thereon, to be, and the Note and the outstanding Loans and all other
indebtedness or obligations owing hereunder or under any of the other Credit
Documents or in connection herewith or therewith, shall thereupon become
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
<PAGE> 29
rights of set off. Notwithstanding the foregoing, in the case of an Event of
Default described in clauses (f) or (g) of Section 7.1 relating to bankruptcy
and insolvency, the Note, the Loans, and all accrued interest, fees and other
indebtedness and other amounts owing hereunder or under any of the other Credit
Documents 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: Wachovia Bank, N.A.
Post Office Box 27886
Raleigh, North Carolina 27601-7886
Attn: Ms. Beth Duffy
Phone: (919) 755-7979
Fax: (919) 755-7826
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 Note and the Loans
and other amounts owing by the Borrower or any Guarantor hereunder or under the
other Credit Documents, regardless of whether the Note and the Loans 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, the respective successors and permitted assigns
of the parties
<PAGE> 30
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 delivery of the Credit Documents (including
reasonable fees and expenses of Bank counsel) 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.
<PAGE> 31
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 Loans and termination of
Commitment 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. Consent to Jurisdiction. The Borrower and each Guarantor (a)
submits to personal jurisdiction in the State of North Carolina, the courts
thereof and the United States District Courts sitting therein, for the
enforcement of this Agreement, the Note and the other Credit Documents, (b)
waives any and all personal rights under the law of any jurisdiction to object
on any basis (including, without limitation, inconvenience of forum) to
jurisdiction or venue within the State of North Carolina for the purpose of
litigation to enforce this Agreement, the Note or the other Credit Documents,
and (c) agrees that service of process may be made upon it by personal delivery
or certified or registered mail in the manner prescribed in Section 8.1 for the
giving of notice to the Borrower (the address for notices to each Guarantor
being set forth on the signature pages hereof). Nothing herein contained,
however, shall prevent the Bank from bringing any action or exercising any
rights against any security and against the Borrower or any Guarantor
personally, and against any assets of the Borrower or any Guarantor, within any
other state or jurisdiction.
8.12 Participations. The Bank shall have the right, at its sole
discretion and at any time or from time to time, to invite participations to
participate in the Loans and the Borrower agrees to execute any documents
reasonably requested by the Bank in connection with any such participation(s).
The Bank may disclose to any participants or prospective participants any
information or other data or material in the Bank's possession relating to the
Borrower, its subsidiaries, the Guarantors, the Loans, and/or the Credit
Documents, without further consent of, or notice to the Borrower.
[The Remainder of this Page Intentionally Left Blank]
<PAGE> 32
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: Vice President
Address for Notice:
3151 17th Street Extension
Wilmington, NC 28412
Attention: Rudy C. Howard
Phone: (910) 772-6860
Attest: Fax: (910) 772-7056
Fred B. Davenport, Jr.
- ----------------------
Secretary
[Corporate Seal]
<PAGE> 33
IN WITNESS WHEREOF, this Loan Agreement has been executed this day by
duly authorized officers of the undersigned parties.
GUARANTORS: PPD PHARMACO, INC., a Texas corporation
By: /s/ Rudy C. Howard
------------------
Name: Rudy C. Howard
Title: Vice President
Address for Notice:
3151 17th Street Extension
Wilmington, NC 28412
Attention: Rudy C. Howard
Phone: (910) 772-6860
Attest: Fax: (910) 772-7056
/s/ Fred B. Davenport, Jr.
- --------------------------
Secretary
[Corporate Seal]
APBI ENVIRONMENTAL SCIENCES GROUP, INC.,
a Virginia corporation
By: /s/ Rudy C. Howard
------------------
Name: Rudy C. Howard
Title: Vice President
Address for Notice:
3151 17th Street Extension
Wilmington, NC 28412
Attention: Rudy C. Howard
Phone: (910) 772-6860
Attest: Fax: (910) 772-7056
/s/ Fred B. Davenport, Jr.
- --------------------------
Secretary
[Corporate Seal]
<PAGE> 34
IN WITNESS WHEREOF, this Loan Agreement has been executed this day by
duly authorized officers of the undersigned parties.
BANK: WACHOVIA BANK, N.A.
By: /s/ William Farr IV
-------------------
Name: William Farr IV
Title: Assistant Vice President
<PAGE> 35
Schedule I
List of Material Subsidiaries
PPD PHARMACO, INC., a Texas corporation
APBI ENVIRONMENTAL SCIENCES GROUP, INC., a Virginia corporation
<PAGE> 36
ANNEX A
PROMISSORY NOTE
$50,000,000.00 July ____, 1997
FOR VALUE RECEIVED, the undersigned, PHARMACEUTICAL PRODUCT
DEVELOPMENT, INC., a North Carolina corporation (the "Borrower"), promises to
pay to the order of WACHOVIA BANK, N.A., its endorsees, successors and assigns
(the "Bank") on or before the Termination Date the principal sum of FIFTY
MILLION AND NO/100 DOLLARS ($50,000,000.00) 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.
TIME IS OF THE ESSENCE OF THIS CONTRACT. In addition and not in
limitation of the foregoing and the provisions of the Loan Agreement, the
Borrower further agrees to pay all expenses of collection, including reasonable
attorneys' fees, if this Note shall be collected by law or through an attorney
at law, or in bankruptcy, receivership or other court proceedings.
This Note shall be governed by and construed in accordance with the
laws of the State of North Carolina. This Note is intended to be effective as an
instrument executed under seal.
<PAGE> 37
PRESENTMENT, DEMAND, PROTEST, NOTICE OF DISHONOR AND NOTICE OF ANY KIND
ARE HEREBY WAIVED BY THE BORROWER.
Executed under hand and seal of the Borrower on the date first above
written.
PHARMACEUTICAL PRODUCT DEVELOPMENT, INC.,
a North Carolina corporation
By:
----------------------
Name: ____________________
Title: ___________________
Attest:
- ---------------------------
_________________ Secretary
[Corporate Seal]
<PAGE> 38
ANNEX B
Form of Joinder Agreement
THIS JOINDER AGREEMENT (the "Agreement"), dated as of _________, 19__,
is by and between _________________________________________________________, a
________________ (the "Applicant Guarantor"), and WACHOVIA BANK, N.A. under that
certain Loan Agreement dated as of July ____, 1997 (as amended, modified,
supplemented, renewed and extended, the "Loan Agreement") by and among
PHARMACEUTICAL PRODUCT DEVELOPMENT, INC., a North Carolina corporation, as
Borrower, and the other Guarantors identified therein and Wachovia Bank, N.A.
All of the defined terms in the Loan Agreement are incorporated herein by
reference.
The Applicant Guarantor is a Material Subsidiary and desires to become
a Guarantor under the Loan Agreement.
Accordingly, the Applicant Guarantor hereby agrees as follows with the
Bank:
1. The Applicant Guarantor hereby acknowledges, agrees and confirms
that, by its execution of this Agreement, the Applicant Guarantor will be deemed
to be a party to the Loan Agreement and a "Guarantor" for all purposes of the
Loan Agreement and the other Credit Documents, and shall have all of the
obligations of a Guarantor thereunder as if it had executed the Loan Agreement
and the other Credit Documents. The Applicant Guarantor agrees to be bound by,
all of the terms, provisions and conditions contained in the Credit Documents,
including without limitation (i) all of the affirmative and negative covenants
set forth in Section 6 the Loan Agreement and (ii) all of the undertakings and
waivers set forth in Section 3 of the Loan Agreement. Without limiting the
generality of the foregoing terms of this paragraph 1, the Applicant Guarantor
hereby (A) jointly and severally together with the other Guarantors, guarantees
to the Bank as provided in Section 3 of the Loan Agreement, the prompt payment
and performance of the Guaranteed Obligations in full when due (whether at
stated maturity, as a mandatory prepayment, by acceleration, as a mandatory cash
collateralization or otherwise) strictly in accordance with the terms thereof
and (B) agrees that if any of the Guaranteed Obligations are not paid or
performed in full when due (whether at stated maturity, as a mandatory
prepayment, by acceleration or otherwise), the Applicant Guarantor will, jointly
and severally together with the other Guarantors, promptly pay and perform 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, as a mandatory cash
collateralization or otherwise) in accordance with the terms of such extension
or renewal.
<PAGE> 39
2. The Applicant Guarantor acknowledges and confirms that it has
received a copy of the Loan Agreement and the Schedules and Exhibits thereto.
The information on the Schedules to the Loan Agreement are amended to provide
the information shown on the attached Schedule A.
3. The Applicant Guarantor hereby waives acceptance by the Bank of the
guaranty by the Applicant Guarantor under Section 3 of the Loan Agreement upon
the execution of this Joinder Agreement by the Applicant Guarantor.
4. This Agreement may be executed in two or more counterparts, each of
which shall constitute an original but all of which when taken together shall
constitute one contract.
5. This Agreement shall be governed by and construed and interpreted in
accordance with the laws of the State of North Carolina.
IN WITNESS WHEREOF, the Applicant Guarantor has caused this Joinder
Agreement to be duly executed by its authorized officers for the benefit of the
Bank as of the day and year first above written.
APPLICANT GUARANTOR
By:
----------------------
Name: ____________________
Title: ___________________
Attest:
- ---------------------------
_________________ Secretary
[Corporate Seal]
Address for Notices:
_________________________
_________________________
Attn:
Telephone: ______________
Telecopy: _______________
Acknowledged and accepted:
WACHOVIA BANK, N.A.
By:
---------------------
Name: ___________________
Title: __________________
<PAGE> 40
Wachovia Bank, N.A.
July ___, 1997
Page 1
ANNEX C
[Closing Date]
Wachovia Bank, N.A.
Post Office Box 27886
Raleigh, North Carolina 27601-7886
Re: $50 Million Loan Agreement dated as of the date hereof (the "Loan
Agreement") among Pharmaceutical Product Development, Inc., a North
Carolina corporation, the Guarantors identified therein and Wachovia
Bank, N.A. Terms used but not otherwise defined shall have the meanings
provided in the Loan Agreement.
Ladies and Gentlemen:
I serve as General Counsel to Pharmaceutical Product Development, Inc.,
a North Carolina corporation (the "Borrower"), and those subsidiaries of the
Borrower which are Guarantors under the Loan Agreement (collectively with the
Borrower, the "Credit Parties").
This opinion is given in accordance with the requirements of Section
4.1(b) of the Loan Agreement.
In my capacity as General Counsel, I have participated in the
preparation of the Loan Agreement and the other Credit Documents, and have
examined copies of each of the foregoing documents executed by the Credit
Parties. I also have examined such certificates, documents and records, and have
made such examination of law, as I have deemed necessary to enable me to render
the opinions expressed below. In addition, I have examined and relied as to
matters of fact upon representations and warranties contained in the Credit
Documents and in certificates, copies of which have been furnished to you, in
connection with the Credit Documents.
For purposes of paragraph 4 below, I have assumed that the Credit
Documents are the legal, valid and binding obligations of the parties thereto
other than the Credit Parties, enforceable against them in accordance with their
respective terms.
The opinions expressed below are limited to matters governed by the
internal laws of the State of North Carolina and the federal laws of the United
States of America.
<PAGE> 41
Wachovia Bank, N.A.
July ___, 1997
Page 2
Whenever the phrase "to the best of my knowledge" is used herein, it
refers to my actual knowledge learned by me in my position as General Counsel to
the Credit Parties without investigation.
Based on the foregoing, and subject to the qualifications stated
herein, I am of the opinion that:
1. Each of the Credit Parties is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation as identified in the Loan Agreement and is qualified to carry on
its business in the manner as contemplated under the Credit Documents and as now
conducted.
