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SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998.
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
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: 23,253,920 shares of common
stock, par value $0.10 per share, as of August 3, 1998.
================================================================================
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<PAGE>
INDEX
Page
----
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Statements of Operations for the Three and
Six Months Ended June 30, 1998 and 1997 ............................. 3
Consolidated Condensed Balance Sheets as of June 30, 1998
and December 31, 1997 ............................................... 4
Consolidated Condensed Statements of Cash Flows for the Six Months Ended
June 30, 1998 and 1997 .............................................. 5
Notes to Consolidated Condensed Financial Statements .................. 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations ........................................ 8
Part II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders .............. 13
Item 5. Other Information ................................................. 13
Item 6. Exhibits and Reports on Form 8-K ................................. 13
Signatures ................................................................ 14
2
<PAGE>
PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(unaudited)
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
--------- -------- --------- ---------
<S> <C> <C> <C> <C>
Life sciences revenues, net of subcontractor costs of $24,468,
$16,037, $43,594 and $34,784, respectively $ 57,387 $ 47,929 $ 109,428 $ 93,894
Environmental sciences revenues, net of subcontractor costs of
$1,955, $1,549, $4,447 and $3,075, respectively 12,793 12,123 25,489 23,832
Discovery sciences revenues, net of subcontractor costs of
$13, $0, $35 and $0, respectively 79 13 191 17
Net revenue -- -- -- --
70,259 60,065 135,108 117,743
--------- --------- --------- ---------
Direct costs - Life sciences 28,397 24,113 55,068 48,227
Direct costs - Environmental sciences 8,997 8,294 17,960 16,632
Direct costs - Discovery sciences 852 323 1,703 480
Selling, general and administrative expenses 21,227 17,677 40,313 34,294
Depreciation and amortization 3,447 3,065 6,925 5,807
Merger costs -- 69 -- 512
Acquired in-process research and development costs 3,163 9,112 3,163 9,112
--------- --------- --------- ---------
66,083 62,653 125,132 115,064
--------- --------- --------- ---------
Operating income (loss) 4,176 (2,588) 9,976 2,679
Interest income, net 263 271 502 616
Other income (expense), net 312 93 1,706 52
--------- --------- --------- ---------
Income (loss) before income taxes 4,751 (2,224) 12,184 3,347
Provision (benefit) for income taxes 1,876 (878) 4,773 1,350
--------- --------- --------- ---------
Net income (loss) $ 2,875 $ (1,346) $ 7,411 $ 1,997
========= ========= ========= =========
Net income (loss) per share:
Basic $ 0.12 $ (0.06) $ 0.32 $ 0.09
========= ========= ========= =========
Diluted $ 0.12 $ (0.06) $ 0.32 $ 0.09
========= ========= ========= =========
Weighted average number of common shares outstanding:
Basic 23,079 22,490 23,052 22,464
Dilutive effect of stock options 167 74 139 74
--------- --------- --------- ---------
Diluted 23,246 22,564 23,191 22,538
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
3
<PAGE>
PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands)
Assets
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
--------- ------------
(unaudited)
<S> <C> <C>
Current assets
Cash and cash equivalents $ 19,772 $ 15,879
Marketable securities - 7,994
Accounts receivable and unbilled services, net 119,357 101,554
Investigator advances 1,473 1,870
Prepaid expenses and other current assets 7,107 7,227
Deferred tax asset 1,278 1,973
--------- ---------
Total current assets 148,987 136,497
Property, plant and equipment, net 38,007 34,902
Goodwill, net 14,940 18,026
Other assets, net 8,434 7,622
--------- ---------
Total assets $ 210,368 $ 197,047
========= =========
Liabilities and Shareholders' Equity
Current liabilities
Current maturities of long-term debt $ 4,128 $ 4,906
Accounts payable 6,929 6,249
Payables to investigators 5,844 4,138
Other accrued expenses 24,368 23,532
Unearned income 29,539 27,722
--------- ---------
Total current liabilities 70,808 66,547
Long-term debt, less current maturities 355 340
Deferred rent and other 2,286 2,555
--------- ---------
Total liabilities 73,449 69,442
--------- ---------
Shareholders' equity
Common stock 2,310 2,295
Paid-in capital 117,958 115,680
Unrealized gain on investments and marketable securities,
net -- 168
Cumulative translation adjustment (920) (650)
Retained earnings 17,571 10,112
--------- ---------
Total shareholders' equity 136,919 127,605
--------- ---------
Total liabilities and shareholders' equity $ 210,368 $ 197,047
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
4
<PAGE>
PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
---------------------
1998 1997
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 7,411 $ 1,997
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 6,925 5,807
Acquired in-process research and development costs 3,163 9,112
Gain on sale of business (1,071) --
Other 1,093 (4,230)
Merger expenses -- (6,253)
Change in operating assets and liabilities (13,802) (6,658)
-------- --------
Net cash provided by (used in) operating activites 3,719 (225)
-------- --------
Cash flows from investing activities:
Purchases of investments -- (10,972)
Sale of investments 8,000 17,240
Purchases of property and equipment (10,254) (6,351)
Net cash paid for acquisitions (1,006) (8,121)
Net cash paid for acquisition of in-process research
and development costs (3,163) --
Net cash received in sale of business 5,285 --
Other -- 174
-------- --------
Net cash used in investing activities (1,138) (8,030)
-------- --------
Cash flows from financing activities:
Repayment of long-term debt (739) (201)
Proceeds from issuance of common stock 2,273 1,634
Distributions to shareholders -- (430)
Other 48 --
-------- --------
Net cash used in financing activities 1,582 1,003
-------- --------
Effect of exchange rate changes on cash (270) (1,343)
-------- --------
Net increase (decrease) in cash and cash equivalents 3,893 (8,595)
Cash and cash equivalents, beginning of the period 15,879 21,838
-------- --------
Cash and cash equivalents, end of the period $ 19,772 $ 13,243
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
5
<PAGE>
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 consolidated condensed financial statements do
not purport to contain all the necessary financial disclosures that might
otherwise be necessary in the circumstances and should be read in conjunction
with the consolidated financial statements and notes thereto in the Company's
Annual Report for the year ended December 31, 1997. The results of operations
for the three month and six month periods ended June 30, 1998 are not
necessarily indicative of the results to be expected for the full year or any
other period. The amounts on the December 31, 1997 consolidated condensed
balance sheet have been derived from the audited financial statements included
in the Company's Annual Report on Form 10-K for the year ended December 31,
1997.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Reclassifications
Certain 1997 financial statement amounts have been reclassified to conform
with the 1998 presentation.
2. PRINCIPLES OF CONSOLIDATION
The accompanying unaudited consolidated condensed financial statements
include the accounts and operations of the Company and its wholly-owned
subsidiaries. All significant intercompany balances and transactions have been
eliminated in consolidation.
3. ACQUISITIONS
Purchases
In January 1998, the Company acquired two environmental consulting
businesses for a total of $1,000,000 in cash and the potential for the former
owners to earn an additional amount depending on the profitability of the
businesses for a certain period after the acquisition. In connection with these
acquisitions, the Company recorded approximately $900,000 in goodwill. Pro forma
information is not presented as the acquired company's results of operations
prior to the dates of the acquisitions were not material individually or
collectively to the Company.
In January 1997, 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 connection with the acquisition, the Company recorded
$1,070,000 in goodwill. In June 1997, the Company acquired the GSX System, a
functional genomics platform technology. The GSX System was purchased for
approximately $8,700,000 in cash. Liabilities assumed in this transaction were
$832,000. Pro forma information is not presented as the acquired company's
results of operations prior to the dates of the acquisitions were not material
individually or collectively to the Company.
Pooling
In March 1997, the Company acquired Belmont Research, Inc. ("Belmont"). 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 acquired SARCO, Inc. ("SARCO"). The
consideration for SARCO consisted of 263,158 shares of the Company's common
stock. In November 1997, the Company acquired Intek Labs, Inc. ("Intek"). The
consideration for Intek consisted of 399,999 shares of the Company's common
stock. All three of these acquisitions were accounted for as pooling of
interests transactions. Pro forma information is not presented as the acquired
company's results of operations prior to the year of the acquisitions were not
material individually or collectively to the Company.
6
<PAGE>
PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(unaudited)
4. PER SHARE INFORMATION
The computation of basic income per share information is based on the
weighted average number of common shares outstanding during the period. The
computation of diluted income per share information is based on the weighted
average number of common shares outstanding during the period plus the effects
of any dilutive common stock equivalents at period end.
5. SALE OF BUSINESS
On February 27, 1998, the Company, through its subsidiary Clinix
International Inc., sold the business and assets of the Chicago Center for
Clinical Research ("CCCR"). The selling price was approximately $7,785,000 in
the form of cash and a promissory note payable over five years. The sale
resulted in a gain of approximately $1,071,000 which was recognized as other
income during the first quarter of 1998. As part of the sales agreement, the
Company will continue to provide CCCR with certain clinical and administrative
services over the next several quarters.
6. 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 ending December 31, 1998. SFAS No. 131 requires the Company
to report certain information about operating segments in complete sets of
financial statements and in condensed financial statements of interim period
issued to shareholders. It also establishes standards for related disclosures
about products and services, geographic areas and major customers. The Company
does not expect this new pronouncement to have a significant impact on the
financial statements.
The Company will adopt Statement of Financial Accounting Standards No. 132,
"Employers' Disclosures about Pensions and Other Postretirement Benefits" ("SFAS
No. 132"), for the year ending December 31, 1998. SFAS No. 132 standardizes the
disclosure requirements for pensions and other postretirement benefits to the
extent practicable, requires additional information and changes in the benefit
obligations and fair values of plan assets that will facilitate financial
analysis, and eliminates certain disclosures that are no longer useful. The
Company does not expect this new pronouncement to have a significant impact on
the financial statements.
7. COMPREHENSIVE INCOME
On January 1, 1998, the Company adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income" ("SFAS No. 130"). As
required by SFAS No. 130, prior year information has been modified to conform
with the new presentation.
The Company's total comprehensive income (loss) for the three month periods
ended June 30, 1998 and 1997 was $2,559,000 and $(2,212,000), respectively, and
for the six month periods ended June 30, 1998 and 1997 was $7,141,000 and
$612,000, respectively. Information concerning the components of the Company's
other comprehensive income (loss) for the three and six month periods ended June
30, 1998 and 1997 is as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
1998 1997 1998 1997
--------------------------- -------------------------
<S> <C> <C> <C> <C>
Cumulative translation adjustment $(316) $(865) $(270) $(1,307)
Unrealized gain on investments -- (1) -- (78)
</TABLE>
7
<PAGE>
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 Group provides services through
(i) PPD Pharmaco, Inc. and its wholly-owned European, South American, South
African, Australian and Canadian subsidiaries (collectively "PPD Pharmaco"),
(ii) Belmont Research, Inc. ("Belmont"), and (iii) Intek Labs, Inc. ("Intek").
PPD Pharmaco is a leading contract research organization ("CRO"), providing
integrated product development services on a global basis to complement the
research and development activities of companies in the pharmaceutical and
biotechnology industries. Through its environmental sciences subsidiary, APBI
Environmental Sciences Group, Inc., operating under the trade name ENVIRON, the
Company also provides assessment and management of chemical and environmental
health risk. PPD Discovery, Inc., the Company's discovery sciences subsidiary,
focuses on the discovery segment of the research and development outsourcing
market.
Life Sciences Group
PPD Pharmaco offers its clients high quality, value-added services designed
to reduce drug development time. Reduced development time allows the client to
get its products into the market faster and to maximize the period of marketing
exclusivity and the economic return for such products. In addition, PPD
Pharmaco's integrated services offer its clients a variable cost alternative to
the fixed costs associated with internal drug development. PPD Pharmaco's
professional CRO services include Phase I clinical testing, laboratory services,
patient recruitment, Phase II-IV clinical trial management, clinical data
management and biostatistical analysis, treatment Investigational New Drug
Applications, medical writing and regulatory services, and healthcare economics
and outcomes research. The Company believes that it is one of only a few CROs in
the world capable of providing such a broad range of clinical development
services.
Belmont was acquired by the Company in March 1997. Belmont provides
software development and system integration services to the pharmaceutical
industry. Belmont's clients include international and domestic pharmaceutical
and biotechnology companies, scientific software vendors and government agencies
including the FDA. Belmont also develops specialized software products to
support different aspects of the pharmaceutical research process, including drug
discovery, clinical trials and regulatory review. Current Belmont software
products include Resolve TM, which manages data queries to investigator sites,
and CrossGraphs (R), which is used for exploration and presentation of research
data.
Intek was acquired in November 1997. Intek provides molecular genotyping,
phenotyping and large-scale genomic DNA purification services through its
current Good Laboratory Practice ("cGLP") compliant reference laboratory. Intek
furnishes pharmacogenetic services for clinical trials. Intek routinely reports
pharmacogenetic profiles within 48 hours enabling genotyping to be performed on
clinical trial candidates at enrollment. Intek also provides genotyping and
phenotyping for difficult cellular and tissue samples such as liver, hepatocytes
and S9 liver fractions. Additional services include in vitro studies to
correlate therapeutic response with polymorphisms early in drug development, and
large-scale genomic DNA purification and archiving services to prepare clinical
trial samples for DNA banking and pharmacogenomic research.
The Life Sciences Group also includes Clinix International, Inc., which in
August 1995 acquired the business and substantially all of the assets of Chicago
Center for Clinical Research ("CCCR"), a nationally recognized organization
which conducts clinical trials in the pharmaceutical, food and nutrition
industries. The Company sold substantially all of the assets of CCCR in February
1998. 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, 1997.
Environmental Sciences Group
ENVIRON provides a broad range of scientific, technical and strategic
management consulting services that address a wide variety of public health and
environmental issues related to the presence of chemicals in foods, drugs,
medical devices, consumer products, the workplace, and the environment. 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, 1997.
8
<PAGE>
Discovery Sciences Group
PPD Discovery, Inc. ("PPD Discovery") was established in June 1997, at
which time the Company acquired SARCO, Inc. ("SARCO"), a combinational chemistry
company, and the GSX System, a functional genomics platform technology. These
acquisitions form the basis of a group of wholly-owned subsidiaries focused on
the discovery research segment of the research and development outsourcing
market. In May 1998, the Company created Subsidiary No. 5, Inc., a subsidiary of
PPD which holds licenses to a number of compounds in the genitourinary field.
For more detailed information on the Company's Discovery Sciences Group, see the
Company's Annual Report on Form 10-K for the year ended December 31, 1997.
FORWARD-LOOKING STATEMENTS
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 and reflect
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 PPD'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. See "Potential Volatility of Quarterly Operating Results and Stock
Price".
RESULTS OF OPERATIONS
General
In January 1998, the Company acquired two environmental consulting
businesses for $1,000,000. These acquisitions were accounted for using the
purchase method of accounting and resulted in the Company recording
approximately $900,000 in goodwill. In May 1998, the Company created Subsidiary
No. 5, Inc., a subsidiary of PPD which holds licenses to a number of compounds
in the genitourinary field. As a result of this transaction, the Company
recorded one-time acquired in-process research and development of $3.2 million
in the second quarter of 1998.
During the second quarter of 1998, net income, excluding nonrecurring
costs (acquired in-process research and development costs, the gain relating to
the sale of CCCR and merger costs), increased 13.8% to $4.8 million, from $4.2
million for the same period in 1997. On that basis, operating income increased
by 11.3% to $7.3 million from $6.6 million a year earlier. If the nonrecurring
costs are included, net income rose $4.2 million to $0.12 per share.
Three Months Ended June 30, 1998 Versus Three Months Ended June 30, 1997
Net revenue increased $10.2 million, or 17.0%, to $70.3 million in 1998
from $60.1 million last year. The Life Sciences Group's operations accounted for
81.7% of the Company's net revenue for the 1998 period as compared to 79.8% for
the 1997 period. The Life Sciences Group generated net revenue of $57.4 million,
up $9.5 million, or 19.7%, from last year. The growth in the Life Sciences Group
operations was due primarily to an increase in the size, scope and number of
contracts in the clinical development and biostatistics business. Net revenue
from ENVIRON, the Company's Environmental Sciences Group, representing 18.2% of
the Company's net revenue for the second quarter 1998, was $12.8 million,
compared with $12.1 million in 1997.
Total direct costs increased 16.9% to $38.3 million from $32.7 million last
year and remained relatively constant as a percentage of net revenue at 54.4%
for 1998 and 54.5% for 1997. The Life Science Group's direct costs as a
percentage of related net revenue declined to 49.5% from 50.3% last year. This
decrease is principally due to higher labor utilization and a focused effort to
control costs across all business segments. ENVIRON's direct costs as a
percentage of related net revenue increased to 70.3% from 68.4% last year.
