<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 22, 1996
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
---------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
PAREXEL INTERNATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
MASSACHUSETTS 8731 04-2776269
(State or other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Incorporation or Classification Code Number) Identification Number)
Organization)
</TABLE>
---------------------
195 WEST STREET
WALTHAM, MASSACHUSETTS 02154
(617) 487-9900
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
JOSEF H. VON RICKENBACH
PRESIDENT, CHIEF EXECUTIVE OFFICER AND CHAIRMAN
PAREXEL INTERNATIONAL CORPORATION
195 WEST STREET
WALTHAM, MASSACHUSETTS 02154
(617) 487-9900
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
COPIES TO:
<TABLE>
<S> <C>
WILLIAM J. SCHNOOR, JR. DAVID B. WALEK, ESQ.
HEATHER M. STONE ROPES & GRAY
TESTA, HURWITZ & THIBEAULT, LLP ONE INTERNATIONAL PLACE
HIGH STREET TOWER BOSTON, MASSACHUSETTS 02110
125 HIGH STREET (617) 951-7000
BOSTON, MASSACHUSETTS 02110
(617) 248-7000
</TABLE>
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this registration statement becomes effective.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=============================================================================================
TITLE OF EACH CLASS OF PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE REGISTERED AGGREGATE OFFERING PRICE(1) REGISTRATION FEE
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stock, $.01 par value... $118,125,000 $36,000
=============================================================================================
<FN>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rules 457(c) and 457(o).
</TABLE>
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED OCTOBER 22, 1996
PROSPECTUS
1,275,000 SHARES
[LOGO]
COMMON STOCK
------------------------
Of the 1,275,000 shares of Common Stock offered hereby 1,066,900 are being
sold by PAREXEL International Corporation ("PAREXEL" or the "Company") and
208,100 are being sold by the Selling Stockholders. See "Principal and Selling
Stockholders." The Company will not receive any of the proceeds from the sale of
the shares by the Selling Stockholders.
The Company's Common Stock is quoted on the Nasdaq National Market under
the symbol "PRXL." The last sale price for the Common Stock on October 21, 1996,
as reported on the Nasdaq National Market, was $56.00 per share. See "Price
Range of Common Stock and Dividend Policy."
SEE "RISK FACTORS" ON PAGE 6 FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE
CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED HEREBY.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
======================================================================================================
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2) SELLING STOCKHOLDERS
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share..................... $ $ $ $
Total(3)...................... $ $ $ $
======================================================================================================
<FN>
(1) The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting expenses payable by the Company, estimated at $500,000.
(3) The Company has granted the Underwriters a 30-day option to purchase up to
an additional 191,250 shares of Common Stock solely to cover
over-allotments, if any. See "Underwriting." If all such shares are
purchased, the total Price to Public, Underwriting Discounts and
Commissions, and Proceeds to Company will be $ , $ and
$ , respectively.
</TABLE>
------------------------
The shares of Common Stock are being offered by the several Underwriters
named herein, subject to prior sale, when, as and if accepted by them and
subject to certain conditions. It is expected that certificates for the shares
of Common Stock offered hereby will be available for delivery on or about
, at the office of Smith Barney Inc., 333 West 34th Street, New York,
NY 10001.
------------------------
SMITH BARNEY INC.
WILLIAM BLAIR & COMPANY
LEHMAN BROTHERS
ADAMS, HARKNESS & HILL, INC.
, 1996
<PAGE> 3
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission"), a Registration Statement on Form S-1 (including all amendments
thereto, the "Registration Statement") under the Securities Act of 1933, as
amended, with respect to the Common Stock offered hereby. As permitted by the
rules and regulations of the Commission, this Prospectus omits certain
information contained in the Registration Statement. For further information
with respect to the Company and the Common Stock offered hereby, reference is
hereby made to the Registration Statement and to the exhibits and schedules
filed therewith. Statements contained in this Prospectus regarding the contents
of any agreement or other document filed as an exhibit to the Registration
Statement are not necessarily complete, and in each instance reference is made
to the copy of such agreement filed as an exhibit to the Registration Statement,
each such statement being qualified in all respects by such reference. In
addition, the Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports and other information with the Commission.
The Registration Statement, including the exhibits and schedules thereto, as
well as the Company's periodic reports, proxy statements and other information,
may be inspected at the public reference facilities maintained by the Commission
at 450 Fifth Street, N.W., Washington, D.C. 20549 and at the Commission's
Regional Offices located at Seven World Trade Center, 13th Floor, New York, New
York 10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of all or any part thereof may be obtained upon payment of the prescribed
fees from the Public Reference Section of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549. In addition, the Commission maintains a Web site
(http://www.sec.gov) that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission.
PAREXEL is a registered service mark of the Company.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS (IF ANY) MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON
STOCK ON THE NASDAQ NATIONAL MARKET IN ACCORDANCE WITH RULE 10B-6A UNDER THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. SEE "UNDERWRITING."
2
<PAGE> 4
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information, including Risk Factors and Consolidated Financial Statements and
Notes thereto, appearing elsewhere in this Prospectus. This Prospectus contains
certain "forward-looking" information, as that term is defined by (i) the
Private Securities Litigation Reform Act of 1995 (the "Act") and (ii) releases
made by the Securities and Exchange Commission. Such information involves risks
and uncertainties. The Company's actual results may differ materially from the
results discussed in the forward-looking statements. Factors that might cause
such a difference include, but are not limited to, those discussed in "Risk
Factors." Unless otherwise indicated, all information in this Prospectus assumes
no exercise of the Underwriters' over-allotment option.
THE COMPANY
PAREXEL International Corporation ("PAREXEL" or the "Company") is a leading
contract research organization ("CRO"), providing clinical research and
development services to the worldwide pharmaceutical and biotechnology
industries. The Company believes it is the fourth largest CRO, based on
estimated annual net revenue, and one of only a few CROs capable of providing a
full range of clinical services on a global basis. The Company complements the
research and development departments of pharmaceutical and biotechnology
companies by offering high quality clinical research services to the client and
reducing drug development time and cost. In addition, the Company's integrated
services and extensive information technology capabilities, coupled with its
broad experience and expertise in global drug development, provide clients with
a variable cost alternative to the fixed costs associated with internal drug
development. The Company offers a full complement of clinical research and
development services, including designing, initiating and monitoring clinical
trials, managing and analyzing clinical data and consulting on regulatory
affairs.
PAREXEL's integrated information systems and worldwide network of offices
enable the Company to provide high-quality comprehensive services on a global
basis. The Company has provided clinical research and development services in
North America since 1985, in Europe since 1989, in Japan since May 1995 and in
Australia since December 1995. The Company derived 61.6% and 66.2% of net
revenue from its North American operations and 37.3% and 32.5% of net revenue
from its European operations in the fiscal year ended June 30, 1996 and the
three months ended September 30, 1996, respectively. During fiscal 1996, the
Company provided services to each of the 20 largest pharmaceutical companies, as
ranked by estimated worldwide 1995 research and development expenditures, and to
seven of the ten largest biotechnology companies, as ranked by December 1995
market capitalization. During fiscal 1996, the Company performed services for
over 250 clients, including 53 biotechnology companies, involving over 1,000
projects.
The CRO industry derives substantially all of its revenue from the
pharmaceutical and biotechnology industries. In 1995, the global pharmaceutical
and biotechnology industries spent an estimated $33.0 billion on research and
development, of which the Company estimates $15.2 billion was spent on the type
of services offered by the Company. Of this amount, $2.6 billion was outsourced
to CROs. The Company believes that the following trends will cause the CRO
industry to continue to grow: (i) many pharmaceutical companies, in response to
margin pressures, are seeking to reduce the high fixed costs associated with
peak-load staffing for drug development by relying on a combination of internal
resources and CROs; (ii) pharmaceutical and biotechnology companies increasingly
are attempting to maximize profits from a given drug by pursuing regulatory
approvals in multiple countries in parallel, rather than sequentially, by
outsourcing to CROs with global capabilities; (iii) as consolidation in the
pharmaceutical industry continues, many pharmaceutical companies aggressively
manage costs by reducing jobs and outsourcing to variable-cost CROs in an effort
to reduce the fixed costs associated with internal drug development; (iv) as
regulatory requirements in many jurisdictions have become more complex, the
pharmaceutical and biotechnology industries are increasingly outsourcing to
certain CROs to take advantage of their data management expertise and global
presence; (v) the worldwide research and development expenditures for new drugs,
including amounts spent on services of the type provided by CROs, have
experienced substantial growth in recent years as a result of pressures to
develop new drugs for an aging population and for the treatment of life
threatening diseases and chronic disorders; and (vi) the growth of the
biotechnology industry has increased the demand for expertise and
- --------------------------------------------------------------------------------
3
<PAGE> 5
- -------------------------------------------------------------------------------
services provided by outside sources, including CROs. There can be no assurance,
however, that these trends will result in growth in the CRO industry.
PAREXEL's objective is to maintain and enhance its position as a leading
CRO by providing a full range of clinical services on a global basis. The
Company addresses all aspects of clinical research and development with a
flexible approach that allows its clients to use the Company's services on an
individual or bundled basis. The Company believes its expertise in conducting
scientifically demanding trials and its ability to coordinate complicated global
trials are significant competitive strengths. PAREXEL continues to devote
significant resources to developing information systems designed to allow the
Company to more effectively manage its business operations and deliver services
to its clients. The Company will continue to invest in improvements in
information technology and consider acquisitions of complementary businesses in
order to enhance its competitive position and its level of service.
RECENT EVENTS
In June 1996, the Company acquired Caspard Consultants, a Paris-based CRO,
and in August 1996 acquired Lansal Clinical Pharmaceutics Limited, a Tel
Aviv-based CRO. These acquisitions augment the Company's existing clinical
operations and are in line with management's focused international expansion
efforts. In June 1996, the Company acquired Sitebase Clinical Systems, Inc., a
provider of remote data entry ("RDE") technology. RDE technology is expected to
enhance the quality and timeliness of clinical trial data. In August 1996, the
Company also acquired State and Federal Associates, Inc. ("S&FA"), a Washington
D.C.-based provider of consulting services to the healthcare and pharmaceutical
industries. The acquisition broadens the Company's portfolio of consulting
services, specifically in the area of health economics. These acquisitions are
each being accounted for as poolings of interest. The aggregate historical
financial results of the acquired companies are not material to the Company's
financial position and results of operations. Therefore, prior periods have not
been restated and results of operations have been included since the date of
acquisition.
In addition, during fiscal 1996 the Company opened offices in Chicago and
Madrid, Spain.
<TABLE>
THE OFFERING
<S> <C>
Common Stock Offered by the Company....................... 1,066,900 shares
Common Stock Offered by the Selling Stockholders.......... 208,100 shares
Common Stock Outstanding Immediately after the Offering... 9,515,868 shares(1)
Use of Proceeds........................................... Working capital and general
corporate purposes, including
possible acquisitions.
Nasdaq National Market Symbol............................. PRXL
<FN>
- ---------------
(1) Based on shares outstanding as of October 15, 1996. Excludes 776,710
additional shares of Common Stock issuable upon exercise of stock options
at a weighted average exercise price per share of $23.74. See
"Capitalization" and Note 11 of Notes to Consolidated Financial Statements
of the Company.
</TABLE>
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4
<PAGE> 6
- --------------------------------------------------------------------------------
<TABLE>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<CAPTION>
THREE MONTHS
ENDED
FOR THE YEAR ENDED JUNE 30, SEPTEMBER 30,
----------------------------------------------- -----------------
1992 1993 1994 1995 1996 1995 1996
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenue........................................... $45,407 $54,000 $58,002 $58,573 $88,006 $17,973 $33,030
------- ------- ------- ------- ------- ------- -------
Costs and expenses:
Direct costs........................................ 29,772 36,106 38,244 42,140 60,141 12,465 22,821
Selling, general and administrative................. 10,164 11,831 13,631 13,294 19,027 3,834 6,617
Depreciation and amortization....................... 2,299 2,511 2,435 2,251 2,343 515 883
Facility and other restructuring charges............ -- 3,254(1) -- -- -- -- --
Impairment of long-lived assets..................... -- -- -- 11,253(2) -- -- --
------- ------- ------- ------- ------- ------- -------
Total costs and expenses...................... 42,235 53,702 54,310 68,938 81,511 16,814 30,321
------- ------- ------- ------- ------- ------- -------
Income (loss) from operations......................... 3,172 298 3,692 (10,365) 6,495 1,159 2,709
Other income (expense), net........................... 138 (520) (196) 55 1,157 98 364
------- ------- ------- ------- ------- ------- -------
Income (loss) before provision for income taxes and
cumulative effect of accounting change.............. 3,310 (222) 3,496 (10,310) 7,652 1,257 3,073
======= ======= ======= ======= ======= ======= =======
Net income (loss)..................................... 1,536 (2,157) 2,423 (10,630) 4,599 742 1,936
======= ======= ======= ======= ======= ======= =======
Net income (loss) per share........................... $ 0.33 $ (2.97) $ 0.44 $(12.61) $ 0.68 $ 0.14 $ 0.22
======= ======= ======= ======= ======= ======= =======
PRO FORMA DATA:
Income from operations (3)............................ $ 3,172 $ 3,552 $ 3,692 $ 888 $ 6,495 $ 1,159 $ 2,709
<CAPTION>
SEPTEMBER 30, 1996
---------------------------
ACTUAL AS ADJUSTED(4)
-------- --------------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital.................................................. $ 54,416 $111,010
Total assets..................................................... 107,670 164,264
Long-term debt, less current maturities.......................... 304 304
Stockholders' equity............................................. 66,372 122,966
<FN>
- ---------------
(1) Represents a charge incurred in connection with a restructuring of
operations in Germany because of a decline in net revenue from those
operations. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and Note 3 of Notes to Consolidated Financial
Statements of the Company.
(2) Represents a non-cash charge primarily due to the write-down of intangible
assets of the Company's German operations. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and Note 3 of
Notes to Consolidated Financial Statements of the Company.
(3) Excludes facility and other restructuring charges incurred in fiscal 1993
and the impairment loss from the write-down of long-lived assets incurred in
fiscal 1995.
(4) Adjusted to give effect to the sale of 1,066,900 shares of Common Stock by
the Company in this offering at an assumed public offering price of $56.00
per share, after deducting the estimated underwriting discount and estimated
offering expenses. See "Use of Proceeds," "Capitalization" and Note 10 of
Notes to Consolidated Financial Statements of the Company.
</TABLE>
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5
<PAGE> 7
RISK FACTORS
In addition to the other information in this Prospectus, the following risk
factors should be considered carefully in evaluating the Company and its
business before purchasing the shares of Common Stock offered hereby.
LOSS OR DELAY OF LARGE CONTRACTS
Most of the Company's contracts are terminable upon 60 to 90 days' notice
by the client. Clients terminate or delay contracts for a variety of reasons,
including, among others, the failure of products being tested to satisfy safety
requirements, unexpected or undesired clinical results of the product, the
client's decision to forego a particular study, insufficient patient enrollment
or investigator recruitment or production problems resulting in shortages of the
drug. In addition, the Company believes that several factors, including the
potential adverse impact of health care reform, have caused pharmaceutical
companies to apply more stringent criteria to the decision to proceed with
clinical trials and therefore may result in a greater willingness of these
companies to cancel contracts with CROs. The loss or delay of a large contract
or the loss or delay of multiple contracts could have a material adverse effect
on the financial performance of the Company. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
VARIABILITY OF QUARTERLY OPERATING RESULTS
The Company's quarterly operating results have been subject to variation,
and will continue to be subject to variation, depending upon factors such as the
initiation and progress of significant projects, exchange rate fluctuations, the
mix of services offered, the opening of new offices, the costs associated with
integrating acquisitions and the startup costs incurred in connection with the
introduction of new products and services. In addition, during the third quarter
of fiscal 1993 and 1995, the Company's results of operations were affected by a
non-cash restructuring charge and a non-cash write-down due to the impairment of
long-lived assets, respectively. See "Risks Associated with Acquisitions."
Because a high percentage of the Company's operating costs are relatively fixed,
variations in the initiation, completion, delay or loss of contracts, or in the
progress of clinical trials can cause material adverse variations in quarterly
operating results. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Quarterly Results."
DEPENDENCE ON CERTAIN INDUSTRIES AND CLIENTS
The Company's revenues are highly dependent on research and development
expenditures by the pharmaceutical and biotechnology industries. The Company's
operations could be materially and adversely affected by general economic
downturns in its clients' industries, the impact of the current trend toward
consolidation in these industries or any decrease in research and development
expenditures. Furthermore, the Company has benefited to date from the increasing
tendency of pharmaceutical and biotechnology companies to outsource large
clinical research projects. A reversal or slowing of this trend would have a
material adverse effect on the Company.
The Company believes that concentrations of business in the CRO industry
are not uncommon. The Company has experienced such concentration in the past and
may experience such concentration in future years. No client accounted for 10%
or more of consolidated net revenue in fiscal 1994, 1995 or 1996. In fiscal
1994, 1995 and 1996, the Company's top five clients accounted for 29.8%, 25.2%
and 32.0%, respectively, of the Company's consolidated net revenue. The loss of
business from a significant client could have a material adverse effect on the
Company. See "Business -- Industry Overview" and "-- Clients and Marketing."
DEPENDENCE ON GOVERNMENT REGULATION
The Company's business depends on the comprehensive government regulation
of the drug development process. In the United States, the general trend has
been in the direction of continued or increased regulation, although the FDA
recently announced regulatory changes intended to streamline the approval
process for biotechnology products by applying the same standards as are in
effect for conventional drugs. In Europe, the general trend has been toward
coordination of common standards for clinical testing of new drugs, leading to
changes in the various requirements currently imposed by each country. Changes
in regulation, including a
6
<PAGE> 8
relaxation in regulatory requirements or the introduction of simplified drug
approval procedures, as well as anticipated regulation, could materially and
adversely affect the demand for the services offered by the Company. In
addition, failure on the part of the Company to comply with applicable
regulations could result in the termination of ongoing research or the
disqualification of data, either of which could have a material adverse effect
on the Company. See "Business -- Industry Overview" and "-- Government
Regulation."
POTENTIAL ADVERSE IMPACT OF HEALTH CARE REFORM
Numerous governments have periodically undertaken efforts to control
growing health care costs through legislation, regulation and voluntary
agreements with medical care providers and pharmaceutical companies. In the last
several years, several comprehensive health care reform proposals were
introduced in the U.S. Congress. The intent of the proposals was, generally, to
expand health care coverage for the uninsured and reduce the growth of total
health care expenditures. While none of the proposals was adopted, health care
reform may again be addressed by the U.S. Congress. Implementation of government
health care reform may adversely affect research and development expenditures by
pharmaceutical and biotechnology companies, resulting in a decrease of the
business opportunities available to the Company. Management is unable to predict
the likelihood of health care reform proposals being enacted into law or the
effect such law would have on the Company. See "Business -- Industry Overview."
Many European governments have also reviewed or undertaken health care
reform. For example, German health care reform legislation (the "Seehofer
Gesetz"), which was implemented on January 1, 1993, contributed to an estimated
15% decline in German pharmaceutical industry sales in calendar 1993 and led
several clients to cancel contracts with the Company. Subsequent to these
events, in the third quarter of fiscal 1993, the Company restructured its German
operations and incurred a restructuring charge of approximately $3.3 million. In
addition, in the third quarter of fiscal 1995, the Company's results of
operations were affected by a non-cash write-down due to the impairment of
long-lived assets of PAREXEL GmbH, the Company's German subsidiary, of
approximately $11.3 million. The Company cannot predict the impact that any
pending or future health care reform proposals may have on the Company's
business in Europe. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
COMPETITION; CRO INDUSTRY CONSOLIDATION
The Company primarily competes against in-house departments of
pharmaceutical companies, full service CROs and, to a lesser extent,
universities and teaching hospitals. Some of these competitors have
substantially greater capital, technical and other resources than the Company.
CROs generally compete on the basis of previous experience, medical and
scientific expertise in specific therapeutic areas, the quality of contract
research, the ability to organize and manage large-scale trials on a global
basis, the ability to manage large and complex medical databases, the ability to
provide statistical and regulatory services, the ability to recruit
investigators, the ability to integrate information technology with systems to
improve the efficiency of contract research, an international presence with
strategically located facilities, financial viability and price. There can be no
assurance that the Company will be able to compete favorably in these areas. See
"Business -- Competition."
The CRO industry is highly fragmented, with participants ranging from
several hundred small, limited-service providers to several large, full-service
CROs with global operations. The trend toward CRO industry consolidation has
resulted in heightened competition among the larger CROs for clients and
acquisition candidates. In addition, consolidation within the pharmaceutical
industry as well as a trend by pharmaceutical companies of outsourcing among
fewer CROs has led to heightened competition for CRO contracts.
MANAGEMENT OF BUSINESS EXPANSION; NEED FOR IMPROVED SYSTEMS; ASSIMILATION OF
FOREIGN OPERATIONS
The Company's business and operations have experienced substantial
expansion over the past 10 years. The Company believes that such expansion
places a strain on operational, human and financial resources. In order to
manage such expansion, the Company must continue to improve its operating,
administrative and information systems, accurately predict its future personnel
and resource needs to meet client contract commitments, track the progress of
ongoing client projects and attract and retain qualified management,
professional, scientific and technical operating personnel. Expansion of foreign
operations also may involve the additional risks of assimilating differences in
foreign business practices, hiring and retaining qualified
7
<PAGE> 9
personnel, and overcoming language barriers. In the event that the operation of
an acquired business does not live up to expectations, the Company may be
required to restructure the acquired business or write-off the value of some or
all of the assets of the acquired business. In fiscal 1993 and 1995, the
Company's results of operations were materially and adversely affected by
write-offs associated with the Company's acquired German operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Global Operations." Failure by the Company to meet the demands of
and to manage expansion of its business and operations could have a material
adverse effect on the Company's business.
RISKS ASSOCIATED WITH ACQUISITIONS
The Company has made a number of acquisitions, including four since June 1,
1996, and will continue to review future acquisition opportunities. No
assurances can be given that acquisition candidates will continue to be
available on terms and conditions acceptable to the Company. Acquisitions
involve numerous risks, including, among other things, difficulties and expenses
incurred in connection with the acquisitions and the subsequent assimilation of
the operations and services or products of the acquired companies, the
difficulty of operating new (albeit related) businesses, the diversion of
management's attention from other business concerns and the potential loss of
key employees of the acquired company. Acquisitions of foreign companies also
may involve the additional risks of assimilating differences in foreign business
practices and overcoming language barriers. In the event that the operations of
an acquired business do not live up to expectations, the Company may be required
to restructure the acquired business or write-off the value of some or all of
the assets of the acquired business. In fiscal 1993 and 1995, the Company's
results of operations were materially and adversely affected by write-offs
associated with the Company's acquired German operations. There can be no
assurance that any acquisition will be successfully integrated into the
Company's operations. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
DEPENDENCE ON PERSONNEL
The Company relies on a number of key executives, including Josef H. von
Rickenbach, its President, Chief Executive Officer and Chairman, upon whom the
Company maintains key man life insurance. Although the Company has entered into
agreements containing non-competition restrictions with its senior officers, the
Company does not have employment agreements with most of these persons and the
loss of the services of any of the Company's key executives could have a
material adverse effect on the Company. The Company's performance also depends
on its ability to attract and retain qualified professional, scientific and
technical operating staff. The level of competition among employers for skilled
personnel, particularly those with M.D., Ph.D. or equivalent degrees, is high.
There can be no assurance the Company will be able to continue to attract and
retain qualified staff. In addition, the cost of recruiting skilled personnel
has increased and there can be no assurance that such costs will not continue to
rise. See "Business -- Employees."
POTENTIAL LIABILITY; POSSIBLE INSUFFICIENCY OF INSURANCE
Clinical research services involve the testing of new drugs on human
volunteers pursuant to a study protocol. Such testing involves a risk of
liability for personal injury or death to patients due to, among other reasons,
possible unforeseen adverse side effects or improper administration of the new
drug. Many of these patients are already seriously ill and are at risk of
further illness or death. The Company could be materially and adversely affected
if it were required to pay damages or incur defense costs in connection with a
claim that is outside the scope of an indemnity or insurance coverage, or if the
indemnity, although applicable, is not performed in accordance with its terms or
if the Company's liability exceeds the amount of applicable insurance. In
addition, there can be no assurance that such insurance will continue to be
available on terms acceptable to the Company. See "Business -- Potential
Liability and Insurance."
ADVERSE EFFECT OF EXCHANGE RATE FLUCTUATIONS
Approximately 36.0%, 40.2%, 38.4% and 33.8% of the Company's net revenue
for fiscal 1994, 1995 and 1996 and the three months ended September 30, 1996,
respectively, were derived from the Company's operations outside of North
America. Since the revenue and expenses of the Company's foreign operations are
generally denominated in local currencies, exchange rate fluctuations between
local currencies and the United States dollar will subject the Company to
currency translation risk with respect to the results of its foreign operations.
To the extent the Company is unable to shift to its clients the effects of
currency fluctuations, these
8
<PAGE> 10
fluctuations could have a material adverse effect on the Company's results of
operations. The Company does not currently hedge against the risk of exchange
rate fluctuations.
VOLATILITY OF STOCK PRICE
The market price of the Company's Common Stock is subject to wide
fluctuations in response to quarter-to-quarter variations in operating results,
changes in earnings estimates by analysts, market conditions in the industry,
prospects of health care reform, changes in government regulation and general
economic conditions. In addition, the stock market has from time to time
experienced significant price and volume fluctuations that have been unrelated
to the operating performance of particular companies. These market fluctuations
may adversely affect the market price of the Company's Common Stock. Because the
Company's Common Stock currently trades at a relatively high price-earnings
multiple, due in part to analysts' expectations of continued earnings growth,
even a relatively small shortfall in earnings from, or a change in, analysts'
expectations may cause an immediate and substantial decline in the Company's
stock price. Investors in the Company's Common Stock must be willing to bear the
risk of such fluctuations in earnings and stock price.