2. Each of the Credit Parties has all requisite corporate power and
authority, and the legal right, to make, execute, deliver and perform the Loan
Agreement and the other Credit Documents to which it is a party and to borrow
and accept extensions of credit or give a guaranty in respect thereof, as
appropriate, and has taken all necessary corporate action to authorize the
execution, delivery and performance of the Loan Agreement and other Credit
Documents to which it is a party.
3. No consent or authorization of, filing with, notice to or other
similar act by or in respect of, any federal court or Governmental Authority or
any other Person is required to be obtained or made by or on behalf of any
Credit Party on or prior to the date hereof in connection with the execution,
delivery or performance of the Credit Documents, except for consents, approvals,
authorizations or other actions as have been obtained or made.
4. To the best of my knowledge, no claim, litigation or proceeding
before an arbitrator or governmental authority is pending or 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. The Loan Agreement, and each of the other Credit Documents to which
it is a party, have been duly executed and delivered by each Credit Party and
constitute the legal, valid and binding obligations of each Credit Party,
enforceable in accordance with their respective terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforceability of creditors' rights
generally and by general equitable principles (whether enforcement is sought by
proceedings in equity or at law).
6. The execution, delivery and performance by each Credit Party of the
Loan Agreement and the other Credit Documents to which it is a party, the
borrowings and
<PAGE> 42
Wachovia Bank, N.A.
July ___, 1997
Page 3
guaranties thereunder and the use of the proceeds thereof will not violate or
otherwise contravene the articles of incorporation or bylaws of any of the
Credit Parties or any Requirement of Law, or, to the best of my knowledge, any
contractual obligation of any of the Credit Parties.
The opinions expressed herein do not purport to cover, and I express no
opinion with respect to, the applicability of Section 548 of the federal
Bankruptcy Coder or any comparable provision of state law, including any
provisions related to fraudulent conveyances. I call your attention to the fact
that certain cases have held that an obligation of a corporation incurred to
purchase such corporation's stock is subordinate to the claims of general
creditors upon the bankruptcy or insolvency of the corporation. In addition, I
express no opinion as to whether a subsidiary may guarantee, become a joint and
several obligor or otherwise become liable for, or pledge its assets to secure,
indebtedness incurred by its parent or other subsidiary of its parent except to
the extent that such subsidiary may be determined to have benefited from the
incurrence of such indebtedness by its parent or such other subsidiary, or as to
whether such benefit may be measured other than by the extent to which the
proceeds of the indebtedness incurred by its parent or such other subsidiary are
directly or indirectly made available to such subsidiary for its corporate
purposes.
This opinion is rendered solely for your benefit, and the benefit of
your successors and assigns, in connection with the transactions described
above. This opinion may not be used or relied upon by any other person without
my prior written consent.
Sincerely yours,
Fred B. Davenport, Jr.
General Counsel
cc: Mr. Rudy C. Howard
<PAGE> 43
PROMISSORY NOTE
<PAGE> 44
$50,000,000.00 August 7, 1997
FOR VALUE RECEIVED, the undersigned, PHARMACEUTICAL PRODUCT
DEVELOPMENT, INC., a North Carolina corporation (the "Borrower"), promises to
pay to the order of WACHOVIA BANK, N.A., its endorsees, successors and assigns
(the "Bank") on or before the Termination Date the principal sum of FIFTY
MILLION AND NO/100 DOLLARS ($50,000,000.00) 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.
TIME IS OF THE ESSENCE OF THIS CONTRACT. In addition and not in
limitation of the foregoing and the provisions of the Loan Agreement, the
Borrower further agrees to pay all expenses of collection, including reasonable
attorneys' fees, if this Note shall be collected by law or through an attorney
at law, or in bankruptcy, receivership or other court proceedings.
This Note shall be governed by and construed in accordance with the
laws of the State of North Carolina. This Note is intended to be effective as an
instrument executed under seal.
<PAGE> 45
PRESENTMENT, DEMAND, PROTEST, NOTICE OF DISHONOR AND NOTICE OF ANY KIND
ARE HEREBY WAIVED BY THE BORROWER.
Executed under hand and seal of the Borrower on the date first above
written.
PHARMACEUTICAL PRODUCT DEVELOPMENT, INC.,
a North Carolina corporation
By: /s/ Rudy C. Howard
------------------
Name: Rudy C. Howard
Title: Vice President & Treasurer
Attest:
/s/ Fred B. Davenport, Jr.
- --------------------------
Secretary
[Corporate Seal]
<PAGE> 1
FIRST AMENDMENT TO LOAN AGREEMENT
THIS FIRST AMENDMENT TO LOAN AGREEMENT, dated this 11th day of August,
1997, amends that certain Loan Agreement dated June 25, 1997 (the "Loan
Agreement") by and among Pharmaceutical Product Development, Inc., the
Guarantors identified in the Loan Agreement and First Union National Bank,
successor-in-interest to First Union National Bank of North Carolina.
For and in consideration of the mutual promises and covenants herein
contained and other good and valuable consideration, receipt and sufficiency of
which is hereby acknowledged, the parties amend the Loan Agreement as follows:
1. A definition of "Material Subsidiary" is added to Section 1 of the
Loan Agreement, to read as follows:
"Material Subsidiary" means each subsidiary of the Borrower with either
a ten percent (10%) or greater revenue contribution to the total revenue of the
Borrower and its subsidiaries determined on a consolidated basis, or control or
ownership of ten percent (10%) or more of the total assets of the Borrower and
its subsidiaries determined on a consolidated basis.
2. Section 3.8 of the Loan Agreement is rewritten as follows:
"3.8 Joinder of Additional Guarantors. Borrower shall from time to time
after the date hereof, join all Material Subsidiaries (who are not already
listed as Guarantors hereunder) as Guarantors hereunder by causing each such
Material Subsidiary to execute in favor of the Bank a Joinder Agreement in the
form attached as Annex C."
3. Section 6.9(c) is rewritten as follows:
"(c) Investments in and to a Credit Party or any wholly-owned
subsidiary of the Borrower; and".
The Loan Agreement, as herein amended, shall continue in full force and
effect.
<PAGE> 2
IN WITNESS WHEREOF, the parties have caused this First Amendment to
Loan Agreement to be executed as of the date first hereinabove stated.
BORROWER Pharmaceutical Product Development, Inc.,
a North Carolina corporation
By: /s/ Fred B. Davenport, Jr.
--------------------------
Name: Fred B. Davenport, Jr.
Title: Vice President
GUARANTORS: PPD Pharmaco, Inc.,
a Texas corporation
By: /s/ Fred B. Davenport, Jr.
--------------------------
Name: Fred B. Davenport, Jr.
Title: Vice President
APBI Environmental Sciences Group, Inc.,
a Virginia Corporation
By: /s/ Fred B. Davenport, Jr.
--------------------------
Name: Fred B. Davenport, Jr.
Title: Vice President
BANK: First Union National Bank
By: /s/ Mendel Lay, Jr.
-------------------
Name: Mendel Lay, Jr.
Title: Vice President
<PAGE> 1
LEASE AGREEMENT BY AND BETWEEN
PPD PHARMACO, INC., as tenant
AND
WEEKS REALTY, L.P., as landlord
at
Perimeter Park West, Morrisville, NC
<PAGE> 2
TABLE OF CONTENTS
1. PREMISES AND TERM.
2. BASE RENT, OPERATING EXPENSES, AND SECURITY DEPOSIT.
3. COMPLIANCE WITH LAWS AND USE.
4. REPAIR AND MAINTENANCE.
5. ALTERATIONS.
6. SIGNS.
7. INSPECTION.
8. UTILITIES.
9. ASSIGNMENT AND SUBLETTING.
10. FIRE AND CASUALTY DAMAGE.
11. LIABILITY.
12. CONDEMNATION.
13. HOLDING OVER AND TERMINATION.
14. QUIET ENJOYMENT.
15. EVENTS OF DEFAULT.
16. REMEDIES.
17. LANDLORD'S LIEN.
18. MORTGAGES.
19. MECHANIC'S LIENS.
20. NOTICES.
21. BROKER'S CLAUSE.
22. LANDLORD'S LIABILITY.
23. RULES AND REGULATIONS.
24. HAZARDOUS MATERIALS.
25. LANDLORD'S RIGHT TO SUBSTITUTE THE PREMISES.
26. COVENANT OF TENANT.
27. MISCELLANEOUS.
EXHIBIT A- THE LAND
EXHIBIT B- CONSTRUCTION PORTION
EXHIBIT C- PLANS AND SPECIFICATIONS
EXHIBIT C-1- PRELIMINARY PLANS AND SPECIFICATIONS
i
<PAGE> 3
EXHIBIT C-2- SHELL BUILDING DESIGN SCHEDULE
EXHIBIT D- RULES AND REGULATIONS
EXHIBIT E- RIGHT OF FIRST REFUSAL
ii
<PAGE> 4
LEASE AGREEMENT
THIS LEASE AGREEMENT (the "Lease"), is made and entered into as of the
9th day of July, 1997, by and between WEEKS REALTY, L.P., a Georgia limited
partnership (the "Landlord"), and PPD PHARMACO, INC., a Texas corporation (the
"Tenant").
W I T N E S S E T H:
1. PREMISES AND TERM.
(a) PREMISES. In consideration of the obligation of Tenant to
pay rent as herein provided, and in consideration of the other terms,
provisions and covenants hereof, Landlord hereby leases to Tenant and
Tenant hereby leases from Landlord, certain premises to be comprised of
99,684 rentable square feet (the "Premises") in a building to be
constructed by Landlord consisting of four floors in Perimeter Park
West (the "Building") situated on certain land (the "Land") in
Morrisville, the County of Wake, State of North Carolina, more
particularly described on Exhibit A, attached hereto and incorporated
herein by reference, together with all rights, privileges, easements,
appurtenances and immunities belonging to or in any way pertaining to
the Premises.
The measurement of the Premises shall be conducted in
accordance with BOMA standards, 1996 edition, currently applicable for
a Class A office building comparable to the Building. Any upfit
performed by Landlord to prepare the Premises for occupancy by Tenant
shall be conducted in a good and workmanlike manner, and Landlord shall
warrant the construction of the improvements for a period of one year
from the Commencement Date. The taking of possession by Tenant shall be
deemed conclusively to establish that each portion of the Premises and
any improvements thereto are in good and satisfactory condition as of
the date Tenant commenced occupancy of that portion of the Premises,
except for latent defects and punchlist items. Tenant and Landlord
shall complete a punchlist of items requiring repair that are the
responsibility of Landlord within thirty (30) days of the Commencement
Date. Tenant further acknowledges that no representations as to the
repair of the Premises, nor promises to alter, remodel or improve the
Premises have been made by Landlord unless such representations or
promises are expressly set forth in this Lease. Within five days of the
Commencement Date, Tenant shall, upon demand of Landlord, execute and
deliver to Landlord a letter of acceptance of delivery of the Premises,
acknowledging the Commencement Date.