Selling, general and administrative ("SG&A") expenses increased 20.1% to
$21.2 million from $17.7 million in 1997. As a percentage of net revenue, SG&A
expenses increased to 30.2% from 29.4% last year. The SG&A increase as a
percentage of net revenue is primarily attributable to the recent investment in
the Company's business development and
9
<PAGE>
marketing department, as well as, the addition of the SG&A of the Discovery
Sciences Group, which began operations in July 1997.
Total depreciation and amortization expense of $3.5 million was $0.4
million, or 12.5%, higher than last year. The increase was related to the
Company's growth, as well as the depreciation of the ongoing capital investment
in the Company's base business.
The Company recorded one-time acquired in-process research and development
of $3.2 million in the second quarter of 1998. These costs were charged to
operations upon the creation of Subsidiary No. 5, Inc. and subsequent to the
purchase of six licenses to genitourinary compounds. The Company immediately
expensed the acquired in-process research and development costs because it
believes that the compounds have no alternative future use and have not reached
technological feasibility.
Operating income increased $6.8 million to an operating income of $4.2
million for the three months ended June 30, 1998, as compared to an operating
loss of $2.6 million for the three months ended June 30, 1997. As a percentage
of net revenue, excluding nonrecurring costs, the quarterly operating income of
10.5% represents a decline from the operating income of 11.0% of net revenue for
the same period last year. This decline was primarily due to the increase in
SG&A mentioned above.
Net income of $2.9 million represents an improvement of $4.2 million over
the same quarter a year ago. Net income per basic and diluted share of $0.12
compares to net loss per basic and diluted share of $0.06 for the same period
last year. Excluding nonrecurring costs, the Company's net income of $4.8
million was 13.8% higher than last year's net income of $4.2 million. On an
equivalent earnings-per-share basis, the net income per diluted share, excluding
nonrecurring costs, of $0.21 compares to $0.19 for the same period last year
computed on 0.7 million less shares outstanding.
Six Months Ended June 30, 1998 Versus Six Months Ended June 30, 1997
Net revenue increased $17.4 million, or 14.8%, to $135.1 million in 1998
from $117.7 million last year. The Life Sciences Group's operations accounted
for 81.0% of the Company's net revenue for the 1998 period as compared to 79.7%
for the 1997 period. The Life Sciences Group generated net revenue of $109.4
million, up $15.5 million, or 16.5%, from last year. The growth in the Life
Sciences Group operations was due primarily to an increase in the size, scope
and number of contracts in the clinical development and biostatistics business.
Net revenue from ENVIRON, the Company's Environmental Sciences Group,
representing 18.9% of the Company's net revenues in the first six months was
$25.5 million, compared with $23.8 million in 1997.
Total direct costs increased 14.4% to $74.7 million from $65.3 million last
year and remained relatively constant as a percentage of net revenue at 55.3%
for 1998 and 55.5% for 1997. The Life Science Group's direct costs as a
percentage of related net revenue declined to 50.3% from 51.4% last year. This
decrease is principally due to higher labor utilization and a focused effort to
control costs across all business segments. ENVIRON's direct costs as a
percentage of related net revenue increased slightly to 70.5% from 69.8% last
year.
Selling, general and administrative ("SG&A") expenses increased 17.6% to
$40.3 million from $34.3 million in 1997. As a percentage of net revenue, SG&A
expenses increased to 29.8% from 29.1% last year. The SG&A increase as a
percentage of net revenue is primarily attributable to the recent investment in
the Company's business development and marketing department, as well as, the
addition of the SG&A of the Discovery Sciences Group, which began operations in
July 1997.
Total depreciation and amortization expense of $6.9 million was $1.1
million, or 19.3%, higher than last year. The increase was related to the
Company's growth, as well as the depreciation of the ongoing capital investment
in the Company's base business.
Operating income increased $7.3 million to $10.0 million for the six months
ended June 30, 1998, as compared to $2.7 million for the six months ended June
30, 1997. As a percentage of net revenue, excluding nonrecurring costs, the
operating income of 9.7% represents a decline from the operating income of 10.5%
of net revenue for the same period last year. This decline was due primarily to
the increase in SG&A mentioned above.
10
<PAGE>
Net income of $7.4 million represents an improvement of $5.4 million over
the same period a year ago. Net income per basic and diluted share of $0.32
compares to net income per basic and diluted share of $0.09 for the same period
last year. Excluding the nonrecurring costs, the Company's net income of $8.6
million was 10.5% higher than last year's net income of $7.8 million. On an
equivalent earnings-per-share basis, the net income per diluted share, excluding
nonrecurring costs, of $0.37 compares to $0.35 for the same period last year
computed on 0.7 million less shares outstanding.
Liquidity and Capital Resources
As of June 30, 1998, the Company had $19.8 million of cash and cash
equivalents on hand. The Company has historically funded its operations and
growth, including acquisitions, with cash flow from operations and borrowings.
For the six months ended June 30, 1998, the Company experienced a net
increase in cash from operating activities of $3.7 million. For the period, net
income of $7.4 million, and depreciation and amortization of $6.9 million were
partially offset by the gain on sale of business of $1.1 million and the net
change of $13.8 million in operating assets and liabilities (which includes a
$20.8 million increase in billed and unbilled receivables).
For the six months ended June 30, 1998, the Company's investing activities
used $1.1 million in cash. Net cash received in sale of business was $5.3
million and the sale of investments provided $8.0 million. This was more than
offset by capital expenditures of $10.3 million, cash paid for the purchase of
technology of $3.2 and the $1.0 million net cash paid for acquisitions.
For the six months ended June 30, 1998, the Company's financing activities
provided $1.6 million in cash, as net proceeds from stock option exercises of
$2.3 million were partially offset by $0.7 million in net repayment of long-term
debt.
In June 1998, the Company entered into a $50.0 million revolving credit
facility with First Union National Bank. Interest accrues on amounts borrowed at
a floating rate currently equal to LIBOR plus 0.625% 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
June 30, 1998, the Company had $15.0 million reserved under this facility in the
form of a letter of credit.
In August 1997, the Company entered into a credit facility for $50.0
million with Wachovia Bank, N.A. Interest accrues on amounts borrowed at a
floating rate currently equal to LIBOR 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 June 30, 1998,
the Company had $3.3 million outstanding under this facility.
The Company expects to continue expanding its operations through internal
growth and strategic acquisitions. The Company expects such activities will be
funded from existing cash and marketable securities, cash flow from operations
and borrowings under its credit facilities. The Company believes that such
sources of cash will be sufficient to fund the Company's current operations for
at least the next 12 months. The Company is currently evaluating a number of
acquisition and other growth opportunities which may require additional external
financing, and the Company may from time to time seek to obtain funds from
public or private issuances of equity or debt securities.
Year 2000 Compliance
Computers, software and other equipment utilizing microprocessors that use
only two digits to identify a year in a date field may be unable to process
accurately certain date-based information at or after the year 2000. This is
commonly referred to as the "Year 2000 issue," and the Company is addressing
this issue on primarily two fronts. First, the Company has requested Year 2000
compliance certification from each of its major vendors and suppliers for their
hardware or software products or documentation on what aspects of their products
are not Year 2000 compliant and what steps they are taking to ensure compliance
by Year 2000. Secondly, the Company has established a separate team to
coordinate solutions to the Year 2000 issue for our small number of internally
developed systems, with a goal of having all of its internal systems Year 2000
compliant by the end of first quarter of 1999. In addition, our purchasing
policy for all new products requires Year 2000 compliance. The Company currently
does not expect that the cost of its Year 2000 compliance program will be
material to its financial condition or results of operations or that its
business will be adversely affected by the Year 2000 issue in any material
respect. Nevertheless, achieving Year 2000 compliance is dependent on many
factors, some of which are not completely within the Company's control. Should
either the Company's internal systems or the internal systems of one or more
significant vendors or suppliers fail to achieve Year 2000 compliance, the
Company's business and its results of operations could be adversely affected.
11
<PAGE>
Inflation
The Company believes the effects of inflation do not have a material
adverse effect on its results of operations or financial condition.
Exchange Rate Fluctuations and Exchange Controls
The vast majority of the Company's contracts are entered into by the
Company's United States or United Kingdom subsidiaries. The contracts entered
into by the United States subsidiaries are almost always denominated in United
States dollars.
Contracts between the Company's United Kingdom subsidiaries and their
clients are generally denominated in pounds sterling. Substantially all of the
United Kingdom subsidiaries' expenses, such as salaries, services, materials and
supplies, are paid in pounds sterling. However, the Company's consolidated
financial statements are denominated in dollars and, accordingly, changes in the
exchange rate between the pound sterling and the dollar will affect the
translation of such subsidiaries' financial results into dollars for purposes of
reporting the Company's consolidated financial results, and also affect the
dollar amounts actually received by the Company from such subsidiaries.
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%). The Company currently believes that those
conditions will persist for at least the following year.
There are no material exchange controls currently in effect in any country
in which the Company's subsidiaries conduct operations on the payment of
dividends or otherwise restricting the transfer of funds outside such countries
by a company resident in such countries. Although the Company performs services
for clients located in a number of foreign jurisdictions, to date, the Company
has not experienced any difficulties in receiving funds remitted from foreign
countries. However, if any such jurisdictions were to impose or modify existing
exchange control restrictions on the remittance of funds to the Company, such
restrictions could have an adverse effect on the Company's business.
Potential Volatility of Quarterly Operating Results and Stock Price
The Company's quarterly operating results are subject to volatility due to
such factors as the commencement, completion or cancellation of large contracts,
progress of ongoing contracts, acquisitions, the timing of start-up expenses for
new offices, management of growth and changes in the mix of services. Since a
large percentage of the Company's operating costs are relatively fixed,
variations in the timing and progress of large contracts can materially affect
quarterly results. To the extent the Company's international business increases,
exchange rate fluctuations may also influence these results. The Company
believes that comparisons of its quarterly financial results are not necessarily
meaningful and should not be relied upon as an indication of future performance.
However, fluctuations in quarterly results or other factors beyond the Company's
control, such as changes in earnings estimates by analysts, market conditions in
the CRO, environmental, pharmaceutical and biotechnology industries and general
economic conditions could affect the market price of the Common Stock in a
manner unrelated to the longer-term operating performance of the Company.
12
<PAGE>
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders
The 1998 Annual Meeting of Shareholders of the Company was held on May 13,
1998.
At the Annual Meeting, the following directors were elected to office for
the ensuing year and were approved by the following votes:
<TABLE>
<CAPTION>
For Against
---------- ----------
<S> <C> <C>
Ernest Mario 17,873,920 7,674
Fredric N. Eshelman 17,873,920 8,074
John A. McNeill, Jr. 17,873,210 8,384
Stuart Bondurant 17,872,960 8,634
Frederick Frank 17,866,175 15,419
Frank E. Loy 17,872,860 8,734
Thomas D'Alonzo 17,874,020 7,574
</TABLE>
Item 5. Other Information
Pursuant to recently amended Rule 14a-4 promulgated under the Securities
Exchange Act of 1934, as amended, a shareholder seeking to have a proposal
considered at the Company's 1999 Annual Meeting of Shareholders must notify the
Company by February 15, 1999 (based on tentatively scheduled Annual Meeting) or
the persons appointed as proxies. Proxies may exercise their discretionary
voting authority on the proposal notwithstanding that the shareholders have not
been advised of the proposal in the proxy statement. Any proposals submitted by
shareholders must comply in all respects with the rules and regulations of the
Securities and Exchange Commission and the Company's Bylaws.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 10.111 Employment Agreement dated May 22, 1998 between Subsidiary
No. 5, Inc. and Karl B. Thor.
Exhibit 10.112 Severance Agreement dated May 22, 1998 between Subsidiary
No. 5, Inc. and Karl B. Thor.
Exhibit 10.113 Note and Loan Agreement, dated June 24, 1998 between
Pharmaceutical Product Development, Inc. and First Union
National Bank.
Exhibit 10.114 Lease Agreement dated June 26, 1998 between, Weeks Realty
Limited Partnership 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 June 30, 1998
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PHARMACEUTICAL PRODUCT DEVELOPMENT, INC.
----------------------------------------
(Registrant)
By /s/ Rudy C. Howard
---------------------------------------
Chief Financial Officer, Vice President
of Finance and Treasurer
(Principal Financial Officer)
Date: August 13, 1998
14
EX-10.111
EMPLOYMENT AGREEMENT DATED 5/22/98
<PAGE>
EMPLOYMENT AGREEMENT
THIS AGREEMENT (the "Agreement"), is made and entered into as of
this 22nd day of May, 1998, by and between Subsidiary No. 5, Inc. (the
"Company"), a North Carolina corporation whose mailing address for notice
purposes is 3151 Seventeenth Street Extension, Wilmington, North Carolina,
28412, Attention: Chief Executive Officer, Facsimile No.: (910) 343-5920, and
Karl Thor ("Employee"), an individual resident of North Carolina whose mailing
address is 109 Draymore Way, Morrisville, North Carolina 27560.
RECITALS
A. The Company is engaged in the development of compounds,
particularly those for genitourinary indications (the "Business").
B. Employee has extensive knowledge and a deep understanding of the
Business and has developed long-standing business relationships with customers,
suppliers and other business constituencies who are involved in the Business.
C. The Company desires to employ Employee and Employee desires to be
employed by the Company, all upon the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing recitals, the
mutual covenants of the parties hereinafter set forth and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
ARTICLE 1
EMPLOYMENT AND DUTIES
1.1 Engagement of Employee. The Company agrees to employ Employee
and Employee agrees to accept such employment, all pursuant and subject to the
terms and conditions of this Agreement.
1.2. Duties and Powers. At all times during the Employment Period
(as defined herein), the Company agrees that Employee shall serve as Chief
Scientific Officer of the Company and will have such responsibilities, duties
and authority, and will render such services for and in connection with the
Company and its affiliates as are customary in such position and as the Board of
Directors of the Company (the "Board") shall from time to time reasonably
direct. Employee agrees to devote Employee's full business time and attention
exclusively to the Business of the Company except as otherwise permitted or
contracted for by the Company, and to use Employee's best efforts to faithfully
carry out Employee's duties and responsibilities hereunder. Employee
2
<PAGE>
agrees to comply with all personnel policies and procedures of the Company as
the same now exist or may be hereafter implemented by the Company from time to
time, including those policies contained in the Pharmaceutical Product
Development, Inc. ("PPD") employee manual or handbook which sets forth policies
and procedures generally for employees of PPD and its subsidiaries and
affiliates (the "Handbook") to the extent not inconsistent with this Agreement.
ARTICLE 2
TERM OF EMPLOYMENT
Unless sooner terminated as provided elsewhere in this Agreement,
Employee's employment under this Agreement shall be for a period of four (4)
years beginning on May 22, 1998 and ending on May 21, 2002 ("Initial Employment
Period"). This Agreement automatically shall renew for successive one-year
periods, unless either the Company or Employee provides written notice to the
other at least six (6) months prior to the termination of any such period
stating said party's desire to terminate this Agreement. The Initial Employment
Period and any extension or renewal thereof shall be referred to herein together
as the "Employment Period". Notwithstanding anything to the contrary contained
herein, the Employment Period is subject to termination pursuant to Article 4
hereof.
ARTICLE 3
COMPENSATION AND BENEFITS
3.1 Compensation. In consideration of Employee performing the duties
under this Agreement during the Employment Period, the Company will pay Employee
a base salary at a rate of $115,000 per annum (the "Base Salary"), payable in
accordance with the Company's regular payroll policy for salaried employees. The
Base Salary of Employee may be subject to increase annually during the
Employment Period by the Board of the Company. If the Employment Period is
terminated pursuant to Article 4 hereof, except as otherwise provided in Section
4.4 the Base Salary for any partial year will be prorated based on the number of
days elapsed in such year during which services were actually performed by
Employee.
3.2. Benefits. During the Employment Period, Employee shall be
eligible to participate in and/or receive benefits under such employee and
welfare benefit plans as may be established from time to time by PPD for its
subsidiaries, including any profit-sharing, stock purchase, bonus, pension,
disability, group-term life insurance, health insurance and flexible benefit
payroll deduction plans, subject in each instance to Employee meeting all
eligibility and qualification requirements of such plans. In addition, Employee
shall be entitled to participate in such additional benefits as made available
generally to Senior Vice Presidents of PPD Pharmaco, Inc. ("PPD Pharmaco"), a
wholly owned subsidiary of PPD and an affiliate of the Company. Employee shall
be entitled to roll over to the Pharmaceutical Product Development, Inc.