ANTI-TAKEOVER PROVISIONS; POSSIBLE ISSUANCE OF PREFERRED STOCK
The Company's Restated Articles of Organization and Restated By-Laws
contain provisions that may make it more difficult for a third party to acquire,
or may discourage a third party from acquiring, the Company. These provisions
could limit the price that certain investors might be willing to pay in the
future for shares of the Company's Common Stock. In addition, shares of the
Company's Preferred Stock may be issued in the future without further
stockholder approval and upon such terms and conditions, and having such rights,
privileges and preferences, as the Board of Directors may determine. The rights
of the holders of Common Stock will be subject to, and may be adversely affected
by, the rights of any holders of Preferred Stock that may be issued in the
future. The issuance of Preferred Stock, while providing desirable flexibility
in connection with possible acquisitions and other corporate purposes, could
adversely affect the market price of the Common Stock and could have the effect
of making it more difficult for a third party to acquire, or discouraging a
third party from acquiring, a majority of the outstanding voting stock of the
Company. The Company has no present plans to issue any shares of Preferred
Stock. See "Description of Capital Stock."
9
<PAGE> 11
THE COMPANY
The Company was incorporated in The Commonwealth of Massachusetts in 1983.
Unless the context otherwise requires, the terms "PAREXEL" and "the Company"
refer to PAREXEL International Corporation and its subsidiaries. The Company's
principal executive offices are located at 195 West Street, Waltham,
Massachusetts 02154, and its telephone number is (617) 487-9900.
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 1,066,900 shares of
Common Stock offered by the Company hereby are estimated to be $56.6 million
($66.8 million if the Underwriters' over-allotment option is exercised in full)
at an assumed public offering price of $56.00 per share and after deducting the
estimated underwriting discounts and estimated offering expenses. The Company
will not receive any proceeds from the sale of Common Stock by the Selling
Stockholders.
To further the Company's strategy of providing a full range of drug
development services on a global basis, the Company intends to use the net
proceeds of this offering approximately as follows: $35.0 million to $45.0
million to expand services or enhance therapeutic expertise through internal
growth and acquisitions and geographic expansion, $10.0 million to $15.0 million
for capital expenditures, primarily for information technology, expansion of
existing facilities or the opening or acquisition of new facilities, and the
remainder for working capital and other general corporate purposes. The Company
may vary the use of proceeds among the categories listed above because the
Company's ability to use the proceeds in the approximate amounts listed is
dependent on a number of factors including its ability to locate and retain
qualified staff in the areas of its planned geographic and specialty expansion,
its ability to locate and acquire attractive acquisition candidates, and the
patterns of market demand for its services. Pending such uses, the Company
intends to invest the net proceeds from this offering in investment grade,
interest-bearing securities.
As part of its business strategy, the Company regularly reviews acquisition
candidates in the ordinary course of business and, in addition to acquisitions
already made, the Company continually is evaluating new acquisition
opportunities. No binding agreements or firm commitments currently exist to make
any acquisition, and no portion of the net proceeds has been allocated for any
specific acquisition.
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
<TABLE>
The Company's Common Stock is quoted on the Nasdaq National Market under
the symbol "PRXL." Public trading of the Common Stock commenced on November 22,
1995. Prior to that time, there was no public market for the Company's Common
Stock. The following table sets forth the high and low sale prices for the
Common Stock as reported by Nasdaq for the periods indicated:
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
FISCAL YEAR ENDED JUNE 30, 1996:
Second quarter (from November 22, 1995).................... $36 $18 3/4
Third quarter.............................................. 44 1/2 26
Fourth quarter............................................. 55 3/4 37 1/2
FISCAL YEAR ENDED JUNE 30, 1997:
First quarter.............................................. $63 $31
Second quarter (through October 21, 1996).................. 63 3/4 55 3/4
</TABLE>
On October 21, 1996, the last reported sale price of the Common Stock on
the Nasdaq National Market, was $56.00 per share. As of October 15, 1996, there
were approximately 64 stockholders of record of the Common Stock. The Company
believes that most of its stock (other than shares held by its officers and
directors) is held in street names through one or more nominees.
In November 1995, in connection with its initial public offering, the
Company paid a cash dividend of approximately $940,000 on certain series of its
Preferred Stock, which were subsequently converted into Common Stock. The
Company has never paid or declared any dividends on its Common Stock and does
not anticipate paying any cash dividends in the foreseeable future. The Company
currently intends to retain future earnings to fund the development and growth
of its business.
10
<PAGE> 12
CAPITALIZATION
<TABLE>
The following table sets forth the actual and as adjusted capitalization of
the Company as of September 30, 1996. The as adjusted column sets forth the
actual capitalization as of September 30, 1996, as adjusted to give effect to
the sale of 1,066,900 shares of Common Stock by the Company pursuant to this
offering at an assumed initial public offering price of $56.00 per share and the
application of the net proceeds therefrom. See "Use of Proceeds" and
"Description of Capital Stock." This table should be read in conjuction with the
Company's Consolidated Financial Statements and the Notes thereto included
elsewhere in this Prospectus.
<CAPTION>
SEPTEMBER 30, 1996
------------------------
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS)
<S> <C> <C>
Long-term debt, excluding current maturities.................. $ 304 $ 304
------- --------
Stockholders' equity:
Preferred stock, $.01 par value, 5,000,000 shares
authorized,
no shares outstanding actual or as adjusted.............. -- --
Common stock, $.01 par value, 25,000,000 shares authorized,
8,448,968 shares outstanding actual, 9,515,868 shares
outstanding as adjusted(1)............................... 84 95
Additional paid-in capital.................................. 68,510 125,093
Accumulated deficit......................................... (2,209) (2,209)
Cumulative translation adjustment........................... (13) (13)
------ --------
Total stockholders' equity.......................... 66,372 122,966
------- --------
Total capitalization................................ $66,676 $123,270
======= ========
<FN>
- ---------------
(1) Outstanding shares excludes 776,710 shares of Common Stock issuable as of
September 30, 1996 upon exercise of stock options at a weighted average
exercise price per share of $23.74. See "Management -- Options" and Note 11
of Notes to Consolidated Financial Statements of the Company. On September
19, 1996, the Board of Directors of the Company voted, subject to the
approval of the Stockholders of the Company at the 1996 Annual Meeting of
Stockholders to be held November 14, 1996, to increase the authorized
Common Stock to 50,000,000 shares.
</TABLE>
11
<PAGE> 13
SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
The selected consolidated financial data set forth below at and for each of
the years in the five-year period ended June 30, 1996 are derived from financial
statements that have been audited by Price Waterhouse LLP, independent
accountants. The audited balance sheet at June 30, 1995 and 1996 and the related
statements of operations, of stockholders' equity, and of cash flows for each of
the three years in the period ended June 30, 1996 and related notes thereto
appear elsewhere in this Prospectus. The balance sheet data at September 30,
1995 and 1996 and the statement of operations data for the three months ended
September 30, 1995 and 1996 are derived from unaudited financial statements. The
unaudited financial statements include all adjustments, consisting only of
normal recurring adjustments, that the Company considers necessary for a fair
presentation of the financial position and results of operations for these
periods. Operating results for the three months ended September 30, 1996 are not
necessarily indicative of the results that may be expected for the fiscal year
ended June 30, 1997. The data set forth below should be read in conjunction
with, and are qualified by reference to, "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and the Company's financial
statements and related notes included elsewhere in this Prospectus.
<CAPTION>
THREE MONTHS
ENDED
FOR THE YEAR ENDED JUNE 30, SEPTEMBER 30,
--------------------------------------------------- -------------------
1992 1993 1994 1995 1996 1995 1996
------- -------- -------- -------- -------- ------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue.............................................. $53,292 $ 65,294 $ 69,646 $ 79,928 $121,869 $24,369 $ 43,152
Reimbursed costs..................................... (7,885) (11,294) (11,644) (21,355) (33,863) (6,396) (10,122)
------- -------- -------- -------- -------- ------- --------
Net revenue.......................................... 45,407 54,000 58,002 58,573 88,006 17,973 33,030
------- -------- -------- -------- -------- ------- --------
Costs and expenses:
Direct costs....................................... 29,772 36,106 38,244 42,140 60,141 12,465 22,821
Selling, general and administrative................ 10,164 11,831 13,631 13,294 19,027 3,834 6,617
Depreciation and amortization...................... 2,299 2,511 2,435 2,251 2,343 515 883
Facility and other restructuring charges........... -- 3,254(1) -- -- -- -- --
Impairment of long-lived assets.................... -- -- -- 11,253(2) -- -- --
------- -------- -------- -------- -------- ------- --------
Total costs and expenses..................... 42,235 53,702 54,310 68,938 81,511 16,814 30,321
------- -------- -------- -------- -------- ------- --------
Income (loss) from operations........................ 3,172 298 3,692 (10,365) 6,495 1,159 2,709
Other income (expense), net.......................... 138 (520) (196) 55 1,157 98 364
------- -------- -------- -------- -------- ------- --------
Income (loss) before provision for income taxes and
cumulative effect of accounting change............. 3,310 (222) 3,496 (10,310) 7,652 1,257 3,073
Provision for income taxes........................... 1,774 1,935 1,573 320 3,053 515 1,137
------- -------- -------- -------- -------- ------- --------
Net income (loss) before cumulative effect of
accounting change.................................. 1,536 (2,157) 1,923 (10,630) 4,599 742 1,936
Cumulative effect of change in method of accounting
for income taxes................................... -- -- 500 -- -- -- --
------- -------- -------- -------- -------- ------- --------
Net income (loss).................................... $ 1,536 $ (2,157) $ 2,423 $(10,630) $ 4,599 $ 742 $ 1,936
======= ======== ======== ======== ======== ======= ========
Net income (loss) per share.......................... $ 0.33 $ (2.97) $ 0.44 $ (12.61) $ 0.68 $ 0.14 $ 0.22
======= ======== ======== ======== ======== ======= ========
Weighted average common shares
outstanding........................................ 5,236 727(3) 5,747 843(3) 6,780 5,734 8,628
======= ======== ======== ======== ======== ======= ========
BALANCE SHEET DATA (AT PERIOD END):
Working capital...................................... $ 5,884 $ 7,161 $ 10,885 $ 11,574 $ 53,428 $12,144 $ 54,416
Total assets......................................... 44,390 45,457 45,936 43,250 102,401 45,961 107,670
Long-term debt, less current maturities.............. 790 222 391 633 360 719 304
Stockholders' equity................................. 21,807 21,847 25,236 15,524 61,212 16,119 66,372
<FN>
- ---------------
(1) Represents a charge incurred in connection with a restructuring of
operations in Germany because of a decline in revenues from those
operations. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and Note 3 of Notes to Consolidated Financial
Statements of the Company.
(2) Represents a non-cash charge primarily due to the write-down of intangible
assets of the Company's German operations. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and Note 3 of
Notes to Consolidated Financial Statements of the Company.
(3) For the years ended June 30, 1993 and 1995, weighted average common shares
outstanding exclude common share equivalents (primarily convertible
preferred stock), the inclusion of which would have been anti-dilutive. See
Note 2 of Notes to Consolidated Financial Statements of the Company.
</TABLE>
12
<PAGE> 14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company provides a full spectrum of clinical research and development
services on a contract basis to the pharmaceutical and biotechnology industries.
These services are provided to clients on a global basis and include: (i)
designing, initiating and monitoring clinical trials; (ii) managing and
analyzing clinical data; and (iii) industry consulting services including
regulatory affairs, medical writing, performance improvement, training and
health economics.
The Company, founded in 1983 as a regulatory consulting firm, has built its
business both through internal expansion and acquisitions. In 1988, the Company
acquired Consulting Statisticians, Inc., a biostatistics and data management
provider specializing in the healthcare industry. In 1989, the Company initiated
its international expansion by acquiring the London-based McDonnell Douglas
Clinical Trials Analysis Division, a division of McDonnell Douglas Informations
Systems Ltd., which provided biostatistics and data management services in
Europe. In 1990, PAREXEL acquired Barnett Associates, Inc. to expand the
Company's Information Products Division, which offers a range of specialized
clinical consulting and training services and related products. In 1991, the
Company acquired AFB Arzneimittelforschung GmbH in Berlin, a European CRO based
in Berlin with offices in Frankfurt and Paris. The Company is headquartered in
Waltham, Massachusetts, and opened offices in San Diego in 1990; Raleigh-Durham
in 1994; Milan, Italy; Kobe, Japan; and Sydney, Australia in 1995; and Madrid,
Spain; and Chicago in 1996.
In June 1996, the Company acquired Caspard Consultants, a Paris-based CRO,
and in August 1996 acquired Lansal Clinical Pharmaceutics Limited, a CRO based
in Israel. These acquisitions augment the Company's existing clinical operations
and are in line with management's focused international expansion efforts. In
June 1996, the Company acquired Sitebase Clinical Systems, Inc., a provider of
remote data entry ("RDE") technology. This acquisition positions the Company as
a provider of RDE technology which is expected to enhance the quality and
timeliness of clinical trial data. In August 1996, the Company also acquired
State and Federal Associates, Inc. (S&FA), a Washington D.C.-based provider of
consulting services to the healthcare and pharmaceutical industries. The
acquisition broadens the Company's portfolio of consulting services,
specifically in the area of health economics. These acquisitions are each being
accounted for as poolings of interest. The aggregate historical financial
results of the acquired companies are not material to the Company's financial
position and results of operations. Therefore, prior periods have not been
restated and results of operations have been included since the date of
acquisition. See Note 4 of Notes to Consolidated Financial Statements of the
Company.
The Company's clinical research and development services contracts are
generally fixed price, with some variable components, and range in duration from
a few months to several years. A portion of the fee is typically required to be
paid at the time the contract is entered into and the balance in installments
over the contract's duration, in some cases on a milestone achievement basis.
Revenue from the contracts is generally recognized on a percentage of completion
basis as work is performed. Most of the Company's contracts are terminable upon
60 to 90 days' notice by the client. Clients terminate or delay contracts for a
variety of reasons, including, among others, the failure of products being
tested to satisfy safety requirements, unexpected or undesired clinical results
of the product, the client's decision to forego a particular study, insufficient
patient enrollment or investigator recruitment or production problems resulting
in shortages of the drug. Although the Company typically is entitled to receive
certain fees for winding down a study which is terminated or delayed and, in
some cases, a termination fee, the loss or delay of a large contract or the loss
or delay of multiple contracts could have a material adverse effect on the
Company. The Company believes that several factors, including the potential
adverse impact of health care reform, have caused pharmaceutical companies to
apply more stringent criteria to the decision to proceed with clinical trials
and therefore may have resulted in a greater willingness of these companies to
cancel contracts with CROs. As is customary in the industry, the Company
routinely subcontracts with third party investigators in connection with
clinical trials and with other third party service providers for laboratory
analysis and other specialized services. These and other reimbursable costs are
paid by the Company and reimbursed by clients and, in accordance with industry
practice, are included in
13
<PAGE> 15
revenue. Reimbursed costs vary from contract to contract. Accordingly, the
Company views net revenue, which consists of revenue less reimbursed costs, as
its primary measure of revenue growth.
Direct costs consist of compensation and related fringe benefits for
project-related employees, recruiting-related expenses for project-related
employees, other project-related costs not reimbursed and allocated facilities
and information systems costs. Selling, general and administrative expenses
consist of compensation and related fringe benefits for selling and
administrative employees, professional services and advertising costs, as well
as allocated costs related to facilities and information systems.
A key component of the Company's strategy is its investment in technology,
both client-oriented and internal management-oriented. These systems provide
increased standardization of operating processes and contract management
throughout the Company's worldwide operations. Integral to the system are: (i)
periodic monitoring and reviewing of contract progress; (ii) increased
visibility and periodic reviewing of hourly billing by employees and utilization
of project resources resulting in more efficient resource deployment; (iii)
integrated revenue recognition and billing subsystems; (iv) proposal and budget
generation; (v) management of clinical data; and (vi) forecasting of project
revenues and resource requirements.
GLOBAL OPERATIONS
<TABLE>
The following table sets forth, for the periods indicated, net revenue by
geographic region as well as the percentage of total net revenue represented by
such region.
<CAPTION>
FOR THE YEAR ENDED JUNE 30, THREE MONTHS ENDED SEPTEMBER 30,
------------------------------------------------------------- ----------------------------------------
1994 % OF TOTAL 1995 % OF TOTAL 1996 % OF TOTAL 1995 % OF TOTAL 1996 % OF TOTAL
------- ---------- ------- ---------- ------- ---------- ------- ---------- ------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenue:
North America.......... $37,111 64.0% $35,037 59.8% $54,179 61.6% $11,003 61.2% $21,864 66.2%
Europe................. 20,891 36.0 23,443 40.0 32,834 37.3 6,833 38.0 10,719 32.5
Asia-Pacific........... -- -- 93 0.2 993 1.1 137 0.8 447 1.3
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Total............ $58,002 100.0% $58,573 100.0% $88,006 100.0% $17,973 100.0% $33,030 100.0%
======= ===== ======= ===== ======= ===== ======= ===== ======= =====
</TABLE>
The Company's foreign subsidiaries generally enter into contracts
denominated in the local currency of the foreign subsidiary. Because the foreign
subsidiary's expenses are generally paid in the local currency, such foreign
subsidiaries' local currency earnings are not materially affected by
fluctuations in exchange rates. However, changes in the exchange rates between
these local currencies and the U.S. dollar will affect the translation of such
subsidiaries' financial results into U.S. dollars for purposes of reporting the
Company's consolidated financial results. In cases where the Company contracts
for a multi-country clinical trial and a significant portion of the contract
expenses are in a currency other than the contract currency, the Company seeks
to contractually shift to its client the effect of fluctuations in the relative
values of the contract currency and the currency in which the expenses are
incurred. To the extent the Company is unable to shift to its clients the
effects of currency fluctuations, these fluctuations could have a material
effect on the Company's results of operations. The Company does not currently
hedge against the risk of exchange rate fluctuations.
As the Company conducts operations on a global basis, the Company's
effective tax rate has depended and will depend on the geographic distribution
of its revenue among locations with varying tax rates. The Company's results of
operations will be affected by changes in the tax rates of the various
jurisdictions. In particular, as the geographic mix of the Company's results of
operations among various tax jurisdictions changes the Company's effective tax
rate may vary significantly from period to period.
Impact of German Operations
The Company's operations from fiscal 1993 through fiscal 1995 were
adversely affected by its German operations. In the wake of uncertainty caused
by German health care reform in 1993, the Company's German operations
experienced a sudden decline in demand for services and an associated decline in
net revenue. In response to this revenue decline, the Company consolidated
certain facilities and reduced personnel costs in Germany and, as a result,
incurred a $3.3 million restructuring charge in the quarter ending March 31,
1993,
14
<PAGE> 16
consisting of $2.4 million, $600,000 and $300,000 for facilities, wages and
severance and other operating costs, respectively. As a result of the
restructuring, the Company reduced annual facility, personnel and other
operating costs by an estimated $1.0 million, $1.0 million and $150,000
respectively.
While the fiscal 1993 restructuring temporarily improved operating margins
in fiscal 1994, changes in drug development regulations in Germany and Europe
significantly impacted revenues in fiscal 1995. As a result of this development,
and in light of past history of poor operating performance, the Company
reassessed the recoverability of long-lived assets acquired in the 1991
acquisition of PAREXEL GmbH. As a result of this reassessment, the Company
recorded an $11.3 million non-cash charge reflecting the excess of book value of
PAREXEL GmbH over the fair value. Of the $11.3 million charge, $9.9 million
consisted of goodwill and other intangible assets. See Note 3 of Notes to
Consolidated Financial Statements of the Company.
RESULTS OF OPERATIONS
<TABLE>
The following table sets forth for the periods indicated certain financial
data as a percentage of net revenue and the percentage change in these items
compared to the prior comparable period. The trends illustrated in the following
table may not be indicative of future results.
<CAPTION> PERCENTAGE INCREASE
PERCENTAGE OF NET REVENUE (DECREASE)
----------------------------------------------- ------------------------------
THREE MONTHS
FISCAL YEAR ENDED FISCAL FISCAL THREE
ENDED JUNE 30, SEPTEMBER 30, 1994 1995 MONTHS
--------------------------- ---------------- TO TO 1995 TO
1994 1995 1996 1995 1996 1995 1996 1996
------- ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenue...................... 100.0% 100.0% 100.0% 100.0% 100.0% 1.0% 50.3% 83.8%
Costs and expenses:
Direct costs................... 65.9 71.9 68.3 69.4 69.1 10.2 42.7 83.1
Selling, general and
administrative............... 23.5 22.7 21.6 21.3 20.0 (2.5) 43.1 72.6
Depreciation and
amortization................. 4.2 3.9 2.7 2.9 2.7 (7.6) 4.1 71.5
Impairment of long-lived
assets....................... -- 19.2 -- -- -- * * --
----- ----- ----- ----- ----- ---- ---- -----
Income (loss) from
operations..................... 6.4% (17.7)% 7.4% 6.4% 8.2% * * 133.7%
===== ===== ===== ===== ===== ==== ==== =====
<FN>
- ---------------
* not meaningful
</TABLE>
Three Months Ended September 30, 1996 Compared to Three Months Ended September
30, 1995
Net revenue increased by $15.1 million, or 83.8%, from $18.0 million for
the three months ended September 30, 1995 to $33.0 million for the three months
ended September 30, 1996. This net revenue growth was primarily attributable to
an increase in the volume of clinical research projects serviced by the Company,
particularly in the areas of data management and biostatistical analysis and, to
a lesser extent, clinical monitoring services.
Direct costs increased by $10.4 million, or 83.1%, from $12.5 million for
the three months ended September 30, 1995 to $22.8 million for the three months
ended September 30, 1996. This increase in direct costs was due to the increase
in the number of project-related personnel, hiring, facilities and information
system costs necessary to support the increased level of operations. Direct
costs as a percentage of net revenue decreased slightly from 69.4% for the three
months ended September 30, 1995 to 69.1% for the three months ended September
30, 1996.
Selling, general and administrative expenses increased by $2.8 million, or
72.6%, from $3.8 million for the three months ended September 30, 1995 to $6.6
million for the three months ended September 30, 1996. This increase was
primarily due to increased administrative personnel, hiring and facilities
costs, in line with management's objective of increasing infrastructure to
accommodate the Company's growth. Selling, general and administrative expenses
as a percentage of net revenue decreased from 21.3% for the three months ended
15
<PAGE> 17
September 30, 1995 to 20.0% for the three months ended September 30, 1996
primarily due to leveraging of infrastructure over an expanding revenue base.
Depreciation and amortization expense increased by $368,000, or 71.5%, from
$515,000 for the three months ended September 30, 1995 to $883,000 for the three
months ended September 30, 1996. The increase is primarily due to increased
capital spending on computer equipment to support the increase in project
related personnel.
Income from operations for the three months ended September 30, 1996
increased by $1.6 million, or 133.7%, from $1.2 million for the three months
ended September 30, 1995 to $2.7 million for the three months ended September
30, 1996.
Interest income increased by $343,000 from $90,000 for the three months
ended September 30, 1995 to $433,000 for the three months ended September 30,
1996. This increase resulted from higher average balances of cash, cash
equivalents and marketable securities due primarily to proceeds from the
Company's public offerings in fiscal 1996.
The Company's effective income tax rate was 37.0% for the three months
ended September 30, 1996, compared to 41.0% for the three months ended September
30, 1995. The effective income tax rate varies with changes in the mix of
taxable income from the different jurisdictions in which the Company operates.
Fiscal Year Ended June 30, 1996 Compared to Fiscal Year Ended June 30, 1995
Net revenue increased by $29.4 million, or 50.3%, from $58.6 million for
fiscal 1995 to $88.0 million for fiscal 1996. This net revenue growth was
primarily attributable to an increase in the number and average contract value
of clinical research projects serviced by the Company, many of which have a
multi-national scope.
Direct costs increased by $18.0 million, or 42.7%, from $42.1 million for
fiscal 1995 to $60.1 million for fiscal 1996. This increase in direct costs was
due to the increase in the number of project-related personnel, facilities, and
information system costs necessary to support the increased level of operations.
Direct costs as a percentage of net revenue decreased from 71.9% for fiscal 1995
to 68.3% for fiscal 1996, primarily due to improved workforce and facility
utilization.
Selling, general and administrative expenses increased by $5.7 million, or
43.1%, from $13.3 million for fiscal 1995 to $19.0 million for fiscal 1996. This
increase was primarily due to increased costs associated with additional
administrative personnel, greater hiring and selling costs, and additional
facilities to support the Company's growth and operation as a publicly held
company. Selling, general and administrative expenses as a percentage of net
revenue decreased from 22.7% for fiscal 1995 to 21.6% for fiscal 1996, primarily
due to the leveraging of infrastructure over an expanded revenue base.
Depreciation and amortization expense increased $92,000, or 4.1%, from $2.2
million for fiscal 1995 to $2.3 million for fiscal 1996. The change resulted
from an increase in depreciation associated with increased capital expenditures,
offset by a decrease in depreciation and amortization due to the write-down of
impaired long-lived assets of the Company's German operations. Depreciation and
amortization expense in fiscal 1995 includes approximately $588,000 related to
long-lived assets which were written-down and did not recur in fiscal 1996.
Income from operations for fiscal 1996 was $6.5 million, compared to a loss
from operations of $10.4 million for fiscal 1995. Results for fiscal 1995
included an $11.3 million non-cash charge related to the write-down of impaired
long-lived assets of the Company's German operations. Income from operations for
fiscal 1995, excluding the impact of the asset impairment charge, was
approximately $303,000.
Interest income increased by $1.1 million from $213,000 for fiscal 1995 to
$1.3 million for fiscal 1996. This increase resulted from higher average
balances of cash and investments due primarily to proceeds from the Company's
public offerings in November 1995 and March 1996.
16
<PAGE> 18
The Company's effective income tax rate was 39.9% for fiscal 1996. The
effective tax rate in fiscal 1995, excluding the effect of the $11.3 million
non-cash, non-deductible write-down due to the impairment of long-lived assets,
would have been 89.4%. The effective income tax rate may vary with changes in
the mix of taxable income from the different geographic jurisdictions in which
the Company operates.
Fiscal Year Ended June 30, 1995 Compared to Fiscal Year Ended June 30, 1994
Net revenue increased by $571,000, or 1.0%, from $58.0 million for fiscal
1994 to $58.6 million for fiscal 1995. This increase was due to an increase of
$2.6 million in net revenue from European operations, offset by a decrease of
$2.1 million in net revenue from North American operations. The increase in
European net revenue was primarily due to the weakening of the dollar and, to a
lesser extent, to an increase in clinical research contract volume in all areas
in Europe other than Germany, which experienced a decline in net revenue. The
decline in net revenue from North America was primarily due to a decline in net
revenue from the Company's data management operation, which substantially
completed work on a number of large contracts during fiscal 1994 that were not
replaced in fiscal 1995.