All upfit of the Premises shall be performed by Landlord in
accordance with the final plans and specifications for the Premises
(the "Plans") which are subject to the approval of Landlord and Tenant,
a copy of which are attached hereto and made a part hereof as Exhibit
C. Exhibit C-1 contains a preliminary outline of the upfit of the
Premises and shall be modified by the mutual approval of Landlord and
Tenant as the plans and specifications are finalized. Landlord shall
conduct the upfit of the Premises in accordance with the Plans which
have been mutually and reasonably approved by Landlord and Tenant and
shall provide an upfit allowance for such purposes in accordance with
the mutually approved Plans (the "Upfit Allowance"). Tenant
1
<PAGE> 5
shall review the Plans to provide its input with respect to all
aspects of the Plans, including, but not limited to, the specific needs
of Tenant with respect to HVAC, and Landlord shall act reasonably to
accommodate the specific needs of Tenant with respect to the HVAC and
electrical systems in the Building. Any amounts incurred in the upfit
of the Premises in excess of the Upfit Allowance (the "Excess") due to
modifications requested by Tenant to the Plans after their mutual
approval shall be borne by Tenant and paid by Tenant to Landlord within
thirty days of demand made by Landlord. Failure by Tenant to pay the
Excess upon demand as aforesaid is an event of default hereunder, and
in addition, to all other remedies available to Landlord at law, or in
equity for such event of default, Landlord may recover from Tenant the
cost it incurs in preparing the Premises for another tenant. As a
preliminary outline, Exhibit C-1 is to be reviewed and mutually
approved and finalized by Landlord and Tenant, and once finalized the
final version of Exhibit C-1 shall be attached hereto and made a part
hereof as Exhibit C.
Provided there shall be no default or event of default by
Tenant hereunder, Landlord shall advance Tenant $500,000.00 for use by
Tenant in conducting certain upfit at the Premises (the "Improvement
Allowance") on or prior to the Commencement Date. The Improvement
Allowance shall be added to the base rent (as hereinafter defined)
payable hereunder in the amount of $.77 per rentable square foot as an
increase therein over the term of the Lease over the amount of the base
rent in Section 2 hereof and payable in equal monthly payments over the
term of the Lease as a portion of the base rent hereunder.
Landlord shall act reasonably to allow Tenant reasonable
access to the Premises at least fifteen days prior to the Commencement
Date to install its furniture, and telephone and computer systems.
Tenant covenants and agrees to conduct its actions in such a manner to
not disturb the preparation by Landlord of the Premises for occupancy
by Tenant. Upon the entry by Tenant onto the Premises, this Lease shall
be deemed to apply with respect to the requirements that Tenant carry
the insurance policies required under this Lease, and that Tenant shall
indemnify, defend and hold harmless Landlord in accordance with the
provisions of this Lease.
(b) TERM.
TO HAVE AND TO HOLD the same for a term of one hundred and
twenty (120) months commencing thirteen months from the date the Lease
has been fully executed and delivered (the "Commencement Date"), and
ending 120 months thereafter, unless sooner terminated pursuant to the
provisions hereof (the "Termination Date"). The Commencement Date and
Termination Date shall be extended due to delays beyond the control of
Landlord, including, but not limited to, acts or omissions of Tenant,
force majeure, delays in obtaining permits, licenses or other
approvals, acts of God, delays caused by Tenant, and/or inclement
weather, including site conditions or winter weather that prohibit or
adversely affect construction (the "Excused Delays"). In the event the
Commencement Date has not occurred by July 1, 1998 (with such date
being extended for any Excused Delays), Landlord shall credit against
the first installment(s) of base rent due hereunder from Tenant an
amount equal to one day's base rent
2
<PAGE> 6
for each day the Commencement Date is delayed. The aforesaid monetary
amounts shall act as a full and complete remedy to Tenant for the delay
by Landlord in delivering the Premises. Landlord shall act reasonably
to provide Tenant at least sixty days prior written notice of the
Commencement Date.
(c) Option to Renew.
Tenant shall have the option to renew the term of the Lease
for two renewal periods each a Renewal Term of five lease years in
duration, provided that Tenant shall not be in default under the Lease
on the date such rights are exercised, or on the date either Renewal
Term shall commence. The date of the commencement of each Renewal Term
shall be the day after the expiration of the then current term of the
Lease, as renewed (unless sooner terminated as provided herein).
All terms and conditions of this Lease shall be in effect
during a Renewal Term (including the right of Landlord to increase base
rent as provided in paragraph 2 of the Lease), except that (i) the base
rent paid by Tenant during a Renewal Term shall be the then market
rental rate (the "Market Rent") in buildings in the Research Triangle
Park, North Carolina area of similar size, age, construction, with
similar amenities and landscaping, and similar occupancy levels to the
Building, and (ii) upon each exercise of the right for a Renewal Term,
a right to renew shall lapse. In the event that Landlord and Tenant
cannot agree upon the Market Rent, this Lease shall terminate and the
option to renew provided to Tenant hereunder shall be null and void and
of no further force and effect.
(d) Additional Space.
At any time prior to the first day of the twenty-fifth month
(the "Election Date") of the term of this Lease and (i) provided there
is no default or event of default under this Lease by Tenant at the
time such right is exercised or upon the Election Date, and (ii) that
upon Tenant's notice ("Notice") to Landlord of its need for a minimum
of 20,000 additional rentable square feet (the "Additional Space"),
Landlord shall commence construction of a new building (the "New
Building") adjacent to the Building. The New Building shall consist of
at least 100,000 rentable square feet, and shall be connected to the
Building by a covered walkway (the "Walkway") over which shall be
located office space for the New Building, all of which shall be in
accordance with plans and specifications for the New Building, as
mutually and reasonably approved by Landlord and Tenant.
During the period of construction of the New Building, Tenant shall
allow the use by Landlord of a certain portion of the Premises (the
"Construction Portion") as outlined on Exhibit B, attached hereto and
made a part hereto, as reasonably determined by Landlord, for the
connection of the Walkway to the Building. Base rent shall be abated
for the Construction Portion during the period of its use by Landlord,
and Tenant shall remove all of its personal property therefrom during
the period of construction. Once construction of the New Building is
completed, Landlord shall repair any damage to the Construction Portion
and restore the Construction Portion to its condition existing as of
the date Landlord commenced its use. During the period of construction
of the New
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Building and until Landlord completes its repair and restoration of the
Construction Portion and advises Tenant that the Construction Portion
is delivered to Tenant for its use, Landlord shall use reasonable
efforts to make available to Tenant temporary space (the "Temporary
Space") for its use in an amount substantially equal to the size of the
Construction Portion. During the period of use by Tenant of the
Temporary Space, the Premises shall be defined to include the Temporary
Space and the terms of the Lease shall apply with respect thereto,
including, but not limited to, the obligations of Tenant to pay base
rent and other charges with respect thereto, and to obtain insurance in
accordance herewith.
Within thirty days of the Notice, Tenant shall execute a lease
agreement (the "New Lease") in form substantially similar to the Lease
for at least 20,000 rentable square feet at the New Building with (i)
the term of the New Lease to be coterminous with the term remaining
under this Lease, (ii) base rent being the current base rent provided
herein and subject to increase as provided herein, and (iii) a right of
refusal in Tenant for the remainder of the Building. The right of first
refusal shall be in the form attached hereto and made a part hereof as
Exhibit E.
Should Tenant fail to comply with the conditions precedent to the
exercise of its right under this subparagraph (c) strictly in
accordance with this subparagraph (c), the rights provided to Tenant
hereunder shall be null and void and of no further force and effect.
(e) Termination of Leases. Upon Tenant entering into occupancy
of the entire Premises and provided there is no default or event of
default under this Lease by Tenant, all obligations of Landlord and
Tenant under: (1) that certain Lease Agreement for 20,000 rentable
square feet at 1500 Perimeter Park dated February 25, 1995 and amended
April 4, 1997 and October 25, 1995, shall be deemed terminated and the
parties hereto shall have no further liability thereunder, except as
expressly provided therein, and except for obligations accrued
thereunder and remaining unpaid and unsatisfied; and (2) that certain
Lease Agreement dated October 25, 1995 and amended February 1, 1997 for
29,113 rentable square feet of space at 1400 Perimeter Park (the "1400
Perimeter Park Premises") shall be deemed terminated with respect to
all of the 1400 Perimeter Park Premises as defined therein (except as
expressly provided therein, and except for obligations accrued
thereunder and remaining unpaid and unsatisfied), other than duties and
obligations for the first floor of the 1400 Perimeter Park Premises
which consists of 15,803 rentable square feet, all of which obligations
shall continue.
2. BASE RENT, OPERATING EXPENSES, AND SECURITY DEPOSIT.
(a) BASE RENT.
Tenant agrees to make monthly payments of base rent to
Landlord for the Premises ("base rent"), in advance, without demand,
deduction or offset, in lawful money of the United States, in the
amount of Sixteen and 30/100 Dollars ($16.30) per rentable square foot
of the Premises, commencing on the Commencement Date, and continuing on
the first day of each
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and every month thereafter until the Termination Date. Rent payments
for any fractional calendar month at the end, or the beginning of the
term of the Lease, shall be prorated. Notwithstanding the foregoing,
base rent shall be abated for 20,000 rentable square feet of the
Premises only for the first eight months of the term of this Lease,
commencing upon the Commencement Date and ending at the end of the
eight month thereafter (the "Base Rent Abatement"); provided, however,
should Tenant default and fail to enter into occupancy of the Premises,
Tenant acknowledges that the damages of Landlord for such failure shall
include the recoupment by Landlord of the amount of the Base Rent
Abatement.
Base rent is comprised of two components, (i) rent for each
year, plus (ii) operating expenses (but not Additional Rent amounts),
as described below. In addition, as described below, Landlord shall
advise Tenant each year in accordance with the Lease of amounts due
under the Lease as Additional Rent (amounts in excess of the estimate
of operating expenses), and a revised estimate of operating expenses
for each year.
Base rent per rentable square foot, net of operating expenses,
shall be increased on each anniversary of the Commencement Date during
the term of this Lease by three percent over the base rent paid per
rentable square foot the previous lease year.
(b) ADDITIONAL RENT. Tenant shall pay as Additional Rent,
Tenant's pro rata share of the following items:
(i) any sales or use tax imposed on rents collected
by Landlord (other than City, State or Federal Income Tax), or
any tax on rents in lieu of ad valorem taxes on the Building,
even though laws imposing such taxes attempt to require
Landlord to pay the same; and
(ii) the amount of operating expenses (as defined
below) for the Building to the extent operating expenses
exceed the actual amount of operating expenses for the first
twelve months of occupancy of any portion of the Building per
rentable square foot of the Building in any lease year during
the term of this Lease; provided, however, an amount equal to
$1.25 per rentable square foot shall be used as the expense
stop for the Tenant for utilities for the first lease year of
the Lease.
Notwithstanding the foregoing, the increased cost to Tenant
for operating expenses (exclusive of the costs for utilities
which cost is not capped) shall not exceed per rentable square
foot of the Premises, in any lease year, an amount greater
than a five percent increase over the amount paid the previous
lease year per rentable square foot of the Premises.
Tenant's pro rata share of the items set forth in subparagraph (b)
above shall be calculated by dividing the rentable square footage of
the Premises by the rentable square footage of the Building. Tenant's
pro rata share of the items to be billed to all tenants of the Building
as Additional Rent shall be determined by calculating the total
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amount to be billed tenants of the Building for Additional Rent, and
multiplying this amount by Tenant's pro rata share. Ad valorem taxes
included as operating expenses shall be included on a fully assessed
basis, and operating expenses shall be grossed up to reflect 100
percent occupancy.