Retirement Savings Plan (the "PPD 401(k) Plan") all of Employee's vested account
balances in defined
3
<PAGE>
contribution plans sponsored by Eli Lilly and Company ("Lilly") , provided,
however, that such defined contribution plans sponsored by Lilly permit such
rollover and the PPD 401(k) Plan permits acceptance of such rollover amounts.
3.3 Bonuses. During the Employment Period, the Employee shall be
eligible to receive bonuses as follows:
a. Annual Incentive Bonuses. Employee shall be eligible to
participate in the PPD Pharmaco, Inc. Employee Incentive Compensation Plan, or
its successor, in effect from time to time (the "Incentive Plan") in the same
manner as a Senior Vice President of PPD Pharmaco; provided, however, that
Employee's business unit performance, as described in the Incentive Plan, shall
be based on the performance of the Company. (Under the Incentive Plan as
currently in effect, Employee's "target" bonus is thirty percent (30%) of Base
Salary and, based on performance, can be as high as sixty percent (60%) of the
Base Salary.)
b. Milestone Bonuses. Unless otherwise expressly stated, all
capitalized terms used in this Section 3.3.b. and in Sections 3.3.c. and 4.4.d.
below shall have the same meaning ascribed to them in that certain Development
and License Agreement (the "Development Agreement") dated May 22, 1998 by and
between Lilly, PPD and the Company. If Lilly exercises its Commercialization
Option for a particular Licensed Product pursuant to Section 4.01 of the
Development Agreement, or if PPD exercises its Commercialization Option for a
particular Licensed Product pursuant to Section 4.02 of the Development
Agreement, Employee shall be entitled to a milestone bonus of $90,000 (the
"Milestone Bonus") for each Licensed Product for which Lilly or PPD exercises
its respective Commercialization Option; provided, however, that in no event
shall Employee receive a Milestone Bonus for more than three (3) Licensed
Products (the "Three Products") for which Lilly and/or PPD exercise their
respective Commercialization Options, and provided further that the Milestone
Bonus for each Licensed Product of the Three Products for which Lilly or PPD
exercises its respective Commercialization Option before May 22, 2000, if any,
shall be doubled. Each Milestone Bonus to which Employee is entitled shall be
paid within thirty (30) days after receipt by the Company of milestone payments
described in Section 4.01(d) or Section 4.02(a) of the Development Agreement,
whichever is applicable, which enable it to cover all licensing fees paid
pursuant to Section 7.01(a) of the Development Agreement and to pay the
Milestone Bonus.
c. Royalty Bonus. Employee shall be entitled to a royalty
bonus equal to one half of one percent (0.5%) of net royalty payments owed by
the Company to PPD (the "Royalty Bonus") with respect to each of the Three
Products, if any. Said Royalty Bonuses, if any, shall be paid at the same time
that the Company pays any royalties which it owes to Lilly and/or PPD under
Section 4.10 of the Development Agreement.
4
<PAGE>
3.4 Expenses. The Company will reimburse Employee, in accordance
with and subject to Employee's compliance with the Company's policy, for
Employee's necessary and reasonable out-of-pocket expenses incurred in the
course of performance of Employee's duties hereunder. All reimbursement of
expenses to Employee hereunder shall be conditioned upon presentation of
sufficient documentation evidencing such expenses.
3.5 Vacation and Leave. During each year of the Employment Term,
Employee shall be entitled to four weeks of paid vacation and such additional
number of days of "Paid Time Off" allotted for the position of a Senior Vice
President of PPD Pharmaco treated as having been employed on the date of this
Agreement, and such other leave as may be established from time to time by the
Company for the benefit of its employees, subject to Employee's compliance with
the guidelines set forth in the Handbook.
3.6 Stock Options. Employee shall be entitled to receive as of the
effective date of this Agreement (the "Grant Date") options to purchase 15,000
shares of PPD's common stock at a purchase price equal to $22.125, the NASDAQ
market close price on the Grant Date. Said share options are granted pursuant to
the terms of PPD's Equity Compensation Plan (the "Equity Plan") and are subject
to all of the terms and conditions of the Equity Plan as more specifically
evidenced by that certain Stock Award Agreement attached hereto as Exhibit 3.6
entered into between Employee and PPD concurrently with this Agreement. In
addition, Employee shall be entitled to consideration for annual stock option
grants at the same time and in accordance with the guidelines prescribed from
time to time by PPD's board of directors for Senior Vice Presidents of PPD
Pharmaco. (Under the current PPD stock option guidelines, the "target" annual
performance award for a Senior Vice Proesident of PPD Pharmaco is 5,000
options.)
3.7 Severance Agreement. PPD shall enter into a Severance Agreement
with Employee concurrently with the execution of this Agreement in the form set
forth in Exhibit 3.7.
3.8 Working Facilities. The Company shall furnish Employee with such
office space, equipment, technical, secretarial and clerical assistance and such
other facilities, services and supplies as shall be reasonably necessary to
enable Employee to perform the duties required of Employee hereunder in an
efficient and professional manner.
ARTICLE 4
TERMINATION OF EMPLOYMENT
4.1 Basis for Termination. Notwithstanding any other provision in
this Agreement to the contrary, the Employment Period and Employee's employment
5
<PAGE>
hereunder shall terminate, effective on the date indicated, only upon the
happening of any of the following events:
a. Termination for "Cause" (as hereinafter defined), effective
immediately upon giving written notice of termination to Employee.
b. Death of Employee, effective immediately on the date of
death without any notice.
c. Disability (as hereinafter defined) of Employee, effective
immediately upon giving written notice of Disability to Employee.
4.2 Termination for "Cause". For purposes of this Agreement, the
term "Cause" shall mean (i) any material breach by Employee of this Agreement,
after an opportunity to be heard thereon at a meeting of the Board of the
Company, that is not cured within thirty (30) days of the Company's written
notice to Employee specifying such breach, provided, however, Employee shall
have no right to cure any breach which is not capable of being cured within
thirty (30) days of such notice; (ii) conduct by Employee constituting gross
neglect, willful misconduct, fraud or dishonesty affecting the Company's
business or reputation; or (iii) any misappropriation of the Company's property
or any misappropriation of any corporate or business opportunity of the Company.
4.3 Disability of Employee. Employee shall be deemed to have a
"Disability" for purposes of this Agreement if Employee, by reason of physical
or mental illness, incapacity or injury, is unable to perform the essential
functions of Employee's position for a total period of sixty (60) days during
any twelve-month period. The Board of the Company shall determine, according to
the facts then available, whether and when the Disability of Employee has
occurred. Such determination will take into consideration the expert medical
opinion of a physician chosen by the Company after such physician has completed
an examination of Employee. Employee agrees to be available for such examination
upon the reasonable request of the Company.
4.4 Compensation After Termination During Employment Period. If the
Company shall terminate Employee's employment during the Employment Period
pursuant to Section 4.1 hereof, the Company shall have no further obligations
hereunder or otherwise with respect to Employee's employment from and after the
termination or expiration date, except that the Company shall pay Employee's
Base Salary accrued through the date of termination or expiration and shall
provide such benefits as are required by applicable law. If the Company shall
terminate Employee's employment during the Employment Period other than pursuant
to Section 4.1 hereof, the Company shall have the following obligations to
Employee, which shall be Employee's sole and exclusive remedy in the event of
such termination:
6
<PAGE>
a. The Company shall continue to pay Employee his Base Salary
established pursuant to Section 3.1 hereof in accordance with the Company's
regular payroll policy for salaried employees, for a period equal to the lesser
of (i) eighteen (18) months or (ii) the remainder of the Employment Period.
b. For a period equal to the lesser of (i) eighteen (18)
months or (ii) the remainder of the Employment Period, Employee shall continue
to be eligible for bonuses under the Incentive Plan as described in Section
3.3.a. above.
c. All unvested PPD stock options, if any, awarded to Employee
on the Grant Date shall become fully vested on the date of Employee's
termination of employment.
d. If within six (6) months after Employee's termination of
employment hereunder either Lilly or PPD exercises its respective
Commercialization Option with respect to a Licensed Product to which Employee
would be entitled to Milestone and Royalty Bonuses under Sections 3.3.b. and
3.3.c. of this Agreement, said bonuses shall be paid to Employee in the manner
described in said sections.
e. For a period of one year after Employee's termination of
employment, the Company shall continue to pay for and provide existing employee
welfare benefits which Employee is receiving as of the date of termination of
employment, including life insurance, health, medical, dental, vision and
wellness, accidental death and dismemberment and disability benefits; provided,
however, that the Company's obligations under this section shall terminate from
the date that Employee first becomes eligible after termination of employment
with the Company for similar coverage under another employer's plan.
From and after such termination or expiration date, the Company shall continue
to have all other rights available hereunder, including without limitation, all
rights at law, in equity or under the Propriety Information and Invention
Agreement described in Article 5 hereof.
4.5 Return of Property of Company. Employee agrees that, upon the
termination of Employee's employment, Employee will surrender to the Company all
memoranda, notes, reports, lists, books, records and similar items (and all
copies thereof) in Employee's possession, which contain information regarding
the Company's Business, and also will return to the Company all other property
of the Company which has come into Employee's possession while an employee of
the Company.
ARTICLE 5
RESTRICTIVE COVENANTS
7
<PAGE>
Concurrent with the execution of this Agreement, Employee shall
enter into a Proprietary Information and Invention Agreement in the form set
forth in Exhibit 5 attached hereto.
ARTICLE 6
MISCELLANEOUS
6.1 Withholding Taxes. All amounts payable under this Agreement,
whether such payment is to be made in cash or other property, shall be subject
to withholding for Federal, state and local income taxes, employment and payroll
taxes, and other legally required withholding taxes and contributions to the
extent appropriate in the determination of the Company, and Employee agrees to
report all such amounts as ordinary income on Employee's personal income returns
and for all other purposes.
6.2 Assignment. No party hereto may assign or delegate any of its
rights or obligations hereunder without the prior written consent of the other
party hereto; provided, however, that the Company shall have the right to assign
all or any part of its rights and obligations under this Agreement (i) to any
affiliate of the Company to which the Business of the Company is assigned at any
time, any other affiliate or subsidiary of the Company, or any surviving entity
following any merger or consolidation of any of those entities with any entity
other than the Company, or (ii) in connection with the sale of the Business by
the Company.
6.3 Binding Effect. Except as otherwise expressly provided herein,
all covenants and agreements contained in this Agreement by or on behalf of any
of the parties hereto shall be binding upon and inure to the benefit of the
respective legal representatives, heirs, successors and permitted assigns of the
parties hereto whether so expressed or not.
6.4 Entire Agreement. Except as otherwise expressly set forth
herein, this Agreement and all other agreements entered into by the parties
hereto on the date hereof set forth the entire understanding of the parties, and
supersede and preempt all prior oral or written understandings and agreements
with respect to the subject matter hereof.
6.5 Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
8
<PAGE>
6.6 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 the 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
default, either of a similar or different nature, unless expressly so stated in
writing.
6.7 Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of North Carolina, without
giving effect to provisions thereof regarding conflict of laws.
6.8 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, or
damages, including claims in tort, shall be decided by a single neutral
arbitrator agreed upon by the parties hereto 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.
6.9 Notices. All notices, demands or other communications to be
given or delivered hereunder or by reason of the provisions of this Agreement
shall be in writing and shall be deemed to have been properly served if (a)
delivered personally, (b) delivered by a recognized overnight courier service,
(c) sent by certified mail, return receipt requested and first class postage
prepaid, or (d) sent by facsimile transmission followed by a confirmation copy
delivered by a recognized overnight courier service the next day. Such notices,
demands and other communications shall be sent to the address first set forth
above, or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party. Date
of service of such notice shall be (i) the date such notice is personally
delivered or sent by facsimile transmission (with issuance by the transmitting
machine of a confirmation of successful transmission), (ii) the date of receipt
if sent by certified mail, or (iii) the date of receipt if sent by overnight
courier.
6.10 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.
9
<PAGE>
6.11 Descriptive Heading; 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.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first above written.
COMPANY: SUBSIDIARY NO. 5, INC.
By: /s/ Fred Eshelman
-------------------------
Its: Chief Executive Officer
-------------------------
EMPLOYEE /s/ Karl Thor (SEAL)
-------------------------------
Name: Karl Thor
PPD: Pharmaceutical Product
Development, Inc.
By: /s/Fred Eshelman
---------------------------
Its: Chief Executive Officer
---------------------------
Pharmaceutical Product Development, Inc. has executed this Agreement
to acknowledge its binding obligations under Sections 3.2, 3.3, 3.6, 3.7, 4.4.c.
and 4.4.e.
10
EX-10.112
SEVERANCE AGREEMENT DATED 5/22/98
<PAGE>
SEVERANCE AGREEMENT
THIS AGREEMENT, made this 22nd day of May, 1998, by and between
Pharmaceutical Product Development, Inc. ("PPD") and Karl Thor ("Employee").
WHEREAS, Employee is a valued employee of PPD and in order to induce
Employee to remain in the employ of PPD, PPD desires to provide the severance
benefits hereinafter described in the event of a "Change in Control", as
hereinafter defined, of PPD.
NOW, THEREFORE, it is agreed as follows:
1. Definitions
a. "Change in Control" means a change of control of a nature that
would be required to be reported in response to Item 6(e) of Schedule 14A of
Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended
("Exchange Act"), provided that such a Change in Control shall be deemed to have
occurred if any "person" (as such term is used in Sections 13(d) and 14(d)(2) of
the Exchange Act) is or becomes the beneficial owner, directly or indirectly, of
securities of PPD representing 50% or more of the combined voting power of PPD's
then outstanding securities.
b. "Constructive Termination" means a termination of Employee's
employment by PPD during the Covered Period initiated by Employee after (i) a
substantial diminution or alteration in the duties of Employee, (ii) a reduction
by PPD in Employee's base salary in effect on the date of the Change in Control,
or (iii) the relocation of Employee's primary work location to a location that
is more than twenty-five (25) miles from Employee's primary work location prior
to the Change in Control. Constructive Termination specifically does not include
termination of Employee by reason of death, Disability or retirement at or after
age 65. Employee shall give PPD written notice of a Constructive Termination,
which notice shall provide a brief description of the circumstances which
Employee asserts gives rise to a right of Constructive Termination, and PPD
shall have ten (10) days from receipt of said notice within which to remedy said
circumstances.
c. "Covered Period" means the time period commencing on the date of
and coincident with a Change of Control and ending one year thereafter.
d. "Disability" means the inability of Employee to perform his
assigned duties for PPD for a period of three (3) months due to Employee's
physical or mental illness as determined by a reputable medical doctor.
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e. "PPD" means Pharmaceutical Product Development, Inc. and all of
its subsidiaries and affiliated entities.
f. "Termination for Cause" means (i) an act or acts involving fraud,
embezzlement or theft from PPD, (ii) Employee's willful and repeated failure to
follow directions of the Board of Directors that continues for at least ten (10)
days following written notice of the Board of Directors of such failure to
follow directions, or (iii) termination for cause as defined in and made
pursuant to a then effective employment agreement, if any, between Employee and
PPD.
2. Compensation Upon Change of Control. If during the Covered Period (i)
PPD terminates Employee's employment for reason other than Termination for Cause
or (ii) Employee's employment is terminated by reason of Constructive
Termination, Employee shall be entitled to the following compensation and
benefits:
a. PPD shall pay Employee a lump sum equal to two times Employee's
W-2 compensation for Base Salary and bonuses under the Incentive Plan as said
terms are defined in Employee's employment agreement with Subsidiary No. 5, Inc.
of even date (the "Employment Agreement") for the twelve (12) months ending on
the last day of the month preceding the month of Employee's termination, said
sum to be paid within ten (10) days after Employee's termination of employment.
b. PPD shall pay Employee any bonus or deferred compensation
(whether in the form of cash, stock or otherwise) accrued but unpaid as of
Employee's termination, said sum to be paid within ten (10) days after
Employee's termination of employment.
c. For a period of one year after Employee's termination of
employment with PPD, PPD shall continue to pay for and provide existing employee
welfare benefits which Employee is receiving as of the date of termination of
employment, including life insurance, health, medical, dental, vision and
wellness, accidental death and dismemberment and disability benefits; provided,
however, that PPD's obligations under this clause shall terminate from the date
that Employee first becomes eligible after termination of employment with PPD
for similar coverage under another employer's plan.
d. Notwithstanding anything to the contrary in any award agreement
for non-qualified stock options, (i) all unvested shares underlying PPD
non-qualified stock options granted more than six months prior to the date of
Employee's termination shall become fully vested as of the date of Employee's
termination, and (ii) Employee shall continue to be treated under each award
agreement as if he was an employee of PPD until the first to occur of (x) the
third anniversary of Employee's termination of employment, or (y) the expiration
of the exercise period provided for therein; provided, however, in the event of
Employee's death or his disability (as disability is defined in the award
agreement) after the date of Employee's termination of employment hereunder, the
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time for exercise after death or such disability prescribed in the award
agreement shall apply. The provisions of this subsection shall also apply to any
and all substitute stock options granted to Employee in exchange for Employee's
PPD non-qualified stock options to which this subsection applies.
e. Employee shall be paid all Milestone and Royalty Bonuses, as said
terms are defined in the Employment Agreement, to which Employee would be
entitled under Section 4.4.d. of the Employment Agreement as if Employee's
employment had been terminated without cause.