Direct costs increased by $3.9 million, or 10.2%, from $38.2 million for
fiscal 1994 to $42.1 million for fiscal 1995. Substantially all of the increase
in direct costs was due to increased expenses associated with European
operations. The increase in direct costs in Europe was primarily due to the
hiring of additional project-related personnel and expansion of facilities in
the United Kingdom and France. The weakening of the dollar also contributed to
the increase of direct costs in Europe. Direct costs as a percentage of net
revenue increased from 65.9% in fiscal 1994 to 71.9% in fiscal 1995. This
increase was primarily due to the increased costs incurred in Europe, where
direct costs increased as a percentage of net revenue from 65.5% in fiscal 1994
to 75.4% in fiscal 1995 and to a decline in net revenue in North America, where
direct costs remained flat against lower net revenue, resulting in an increase
in direct costs as a percentage of net revenue from 66.2% in fiscal 1994 to
69.8% in fiscal 1995.
Selling, general and administrative expenses decreased by $337,000, or
2.5%, from $13.6 million in fiscal 1994 to $13.3 million in fiscal 1995. The
decrease in selling, general and administrative expenses was primarily due to
savings in Europe as a result of a more effective deployment of employee and
facility resources in the United Kingdom and Germany, partially offset by the
weakness of the dollar. Due to these factors, selling, general and
administrative expenses as a percentage of net revenue decreased from 23.5% for
fiscal 1994 to 22.7% in fiscal 1995.
Depreciation and amortization expenses decreased by $184,000, or 7.6%, from
$2.4 million in fiscal 1994 to $2.3 million in fiscal 1995. This decrease was
primarily due to a reduction in depreciation and amortization expense from fully
amortized intangible assets and the write-down of impaired long-lived assets,
offset in part by the weakness of the dollar. Fiscal 1995 includes only six
months of depreciation and amortization, or approximately $588,000, resulting
from the 1991 acquisition of PAREXEL GmbH, due to the impairment charge in the
third quarter.
Other income (expense), net changed from an expense of $375,000 in fiscal
1994 to income of $14,000 in fiscal 1995. The change was primarily due to the
incurrence in fiscal 1994 of approximately $450,000 related to the Company's
postponed fiscal 1994 initial public offering.
The effective tax rate in fiscal 1995, excluding the effect of the $11.3
million non-cash, non-deductible write-down due to the impairment of long-lived
assets, would have been 89.4%, compared to an effective rate of 45.0% in fiscal
1994. In fiscal 1994, the Company adopted Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes," the cumulative effect of which
increased net income by $500,000 in fiscal 1994.
Quarterly Results
The Company's quarterly operating results have been subject to variation,
and will continue to be subject to variation, depending on factors such as the
initiation and progress of significant projects, exchange rate fluctuations, the
opening of new offices, the costs associated with integrating acquisitions and
the start-up costs
17
<PAGE> 19
incurred in connection with the introduction of new products and services. In
addition, during the third quarter of fiscal 1995, the Company's results of
operations were affected by a write-down due to the impairment of long-lived
assets. Because a high percentage of the Company's operating costs are
relatively fixed in the short term, variations in the initiation, completion,
delay or loss of contracts or progress of clinical trials can cause material
adverse variations in quarterly operating results.
<TABLE>
The following table presents unaudited quarterly operating results for the
Company for each of the ten most recent fiscal quarters in the period ended
September 30, 1996. In the opinion of the Company, this information has been
prepared on the same basis as the consolidated financial statements appearing
elsewhere in this Prospectus and reflects all adjustments (consisting only of
normal recurring adjustments) necessary for a fair presentation of results for
operations for those periods. This quarterly financial data should be read in
conjunction with the Consolidated Financial Statements and Notes thereto
appearing elsewhere in this Prospectus. The operating results for any quarter
are not necessarily indicative of the results of any future period.
<CAPTION>
QUARTER ENDED
-------------------------------------------------------------------------------------------------------------
JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30,
1994 1994 1994 1995 1995 1995 1995 1996 1996 1996
-------- --------- -------- -------- -------- --------- -------- -------- -------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenue........ $15,172 $13,176 $14,281 $ 14,824 $16,292 $17,973 $20,616 $22,507 $26,910 $33,030
------- ------- ------- -------- ------- ------- ------- ------- ------- -------
Costs and expenses:
Direct costs..... 10,223 10,573 10,000 10,230 11,337 12,465 14,409 15,154 18,113 22,821
Selling, general
and
administrative... 3,850 3,384 3,099 3,279 3,532 3,834 4,244 5,001 5,948 6,617
Depreciation and
amortization... 580 668 709 432 442 515 518 616 694 883
Impairment of
long-lived
assets......... -- -- -- 11,253 -- -- -- -- -- --
------- -------- ------- -------- ------- ------- ------- ------- ------- -------
Total costs
and
expenses.. 14,653 14,625 13,808 25,194 15,311 16,814 19,171 20,771 24,755 30,321
------- -------- ------- -------- ------- ------- ------- ------- ------- -------
Income (loss) from
operations....... $ 519 $(1,449) $ 473 $(10,370) $ 981 $ 1,159 $ 1,445 $ 1,736 $ 2,155 $ 2,709
======= ======== ======= ======== ======= ======= ======= ======= ======= =======
Net income
(loss)........... $ 95 $ (971) $ 295 $(10,637) $ 683 $ 742 $ 956 $ 1,297 $ 1,604 $ 1,936
======= ======== ======= ======== ======= ======= ======= ======= ======= =======
</TABLE>
Liquidity and Capital Resources
Since its inception, the Company has primarily financed its operations and
growth, including acquisition costs, with cash flow from operations and the
proceeds from the sale of equity securities. Investing activities primarily
reflect capital expenditures for information systems enhancements and net
purchases of marketable securities.
The Company's clinical research and development contracts are generally
fixed price with some variable components, and range in duration from a few
months to several years. The cash flows from contracts typically consists of a
down payment required to be paid at the time the contract is entered into and
the balance in installments over the contract's duration, in some cases on a
milestone achievement basis. Revenue from contracts is generally recognized on a
percentage of completion basis as the work is performed. Accordingly, cash
receipts do not necessarily correspond to costs incurred and revenue recognized
on contracts. The Company's cash flow is influenced by the changes in levels of
billed and unbilled accounts receivable, net of amounts advance billed
representing unearned revenue. As a result, the number of days outstanding in
accounts receivable, net of advance billings, and the related dollar values of
these accounts can vary due to the achievement of contractual milestones and the
timing and size of cash receipts. The number of days revenue outstanding, net of
advance billings, was 40 days at June 30, 1995, 47 days at June 30, 1996 and 65
days at September 30, 1996. The increase in days revenue outstanding from June
30, 1996 to September 30, 1996 was primarily due to the timing of the
achievement of project milestones and related billings, as well as a decline in
the amounts billed to clients in advance of revenue earned. Accounts receivable,
net of the allowance for doubtful accounts, increased from $24.7 million at June
30, 1995 to $39.3 million at June 30, 1996 and $49.6 million at September 30,
1996 while advance billings increased from $14.0 million at June 30, 1995 to
$20.0 million at June 30, 1996 and decreased to $18.5 million at September 30,
1996.
Unrestricted cash and cash equivalents decreased by $7.0 million during the
three months ended September 30, 1996 as a result of $6.1 million and $1.3
million in cash used by operating and financing
18
<PAGE> 20
activities, respectively, offset by $518,000 in cash provided by investing
activities. Net cash used by operating activities resulted from net income,
excluding non-cash expenses, of $2.8 million and an increase in accounts payable
of $1.6 million being more than offset by increases in restricted cash of
$512,000 and billed and unbilled receivables of $7.7 million and decreases in
advance billings of $1.7 million and other current liabilities of $858,000. Cash
provided by investing activities consisted of net proceeds from sales of
marketable securities of $2.9 million and the net cash balances of acquired
companies of $251,000 nearly offset by capital expenditures of $2.7 million.
Cash used by financing activities reflects repayments of long-term debt of $2.8
million partially offset by net proceeds from the exercise of stock options of
$1.4 million. Debt repayments included $2.3 million to retire third-party debt
of S&FA assumed during the acquisition.
Unrestricted cash and cash equivalents decreased by $10.9 million during
fiscal 1996 as a result of $6.5 million and $37.4 million in cash provided by
operating and financing activities, respectively, offset by $32.8 million in
cash used for investing activities and an $155,000 unfavorable effect of
exchange rate changes. Net cash provided by operating activities resulted
primarily from net income, excluding non-cash expenses, of $6.9 million and
increases in advance billings, accounts payable and other current liabilities of
$6.4 million, $4.6 million and $3.3 million, respectively. Cash used by
operating activities included an increase in accounts receivable of $15.1
million. Financing activities consisted primarily of net proceeds of
approximately $21.2 million from the Company's initial public offering of
1,600,000 shares of common stock in November 1995, and net proceeds of
approximately $15.7 million from the Company's follow-on public offering of
500,000 shares of common stock in March 1996. Investing activities consisted of
net purchases of marketable securities of $27.8 million and capital
expenditures.
The Company made approximately $5.0 million of capital expenditures in
fiscal 1996 related to facility expansion and investments in information
technology and expects to invest approximately $8 million to $10 million in the
next twelve months.
The Company has domestic and foreign line of credit arrangements with banks
totalling approximately $7.5 million and a capital lease line of credit with a
U.S. bank for $2.4 million. At September 30, 1996 the Company had approximately
$9.0 million in available credit under these arrangements.
The Company's primary cash needs on both a short-term and long-term basis
are for the payment of the salaries and fringe benefits, hiring and recruiting
expenses, business development costs, capital expenditures and facility-related
expenses. The Company believes that its existing capital resources, together
with cash flows from operations and borrowing capacity under its existing lines
of credit, will be sufficient to meet its foreseeable cash needs. In the future,
the Company will continue to consider acquiring businesses to enhance its
service offerings, therapeutic base and global presence. Any such acquisitions
may require additional external financings and the Company may from time to time
seek to obtain funds from public or private issuances of equity or debt
securities. There can be no assurance that such financings will be available on
terms acceptable to the Company.
The foregoing statements include forward-looking statements which involve
risks and uncertainties. The Company's actual experience may differ materially
from that discussed above. Factors that might cause such a difference include,
but are not limited to, those discussed in "Risk Factors" as well as future
events that have the effect of reducing the Company's available cash balances,
such as unexpected operating losses or capital expenditures or cash expenditures
related to possible future acquisitions.
Inflation
The Company believes the effects of inflation generally do not have a
material adverse impact on its operations or financial conditions.
Recently Issued Accounting Standards
In October 1995, the Financial Accounting Standards Board issued Statement
No. 123, "Accounting for Stock-Based Compensation" ("FAS 123"). The Company has
elected to adopt FAS 123 in fiscal 1997 through disclosure only.
19
<PAGE> 21
BUSINESS
PAREXEL is a leading contract research organization ("CRO"), providing
clinical research and development services to the worldwide pharmaceutical and
biotechnology industries. The Company believes it is the fourth largest CRO,
based on estimated annual net revenue, and one of only a few CROs capable of
providing a full range of clinical services on a global basis. The Company
complements the research and development departments of pharmaceutical and
biotechnology companies by offering high quality clinical research services to
the client and reducing drug development time and cost. In addition, the
Company's integrated services and extensive information technology capabilities
coupled with its broad experience and expertise in global drug development
provide clients with a variable cost alternative to the fixed costs associated
with internal drug development. The Company offers a full complement of clinical
research and development services, including designing, initiating and
monitoring clinical trials, managing and analyzing clinical data and consulting
on regulatory affairs.
The Company, founded in 1983 as a regulatory consulting firm, has built its
business both through internal expansion and acquisitions. In 1988, the Company
acquired Consulting Statisticians Inc., a leading biostatistics and data
management provider specializing in the healthcare industry. In 1989, the
Company initiated its international expansion by acquiring the London-based
McDonnell Douglas Clinical Trials Analysis Division, a division of McDonnell
Douglas Informations Systems Ltd., which provided biostatistics and data
management services in Europe. In 1990, the Company acquired Barnett Associates,
Inc. to expand its Information Products Division, through which the Company
offers a range of specialized clinical consulting and training services and
related products. In 1991, the Company acquired AFB Arzneimittelforschung GmbH
in Berlin, a European CRO based in Berlin, with offices in Frankfurt and Paris.
The Company is headquartered in Waltham, Massachusetts and opened offices in San
Diego in 1990; Raleigh-Durham in 1994; Milan, Italy; Kobe, Japan; and Sydney,
Australia in 1995; and Madrid, Spain and Chicago in 1996.
In June 1996, the Company acquired Caspard Consultants, a Paris-based CRO,
and in August 1996 acquired Lansal Clinical Pharmaceutics Limited, a CRO based
in Israel. These acquisitions augment the Company's existing clinical operations
and are in line with management's focused international expansion efforts. In
June 1996, the Company acquired Sitebase Clinical Systems, Inc., a provider of
remote data entry ("RDE") technology. This acquisition positions the Company as
a provider of RDE technology which is expected to enhance the quality and
timeliness of clinical trial data. In August 1996, the Company also acquired
State and Federal Associates, Inc. (S&FA), a Washington D.C.-based provider of
consulting services to the health care and pharmaceutical industries. The
acquisition broadens the Company's portfolio of consulting services,
specifically in the area of health economics.
INDUSTRY OVERVIEW
The CRO industry provides independent product development services for the
pharmaceutical and biotechnology industries. Generally, CROs derive
substantially all of their revenue from the research and development
expenditures of pharmaceutical and biotechnology companies. The CRO industry has
evolved from providing limited clinical services in the 1970s to an industry
which currently offers a full range of services that encompass the clinical
research process, including pre-clinical evaluations, study design, clinical
trial management, data collection and biostatistical analysis and product
registration support. All of these services are provided in accordance with
regulations which govern clinical trials and the drug approval process.
The CRO industry is highly fragmented, with participants ranging from
several hundred small, limited-service providers to several large full-service
CROs with global operations. Although there are few barriers to entry for small,
limited-service providers, the Company believes there are significant barriers
to becoming a full-service CRO with global capabilities. Some of these barriers
include the development of broad therapeutic expertise and the infrastructure
and experience necessary to serve the global demands of clients, the ability to
simultaneously manage complex clinical trials in numerous countries, the
expertise to prepare regulatory submissions in multiple countries, and the
development and maintenance of the complex information technology systems
required to integrate these capabilities. In recent years, the CRO industry has
experienced consolidation due in part to the acquisition of smaller firms by
larger full-service CROs.
20
<PAGE> 22
The CRO industry derives substantially all of its revenue from the
pharmaceutical and biotechnology industries. The global pharmaceutical and
biotechnology industries spent an estimated $33 billion in 1995 on research and
development, of which the Company estimates $15.2 billion was spent on the type
of services offered by the Company. Of this amount, approximately $2.6 billion
was outsourced to CROs. The Company believes that the following trends will lead
to further growth opportunities for full-service, global CROs, although there
can be no assurance that this growth will materialize:
- Cost Containment Pressures. Recently, drug companies have been focusing
on more efficient ways of conducting business because of margin pressures
stemming from patent expirations, market acceptance of generic drugs and
impending regulatory pressures to reduce drug prices. The Company believes
that the pharmaceutical industry is responding by consolidating and
reducing jobs, centralizing the research and development process and
outsourcing to variable cost CROs, thereby reducing the fixed costs
associated with internal drug development. The CRO industry, by
specializing in clinical trials management, is often able to perform the
needed services with a higher level of expertise or specialization, more
quickly and at a lower cost than the client could perform the services
internally. The Company believes that some large pharmaceutical companies,
rather than utilizing many CRO service providers, are selecting a limited
number of full-service, global CROs to serve as their primary CROs.
- Globalization of Clinical Development and Regulation Strategy.
Pharmaceutical and biotechnology companies increasingly are attempting to
maximize profits from a given drug by pursuing regulatory approvals in
multiple countries in parallel rather than sequentially, as was the
practice historically. The Company believes that the globalization of
clinical research and development activities has increased the demand for
CRO services. A pharmaceutical or biotechnology company seeking approvals
in a country in which it lacks experience or internal resources will
frequently turn to a CRO for assistance in interacting with regulators or
in organizing and conducting clinical trials. In addition, a company may
turn to a CRO in the belief that regulatory authorities who are not
familiar with the company may have more confidence in the results from
tests independently conducted by a CRO known to those authorities.
- Consolidation in the Pharmaceutical Industry. The pharmaceutical
industry is consolidating as pharmaceutical companies seek to obtain cost
reduction synergies through business combinations. Recently announced
consolidations include some of the largest multinational pharmaceutical
companies in the world, such as Glaxo-Wellcome, American Home
Products-American Cyanamid, Hoechst-Marion Merrill Dow, Upjohn-Pharmacia,
Roche-Syntex and Sandoz-Ciba Geigy. Once consolidated, many pharmaceutical
companies aggressively manage costs by reducing headcount and outsourcing
to variable-cost CROs in an effort to reduce the fixed costs associated
with internal drug development. The Company believes that full-service
global CROs will benefit from this trend.
- Increasingly Complex and Stringent Regulation; Need for Technological
Capabilities. Increasingly complex and stringent regulatory requirements
throughout the world have increased the volume of data required for
regulatory filings and escalated the demands on data collection and
analysis during the drug development process. In recent years, the FDA and
corresponding regulatory agencies of Canada, Japan and Western Europe
commenced discussions to develop harmonized standards for preclinical and
clinical studies and the format and content of applications for new drug
approvals. Further, the FDA encourages the use of computer-assisted
filings in an effort to expedite the approval process. As regulatory
requirements have become more complex, the pharmaceutical and
biotechnology industries are increasingly outsourcing to CROs to take
advantage of their data management expertise, technological capabilities
and global presence.
- Drug Development Pressures. The Company believes that research and
development expenditures have increased as a result of the constant
pressure to develop a pipeline of products, and to respond to the demand
for products for an aging population and for the treatment of chronic
disorders and life-threatening conditions such as infectious diseases,
including AIDS. The development of therapies for chronic disorders, such
as Alzheimer's disease, diabetes and arthritis, requires complex clinical
trials to
21
<PAGE> 23
demonstrate the therapy's effectiveness and determine whether the drug
causes any long-term side effects.
- Biotechnology Industry Growth. The U.S. biotechnology industry has grown
rapidly over the last ten years and is introducing significant numbers of
new drug candidates which will require regulatory approval. Many
biotechnology companies do not have the necessary experience or resources
to conduct clinical trials. Accordingly, many of these companies have
chosen to outsource to CROs rather than expend significant time and
resources to develop an internal clinical development capability.
Moreover, the biotechnology industry is rapidly expanding into and within
Europe, providing significant growth opportunities for CROs with a global
presence.
PAREXEL'S STRATEGY
PAREXEL's objective is to maintain and enhance its position as a leading
CRO by providing a full range of clinical services on a global basis. The
Company addresses all aspects of clinical research and development with a
flexible approach that allows its clients to use the Company's services on an
individual or bundled basis. The Company believes its expertise in conducting
scientifically demanding trials and its ability to coordinate complicated global
trials are significant competitive strengths. The Company continues to devote
significant resources to developing information systems designed to allow the
Company to more effectively manage its business operations and deliver services
to its clients. The Company will continue to invest in improvements in
information technology and consider acquisitions of complementary businesses in
order to enhance its competitive position and its level of service.
Serve the Global Model of New Drug Development
The Company believes that its ability to conduct clinical trials worldwide
enhances its ability to serve the increasingly global model of drug development.
The Company has provided clinical research and development services to major
North American, European and Japanese pharmaceutical companies. The Company has
expanded geographically primarily through internal growth, supplemented by
strategic acquisitions, with a goal of serving all major client markets
worldwide and positioning the Company to serve developing markets. Since January
1, 1994, the Company has established a presence in Kobe, Japan; Milan, Italy;
Raleigh-Durham; Sydney, Australia; Madrid, Spain; Tel Aviv, Israel; Washington,
D.C. and Chicago. PAREXEL is conducting a number of multinational clinical
studies designed to pursue concurrent regulatory approvals in multiple
countries. The Company believes that the expertise developed by conducting
multi-jurisdictional clinical trials is a competitive advantage as
pharmaceutical companies increasingly pursue regulatory approvals in multiple
jurisdictions in parallel.
The Company believes that the efficient delivery of high-quality clinical
services requires adherence to standardized procedures on a worldwide basis. The
Company has devoted considerable resources to developing internal standard
operating procedures. These procedures, together with the Company's information
technology, enable the Company to reduce the time involved in preparing
regulatory submissions by concurrently compiling and analyzing large volumes of
data from multinational trials and preparing regulatory submissions for filings
on a global basis.
Address All Aspects of Clinical Research; Offer Flexible Menu of Services
The Company offers a full range of services that encompasses the clinical
research process. The Company believes that its knowledge and experience in all
stages of clinical research enhance its credibility with prospective clients.
The Company's full range of services and global experience complement the
research and development departments of pharmaceutical and biotechnology
companies. In order to meet the needs of specific clients, PAREXEL offers its
services on either an individual or a bundled basis. This approach allows the
Company to establish a relationship with a new client with the need for a
particular service which may in turn lead to larger, more comprehensive
projects. This flexibility allows PAREXEL to deliver its services by operating
autonomously or by working in close collaboration with its clients. In some
cases, the Company has taken advantage of the flexibility of its information
technology systems to gain direct access to client data on client systems. In
addition, the Company provides regulatory periodicals, training materials and
seminars and other complementary information products and services designed to
meet its clients' demands for increased productivity in clinical development.
22
<PAGE> 24
Conduct Scientifically Demanding Trials
The Company provides its services in connection with scientifically and
clinically demanding trials in a wide range of therapeutic areas, such as trials
involving the testing of drugs developed by biotechnology companies and drugs
addressing complex diseases such as AIDS, cancer and Alzheimer's. The Company's
leadership in AIDS-related therapeutic areas is evidenced by the selection of
PAREXEL as the CRO for the Intercompany Collaborative for AIDS Drug Development,
a consortium including 18 global leaders in AIDS research. Other therapeutic
categories in which the Company has expertise include neurology, oncology,
gastroenterology, endocrinology, cardiology, hematology, immunology,
rheumatology and the study of pulmonary, reproductive and infectious diseases.
The Company believes that as trials involve increasingly complex therapeutic
areas, CROs with a broad range of experience have a competitive advantage over
other companies with more limited capabilities.
Continue Investment in Information Technology
The Company believes that superior information technology is essential to
enable a CRO to provide project services concurrently in multiple countries,
expand its geographic operations to meet the global needs of the pharmaceutical
and biotechnology industries and provide innovative services designed to
expedite the clinical trials process. The Company has an extensive and effective
global information technology network and believes that its information
technology provides it with a significant competitive advantage. The Company's
information technology supports its global organizational structure by enabling
all offices to exchange information with each other so that several offices
worldwide can work simultaneously on a project. The global information
technology network also allows the Company to track the progress of ongoing
client projects and predict more accurately and quickly its future personnel
needs to meet client contract commitments. In addition, the Company's open and
flexible information technology system can be adapted to the multiple needs of
different clients and regulatory systems. For example, the system enables the
Company to reduce the time involved in preparing regulatory submissions by
concurrently compiling and analyzing large volumes of data from multinational
trials and preparing regulatory submissions for filings on a global basis. This
system also enables the Company to respond quickly to client inquires on the
progress of projects and, in some cases, to gain direct access to client data on
client systems.
SERVICES
The Company provides a full range of clinical research and development
services, including clinical trials management, clinical data management,
biostatistical analysis, study design and regulatory affairs services, including
product registrations with regulatory authorities for its clients. The Company
provides services individually or as an integrated package of two or more
services. The Company's full range of services and global experience complement
the research and development departments of the Company's clients. In addition,
the Company's Information Products Division ("IPD") offers specialized clinical
consulting and training services and related products.
Clinical Trials Management Services
PAREXEL offers complete services for the design, initiation and management
of clinical trial programs, a critical element in obtaining regulatory approval
for drugs. The Company has performed services in connection with trials in most
therapeutic areas, including neurology, oncology, gastroenterology,
endocrinology, cardiology, hematology, immunology, rheumatology and the study of
pulmonary, reproductive and infectious diseases. PAREXEL's multi-disciplinary
clinical trials group examines a product's existing preclinical and clinical
data to design clinical trials to provide evidence of the product's safety and
efficacy.
PAREXEL can manage every aspect of clinical trials, including design,
placement, initiation, monitoring, report preparation and strategy development.
See "Government Regulation -- New Drug Development-An Overview." Most of the
Company's clinical trials management projects involve Phase II or III clinical
trials, which are generally much larger and more complex than Phase I trials.
23
<PAGE> 25
Clinical trials are monitored for and with strict adherence to good
clinical practices ("GCP"). The design of efficient Case Report Forms ("CRF"),
detailed operations manuals and site visits by PAREXEL's clinical research
associates ensure that clinical investigators and their staffs follow the
established protocols of the studies. The Company has adopted standard operating
procedures which are intended to satisfy regulatory requirements and serve as a
tool for controlling and enhancing the quality of PAREXEL's worldwide clinical
services.
Clinical trials represent one of the most expensive and time-consuming
parts of the overall drug development process. The information generated during
these trials is critical for gaining marketing approval from the FDA or other
regulatory agencies. PAREXEL's clinical trials management group assists clients
with one or more of the following steps:
- Study Protocol Design. The protocol defines the medical issues the study
seeks to examine and the statistical tests that will be conducted.
Accordingly, the protocol defines the frequency and type of laboratory and
clinical measures that are to be tracked and analyzed. The protocol also
defines the number of patients required to produce a statistically valid
result, the period of time over which they must be tracked and the
frequency and dosage of drug administration. The study's success depends
on the protocol's ability to predict correctly the requirements of the
regulatory authority.
- Case Report Forms Design. Once the study protocol has been finalized,
CRFs must be developed. The CRF may change at different stages of a trial.
The CRFs for one patient in a given study may consist of 100 or more
pages.