(c) OPERATING EXPENSES. The term "operating expenses" as used
herein shall include all of the costs and expenses of the operation,
repair and maintenance of the Premises, the Land, the Building, and its
interior and exterior common areas, and shall include by way of
illustration, but is not limited to, all taxes, assessments and
governmental charges of any kind or nature whatsoever levied or
assessed against the Land and the Building by any municipality, county,
or other governmental agency, all insurance premiums for commercial
general liability, fire and extended coverage on the Building and the
Land, utilities for the Premises and the common areas of the Building,
including, electricity, gas, and water and sewer, all lawn, interior
common area, and driveway and paved parking area maintenance related to
the Land upon which the Premises are located, and for the streets and
roadways providing access to the Building and the Land, management and
supervisory fees, exterior lighting maintenance, snow removal, waste
removal, repair and maintenance of paved areas, cleaning supplies,
miscellaneous building supplies, sweeper brushes, supplies for
materials used in common by all tenants of the complex in which the
Premises are located, external paint for the Building, exterior and
interior common area maintenance, elevator repair and maintenance,
external plumbing for the Building, exterior lighting in common areas,
insect and pest extermination, security guards for the complex in which
the Premises are located, signs for the complex in which the Premises
are located, fuel for vehicles and street sweepers used by Landlord in
the complex in which the Premises are located and miscellaneous
maintenance expenses, heat, air conditioning, labor, materials,
supplies, equipment and tools, permits, licenses, inspection fees,
window glass replacement and repair, compensation (including employment
taxes and fringe benefits) of all persons who perform duties in
connection with the operation and/or maintenance of the Building, and
costs for janitorial expense and trash removal at the Premises.
In the event the Building is one of several buildings located on the
Land for tax assessment purposes, the amount of tax assessed against
the Land and the buildings thereon shall be allocated amongst the
buildings in proportion to the square footage of each building to the
total amount of tax assessed, as reasonably determined by Landlord. For
example, if the ad valorem taxes assessed for the Land and the
buildings for a calendar year is $100,000.00, and two buildings occupy
the Land with one building of 100,000 rentable square feet ("building
A") and the other building of 70,000 rentable square feet ("building
B"), the proportionate share for building A would be $58,823.53, and
the proportionate share for building B would be $41,176.44. During the
time that the Building is the only building located on the Land, the
amount of ad valorem taxes assessed shall be allocated as follows: all
taxes due for improvements to the Land shall be allocated to and paid
by Tenant and all taxes due for the Land shall be shared by the Tenant
and the Landlord based upon each party's proportionate share of the
Land.
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Utilities for the Premises included as part of operating expenses shall
not include utility charges and HVAC beyond the hours of 8:00 AM to
6:00 PM, Monday - Friday, and 8:00 AM to 1:00 PM, Saturday. Any usage
by Tenant of HVAC and utilities at times other than the aforesaid hours
shall be at the sole cost and expense of Tenant. Landlord shall bill
Tenant directly for all such costs as a separate item of Additional
Rent, and Tenant shall pay such amounts within fifteen days of receipt
of demand for payment from Landlord, and the failure by Tenant to pay
such costs in accordance with the demand made by Landlord shall be
treated in the same manner under this Lease as a non-payment of base
rent by Tenant with Landlord being afforded the same rights and
remedies for such non-payment.
(d) ESTIMATE OF ADDITIONAL RENT. Upon the completion of each
lease year during the term of this Lease, Landlord shall provide
Tenant with an estimate of its prorata share of operating expenses
for the following year. Tenant shall remit with each monthly payment
of base rent hereunder one-twelfth of this estimated amount as a
payment of Additional Rent.
Failure by Tenant to pay Landlord any payment of Additional
Rent shall constitute a non-payment of rent by Tenant and a default of
Tenant's obligation under the Lease, and Landlord shall be entitled to
all remedies provided for in this Lease upon default in payment of
rent.
(e) RECONCILIATION OF EXPENSES. Landlord shall promptly
notify Tenant of the total actual operating expenses for the Premises
and the excess, if any, of Tenant's pro rata share over Landlord's
estimation for such lease year. Tenant shall pay the excess amount so
specified to Landlord within thirty (30) days following receipt
by Tenant of Landlord's letter. Failure by Tenant to pay Landlord such
amount within the period designated shall constitute a non-payment of
rent by Tenant and a default of Tenant's obligation under the Lease,
and Landlord shall be entitled to all remedies provided for in this
Lease upon default in payment of rent. If the first year for which
Tenant's pro rata share of operating expenses are due or the final
year of the term hereof do not coincide with the calendar year,
Tenant's pro rata share of operating expenses for the portion of that
year shall be prorated according to the number of months during which
Tenant was in possession of the Premises. In the event Landlord's
estimation of operating expenses shall exceed the actual amount of
operating expenses, the amount paid by Tenant for such year shall be
adjusted between Landlord and Tenant and Tenant shall receive a credit
against the next due installment of rent hereunder in such excess
amount unless this Lease has expired or been otherwise terminated, in
which event Landlord shall pay to Tenant such excess amount within
thirty (30) days following receipt by Tenant of Landlord's letter.
In the event Tenant shall dispute the amount set forth in any statement
provided by Landlord under this subparagraph (e), Tenant shall have the
right, not later than thirty days following the receipt of such
statement and upon condition that Tenant shall first deposit with
Landlord the undisputed portion, if any, to elect to have Landlord's
books and records with respect to such calendar year to be audited by
auditors selected by Tenant and subject to Landlord's
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reasonable approval. Such audit must be completed no later than 60 days
after receipt of Landlord's letter, with such time limit to be extended
due to delays caused by Landlord. All costs for the audit shall be
borne by Tenant unless the audit disclosed an overcharge of ten percent
or more, in which case the costs of the audit not to exceed $1,000
shall be borne by Landlord. If Tenant shall not request an audit in
accordance with the provisions of this paragraph within thirty days of
receipt of Landlord's statement provided pursuant to this subparagraph
(e), such statement shall be final and binding for all purposes hereof.
(f) SECURITY DEPOSIT. [INTENTIONALLY DELETED.]
(g) PROVISIONS TO SURVIVE LEASE TERMINATION.
Any unperformed obligations of Tenant under this Section 2
shall survive the termination of the Lease, for whatever reason, or any
extension or renewal hereof.
3. COMPLIANCE WITH LAWS AND USE.
(a) The Premises shall be used only for the following
purposes: general office purposes, and the entry, management, and
analysis of clinical trial data using computer software. Tenant shall
conduct no activity that will result in the discharge of harmful gases,
affluents or other wastes or toxic substances. Outside storage,
including, without limitation, trucks and other vehicles, is prohibited
without Landlord's prior written consent. Tenant shall at its sole cost
and expense obtain any and all licenses and permits necessary for its
use of the Premises. Tenant shall comply with all governmental laws,
ordinances and regulations relating to the use of the Premises, and
shall promptly comply with all governmental orders and directives for
the correction, prevention and abatement of nuisances in or upon, or
connected with, the Premises, all at Tenant's sole expense. Tenant
shall not permit any objectionable or unpleasant odors, smoke, dust,
gas, noise or vibrations to permeate in or emanate from the Premises,
nor take any other action which would constitute a nuisance or would
disturb or endanger any other tenants of the Building or unreasonably
interfere with their respective premises. Without Landlord's prior
written consent, Tenant shall not receive, store or otherwise handle
any product, material or merchandise which is explosive, inflammable,
combustible, corrosive, caustic or poisonous. Tenant will not permit
the Premises to be used for any purpose or in any manner (including,
without limitation, any method of storage) which would render the
insurance thereon void or the insurance risk more hazardous or cause
the State Board of Insurance or other insurance authority to disallow
any sprinkler credits. Tenant shall give notice to Landlord immediately
upon the occurrence of any accident in the Premises or upon Tenant's
discovery of any defects thereon or in any fixtures or equipment
located therein or upon the occurrence of any emergency in the Premises
or the Building.
(b) Any costs or expenses for alterations, additions or
improvements required to modify the common areas of the Building to
comply with the Americans with Disabilities Act, as amended (the "ADA")
shall be paid by Landlord throughout the term of this Lease. Such
alterations, additions or improvements shall be made or not made in the
sole discretion
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of Landlord, and Landlord shall be solely liable for failure to make
the required alterations, additions or improvements. All alterations,
additions or improvements to the Premises required by the ADA on the
Commencement Date of this Lease, and after the Commencement Date if the
initial construction to be performed by Landlord has not been completed
prior to the Commencement Date, shall be made and paid for by Landlord,
and Landlord shall be solely liable for failure to make such required
alterations, additions or improvements. Except as provided above, any
alterations, additions or improvements to the Premises required by any
modification or supplement to the ADA promulgated after the
Commencement Date, shall be made and paid for by Tenant, and Tenant
shall be solely liable for failure to make such required alterations,
additions or improvements. In the event either party hereto shall fail
to make any required alterations, additions or improvements pursuant to
the ADA, after thirty (30) days written notice to the other party
hereto, accompanied by evidence in support of its position regarding
the needed alterations, shall have the right but not the obligation to
make such alterations, additions or improvements at the expense of the
other party and demand reimbursement of its expenses.
For purposes of this Lease, the common areas for the Building shall
consist of the entranceways and private roadways to the Building,
landscape areas on the Land, and the driveways and parking areas
located on the Land (hereinafter collectively, the "Common Areas") but
no third party shall have rights thereto unless specifically granted.
These common areas may be expanded by Landlord for the benefit of all
occupants of the Building.
(c) To the best of Landlord's knowledge, the Premises shall,
as of the Commencement Date, comply with the ADA.
4. REPAIRS AND MAINTENANCE.
(a) Landlord shall at its expense maintain, repair and replace
only the roof, downspouts, gutters, foundation, utility lines located
outside the Premises, heating and air conditioning systems, dock
boards, truck doors, dock bumpers, plumbing work and fixtures,
elevators, and the structural soundness of the exterior walls of the
Building in good repair, reasonable wear and tear excepted. Tenant
shall repair, replace and pay for, any damage to the foregoing caused
by the negligence of Tenant or Tenant's employees, agents or invitees,
or caused by Tenant's default hereunder. The term "walls" as used
herein shall not include windows, glass or plate glass, doors, special
store fronts or office entries. Tenant shall immediately give Landlord
written notice of defect or need for repairs, after which Landlord
shall have reasonable opportunity to repair same or cure such defect.
Landlord's liability with respect to any defects, repairs or
maintenance for which Landlord is responsible under any of the
provisions of this Lease shall be limited to the cost of such repairs
or maintenance or the curing of such defect.
(b) Tenant shall at its own cost and expense maintain, repair
and replace all parts of the Premises (except those for which Landlord
is expressly responsible under the terms of this Lease) in good
condition, promptly making all necessary repairs and replacements,
including, but not
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limited to, windows, glass and plate glass, doors, any special office
entry, interior walls, finish work, and floors and floor coverings,
normal wear and tear excepted. Tenant shall not be obligated to repair
any casualty covered by the insurance to be maintained by Landlord
pursuant to subparagraph 10(a) below.
(c) If either party hereto shall fail to fulfill its
obligations under this paragraph, the other party hereto may enter upon
the area of the Building or the Premises as required to conduct the
obligations of the defaulting party, and shall be entitled to
reimbursement from the defaulting party for its actual costs and
expenses in conducting such obligations. The defaulting party shall
reimburse the other party hereto for its actual costs and expense
promptly upon demand made by the other party hereto. The provisions of
this subparagraph shall not be interpreted to obligate either party
hereto to conduct obligations of the other party hereto.
(d) Landlord shall conduct periodic maintenance of all hot
water, heating and air conditioning systems and units in the Premises,
remove and replace filters therein, and provide for janitorial service
for the Premises. Temperature levels in the Building shall be
maintained at levels customary for Class A office buildings comparable
to the Building in the Research Triangle Park, North Carolina area.
(e) Tenant shall not damage any demising wall of the Building,
or disturb the integrity and support provided by any demising wall and
shall, at its sole cost and expense, promptly repair any damage or
injury to any demising wall caused by Tenant or its employees, agents
or invitees.