3. Miscellaneous.
a. PPD will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of PPD, to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that PPD would be required
to perform it if no succession had taken place.
b. This Agreement shall inure to the benefit of and be enforceable
by Employee's personal or legal representatives, executives, administrators,
successors, heirs, distributees, devisees and legatees.
c. For purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
given (i) by certified mail, return receipt requested, postage prepaid, or (ii)
by recognized overnight carrier, and shall be deemed received when actually
received. Notices shall be addressed as follows:
If to PPD: Pharmaceutical Product Development, Inc.
3151 17th Street Extension
Wilmington, North Carolina 28412
Attention: Chief Executive Officer
Facsimile No.: (910) 343-5920
If to Employee: Karl Thor
109 Draymore Way
Morrisville, North Carolina 27560
Facsimile No.: (919) 468-9895
Either party hereto may change the notice address by giving notice thereof in
the same manner as provided for herein.
d. No waiver by either party hereto at any time of any breach by the
other party hereto of, or compliance with, any provision or condition of this
Agreement
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to be performed by such other party shall be deemed a subsequent waiver of the
same or similar provisions or conditions.
e. No agreements or representations, oral or otherwise, expressed or
implied, with respect to the subject matter hereof have been made by either
party which are not set forth expressly in this agreement, and this Agreement
supersedes and replaces in its entirety all prior agreements and
representations, expressed, implied, oral or otherwise, made by PPD to or with
Employee.
f. This Agreement shall be governed by and interpreted under the
laws of the State of North Carolina.
g. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
h. This Agreement may be executed in one or more counterparts, each
of which shall be deemed an original but all of which together shall constitute
one and the same instrument.
i. All legal expenses incurred by Employee in the successful
enforcement of any of the terms of this Agreement shall be paid by PPD.
IN WITNESS WHEREOF, the parties have executed this Agreement effective the
date first hereinabove set forth.
PHARMACEUTICAL PRODUCT
DEVELOPMENT, INC.
By: /s/ Fred Eshelman
-----------------------------------------
Title:Chief Executive Officer
------------------------
EMPLOYEE
/s/ Karl Thor (SEAL)
-----------------------------------------
Name: Karl Thor
EX-10.113
Note and Loan Agreement Dated 6/24/98
<PAGE>
LOAN AGREEMENT
LOAN AGREEMENT dated June 24, 1998 (the "Loan Agreement" or this
"Agreement") by and among PHARMACEUTICAL PRODUCT DEVELOPMENT, INC., a North
Carolina corporation (the "Borrower"), the subsidiaries and affiliates
identified on the signature pages hereto or hereafter joined as a Guarantor
hereunder (the "Guarantors", and together with the Borrower, the "Credit
Parties") and FIRST UNION NATIONAL BANK (the "Bank").
W I T N E S S E T H
WHEREAS, the Borrower has requested a $50 million revolving credit
facility for the purposes hereinafter set forth;
WHEREAS, the Bank has agreed to make the requested credit facility
available to the Borrower on the terms and conditions hereinafter set forth;
NOW, THEREFORE, IN CONSIDERATION of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
SECTION 1. DEFINITIONS.
"Bankruptcy Code" means the Bankruptcy Code in Title 11 of the United
States Code, as amended, modified, succeeded or replaced from time to time.
"Business Day" means a day other than a Saturday, Sunday or other day on
which commercial banks in Charlotte, North Carolina are authorized or required
by law to close; provided, however, that when used in connection with a rate
determination, borrowing or payment in respect of a LIBOR Rate Loan, the term
"Business Day" shall also exclude any day on which banks in London, England are
not open for dealings in U.S. dollar deposits in the London interbank market.
"Closing Date" means the date hereof.
"Commitment Period" means the period from and including the date hereof to
but excluding the earlier of (i) the Termination Date, or (ii) the date on which
the commitments hereunder shall have been terminated in accordance with the
provisions hereof.
"Consolidated Debt to Total Capitalization Ratio" means, as of any day,
the ratio of Consolidated Funded Debt to Consolidated Total Capitalization.
"Consolidated Fixed Charge Coverage Ratio" means, as of the last day of
any fiscal quarter for the Borrower and its subsidiaries on a consolidated
basis, the ratio of Consolidated Income Available for Fixed Charges to
Consolidated Fixed Charges.
"Consolidated Fixed Charges" means, for the applicable period for the
Borrower and its subsidiaries on a consolidated basis, the sum of Consolidated
Interest Expense plus rental and lease expense, in each case as determined in
accordance with GAAP applied on a consistent basis. Except as expressly provided
otherwise, the applicable period shall be for the four consecutive fiscal
quarters ending as of the date of determination.
"Consolidated Funded Debt" means Funded Debt of the Borrowers and its
subsidiaries on a consolidated basis determined in accordance with GAAP.
"Consolidated Income Available for Fixed Charges" means, for any period
for the Borrower and its subsidiaries on a consolidated basis, the sum of
Consolidated Net Income plus Consolidated
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Interest Expense plus federal, state and local income taxes paid plus rental and
lease expense, in each case determined in accordance with GAAP applied on a
consistent basis. Except as expressly provided otherwise, the applicable period
shall be for the four consecutive fiscal quarters ending as of the date of
determination.
"Consolidated Interest Expense" means, for any period for the Borrower and
its subsidiaries on a consolidated basis, all interest expense, including the
amortization of debt discount and premium, the interest component under capital
leases and the implied interest component under securitization transactions,
expense, in each case determined in accordance with GAAP applied on a consistent
basis. Except as expressly provided otherwise, the applicable period shall be
for the four consecutive fiscal quarters ending as of the date of determination.
"Consolidated Net Income" means, for any period for the Borrower and its
subsidiaries on a consolidated basis, net income as determined in accordance
with GAAP applied on a consistent basis, but excluding for purposes of
determining the Fixed Charge Coverage Ratio, (i) extraordinary gains or losses,
and any taxes on such excluded gains and any tax deductions or credits on
account of any such excluded losses, and (ii) one-time non-recurring charges
associated with mergers and acquisitions permitted hereunder. Except as
expressly provided otherwise, the applicable period shall be for the four
consecutive fiscal quarters ending as of the date of determination.
"Consolidated Net Worth" means, on any day for the Borrower and its
subsidiaries on a on a consolidated basis, shareholders' equity as determined in
accordance with GAAP applied on a consistent basis.
"Consolidated Tangible Net Worth" means, on any day Consolidated Net Worth
minus the aggregate amount of goodwill, franchises, licenses, patents,
trademarks, trade names, copyrights, service marks, brand names, organizational
and developmental expenses, covenants not to compete and other intangible
assets, in each case as determined in accordance with GAAP applied on a
consistent basis.
"Consolidated Total Capitalization" means, on any day for the Borrower and
its subsidiaries on a consolidated basis, the sum of Consolidated Funded Debt
plus Consolidated Net Worth.
"Credit Documents" means, collectively, this Agreement and the Note.
"Eurodollar Reserve Percentage" means for any day, the percentage
(expressed as a decimal and rounded upwards, if necessary, to the next higher
1/100th of 1%) which is in effect for such day as prescribed by the Federal
Reserve Board (or any successor) for determining the maximum reserve requirement
(including without limitation any basic, supplemental or emergency reserves) in
respect of Eurocurrency liabilities, as defined in Regulation D of such Board as
in effect from time to time, or any similar category of liabilities for a member
bank of the Federal Reserve System in New York City.
"Extension of Credit" means the making of any loans (including the
extension of, or conversion into, Eurodollar Loans) or the issuance or extension
of any letter of credit hereunder.
"Funded Debt" means, as of any day for the Borrower, without duplication,
(i) all indebtedness for borrowed money, (ii) all indebtedness and obligations
evidenced by bonds, debentures, notes or other similar instruments, (iii) all
obligations to pay the deferred purchase price of property or services (other
than trade accounts payable arising in the ordinary course of business), (iv)
all obligations as lessee under capital leases, (v) all obligations of
reimbursement relating to letters of credit, bankers' acceptances or other
similar instruments (whether or not then drawn and owing), (vi) all Guaranty
Obligations, (vii) the attributed principal amount of any securitization
transaction and (viii) all obligations under any synthetic lease, tax retention
operating lease, off-balance sheet loan or other similar off-balance sheet
financing product where the product is considered borrowed money indebtedness
for tax purposes, but is classified as an operating lease for purposes of GAAP.
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"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
(b) all other indebtedness, liabilities and obligations of any kind
or nature, now existing or hereafter arising, owing by the Borrower to
the Bank, arising under any interest rate protection agreement, currency
agreement or other agreement or arrangement, whether primary, secondary,
direct, contingent, or joint and several.
"Guaranty Obligation" means any obligation, contingent or otherwise,
directly or indirectly guaranteeing the indebtedness or other obligation of
another Person, including without limitation, (i) an agreement to purchase or
pay (or to supply or advance funds for the purchase or payment of) any such
indebtedness or other obligation (whether by way of partnership agreement,
keep-well agreement, comfort letter, maintenance agreement or the like), or (ii)
any arrangement entered into for the purpose of assuring payment of the
indebtedness or other obligation of another Person or otherwise protecting a
party from loss in respect thereof; provided that such term shall not include
endorsements for collection or deposit in the ordinary course of business.
"Interest Payment Date" means (a) as to any Prime Loan, the last Business
Day of each March, June, September and December to occur while such Loan is
outstanding, (b) as to any LIBOR Rate Loan having an Interest Period of three
months or less, the last day of such Interest Period and (c) as to any LIBOR
Rate Loan having an Interest Period longer than three months, each day which is
three months after the first day of such Interest Period and the last day of
such Interest Period.
"Interest Period" means with respect to any LIBOR Rate Loan,
(i) initially, the period commencing on the date of borrowing or
conversion date, as the case may be, with respect to such LIBOR Rate Loan
and ending one, two or 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, three or six months thereafter, as selected by the
Borrower by irrevocable notice to
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the Bank not less than three Business Days prior to the last day of the
then current Interest Period with respect thereto;
provided that the foregoing provisions are subject to the
following:
(A) if any Interest Period pertaining to a LIBOR Rate Loan
would otherwise end on a day that is not a Business Day, such Interest
Period shall be extended to the next succeeding Business Day unless the
result of such extension would be to carry such Interest Period into
another calendar month in which event such Interest Period shall end on
the immediately preceding Business Day;
(B) any Interest Period pertaining to a LIBOR Rate Loan that
begins on the last Business Day of a calendar month (or on a day for which
there is no numerically corresponding day in the calendar month at the end
of such Interest Period) shall end on the last Business Day of the
relevant calendar month;
(C) if the Borrower shall fail to give notice as provided
above, the Borrower shall be deemed to have selected a Prime Loan to
replace the affected LIBOR Rate Loan as provided herein;
(D) any Interest Period that would otherwise extend beyond the
Termination Date shall end on the Termination Date; and
(E) no more than 6 LIBOR Rate Loans may be in effect at any
time. For purposes hereof, LIBOR Rate Loans with different Interest
Periods shall be considered as separate LIBOR Rate Loans, even if they
shall begin on the same date and have the same duration, although
borrowings, extensions and conversions may, in accordance with the
provisions hereof, be combined at the end of existing Interest Periods to
constitute a new LIBOR Rate Loan with a single Interest Period.
"LIBOR" means the arithmetic mean (rounded to the nearest 1/100th of 1%)
of the offered rates for deposits in U.S. dollars for a period equal to the
Interest Period selected which appears on the Telerate Page 3750 at
approximately 11:00 A.M. London time, two (2) Business Days prior to the
commencement of the applicable Interest Period. If, for any reason, such rate is
not available, then "LIBOR" shall mean the rate per annum at which, as
determined by the Bank, U.S. dollars in the amount of $5,000,000 are being
offered to leading banks at approximately 11:00 A.M. London time, two (2)
Business Days prior to the commencement of the applicable Interest Period for
settlement in immediately available funds by leading banks in the London
interbank market for a period equal to the Interest Period selected.
"LIBOR Rate" means a rate per annum (rounded upwards, if necessary, to the
next higher 1/100th of 1%) determined by the Bank pursuant to the following
formula:
LIBOR
LIBOR Rate = ------------------------------------
1.00 - Eurodollar Reserve Percentage
"LIBOR Rate Loan" means Loans hereunder bearing interest at a rate
determined by reference to the LIBOR Rate.
"Lien" means any mortgage, pledge, hypothecation, assignment, security
interest, encumbrance, lien, preference or priority of any kind.
"LOC Obligations" means, at any time, the sum of (i) the maximum amount
which is, or any time may become, available to be drawn under letters of credit
issued hereunder assuming compliance with all requirements for drawings referred
to therein, and (ii) the aggregate amount of unreimbursed drawings owing in
respect of letters of credit issued hereunder.
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"Loan" or "loan" shall mean revolving loans under Section 2.1 hereof.
"Obligations" means, collectively, loans advanced and extended and letters
of credit issued hereunder.
"Person" means any individual, partnership, joint venture, firm,
corporation, limited liability company, association, trust or other enterprise
(whether or not incorporated) or any Governmental Authority.
"Prime Loan" means Loans hereunder bearing interest at a rate determined
by reference to the Prime Rate.
"Prime Rate" means the rate of interest per annum publicly announced from
time to time by the Bank as its prime rate in effect at its principal office in
Charlotte, North Carolina, with each change in the Prime Rate being effective on
the date such change is publicly announced as effective (it being understood and
agreed that the Prime Rate is a reference rate used by the Bank in determining
interest rates on certain loans and is not intended to be the lowest rate of
interest charged on any extension of credit by the Bank to any debtor).
"Pro Forma Basis" means, with respect to any transaction, that such
transaction shall be deemed to have occurred as of the first day of the four
fiscal quarter period ending as of the most recent fiscal quarter end preceding
the date of such transaction with respect to which the Bank has received annual
or quarterly financial statements and accompanying officer's certificate.
"Requirement of Law" means, as to any Person, the certificate of
incorporation and by-laws or other organizational or governing documents of such
Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
or any of its material property is subject.
"Termination Date" means the date 364 days following the date of this
Note, or such later date not more than 364 days following the then applicable
Termination Date as to which the Bank may agree in its sole discretion.
SECTION 2. LOAN.
2.1 Loan. During the Commitment Period, subject to the terms and
conditions hereof, the Bank agrees to make revolving loans to and to issue
letters of credit for the account of the Borrower upon request up to FIFTY
MILLION DOLLARS ($50,000,000) at any time outstanding in the aggregate principal
amount of Obligations. The loans hereunder may consist of Prime Loans or LIBOR
Rate Loans, or a combination thereof. The obligation of the Bank to make any
Extension of Credit is subject to the condition that the Representations and
Warranties set forth herein are true and correct in all material respects.
Letters of credit issued hereunder (i) shall be of a duration reasonably
acceptable to the Bank, but shall not, in any event, extend more than ninety
(90) days beyond the Termination Date, (ii) may be issued subject to any
additional terms and provisions provided in any application or other document
executed in connection therewith, and (iii) may be issued subject to The Uniform
Customs and Practice for Documentary Credits as published by the International
Chamber of Commerce.
2.2 Notices. Requests by the Borrower for Extensions of Credit hereunder
(including extensions or conversions of loans hereunder), shall be made by
written notice (or telephone notice promptly confirmed in writing) by 12:00 Noon
Charlotte, North Carolina time (i) on the Business Day of the requested
borrowing, extension or conversion in the case of Prime Loans, (ii) on the third
Business Day prior to the date of the requested borrowing, extension or
conversion in the case of Eurodollar Loans and (iii) on third Business Day prior
to the date of requested issuance or extension in the case of letters of credit.