- Site and Investigator Recruitment. The drug is administered to patients
by physicians, referred to as investigators, at hospitals, clinics or
other locations, referred to as sites. Potential investigators may be
identified by the drug sponsor or the CRO. The CRO generally solicits the
investigators' participation in the study. The trial's success depends on
the successful identification and recruitment of investigators with an
adequate base of patients who satisfy the requirements of the study
protocol. The Company has access to several thousand investigators who
have conducted clinical trials for the Company.
- Patient Enrollment. The investigators find and enroll patients suitable
for the study. The speed with which trials can be completed is
significantly affected by the rate at which patients are enrolled.
Prospective patients are required to review information about the drug and
its possible side effects, and sign an informed consent form to record
their knowledge and acceptance of potential side effects. Patients also
undergo a medical examination to determine whether they meet the
requirements of the study protocol. Patients then receive the drug and are
examined by the investigator as specified by the study protocol.
- Study Monitoring and Data Collection. As patients are examined and tests
are conducted in accordance with the study protocol, data are recorded on
CRFs and laboratory reports. The data are collected from study sites by
specially trained persons known as monitors. Monitors visit sites
regularly to ensure that the CRFs are completed correctly and that all
data specified in the protocol are collected. The monitors take completed
CRFs to the study coordinating site, where the CRFs are reviewed for
consistency and accuracy before their data is entered into an electronic
database. The Company believes RDE technology will significantly enhance
both the quality and timeliness of clinical data collection with
significant efficiency savings. The Company's study monitoring and data
collection services comply with the FDA's adverse events reporting
guidelines.
- Report Writing. The findings of statistical analysis of data collected
during the trial together with other clinical data are included in a final
report generated for inclusion in a regulatory document.
- Medical Services. Throughout the course of a clinical trial, PAREXEL's
physicians can provide a wide range of medical research and consulting
services, including medical monitoring of clinical trials.
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Clinical Data Management and Biostatistical Services
PAREXEL's data management professionals assist in the design of CRFs, as
well as training manuals for investigators, to ensure that data are collected in
an organized and consistent format. Databases are designed according to the
analytical specifications of the project and the particular needs of the client.
Prior to data entry, PAREXEL personnel screen the data to detect errors,
omissions and other deficiencies in completed CRFs. The use of RDE technology to
gather and report clinical monitoring information is expected to expedite data
exchange while minimizing data collection errors as a result of real time data
integrity verification. The Company provides clients with data abstraction, data
review and coding, data entry, database verification and editing and problem
data resolution.
The Company has extensive experience in the United States and Europe in the
creation of scientific databases for all phases of the drug development process,
including the creation of customized databases to meet client-specific formats,
integrated databases to support New Drug Application submissions and databases
in strict accordance with FDA and European specifications. For example, the
Company completed, in support of a New Drug Application filing, an expanded
access program with over 2,000 investigators enrolling over 11,000 patients at
sites located in 26 countries, including 17 in Europe, five in South America,
two in Central America, the United States and Australia. Over 300,000 pages of
CRF data were collected from these sites and merged into one integrated
database.
PAREXEL's biostatistics professionals assist clients with all phases of
drug development, including biostatistical consulting, database design, data
analysis and statistical reporting. These professionals develop and review
protocols, design appropriate analysis plans and design report formats to
address the objectives of the study protocol as well as the client's individual
objectives. Working with the programming staff, biostatisticians perform
appropriate analyses and produce tables, graphs, listings and other applicable
displays of results according to the analysis plan. Frequently, biostatisticians
represent clients during panel hearings at the FDA.
Regulatory Affairs Services
PAREXEL provides comprehensive regulatory product registration services for
pharmaceutical and biotechnology products in major jurisdictions in Europe and
North America, including regulatory strategy formulation, document preparation
and liaison with the FDA and other regulatory agencies. In addition, the Company
provides the services of qualified experts to assist with good manufacturing
practices ("GMP") compliance in existing manufacturing plants and to assure that
new facilities are built to conform to GMP. PAREXEL's staff provides on-site GMP
training sessions and conducts internal and external quality control and quality
assurance audits.
PAREXEL works closely with clients to devise regulatory strategies and
comprehensive product development programs. The Company's regulatory affairs
experts review existing published literature, assess the scientific background
of a product, assess the competitive and regulatory environment, identify
deficiencies and define the steps necessary to obtain registration in the most
expeditious manner. Through this service, the Company helps its clients
determine the feasibility of developing a particular product or product line.
Health Economics
The Company, through its subsidiary PAREXEL/S&FA, provides health economics
services that enable regulators, health care providers and third parties to
assess the pricing and cost effectiveness of new medical therapies. PAREXEL/S&FA
provides empirical economic data and demonstration of cost effectiveness in
development programs. PAREXEL/S&FA economists document critical economic
advantages of the new drug design and execute an integrated research program to
support both regulatory approval and post-approval pricing, marketing and
reimbursement strategies, marketing analyses and hotline services.
Market Analysis and Hotline Services
PAREXEL/S&FA has extensive experience providing pre-launch payment and
utilization planning and computing services to pharmaceutical and biotechnology
clients. These services are complemented by launch
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<PAGE> 27
support and post-launch reimbursement consulting as well as reimbursement
hotline services. The PAREXEL/S&FA hotline capability also services indigent
patient programs and expanded access programs.
Information Products Division
The Company's Information Products Division offers a range of specialized
clinical consulting and training services and related products through Barnett
International Corporation, a subsidiary of the Company, and through IPD's
publications group. Barnett International Corporation is a leader in providing
training, conferences, education and management consulting services to the
worldwide clinical research community, with extensive experience in organization
structure, curriculum design and human resource management in clinical research.
The publications group produces several publications covering regulatory issues,
including the monthly U.S. Regulatory Reporter (launched in 1984), books such as
International Pharmaceutical Product Registration, Medical Devices -- Obtaining
FDA Market Clearance, Drug Formularies and the Pharmaceutical Industries, A
Practical Guide to the EMEA, New Drug Development: A Regulatory Overview and
Biologics Development: A Regulatory Overview. Other publications include the
Worldwide Pharmaceutical Regulation series and PAREXEL's Pharmaceutical R&D
Source Book 1996.
INFORMATION SYSTEMS
The Company is committed to investing in information technology designed to
help the Company provide high quality services in a cost effective manner and to
manage its internal resources. The Company believes it is one of a few CROs that
has an extensive and effective global information technology network. The
Company has built on its network by developing a number of proprietary
information systems that address critical aspects of its business. These systems
track all aspects of the Company's projects utilizing:
- PROGEN[Trademark] -- A dynamic proposal and budget generation system
first developed and implemented globally in fiscal 1991. PROGEN generates
accurate and timely resource budgets in response to client requests for
proposals and also enables the Company to efficiently project staffing
requirements.
- TIMS[Trademark] -- An on-line time information management system,
implemented in North America in January 1994 and globally in January
1995. TIMS records and tracks all hours spent by employees and enables
managers to compare such information with the PROGEN resource budget.
- FORE[Trademark] -- An on-line revenue and resource forecasting system
implemented in January 1995 in North America and in June 1995 in Europe.
FORE tracks actual resource utilization for and progress of client
projects and allows management to efficiently deploy future resources to
match the progress of each project.
- CIMS[Trademark] -- An on-line clinical information management system
introduced in fiscal 1993 in North America and in fiscal 1995 in Europe.
CIMS allows each clinical project manager to monitor and control the
progress of an entire clinical trial, including providing real-time
access to information on site recruitment, tracking of patient
information, monitor information, investigator payments and drug
shipments, as well as participate in a Company-wide integrated reporting
system.
- DEMS[Trademark] -- A flexible, multi-user clinical trials data-entry and
data management system implemented in March 1995 in North America and
August 1995 in Europe. DEMS encompasses data-entry, verification and
validation and provides for real-time CRF tracking and coding of clinical
data and promotes standardization of clinical data management processes
at all of the Company's worldwide locations.
Although the Company began to implement its information systems in 1990,
the Company's current information systems were not completely adopted until
fiscal 1995. The Company recently augmented its information technology
capabilities with the acquisition of Sitebase Clinical Systems, Inc., a provider
of RDE technology which involves entry of data onto electronic case report forms
at the investigational site. RDE technology has important implications for CROs,
including enhancing the accuracy and timeliness of clinical data, thereby
shortening customers' time-to-market. The Company's information systems group
has 52 employees responsible for technology procurement, applications
development and management of the Company's worldwide computer network. The wide
area network links 18 local area networks, interconnecting approxi-
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mately 1,600 computers worldwide. The Company's information systems are designed
to work in support of and reinforce the Company's standard operating procedures.
The Company's information technology system is open and flexible, allowing it to
be adapted to the multiple needs of different clients and regulatory systems.
This system also enables the Company to respond quickly to client inquiries on
the progress of projects and, in some cases, to gain direct access to client
data on client systems.
SALES AND MARKETING
PAREXEL's marketing strategy is to focus on prospective clients whose
clinical development projects are large and complex and to develop close
relationships with key decision-makers throughout its clients' drug development
organizations. The Company's client relations professionals, senior executives
and project team leaders all share responsibility for the maintenance of key
client relationships and business development activities. The Company believes
that its emphasis on developing close relationships with its clients leaves it
well positioned to benefit from the trend among pharmaceutical companies to
concentrate their outsourcing among fewer CROs. The Company's core marketing
activities are complemented by the industry conferences and publications offered
by the Company's IPD. Although the IPD activities are conducted as independent
business activities, the Company believes that the IPD offerings enhance the
Company's market position in the drug development community.
The Company's marketing activities are coordinated by PAREXEL's client
service executives in each of the Company's U.S. locations as well as the
Company's locations in Australia, France, Germany, Italy, Japan, Spain and the
United Kingdom. Most of the Company's business development personnel have
technical or scientific backgrounds and many are physicians, pharmacologists,
statisticians and regulatory affairs professionals. The Company coordinates its
worldwide marketing efforts through a computerized system that is integrated
into each of the Company's locations.
CLIENTS
PAREXEL has served most of the leading U.S., European and Japanese
pharmaceutical companies. PAREXEL's clients also include companies which develop
biotechnology and other emerging technologies. During fiscal 1996, the Company
provided services to each of the 20 largest pharmaceutical companies, as ranked
by estimated worldwide 1995 research and development expenditures revenue, and
seven of the ten largest biotechnology companies, as ranked by December 1995
market capitalization. During fiscal 1996, the Company performed services for
over 250 clients, including 53 biotechnology companies, involving over 1,000
projects.
The Company has in the past derived, and may in the future derive, a
significant portion of its net revenue from a relatively limited number of major
projects or clients. Concentrations of business in the CRO industry are not
uncommon and the Company is likely to experience such concentration in future
years. In fiscal 1994, 1995 and 1996, and the three months ended September 30,
1996, no single customer accounted for more than 10% of consolidated net
revenue. In fiscal 1994, 1995 and 1996, and the three months ended September 30,
1996, the Company's top five customers accounted for 29.8%, 25.2%, 32.0% and
31.7%, respectively, of the Company's consolidated net revenue. The loss of
business from a significant client could materially and adversely affect the
Company's net revenue.
COMPETITION
The Company primarily competes against in-house departments of
pharmaceutical companies, full service CROs, and, to a lesser extent,
universities and teaching hospitals. Some of these competitors have
substantially greater capital, technical and other resources than the Company.
CROs generally compete on the basis of previous experience, medical and
scientific expertise in specific therapeutic areas, the quality of contract
research, the ability to organize and manage large-scale trials on a global
basis, the ability to manage large and complex medical databases, the ability to
provide statistical and regulatory services, the ability to recruit
investigators, the ability to integrate information technology with systems to
improve the efficiency of contract research, an international presence with
strategically located facilities, financial viability and price. PAREXEL
believes that it competes favorably in these areas.
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The CRO industry is highly fragmented, with participants ranging from
several hundred small, limited-service providers to several large, full-service
CROs with global operations. PAREXEL believes that it is the fourth largest
full-service CRO, based on estimated annual net revenue. Other large CROs
include ClinTrials Research, Inc., Corning Pharmaceutical Services, Inc., a
subsidiary of Corning, Inc., Pharmaceutical Product Development, Inc. and
Quintiles Transnational Corporation. The trend toward CRO industry consolidation
has resulted in heightened competition among the larger CROs for clients and
acquisition candidates. In addition, consolidation within the pharmaceutical
industry as well as a trend toward the concentration by pharmaceutical companies
of outsourcing among fewer CROs has led to heightened competition for CRO
contracts.
GOVERNMENT REGULATION
New Drug Development -- An Overview
Before a new drug may be marketed in North America or Europe, the drug must
undergo extensive testing and regulatory review in order to determine that the
drug is safe and effective. The stages of this development process are as
follows:
- Preclinical Research (1 to 3.5 years). In vitro ("test tube") and animal
studies to establish the relative toxicity of the drug over a wide range
of doses and to detect any potential to cause birth defects or cancer. If
results warrant continuing development of the drug, the manufacturer will
file for an IND (Investigational New Drug Application), upon which the
FDA may grant permission to begin human trials.
- Clinical Trials (3.5 to 6 years)
- Phase I (6 months to 1 year). Basic safety and pharmacology testing
in 20 to 80 human subjects, usually healthy volunteers, includes
studies to determine how the drug works, how it is affected by other
drugs, where it goes in the body, how long it remains active, and
how it is broken down and eliminated from the body.
- Phase II (1 to 2 years). Basic efficacy (effectiveness) and
dose-range testing in 100 to 200 afflicted volunteers to help
determine the best effective dose, confirm that the drug works as
expected, and provide additional safety data.
- Phase III (2 to 3 years). Efficacy and safety studies in hundreds
or thousands of patients at many investigational sites (hospitals
and clinics) can be placebo-controlled trials, in which the new
drug is compared with a "sugar pill," or studies comparing the new
drug with one or more drugs with established safety and efficacy
profiles in the same therapeutic category.
- TIND (May span late Phase II, Phase III, and FDA review). When results
from Phase II or Phase III show special promise in the treatment of a
serious condition for which existing therapeutic options are limited or
of minimal value, the FDA may allow the manufacturer to make the new drug
available to a larger number of patients through the regulated mechanism
of a TIND (Treatment Investigational New Drug). Although less
scientifically rigorous than a controlled clinical trial, a TIND may
enroll and collect a substantial amount of data from tens of thousands of
patients.
- NDA Preparation and Submission. Upon completion of Phase III trials, the
manufacturer assembles the statistically analyzed data from all phases of
development into a single large document, the New Drug Application (NDA),
which today comprises, on average, roughly 100,000 pages.
- FDA Review & Approval (1 to 1.5 years). Careful scrutiny of data from
all phases of development (including a TIND) to confirm that the
manufacturer has complied with regulations and that the drug is safe and
effective for the specific use (or "indication") under study.
- Post-Marketing Surveillance and Phase IV Studies. Federal regulation
requires the manufacturer to collect and periodically report to FDA
additional safety and efficacy data on the drug for as long as the
manufacturer markets the drug (post-marketing surveillance). If the drug
is marketed outside the U.S., these reports must include data from all
countries in which the drug is sold. Additional studies (Phase IV) may be
undertaken after initial approval to find new uses for the drug, to test
new dosage
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formulations, or to confirm selected non-clinical benefits, e.g.,
increased cost-effectiveness or improved quality of life.
The clinical investigation of new drugs is highly regulated by government
agencies. The standard for the conduct of clinical research and development
studies comprises GCP, which stipulates procedures designed to ensure the
quality and integrity of data obtained from clinical testing and to protect the
rights and safety of clinical subjects. While GCP has not been formally adopted
by the FDA nor, with certain exceptions, by similar regulatory authorities in
other countries, some provisions of GCP have been included in regulations
adopted by the FDA. Furthermore, in practice, the FDA and many other regulatory
authorities require that study results submitted to such authorities be based on
studies conducted in accordance with GCP.
The FDA's regulatory requirements have served as the model for much of the
regulation for new drug development worldwide. As a result, similar regulatory
requirements exist in the other countries in which the Company operates. The
Company's regulatory capabilities include knowledge of the specific regulatory
requirements in various countries, and the Company has managed simultaneous
regulatory submissions in more than one country for a number of drug sponsors.
Beginning in 1991, the FDA and corresponding regulatory agencies of Canada,
Japan and Western Europe commenced discussions to develop harmonized standards
for preclinical and clinical studies and the format and content of applications
for new drug approvals. Data from multinational studies adhering to GCP are now
generally acceptable to the FDA, Canadian and Western European regulators.
The services provided by PAREXEL are ultimately subject to FDA regulation
in the U.S. and comparable agencies in other countries. The Company is obligated
to comply with FDA requirements governing such activities as obtaining patient
informed consents, verifying qualifications of investigators, reporting
patients' adverse reactions to drugs and maintaining thorough and accurate
records. The Company must maintain source documents for each study for specified
periods, and such documents may be reviewed by the study sponsor and the FDA
during audits. Non-compliance with GCP can result in the disqualification of
data collected during a clinical trial.
BACKLOG
Backlog consists of anticipated net revenue from letter agreements or
contracts that have been signed but not yet completed. Once work under a
contract or letter agreement commences, revenue is generally recognized over the
life of the contract, which usually lasts for 12 months or more. Backlog
excludes anticipated net revenues for projects for which the Company has
commenced work but for which a definitive contract or letter agreement has not
been executed. Backlog at September 30, 1996 was approximately $132 million, as
compared with approximately $90 million at September 30, 1995.
The Company believes that its backlog as of any date is not necessarily a
meaningful predictor of future results. Clinical studies under contracts
included in backlog are subject to termination or delay. Clients terminate or
delay contracts for a variety of reasons including, among others, the failure of
products being tested to satisfy safety requirements, unexpected or undesirable
clinical results of the product, the clients' decision to forego a particular
study, insufficient patient enrollment or investigator recruitment or production
problems resulting in shortages of the drug. Most of the Company's contracts are
terminable upon 60 to 90 days' notice by the client. The Company typically is
entitled to receive certain fees for winding down a study which is terminated or
delayed and, in some cases, a termination fee.
POTENTIAL LIABILITY AND INSURANCE
PAREXEL's clinical research services center on the testing of new drugs on
human volunteers pursuant to a study protocol. Clinical research involves a risk
of liability for personal injury or death to patients due, among other reasons,
to possible unforeseen adverse side effects or improper administration of the
new drug. Many of these patients are already seriously ill and are at risk of
further illness or death. The Company has not experienced any claims to date
arising out of any clinical trial managed or monitored by it.
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The Company believes that the risk of liability to patients in clinical
trials is mitigated by various regulatory requirements, including the role of
institutional review boards ("IRBs") and the need to obtain each patient's
informed consent. The FDA requires each human clinical trial to be reviewed and
approved by the IRB at each study site. An IRB is an independent committee that
includes both medical and non-medical personnel and is obligated to protect the
interests of patients enrolled in the trial. After the trial begins, the IRB
monitors the protocol and measures designed to protect patients, such as the
requirement to obtain informed consent.
To reduce its potential liability, PAREXEL seeks to obtain indemnity
provisions in its contracts with clients and with investigators hired by the
Company on behalf of its clients. These indemnities generally do not, however,
protect PAREXEL against certain of its own actions such as those involving
negligence. Moreover, these indemnities are contractual arrangements that are
subject to negotiation with individual clients, and the terms and scope of such
indemnities can vary from client to client and from study to study. Finally, the
financial performance of these indemnities is not secured, so that the Company
bears the risk that an indemnifying party may not have the financial ability to
fulfill its indemnification obligations. PAREXEL could be materially and
adversely affected if it were required to pay damages or incur defense costs in
connection with a claim that is outside the scope of an indemnity or where the
indemnity, although applicable, is not performed in accordance with its terms.
The Company currently maintains an errors and omissions professional
liability insurance policy. There can be no assurance that this insurance
coverage will be adequate, or that insurance coverage will continue to be
available on terms acceptable to the Company.
INTELLECTUAL PROPERTY
The Company believes that factors such as its ability to attract and retain
highly-skilled professional and technical employees and its project management
skills and experience are significantly more important to its business than are
any intellectual property rights developed by it. PAREXEL has developed certain
computer software and related methodologies that the Company has sought to
protect through a combination of contracts, copyrights and trade secrets;
however, the Company does not consider the loss of exclusive rights to any of
this software or methodology to be material to the Company's business.
EMPLOYEES
As of September 30, 1996, the Company had approximately 1,600 employees, of
which over 120 hold Ph.D. or M.D. degrees and over 225 others hold masters
degrees. Approximately 67% of the full-time employees are located in North
America and 32% are located in Europe. The Company believes that its relations
with its employees are good.
The success of the Company's business depends on its ability to attract and
retain a qualified professional, scientific and technical staff. The level of
competition among employers for skilled personnel, particularly those with
Ph.D., M.D. or equivalent degrees, is high. The Company believes that its
multinational presence, which allows for international transfers, is an
advantage in attracting employees. In addition, the Company believes that the
wide range of clinical trials in which it participates allows the Company to
offer a broad experience to clinical researchers. While the Company has not
experienced any significant difficulties in attracting or retaining qualified
staff to date, there can be no assurance the Company will be able to avoid such
difficulties in the future.
FACILITIES
PAREXEL leases all but one of its facilities. The Company's principal
executive offices are located in Waltham, Massachusetts, where it leases
approximately 100,000 square feet under leases that expire in August 2001. The
Company also maintains North American offices in Chicago, Philadelphia, Raleigh-
Durham, San Diego and Washington D.C.. The Company's European subsidiaries
maintain offices in Berlin, Frankfurt, London, Milan, Paris, Madrid and Tel
Aviv. The Company's Japanese subsidiary is located in Kobe. The Company's
Australian subsidiary is located in Sydney.
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LEGAL PROCEEDINGS
The Company is a defendant in a proceeding initiated by a former
shareholder of a business which was subsequently acquired by the Company
captioned Tallon v. Harwood, Barnett, Barnett Associates, Inc. and PAREXEL
International Corporation, 92-3496. The proceeding was filed on March 3, 1992 in
the Court of Common Pleas, Delaware County, Pennsylvania. The plaintiff, whose
shares were acquired by the other two shareholders of the acquired business
approximately three months prior to the acquisition of the business by PAREXEL,
is seeking unspecified monetary damages based on a claim that his shares were
purchased at an unfairly low price. The Company has filed an answer specifically
denying the material allegations raised in the plaintiff's complaint and raising
various affirmative defenses. The Company believes that resolution of this
matter will not have a material adverse effect on the financial position,
results of operations or business of the Company.
The Company is not a party to, and is not aware of, any proceeding
involving any material claims arising out of any clinical trial that it managed
or monitored.
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MANAGEMENT
<TABLE>
EXECUTIVE OFFICERS AND DIRECTORS
The current executive officers and directors of the Company are as follows:
<CAPTION>
NAME AGE POSITIONS
---- --- ---------
<S> <C> <C>
Josef H. von Rickenbach................ 42 President, Chief Executive Officer and
Chairman of the Board
William T. Sobo, Jr. .................. 40 Senior Vice President, Chief Financial
Officer, Treasurer and Clerk
Barry R. Philpott...................... 48 President, European Operations and
Chief Administrative Officer
R. Adrian Otte, M.D. .................. 40 Senior Vice President
Paule Dapres, M.D. .................... 52 Senior Vice President
Taylor J. Crouch....................... 37 Senior Vice President
Veronica G.H. Jordan, Ph.D. ........... 46 Senior Vice President
A. Dana Callow, Jr.(1)(2)(3)........... 44 Director
Patrick J. Fortune(1).................. 49 Director
Prof. Dr. med. Werner M. Herrmann...... 55 Director and Chief Scientific Officer
Peter Barton Hutt...................... 61 Director
James A. Saalfield(2)(3)............... 50 Director
<FN>
- ---------------
(1) Member of Compensation Committee.
(2) Member of Audit Committee.
(3) Member of Stock Option Committee.
</TABLE>
JOSEF H. VON RICKENBACH co-founded PAREXEL in 1983 and has served as a
director since then. Prior to his involvement with PAREXEL, he was European Area
Manager with ERCO (now ENSECO), Inc., a diversified testing and technical
consulting company. Mr. von Rickenbach has worked for Schering-Plough, Inc., and
3M (East), a division of Minnesota Mining and Manufacturing, Inc. Mr. von
Rickenbach received an M.B.A. from the Harvard University Graduate School of
Business Administration and has an undergraduate degree from the Lucerne College
of Economics and Administration.
WILLIAM T. SOBO, JR. is responsible for all financial and administrative
activities of the Company. Prior to joining PAREXEL in 1987, Mr. Sobo was a
supervisor at Coopers & Lybrand in the emerging business/ middle market group
and also served as the controller for a regional financial consulting firm. Mr.
Sobo is a Certified Public Accountant and received an M.B.A. from Boston
University and a B.S. from the Wharton School at the University of Pennsylvania.
BARRY R. PHILPOTT is responsible for the general management of PAREXEL's
European operations, based in London, England. Prior to joining PAREXEL in 1993,
Mr. Philpott served in several senior management positions with EG&G Inc., a
diversified technology company based in Massachusetts, most recently as General
Manager of its Worldwide Optical & Analytical Division. Previous to this
position he was the President and Managing Director of EG&G Applied Research
Corp.
R. ADRIAN OTTE, M.D., is responsible for the Company's medical monitoring
and medical writing services for ongoing clinical trials. Prior to joining
PAREXEL's operation in Germany as Vice President, Clinical Research Europe and
General Manager of PAREXEL's Central European Region, Dr. Otte served in several
senior management positions, most recently as Head of Clinical Research, at
Duphar BV, Holland. Dr. Otte received his medical degree at the Welsh National
School of Medicine and is a Fellow of the Faculty of Pharmaceutical Medicine.
PAULE DAPRES, M.D. is responsible for the Company's European clinical
operations. Prior to joining PAREXEL in 1992, Dr. Dapres served in several
senior management positions at Schering Plough, Inc. Dr. Dapres received her
M.D. degree from the University of Paris.
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TAYLOR J. CROUCH is responsible for the Company's client relations
activities, including proposal preparation, contract negotiations and account
management, and is responsible for the Company's worldwide marketing activities.
Prior to joining PAREXEL's operation in Germany as Vice President, Client
Relations and Marketing in 1991, Mr. Crouch served in several senior management
positions, most recently as Marketing Operations Manager, at Schering-Plough,
Inc. in Germany. Mr. Crouch received an M.B.A. from the University of Chicago.