(f) Tenant and its employees, customers and licensees shall
have the non-exclusive right to use the parking areas on the Land as
may be designated by Landlord in writing, subject to reasonable rules
and regulations as Landlord may from time to time prescribe and subject
to rights of ingress and egress of other tenants. Tenant shall not park
on streets, rights of ways, driveways, or roadways adjacent to the
Building or the Land, nor allow its employees, agents, invitees, or
licensees to do so. No vehicles other than passenger vehicles shall be
parking on the Land, without the prior written consent of the Landlord.
Any vehicles, including, tractors, trailers, or tractor trailers parked
at the Building in violation of any provision of this Lease, or
abandoned on the Land, as reasonably determined by Landlord, are
subject to removal by Landlord, at the cost and expense of Tenant, and
Tenant shall indemnify, defend, and hold harmless Landlord of and from
all loss, cost and expense incurred by Landlord in the enforcement of
the provisions of this Section. Tenant shall be considerate of the
parking needs of other tenants of the Building, and shall not violate
the rights of other tenants of the Building. The parking ratio provided
to Tenant and its employees for the parking of cars at the Building
shall be five spaces per 1,000 rentable square feet of the Premises and
Tenant shall not exceed this ratio. Landlord shall not be responsible
for enforcing Tenant's parking rights against any third parties.
Landlord may require, at its option, in its sole discretion, that
Tenant, its employees, invitees, and visitors use certain numbered
spaces to be designated by Landlord.
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5. ALTERATIONS.
(a) Tenant shall not make any alterations, additions or
improvements to the Premises (including, but not limited to, roof and
wall penetrations) without the prior written consent of Landlord, which
consent shall not be unreasonably withheld. Tenant may, without the
consent of Landlord, but at its own cost and expense and in a good
workmanlike manner, erect such shelves, bins, machinery and trade
fixtures as it may deem advisable, without altering the basic character
or structure of the Premises or improvements and without overloading or
damaging the Premises or improvements, and in each case complying with
all applicable governmental laws, ordinances, regulations and other
requirements. Tenant shall not make any alterations, additions or
improvements to the Premises which will contravene Landlord's policies
insuring against loss or damage by fire or other hazards, including but
not limited to commercial general liability, or which will prevent
Landlord from securing such policies in companies acceptable to
Landlord. If any such alterations, additions or improvements cause the
rate of fire or other insurance on the Premises by companies acceptable
to Landlord to be increased beyond the minimum rate from time to time
applicable to the Premises for permitted uses thereof, Tenant shall pay
as additional rent the amount of any such increase promptly upon demand
by Landlord.
(b) Any and all alterations, additions, improvements,
partitions and fixtures erected by Tenant shall be the property of
Landlord and shall remain at the Premises upon termination of the Lease
or upon earlier vacating of the Premises. All shelves, bins, machinery
and trade fixtures installed by Tenant may be removed by Tenant prior
to the termination of this Lease provided such removal may be
accomplished without damage to the Premises or to the primary structure
or structural qualities of the Building and other improvements situated
on the Premises. Tenant shall repair any damage to the Premises, or to
the Building as a result of any alteration, addition, improvement, or
repair to the Premises, or the removal of personal property or trade
fixtures by Tenant, its employees, agents, invitees, or contractors to
the Premises. Should Tenant fail to conduct any such repair within ten
days of written notice from Landlord, Landlord may, at its option,
perform same, and Tenant shall remit payment to Landlord for the actual
cost and expense incurred by Landlord in effecting such repair
immediately upon demand.
6. SIGNS.
(a) As part of the upfit of the Premises, Landlord shall
install a monument sign on the Land containing the name of Tenant. In
addition, Landlord shall include the name of Tenant on the Building
directory, and affix a parapet sign on the exterior of the Building.
All signs for the Premises shall be in form and substance, location,
color, shape, and configuration, mutually and reasonably approved by
Landlord.
(b) Tenant shall have the right to install signs upon the
Premises only when first approved in writing by Landlord and subject to
any applicable governmental laws, ordinances, regulations and other
requirements. Tenant shall remove all such signs upon the termination
of this Lease. Such
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installations and removals shall be made in such manner as to avoid
injury or defacement of the Premises, and Tenant shall repair any
injury or defacement, including, without limitation, discoloration of
the Building caused by such installation and/or removal.
7. INSPECTION. Landlord and Landlord's agents and representatives shall
have the right to enter and inspect the Premises at any reasonable time during
business hours, for the purpose of ascertaining the condition of the Premises or
in order to make such repairs as may be required or permitted to be made by
Landlord under the terms of this Lease or in order to show the Premises to any
prospective purchaser or lender. During the period that is six (6) months prior
to the end of the term hereof, Landlord and Landlord's agents and
representatives shall have the right to enter the Premises at any reasonable
time during business hours for the purpose of showing the Premises to any
prospective tenant and shall have the right to erect on the Premises a suitable
sign indicating the Premises are available. Tenant shall schedule with Landlord
at least sixty (60) days prior to vacating the Premises a time mutually
agreeable to the parties hereto for a joint inspection of the Premises prior to
vacating. In the event of Tenant's failure to give notice or arrange such joint
inspection, Landlord's inspection at or after Tenant's vacating the Premises
shall be conclusively deemed correct for purposes of determining Tenant's
responsibilities for repairs and restoration.
8. UTILITIES. Landlord agrees to provide at its cost, all utility line
connections into the Premises. In the event any utilities for the Premises are
not paid by Tenant directly to those providers or included as part of the
operating expense charge to Tenant, Tenant shall pay a reasonable proportion as
determined by Landlord of all charges jointly metered with other tenants of the
Building. Landlord shall not be liable for any interruption or failure of
utility services on the Premises.
9. ASSIGNMENT AND SUBLETTING. Tenant shall not sublet the Premises or
the interest of Tenant therein in whole or in part, or assign this Lease or the
interest of Tenant therein in whole or in part, without the prior written
consent of Landlord, which consent shall not be unreasonably withheld or
delayed; provided, however, Tenant may not sublease or assign more than 25,000
rentable square feet in total in any twelve month period. Further, Tenant may
not sell, lien, or encumber its interest in this Lease, or assign or delegate
the management or permit the use or occupancy of the Premises in whole or in
part by anyone other than Tenant without the prior written consent of Landlord,
which consent Landlord may withhold in its sole discretion. Landlord and Tenant
acknowledge and agree that the foregoing provisions have been freely negotiated
by the parties hereto and that Landlord would not have entered into this Lease
without Tenant's consent to the terms of this Paragraph 9.
In no event shall this Lease be assignable by operation of any law,
without the prior written consent of Landlord which consent shall not be
unreasonably withheld, and Tenant's rights hereunder may not become, and shall
not be listed by Tenant as an asset under any bankruptcy, insolvency, or
reorganization proceedings. No assignment, transfer, mortgage, sublease or other
encumbrance, whether or not approved, and no indulgence granted by Landlord to
any assignee or subtenant, shall in any way impair the continuing primary
liability (which after an assignment shall be joint and several with the
assignee) of Tenant hereunder, and no approval in a particular instance shall be
deemed to be a waiver
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of the obligation to obtain Landlord's approval in any other case.
If for any approved assignment or sublease Tenant receives rent or
other consideration, either initially or over the term of the assignment or
sublease, in excess of the base rent hereunder, or in case of a sublease of part
of the Premises, in excess of the portion of such rent fairly allocable to such
part, after appropriate adjustments to assure that all other payments called for
hereunder are appropriately taken into account, Tenant shall pay to Landlord as
additional rent one-half of the full excess of each such payment of rent or
other consideration received by Tenant promptly after its receipt.
Notwithstanding the foregoing, if Tenant shall offer any sublease or assignment
of space in the Premises for less than the current asking price of Landlord for
space comparable in size (which asking price Landlord shall provide to Tenant
upon request made therefor), then Landlord shall be entitled to receive all of
the full excess of each such payment of rent or other consideration received by
Tenant promptly after its receipt.
Notwithstanding any provision of this Lease to the contrary, should
Tenant receive consent from Landlord to sublease or assign its interest in the
Premises and seek to sublease or assign its interest in the Premises in
accordance with this paragraph, Tenant shall not use the name of Landlord, any
insignia of Landlord, or any likeness of the Building in any of its advertising
for such sublease or assignment.
10. FIRE AND CASUALTY DAMAGE.
(a) Landlord agrees to maintain standard fire and extended
coverage insurance for the Building in an amount not less than full
replacement cost as such term is defined in the Replacement Cost
Endorsement to be attached thereto, insuring against special causes of
loss, including, the perils of fire, and lightning, such coverages and
endorsements to be as defined, provided and limited in the standard
bureau forms prescribed by the insurance regulatory authority for the
State of North Carolina. Subject to the provisions of subparagraphs
10(c), 10(d) and 10(e) below, such insurance shall be for the sole
benefit of Landlord and under its sole control.
(b) If the Premises should be damaged or destroyed by any
peril covered by the insurance to be provided by Landlord under
subparagraph 10(a) above, Tenant shall give immediate written notice
thereof to Landlord.
(c) If the Premises should be totally destroyed by any peril
covered by the insurance to be provided by Landlord under subparagraph
10(a) above, or if they should be so damaged thereby that rebuilding or
repairs cannot in Landlord's estimation be completed within one hundred
and eighty (180) days after the date upon which Landlord is notified by
Tenant of such damage, this Lease shall terminate and the rent shall be
abated during the unexpired portion of this Lease, effective upon the
date of the occurrence of such damage.
(d) If the Premises should be damaged by any peril covered by
the insurance to be provided by Landlord under subparagraph 10(a)
above, but only to such extent that rebuilding or repairs can, in
Landlord's estimation, be
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completed within one hundred and eighty (180) days after the date upon
which Landlord is notified by Tenant of such damage, this Lease shall
not terminate, and Landlord shall, at its sole cost and expense,
thereupon proceed with reasonable diligence to rebuild and repair the
Premises to substantially the condition in which they existed prior to
such damage, except that Landlord shall not be required to rebuild,
repair or replace any part of the partitions, fixtures, additions and
other improvements which may have been placed in, on or about the
Premises by Tenant. If the Premises are untenantable in whole or in
part following such damage, the rent payable hereunder during the
period in which they are untenantable shall be abated as may be fair
and reasonable under all of the circumstances, as reasonably determined
by Landlord and Tenant.
(e) Notwithstanding anything herein to the contrary, in the
event the holder of any indebtedness secured by a mortgage or deed of
trust covering the Premises requires that the insurance proceeds be
applied to such indebtedness, then Landlord shall have the right to
terminate this Lease by delivering written notice of termination to
Tenant within fifteen (15) days after such requirement is made by any
such holder, whereupon all rights and obligations hereunder thereafter
accruing shall cease and terminate.
(f) Each of Landlord and Tenant hereby waives all rights to
recover against each other or against any other tenant or occupant of
the Building, or against the officers, directors, shareholders,
partners, joint venturers, employees, agents, customers, invitees, or
business visitors of each other or of any other tenant or occupant of
the Building, for any loss or damage arising from any cause covered by
any insurance required to be carried by each of them pursuant to this
Lease, or any other insurance actually carried by either of them.
Landlord and Tenant shall cause their respective insurers to issue
waiver of subrogation rights endorsements to all policies of insurance
carried in connection with the Building or the Premises or the contents
of either of them, and any cost for the issuance of such endorsements
shall be borne by the original insured under such policies.