Each request shall be in a minimum principal amount of
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$1,000,000 in the case of LIBOR Rate Loans and $100,000 in the case of Prime
Loans and, in each case, integral multiples of $100,000 in excess thereof, and
shall specify the date of the requested borrowing, extension or conversion, the
aggregate amount to be borrowed, extended or converted and if an extension of
conversion, the loan which is being extended or converted, and whether the
borrowing, extension or conversion shall consist of LIBOR Rate Loans, Prime
Loans or combination thereof. If the Borrower shall fail to specify (A) the type
of Loan requested for a borrowing, the request shall be deemed a request for a
LIBOR Rate Loan with an Interest Period of one month, (B) the duration of the
applicable Interest Period in the case of LIBOR Rate Loans, the request shall be
deemed to be a request for an Interest Period of one month. Each request for an
Extension of Credit hereunder shall be deemed a reaffirmation that the
Representations and Warranties set forth herein are true and correct in all
material respects as of such date. Unless extended in accordance with the
provisions hereof, LIBOR Rate Loans shall be converted to Prime Loans at the end
of the applicable Interest Period.
2.3 Interest Rate.
(a) Loans- Loans outstanding hereunder shall bear interest at a per
annum rate equal to (i) the LIBOR Rate plus five-eighths of one percent (.625%)
or (ii) the Prime Rate, as the Borrower may elect; provided that after the
occurrence and during the continuance of an Event of Default, the principal and,
to the extent permitted by law, interest on the Loan and any other amounts owing
hereunder shall bear interest, payable on demand, at a rate equal to the Prime
Rate plus two percent (2%). Interest will be payable in arrears on each Interest
Payment Date.
(b) Letters of Credit. The unreimbursed portion of any drawing under
a letter of credit shall bear interest, payable on demand, at a per annum rate
equal to the Prime Rate plus two percent (2%) from the date of drawing.
2.4 Repayment.
(a) Repayment of Loans. Unless sooner paid, the Loan shall be due
and payable in full on the Termination Date.
(b) Reimbursement of Letters of Credit. The Bank will notify the
Borrower of any drawing under a letter of credit issued hereunder and the amount
of any such drawing shall be due and payable in full on the date of such
drawing. Unless it shall receive direction from the Borrower to the contrary,
the Bank may, but shall not be required, to make a loan advance to reimburse the
amount of any such drawing. The Borrower's reimbursement obligations hereunder
shall be absolute and unconditional under all circumstances irrespective of any
rights of setoff, counterclaim or defense to payment the Borrower may claim to
have against the Bank, the beneficiary of the letter of credit drawn upon or any
other Person, including without limitation any defense based on any failure of
the Borrower or any other Credit Party to receive consideration or the legality,
validity, regularity or unenforceability of the letter of credit.
2.5 Note. The Loan shall be evidenced by a promissory note of the Borrower
dated as of the Closing Date, in the form of Annex A hereto (as amended,
modified, extended, renewed or replaced, the "Note").
2.6 Fees.
(a) Facility Fee. In consideration of the commitments hereunder, the
Borrower agrees to pay to the Bank a facility fee (the "Facility Fee") equal to
ten basis points (.10%) per annum on the average daily unused portion of the
commitment for the applicable period. The Facility Fee shall be payable
quarterly in arrears on the 15th day following the last day of each calendar
quarter for the immediately preceding quarter (or portion thereof) beginning
with the first such date to occur after the date hereof.
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(b) Letters of Credit Fees. In consideration of the commitments
relating to letters of credit hereunder, the Borrower agrees to pay the Bank a
fee (collectively the "Letter of Credit Fee") equal to five-eighths of one
percent (.625%) per annum on the average daily amount of LOC Obligations for the
applicable period plus other customary charges of administration of Letters of
Credit. The Letter of Credit Fee shall be payable at issuance in advance.
2.7 Prepayments. The Loans may be prepaid in whole or in part without
premium or penalty. LIBOR Rate Loans may not be prepaid in whole or in part
prior to the end of the applicable Interest Period. Amounts prepaid may, subject
to the terms and conditions hereof, be reborrowed.
2.8 Capital Adequacy. If the Bank shall have reasonably determined that
the adoption of or any change in any Requirement of Law regarding capital
adequacy or in the interpretation or application thereof as a consequence of its
obligations hereunder or compliance by the Bank or any corporation controlling
the Bank with any request or directive regarding capital adequacy (whether or
not having the force of law) from any central bank or Governmental Authority
made subsequent to the date hereof as a consequence of its obligations hereunder
does or shall have the effect of reducing the rate of return on the Bank's or
such corporation's capital as a consequence of its obligations hereunder to a
level below that which the Bank or such corporation could have achieved but for
such adoption, change or compliance (taking into consideration the Bank's or
such corporation's policies with respect to capital adequacy) by an amount
reasonably deemed by the Bank to be material, then from time to time, within 15
days after demand by the Bank, the Borrower shall pay to the Bank such
additional amount as shall be certified by the Bank as being required to
compensate it for such reduction. Such a certificate as to any additional
amounts payable under this subsection submitted by the Bank (which certificate
shall include a description in reasonable detail of the basis for the
computation) to the Borrower shall be conclusive absent manifest error.
2.9 Inability to Determine Interest Rate. Notwithstanding any other
provision of this Agreement, if (i) the Bank shall reasonably determine (which
determination shall be conclusive and binding absent manifest error) that, by
reason of circumstances affecting the relevant market, reasonable and adequate
means do not exist for ascertaining LIBOR for such Interest Period, or (ii) the
Bank shall reasonably determine (which determination shall be conclusive and
binding absent manifest error) that the LIBOR Rate does not adequately and
fairly reflect the cost of funding LIBOR Rate Loans, the Bank shall forthwith
give telephone notice of such determination, confirmed in writing, to the
Borrower, and thereafter the right to request and continue Loans as LIBOR Rate
Loans shall be suspended until such time as the conditions giving rise to such
notice shall no longer exist. In the event LIBOR Rate Loans are not available on
account of operation of this Section, the Bank will endeavor to provide an
alternative index or reference rate.
2.10 Illegality. Notwithstanding any other provision of this Agreement, if
the adoption of or any change in any Requirement of Law or in the interpretation
or application thereof, in each case occurring after the Closing Date, by the
relevant Governmental Authority shall make it unlawful for the Bank to make or
maintain LIBOR Rate Loans as contemplated by this Agreement or to obtain in the
interbank eurodollar market through its LIBOR Lending Office the funds with
which to make such Loans, (a) the Bank shall promptly notify the Borrower
thereof, (b) the commitment of the Bank hereunder to make LIBOR Rate Loans or
continue LIBOR Rate Loans as such shall forthwith be suspended until the Bank
shall give notice that the condition or situation which gave rise to the
suspension shall no longer exist, and (c) Loans then outstanding as LIBOR Rate
Loans, if any, shall be converted on the last day of the Interest Period for
such Loans or within such earlier period as required by law to Prime Loans. The
Borrower hereby agrees promptly to pay the Bank, upon its demand, any additional
amounts necessary to compensate the Bank for actual and direct costs (but not
including anticipated profits) reasonably incurred in making any repayment in
accordance with this subsection including, but not limited to, any interest or
fees payable by the Bank to lenders of funds obtained by it in order to make or
maintain its LIBOR Rate Loans hereunder. A certificate as to any additional
amounts payable pursuant to this subsection submitted by the Bank, to the
Borrower shall be conclusive in the absence of manifest error.
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2.11 Requirements of Law. If the adoption of or any change in any
Requirement of Law or in the interpretation or application thereof or compliance
by the Bank with any request or directive (whether or not having the force of
law) from any central bank or other Governmental Authority, in each case made
subsequent to the date hereof:
(i) shall subject the Bank to any tax of any kind whatsoever with
respect to any letter of credit or LIBOR Rate Loan made by it, or change
the basis of taxation of payments to the Bank in respect thereof (except
for changes in the rate of tax on the net income or franchise tax
applicable to the Bank);
(ii) shall impose, modify or hold applicable any reserve, special
deposit, compulsory loan or similar requirement against assets held by,
deposits or other liabilities in or for the account of, advances, loans or
other extensions of credit by, or any other acquisition of funds by, any
office of the Bank which is not otherwise included in the determination of
the LIBOR Rate hereunder; or
(iii) shall impose on the Bank any other condition (excluding any
tax of any kind whatsoever);
and the result of any of the foregoing is to increase the cost to the Bank of
making or maintaining LIBOR Loans or issuing letters of credit or to reduce any
amount receivable hereunder or under the Note, then, in any such case, the
Borrower shall promptly pay the Bank, within 15 days after its demand, any
additional amounts necessary to compensate the Bank for such additional cost or
reduced amount receivable as determined by the Bank with respect to its LIBOR
Rate Loans and/or letters of credit. A certificate as to any additional amounts
payable pursuant to this subsection submitted by the Bank, describing in
reasonable detail the nature of such event and a reasonably detailed explanation
of the calculation thereof, to the Borrower shall be conclusive in the absence
of manifest error.
2.12 Indemnity. The Borrower hereby agree to indemnify the Bank and to
hold the Bank harmless from any funding loss or expense which the Bank may
sustain or incur (other than as a result of and to the extent the Bank's gross
negligence or willful misconduct) as a consequence of (a) default by the
Borrower in payment of the principal amount of or interest on any LIBOR Rate
Loan by the Bank in accordance with the terms hereof, (b) default by the
Borrower in accepting a LIBOR Rate Loan after the Borrower have given a notice
in accordance with the terms hereof, (c) default by the Borrower in making any
prepayment of a LIBOR Rate Loan after the Borrower have given a notice in
accordance with the terms hereof, and/or (d) the making by the Borrower of a
prepayment of a LIBOR Rate Loan, or the conversion thereof, on a day which is
not the last day of the Interest Period with respect thereto, in each case equal
to (i) the amount of interest which would have accrued on the amount so prepaid,
or not so paid, borrowed, converted or continued, for the period from the date
of such prepayment or of such failure to borrow, convert or continue to the last
day of such Interest Period (or, in the case of a failure to pay, borrow,
convert or continue, the Interest Period that would have commenced on the date
of such failure), in each case at the applicable rate of interest for such Loans
provided for herein (exclusive of any margin), over (ii) the amount of interest
(as reasonably determined by the Bank) which would have accrued to the Bank on
such amount by placing such amount on deposit for a comparable period with
leading banks in the interbank eurodollar market. A certificate as to any
additional amounts payable pursuant to this subsection submitted by the Bank, to
the Borrower shall be conclusive in the absence of manifest error
2.13 Taxes. All payments made by the Borrower hereunder or under any Note
will be made free and clear of, and without deduction or withholding for, any
present or future taxes, levies, imposts, duties, fees, assessments or other
charges of whatever nature now or hereafter imposed by any Governmental
Authority or by any political subdivision or taxing authority thereof or therein
with respect to such payments (but excluding (i) any tax imposed on or measured
by the
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net income or profits of a Lender pursuant to the laws of the jurisdiction in
which it is organized or the jurisdiction in which the principal office or
applicable lending office of the Bank is located or any subdivision thereof or
therein and (ii) any franchise taxes, branch taxes, taxes on doing business or
taxes on the overall capital or net worth of the Bank pursuant to the laws of
the jurisdiction in which it is organized or the jurisdiction in which the
principal office or its applicable lending office is located or any subdivision
thereof or therein) and all interest, penalties or similar liabilities with
respect thereto (all such non-excluded taxes, levies, imposts, duties, fees,
assessments or other charges being referred to collectively as "Taxes"). If any
Taxes are so levied or imposed, the Borrower agrees to pay the full amount of
such Taxes, and such additional amounts as may be necessary so that every
payment of all amounts due under this Agreement or under any Note, after
withholding or deduction for or on account of any such Taxes, will not be less
than the amount provided for herein or in such Note. The Borrower will furnish
to the Bank as soon as practicable after the date the payment of any Taxes is
due pursuant to applicable law certified copies (to the extent reasonably
available and required by law) of tax receipts evidencing such payment by the
Borrower. The Borrower agrees to indemnify and hold harmless, and reimburse, the
Bank upon its written request, for the amount of any Taxes so levied or imposed
and paid by the Bank. The agreements in this subsection shall survive
termination of this Agreement and payment of the Notes and all other amounts
payable hereunder.
2.14 Payments and Computations. Payments shall be made hereunder in U.S.
dollars in immediately available funds, without offset, deduction, counterclaim
or withholding of any kind at the offices of the Bank provided in the notice
section hereof. Payments received after 2:00 P.M. (Charlotte, North Carolina
time) will be given credit the next following Business Day. Computations of
interest hereunder shall be made on the basis of actual number of days elapsed
over a year of 360 days.
SECTION 3. GUARANTY
3.1 Guaranty. Each of the Guarantors hereby jointly and severally
guarantees to the Bank as hereinafter provided the prompt payment of the
Guaranteed Obligations in full when due (whether at stated maturity, as a
mandatory prepayment, by acceleration or otherwise and after giving effect to
any grace periods) strictly in accordance with the terms hereof. Each of the
Guarantors hereby further agrees that if any of the Guaranteed Obligations are
not paid in full when due (whether at stated maturity, as a mandatory
prepayment, by acceleration or otherwise and after giving effect to any grace
periods), the Guarantor will promptly pay the same, without any demand or notice
whatsoever, and that in the case of any extension of time of payment or renewal
of any of the Guaranteed Obligations, the same will be promptly paid in full
when due (whether at extended maturity, as a mandatory prepayment, by
acceleration or otherwise and after giving effect to any grace periods) in
accordance with the terms of such extension or renewal. This is a guaranty of
payment and not of collection.
Notwithstanding any provision to the contrary contained herein or in any
other of the Credit Documents, to the extent the obligations of any Guarantor as
guarantor hereunder shall be adjudicated to be invalid or unenforceable for any
reason (including, without limitation, because of any applicable state or
federal law relating to fraudulent conveyances or transfers) then the
obligations of such Guarantor hereunder shall be limited to the maximum amount
that is permissible under applicable law (whether federal or state and
including, without limitation, the Bankruptcy Code).
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
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circumstances. Each of the Guarantors agrees that it shall have no right of
subrogation, indemnity, reimbursement or contribution against the Borrower or
any other guarantor for amounts paid under this Guaranty until such time as the
Bank has been paid in full, all commitments, if any, have been terminated and no
Person or Governmental Authority shall have any right to request any return or
reimbursement of funds from the Bank in connection with monies received under
the Credit Documents. Without limiting the generality of the foregoing, it is
agreed that, to the fullest extent permitted by law, the occurrence of any one
or more of the following shall not alter or impair the liability of the
Guarantors hereunder which shall remain absolute and unconditional as described
above:
(i) at any time or from time to time, without notice to the
Guarantors, the time for any performance of or compliance with any of the
Guaranteed Obligations shall be extended, or such performance or
compliance shall be waived;
(ii) any of the acts mentioned in any of the provisions of this
Agreement or the Note or any other agreement or instrument referred to
herein or therein or relating hereto or thereto shall be done or omitted;
(iii) the maturity of any of the Guaranteed Obligations shall be
accelerated, or any of the Guaranteed Obligations shall be modified,
supplemented or amended in any respect, or any right under any of the
Credit Documents or any other agreement or instrument referred to in the
Credit Documents shall be waived or any other guarantee of any of the
Guaranteed Obligations or any security therefor shall be released or
exchanged in whole or in part or otherwise dealt with;
(iv) any Lien granted to, or in favor of, the Bank as security for
any of the Guaranteed Obligations shall fail to attach or be perfected or
shall be released or discharged in whole or in part; or
(v) any of the Guaranteed Obligations shall be determined to be void
or voidable (including, without limitation, for the benefit of any
creditor of any Guarantor or any other guarantor) or shall be subordinated
to the claims of any Person (including, without limitation, any creditor
of any guarantor).
With respect to its obligations hereunder, each of the Guarantors hereby
expressly waives diligence, presentment, demand of payment, protest and all
notices whatsoever, and any requirement that the Bank exhaust any right, power
or remedy or proceed against any Person under this Agreement or the Note or any
other agreement or instrument referred to herein or therein or relating hereto
or thereto, or against any other Person under any other guarantee of, or
security for, any of the Guaranteed Obligations.