VERONICA G.H. JORDAN, PH.D., is responsible for client relations and
marketing activities at PAREXEL. Before joining PAREXEL in 1987, Dr. Jordan was
Director of Marketing and Business Development at Biogen, Inc. Previously, Dr.
Jordan worked at Clinical Assays, a division of Baxter Travenol. Dr. Jordan has
a Ph.D. from Oxford University and a B.S. from Cambridge University.
A. DANA CALLOW, JR. was elected a director of the Company in June 1986.
Since December 1982, Mr. Callow has been a general partner of the general
partner of several of Boston Capital Ventures' limited partnerships including
Boston Capital Ventures International Limited Partnership, Boston Capital
Ventures Limited Partnership, Boston Capital Ventures II Limited Partnership and
Boston Capital Ventures III, Limited Partnership. Mr. Callow is a director of a
number of privately held companies, including Tektagen Incorporated and ILEX
Oncology, Inc.
PATRICK J. FORTUNE, PH.D. was elected a director of the Company in June
1996. Mr. Fortune is Vice President, Information Technology and Chief
Information Officer of Monsanto Company. From 1994 to October 1995, Mr. Fortune
was President and Chief Operating Officer, Chief Information Officer and a
member of the Board of Directors of Coram Healthcare Corporation. From 1991 to
1994, Mr. Fortune was Corporate Vice President, Information Management at
Bristol-Myers Squibb. Prior to that, Mr. Fortune was Senior Vice President and
General Manager of Packaging Corporation of America, a subsidiary of Tenneco and
held several management positions with Baxter International Inc., including
Corporate Vice President, Vice President, Research and Development and Vice
President, Information Services. Mr. Fortune has been named as a party in four
class action or derivative lawsuits, generally alleging violations of certain
anti-fraud provisions of federal securities law, filed in late 1995 against
Coram Healthcare Corporation and its other officers and directors. These actions
are currently pending and no determination can be made regarding their outcome.
PROF. DR. MED. WERNER M. HERRMANN is Chief Scientific Officer for PAREXEL
and was elected a director of the Company in April 1991. Dr. Herrmann founded a
Berlin-based provider of clinical and biostatistical and clinical data
management services in 1982, which was acquired by PAREXEL and renamed PAREXEL
GmbH Independent Pharmaceutical Research Organization ("PAREXEL GmbH"). Prior to
1982, Dr. Herrmann was head of the Psychiatry and Neurology Branch, Department
of Experimental and Clinical Pharmacology, Institute for Drugs, Federal Health
Office, Berlin, Germany, from 1979 to 1982. Dr. Herrmann is a Full Professor at
the Department of Psychiatry, Free University of Berlin.
PETER BARTON HUTT was elected a director of the Company in March 1989. Mr.
Hutt is a partner in the Washington, D.C. law firm of Covington & Burling,
specializing in food and drug law and in government regulation of health and
safety. He is a director of several pharmaceutical and drug development
companies, including IDEC Pharmaceuticals, Inc., Emisphere Technologies, Inc.,
Interneuron Pharmaceuticals, Inc., Vivus, Inc., Sparta, Inc. and Cell Genesys,
Inc. From 1971 to 1975, Mr. Hutt was Chief Counsel for the FDA.
JAMES A. SAALFIELD was elected a director of the Company in January 1993.
Mr. Saalfield is a retired general partner of Fleet Venture Partners I, II, III
and IV and managing general partner of Dean's Hill L.P. and The Still River Fund
and President of The Still River Management Company. Mr. Saalfield served as the
senior vice president of Fleet Venture Resources, Inc. and senior vice president
of Fleet Growth Resources, Inc. from 1985 to 1993. Mr. Saalfield is a director
of a number of companies, including KVH Industries Inc., a data acquisition and
distribution company, Physiometrix Inc., a medical device company, and a number
of private companies.
Each director holds office until that director's successor has been duly
elected and qualified. Upon the closing of the Company's initial public
offering, the Company's Board of Directors was divided into three
33
<PAGE> 35
classes, with staggered three-year terms. Messrs. Herrmann and Fortune serve in
the class whose term expires in 1996; Messrs. Saalfield and Hutt serve in the
class whose term expires in 1997; and Messrs. von Rickenbach and Callow serve in
the class whose term expires in 1998. Upon the expiration of the term of each
class of directors, persons comprising such class of persons will be elected for
a three-year term at the next succeeding annual meeting of stockholders.
Mr. Callow, a director, was granted a non-qualified option to purchase
100,000 shares of Common Stock in March 1989 at an exercise price of $0.75 per
share. This option was exercised in full in March 1994 and the shares
transferred to Boston Capital Ventures International Limited Partnership and
Boston Capital Ventures Limited Partnership. Mr. Hutt, a director, was granted a
non-qualified option to purchase 17,500 shares of Common Stock in March 1989 at
an exercise price of $0.75 per share and a non-qualified option to purchase
10,000 shares of Common Stock in March 1994 at an exercise price of $12.50 per
share. Messrs. Callow and Saalfield, current non-employee directors of the
Company, were each granted a non-qualified option to purchase 10,000 shares of
Common Stock in May 1994 at an exercise price of $12.50 per share. Mr. Hutt's
March 1994 option was initially exercisable as to 3,333 shares, with the
remaining shares vesting in two installments in March 1995 and March 1996,
subject to specified meeting attendance requirements. The May 1994 options
granted to Messrs. Callow and Saalfield become exercisable in three equal annual
installments, beginning on the first anniversary of the date of grant, subject
to specified meeting attendance requirements.
The Company's 1995 Non-Employee Director Stock Option Plan (the "Director
Plan") provides for the grant of options to purchase a maximum of 300,000 shares
of Common Stock of the Company to non-employee directors of the Company. Under
the Director Plan, each non-employee director who was a member of the Board of
Directors on the effective date of the Company's initial public offering
received options under the Director Plan. In addition, each non-employee
director first elected to the Board of Directors after the effective date of the
Company's initial public offering will receive an option for 10,000 shares on
the date of his or her election. The Director Plan further provides for an
automatic grant of an option for 10,000 shares on the first business day of July
of each year, to each non-employee director who has continuously served for the
lesser of (i) the previous full year or (ii) since the last annual meeting of
stockholders at which directors were elected. The exercise price per share for
all options granted under the Director Plan will be equal to the market price of
the Common Stock as of the date of grant. The options granted annually will
become exercisable in three equal annual installments beginning on the first
anniversary of the date of grant, subject to specified meeting attendance
requirements. Options to purchase an aggregate of 126,500 shares of Common Stock
have been granted to date under the Director Plan. The only cash compensation
payable to non-employee directors is $1,500 per day of in person Board meetings
(with not more than one $1,500 payment being made for any one day). Outside
directors are reimbursed for their reasonable out-of-pocket expenses incurred in
attending meetings of the Board of Directors and Board committees.
Executive officers of the Company are elected by the Board of Directors on
an annual basis and serve until their successors have been duly elected and
qualified. There are no family relationships among any of the executive officers
or directors of the Company.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. von Rickenbach, the President, Chief Executive Officer, and Chairman of
the Company, served as a member of the Compensation Committee of the Board of
Directors until July 1, 1996.
34
<PAGE> 36
EXECUTIVE COMPENSATION
<TABLE>
The following table summarizes the compensation paid or accrued by the
Company for services rendered for fiscal 1995 and 1996 to each of the Company's
executive officers or former executive officers whose total salary and bonus
exceeded $100,000 during fiscal 1996. The Company did not grant any restricted
stock awards or stock appreciation rights or make any long-term incentive plan
payouts during fiscal 1996. The Company does not have a defined benefit or
actuarial plan.
SUMMARY COMPENSATION TABLE
<CAPTION>
LONG-TERM
COMPENSATION
------------
ANNUAL COMPENSATION AWARDS
---------------------------------- SECURITIES
FISCAL OTHER ANNUAL UNDERLYING/ ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY(1) BONUS COMPENSATION OPTIONS(#) COMPENSATION
- --------------------------- ------ --------- ------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Josef H. von Rickenbach................ 1996 $199,188 $ 0 $ 5,144(2) 50,000 $38,825(3)
President, Chief Executive Officer 1995 183,545 0 26,973(4) 0 3,450
and Chairman
Barry R. Philpott...................... 1996 162,530 50,694 12,151(2) 15,000 13,002(5)
President, European Operations 1995 146,300 0 -- 0 11,704(5)
John G. Lee, Ph.D.(6).................. 1996 151,249 52,186 -- 10,000 10,483(7)
Senior Vice President 1995 139,135 0 -- 0 2,964(5)
R. Adrian Otte, M.D. .................. 1996 152,079 40,220 -- 12,000 12,454(8)
Senior Vice President 1995 129,539 10,125 -- 5,000 3,675(5)
Taylor J. Crouch....................... 1996 150,968 16,171 0 12,000 3,570(5)
Senior Vice President 1995 131,176 0 0 0 2,758(5)
<FN>
- ---------------
(1) Includes commissions.
(2) Automobile allowance.
(3) Includes $3,222 contributions to defined contribution plans and $35,603 for
unused paid vacation.
(4) Includes $11,084 automobile allowance and $15,889 related to interest on
stock subscriptions receivable.
(5) Contributions to defined contribution plans.
(6) In a letter dated September 4, 1996, Dr. Lee resigned as an employee of the
Company effective September 30, 1996.
(7) Includes $3,861 contributions to defined contribution plans and $6,622 for
unused paid vacation.
(8) Includes $3,806 contributions to defined contribution plans and $8,648 for
unused paid vacation.
</TABLE>
35
<PAGE> 37
OPTIONS
<TABLE>
The following table sets forth certain information regarding options
granted during the fiscal year ended June 30, 1996 by the Company to the
executives named in the Summary Compensation Table above.
OPTION GRANTS IN LAST FISCAL YEAR
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
PERCENT OF ANNUAL RATE OF
TOTAL STOCK PRICE
OPTIONS APPRECIATION FOR
GRANTED TO OPTION TERM(1)
OPTIONS EMPLOYEES IN EXERCISE OR EXPIRATION --------------------
NAME GRANTED(#) FISCAL YEAR BASE PRICE DATE 5% 10%
---- ---------- ------------ ----------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Josef H. von Rickenbach....... 30,000 9.3% $15.00 11/22/2003 $214,855 $514,615
20,000 6.2 37.50 4/19/2004 358,092 857,692
Barry R. Philpott............. 5,000 1.6 15.00 11/22/2003 35,809 85,769
10,000 3.1 37.50 4/19/2004 179,046 428,846
John G. Lee, Ph.D.(2)......... 5,000 1.6 15.00 11/22/2003 35,809 85,769
5,000 1.6 37.50 4/19/2004 89,523 214,423
R. Adrian Otte, M.D. ......... 2,000 0.6 15.00 11/22/2003 14,324 34,308
10,000 3.1 37.50 4/19/2004 179,046 428,846
Taylor J. Crouch.............. 2,000 0.6 15.00 11/22/2003 14,324 34,308
10,000 3.1 37.50 4/19/2004 179,046 428,846
<FN>
- ---------------
(1) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based on assumed rates of stock price appreciation of 5% and 10%
compounded annually from the date the respective options were granted to
their expiration dates. These numbers are calculated based on rules
promulgated by the Securities and Exchange Commission and do not represent
an estimate by the Company of its future stock price growth. Actual gains,
if any, on stock option exercises and Common Stock holdings are dependent
on the timing of such exercise and the future performance of Common Stock.
There can be no assurances that the rates of appreciation assumed in this
table can be achieved or that the amounts reflected will be received by the
individuals.
(2) In a letter dated September 4, 1996, Dr. Lee resigned as an employee of the
Company effective September 30, 1996.
</TABLE>
36
<PAGE> 38
The following table sets forth information concerning the value of
unexercised options as of June 30, 1996 held by the executives named in the
Summary Compensation Table above. No options were exercised during the year
ended June 30, 1996 by such executives.
<TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<CAPTION>
VALUE OF UNEXERCISED,
NUMBER OF UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT FISCAL
SHARES VALUE FISCAL YEAR-END YEAR-END(2)
ACQUIRED ON REALIZED --------------------------- ---------------------------
NAME EXERCISE(#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Josef H. von Rickenbach... 40,000 $1,396,000 50,000 20,000 $1,950,500 $215,000
Barry R. Philpott......... 0 -- 6,000 19,000 214,500 416,750
John G. Lee, Ph.D.(3)..... 10,000 349,000 50,000 10,000 2,382,500 220,000
R. Adrian Otte, M.D. ..... 0 -- 4,000 18,000 143,000 388,500
Taylor J. Crouch.......... 0 -- 4,800 13,200 183,600 219,900
<FN>
- ---------------
(1) Amounts disclosed in this column do not reflect amounts actually received by
the Named Executive Officers but are calculated based on the difference
between the fair market value of Common Stock on the date of exercise and
exercise price of the options. Named Executive Officers will receive cash
only if and when they sell the Common Stock issued upon exercise of the
options and the amount of cash, if any, received by such individuals is
dependent on the price of the Company's Common Stock at the time of such
sale.
(2) Value is based on the difference between the option exercise price and the
fair market value at 1996 year-end ($48.25 per share) multiplied by the
number of shares underlying the option.
(3) In a letter dated September 4, 1996, Dr. Lee resigned as an employee of the
Company effective September 30, 1996.
</TABLE>
In September 1995, the Company adopted its 1995 Stock Plan which provides
for the issuance of a maximum of 500,000 shares of Common Stock pursuant to the
grant of incentive stock options to officers and other employees and the grant
of non-qualified stock options or stock awards to employees, consultants,
directors and officers of the Company. On September 19, 1996, the Board of
Directors of the Company increased the maximum number of shares of Common Stock
issuable pursuant to the 1995 Stock Plan to 1,000,000 shares, subject to the
approval of the stockholders of the Company at the 1996 Annual Meeting of
Stockholders to be held November 14, 1996. As of October 15, 1996, options to
purchase 411,350 shares have been granted under the 1995 Stock Plan at a
weighted average exercise price of $34.42.
In September 1995, the Company adopted its 1995 Employee Stock Purchase
Plan (the "1995 Purchase Plan") which provides for the issuance of a maximum of
300,000 shares of Common Stock pursuant to the exercise of nontransferable
options granted to participating employees. All employees of the Company, except
employees who by participating would own five percent or more of the Company's
Common Stock, whose customary employment is more than 20 hours per week and more
than five months in any calendar year are eligible to participate in the 1995
Purchase Plan. To participate in the 1995 Purchase Plan, an employee must
authorize the Company to deduct an amount (not less than one percent nor more
than ten percent of a participant's total compensation) from his or her pay
during six-month periods commencing on September 1 and March 1 of each year
(each a "Plan Period"), but in no case shall an employee be entitled to purchase
more than 500 shares in any Plan Period. The exercise price for the option for
each Plan Period is 85% of the lesser of the average market price of the Common
Stock on the first or last business day of the Plan Period. If an employee is
not a participant on the last business day of the Plan Period, such employee is
not entitled to exercise his or her option, and the amount of his or her
accumulated payroll deductions will be refunded without interest. An employee's
rights under the 1995 Purchase Plan terminate upon his or her voluntary
withdrawal from the plan at any time or upon termination of employment. As of
October 15, 1996,
37
<PAGE> 39
approximately 530 employees were enrolled in the 1995 Purchase Plan and options
to purchase an aggregate of 57,479 shares of Common Stock had been exercised
pursuant to the 1995 Purchase Plan.
EMPLOYMENT AGREEMENTS
The Company is party to an employment agreement dated July 2, 1987 with Dr.
Veronica G.H. Jordan. Currently, Dr. Jordan is paid an annual base salary of
$80,000. The employment agreement with Dr. Jordan may be terminated for cause
upon the unanimous action of the Company's Board of Directors.
The Company and Barry R. Philpott are parties to a letter agreement of
employment dated July 6, 1993. Mr. Philpott's current annual base salary is
[British Sterling Pound]120,000 (approximately $190,000). The Company may
terminate Mr. Philpott's employment upon two months' notice and upon payment of
severance benefits equal to one month's base salary per full year of service,
with a maximum payment equal to six months' base salary.
The executive officers of the Company are bound by the terms of a Key
Employee Confidentiality and Invention Agreement, pursuant to which confidential
information proprietary to the Company obtained during the term of employment by
the Company may not be disclosed by the employee during or subsequent to such
term of employment, and pursuant to which the employee agrees not to compete
with the business of the Company during and for one year subsequent to the term
of employment.
In connection with the acquisition by the Company of PAREXEL GmbH, Dr.
Herrmann entered into an employment agreement with PAREXEL GmbH, dated March 11,
1991. The employment agreement was amended as of June 30, 1993. Dr. Herrmann
also entered into an employment agreement with the Company on June 30, 1993. The
employment agreements with Dr. Herrmann expire on June 30, 1997. The employment
agreement with the Company provides for a monthly base salary of approximately
DM 11,400 (approximately $6,900).
38
<PAGE> 40
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On September 1, 1993, the Company loaned $33,500 to Mr. von Rickenbach for
the purchase of 6,700 shares of the Company's Series D Convertible Preferred
Stock. The principal amount of the loan, plus interest accruing at a rate of
5.32% from the date thereof, was paid in full upon the closing of the Company's
initial public offering in November 1995.
The Company has adopted a policy whereby all future transactions between
the Company and its officers, directors and affiliates will be on terms no less
favorable to the Company than could be obtained from unrelated third parties and
will be approved by a majority of the disinterested members of the Company's
Board of Directors.
39
<PAGE> 41
PRINCIPAL AND SELLING STOCKHOLDERS
<TABLE>
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of October 15, 1996 (unless otherwise
indicated): (i) by each person who is known by the Company to own beneficially
more than 5% of the outstanding shares of Common Stock; (ii) by each director
and each executive officer or former executive officer of the Company named in
the Summary Compensation Table; (iii) by each Selling Stockholder; and (iv) by
all current directors and executive officers of the Company as a group. Unless
otherwise indicated below, to the knowledge of the Company, all persons listed
below have sole voting and investment power with respect to their shares of
Common Stock, except to the extent authority is shared by spouses under
applicable law.
<CAPTION>
SHARES SHARES
BENEFICIALLY BENEFICIALLY
OWNED PRIOR TO OWNED AFTER THIS
THIS OFFERING(1) NUMBER OF OFFERING(1)
DIRECTORS, EXECUTIVE OFFICERS AND ----------------- SHARES BEING -----------------
5% STOCKHOLDERS NUMBER PERCENT OFFERED NUMBER PERCENT
- --------------------------------- ------ ------- ------------ ------ -------
<S> <C> <C> <C> <C> <C>
INVESCO PLC and certain affiliates(2)............ 614,500 7.3 -- 614,500 6.5
11 Devonshire Square
London EC2M 4YR
ENGLAND
Josef H. von Rickenbach(3)....................... 402,390 4.7 30,000 372,390 3.9
Werner M. Herrmann............................... 88,493 1.0 -- 88,493 *
A. Dana Callow, Jr.(4)........................... 77,748 * 15,000 62,748 *
John G. Lee(5)................................... 48,000 * -- 48,000 *
Peter Barton Hutt(6)............................. 36,166 * 3,600 32,566 *
James A. Saalfield(7)............................ 18,666 * -- 18,666 *
Barry R. Philpott(8)............................. 8,400 * -- 8,400 *
Taylor J. Crouch(9).............................. 7,750 * -- 7,750 *
R. Adrian Otte(10)............................... 6,500 * -- 6,500 *
Patrick J. Fortune............................... 0 * -- 0 *
All current executive officers and
directors as a group (12 persons)(11).......... 766,213 8.8 48,600 717,613 7.4
OTHER SELLING STOCKHOLDERS
Martin J. Miller................................. 339,091 4.0 125,000 214,091 2.2
Veronica G. H. Jordan(12)........................ 65,000 * 5,000 60,000 *
William T. Sobo, Jr.(13)......................... 51,150 * 5,000 46,150 *
Howard M. Tag(14)................................ 41,952 * 15,700 26,252 *
Peter B. Malamis(15)............................. 24,274 * 7,500 16,774 *
Laurie G. Hughes(16)............................. 3,963 * 1,300 2,663 *
<FN>
- ---------------
* Less than 1% of the outstanding Common Stock.
(1) The number of shares of Common Stock deemed outstanding prior to this
offering includes: (i) 8,448,968 shares of Common Stock outstanding as of
October 15, 1996; and (ii) shares issuable pursuant to options held by the
respective person or group which may be exercised within 60 days after
October 15, 1996 ("presently exercisable" stock options), as set forth
below. The number of shares of Common Stock deemed outstanding after this
offering includes an additional 1,066,900 shares of Common Stock which are
being offered for sale by the Company in this offering.
(2) Ownership is stated as of April 5, 1996. Shares are held by INVESCO on
behalf of other persons have the right to receive, or the power to direct
the receipt of, dividends from, or the proceeds from the sale of, the
Company's Common Stock. INVESCO disclaims beneficial ownership of such
shares.
(3) Includes 321,183 shares of Common Stock owned by The Josef H. von
Rickenbach GRAT dated November 17, 1995. Includes 30,000 shares of Common
Stock issuable pursuant to presently exercisable stock options.
(4) Includes 44,166 shares of Common Stock issuable pursuant to presently
exercisable stock options. The shares to be offered may be offered by Mr.
Callow or by a charitable remainder unitrust.
</TABLE>
40
<PAGE> 42
(5) Includes 44,750 shares of Common Stock issuable pursuant to presently
exercisable stock options. In a letter dated September 4, 1996, Dr. Lee
resigned as an employee of the Company effective September 30, 1996.
(6) Includes 36,166 shares of Common Stock issuable pursuant to presently
exercisable stock options.
(7) Includes 16,666 shares of Common Stock issuable pursuant to presently
exercisable stock options.
(8) Includes 6,000 shares of Common Stock issuable pursuant to presently
exercisable stock options.
(9) Includes 5,300 shares of Common Stock issuable pursuant to presently
exercisable stock options.
(10) Includes 4,000 shares of Common Stock issuable pursuant to presently
exercisable stock options.
(11) Includes 209,548 shares of Common Stock issuable pursuant to presently
exercisable stock options.
(12) Includes 11,250 shares of Common Stock issuable pursuant to presently
exercisable stock options.
(13) Includes 50,000 shares of Common Stock issuable pursuant to presently
exercisable stock options.
(14) Includes 5,200 shares of Common Stock issuable pursuant to presently
exercisable stock options.
(15) Includes 13,900 shares of Common Stock issuable pursuant to presently
exercisable stock options.
(16) Includes 1,000 shares of Common Stock issuable pursuant to presently
exercisable stock options.
41
<PAGE> 43
DESCRIPTION OF CAPITAL STOCK
The current authorized capital stock of the Company is 25,000,000 shares of
Common Stock, par value $.01 per share, and 5,000,000 shares of Preferred Stock,
par value $.01 per share. On September 19, 1996, the Board of Directors of the
Company voted, subject to the approval of the Stockholders of the Company at the
1996 Annual Meeting of Stockholders to be held November 14, 1996, to increase
the authorized Common Stock to 50,000,000 shares.
COMMON STOCK
Immediately after this offering, there will be 9,515,868 shares of Common
Stock outstanding.
Holders of Common Stock are entitled to one vote for each share held on all
matters submitted to a vote of stockholders. Holders of Common Stock do not have
cumulative voting rights. Accordingly, holders of a majority of the shares of
Common Stock entitled to vote in any election of directors may elect all of the
directors standing for election. Holders of Common Stock are entitled to receive
ratably such dividends, if any, as may be declared by the Board of Directors out
of funds legally available therefor, subject to any preferential dividend rights
of any outstanding Preferred Stock. Upon the liquidation, dissolution or winding
up of the Company, the holders of Common Stock are entitled to receive ratably
the net assets of the Company available after the payment of all debts and other
liabilities and subject to the prior rights of any outstanding Preferred Stock.
Holders of the Common Stock have no preemptive, subscription, redemption or
conversion rights. The outstanding shares of Common Stock are, and the shares
offered by the Company in this offering will be, when issued and paid for, fully
paid and nonassessable. The rights, preferences and privileges of holders of
Common Stock are subject to, and may be adversely affected by, the rights of the
holders of shares of any series of Preferred Stock which the Company may
designate and issue in the future. There are no shares of Preferred Stock
outstanding.
PREFERRED STOCK
The Board of Directors is authorized, subject to certain limitations
prescribed by law, without further stockholder approval, to issue from time to
time up to an aggregate of 5,000,000 shares of Preferred Stock in one or more
series and to fix or alter the designations, preferences, rights and any
qualifications, limitations or restrictions of the shares of each such series
thereof, including the dividend rights, dividend rates, conversion rights,
voting rights, terms of redemption (including sinking fund provisions),
redemption price or prices, liquidation preferences and the number of shares
constituting any series or designations of such series. The issuance of
Preferred Stock may have the effect of delaying, deferring or preventing a
change of control of the Company. The Company has no present plans to issue any
shares of Preferred Stock.
MASSACHUSETTS LAW AND CERTAIN PROVISIONS OF THE COMPANY'S RESTATED
ARTICLES OF ORGANIZATION AND BY-LAWS
The Company believes that it has more than 200 beneficial stockholders,
thus making it subject to Chapter 110F of the Massachusetts General Laws, an
anti-takeover law. In general, this statute prohibits a publicly held
Massachusetts corporation from engaging in a "business combination" with an
"interested stockholder" for a period of three years after the date of the
transaction in which the person becomes an interested stockholder, unless (i)
the interested stockholder obtains the approval of the board of directors prior
to becoming an interested stockholder, (ii) the interested stockholder acquires
90% of the outstanding voting stock of the corporation (excluding shares held by
certain affiliates of the corporation) at the time it becomes an interested
stockholder, or (iii) the business combination is approved by both the board of
directors and the holders of two-thirds of the outstanding voting stock of the
corporation (excluding shares held by the interested stockholder). An
"interested stockholder" is a person who, together with its affiliates and
associates, owns (or at any time within the prior three years did own) 5% or
more of the outstanding voting stock of the corporation. A "business
combination" includes a merger, a stock or asset sale, and certain other
transactions resulting in a financial benefit to the interested stockholder. The
Company may at any time elect not to be governed by Chapter 110F by vote of a
majority of its stockholders, but such an amendment would not be
42
<PAGE> 44
effective for twelve months and would not apply to a business combination with
any person who became an interested stockholder prior to the adoption of the
amendment.