(g) The obligation of Landlord in this paragraph 10 to repair
and restore the Premises and the Building as provided herein, does not
include an obligation of Landlord to repair the fixtures, equipment, or
personal property of Tenant, which Tenant shall insure for its benefit,
and Tenant shall have the obligation to repair and restore in the event
of a casualty or other loss.
(h) The period of time within which repair and restoration of
the Premises must be completed shall be extended due to delays
occasioned by force majeure; provided, however, all repair and
restoration must be completed by Landlord within 360 days after the
date of the casualty.
11. LIABILITY. Landlord shall not be liable to Tenant or Tenant's
employees, agents, officers, partners, licensees or invitees, or to any other
person whomsoever, for any damage to property on or about the Premises belonging
to Tenant or any other person, due to any cause whatsoever, unless caused by the
gross negligence, or willful or intentional misconduct of Landlord.
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Tenant hereby covenants and agrees that it will at all times indemnify,
defend (with counsel approved by Landlord) and hold safe and harmless Landlord
(including, without limitation, its trustees and beneficiaries if Landlord is a
trust), and Landlord's agents, employees, patrons and visitors from any loss,
liability, claims, suits, costs, expenses, including without limitation
attorney's fees and damages, both real and alleged, incurred by Landlord, its
agents, employees, officers, partners, invitees, or licensees arising out of or
resulting from of the occupancy by Tenant of the Premises, a breach by Tenant of
any provision of this Lease, or the conduct by Tenant of its business in the
Building.
Landlord hereby covenants and agrees that it will at all times
indemnify, defend (with counsel reasonably approved by Tenant) and hold safe and
harmless Tenant (including, without limitation, its trustees and beneficiaries
if Tenant is a trust), and Tenant's agents, employees, patrons and visitors from
any loss, liability, claims, suits, costs, expenses, including without
limitation attorney's fees and damages, both real and alleged, incurred by
Tenant, its agents, employees, officers, partners, invitees, or licensees
arising out of or resulting from a breach by Landlord of any provision of this
Lease.
Tenant shall procure and maintain throughout the term of this Lease a
policy or policies of insurance, at its sole cost and expense, naming Landlord
as an additional insured, and insuring both Landlord and Tenant against all
claims, demands or actions arising out of or in connection with: (i) the
Premises; (ii) the condition of the Premises; (iii) Tenant's operations in and
maintenance and use of the Premises; (iv) the equipment, personal property and
fixtures of Tenant located on the Premises; (v) any interruption in the conduct
of the business of Tenant on the Premises; (v) Tenant's liability assumed under
this Lease, and such other kinds of insurance as Landlord shall reasonably
request. The limits of coverage maintained by Tenant for (i) commercial general
liability shall be not less than $5,000,000.00 with respect to each occurrence,
not less than $5,000,000.00 with respect to personal injury or death of a single
person, not less than $5,000,000 general aggregate, and not less than
$5,000,000.00 with respect to products completed operations aggregate, (ii) for
business interruption insurance shall be not less than coverage for actual loss,
and (iii) for replacement of the equipment, personal property and fixtures of
Tenant shall be not less than full replacement value.
Tenant shall procure and maintain throughout the term of this Lease a
policy or policies of insurance, at its sole cost and expense, naming Landlord
as an additional insured, and insuring both Landlord and Tenant against all
claims, demands or actions arising out of or in connection with: (i) the
Premises; (ii) the condition of the Premises; (iii) Tenant's operations in and
maintenance and use of the Premises; (iv) the equipment, personal property and
fixtures of Tenant located on the Premises; (v) any interruption in the conduct
of the business of Tenant on the Premises; (v) Tenant's liability assumed under
this Lease, and such other kinds of insurance as Landlord shall reasonably
request. The limits of coverage maintained by Tenant for (i) commercial general
liability shall be not less than $5,000,000.00 with respect to each occurrence,
not less than $5,000,000.00 with respect to personal injury or death of a single
person, not less than $5,000,000 general aggregate, and not less than
$5,000,000.00 with respect to products completed operations aggregate, (ii) for
business interruption insurance shall be not less than coverage
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for actual loss, and (iii) for replacement of the equipment, personal property
and fixtures of Tenant shall be not less than full replacement value.
All such policies shall be procured by Tenant from responsible
insurance companies satisfactory to Landlord. Certified copies of such policies,
together with receipt evidencing payments of premiums thereof, shall be
delivered to Landlord prior to the Commencement Date. Not less than fifteen (15)
days prior to the expiration date of any such policies, certified copies of the
renewals thereof (bearing notations evidencing the payment of renewal premiums)
shall be delivered to Landlord. Such policies shall further provide that not
less than thirty (30) days prior written notice shall be given to Landlord
before such policy may be canceled or changed to reduce insurance provided
thereby.
12. CONDEMNATION.
(a) If the whole or any substantial portion of the Premises
should be taken for any public or quasi-public use under governmental
law, ordinance, or regulation, or by right of eminent domain, or by
private purchase in lieu thereof, and the taking would prevent or
materially interfere with the use of the Premises by Tenant for the
purposes provided herein, this Lease shall terminate and the rent shall
be abated during the unexpired portion of this Lease, effective when
the physical taking of the Premises shall occur.
(b) If a portion of the Premises shall be taken for any public
or quasi-public use under any governmental law, ordinance or
regulation, or by right of eminent domain, or by private purchase in
lieu thereof, and the use by Tenant of the Premises is not materially
interfered with, this Lease shall not terminate but the rent payable
hereunder during the unexpired portion of this Lease shall be reduced
in an amount that shall be reasonable under all of the circumstances.
(c) In the event of any such taking or private purchase in
lieu thereof, Landlord shall be entitled to receive and retain all
awards as may be awarded in any condemnation proceedings other than
those specifically awarded Tenant for a taking of Tenant's personal
property, loss of business and moving expenses.
13. HOLDING OVER AND TERMINATION.
(a) Tenant shall upon the termination of this Lease by lapse
of time or otherwise, yield up immediate possession to Landlord without
the requirement of notice by Landlord to Tenant of the termination of
this Lease, nor any grace or cure period should Tenant fail to yield up
immediate possession to Landlord. Unless the parties hereto shall
otherwise agree in writing, if Landlord agrees in writing that Tenant
may hold over after the expiration or termination of this Lease, the
hold over tenancy shall be subject to termination by Landlord at any
time upon not less than five (5) days advance written notice, or by
Tenant at any time upon not less than thirty (30) days advance written
notice, and all of the other terms and provisions of this Lease shall
be applicable during that period, except that Tenant shall pay Landlord
from time to time upon demand, as rental for the period of any hold
over, an amount equal to one and 35/100 (1-35/100) the rent in effect
on the termination date,
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computed on a daily basis for each day of the hold over period. No
holding over by Tenant, whether with or without consent of Landlord,
shall operate to extend this Lease except as otherwise expressly
provided. The preceding provisions of this Paragraph 13 shall not be
construed as Landlord's consent for Tenant to hold over.
(b) Upon the termination of this Lease for whatever reason,
Tenant shall quit and immediately surrender the Premises to Landlord,
broom clean, in good order and condition with all repairs and
maintenance required by Tenant hereunder having been performed,
ordinary wear and tear excepted, and Tenant shall remove its personal
property from the Premises in accordance with this Lease. Should any of
the personal property or trade fixtures of Tenant remain upon the
Premises after the Termination Date, all such property shall be deemed
abandoned by Tenant, and Landlord may remove same at the cost and
expense of Tenant with no liability to Tenant therefore, and Tenant
hereby releases Landlord from all liability therefor.
14. QUIET ENJOYMENT. Landlord covenants that it now has, or will
acquire before Tenant takes possession of the Premises, good title to the
Premises, free and clear of all liens and encumbrances, excepting only the lien
for current taxes not yet due, deed of trust(s), or mortgage(s) of record,
zoning ordinances and other building and fire ordinances and governmental
regulations relating to the use of such property, and easements, restrictions
and other conditions of record. In the event this Lease is a sublease, then
Tenant agrees to take the Premises subject to the provisions of the prior
leases. Landlord represents and warrants that it has full right and authority to
enter into this Lease and that Tenant, upon paying the rental herein set forth
and performing its other covenants and agreements herein set forth, shall
peaceably and quietly have, hold and enjoy the Premises for the term hereof
without hindrance or molestation from Landlord, subject to the terms and
provisions of this Lease.
15. EVENTS OF DEFAULT. The following events shall be deemed to be
events of default by Tenant under this Lease:
(a) Tenant shall fail to pay any installment of the rent
herein reserved, or payment with respect to taxes hereunder, or any
other payment or reimbursement to Landlord required herein, within five
(5) days of when due; provided, however, the aforesaid five day period
shall be extended to ten days for any one instance in a twelve month
period in which Tenant shall make a payment after the five day period.
(b) Tenant shall become insolvent, or shall make a transfer in
fraud of creditors, or shall make an assignment for the benefit of
creditors.
(c) Tenant shall file a petition under any section or chapter
of the Bankruptcy Reform Act, as amended or under any similar law or
statute of the United States or any state thereof; or Tenant shall be
adjudged bankrupt or insolvent in proceedings filed against Tenant
thereunder.
(d) A receiver or trustee shall be appointed for all or
substantially all of the assets of Tenant.
(e) Tenant shall desert or vacate all or a portion of the
Premises.
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(f) Tenant shall fail to yield up immediate possession of the
Premises to Landlord upon termination of this Lease.
(g) Tenant shall fail to comply with any term, provision or
covenant of this Lease (other than the provisions of subparagraphs (a),
(b), (c), (d), (e) and (f) of this Paragraph 15), and shall not cure
such failure within twenty (20) days after written notice thereof to
Tenant.
16. REMEDIES. Upon the occurrence of any event of default in Paragraph
15 hereof, Landlord shall have the option to pursue any remedy at law or in
equity, including, but not limited to, one or more of the following remedies
without any notice or demand whatsoever:
(a) Terminate this Lease, in which event Tenant shall
immediately surrender the Premises to Landlord, and if Tenant fails to
do so, Landlord may, without prejudice to any other remedy which it may
have for possession or arrearage in rent, enter upon and take
possession of the Premises and expel and remove Tenant and any other
person who may be occupying the Premises or any part thereof, with or
without judicial approval, by any legal means necessary, without being
liable for prosecution or any claim of damages therefor; secure the
Premises against unauthorized entry; and Tenant agrees to pay to
Landlord on demand the amount of all loss and damage which Landlord may
suffer by reason of such termination, whether through inability to
relet the Premises on satisfactory terms or otherwise.
(b) Enter upon and take possession of the Premises and expel
or remove Tenant and any other person who may be occupying such
Premises or any part thereof, with or without judicial approval, by any
legal means necessary, without being liable for prosecution and receive
the rent thereof; secure the Premises against unauthorized entry; store
any property located on the Premises at the expense of the owner
thereof and Tenant agrees to pay to Landlord on demand any deficiency
that may arise by reason of such reletting. In the event Landlord is
successful in reletting the Premises at a rental in excess of that
agreed to be paid by Tenant pursuant to the terms of this Lease,
Landlord and Tenant each mutually agree that Tenant shall not be
entitled, under any circumstances, to such excess rental, and Tenant
does hereby specifically waive any claim to such excess rental.
(c) Enter upon the Premises, with or without judicial
approval, by any legal means necessary, without being liable for
prosecution or any claim for damages therefor, secure the Premises
against unauthorized entry, remove all property of Tenant from the
Premises and store it at the cost and expense of Tenant, and do
whatever Tenant is obligated to do under the terms of this Lease; and
Tenant agrees to reimburse Landlord on demand for any expenses which
Landlord may incur in thus effecting compliance with Tenant's
obligations under this Lease, and Tenant further agrees that Landlord
shall not be liable for any damages resulting to Tenant from such
action, whether caused by the negligence of Landlord or otherwise.