3.3 Reinstatement. The obligations of the Guarantors under this Section 3
shall be automatically reinstated if and to the extent that for any reason any
payment by or on behalf of any Person in respect of the Guaranteed Obligations
is rescinded or must be otherwise restored by any holder of any of the
Guaranteed Obligations, whether as a result of any proceedings in bankruptcy or
reorganization or otherwise, and each of the Guarantors agrees that it will
indemnify the Bank on demand for all reasonable costs and expenses (including,
without limitation, fees and expenses of counsel) incurred by the Bank in
connection with such rescission or restoration, including any such costs and
expenses incurred in defending against any claim alleging that such payment
constituted a preference, fraudulent transfer or similar payment under any
bankruptcy, insolvency or similar law.
3.4 Certain Additional Waivers. Without limiting the generality of
the provisions of this Section 3, each of the Guarantors hereby specifically
waives the benefits of N.C. Gen. Stat. Sec. 26-7 through 26-9, inclusive.
Each of the Guarantors agrees that it shall have no right of recourse to
security for the Guaranteed Obligations, except through the exercise of the
rights of subrogation pursuant to Section 3.2.
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3.5 Remedies. Each of the Guarantors agrees that, to the fullest extent
permitted by law, as between the Guarantors, on the one hand, and the Bank, on
the other hand, the Guaranteed Obligations may be declared to be forthwith due
and payable as provided in Section 7.2 hereof (and shall be deemed to have
become automatically due and payable in the circumstances provided in said
Section 7.2) for purposes of Section 3.1 hereof notwithstanding any stay,
injunction or other prohibition preventing such declaration (or preventing the
Guaranteed Obligations from becoming automatically due and payable) as against
any other Person and that, in the event of such declaration (or the Guaranteed
Obligations being deemed to have become automatically due and payable), the
Guaranteed Obligations (whether or not due and payable by any other Person)
shall forthwith become due and payable by the Guarantors for purposes of said
Section 3.1.
3.6 Continuing Guarantee. The guarantee in this Section 3 is a continuing
guarantee, and shall apply to all Guaranteed Obligations whenever arising.
3.7 Rights of Contribution. The Guarantors hereby agree, as among
themselves, that if any Guarantor shall become an Excess Funding Guarantor (as
defined below), each other Guarantor shall, on demand of such Excess Funding
Guarantor (but subject to the succeeding provisions of this Section), pay to
such Excess Funding Guarantor an amount equal to such Guarantor's Pro Rata Share
(as defined below and determined, for this purpose, without reference to the
properties, assets, liabilities and debts of such Excess Funding Guarantor) of
such Excess Payment (as defined below). The payment obligation of any Guarantor
to any Excess Funding Guarantor under this Section shall be subordinate and
subject in right of payment to the prior payment in full of the obligations of
such Guarantor under the other provisions of this Section 3, and such Excess
Funding Guarantor shall not exercise any right or remedy with respect to such
excess until payment and satisfaction in full of all of such obligations. For
purposes hereof, (i) "Excess Funding Guarantor" shall mean, in respect of any
obligations arising under the other provisions of this Section 3 (hereafter, the
"Guarantied Obligations"), a Guarantor that has paid an amount in excess of its
Pro Rata Share of the Guarantied Obligations; (ii) "Excess Payment" shall mean,
in respect of any Guarantied Obligations, the amount paid by an Excess Funding
Guarantor in excess of its Pro Rata Share of such Guarantied Obligations; and
(iii) "Pro Rata Share", for the purposes of this Section, shall mean, for any
Guarantor, the ratio (expressed as a percentage) of (a) the amount by which the
aggregate present fair saleable value of all of its assets and properties
exceeds the amount of all debts and liabilities of such Guarantor (including
contingent, subordinated, unmatured, and unliquidated liabilities, but excluding
the obligations of such Guarantor hereunder) to (b) the amount by which the
aggregate present fair saleable value of all assets and other properties of the
Borrower and all of the Guarantors exceeds the amount of all of the debts and
liabilities (including contingent, subordinated, unmatured, and unliquidated
liabilities, but excluding the obligations of the Borrower and the Guarantors
hereunder) of the Borrower and all of the Guarantors, all as of the Closing Date
(if any Guarantor becomes a party hereto subsequent to the Closing Date, then
for the purposes of this Section such subsequent Guarantor shall be deemed to
have been a Guarantor as of the Closing Date and the information pertaining to,
and only pertaining to, such Guarantor as of the date such Guarantor became a
Guarantor shall be deemed true as of the Closing Date).
3.8 Joinder of Additional Guarantors. The Borrower may join additional
subsidiaries as Guarantors hereunder by way of execution of a Joinder Agreement,
a form of which is attached as Annex C.
SECTION 4 CONDITIONS TO CLOSING
4.1 Conditions. The effectiveness of this Agreement and extension of the
Loan hereunder are conditioned upon satisfaction of the following:
(a) Receipt of multiple executed counterparts of this Agreement and
the Note, in form and substance satisfactory to the Bank.
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(b) Receipt of opinions of the general counsel for the Borrower and
the Guarantors in the form attached as Annex D hereto.
(c) Receipt of corporate documentation for the Credit Parties,
including resolutions, bylaws, articles of incorporation, certificates of good
standing and certificates of incumbency.
SECTION 5 REPRESENTATIONS AND WARRANTIES
5.1 Financial Condition. The consolidated balance sheet of the Borrower
and its consolidated subsidiaries dated as of December 31, 1997 together with
related consolidated statements of income and cash flows, are complete and
correct in all material respects and present fairly the financial condition and
results from operations of the entities and for the periods specified, subject
in the case of interim company-prepared statements to normal year-end
adjustments.
5.2 No Change. Since the date of the financial statements identified
above, there have been no developments or events which have had, or are likely
to have, a material adverse effect on the Borrower or on the condition
(financial or otherwise), operations, business or prospects of the Borrower and
its subsidiaries taken as a whole.
5.3 Corporate Organization. Each of the Credit Parties is a corporation
duly organized, validly existing and in good standing under the laws of the
State of its incorporation, is qualified to do business in each jurisdiction
where failure to so qualify would have a material adverse effect on the Borrower
and its subsidiaries taken as a whole and is in compliance with all Requirements
of Law except to the extent that failure to be in compliance would not have a
material adverse effect on the Borrower and its subsidiaries taken as a whole.
5.4 Enforceable Obligation. Each of the Credit Parties has the power and
authority and legal right to enter into, deliver and perform under this
Agreement and has taken all necessary action to authorize the execution,
delivery and performance by them of this Agreement. This Agreement constitutes a
legal, valid and binding obligation of each of the Credit Parties enforceable
against them in accordance with its terms except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights generally or by
general equitable principles (whether enforcement is sought by proceedings in
equity or at law).
5.5 Legal Proceedings. No claim, litigation or proceeding before any
arbitrator or Governmental Authority is pending, or to the knowledge of the
Credit Parties, threatened which if adversely determined would reasonably be
expected to have a material adverse effect on the Borrower and its subsidiaries
taken as a whole.
5.6 No Default. No Event of Default or event or condition which with
notice or lapse of time, or both, would constitute an Event of Default,
presently exists.
5.7 Federal Regulations. No part of the proceeds of the Loan hereunder
will be used, directly or indirectly, for any purpose in violation of Regulation
U of the Board of Governors of the Federal Reserve System, as amended, modified
or replaced.
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
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consolidating balance sheets of the Borrower and its subsidiaries and
related statements audited consolidated and company-prepared consolidating
statements of income, retained earnings and cash flows, audited by Coopers
& Lybrand, or other independent public accounting firm reasonably
acceptable to the Bank, setting forth comparative information for the
previous year, and reported without a "going concern" or like
qualification or exception, or qualification indicating limitation of the
scope of the audit; and
(b) Quarterly Statements. As soon as available, and in any event
within 45 days after the end of each fiscal quarter, a company-prepared
consolidated and consolidating balance sheet of the Borrower and its
subsidiaries and related company-prepared consolidated and consolidating
statements of income, retained earnings and cash flows for the quarter and
for the portion of the year with comparative information for the
corresponding periods for the previous year.
All such financial statements to be complete and correct in all material
respects (subject, in the case of interim statements, to normal recurring
year-end audit adjustments) and to be prepared in reasonable detail and in
accordance with GAAP throughout the periods reflected therein (except as
approved by such accountants and disclosed therein) and further accompanied by a
description of, and an estimation of the effect on the financial statements on
account of, a change in the application of accounting principles from a prior
period.
(c) Other Information. Promptly upon request, such additional
financial and other information as the Bank may reasonably request from
time to time.
6.2 Certificates and Notices. Furnish, or cause to be furnished, and give
notice to the Bank:
(a) Officer's Certificate. Concurrently with the annual and
quarterly financial statements referenced above, a certificate of a
responsible officer of the Borrower stating that to the best of his
knowledge and belief, (i) the financial statements fairly present in all
material respects the financial condition of the parties to which such
statements relate and (ii) the Borrower and the Guarantors are in
compliance with the provisions of this Agreement in all material respects
and no Event of Default, or event or condition which with notice or lapse
of time, or both, would constitute an Event of Default exists hereunder
(together with a financial covenant calculation worksheet demonstrating
compliance therewith in reasonable detail).
(b) Public and Other Information. Copies of reports and information
which the Borrower or its subsidiaries sends to its stockholders or files
with the Securities and Exchange Commission, and any other financial or
other information as the Bank may reasonably request.
(c) Notice of Default. Promptly, upon becoming aware thereof, notice
of the occurrence of an Event of Default hereunder.
6.3 Compliance with Laws. Comply will all Requirements of Law applicable
to them except to the extent that failure to comply therewith would not have a
material adverse effect on the Borrower and its subsidiaries taken as a whole.
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.
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(a) Consolidated Tangible Net Worth. Consolidated Tangible Net Worth
shall not at any time be less than the sum of $75 million plus at the end of
each fiscal quarter occurring after March 31, 1997, 50% of Consolidated Net
Income (but not less than zero) for the fiscal quarter then ended, such
increases to be cumulative.
(b) Consolidated Fixed Charge Coverage Ratio. As of the last day of
each fiscal quarter, the Consolidated Fixed Charge Coverage Ratio shall be not
less than 2.0:1.0.
(c) Consolidated Debt to Total Capitalization Ratio. The
Consolidated Debt to Total Capitalization Ratio shall not at any time be greater
than .45:1.0.
6.6 Incurrence of Funded Debt. The Borrower will not, nor will it permit
any of its subsidiaries to, create, assume, incur or suffer to exist any Funded
Debt except:
(a) capital lease obligations and Funded Debt incurred to provide
all or a portion of the purchase price or cost of construction of an
asset, provided that (i) such Debt when incurred will not exceed the
purchase price or cost of construction of the asset , and (ii) no such
Debt shall be refinanced for a principal amount in excess of the principal
balance outstanding thereon at the time of such refinancing; and
(b) other Funded Debt of the Borrower not to exceed $50,000,000.
6.7 Restriction on Liens. The Borrower will not, nor will it permit any of
its subsidiaries to, create, assume, incur or suffer to exist any Lien on any
property or asset of any kind, real or personal, tangible or intangible, now
owned or hereafter acquired by it or assign or subordinate any present or future
right to receive assets except:
(a) Liens securing capital lease obligations and other purchase
money Funded Debt permitted under Section 6.6(a);
(b) Liens securing taxes, assessments or governmental charges or
levies or the claims or demands of materialmen, mechanics, carriers,
warehousemen, landlords and other like persons; provided that (A) with
respect to Liens securing state and local taxes, such taxes are not yet
payable, (b) with respect to Liens securing claims or demands of
materialmen, mechanics, carriers, warehousemen, landlords and the like,
such liens are unfiled and no other action has been taken to enforce the
same, or (C) with respect to taxes, assessments or governmental charges or
levies or claims or demand secured by such Liens, payment is not at the
time required;
(c) Liens not securing indebtedness which are incurred in the
ordinary course of business in connection with workmen's compensation,
unemployment insurance, unemployment insurance, social security and other
like laws;
(d) any Lien arising pursuant to any order of attachment, distraint
or similar legal process arising in connection with court proceedings so
long as the execution or other enforcement thereof is effectively stayed
and the claims secured thereto are being contested in good faith by
appropriate proceedings; and
(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.
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6.8 Mergers and Acquisitions. The Borrower will not, nor will it permit
any of its subsidiaries to, enter into a transaction of merger or consolidation,
nor will it acquire all or substantially all of the capital stock (or other
equity interest) or assets of any other Person, except:
(a) in the case of transactions of mergers and consolidation, (i) if
a Credit Party is a party to the transaction, it shall be the surviving
corporation, (ii) if the Borrower is a party to the transaction, it shall
be the surviving corporation, and (iii) if the transaction is with a
Person other than the Borrower or any of its subsidiaries, the Borrower
shall demonstrate compliance with the financial covenants on a Pro Forma
Basis; and
(b) in all other cases, the Borrower shall demonstrate compliance
with the financial covenants on a Pro Forma Basis.
6.9 Investments. The Borrower will not, nor will it permit any of its
subsidiaries to, make loans or advances or otherwise make an investment in or
capital contribution to, (collectively, an "Investment") any other Person,
except:
(a) cash and cash equivalents and other publicly traded equity and
debt instruments reasonably acceptable to the Bank;
(b) loans and advances to officers, directors, employees and
shareholders not to exceed $2,000,000;
(c) Investments in and to a Credit Party; and
(d) other Investments in an aggregate principal amount (on a cost
basis) at any time of up to $5,000,000.
SECTION 7 EVENTS OF DEFAULT
7.1 Event of Default. Each of the following shall constitute an "Event of
Default" hereunder: (i) the failure to make any payment of principal, interest,
fees or other amounts owing hereunder when due, (ii) any representation or
warranty made herein or in connection herewith shall prove to be false or
incorrect in any material respect, (iii) failure to observe or comply with any
covenants or provisions contained herein, (iv), the occurrence and continuance
of an event of default under any other note or agreement relating to
indebtedness for borrowed money owing by the Borrower or any Guarantor which
results in, or would permit, acceleration of such indebtedness, or would
otherwise cause such indebtedness to become due prior to its stated maturity,
(v) the filing of an action in bankruptcy or insolvency by the Borrower or any
Guarantor, (vi) the filing of an action in bankruptcy or insolvency against the
Borrower or any Guarantor and (vii) the Borrower or any Guarantor shall fail
within 30 days of the due date to pay bond or otherwise discharge any judgment,
settlement or order.
7.2 Remedies. Upon the occurrence of an Event of Default, and at any time
thereafter, the Bank may by notice to the Borrower (i) terminate the commitments
hereunder and declare the unpaid principal of, and any accrued interest owing
on, the Loan and all other indebtedness or obligations owing hereunder or under
any of the other Credit Documents or in connection herewith or therewith,
immediately due and payable, whereupon the same shall be immediately due and
payable without presentment, demand, protest or other notice of any kind, all of
which are hereby waived by the Borrower, (ii) direct the Borrower to pay cash
collateral in the amount of 100% of the maximum amount available to be drawn
under letters of credit there outstanding, and (iii) enforce any other rights
and interests available under the Credit Documents or at law, including rights
of set off. Notwithstanding the foregoing, in the case of an Event of Default
described in clauses (v) or (vi) of Section 7.1 relating to bankruptcy and
insolvency, the commitments hereunder shall immediately terminate and the
Obligations and all accrued interest and all other indebtedness and other
amounts owing hereunder or under any of the other Credit Documents owing to the
Bank
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shall become immediately due and payable without presentment, demand, protest or
the giving of any notice or other action by the Bank, all of which are hereby
waived by the Borrower.
SECTION 8 MISCELLANEOUS
8.1 Notices. Notices and other communications shall be effective, and duly
given, (i) when received, (ii) when transmitted by telecopy or other facsimile
device to the numbers set out below if transmitted before 5:00 p.m. on a
Business Day, or otherwise on the next following Business Day, (iii) the day
following the day on which delivered prepaid to a reputable national overnight
air courier service, or (iv) the third Business Day following the day sent by
certified or registered mail postage prepaid, in each case to the parties at the
address shown below, or at such other address as may be specified by written
notice to the other parties:
Borrower: Pharmaceutical Product Development, Inc.
3151 17th Street Extension
Wilmington, North Carolina 28412
Attn: Rudy Howard
Phone: (910) 772-6860
Fax: (910) 772-7056
Bank: FIRST UNION NATIONAL BANK
Corporate Banking, 6th Floor
150 Fayetteville Street Mall
Raleigh, North Carolina 27601
Attn: Mendel Lay
Phone: (919) 829-6064
Fax: (919) 829-6067
8.2 Right of Set-Off. In addition to other rights now or hereafter
available to the Bank under the Credit Documents or under applicable law, the
Bank may, after the occurrence of an Event of Default, exercise rights of
set-off and may appropriate and apply any and all deposits (general and
specific) or other amounts held or owing by the Bank to the Loan and other
amounts owing by the Borrower or any Guarantor hereunder or under the other
Credit Documents, regardless of whether the Loan or such other amounts are
contingent or unmatured, without presentment, demand, protest or notice of any
kind (any such rights of presentment, demand, protest or notice being hereby
waived).