The Massachusetts Business Corporation Law generally requires that
publicly-held Massachusetts corporations have a classified board of directors
consisting of three classes as nearly equal in size as possible, unless those
corporations elect to opt out of the statute's coverage. By vote of the Board of
Directors, the Company has elected to opt out of the classified board provisions
of this statute and has adopted separate classified Board provisions in its
Restated Articles of Organization. See "Management -- Executive Officers and
Directors."
The Company's By-Laws include a provision that excludes the Company from
the applicability of Massachusetts General Laws Chapter 110D, entitled
"Regulation of Control Share Acquisitions." In general, this statute provides
that any stockholder of a corporation subject to this statute who acquires 20%
or more of the outstanding voting stock of a corporation may not vote such stock
unless the stockholders of the corporation so authorize. The Board of Directors
may amend the Company's By-Laws at any time to subject the Company to this
statute prospectively.
The Company's By-Laws require that nominations for the Board of Directors
made by a stockholder comply with certain notice procedures. A notice by a
stockholder of a planned nomination must be given not less than 60 and not more
than 90 days prior to a scheduled meeting, provided that if less than 70 days'
notice is given of the date of the meeting, a stockholder will have ten days
within which to give such notice. The stockholder's notice of nomination must
include particular information about the stockholder, the nominee and any
beneficial owner on whose behalf the nomination is made. The Company may require
any proposed nominee to provide such additional information as is reasonably
required to determine the eligibility of the proposed nominee.
The By-Laws also require that a stockholder seeking to have any business
conducted at a meeting of stockholders give notice to the Company not less than
60 and not more than 90 days prior to the scheduled meeting, provided that if
less than 70 days' notice is given of the date of the meeting, a stockholder
will have ten days within which to give such notice. The notice from the
stockholder must describe the proposed business to be brought before the meeting
and include information about the stockholder making the proposal, any
beneficial owner on whose behalf the proposal is made, and any other stockholder
known to be supporting the proposal. The By-Laws require the Company to call a
special stockholders' meeting at the request of stockholders holding at least
33 1/3% of the voting power of the Company.
The Company's Restated Articles of Organization include provisions
eliminating the personal liability of the Company's directors for monetary
damages resulting from breaches of their fiduciary duty to the extent permitted
by the Massachusetts Business Corporation Law. Additionally, the Company's
Restated Articles of Organization provide that the Company shall indemnify each
person who is or was a director or officer of the Company, and each person who
is or was serving or has agreed to serve at the request of the Company as a
director or officer of, or in a similar capacity with, another organization or
in any capacity with respect to any employee benefit plan of the Company,
against all liabilities, costs and expenses reasonably incurred by any such
persons in connection with the defense or disposition of or otherwise in
connection with or resulting from any action, suit or other proceeding in which
they may be involved by reason of being or having been such a director or
officer, or by reason of any action taken or not taken in such capacity, except
with respect to any matter as to which such person shall have been finally
adjudicated by a court of competent jurisdiction not to have acted in good faith
in the reasonable belief that his or her action was in the best interests of the
Company or, to the extent such matter relates to service with respect to an
employee benefit plan, in the best interests of the participants or
beneficiaries of such employee benefit plan.
The Restated Articles of Organization provide that certain transactions,
such as the sale, lease or exchange of all or substantially all of the Company's
property and assets and the merger or consolidation of the Company into or with
any other corporation, may be authorized by the approval of the holders of a
majority of the shares of each class of stock entitled to vote thereon, rather
than by two-thirds as otherwise provided by statute, provided that the
transactions have been authorized by a majority of the members of the Board of
43
<PAGE> 45
Directors and the requirements of any other applicable provisions of the
Restated Articles of Organization have been met.
Certain of the provisions of the Restated Articles of Organization and
By-Laws discussed above would discourage or make more difficult a proxy contest
or the assumption of control by a holder of a substantial block of the Company's
stock. Such provisions could also have the effect of discouraging a third party
from making a tender offer or otherwise attempting to obtain control of the
Company, even though such an attempt might be beneficial to the Company and its
stockholders. In addition, since the Restated Articles of Organization and
By-Laws are designed to discourage accumulations of large blocks of the
Company's stock by purchasers whose objective is to have stock repurchased by
the Company at a premium, such provisions could tend to reduce the temporary
fluctuations in the market price of the Company's stock which are caused by such
accumulations. Accordingly, stockholders could be deprived of certain
opportunities to sell their stock at a temporarily higher market price.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is Boston EquiServe
Limited Partnership.
44
<PAGE> 46
UNDERWRITING
<TABLE>
Under the terms and subject to the conditions contained in the Underwriting
Agreement dated the date hereof, each Underwriter named below has severally
agreed to purchase, and the Company and the Selling Stockholders have agreed to
sell to such Underwriter, shares of Common Stock which equal the number of
shares set forth opposite the name of such Underwriter below.
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
----------- ----------
<S> <C>
Smith Barney Inc. ........................................................
William Blair & Company, L.L.C. ..........................................
Lehman Brothers Inc. .....................................................
Adams, Harkness & Hill, Inc. .............................................
---------
Total........................................................... 1,275,000
=========
</TABLE>
The Underwriters are obligated to take and pay for all shares of Common
Stock offered hereby (other than those covered by the over-allotment option
described below) if any such shares are taken.
The Underwriters, for whom Smith Barney Inc., William Blair & Company,
L.L.C., Lehman Brothers Inc. and Adams, Harkness & Hill, Inc. are acting as
Representatives, propose initially to offer part of the shares of Common Stock
directly to the public at the public offering price set forth on the cover page
hereof and part to certain dealers at a price that represents a concession not
in excess of $ per share under the public offering price. The Underwriters may
allow, and such dealers may reallow, a concession not in excess of $ per share
to other Underwriters or to certain other dealers. After the initial offering of
the shares to the public, the offering price and such concessions may be changed
by the Underwriters.
The Company has granted to the Underwriters an option, exercisable for 30
days from the date of this Prospectus, to purchase up to an aggregate of 191,250
additional shares of Common Stock at the public offering price set forth on the
cover page hereof less underwriting discounts and commissions. The Underwriters
may exercise such option to purchase additional shares solely for the purpose of
covering over-allotments, if any, incurred in connection with the sale of the
shares offered hereby. To the extent such option is exercised, each Underwriter
will become obligated, subject to certain conditions, to purchase approximately
the same percentage of such additional shares as the number set forth next to
such Underwriter's name in the preceding table bears to the total number of
shares in such table.
The Company, the Selling Stockholders and the Underwriters have agreed to
indemnify each other against certain liabilities, including liabilities under
the Securities Act.
The Company, its executive officers and directors and the Selling
Stockholders, holding in the aggregate approximately 10.0% of the Company's
outstanding Common Stock, after giving effect to this offering, have agreed
that, for a period of 90 days after the date of this Prospectus, they will not,
without the prior written consent of Smith Barney Inc., offer, sell, contract to
sell or otherwise dispose of any shares of Common Stock or any securities
convertible into, or exercisable or exchangeable for, Common Stock except, in
the case of the Company, in certain limited circumstances.
The Underwriters and certain selling group members that currently act as
market makers for the Common Stock may engage in "passive market making" in the
Common Stock in accordance with Rule 10b-6A under the Exchange Act. Rule 10b-6A
permits, upon the satisfaction of certain conditions, underwriters and selling
group members participating in a distribution that are also market makers in the
security being distributed to engage in limited market making transactions
during the period when Rule 10b-6 under the Exchange Act would otherwise
prohibit such activity. In general, under Rule 10b-6A, any Underwriter or
selling group member engaged in passive market making in the Common Stock (i)
may not effect transactions in, or display bids for, the Common Stock at a price
that exceeds the highest bid for the Common Stock displayed by a market maker
that is not participating in the distribution of the Common Stock, (ii) may not
have net daily purchases of the Common Stock that exceed 30% of the average
daily trading volume in such stock for the two full consecutive calendar months
immediately preceding the filing
45
<PAGE> 47
date of the registration statement of which this Prospectus forms a part and
(iii) must identify its bid or bids as made by a passive market maker.
The Common Stock is quoted on the Nasdaq National Market under the symbol
"PRXL."
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company and the Selling Stockholders by Testa, Hurwitz & Thibeault,
LLP, Boston, Massachusetts. Certain legal matters relating to this offering will
be passed upon for the Underwriters by Ropes & Gray, Boston, Massachusetts.
EXPERTS
The consolidated financial statements as of June 30, 1995 and 1996 and for
each of the three years in the period ended June 30, 1996 included in this
Prospectus and the financial statement schedule included in the Registration
Statement have been so included in reliance on the report of Price Waterhouse
LLP, independent accountants, given on the authority of said firm as experts in
auditing and accounting.
46
<PAGE> 48
PAREXEL INTERNATIONAL CORPORATION
<TABLE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<S> <C>
Report of independent accountants..................................................... F-2
Consolidated statement of operations for the three years ended June 30, 1996 and
unaudited for the three months ended September 30, 1995 and 1996.................... F-3
Consolidated balance sheet at June 30, 1995 and 1996 and unaudited at
September 30, 1996.................................................................. F-4
Consolidated statement of stockholders' equity for the three years ended June 30,
1996 and unaudited for the three months ended September 30, 1996.................... F-5
Consolidated statement of cash flows for the three years ended June 30, 1996 and
unaudited for the three months ended September 30, 1995 and 1996.................... F-6
Notes to consolidated financial statements............................................ F-7
</TABLE>
F-1
<PAGE> 49
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
PAREXEL International Corporation
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, of stockholders' equity and of cash flows
present fairly, in all material respects, the financial position of PAREXEL
International Corporation and its subsidiaries at June 30, 1995 and 1996, and
the results of their operations and their cash flows for each of the three years
in the period ended June 30, 1996, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Boston, Massachusetts
August 22, 1996
F-2
<PAGE> 50
PAREXEL INTERNATIONAL CORPORATION
<TABLE>
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except per share data)
<CAPTION>
THREE MONTHS ENDED
FOR THE YEAR ENDED JUNE 30, SEPTEMBER 30,
------------------------------- -------------------
1994 1995 1996 1995 1996
-------- -------- --------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue.................................... $ 69,646 $ 79,928 $121,869 $24,369 $43,152
Reimbursed costs........................... (11,644) (21,355) (33,863) (6,396) (10,122)
-------- -------- -------- ------- -------
Net revenue................................ 58,002 58,573 88,006 17,973 33,030
-------- -------- -------- ------- -------
Costs and expenses:
Direct costs............................. 38,244 42,140 60,141 12,465 22,821
Selling, general and administrative...... 13,631 13,294 19,027 3,834 6,617
Depreciation and amortization............ 2,435 2,251 2,343 515 883
Impairment of long-lived assets.......... -- 11,253 -- -- --
-------- -------- -------- ------- -------
54,310 68,938 81,511 16,814 30,321
-------- -------- -------- ------- -------
Income (loss) from operations.............. 3,692 (10,365) 6,495 1,159 2,709
Interest income............................ 250 213 1,297 90 433
Interest expense........................... (71) (172) (162) (36) (55)
Other income (expense), net................ (375) 14 22 44 (14)
-------- -------- -------- ------- -------
(196) 55 1,157 98 364
-------- -------- -------- ------- -------
Income (loss) before provision for income
taxes and cumulative effect of
accounting change........................ 3,496 (10,310) 7,652 1,257 3,073
Provision for income taxes................. 1,573 320 3,053 515 1,137
-------- -------- -------- ------- -------
Net income (loss) before cumulative effect
of accounting change..................... 1,923 (10,630) 4,599 742 1,936
Cumulative effect of change in accounting
for income taxes......................... 500 -- -- -- --
-------- -------- -------- ------- -------
Net income (loss).......................... $ 2,423 $(10,630) $ 4,599 $ 742 $ 1,936
======== ======== ======== ======= =======
Net income (loss) per share:
Before cumulative effect of accounting
change................................ $ 0.35 $ (12.61) $ 0.68 $ 0.14 $ 0.22
Cumulative effect of change in
accounting for income taxes........... 0.09 -- -- -- --
-------- -------- -------- ------- -------
Net income (loss) per share................ $ 0.44 $ (12.61) $ 0.68 $ 0.14 $ 0.22
======== ======== ======== ======= =======
Weighted average common and common
equivalent shares outstanding............ 5,747 843 6,780 5,734 8,628
======== ======== ======== ======= =======
</TABLE>
F-3
<PAGE> 51
PAREXEL INTERNATIONAL CORPORATION
<TABLE>
CONSOLIDATED BALANCE SHEET
(in thousands, except share data)
<CAPTION>
JUNE 30,
-------------------- SEPTEMBER 30,
1995 1996 1996
---- ---- -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents:
Unrestricted.................................... $ 5,315 $ 16,243 $ 9,281
Restricted...................................... 1,360 858 1,370
Marketable securities.............................. 1,500 29,319 26,425
Accounts receivable, net........................... 24,675 39,277 49,596
Other current assets............................... 4,003 6,905 6,960
------- -------- --------
Total current assets....................... 36,853 92,602 93,632
Property and equipment, net.......................... 4,671 8,193 12,210
Other assets......................................... 1,726 1,606 1,828
------- -------- --------
$43,250 $102,401 $107,670
======= ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt............... $ 692 $ 762 $ 774
Accounts payable................................... 2,466 7,003 9,014
Advance billings................................... 14,032 20,008 18,482
Other current liabilities.......................... 8,089 11,401 10,946
------- -------- --------
Total current liabilities.................. 25,279 39,174 39,216
Long-term debt....................................... 633 360 304
Other liabilities.................................... 1,814 1,655 1,778
------- -------- --------
Total liabilities.......................... 27,726 41,189 41,298
------- -------- --------
Commitments and contingencies
Stockholders' equity:
Convertible preferred stock -- $.01 par value...... 23,683 -- --
Common stock -- $.01 par value; shares authorized:
6,684,077 at June 30, 1995 and 25,000,000 at
June 30, 1996 and September 30, 1996; shares
issued: 858,364 at June 30, 1995, 7,827,110 at
June 30, 1996 and 8,463,674 at September 30,
1996; shares outstanding: 843,658 at June 30,
1995, 7,812,404 at June 30, 1996 and 8,448,968
at September 30, 1996........................... 9 78 84
Additional paid-in capital......................... 406 66,291 68,510
Accumulated deficit................................ (8,826) (5,199) (2,209)
Stock subscriptions receivable..................... (157) -- --
Cumulative translation adjustment.................. 409 42 (13)
------- -------- --------
Total stockholders' equity................. 15,524 61,212 66,372
------- -------- --------
$43,250 $102,401 $107,670
======= ======== ========
</TABLE>
F-4
<PAGE> 52
PAREXEL INTERNATIONAL CORPORATION
<TABLE>
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(in thousands, except number of shares)
<CAPTION>
CONVERTIBLE COMMON STOCK
PREFERRED STOCK -------------------------------- RETAINED
----------------------- ADDITIONAL EARNINGS STOCK
NUMBER ISSUANCE NUMBER PAR PAID-IN (ACCUMULATED SUBSCRIPTIONS
OF SHARES PRICE, NET OF SHARES VALUE CAPITAL DEFICIT) RECEIVABLE
---------- ---------- ---------- ----- ---------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT JUNE 30, 1993............... 2,101,044 $ 22,550 721,045 $ 7 $ 203 $ (619) $(148)
Issuance of convertible preferred stock
upon exercise of warrants............ 226,700 1,133 (33)
Issuance of common stock upon exercise
of stock options..................... 102,000 1 75
Income tax benefit from exercise of
stock options........................ 80
Proceeds from stock subscriptions
receivable........................... 18
Foreign currency translation...........
Net income............................. 2,423
---------- -------- --------- --- ------- -------- -----
BALANCE AT JUNE 30, 1994............... 2,327,744 23,683 823,045 8 358 1,804 (163)
Issuance of common stock upon exercise
of stock options..................... 21,986 1 65
Repurchase of common shares............ (1,373) (17)
Proceeds from stock subscriptions
receivable........................... 6
Foreign currency translation...........
Net loss............................... (10,630)
---------- -------- --------- --- ------- -------- -----
BALANCE AT JUNE 30, 1995............... 2,327,744 23,683 843,658 9 406 (8,826) (157)
Issuance of convertible preferred stock
upon exercise of warrants............ 176,887 1,769
Proceeds from stock subscriptions
receivable........................... 157
Conversion of preferred stock into
common upon initial public
offering............................. (2,504,631) (25,452) 4,478,008 44 25,408
Payment of accrued preferred stock
dividends............................ (940)
Net proceeds from public offerings..... 2,100,000 21 36,866
Issuance of common stock upon exercise
of stock options..................... 309,920 3 408
Acquisitions (Note 4).................. 80,818 1 145 (76)
Income tax benefit from exercise of
stock options........................ 3,058
Net unrealized gain on marketable
securities........................... 44
Foreign currency translation...........
Net income............................. 4,599
---------- -------- --------- --- ------- -------- -----
BALANCE AT JUNE 30, 1996............... -- -- 7,812,404 78 66,291 (5,199) --
Issuance of common stock upon exercise
of stock options (unaudited)......... 132,412 1 1,428
Acquisitions (Note 4) (unaudited)...... 504,152 5 41 1,024
Income tax benefit from exercise of
stock options (unaudited)............ 750
Net unrealized gain on marketable
securities (unaudited)............... 30
Foreign currency translation
(unaudited)..........................
Net income (unaudited)................. 1,936
---------- -------- --------- --- ------- -------- -----
BALANCE AT SEPTEMBER 30, 1996
(UNAUDITED).......................... -- $ -- 8,448,968 $84 $68,510 $ (2,209) $ --
========== ======== ========= === ======= ======== =====
<CAPTION>
CUMULATIVE TOTAL
TRANSLATION STOCKHOLDERS'
ADJUSTMENT EQUITY
----------- ------------
<S> <C> <C>
BALANCE AT JUNE 30, 1993............... $(146) $ 21,847
Issuance of convertible preferred stock
upon exercise of warrants............ 1,100
Issuance of common stock upon exercise
of stock options..................... 76
Income tax benefit from exercise of
stock options........................ 80
Proceeds from stock subscriptions
receivable........................... 18
Foreign currency translation........... (308) (308)
Net income............................. 2,423
----- --------
BALANCE AT JUNE 30, 1994............... (454) 25,236
Issuance of common stock upon exercise
of stock options..................... 66
Repurchase of common shares............ (17)
Proceeds from stock subscriptions
receivable........................... 6
Foreign currency translation........... 863 863
Net loss............................... (10,630)
----- --------
BALANCE AT JUNE 30, 1995............... 409 15,524
Issuance of convertible preferred stock
upon exercise of warrants............ 1,769
Proceeds from stock subscriptions
receivable........................... 157
Conversion of preferred stock into
common upon initial public
offering............................. --
Payment of accrued preferred stock
dividends............................ (940)
Net proceeds from public offerings..... 36,887
Issuance of common stock upon exercise
of stock options..................... 411
Acquisitions (Note 4).................. 70
Income tax benefit from exercise of
stock options........................ 3,058
Net unrealized gain on marketable
securities........................... 44
Foreign currency translation........... (367) (367)
Net income............................. 4,599
----- --------
BALANCE AT JUNE 30, 1996............... 42 61,212
Issuance of common stock upon exercise
of stock options (unaudited)......... 1,429
Acquisitions (Note 4) (unaudited)...... 1,070
Income tax benefit from exercise of
stock options (unaudited)............ 750
Net unrealized gain on marketable
securities (unaudited)............... 30
Foreign currency translation
(unaudited).......................... (55) (55)
Net income (unaudited)................. 1,936
----- --------
BALANCE AT SEPTEMBER 30, 1996
(UNAUDITED).......................... $ (13) $ 66,372
====== ========
</TABLE>
F-5
<PAGE> 53
PAREXEL INTERNATIONAL CORPORATION
<TABLE>
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
<CAPTION>
THREE MONTHS
ENDED
FOR THE YEAR ENDED JUNE 30, SEPTEMBER 30,
------------------------------- --------------------
1994 1995 1996 1995 1996
------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)................................ $ 2,423 $(10,630) $ 4,599 $ 742 $ 1,936
Adjustments to reconcile net income (loss) to net
cash provided (used) by operating activities:
Depreciation and amortization.................. 2,435 2,251 2,343 515 883
Restructuring transactions..................... (1,959) (683) (135) (40) --
Impairment of long-lived assets................ -- 11,253 -- -- --
Change in assets and liabilities, net of
effects from acquisitions:
Restricted cash.............................. (282) (929) 502 (9) (512)
Accounts receivable, net..................... (6,309) (281) (15,086) (5,602) (7,713)
Other current assets......................... (366) (1,395) 54 704 257
Other assets................................. (531) (79) (144) 66 (71)
Accounts payable............................. (1,573) 256 4,605 873 1,638
Advance billings............................. 350 3,953 6,383 2,222 (1,710)
Other current liabilities.................... 1,867 1,932 3,347 (840) (858)
Other liabilities............................ (239) 56 (18) 11 35
------- -------- -------- -------- --------
Net cash provided (used) by operating activities... (4,184) 5,704 6,450 (1,358) (6,115)
------- -------- -------- -------- --------
Cash flows from investing activities:
Purchases of marketable securities............... (2,787) (3,510) (131,903) (1,300) (10,849)
Proceeds from sale of marketable securities...... 4,303 2,710 104,128 1,500 13,773
Cash related to acquisition activities........... (100) -- 52 -- 251
Purchase of property and equipment............... (1,979) (1,460) (5,039) (262) (2,657)
------- -------- -------- -------- --------
Net cash provided (used) by investing activities... (563) (2,260) (32,762) (62) 518
------- -------- -------- -------- --------
Cash flows from financing activities:
Proceeds from issuance of convertible preferred
stock.......................................... 1,100 -- 1,769 -- --
Proceeds from issuance of common stock........... 76 66 37,298 -- 1,429
Cash received from stock subscriptions........... 18 6 157 -- --
Payments to acquire treasury stock............... -- (17) -- -- --
Repayments of long-term debt..................... (510) (684) (889) (202) (2,755)
Dividends on convertible preferred stock......... -- -- (940) -- --
------- -------- -------- -------- --------
Net cash provided (used) by financing activities... 684 (629) 37,395 (202) (1,326)
------- -------- -------- -------- --------
Effect of exchange rate changes on unrestricted
cash and cash equivalents........................ (24) 134 (155) (76) (39)
------- -------- -------- -------- --------
Net increase (decrease) in unrestricted cash and
cash equivalents................................. (4,087) 2,949 10,928 (1,698) (6,962)
Unrestricted cash and cash equivalents at beginning
of period........................................ 6,453 2,366 5,315 5,315 16,243
------- -------- -------- -------- --------
Unrestricted cash and cash equivalents at end of
period........................................... $ 2,366 $ 5,315 $ 16,243 $ 3,617 $ 9,281
======= ======== ======== ======= ========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest....................................... $ 83 $ 179 $ 165 $ 35 $ 55
Income taxes................................... $ 1,237 $ 565 $ 1,649 $ 315 $ 391
Supplemental disclosure of noncash financing
activities:
Property and equipment acquired under capital
lease obligations.............................. $ 666 $ 1,265 $ 536 $ 410 $ --
Income tax benefit from exercise of stock
options........................................ $ 80 -- $ 3,058 $ -- $ 750
</TABLE>
F-6
<PAGE> 54
PAREXEL INTERNATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- DESCRIPTION OF THE BUSINESS
PAREXEL International Corporation (the Company) is a leading contract
research organization (CRO), providing clinical research and development
services to the worldwide pharmaceutical, biotechnology and medical device
industries. The Company designs, initiates and monitors clinical trials, manages
and analyzes clinical data, assists with regulatory affairs and offers other
related services and products.
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of PAREXEL
International Corporation and its wholly-owned domestic and foreign
subsidiaries. The Company's German and French subsidiaries operate on a fiscal
year which ends May 31. All significant intercompany accounts and transactions
have been eliminated.
Accounting Estimates
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, liabilities, revenues
and expenses, and disclosure of contingent assets and liabilities. Actual
results may differ from those estimates.
Revenue
Fixed price contract revenue is recognized using the percentage of
completion method based on the ratio that costs incurred to date bear to
estimated total costs at completion. Revenue from other contracts is recognized
as services are provided. Revenue related to contract modifications is
recognized when realization is assured and the amounts are reasonably
determinable. Adjustments to contract cost estimates are made in the periods in
which the facts which require the revisions become known. When the revised
estimate indicates a loss, such loss is provided for currently in its entirety.
"Unbilled accounts receivable" represents revenue recognized in excess of
amounts billed. "Advance billings" represents amounts billed in excess of
revenue recognized.
Investigator Fees
Investigator fees are accrued as investigator services are rendered. The
timing of payments to investigators is determined by reference to predetermined
contractual arrangements, which may differ from the accrual of the expense.
Payments to investigators in excess of amounts accrued are classified as prepaid
expenses included in other current assets and accrued expenses in excess of
amounts paid are classified as other current liabilities.
Cash, Cash Equivalents, Marketable Securities and Financial Instruments
The Company considers all highly liquid debt instruments purchased with
original maturities of three months or less to be cash equivalents for purposes
of the statement of cash flows. Marketable securities include securities
purchased with original maturities of greater than three months. Cash
equivalents and marketable securities are classified as available-for-sale and
are carried at fair market value, and any unrealized gains or losses are
recorded as part of stockholders' equity. Restricted cash consists of advances
and deposits from customers subject to certain restrictions.
The Company occasionally purchases securities with seven-day put options
which allow the Company to sell the underlying securities in seven days at par
value. The Company uses these derivative financial instruments on a limited
basis to shorten contractual maturity dates, thereby managing interest rate
risk. At
F-7
<PAGE> 55
PAREXEL INTERNATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1996, approximately $1.0 million of securities were subject to
seven-day put options. The Company does not hold derivative instruments for
trading purposes.
Concentration of Credit Risk
Financial instruments which potentially expose the Company to
concentrations of credit risk include trade accounts receivable. However, such
risk is limited due to the large number of clients and their international
dispersion. In addition, the Company maintains reserves for potential credit
losses and such losses, in the aggregate, have not exceeded management
expectations. No single customer accounted for more than 10% of the Company's
consolidated net revenue for the years ended June 30, 1994, 1995 or 1996.