(d) Accelerate and demand the payment of all base rent and
other charges due and payable hereunder over the term of this Lease
which amount shall be reduced by any amounts
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received by Landlord from any new tenant that enters into occupancy of
the Premises.
In the event Tenant fails to pay any installment of base rent or
additional rent hereunder within fifteen days of the due date of such
installment, Tenant shall pay to Landlord on demand a late charge in an amount
equal to four percent (4%) of such installment to help defray the additional
cost to Landlord for processing such late payment. The provision for such late
charge shall be in addition to all of Landlord's other rights and remedies
hereunder or at law and shall not be construed as liquidated damages or as
limiting Landlord's remedies in any manner. If, on account of any breach or
default by Tenant in Tenant's obligations under the terms and conditions of this
Lease, it shall become necessary or appropriate for Landlord to employ or
consult with an attorney concerning or to enforce or defend any of Landlord's
rights or remedies hereunder, Tenant agrees to pay any and all reasonable
attorneys' fees so incurred.
Pursuit of any of the foregoing remedies shall not preclude pursuit of
any of the other remedies herein provided or any other remedies provided by law
or equity, nor shall pursuit of any remedy herein provided constitute a
forfeiture or waiver of any rent due to Landlord hereunder or of any damages
accruing to Landlord by reason of the violation of any of the terms, provisions
and covenants herein contained. No act or thing done by Landlord or its agents
during the term hereby granted shall be deemed a termination of this Lease or an
acceptance of the surrender of the Premises, and no agreement to terminate this
Lease or accept a surrender of the Premises shall be valid unless in writing
signed by Landlord. No waiver by Landlord of any violation or breach of any of
the terms, provisions and covenants herein contained shall be deemed or
construed to constitute a waiver of any other violation or breach of any of the
terms, provisions and covenants herein contained. Landlord's acceptance of the
payment of rental or other payments hereunder after the occurrence of an event
of default shall not be construed as a waiver of such default, unless Landlord
so notifies Tenant in writing, and no receipt of money by Landlord from Tenant
after the termination of this Lease or after service of any notice or after the
commencement of any suit or after final judgment for possession of the Premises
shall reinstate, continue or extend the term of this Lease or affect any such
termination, notice, suit or judgment, unless Landlord so notifies Tenant in
writing. Forbearance by Landlord to enforce one or more of the remedies herein
provided upon an event of default shall not be deemed or construed to constitute
waiver of such default or of Landlord's right to enforce any such remedies with
respect to such default or any subsequent default.
17. LANDLORD'S LIEN. [INTENTIONALLY DELETED.]
18. MORTGAGES. Tenant accepts this Lease subject and subordinate to any
mortgage(s) and/or deed(s) of trust now or at any time hereafter constituting a
lien or charge upon the Premises or the improvements situated thereon; provided,
however, that if the mortgagee, trustee, or holder of any such mortgage or deed
of trust elects to have Tenant's interest in this Lease superior to any such
instrument, then by notice to Tenant from such mortgagee, trustee or holder,
this Lease shall be deemed superior to such lien, whether this Lease was
executed before or after said mortgage or deed of trust. Tenant shall at any
time hereafter on demand execute any instruments, releases or other documents
which may be required by any mortgagee or trustee for the purpose of
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further subjecting and subordinating this Lease to the lien of any such mortgage
or deed to trust, and shall forward same to Landlord within five days of a
request therefor; provided, that any current or future mortgagee, trustee, or
deed of trust beneficiary, as the case may be, shall provide Tenant with a
nondisturbance agreement in form reasonably satisfactory to Tenant which shall
grant Tenant the right to continue to occupy the Premises under the terms hereof
so long as Tenant is not in default under this Lease.
19. MECHANIC'S LIENS. Tenant shall have no authority, express or
implied, to create or place any lien or encumbrance of any kind or nature
whatsoever upon, or in any manner to bind, the interest of Landlord in the
Premises or to charge the rentals payable hereunder for any claim in favor of
any person dealing with Tenant, including those who may furnish materials or
perform labor for any construction or repairs, and each such claim shall affect
and each such lien shall attach to, if at all, only the leasehold interest
granted to Tenant by this instrument. Tenant covenants and agrees that it will
pay or cause to be paid all sums legally due and payable by it on account of any
labor performed or materials furnished in connection with any work performed on
the Premises on which any lien is or can be validly and legally asserted against
its leasehold interest in the Premises or the improvements thereon and that it
will save and hold Landlord harmless from any and all loss, cost or expense
based on or arising out of asserted claims or liens against the leasehold estate
or against the right, title and interest of Landlord in the Premises or under
the terms of this Lease.
20. NOTICES. Each provision of this instrument or of any applicable
governmental laws, ordinances, regulations, or other requirements with reference
to the sending, mailing, or delivery of any notice by Landlord to Tenant or with
reference to the sending, mailing, or delivery of any notice or the making of
any payment by Tenant to Landlord shall be deemed to be complied with when and
if the following steps are taken:
(a) All rent and other payments required to be made by Tenant
to Landlord hereunder shall be payable to Landlord at the address
hereinbelow set forth or at such other address as Landlord may specify
from time to time by written notice delivered in accordance herewith.
Tenant's obligations to pay rent and any other amounts to Landlord
under the terms and of this Lease shall not be deemed satisfied until
such rent and other amounts have been actually received by Landlord.
(b) Any notice or document required or permitted to be
delivered hereunder shall be deemed to be delivered whether actually
received or not when:
(i) deposited in the United States Mail, postage
prepaid;
(ii) sent by federal express or other nationally
recognized overnight courier, charges prepaid; or
(iii) sent by Certified or Registered Mail, return
receipt requested, postage prepaid,
and addressed to the parties hereto at the respective addresses set out
below, or at other such addresses as they have heretofore specified by
written notice delivered in accordance therewith.
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LANDLORD:
Weeks Realty, L.P.
c/o Weeks/Lichtin
1800 Perimeter Park Drive
Suite 200
Morrisville, North Carolina 27560
Attention: Mr. Harold S. Lichtin
With a copy to:
Dave Lindner
Weeks/Lichtin
1800 Perimeter Park Drive
Suite 200
Morrisville, NC 27560
Alan H. Peterson, Esq.
Kennedy Covington Lobdell & Hickman, L.L.P.
Two Hanover Square Building
Fayetteville Street Mall, 24th Floor
Raleigh, North Carolina 27602
TENANT:
PPD Pharmaco, Inc.
3151 South 17th Street Extension
Wilmington, NC 28412
Attention: Director of Administration
With a copy to:
General Counsel
PPD Pharmaco, Inc.
3151 South 17th Street Extension
Wilmington, NC 28412
If and when included within the term "Landlord", as used in this instrument,
there is more than one person, firm or corporation, all shall jointly arrange
among themselves for their joint execution of such a notice specifying some
individual at some specific address for the receipt of notices and payments to
Landlord; if and when included within the term "Tenant, as used in this
instrument, there is more than one person, firm or corporation, all shall
jointly arrange among themselves for their joint execution of such a notice
specifying some individual at some specific address within the continental
United States for the receipt of notices to Tenant. All parties included within
the terms "Landlord" and "Tenant", respectively, shall be deemed to have
received notices in accordance with the provisions of this paragraph with the
same effect as if each had received such notice.
21. BROKER'S CLAUSE. Tenant warrants and represents to Landlord that it
has had no dealings with any real estate broker or agent in connection with this
Lease other than Corporate Realty Advisors, and Weeks/Lichtin, and Tenant
covenants to pay, hold harmless, and indemnify Landlord from and against any and
all costs, expenses, liabilities (including reasonable attorneys' fees), causes
of action, claims or suits in connection with any compensation, commission, fee,
or charges claimed by any other real estate broker or agent with respect to this
Lease or the negotiation thereof, arising out of any act of Tenant. Landlord
warrants and represents to Tenant that it has had no dealings with
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any real estate broker or agent in connection with this Lease other than
Corporate Realty Advisors, and Weeks/Lichtin, and Landlord covenants to pay,
hold harmless, and indemnify Tenant from and against any and all costs,
expenses, liabilities (including reasonable attorneys' fees), causes of action,
claims or suits in connection with any compensation, commission, fee, or charges
claimed by any other real estate broker or agent with respect to this Lease or
the negotiation thereof, arising out of any act of Landlord.
22. LANDLORD'S LIABILITY. Notwithstanding anything to contrary
contained in this Lease, Tenant agrees and understands that Tenant shall look
solely to the estate and property of Landlord in the Building for the
enforcement of a judgment (or other judicial decree) requiring the payment of
money by Landlord to Tenant by reason of default or breach of Landlord in
performance of its obligations under this Lease, it being intended that there
will be absolutely no personal liability on the part of Landlord, its successors
and assigns with respect to any of the terms, covenants, and conditions of this
Lease, and no other assets of Landlord or of Landlord's partners, if any, shall
be subject to levy, execution, attachment or any other legal process for the
enforcement or satisfaction of the remedies pursued by Tenant in the event of
such default or breach, this exculpation of liability to be absolute and without
exception whatsoever.
23. RULES AND REGULATIONS. Tenant shall fully comply with the Rules and
Regulations attached hereto as Exhibit D and made a part hereof and any and all
modifications thereof, or amendments thereto with respect to which Landlord
notifies Tenant.
24. HAZARDOUS MATERIALS.
(a) Tenant agrees that it will not release, discharge, place,
hold, or dispose of any Hazardous Material (as hereinafter defined) on,
under or at the Premises, in the Building, or on the Land, and that it
will not use the Premises, the Building, the Land, or any other portion
thereof as a site for the treatment, storage, or disposal (whether
permanent or temporary) of any Hazardous Material, other than materials
used in the ordinary course of the business of Tenant in accordance
with all Applicable Laws. Tenant further agrees that it will not cause
or allow any asbestos to be incorporated into any improvements or
alterations which Tenant makes or causes to be made to the Premises, or
the Building.
(b) Tenant hereby agrees to indemnify, defend (with counsel
reasonably approved by Landlord) and hold harmless Landlord of from and
against any and all losses, liabilities, damages, injuries, costs,
expenses and claims of any and every kind whatsoever (including without
limitation, court costs and attorneys' fees at all tribunal levels)
which at any time or from time to time may be paid, incurred or
suffered by, or asserted against Landlord for, with respect to, or as a
direct or indirect result of (i) any breach by Tenant of the provisions
of this Paragraph, or (ii) as a direct or indirect result of the acts
or omissions of Tenant or any agent, employee, invitee, licensee, or
independent contractor of Tenant, the presence on or under, or the
escape, seepage, leakage, spillage, discharge, emission, or release
from, onto, or into the Premises, the Building, the Land, the
atmosphere, or any watercourse, body of water, or groundwater, of any
Hazardous Material
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(including, without limitation, any losses, liabilities, damages,
injuries, costs, expenses or claims asserted or arising under the
Comprehensive Environmental Response, Compensation and Liability Act,
any so-called "Superfund" or "Superlien" law, or any other Federal,
state, local or other statute, law, ordinance, code, rule, regulation,
order or decree regulating, relating to or imposing liability or
standards of conduct concerning any Hazardous Material); and the
provisions of and undertakings and indemnification set forth in this
paragraph shall survive the termination or expiration of this Lease,
for any reason, and shall continue to be the liability, obligation and
indemnification of Tenant, binding upon Tenant forever. The provisions
of the preceding sentence shall govern and control over any
inconsistent provision of this Lease.