8.3 Benefit of Agreement. This Agreement shall be binding upon, and shall
inure to the benefit of, successors and assigns of the parties hereto; provided
that neither the Borrower nor any Guarantor may assign or transfer any its
obligations or interests without prior written consent of the Bank.
8.4 No Waiver. No failure or delay on the part of the Bank in exercising
any right, power or privilege hereunder or under any other Credit Document and
no course of dealing between the Bank, on the one hand, and the Credit Parties,
on the other hand, shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, power or privilege hereunder or under any other
Credit Document preclude any other or further exercise thereof or the exercise
of any other right, power or privilege hereunder or thereunder. The rights and
remedies provided herein are cumulative and not exclusive of any rights or
remedies which the Bank would otherwise have.
8.5 Payment of Expenses. The Borrower agrees to: (i) pay all reasonable
out-of-pocket costs and expenses of the Bank in connection with (A) negotiation,
preparation, execution and delivery of the Credit Documents (including
reasonable fees and expenses of Bank counsel, Moore & Van Allen, PLLC) and any
amendments, waivers or consents relating to the Credit Documents and (B)
enforcement of the Credit Documents and the documents and instruments referred
to therein (including, without limitation, in connection with any such
enforcement, the reasonable fees and disbursements of counsel for the Bank);
(ii) pay and hold the Bank harmless from and against any and all present and
future stamp and other similar taxes with respect to the foregoing matters and
save the Bank harmless from and against any and all liabilities with respect to
or resulting from any delay or omission (other than to the extent attributable
to the Bank) to pay such taxes; and (iv) indemnify the Bank, its officers,
directors, employees and representatives from and hold each of them harmless
against any and all losses, liabilities, claims, damages or expenses incurred by
any of them as a result of, or arising out of, or in any way related to, or by
reason of any investigation, litigation or other proceeding (whether or not the
Bank is a party thereto) related to the entering into and/or performance of any
Credit Document or the use of proceeds of the Loan (including other extensions
of credit) hereunder or the consummation of any other transactions contemplated
in any Credit Document, including, without limitation, the reasonable fees and
16
<PAGE>
disbursements of counsel incurred in connection with any such investigation,
litigation or other proceeding (but excluding any such losses, liabilities,
claims, damages or expenses to the extent incurred by reason of gross negligence
or willful misconduct on the part of the Person to be indemnified).
8.6 Amendments. Neither this Agreement nor any of the other Credit
Documents may be amended or modified, nor shall consents or waivers be effective
except with the written consent of the parties hereto.
8.7 Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be an original,
but all of which shall constitute one and the same agreement. It shall not be
necessary in making proof of this Agreement to produce or account for more than
one such counterpart.
8.8 Headings. The headings of the sections and subsections hereof are
provided for convenience only and shall not in any way affect the meaning or
construction of any provision of this Agreement.
8.9 Survival. The indemnities and payment obligations hereunder, including
those set out in Sections 2.8, 2.9, 2.10, 2.11, 2.12, 2.13 and 8.5, and the
representations and warranties made herein or in connection herewith shall
survive the making and repayment of the Loan and termination of commitments
hereunder.
8.10 Governing Law. This Agreement and the rights and obligations of the
parties hereunder shall be governed by and construed in accordance with the laws
of the State of North Carolina.
8.11. Arbitration; Consent to Jurisdiction and Service of Process.
(a) UPON DEMAND OF ANY PARTY HERETO, WHETHER MADE BEFORE OR AFTER
INSTITUTION OF ANY JUDICIAL ACTION, ANY DISPUTE, CLAIM OR CONTROVERSY ARISING
OUT OF OR CONNECTED HEREWITH OR WITH THE CREDIT DOCUMENTS ("DISPUTES") SHALL BE
RESOLVED BY BINDING ARBITRATION AS PROVIDED HEREIN. DISPUTES MAY INCLUDE,
WITHOUT LIMITATION, TORT CLAIMS, COUNTERCLAIMS, CLAIMS BROUGHT AS CLASS ACTIONS
AND CLAIMS ARISING HEREFROM OR FROM CREDIT DOCUMENTS EXECUTED IN THE FUTURE.
ARBITRATION SHALL BE CONDUCTED UNDER THE COMMERCIAL FINANCIAL DISPUTES
ARBITRATION RULES (THE "ARBITRATION RULES") OF THE AMERICAN ARBITRATION
ASSOCIATION AND TITLE 9 OF THE U.S. CODE. ALL ARBITRATION HEARINGS SHALL BE
CONDUCTED IN CHARLOTTE, MECKLENBURG COUNTY, NORTH CAROLINA, OR SUCH OTHER PLACE
AS AGREED TO IN WRITING BY THE PARTIES. A JUDGMENT UPON THE AWARD MAY BE ENTERED
IN ANY COURT HAVING JURISDICTION, AND ALL DECISIONS SHALL BE IN WRITING. THE
PANEL FROM WHICH ALL ARBITRATORS ARE SELECTED SHALL BE COMPRISED OF LICENSED
ATTORNEYS HAVING AT LEAST TEN YEARS' EXPERIENCE REPRESENTING PARTIES IN SECURED
LENDING TRANSACTIONS. NOTWITHSTANDING THE FOREGOING, THIS ARBITRATION PROVISION
DOES NOT APPLY TO DISPUTES UNDER OR RELATED TO INTEREST PROTECTION AGREEMENTS.
17
<PAGE>
(b) Notwithstanding the preceding binding arbitration provision, the Bank
preserves certain remedies that may be exercised during a Dispute. The Bank
shall have the right to proceed in any court of proper jurisdiction or by self
help to exercise or prosecute the following remedies, as applicable: (i) all
rights to foreclose against any real or personal property or other security by
exercising a power of sale granted in the Credit Documents or under applicable
law, (ii) all rights of self help including peaceful occupation of real property
and collection of rents, set-off and peaceful possession of personal property,
(iii) obtaining provisional or ancillary remedies including injunctive relief,
sequestration, garnishment, attachment and appointment of receiver, (iv) when
applicable, a judgment by confession of judgment and (v) other remedies.
Preservation of these remedies does not limit the power of an arbitrator to
grant similar remedies that may be requested by a party in a Dispute.
(c) BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE PARTIES
HERETO ACCEPTS, FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND
UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION RELATING TO ANY ARBITRATION
PROCEEDINGS CONDUCTED UNDER THE ARBITRATION RULES IN CHARLOTTE, MECKLENBURG
COUNTY, NORTH CAROLINA AND IRREVOCABLY AGREES TO BE BOUND BY ANY FINAL JUDGMENT
RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT FROM WHICH NO APPEAL HAS BEEN
TAKEN OR IS AVAILABLE. Each of the parties hereto irrevocably agrees that all
process in any such arbitration proceedings or otherwise may be effected by
mailing a copy thereof by registered or certified mail (or any substantially
similar form of mail), postage prepaid, to it at its address set forth in
Section 8.1 or at such other address of which such party shall have been
notified pursuant thereto, such service being hereby acknowledged by each party
hereto to be effective and binding service in every respect. Each party hereto
irrevocably waives any objection, including, without limitation, any objection
to the laying of venue or based on the grounds of forum non conveniens which it
may now or hereafter have to the bringing of any such arbitration proceeding in
any jurisdiction. Nothing herein shall affect the right to serve process in any
other manner permitted by law or shall limit the right of any party to bring
proceedings against the Borrower or any party hereto in any court or pursuant to
arbitration proceedings in any other jurisdiction.
[Remainder of Page Intentionally Left Blank]
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<PAGE>
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 Howard
-------------------------
Name: Rudy Howard
Title: VP/CFO
GUARANTORS: PPD PHARMACO, INC.,
a Texas corporation
By: /s/ Rudy Howard
-------------------------
Name: Rudy Howard
Title: VP
APBI ENVIRONMENTAL SCIENCES GROUP, INC.,
a Virginia corporation
By: /s/ Rudy Howard
-------------------------
Name: Rudy Howard
Title: AVP
BANK: FIRST UNION NATIONAL BANK
By: /s/ G. Mendel Lay
-------------------------
Name: G. Mendel Lay
Title: Sr. VP
<PAGE>
Annex A
Form of Note
$50,000,000 June 24, 1998
PHARMACEUTICAL PRODUCT DEVELOPMENT, INC., a North Carolina corporation
(the "Borrower"), promises to pay to the order of FIRST UNION NATIONAL BANK, its
successor and assigns (the "Bank") on or before the Termination Date the
principal sum of FIFTY MILLION DOLLARS ($50,000,000) or, if less, the aggregate
unpaid principal amount of all Loans made by the Bank to the Borrower, in lawful
money of the United States in immediately available funds at the office of the
Bank as provided in the Loan Agreement referenced below or as otherwise directed
by the Bank pursuant to the terms of the Loan Agreement, together with interest,
in like money and funds, on the unpaid principal amount hereof at the rates and
on the dates as set forth in the Loan Agreement.
This Note is issued pursuant to, and is entitled to the benefits of, the
Loan Agreement dated as of the date hereof (as the same may be amended or
modified and in effect from time to time, the "Loan Agreement") among the
Borrower, the Guarantors identified therein and the Bank, to which Loan
Agreement reference is hereby made for a statement of the terms and conditions
under which this Note may be prepaid or its maturity date accelerated.
Capitalized terms used herein and not otherwise defined herein are used with the
meanings attributed to them in the Loan Agreement.
In the event payment of amounts due hereunder are accelerated under the
terms of the Loan Agreement, all such amounts shall become immediately due and
payable, without presentment, demand, protest or notice of any kind, all of
which are hereby waived. Further, in the event this Note is not paid when due at
any stated or accelerated maturity, the Borrower agrees to pay, in addition to
principal and interest, all costs of collection, including reasonable attorneys'
fees.
This Note shall be governed by and construed in accordance with the laws
of the State of North Carolina.
PHARMACEUTICAL PRODUCT DEVELOPMENT, INC.,
a North Carolina corporation
By:
Name:
Title:
2
<PAGE>
Annex C
Form of Joinder Agreement
THIS JOINDER AGREEMENT (the "Agreement"), dated as of _____________, 19__,
is by and between _____________________, a ___________________ (the "Applicant
Guarantor"), and FIRST UNION NATIONAL BANK under that certain Credit Agreement
dated as of June __, 1997 (as amended and modified, the "Credit Agreement") by
and among PHARMACEUTICAL PRODUCT DEVELOPMENT, INC., a North Carolina
corporation, as Borrower, and the other Guarantors identified therein and First
Union National Bank of North Carolina. All of the defined terms in the Credit
Agreement are incorporated herein by reference.
The Applicant Guarantor has indicated its desire to become a Guarantor in
accordance with the provisions Section 3.8 of the Credit Agreement to become, a
Guarantor under the Credit 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 Credit Agreement and a "Guarantor" for all purposes of the Credit
Agreement and the other Credit Documents, and shall have all of the obligations
of a Guarantor thereunder as if it had executed the Credit 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 Credit Agreement and (ii) all of the undertakings and
waivers set forth in Section 3 of the Credit 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 Credit 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.
2. The Applicant Guarantor acknowledges and confirms that it has received
a copy of the Credit Agreement and the Schedules and Exhibits thereto. The
information on the Schedules to the Credit Agreement and Pledge 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 Credit 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.
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IN WITNESS WHEREOF, the Applicant Guarantor has caused this Joinder
Agreement to be duly executed by its authorized officers, and the Administrative
Agent, for the benefit of the Lenders, has caused the same to be accepted by its
authorized officer, as of the day and year first above written.
APPLICANT GUARANTOR
By:___________________________
Name:
Title:
Address for Notices:
Attn: _______________________
Telephone:
Telecopy:
Acknowledged and accepted:
FIRST UNION NATIONAL BANK
By:____________________________
Name:
Title:
4
<PAGE>
Annex D
Form of Legal Opinion
June __, 1998
First Union National Bank
Raleigh, North Carolina
Re: $50 million Credit Agreement dated as of the date hereof (the
"Credit Agreement") among Pharmaceutical Product Development, Inc.,
a North Carolina corporation, the Guarantors identified therein and
First Union National Bank. Terms used but not otherwise defined
shall have the meanings provided in the Credit Agreement.
Ladies and Gentlemen:
We have acted as counsel to Pharmaceutical Product Development, Inc., a
North Carolina corporation (the "Borrower"), and those subsidiaries of the
Borrower which are Guarantors under the Credit Agreement identified on Schedule
A attached hereto (collectively with the Borrower, the "Credit Parties"), in
connection with the execution and delivery by them of the Credit Agreement.
This opinion is given in accordance with the requirements of Section
4.1(b) of the Credit Agreement.
We have participated in the preparation of the Credit Agreement and the
other Credit Documents, and have examined copies of each of the foregoing
documents executed by the Credit Parties. We have also examined such
certificates, documents and records, and have made such examination of law, as
we have deemed necessary to enable us to render the opinions expressed below. In
addition, we 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, we 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, the General Corporation Law of the
State of Delaware and the federal laws of the United States of America.
Whenever the phrase "to the best of our knowledge" is used herein, it
refers to the actual knowledge of the attorneys of this firm involved in the
representation of the Credit Parties without further investigation.
Based on the foregoing, and subject to the qualifications stated herein,
we are of the opinion that:
1. Each of the Credit Parties and each of the Issuers (as hereinafter
defined) is a corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation, as identified on
Schedule A attached hereto and qualified to carry on their 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 Credit
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
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<PAGE>
thereof, as appropriate, and has taken all necessary corporate action to
authorize the execution, delivery and performance of the Credit Agreement and
the 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 such consents, approvals,
authorizations or other actions as have been obtained or made.
4. To the best of our knowledge, no claim, litigation or proceeding before
any 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 Credit 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
Credit Agreement and the other Credit Documents to which it is a party, the
borrowings and 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 Issuers or any Requirement of Law, or to the best
of our knowledge, any Contractual Obligation of any of the Credit Parties.
The opinions expressed herein do not purport to cover, and we express no
opinion with respect to, the applicability of Section 548 of the federal
Bankruptcy Code or any comparable provision of state law, including the
provisions relating to fraudulent conveyances. We call you 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, we
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 another subsidiary of its parent except
to the extent 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 our
prior written consent.
Very truly yours,
6
EX-10.114
Lease Agreement Dated 6/26/98
LEASE AGREEMENT BY AND BETWEEN
PPD PHARMACO, INC., as tenant
AND
WEEKS REALTY, L.P., as landlord
at
Perimeter Park West, Morrisville, NC
<PAGE>
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.
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EXHIBITS
EXHIBIT A- THE LAND
EXHIBIT B- FLOOR PLAN
EXHIBIT C- PLANS AND SPECIFICATIONS
EXHIBIT C-1- SHELL BUILDING DESIGN SCHEDULE
EXHIBIT C-2- BASE BUILDING SPECIFICATIONS
EXHIBIT D- RULES AND REGULATIONS
ii
<PAGE>
LEASE AGREEMENT
THIS LEASE AGREEMENT (the "Lease"), is made and entered into as of the 26th
day of June, 1998, by and between WEEKS REALTY, L.P., a Georgia limited
partnership authorized to do business in North Carolina as WEEKS REALTY 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 approximately 35,353 rentable
square feet (the "Premises") encompassing the third and fourths floor of a
building consisting of approximately 118,825 rentable square feet 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 Building shall be connected to 4025 Paramount Parkway, Morrisville, NC,
a building owned by Landlord and located adjacent to the Building, and currently
occupied by Tenant, by a covered walkway (the "Walkway") over which shall be
located a portion of the Premises, all of which shall be in accordance with the
Plans (as hereinafter defined). Tenant has leased approximately 100,987 rentable
square feet at 4025 Paramount Parkway pursuant to that certain Lease Agreement
with Landlord dated July 9, 1997 (the "Prior Lease"). A floor plan of the
Building and the Premises shall be attached hereto and made a part hereof as
Exhibit B.