Property and Equipment
Property and equipment is stated at cost. Depreciation is provided on the
straight-line method over the estimated useful lives of the assets ranging from
three to five years. Leasehold improvements are amortized over the lesser of the
estimated useful lives of the improvements or the remaining lease term. Repair
and maintenance costs are charged to expense as incurred.
Intangible Assets
Intangible assets consist principally of goodwill, customer lists,
covenants not to compete, and other intangible assets attributable to businesses
acquired. Goodwill represents the excess of the cost of businesses acquired over
the fair value of the related net assets at the date of acquisition. Goodwill
and other intangible assets are amortized using the straight-line method over
five to ten years.
Impairment of Long-Lived Assets
The Company periodically assesses the recoverability of the carrying amount
of long-lived assets, including intangible assets. A loss is recognized when
expected future cash flows (undiscounted and without interest) are less than the
carrying amount of the asset. The amount of the impairment loss is determined as
the difference by which the carrying amount of the asset exceeds the fair value
of the asset.
Income Taxes
Effective July 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" (FAS 109)
prospectively. FAS 109 requires the recognition of deferred tax assets
(representing future tax benefits) attributable to deductible temporary
differences between financial statement and income tax bases of assets and
liabilities and to operating loss carryforwards to the extent that realization
of these benefits is more likely than not. The cumulative effect of the
Company's adoption of FAS 109 increased net income by $500,000 for the year
ended June 30, 1994, and primarily related to the future tax benefit of
temporary differences within the North American operations.
Foreign Currency
Assets and liabilities of the Company's international operations are
translated into U.S. dollars at exchange rates in effect at the balance sheet
date. Income and expense items are translated at average exchange rates for the
period. Accumulated net translation adjustments are included in stockholders'
equity. Realized gains and losses recorded in the statement of operations were
not material.
Net Income (Loss) Per Share
Net income (loss) per share is calculated based on the weighted average
number of common shares and common equivalent shares assumed outstanding during
the period. Pursuant to Securities and Exchange Commission Staff Accounting
Bulletin No. 83, certain common and common equivalent shares issued by the
F-8
<PAGE> 56
PAREXEL INTERNATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Company during the twelve months immediately preceding the initial filing of the
registration statement relating to the Company's initial public offering have
been included in the calculation of weighted average shares, using the treasury
stock method and an assumed initial public offering price of $14 per share, as
if these shares were outstanding for all periods prior to the initial public
offering.
Recently Issued Accounting Standards
In October 1995, the Financial Accounting Standards Board issued Statement
No. 123, "Accounting for Stock-Based Compensation" (FAS 123). The Company has
elected to adopt FAS 123 in fiscal 1997 through disclosure only.
Interim Financial Data (Unaudited)
The interim financial data at and for the three months ended September 30,
1995 and 1996 included in the accompanying consolidated financial statements are
unaudited; however, in the opinion of the Company, the interim financial data
include all adjustments, consisting only of normal recurring adjustments,
necessary for a fair statement of the results for the interim periods. The
interim financial data are not necessarily indicative of the results of
operation for a full fiscal year.
NOTE 3 -- IMPAIRMENT OF LONG-LIVED ASSETS
In fiscal 1991, PAREXEL acquired AFB Arzneimittelforschung GmbH, (which was
subsequently renamed PAREXEL GmbH), a contract research organization
headquartered in Germany, in exchange for $3.9 million of cash, Convertible
Preferred Stock then valued at $1.3 million and the assumption of $16.1 million
of liabilities. Since it was acquired, PAREXEL GmbH's financial performance has
fallen below management's expectations and experienced a declining revenue base.
In fiscal 1993, the Company recorded a charge aggregating $3.3 million with
respect to a plan to restructure its German operations. The plan primarily
involved the physical consolidation of several operating groups within two
facilities and a reduction in employee headcount. The charge included lease
abandonment costs, write-offs of leasehold improvements, severance payments and
other expenses directly associated with the restructuring plan. There were no
material changes in estimates included in this charge, and at June 30, 1996
these actions were complete.
As a result of the restructuring effort in fiscal 1993, management budgeted
positive operating results that supported the realization of the related net
assets. However, in the third quarter of fiscal 1995, PAREXEL GmbH's operations
suffered a further decline in net revenue resulting in a net loss for the
period. Also during the third quarter, drug development regulations in Germany
and Europe were modified, and further changes were being contemplated, all of
which were expected to have a detrimental impact on PAREXEL GmbH's operations.
Considering the cumulative impact of the above-described factors,
management updated its assessment of the realizability of the long-lived assets
of PAREXEL GmbH as of the third quarter of fiscal 1995.
In accordance with its accounting policy for impaired long-lived assets,
management prepared a forecast of PAREXEL GmbH's expected future cash flows on
an undiscounted basis and without interest charges. This forecast was based on
assumptions developed by management using PAREXEL GmbH's historical experience
as well as the best estimate of future trends and events. In the short-term,
management had forecasted declining revenue in certain of PAREXEL GmbH's
operations in recognition of the current business environment within Germany. In
the longer-term, management's assumptions reflected a stabilization of the
revenue base, followed by a period of moderate revenue and expense growth
(approximately 4% annually). The sum of the forecasted cash flows from
management's model was less than the carrying amount of PAREXEL's investment in
PAREXEL GmbH.
To assess the fair value of PAREXEL GmbH, the Company retained a valuation
expert. A discounted cash flow valuation technique was utilized with a discount
rate of approximately 19.5% based upon
F-9
<PAGE> 57
PAREXEL INTERNATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PAREXEL GmbH's calculated cost of capital. The results of this calculation
indicated a de minimus valuation and accordingly, in the third quarter of fiscal
1995, the Company recorded an impairment loss on long-lived assets of $11.3
million; comprising $8.7 million in goodwill, $1.4 million in fixed assets and
$1.2 million in identifiable intangible assets.
NOTE 4 -- ACQUISITIONS
On June 28, 1996, the Company acquired, in separate transactions, Sitebase
Clinical Systems, Inc., (Sitebase), a provider of remote data entry technology,
and Caspard Consultants (Caspard), a Paris-based biostatistical and data
management consulting company. The Company issued a total of 80,818 shares of
common stock in exchange for all of the outstanding shares of Sitebase and
Caspard. Both of these transactions are being accounted for as poolings of
interest. The aggregate historical results of operations and financial position
of Sitebase and Caspard are not material to the Company's consolidated financial
statements. Therefore, prior period amounts have not been restated and results
of operations have been included since the date of acquisition.
On August 16, 1996, the Company acquired Lansal Clinical Pharmaceutics
Limited (Lansal), a contract research organization in Israel. On August 22,
1996, the Company acquired State and Federal Associates, Inc. (S&FA), a
strategic healthcare consulting organization located in Washington D.C. Both of
these transactions are being accounted for as poolings of interest. The Company
issued 504,152 shares of common stock in exchange for all of the outstanding
shares of Lansal and S&FA. The aggregate historical results of operations and
financial position of Lansal and S&FA are not material to the Company's
consolidated financial statement. Therefore, prior period amounts have not been
restated and results of operations have been included since the date of
acquisition.
Pro forma results of the Company, assuming the above acquisitions were made
at the beginning of each period presented, would not be materially different
from the actual results reported.
NOTE 5 -- INVESTMENTS
<TABLE>
Available-for-sale securities included in cash and cash equivalents as of
June 30, 1995 and 1996 consisted of the following:
<CAPTION>
(in thousands) 1995 1996
---- ----
<S> <C> <C>
Money market.................................................... $ -- $ 2,492
Municipal securities............................................ -- 10,000
Repurchase agreements........................................... 2,191 1,141
------ -------
$2,191 $13,633
====== =======
</TABLE>
<TABLE>
Available-for-sale securities included in marketable securities at June 30,
1995 consisted of $1.5 million of municipal securities (which are carried at
fair market value which approximates cost). Available-for-sale securities
included in marketable securities at June 30, 1996 consisted of the following:
<CAPTION>
UNREALIZED
AMORTIZED -------------- FAIR
(in thousands) COST GAINS LOSSES VALUE
--------- ----- ------ -----
<S> <C> <C> <C> <C>
Municipal securities............................ $16,972 $ 3 $(34) $16,941
Federal Government securities................... 10,344 66 (1) 10,409
Corporate debt securities....................... 1,959 10 -- 1,969
------- --- ---- -------
$29,275 $79 $(35) $29,319
======= === ==== =======
</TABLE>
The contractual maturity of available-for-sale securities at June 30, 1996
was $39.5 million within one year, $2.8 million over one year and less than five
years, and $700,000 over five years. Proceeds from the maturities and sales of
available-for-sale securities amounted to approximately $568.1 million for the
year ended June 30, 1996 and $2.7 million for the year ended June 30, 1995.
Purchases amounted to approximately $607.4 million for the year ended June 30,
1996 and $3.5 million for the year ended June 30, 1995. Gains and
F-10
<PAGE> 58
PAREXEL INTERNATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
losses realized upon the sale of securities (the cost of which is based upon the
specific identification method) were not significant.
NOTE 6 -- ACCOUNTS RECEIVABLE
<TABLE>
Accounts receivable at June 30, 1995 and 1996 consisted of the following:
<CAPTION>
(in thousands) 1995 1996
---- ----
<S> <C> <C>
Billed......................................................... $14,081 $21,286
Unbilled....................................................... 11,868 19,490
Allowance for doubtful accounts................................ (1,274) (1,499)
------- -------
$24,675 $39,277
======= =======
</TABLE>
NOTE 7 -- PROPERTY AND EQUIPMENT
<TABLE>
Property and equipment at June 30, 1995 and 1996 consisted of the
following:
<CAPTION>
(in thousands) 1995 1996
---- ----
<S> <C> <C>
Computer and office equipment.................................. $ 6,807 $10,527
Computer software.............................................. 1,061 1,725
Furniture and fixtures......................................... 2,117 3,058
Leasehold improvements......................................... 394 652
------- -------
10,379 15,962
Less accumulated depreciation and amortization................. 5,708 7,769
------- -------
$ 4,671 $ 8,193
======= =======
</TABLE>
Included in the above amounts is computer and office equipment acquired
under capital lease obligations of approximately $3.0 million and $3.6 million
at June 30, 1995 and 1996, respectively. Accumulated depreciation on computer
and office equipment under capital leases totalled approximately $1.3 million
and $1.8 million at June 30, 1995 and 1996, respectively.
Depreciation and amortization expense relating to property and equipment
was approximately $1.5 million, $1.7 million and $2.1 million for the years
ended June 30, 1994, 1995 and 1996, respectively, of which $286,000, $427,000
and $634,000 related to amortization of property and equipment under capital
leases.
NOTE 8 -- OTHER CURRENT LIABILITIES
Other current liabilities at June 30, 1995 and 1996 consisted of the
following:
<TABLE>
<CAPTION>
(in thousands) 1995 1996
------- -------
<S> <C> <C>
Accrued compensation and withholdings.......................... $ 2,068 $ 4,281
Accrued investigator fees...................................... 1,608 1,565
Other.......................................................... 4,413 5,555
------- -------
$ 8,089 $11,401
======= =======
</TABLE>
NOTE 9 -- CREDIT ARRANGEMENTS
The Company has domestic and foreign line of credit arrangements with banks
totalling approximately $6.4 million. The lines are collateralized by accounts
receivable, are payable on demand and bear interest at the local bank base or
money market rate, plus 1% to 3% (resulting in interest rates ranging from 5.5%
to
F-11
<PAGE> 59
PAREXEL INTERNATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9.25% at June 30, 1996). The lines of credit expire at various dates through
December 1996 and are renewable. There were no amounts outstanding under these
lines of credit at June 30, 1996.
The Company has a $2.4 million capital lease line of credit with a U.S.
bank for the financing of property and equipment. This line is collateralized by
property and equipment. Borrowings under this line are payable over a three-year
term with interest fixed at the five-year U.S. Treasury note rate plus 2.5% (for
a total interest rate of 9.2% at June 30, 1996) and are included in long-term
debt. This line of credit expires on November 30, 1998 and is renewable
annually. Available capacity under this line was approximately $1.2 million at
June 30, 1996.
Long-term debt at June 30, 1995 and 1996 consisted of borrowings under the
capital lease line. The fair value of debt is estimated based on the market
value for similar debt and approximates carrying value at June 30, 1995 and
1996. Aggregate lease obligations bear a weighted average interest rate of
approximately 7.9% at June 30, 1996. Long-term debt matures as follows: $762,000
in fiscal 1997, $333,000 in fiscal 1998 and $27,000 in fiscal 1999.
NOTE 10 -- STOCKHOLDERS' EQUITY
On November 22, 1995 the Company sold 1.6 million shares of common stock to
the public in the Company's initial public offering at a price of $15.00 per
share. Proceeds to the Company, net of offering expenses, amounted to $21.2
million. Upon closing of the initial public offering, the Company received
$157,000 in repayment of stock subscriptions receivable, $1.8 million of
proceeds from the exercise of preferred stock warrants and all of the preferred
stock automatically converted into a total of 4,478,008 shares of common stock.
In addition, the Company paid cumulative dividends to preferred stockholders of
approximately $940,000.
On March 1, 1996, an additional 500,000 shares of the Company's common
stock were sold by the Company to the public at a price per share of $33.75.
Proceeds to the Company, net of offering expenses, amounted to $15.7 million.
At June 30, 1996 there were 5,000,000 shares of preferred stock, $0.01 per
share, authorized, but none were issued or outstanding. Preferred stock may be
issued at the discretion of the Board of Directors of the Company (without
stockholder approval) with such designations, rights and preferences, including
voting rights, dividend rights and rates and terms of redemption, as the Board
of Directors may determine from time to time.
At June 30, 1994, the Company held 13,333 shares of common stock in
treasury, at a cost per share of $0.01. During the year ended June 30, 1995,
1,373 common shares were repurchased at a cost per share of $12.50. There were
14,706 shares of common stock held in treasury at June 30, 1995 and 1996.
NOTE 11 -- STOCK AND EMPLOYEE BENEFIT PLANS
Common Stock Options
The Company's 1986 Incentive Stock Option Plan, 1987 Stock Plan and 1989
Stock Plan (collectively, the Plans) provide for the granting of incentive and
non-qualified stock options for the purchase of shares of common stock, and
awards and sales of common stock, to directors, officers, employees and
consultants, depending upon the provisions of the plan. An aggregate of 638,000
shares of common stock was originally reserved for issuance under the Plans. In
September 1995 the Company adopted the 1995 Stock Plan (the 1995 Plan), which
provides for the issuance of options to purchase up to 500,000 shares of common
stock to employees, officers, consultants and advisors of the Company. The
Compensation Committee of the Company's Board of Directors determines the type
of grant, option exercise price per share, the vesting period (generally four to
five years), and the expiration date at the date of grant.
F-12
<PAGE> 60
PAREXEL INTERNATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In September 1995, the Company adopted the 1995 Non-Employee Director Stock
Option Plan (Director Plan). The Director Plan provides for the grant of options
to purchase up to 300,000 shares of common stock of the Company to non-employee
directors. An aggregate of 86,500 options were granted on November 21, 1995, the
effective date of the Company's initial public offering, at an exercise price
equal to the initial public offering price of $15.00 per share. The options
became exercisable on the first succeeding June 30th after the effective date.
All other options become exercisable in three equal annual installments
beginning on the first anniversary of the date of grant, subject to specified
meeting attendance requirements.
In addition to plan options granted, the Company granted at various dates
prior to 1989 options to purchase an aggregate of 86,300 shares of common stock
at prices ranging from $0.35 to $0.75 not pursuant to any plan. During the year
ended June 30, 1994, the Company granted additional options to purchase 40,000
shares of common stock not pursuant to any plan. These options vest over a three
year period and have an exercise price of $12.50 per share.
<TABLE>
Aggregate stock option activity during fiscal 1994, 1995 and 1996 was as
follows:
<CAPTION>
OPTIONS EXERCISE PRICE
------- --------------
<S> <C> <C> <C>
Outstanding at June 30, 1993................................... 741,022 $0.25 -- $12.50
Granted................................................... 95,300 12.50
Canceled.................................................. (11,500) 0.60 -- 12.50
Exercised................................................. (102,000) 0.60 -- 0.75
--------
Outstanding at June 30, 1994................................... 722,822 0.25 -- 12.50
Granted................................................... 12,000 12.50
Canceled.................................................. (75,383) 3.00 -- 12.50
Exercised................................................. (21,986) 3.00
--------
Outstanding at June 30, 1995................................... 637,453 0.25 -- 12.50
Granted................................................... 419,000 12.50 -- 47.50
Canceled.................................................. (26,073) 3.00 -- 15.00
Exercised................................................. (309,920) 0.25 -- 10.00
--------
Outstanding at June 30, 1996................................... 720,460 0.35 -- 47.50
========
Exercisable at June 30, 1996................................... 393,757 0.35 -- 19.38
========
Available for future grant at June 30, 1996.................... 408,667
========
</TABLE>
All of the foregoing options were granted with an exercise price equal to
fair market value at the time of grant.
Employee Stock Purchase Plan
In September 1995, the Company adopted the 1995 Employee Stock Purchase
Plan (the Purchase Plan). Under the Purchase Plan, employees have the
opportunity to purchase common stock at 85% of the average market value on the
first or last day of the plan period (as defined by the Purchase Plan),
whichever is lower, up to specified limits. An aggregate of 300,000 shares may
be issued under the Purchase Plan.
F-13
<PAGE> 61
PAREXEL INTERNATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
401(k) Plan
The Company sponsors an employee savings plan (the Plan) as defined by
Section 401(k) of the Internal Revenue Code of 1986, as amended. The Plan covers
substantially all employees in the U.S. who elect to participate. Participants
have the opportunity to invest on a pre-tax basis in a variety of mutual fund
options. Effective July 1, 1992, the Company matches 100% of each participants'
voluntary contributions up to 3% of gross salary per payroll period. Company
contributions vest to the participants in 20% increments for each year of
employment, and become fully vested after five years of continuous employment.
Company contributions to the Plan were $327,000 and $526,000 for the years ended
June 30, 1995 and 1996, respectively.
NOTE 12 -- INCOME TAXES
<TABLE>
Domestic and foreign income (loss) before income taxes for the years ended
June 30, 1994, 1995 and 1996 are as follows:
<CAPTION>
(in thousands) 1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Domestic.................................................. $2,702 $ 350 $5,526
Foreign................................................... 794 (10,660) 2,126
------ -------- ------
$3,496 $(10,310) $7,652
====== ======== ======
</TABLE>
<TABLE>
The provision for income taxes for the years ended June 30, 1994, 1995 and
1996 are as follows:
<CAPTION>
(in thousands) 1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Current:
Federal.............................................. $ 881 $ 274 $2,202
State................................................ 421 192 636
Foreign.............................................. 361 78 427
------ ----- ------
1,663 544 3,265
------ ----- ------
Deferred:
Federal.............................................. (55) (164) (157)
State................................................ (18) (55) (52)
Foreign.............................................. (17) (5) (3)
------ ----- ------
(90) (224) (212)
------ ----- ------
$1,573 $ 320 $3,053
====== ===== ======
</TABLE>
<TABLE>
Income taxes are greater than the amount of income tax determined by
applying the applicable U.S. federal statutory income tax rate to income before
income taxes as a result of the following differences:
<CAPTION>
(in thousands) 1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Income tax expense (benefit) at the 34% federal statutory
rate.................................................... $1,189 $(3,505) $2,602
State income taxes, net of federal benefit................ 282 92 460
Foreign rate differential................................. 105 (108) (234)
Non-deductible amortization of intangible assets.......... 305 169 45
Non-deductible impairment of assets....................... -- 3,348 --
Foreign operating losses without current benefit.......... -- 334 26
Temporary items without current benefit (reversals)....... (341) -- --
Other..................................................... 33 (10) 154
------ ------- ------
$1,573 $ 320 $3,053
====== ======= ======
</TABLE>
Temporary items without current benefit relate primarily to book and tax
differences between the deductibility of restructuring charges incurred in
fiscal 1993.
F-14
<PAGE> 62
PAREXEL INTERNATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Provision has not been made for U.S. or additional foreign taxes on
undistributed earnings of foreign subsidiaries as those earnings have been
permanently reinvested. Such taxes, if any, are not expected to be significant.
<TABLE>
Significant components of the Company's net deferred tax asset as of June
30, 1995 and 1996 are as follows:
<CAPTION>
(in thousands) 1995 1996
---- ----
<S> <C> <C>
Deferred tax assets:
Foreign loss carryforwards....................... $ 6,891 $ 6,048
Facility and other restructuring costs........... 763 --
Accrued expenses................................. 445 497
Property and equipment........................... 703 486
Allowance for doubtful accounts.................. 417 491
Other............................................ 118 477
------- -------
Gross deferred tax assets........................ 9,337 7,999
Deferred tax asset valuation allowance........... (7,491) (5,926)
------- -------
Total deferred tax assets................... 1,846 2,073
------- -------
Deferred tax liabilities:
Deferred contract profit......................... (463) (274)
Other............................................ (289) (292)
------- -------
Total deferred tax liabilities.............. (752) (566)
------- -------
$ 1,094 $ 1,507
======= =======
</TABLE>
<TABLE>
The net deferred tax assets are included in the consolidated balance sheet
as of June 30, 1995 and 1996 as follows:
<CAPTION>
(in thousands) 1995 1996
---- ----
<S> <C> <C>
Other current assets.................................. $ 716 $1,255
Other assets.......................................... 378 252
------ ------
$1,094 $1,507
====== ======
</TABLE>
The net deferred tax asset includes the tax effect of approximately $12
million of pre-acquisition and post-acquisition foreign tax loss carryforwards
available to offset future liabilities for foreign income tax. Substantially all
of the foreign tax losses are carried forward indefinitely, subject to certain
limitations. A valuation allowance has been established for the future foreign
income tax benefits primarily related to income tax loss carryforwards and
temporary differences based on management's assessment that it is more likely
than not that such benefits will not be realized. The ultimate realization of
these loss carryforwards is primarily dependent upon the generation of
sufficient taxable income in respective foreign jurisdictions, primarily
Germany.
F-15
<PAGE> 63
PAREXEL INTERNATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13 -- GEOGRAPHIC INFORMATION
<TABLE>
The Company's operations involve a single industry segment providing
clinical research and development services. The principal financial information
by geographic area for the years ended June 30, 1994, 1995 and 1996 is as
follows:
<CAPTION>
(in thousands) 1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Net revenue
North America.......................................... $37,111 $ 35,037 $ 54,179
Europe................................................. 20,891 23,443 32,834
Asia-Pacific -- 93 993
------- -------- --------
$58,002 $ 58,573 $ 88,006
======= ======== ========
Income (loss) from operations
North America.......................................... $ 3,908 $ 1,166 $ 5,405
Europe................................................. (216) (11,531) 1,266
Asia-Pacific........................................... -- -- (176)
------- -------- --------
$ 3,692 $(10,365) $ 6,495
======= ======== ========
Identifiable assets
North America.......................................... $21,349 $ 25,288 $ 77,493
Europe................................................. 24,587 17,927 24,752
Asia-Pacific........................................... -- 35 156
------- -------- --------
$45,936 $ 43,250 $102,401
======= ======== ========
</TABLE>
NOTE 14 -- LEASES
<TABLE>
The Company leases its facilities under operating leases which include
renewal and escalation clauses. Total rent expense was approximately $3.7
million, $4.3 million and $5.1 million for years ended June 30, 1994, 1995 and
1996, respectively. Future minimum lease commitments due under non-cancelable
operating leases and capital lease obligations at each fiscal year end are as
follows:
<CAPTION>
CAPITAL OPERATING
(in thousands) LEASES LEASES
------ ---------
<S> <C> <C>
1997............................................................ $ 823 $ 6,170
1998............................................................ 347 6,146
1999............................................................ 28 5,642
2000............................................................ -- 4,013
2001............................................................ -- 3,699
Thereafter...................................................... -- 1,520
------ -------
Total obligations............................................... 1,198 $27,190
=======
------
Less amount representing interest............................... 76
------
$1,122
======
</TABLE>
NOTE 15 -- RELATED PARTY TRANSACTIONS
Certain of the Company's Directors are affiliated with certain of the
Company's customers. Net revenue recognized from these customers was $2.3
million, $3.0 million and $8.1 million in fiscal 1994, 1995 and 1996,
respectively. Amounts included in accounts receivable at June 30, 1995 and 1996
were $1.2 million and $1.9 million respectively. Related party amounts included
in accounts receivable are on standard terms and manner of settlement.
F-16
<PAGE> 64
==============================================================================
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER CONTAINED HEREIN, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR BY ANY OF THE UNDERWRITERS. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THOSE TO WHICH IT RELATES
OR AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THOSE TO WHICH IT
RELATES IN ANY STATE TO ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE SUCH OFFER
IN SUCH STATE. THE DELIVERY OF THIS PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT
THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
------------------------
<TABLE>
TABLE OF CONTENTS
<CAPTION>
PAGE
----
<S> <C>
Additional Information................ 2
Prospectus Summary.................... 3
Risk Factors.......................... 6
The Company........................... 10
Use of Proceeds....................... 10
Price Range of Common Stock and
Dividend Policy..................... 10
Capitalization........................ 11
Selected Consolidated Financial
Data................................ 12
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 13
Business.............................. 20
Management............................ 32
Certain Relationships and Related
Transactions........................ 39
Principal and Selling Stockholders.... 40
Description of Capital Stock.......... 42
Underwriting.......................... 45
Legal Matters......................... 46
Experts............................... 46
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>
==============================================================================
==============================================================================
1,275,000 SHARES
LOGO
COMMON STOCK
---------------
PROSPECTUS
, 1996
---------------
SMITH BARNEY INC.
WILLIAM BLAIR & COMPANY
LEHMAN BROTHERS
ADAMS, HARKNESS & HILL, INC.