(c) For purposes of this Lease, "Hazardous Material" means and
includes any hazardous or toxic substance, pollutant, contaminant, gas,
or petroleum product defined as such in (or for purposes of) the
Comprehensive Environmental Response, Compensation, and Liability Act,
as amended, any so-called "Superfund" or "Superlien", law, the Toxic
Substances Control Act, as amended, or any other Federal, state or
local statute, law, ordinance, code, rule, regulation, order or decree
regulating, relating to, or imposing liability or standards of conduct
concerning, any hazardous, toxic or dangerous waste, substance or
material, as now or at any time hereafter in effect, or any other
hazardous, toxic or dangerous, waste, substance or material, gas or
petroleum product, and "Applicable Laws" shall mean the Comprehensive
Environmental Response, Compensation, and Liability Act, as amended,
any so-called "Superfund" or "Superlien", law, the Toxic Substances
Control Act, as amended, or any other Federal, state or local statute,
law, ordinance, code, rule, regulation, order or decree regulating,
relating to, or imposing liability or standards of conduct concerning,
any hazardous, toxic or dangerous waste, substance or material, as now
or at any time hereafter in effect, or any other hazardous, toxic or
dangerous, waste, substance or material, gas or petroleum product.
(d) Tenant shall provide Landlord with a list of any and all
Hazardous Materials released, discharged, placed, held, or disposed of
on the Premises, and certification to Landlord of compliance by Tenant
with all Applicable Laws, within ten days of a request therefor by
Landlord.
25. [INTENTIONALLY DELETED.]
26. COVENANT OF TENANT. If Landlord encounters difficulties in
negotiating permanent or construction financing for the Building, and after
using its best efforts is unable to resolve those difficulties without obtaining
minor modifications to this Lease, Tenant will act in good faith to execute an
amendment to this Lease, but this agreement on the part of Tenant will not
require Tenant to make any changes that in Tenant's reasonable judgment alter
the term hereof, or adversely affect any substantive right of Tenant, whether
legal or economic.
27. MISCELLANEOUS.
(a) Words of any gender used in this Lease shall be held and
construed to include any other gender, and words in
23
<PAGE> 27
the singular number shall be held to include the plural, unless the
context otherwise requires.
(b) The terms, provisions and covenants and conditions
contained in this Lease shall apply to, inure to the benefit of, and be
binding upon the parties hereto and upon their respective heirs, legal
representatives, successors and permitted assigns, except as otherwise
herein expressly provided. Landlord shall have the right to assign any
of its rights and obligations under this Lease. Each party agrees to
furnish to the other, promptly upon demand, a resolution, or other
appropriate documentation evidencing the due authorization of such
party to enter into this Lease.
(c) The captions inserted in this Lease are for convenience
only and in no way define, limit or otherwise describe the scope or
intent of this Lease, or any provision hereof, or in any way affect the
interpretation of this Lease.
(d) Tenant agrees from time to time, within ten (10) days
after request of Landlord, to deliver to Landlord, or Landlord's
designee, an estoppel certificate stating that this Lease is in full
force and effect, the date to which rent has been paid, the unexpired
term of this Lease and such other matters pertaining to this Lease as
may be requested by Landlord. It is understood and agreed that Tenant's
obligation to furnish such estoppel certificates in a timely fashion is
a material inducement for Landlord's execution of this Lease.
(e) This Lease may not be altered, changed or amended except
by an instrument in writing signed by both parties hereto.
(f) All obligations of Tenant hereunder not fully performed as
of the expiration or earlier termination of the term of this Lease
shall survive the expiration or earlier termination of the term hereof,
including, without limitation, all payment obligations concerning the
condition of the Premises.
(g) In the event of a transfer by Landlord of its interest in
the Premises, Landlord shall be released from all obligations and
liabilities under the terms of this Lease subsequent to the date of
such transfer. In the event a transferee shall agree to assume the
obligations and liabilities of Landlord under the Lease prior to the
date of the transfer, Landlord shall be released from all obligations
and liabilities under the Lease.
(h) If any clause or provision of this Lease is illegal,
invalid or unenforceable under present or future laws effective during
the term of this Lease, then and in that event, it is the intention of
the parties hereto that the remainder of this Lease shall not be
affected thereby, and it is also the intention of the parties to this
Lease that in lieu of each clause or provision of this Lease that is
illegal, invalid or unenforceable, there be added as a part of this
Lease contract a clause or provision as similar in terms to such
illegal, invalid or unenforceable clause or provision as may be
possible and be legal, valid and enforceable.
24
<PAGE> 28
(i) Because the Premises are on the open market and are
presently being shown, this Lease shall be treated as an offer with the
Premises being subject to prior lease and such offer subject to the
withdrawal or non-acceptance by Landlord or to other use of the
Premises without notice, and this Lease shall not be valid or binding
unless and until accepted by Landlord in writing and a fully executed
copy delivered to both parties hereto.
(j) All references in this Lease to "the date hereof" or
similar references shall be deemed to refer to the last date, in point
of time, on which all parties hereto have executed this Lease.
(k) Time is of the essence of this Lease.
(l) (i) If Landlord (1) breaches any agreement or obligation
in this Lease and such breach continues for a period of thirty (30)
days after written notice to Landlord by Tenant, or (2) through
Landlord's gross negligence or willful act, Landlord fails to provide
(where Landlord is obligated to provide the Landlord Essential
Service), or Landlord fails to act reasonably to cause a cure (but only
to the extent that Landlord is responsible for the cure and such cure
is within Landlord's control to effect) or Landlord otherwise
affirmatively acts to stop, interrupt or materially reduce a Landlord
Essential Service (as hereinafter defined) so that Tenant is not able
to carry on its business at the Premises for five (5) consecutive
business days and such interruption continues for a period of five (5)
business days after written notice to Landlord, then upon the
occurrence of (l) and/or (ii) above, if Landlord shall not in good
faith have commenced the curing of such breach specified in (1) or (2)
above within such thirty (30) or five (5) business day period after
written notice, as the case may be and thereafter, shall have not
diligently and continuously proceeded to cure such breach completely,
the Landlord shall be in default hereunder, and Tenant shall have all
rights and remedies available at law or in equity for such default.
(ii) In addition, Tenant shall have the right but not the obligation,
to effect a cure on behalf of Landlord and to demand the actual and
reasonable costs of cure from Landlord.
(iii) For purposes of this Lease, a "Landlord Essential Service" does
not mean a service to be provided by Landlord under this Lease per se,
but rather a facility or system within the Building controlled,
operated or maintained by Landlord (but not a third party, e.g.,
Carolina Power & Light Company, to the extent that such third party is
responsible) that provides electricity, elevator service,
telecommunications (including data transmission), and heating, air
conditioning and ventilation and are necessary for the purpose of
Tenant's conduct of its business at the Premises.
(iv) Landlord shall have no liability for any incidental or
consequential damages of Tenant, or anyone claiming by, through or
under Tenant, for any reason whatsoever.
(m) In the event that Landlord shall default in the
performance of Landlord's obligations hereunder, the holder of a
mortgage or the beneficiary of a deed of trust which includes the
Premises shall have the right, but not the obligation, to perform or
comply with any covenants,
25
<PAGE> 29
agreements and provisions violated in connection with such default.
Further, if such holder or beneficiary notifies Tenant that such holder
or beneficiary has taken over Landlord's right under this Lease, Tenant
shall not assert any right to deduct the cost of repairs or any
monetary claims against Landlord theretofore accrued from rent
thereafter due and payable, but shall look solely to Landlord and not
such holder or beneficiary for satisfaction of such claim.
(n) This Lease does not create the relationship of partner or
joint venturer between Landlord and Tenant.
(o) The laws of the State of North Carolina shall govern the
interpretation, the validity, performance and enforcement of this
Lease.
(p) The undersigned officer of Tenant does hereby warrant and
certify to Landlord that Tenant is a corporation in good standing and
duly organized under the laws of the State of Texas and is authorized
to do business in the State of North Carolina. The undersigned officer
of Tenant hereby further warrants and certifies to Landlord that such
officer is authorized and empowered to bind the corporation to the
terms of this Lease by such officer's signature hereto. Tenant shall
provide Landlord a consent of its officers and directors to enter into
this Lease, and the person authorized to sign this Lease on behalf of
Tenant concurrently with the execution of this Lease.
(q) This Lease shall be executed in duplicate, each of which
shall be deemed an original and complete of itself and may be
introduced into evidence or used for any purpose without the production
of any other copy. If Tenant is a corporation, two authorized corporate
officers must execute this Lease in their appropriate capacity for
Tenant and affix the corporate seal.
(r) The provisions contained in the Rider attached hereto, if
any, are incorporated herein by reference and made a part of this
Lease. In the event of any conflict between the printed portion of this
Lease and the Rider, the provisions of the Rider shall govern and
control.
(s) Although the printed provisions of this Lease were drafted
by Landlord, such fact shall not cause this Lease to be construed
either for or against Landlord or Tenant.
(t) This Lease may not be recorded. Upon the request and at
the expense of Tenant, Landlord shall execute a memorandum of this
Lease suitable for recording which shall omit the financial terms
herein but which shall identify the Premises and the term of this
Lease. Upon the expiration of this Lease, a recorded memorandum of this
Lease may be canceled of record by a document executed by Landlord, or
its successor in interest for such purpose.
(u) Within five days of the request by Landlord upon the
occurrence of a default or event of default hereunder by Tenant, Tenant
shall provide to Landlord, financial statements of Tenant certified by
the chief financial officer of Tenant.
26
<PAGE> 30
(v) No remedy conferred herein is intended to be exclusive of
any other remedy and each and every remedy shall be cumulative and
shall be in addition to every other remedy given hereunder or
thereunder or now or hereafter existing at law or in equity or by
statute or otherwise.
(w) No provision of this Lease shall be deemed to waive any
statutory (as provided in Chapter 44A of the North Carolina General
Statutes), or common law rights of Landlord to assert a lien upon
property of Tenant.
[THE REMAINDER OF THIS PAGE WAS INTENTIONALLY LEFT BLANK.]
27
<PAGE> 31
IN WITNESS WHEREOF, the parties hereto have executed this Lease under
seal as of the day and year first above written.
LANDLORD:
WEEKS REALTY, L.P. (SEAL), a Georgia
limited partnership
BY: WEEKS CORPORATION, its general
partner
Date of execution: By: /s/ Harold S. Lichtin (SEAL)
---------------------
Harold S. Lichtin,
Managing Director
TENANT:
PPD PHARMACO, INC., a Texas
corporation
Date of execution: By: /s/ Rudy C. Howard
6/16/97 ------------------
Print Name: Rudy C. Howard
Title: Chief Financial Officer
Witness/Attest:
/s/ Heather Utzig
- -----------------
Print Name: Heather Utzig
Title: Administrative Assistant
[CORPORATE SEAL]
28
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<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 12,776
<SECURITIES> 8,000
<RECEIVABLES> 95,530
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 126,755
<PP&E> 81,261
<DEPRECIATION> 46,391
<TOTAL-ASSETS> 188,211
<CURRENT-LIABILITIES> 60,770
<BONDS> 0
0
0
<COMMON> 2,254
<OTHER-SE> 121,128
<TOTAL-LIABILITY-AND-EQUITY> 188,211
<SALES> 0
<TOTAL-REVENUES> 176,016
<CGS> 0
<TOTAL-COSTS> 166,672
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 294
<INCOME-PRETAX> 10,312
<INCOME-TAX> 4,101
<INCOME-CONTINUING> 6,211
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,211
<EPS-PRIMARY> .28
<EPS-DILUTED> .28
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