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. Landlord shall conduct the
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<PAGE>
upfit of the Premises in accordance with the Plans which have been mutually and
reasonably approved by Landlord and Tenant. Construction of the Premises shall
proceed in accordance with the Shell Building Design Schedule which shall be
attached hereto and made a part hereof as Exhibit C-1. Landlord shall provide an
upfit allowance for such purposes in an amount up to $20.00 per rentable square
foot of the Premises below the finished ceiling (the "Upfit Allowance"). The
components of the base building, including, the finished ceiling shall be as set
forth on Exhibit C-2, attached hereto and made a part hereof. Tenant 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 by Landlord and Tenant 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.
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, as provided in Sections 10 and 11 hereof.
(b) TERM.
TO HAVE AND TO HOLD the same for a term of one hundred and twenty (120)
months commencing upon the date the Premises are delivered by Landlord to Tenant
as substantially complete as evidenced by the issuance of a temporary
certificate of occupancy by the Town of Morrisville, NC (the "Commencement
Date"), and ending 120 months thereafter, unless sooner terminated pursuant to
the provisions hereof (the "Termination Date"); provided, however, that
notwithstanding anything herein to the contrary, the term of this Lease,
including, any renewals hereof, shall be coterminous with the current term,
including renewals of the Prior Lease. 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 June 1, 1999 (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 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.
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(c) Option to Renew.
Tenant shall have the option to renew the term of the Lease for two renewal
periods (the "Renewal Term(s)") 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 options to renew
provided to Tenant hereunder shall be null and void and of no further force and
effect. Tenant shall deliver Landlord written notice of its election to exercise
its option to renew no less than nine (9) months prior to the expiration of the
initial term of the Lease; failing which Tenant's right to renew for the
applicable Renewal Term shall be null and void.
(d) EXPANSION RIGHTS.
(1) At any time prior to October 31, 1998, and provided that (i) there shall
be no default or event of default hereunder by Tenant, and (ii) Tenant shall
provide written notice to Landlord of its desire to lease the First Expansion
Space on or prior to October 31, 1998 (the "First Notice"), Tenant shall have
the option to lease not less than 20,000 rentable square feet in the Building
and no more than the remainder of the Building (the "First Expansion Space"). In
leasing the First Expansion Space, Tenant shall first lease the space in the
Building that is directly adjacent to and contiguous with the Premises, and
shall then lease space in the Building on the floor adjacent to the Premises
proceeding downward in the Building to the first floor, leasing all space
available on each floor before proceeding to the next floor down. Should Tenant
lease less than a full floor of the Building, the space leased by Tenant shall
be configured in a manner and shall include an amount of square footage that
would allow Landlord to lease the remainder of the applicable floor in the
Building to other tenant(s), as reasonably approved by Landlord. Base rent,
Additional Rent, and operating expenses shall be due and payable for the First
Expansion Space as provided herein, and payment by Tenant shall commence upon
the Commencement Date as provided herein. Tenant shall be provided an upfit
allowance in an amount not to exceed $20.00 per rentable square foot of the
First Expansion Space. Tenant must execute an amendment to this Lease within
fifteen days of the receipt by Landlord of the First Notice evidencing the
provisions of this subparagraph, and in form and substance approved by Landlord.
Failure of Tenant to comply strictly with the provisions of this subparagraph
shall render the rights of Tenant hereunder null and void.
(2) At any time prior to October 31, 1998, and provided that (i) there shall
be no default or event of default hereunder by Tenant, (ii) Tenant has exercised
its rights under subparagraph (1) above for the First Expansion Space by
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October 31, 1998, and (iii) Tenant shall provide written notice to Landlord of
its desire to lease the Second Expansion Space on or prior to December 31, 1998
(the "Second Notice"), Tenant shall have the option to lease not less than (i)
12,500 rentable square feet, and (ii) no more than 24,938 rentable square feet
in the Building but not on the first floor of the Building (the "Second
Expansion Space"). In leasing the Second Expansion Space, Tenant shall first
lease the space in the Building that is directly adjacent to and contiguous with
the Premises, and shall then lease space in the Building on the floor adjacent
to the Premises proceeding downward in the Building to the first floor, leasing
all space available on each floor before proceeding to the next floor down.
Should Tenant lease less than a full floor of the Building, the space leased by
Tenant shall be configured in a manner and shall include an amount of square
footage that would allow Landlord to lease the remainder of the applicable floor
in the Building to other tenant(s), as reasonably approved by Landlord. For six
months following the completion of the Building shell per Exhibit C-1 hereof
(the "Completion Date"), Tenant shall reimburse Landlord for its costs with
respect to the Building in the amount of $7.41 per rentable square foot of the
Building. The term of this Lease for the Second Expansion Space shall commence
upon the earlier of (i) six months following the Completion Date, or (ii) the
completion by Tenant of its upfit of the Premises, as reasonably determined by
Landlord. Tenant shall pay base rent for the Second Expansion Space, (i)
commencing upon the seventh month following the Completion Date and continuing
thereafter until the end of the twelfth month, in an amount equal to $14.45 per
rentable square foot, and thereafter (ii) in an amount equal to $17.85 per
rentable square foot. Notwithstanding the foregoing, upon the date that Tenant
has completed its upfit of the Second Expansion Space in accordance with plans
and specifications that have been mutually approved by Landlord and Tenant, as
reasonably determined by Landlord, base rent shall increase to $17.85 per
rentable square feet. Thereafter, base rent shall increase in accordance with
the provisions of this Lease. Additional Rent and operating expenses shall be
due and payable for the Second Expansion Space in accordance with this Lease.
Tenant shall be provided an upfit allowance in an amount not to exceed $20.00
per rentable square foot of the Second Expansion Space which must be used in
full by Tenant prior to the end of twelfth month after the Completion Date.
Tenant must execute an amendment to this Lease within fifteen days of the
receipt by Landlord of the Second Notice evidencing the provisions of this
subparagraph, and in form and substance approved by Landlord. Failure of Tenant
to comply strictly with the provisions of this subparagraph shall render the
rights of Tenant hereunder null and void.
(e) RIGHT OF FIRST REFUSAL.
(i) Provided there is no default or event of default under the Lease on the
date such right is exercised, or on the date Tenant shall enter into occupancy
of any or all of the unleased space in the Building (the "Leasable Space"),
Tenant shall have a continuous right of first refusal to lease the Leasable
Space any time such space is offered for lease, subject to provisions of this
subparagraph (e).
(ii) Upon the receipt by Landlord of notice from a third party of interest
in any or all of the Leasable Space, Landlord shall notify Tenant in writing of
such interest (the "Third Party Notice") specifying the terms under which Tenant
may lease the Leasable Space in which the third party has expressed an interest.
Tenant shall respond to the Landlord in writing within five business days of the
receipt of the Third Party Notice indicating its intent or lack of intent to
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exercise the rights under this Paragraph. Tenant's failure to notify Landlord
within the five business day period set forth above will entitle Landlord to
lease such space to such third party substantially in accordance with the terms
and conditions of the Third Party Notice without liability to Tenant.
(iii) If Tenant exercises its right of first refusal pursuant to this
subparagraph (e), Tenant shall lease the space with respect to which it
exercised its right of first refusal hereunder substantially in accordance with
the terms and conditions of the Third Party Notice, as reasonably determined by
Landlord, including, the amount of Leasable Space in which the third party was
interested, i.e., Tenant may not lease less than the amount of space in which
the third party was interested.
(iv) An amendment to this Lease providing for the lease of such space shall
be executed by Tenant within ten business days of the receipt by Tenant from
Landlord of a draft Lease amendment.
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, at the annual rate 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 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.
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 under the Prior Lease
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.
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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 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
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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.
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 actual 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 reasonable approval. Such audit must be completed no later than 60
days
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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 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
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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 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
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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 non-exclusive parking of cars at the Building shall be
3.44 spaces per 1,000 rentable square feet of the Premises and Tenant shall not
exceed this ratio; provided, however, in the event any improvements, or
equipment located by Tenant on the Land consume any portion of the parking area
located on the Land, the parking spaces affected shall be counted against the
parking ratio available for use by Tenant at the Premises. 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.
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
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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. 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 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.
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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, in any twelve
month period, cumulatively, more than 25 percent of its then current rentable
square feet in total in the Building and/or in the building leased under the
Prior Lease. 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 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
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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 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
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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.
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.
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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.
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
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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, 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.
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(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.
(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 received by Landlord from any new tenant that enters into
occupancy of the Premises.
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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 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.
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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.
LANDLORD:
Weeks Realty, L.P.
1800 Perimeter Park Drive
Suite 200
Morrisville, North Carolina 27560
Attention: Mr. Robert G. Cutlip
With a copy to:
Dave Lindner
Weeks Realty, L.P.
1800 Perimeter Park Drive
Suite 200
Morrisville, NC 27560
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Cathy M. Rudisill, Esq.
Poyner & Spruill, L.L.P.
3600 Glenwood Avenue
Raleigh, North Carolina 27612
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 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.
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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 (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
21
<PAGE>
"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 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,
22
<PAGE>
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.
(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 (2) 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
23
<PAGE>
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, 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
24
<PAGE>
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.
(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.]
25
<PAGE>
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 authorized to do
business in the State of North
Carolina as Weeks Realty Limited Partnership
BY: WEEKS GP HOLDINGS, INC., a
Georgia corporation, its sole
general partner
By: /s/ Robert G. Cutlip
-------------------------
Robert G. Cutlip,
Senior Vice President
TENANT:
PPD PHARMACO, INC., a Texas corporation
Date of execution: By: /s/ Fred Eshelman
---------------------
7/9/98 Print Name: Fred Eshelman
--------------
Title:Chief Executive Officer
--------------------------
Witness/Attest:
/s/ Meg Davenport
------------------
Print Name: Meg Davenport
--------------
Title:Exec. Dir., Corp. Admin
------------------------
[CORPORATE SEAL]
26
<PAGE>
EXHIBIT A
THE LAND
TO BE ATTACHED UPON COMPLETION OF SITE PREPARATION FOR THE BUILDING.
<PAGE>
EXHIBIT B
FLOOR PLAN OF BUILDING AND PREMISES
<PAGE>
EXHIBIT C
PLANS AND SPECIFICATIONS
[TO BE ATTACHED UPON THE MUTUAL APPROVAL OF LANDLORD AND TENANT.]
<PAGE>
EXHIBIT C-1
SHELL BUILDING DESIGN SCHEDULE
[TO BE ATTACHED UPON THE MUTUAL APPROVAL OF LANDLORD AND TENANT.]
<PAGE>
EXHIBIT C-2
COMPONENTS OF BASE BUILDING
[TO BE ATTACHED UPON THE MUTUAL APPROVAL OF LANDLORD AND TENANT.]
<PAGE>
EXHIBIT D
RULES AND REGULATIONS
1.The sidewalks, common areas, and public portions of the Building, such as
entrances, passages, courts, elevators, vestibules, stairways, corridors or
halls, and the streets, alleys or ways surrounding or in the vicinity of the
Building shall not be obstructed by Tenant, even temporarily, or encumbered by
Tenant or used for any purpose other than ingress to and egress from the
Premises.
2.No awnings or other projections shall be attached to the outside walls of
the Building.
3.No sign, advertisement, notice or other lettering shall be exhibited,
inscribed, painted or affixed by Tenant on any part of the outside of the
Premises or Building unless approved by Landlord. Signs on entrance doors shall,
at Tenant's expense, be inscribed, painted or affixed for each tenant by sign
makers approved by Landlord. In the event of the violation of the foregoing by
Tenant, Landlord may remove same without notice to Tenant or any liability
therefor, and may charge the expense incurred by such removal to Tenant.
4.The sashes, sash doors, skylights, windows, heating, ventilating and air
conditioning vents and doors that reflect or admit light and air into the halls,
passageways or other public places in the Building shall not be covered or
obstructed by Tenant.
5.No show cases or other articles shall be put in front of or affixed to any
part of the exterior of the Building, nor placed in the public halls, corridors,
or vestibules without the prior written consent of Landlord.
6.The bathrooms and plumbing fixtures shall not be used for any purposes
other than those for which they were designed, and no sweepings, rubbish, rags,
or other substances shall be thrown therein. All damages resulting from any
misuse of the bathrooms or fixtures shall be the responsibility of Tenant.
7.Tenant shall not in any way deface any part of the Premises or the
Building.
8.No bicycles, vehicles, or animals of any kind shall be brought into or
kept in or about the Premises, or in the Building. No cooking shall be done or
permitted by Tenant on the Premises except in conformity with all applicable
laws, statutes, regulations and ordinances and then only in the area designated
as a kitchen, if any, on the Premises of Tenant, which is to be primarily used
by Tenant's employees for heating beverages and light snacks. Tenant shall not
cause or permit any unusual or objectionable odors to be produced upon or
permeate from the Premises.
40
<PAGE>
9.[INTENTIONALLY DELETED.]
10. No space in the Building shall be used for the sale of merchandise,
goods, or property of any kind at auction.
11. Tenant shall not make, or permit to be made, any unseemly or disturbing
noises or disturb or interfere with occupants of the Building or neighboring
buildings or premises or those having business with them, whether by the use of
any musical instrument, radio, talking machine, unmusical noise, whistling,
singing, or in any other way. Tenant shall not throw anything out of the doors,
windows or skylights or down the passageways.
12. Neither Tenant, nor any of Tenant's servants, employees, agents,
visitors, or licensees, shall at any time bring or keep upon the Premises any
inflammable, combustible or explosive fluid, or chemical substance, other than
reasonable amounts of cleaning fluids or solvents required in the normal
operation of Tenant's business offices.
13. No additional locks or bolts of any kind shall be placed upon any of the
doors, walls, accessways, or windows by Tenant, nor shall any changes be made in
existing locks or the mechanism thereof, without the prior written approval of
Landlord and unless and until a duplicate key or access card, as applicable, is
delivered to Landlord. Tenant shall, upon the termination of its tenancy (i)
return to Landlord all keys for the Premises and for any area of the Building,
or common areas, either furnished to, or otherwise procured by Tenant, (ii)
restore the locks, walls, accessways, windows, and doors to their original
condition on the date of this Lease by removing any security measures installed
by Tenant, repairing any damage to the Premises or to the Building as a result
of the restoration and removal, and (iii) in the event of the loss of any keys
furnished to Tenant by Landlord, Tenant shall pay to Landlord the cost thereof.
14. Tenant shall not overload any floor.
15. Tenant shall not occupy or permit any portion of the Premises to be used
for the possession, storage, manufacture or sale of liquor, narcotics, or
tobacco in any form.
16. Tenant shall be responsible for all persons for whom it issues passes
and/or keys and shall be liable to Landlord for all acts of such persons.
17. The Premises shall not be used for lodging or sleeping or for any
immoral or illegal purpose.
18. The requirements of Tenant will be attended to only by Landlord or the
property manager of the Premises.
19. Canvassing, soliciting, and peddling in the Building are prohibited and
Tenant shall cooperate to prevent the same.
20. All paneling, grounds or other wood products not
41
<PAGE>
considered furniture shall be of fire retardant materials.
21. No smoking is permitted in the Premises, or in the Building. Smoking is
permitted outside the Building in designated smoking areas. All cigarette butts
and other refuse should be placed in designated containers.
22. No weapons concealed or visible are permitted in the Premises, in the
Building, or on the Land.
23. Landlord shall not be responsible to Tenant or liable for the
non-observance or violation of any of these Rules and Regulations by any other
tenant.
Whenever the above rules conflict with any of the rights or obligations of
Tenant pursuant to the provisions of the Lease, the provisions of the Lease
shall govern.
42
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Pharmaceutical Product Development Inc. Consolidated Balance Sheet and Statement
of Operations included within this Form 10-K and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-mos
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-START> Jan-01-1998
<PERIOD-END> Jun-30-1998
<CASH> 19,772
<SECURITIES> 0
<RECEIVABLES> 120,496
<ALLOWANCES> 1,139
<INVENTORY> 0
<CURRENT-ASSETS> 148,987
<PP&E> 91,873
<DEPRECIATION> 53,886
<TOTAL-ASSETS> 210,368
<CURRENT-LIABILITIES> 70,808
<BONDS> 0
0
0
<COMMON> 2,310
<OTHER-SE> 134,609
<TOTAL-LIABILITY-AND-EQUITY> 210,368
<SALES> 0
<TOTAL-REVENUES> 135,108
<CGS> 0
<TOTAL-COSTS> 74,731
<OTHER-EXPENSES> 50,401
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 181
<INCOME-PRETAX> 12,184
<INCOME-TAX> 4,773
<INCOME-CONTINUING> 7,411
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,411
<EPS-PRIMARY> 0.32
<EPS-DILUTED> 0.32
</TABLE>