'
==============================================================================
<PAGE> 65
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
<TABLE>
Estimated expenses (other than underwriting discounts and commissions)
payable in connection with the sale of the Common Stock offered hereby are as
follows:
<S> <C>
Registration fee.......................................................... $ 36,000
NASD filing fee........................................................... 8,748
Nasdaq Additional Listing fee............................................. 17,500
Printing and engraving expenses........................................... 80,000
Legal fees and expenses................................................... 200,000
Accounting fees and expenses.............................................. 50,000
Blue Sky fees and expenses (including legal fees)......................... 15,000
Transfer agent and registrar fees and expenses............................ 10,000
Miscellaneous............................................................. 82,752
--------
Total........................................................... $500,000
========
</TABLE>
The Company will bear all expenses shown above.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article 6 of the Company's Restated Articles of Organization provides that
the Company shall indemnify each person who is or was a director or officer of
the Company, and each person who is or was serving or has agreed to serve at the
request of the Company as a director or officer of, or in a similar capacity
with, another organization against all liabilities, costs and expenses
reasonably incurred by any such persons in connection with the defense or
disposition of or otherwise in connection with or resulting from any action,
suit or other proceeding in which they may be involved by reason of being or
having been such a director or officer or by reason of any action taken or not
taken in such capacity, except with respect to any matter as to which such
person shall have been finally adjudicated by a court of competent jurisdiction
not to have acted in good faith in the reasonable belief that his or her action
was in the best interests of the Company. Section 67 of Chapter 156B of the
Massachusetts Business Corporation Law authorizes a corporation to indemnify its
directors, officers, employees and other agents unless such person shall have
been adjudicated in any proceeding not to have acted in good faith in the
reasonable belief that such action was in the best interests of the corporation.
Reference is hereby made to Section 9 of the Underwriting Agreement among
the Company and the Underwriters, filed as Exhibit 1.1 of this Registration
Statement, for a description of indemnification arrangements between the Company
and the Underwriters, pursuant to which the Underwriters are obligated, under
certain circumstances, to indemnify directors, officers and controlling persons
of the Company against certain liabilities, including liabilities under the
Securities Act of 1933, as amended (the "Act").
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
In the three years preceding the filing of this registration statement, the
Company has issued the following securities that were not registered under the
Act:
Since October 15, 1993 and through the date the Company's Registration
Statement on Form S-8 was declared effective (December 12, 1995), the Company
has issued options to purchase an aggregate of 302,550 shares of Common Stock
exercisable at a weighted average price of $14.05. During such time period,
options to purchase an aggregate of 24,486 shares of Common Stock were
exercised.
No underwriter was engaged in connection with the foregoing sales of
securities. Sales of Common Stock to directors, officers and employees were made
in reliance upon Section 4(2) of the Act as transactions not involving any
public offering or in reliance upon Rule 701 under the Act or Regulation S under
the Act. The
II-1
<PAGE> 66
Company has reason to believe that all of the foregoing purchasers were familiar
with or had access to information concerning the operations and financial
condition of the Company, and all of those individuals acquired the shares for
investment and not with a view to the distribution thereof. At the time of
issuance, all of the foregoing securities were deemed to be restricted
securities for the purposes of the Act and the certificates representing such
securities bore legends to that effect.
<TABLE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE.
(a) Exhibits.
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C> <C>
1.1 -- Form of Underwriting Agreement.
3.1 -- Amended and Restated Articles of Organization of the Company (filed as exhibit
3.1 to the Registrant's Registration Statement on Form S-1 (File No. 333-1188)
and incorporated herein by this reference).
3.2 -- Amended and Restated By-laws of the Company (filed as exhibit 3.2 to the
Registrant's Registration Statement on Form S-1 (File No. 333-1188) and
incorporated herein by this reference).
4.1 -- Specimen certificate representing the Common Stock of the Company (filed as
exhibit 4.1 to the Registrant's Registration Statement on Form S-1 (File No.
33-97406) and incorporated herein by this reference).
4.2 -- Stock Purchase Agreement dated as of May 24, 1996 between the Company, Sitebase
Clinical Systems, Inc., Raymond A. Konisky and Karen A. Konisky (filed as exhibit
4.2 to the Registrant's Registration Statement on Form S-1 (File No. 333-06953)
and incorporated herein by this reference).
4.3 -- Registration Rights Agreement dated as of June 28, 1996 between the Company,
Raymond A. Konisky and Karen A. Konisky (filed as exhibit 4.3 to the Registrant's
Registration Statement on Form S-1 (File No. 333-06953) and incorporated herein
by this reference).
5.1 -- Opinion of Testa, Hurwitz & Thibeault, LLP.
10.1 -- Stock Restriction and Registration Rights Agreement dated as of June 15, 1990
among the Company and Samuel T. Barnett and Frederic Harwood (filed as exhibit
10.1 to the Registrant's Registration Statement on Form S-1 (File No. 33-97406)
and incorporated herein by this reference).
10.2 -- Stock Purchase, Restriction and Registration Rights Agreement dated as of March
11, 1991 between the Company and Prof. Dr. Werner M. Herrmann (filed as exhibit
10.2 to the Registrant's Registration Statement on Form S-1 (File No. 33-97406)
and incorporated herein by this reference).
10.3 -- Investment Agreement dated as of December 26, 1990 among the Company and the
stockholders named therein (filed as exhibit 10.3 to the Registrant's
Registration Statement on Form S-1 (File No. 33-97406) and incorporated herein by
this reference).
10.4 -- Investment Agreement dated as of March 31, 1992 among the Company and the
stockholders named therein (filed as exhibit 10.4 to the Registrant's
Registration Statement on Form S-1 (File No. 33-97406) and incorporated herein by
this reference).
10.5 -- Sales Contract dated March 11, 1991 among Prof. Dr. Werner M. Herrmann, Josef H.
von Rickenbach and William T. Sobo with respect to the sale by Prof. Dr. Herrmann
of a majority interest in AFB Arzneimittelforschung GmbH (filed as exhibit 10.5
to the Registrant's Registration Statement on Form S-1 (File No. 33-97406) and
incorporated herein by this reference).
10.6 -- Employment Agreement dated June 30, 1993 between AFB-PAREXEL GmbH Independent
Pharmaceutical Research Organization and Prof. Dr. med. Werner M. Herrmann (filed
as exhibit 10.6 to the Registrant's Registration Statement on Form S-1 (File No.
33-97406) and incorporated herein by this reference).
</TABLE>
II-2
<PAGE> 67
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C> <C>
10.7 -- Letter Agreement dated June 30, 1993 between the Company and Prof. Dr. Werner M.
Herrmann (filed as exhibit 10.7 to the Registrant's Registration Statement on
Form S-1 (File No. 33-97406) and incorporated herein by this reference).
10.8 -- Employment Agreement dated July 2, 1987 between Dr. Veronica G.H. Jordan and the
Company (filed as exhibit 10.8 to the Registrant's Registration Statement on Form
S-1 (File No. 33-97406) and incorporated herein by this reference).
10.9 -- Form of Stock Option Agreement of the Company (filed as exhibit 10.9 to the
Registrant's Registration Statement on Form S-1 (File No. 333-1188) and
incorporated herein by this reference).
10.10 -- 1986 Incentive Stock Option Plan of the Company (filed as exhibit 10.10 to the
Registrant's Registration Statement on Form S-1 (File No. 33-97406) and
incorporated herein by this reference).
10.11 -- 1987 Stock Plan of the Company (filed as exhibit 10.11 to the Registrant's
Registration Statement on Form S-1 (File No. 33-97406) and incorporated herein by
this reference).
10.12 -- 1989 Stock Plan of the Company (filed as exhibit 10.12 to the Registrant's
Registration Statement on Form S-1 (File No. 33-97406) and incorporated herein by
this reference).
10.13 -- 1995 Stock Plan of the Company (filed as exhibit 10.13 to the Registrant's
Registration Statement on Form S-1 (File No. 33-97406) and incorporated herein by
this reference).
10.14 -- 1995 Non-Employee Director Stock Option Plan of the Company (filed as exhibit
10.14 to the Registrant's Registration Statement on Form S-1 (File No. 33-97406)
and incorporated herein by this reference).
10.15 -- 1995 Employee Stock Purchase Plan of the Company (filed as exhibit 10.15 to the
Registrant's Registration Statement on Form S-1 (File No. 33-97406) and
incorporated herein by this reference).
10.16 -- Corporate Plan for Retirement of the Company (filed as exhibit 10.16 to the
Registrant's Registration Statement on Form S-1 (File No. 33-97406) and
incorporated herein by this reference).
10.17 -- Loan and Security Agreement dated as of July 31, 1992 between the Company,
Barnett International Corporation and The First National Bank of Boston, as
amended (filed as exhibit 10.17 to the Registrant's Registration Statement on
Form S-1 (File No. 333-06953) and incorporated herein by this reference.)
10.18 -- Line of Credit Agreement between PAREXEL GmbH and Deutsche Bank Berlin, dated
January 23, 1995 (filed as exhibit 10.24 to the Registrant's Registration
Statement on Form S-1 (File No. 33-97406) and incorporated herein by this
reference).
10.19 -- First Amendment dated as of January 3, 1992 to the Lease dated June 14, 1991
between 200 West Street Limited Partnership and the Company (filed as exhibit
10.25 to the Registrant's Registration Statement on Form S-1 (File No. 33-97406)
and incorporated herein by this reference).
10.20 -- Second Amendment dated as of June 28, 1993 to the lease dated June 14, 1991
between 200 West Street Limited Partnership and the Company (filed as exhibit
10.28 to the Registrant's Registration Statement on Form S-1 (File No. 33-97406)
and incorporated herein by this reference).
10.21 -- Letter of employment dated July 6, 1993 between Barry R. Philpott and the Company
(filed as exhibit 10.29 to the Registrant's Registration Statement on Form S-1
(File No. 33-97406) and incorporated herein by this reference).
10.22 -- Credit Agreement dated December 30, 1994 between PAREXEL GmbH and The First
National Bank of Boston (filed as exhibit 10.30 to the Registrant's Registration
Statement on Form S-1 (File No. 33-97406) and incorporated herein by this
reference).
</TABLE>
II-3
<PAGE> 68
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C> <C>
10.23 -- Collateral Agreement dated December 30, 1994 between PAREXEL GmbH and The First
National Bank of Boston (filed as exhibit 10.31 to the Registrant's Registration
Statement on Form S-1 (File No. 33-97406) and incorporated herein by this
reference).
11.1 -- Statement re computation of per share earnings.
21.1 -- List of subsidiaries of the Company (filed as exhibit 21.1 to the Registrant's
Annual Report on Form 10-K for the fiscal year ended June 30, 1996 (File No.
0-27058) and incorporated herein by this reference).
23.1 -- Consent of Price Waterhouse LLP.
23.2 -- Consent of Testa, Hurwitz & Thibeault, LLP (contained in Exhibit 5.1).
24.1 -- Powers of Attorney (see page II-7).
</TABLE>
<TABLE>
(b) Financial Statement Schedule for the three years ended June 30, 1996:
<CAPTION>
PAGE
NUMBER
------
<S> <C> <C> <C>
Schedule II -- Valuation and Qualifying Accounts and Reserves................. S-1
</TABLE>
All other schedules are omitted because they are not applicable or the
required information is shown in the consolidated financial statements or the
notes thereto.
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the registrant
pursuant to provisions described in Item 14 above, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned registrant hereby undertakes (1) to provide to the
underwriters at the closing specified in the underwritng agreement certificates
in such denominations and registered in such names as required by the
underwriters to permit prompt delivery to each purchaser; (2) that for purposes
of determining any liability under the Act, the information omitted from the
form of prospectus filed as part of a registration statement in reliance upon
Rule 430A and contained in the form of prospectus filed by the registrant
pursuant to Rule 424(b)(1) or (4) or 497(h) under the Act shall be deemed to be
part of this registration statement as of the time it was declared effective;
and (3) that for the purpose of determining any liability under the Act, each
post-effective amendment that contains a form of prospectus shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
II-4
<PAGE> 69
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this amendment to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Waltham, Massachusetts, on the 21st
day of October, 1996.
PAREXEL INTERNATIONAL CORPORATION
By: /s/ JOSEF H. VON RICKENBACH
--------------------------------
Josef H. von Rickenbach
President, Chief Executive
Officer and Chairman
POWER OF ATTORNEY AND SIGNATURES
We, the undersigned officer and directors of PAREXEL International
Corporation, hereby severally constitute and appoint Josef H. von Rickenbach,
William T. Sobo, Jr. and William J. Schnoor, Jr., and each of them singly, as
true and lawful attorneys, with full power to them and each of them singly, to
sign for us in our names in the capacities indicated below, all pre-effective
and post-effective amendments to this registration statement, and generally to
do all things in our names and on our behalf in such capacities to enable
PAREXEL International Corporation to comply with the provisions of the
Securities Act of 1933, as amended, and all requirements of the Securities and
Exchange Commission.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURES TITLE(S) DATE
---------- -------- ----
/s/ JOSEF H. VON RICKENBACH President, Chief Executive October 21, 1996
- ---------------------------- Officer and Chairman (principal
Josef H. von Rickenbach executive officer)
/s/ WILLIAM T. SOBO, JR. Senior Vice President and October 21, 1996
- ---------------------------- Treasurer (principal financial
William T. Sobo, Jr. and accounting officer)
/s/ A. DANA CALLOW, JR. Director October 21, 1996
- ----------------------------
A. Dana Callow, Jr.
/s/ PATRICK J. FORTUNE Director October 21, 1996
- ----------------------------
Patrick J. Fortune
/s/ WERNER M. HERRMANN Director October 21, 1996
- ----------------------------
Werner M. Herrmann
/s/ PETER BARTON HUTT Director October 21, 1996
- ----------------------------
Peter Barton Hutt
/s/ JAMES A. SAALFIELD Director October 21, 1996
- ----------------------------
James A. Saalfield
II-5
<PAGE> 70
SCHEDULE II
PAREXEL INTERNATIONAL CORPORATION
<TABLE>
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
<CAPTION>
BALANCE AT CHARGED TO CHARGED TO DEDUCTIONS BALANCE AT
BEGINNING OF COSTS AND OTHER AND END OF
DESCRIPTION PERIOD EXPENSES ACCOUNTS WRITE-OFFS PERIOD
----------- ------------ ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful
accounts
Year ended June 30, 1994.... $ 242,000 $ 349,000 -- $ (11,000) $ 580,000
Year ended June 30, 1995.... 580,000 1,021,000 -- (327,000) 1,274,000
Year ended June 30, 1996.... 1,274,000 515,000 -- (290,000) 1,499,000
Deferred tax asset valuation
allowance
Year ended June 30, 1994.... -- -- $6,659,000(1) (588,000) 6,071,000
Year ended June 30, 1995.... 6,071,000 -- 1,620,000 (200,000) 7,491,000
Year ended June 30, 1996.... 7,491,000 -- -- (1,565,000) 5,926,000
<FN>
- ---------------
(1) Recorded in connection with the adoption of Statement of Financial
Accounting Standards No. 109 on July 1, 1993.
</TABLE>
S-1
<PAGE> 1
DRAFT 10/21/96
11:15pm
1,275,000 Shares(1)
PAREXEL INTERNATIONAL CORPORATION
Common Stock
UNDERWRITING AGREEMENT
----------------------
October , 1996
SMITH BARNEY INC.
WILLIAM BLAIR COMPANY, L.L.C.
LEHMAN BROTHERS INC.
ADAMS, HARKNESS & HILL, INC.
As Representatives of the Several Underwriters
c/o SMITH BARNEY INC.
388 Greenwich Street
New York, New York 10013
Dear Sirs:
PAREXEL International Corporation, a Massachusetts corporation (the
"Company"), proposes to issue and sell an aggregate of 1,066,900 shares of its
common stock, $0.01 par value per share, to the several Underwriters named in
Schedule II hereto (the "Underwriters") and the persons named in Schedule I
hereto (the "Selling Stockholders") propose to sell to the several Underwriters
an aggregate of 208,100 shares of common stock of the Company. The Company and
the Selling Stockholders are hereinafter sometimes referred to as the "Sellers".
The Company's common stock, $0.01 par value, is hereinafter referred to as the
"Common Stock" and the 1,275,000 shares of Common Stock to be issued and sold to
the Underwriters by the Company and the Selling Stockholders are hereinafter
referred to as the "Firm Shares". The Company also proposes to sell to the
Underwriters, upon the terms and conditions set forth in Section 2 hereof, up to
an additional 191,250 shares (the "Additional Shares") of Common Stock. The Firm
Shares and the Additional Shares are hereinafter collectively referred to as the
"Shares".
The Company and the Selling Stockholders wish to confirm as follows
their respective agreements with you (the "Representatives") and the other
several Underwriters on whose behalf you are acting, in connection with the
several purchases of the Shares by the Underwriters.
[FN]
- -----------------------
(1) Plus an option to acquire up to 191,250 additional shares to cover
over allotments.
<PAGE> 2
1. REGISTRATION STATEMENT AND PROSPECTUS. The Company has prepared and
filed with the Securities and Exchange Commission (the "Commission") in
accordance with the provisions of the Securities Act of 1933, as amended, and
the rules and regulations of the Commission thereunder (collectively, the
"Act"), a registration statement on Form S-1 under the Act (the "registration
statement"), including a prospectus subject to completion relating to the
Shares. The term "Registration Statement" as used in this Agreement means the
registration statement (including all financial schedules and exhibits), as
amended at the time it becomes effective, or, if the registration statement
became effective prior to the execution of this Agreement, as supplemented or
amended prior to the execution of this Agreement. If it is contemplated, at the
time this Agreement is executed, that a post-effective amendment to the
registration statement will be filed and must be declared effective before the
offering of the Shares may commence, the term "Registration Statement" as used
in this Agreement means the registration statement as amended by said
post-effective amendment. The term "Prospectus" as used in this Agreement means
the prospectus in the form included in the Registration Statement, or, if the
prospectus included in the Registration Statement omits information in reliance
on Rule 430A under the Act and such information is included in a prospectus
filed with the Commission pursuant to Rule 424(b) under the Act, the term
"Prospectus" as used in this Agreement means the prospectus in the form included
in the Registration Statement as supplemented by the addition of the Rule 430A
information contained in the prospectus filed with the Commission pursuant to
Rule 424(b). The term "Prepricing Prospectus" as used in this Agreement means
the prospectus subject to completion in the form included in the registration
statement at the time of the initial filing of the registration statement with
the Commission, and as such prospectus shall have been amended from time to time
prior to the date of the Prospectus.
2. AGREEMENTS TO SELL AND PURCHASE. Subject to such adjustments as you
may determine in order to avoid fractional shares, the Company hereby agrees,
subject to all the terms and conditions set forth herein, to issue and sell to
each Underwriter and, upon the basis of the representations, warranties and
agreements of the Company and the Selling Stockholders herein contained and
subject to all the terms and conditions set forth herein, each Underwriter
agrees, severally and not jointly, to purchase from the Company, at a purchase
price of $[00.00] per Share (the "purchase price per share"), the number of Firm
Shares which bears the same proportion to the aggregate number of Firm Shares to
be issued and sold by the Company as the number of Firm Shares set forth
opposite the name of such Underwriter in Schedule II hereto (or such number of
Firm Shares increased as set forth in Section 12 hereof) bears to the aggregate
number of Firm Shares to be sold by the Company and the Selling Stockholders.
Subject to such adjustments as you may determine in order to avoid
fractional shares, each Selling Stockholder agrees, subject to all the terms and
conditions set forth herein, to sell to each Underwriter and, upon the basis of
the representations, warranties and agreements of the Company and the Selling
Stockholders herein contained and subject to all the terms and conditions set
forth herein, each Underwriter, severally and not jointly, agrees to purchase
from each Selling Stockholder at the purchase price per share that number of
Firm Shares which bears the same proportion to the number of Firm Shares set
forth opposite the name of such Selling Stockholder in Schedule I hereto as the
number of Firm Shares set forth opposite the name of such Underwriter in
Schedule II hereto (or such number of Firm Shares increased as set forth in
Section 12 hereof)
-2-
<PAGE> 3
bears to the aggregate number of Firm Shares to be sold by the Company and the
Selling Stockholders.
The Company also agrees, subject to all the terms and conditions set
forth herein, to sell to the Underwriters, and, upon the basis of the
representations, warranties and agreements of the Company herein contained and
subject to all the terms and conditions set forth herein, the Underwriters shall
have the right to purchase from the Company at the purchase price per share,
pursuant to an option (the "over-allotment option") which may be exercised at
any time and from time to time prior to 9:00 P.M., New York City time, on the
30th day after the date of the Prospectus (or, if such 30th day shall be a
Saturday or Sunday or a holiday, on the next business day thereafter when the
New York Stock Exchange is open for trading), up to an aggregate of 191,250
Additional Shares from the Company. Additional Shares may be purchased only for
the purpose of covering over-allotments made in connection with the offering of
the Firm Shares.
Certificates in transferable form for the Shares which each of the
Selling Stockholders agrees to sell pursuant to this Agreement have been placed
in custody with [ ] (the "Custodian") for delivery under this Agreement
pursuant to a Custody Agreement and Power of Attorney (the "Custody Agreement")
executed by each of the Selling Stockholders appointing and as
agents and attorneys-in-fact (the "Attorneys-in-Fact"). Each Selling Stockholder
agrees that (i) the Shares represented by the certificates held in custody
pursuant to the Custody Agreement are subject to the interests of the
Underwriters, the Company and each other Selling Stockholder, (ii) the
arrangements made by the Selling Stockholders for such custody are, except as
specifically provided in the Custody Agreement, irrevocable, and (iii) the
obligations of the Selling Stockholders hereunder and under the Custody
Agreement shall not be terminated by any act of such Selling Stockholder or by
operation of law, whether by the death or incapacity of any Selling Stockholder
or the occurrence of any other event. If any Selling Stockholder shall die or be
incapacitated or if any other event shall occur before the delivery of the
Shares hereunder, certificates for the Shares of such Selling Stockholder shall
be delivered to the Underwriters by the Attorneys-in-Fact in accordance with the
terms and conditions of this Agreement and the Custody Agreement as if such
death or incapacity or other event had not occurred, regardless of whether or
not the Attorneys-in-Fact or any Underwriter shall have received notice of such
death, incapacity or other event. Each Attorney-in-Fact is authorized, on behalf
of each of the Selling Stockholders, to execute this Agreement and any other
documents necessary or desirable in connection with the sale of the Shares to be
sold hereunder by such Selling Stockholder, to make delivery of the certificates
for such Shares, to receive the proceeds of the sale of such Shares, to give
receipts for such proceeds, to pay therefrom any expenses to be borne by such
Selling Stockholder in connection with the sale and public offering of such
Shares, to distribute the balance thereof to such Selling Stockholder, and to
take such other action as may be necessary or desirable in connection with the
transactions contemplated by this Agreement. Each Attorney-in-Fact agrees to
perform his duties under the Custody Agreement.
3. TERMS OF PUBLIC OFFERING. The Sellers have been advised by you that
the Underwriters propose to make a public offering of their respective portions
of the Shares as soon
- 3 -
<PAGE> 4
after the Registration Statement and this Agreement have become effective as in
your judgment is advisable and initially to offer the Shares upon the terms set
forth in the Prospectus.
4. DELIVERY OF THE SHARES AND PAYMENT THEREFOR. Delivery to the
Underwriters of and payment for the Firm Shares shall be made at the office of
Smith Barney Inc., 388 Greenwich Street, New York, NY 10013, at 10:00 A.M., New
York City time, on October __, 1996 (the "Closing Date"). The place of closing
for the Firm Shares and the Closing Date may be varied by agreement among you,
the Company and the Attorneys-in-Fact.
Delivery to the Underwriters of and payment for any Additional Shares
to be purchased by the Underwriters shall be made at the aforementioned office
of Smith Barney Inc. at such time on such date (the "Option Closing Date"),
which may be the same as the Closing Date but shall in no event be earlier than
the Closing Date nor earlier than two nor later than ten business days after the
giving of the notice hereinafter referred to, as shall be specified in a written
notice from you on behalf of the Underwriters to the Company of the
Underwriters' determination to purchase a number, specified in such notice, of
Additional Shares. The place of closing for any Additional Shares and the Option
Closing Date for such Shares may be varied by agreement among you and the
Company.
Certificates for the Firm Shares and for any Additional Shares to be
purchased hereunder shall be registered in such names and in such denominations
as you shall request prior to 9:30 A.M., New York City time, on the second
business day preceding the Closing Date or any Option Closing Date, as the case
may be. Such certificates shall be made available to you in New York City for
inspection and packaging not later than 9:30 A.M., New York City time, on the
business day next preceding the Closing Date or the Option Closing Date, as the
case may be. The certificates evidencing the Firm Shares and any Additional
Shares to be purchased hereunder shall be delivered to you on the Closing Date
or the Option Closing Date, as the case may be, against payment of the purchase
price therefor by certified or official bank check or checks payable in New York
Clearing House (next day) funds to the order of the Company and the
Attorneys-in-Fact.
5. AGREEMENTS OF THE COMPANY. The Company agrees with the several
Underwriters as follows:
(a) If, at the time this Agreement is executed and delivered,
it is necessary for the Registration Statement or a post-effective amendment
thereto to be declared effective before the offering of the Shares may commence,
the Company will endeavor to cause the Registration Statement or such
post-effective amendment to become effective as soon as possible and will advise
you promptly and, if requested by you, will confirm such advice in writing, when
the Registration Statement or such post-effective amendment has become
effective.
(b) The Company will advise you promptly and, if requested by
you, will confirm such advice in writing: (i) of any request by the Commission
for amendment of or a supplement to the Registration Statement, any Prepricing
Prospectus or the Prospectus or for
- 4 -
<PAGE> 5
additional information; (ii) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or of the suspension
of qualification of the Shares for offering or sale in any jurisdiction or the
initiation of any proceeding for such purpose; and (iii) within the period of
time referred to in paragraph (f) below, of any change in the Company's
condition (financial or other), business, prospects, properties, net worth or
results of operations, or of the happening of any event, which makes any
statement of a material fact made in the Registration Statement or the
Prospectus (as then amended or supplemented) untrue or which requires the making
of any additions to or changes in the Registration Statement or the Prospectus
(as then amended or supplemented) in order to state a material fact required by
the Act or the regulations thereunder to be stated therein or necessary in order
to make the statements therein not misleading, or of the necessity to amend or
supplement the Prospectus (as then amended or supplemented) to comply with the
Act or any other law. If at any time the Commission shall issue any stop order
suspending the effectiveness of the Registration Statement, the Company will
make every reasonable effort to obtain the withdrawal of such order at the
earliest possible time.
(c) The Company will furnish to you, without charge (i) five
signed copies of the registration statement as originally filed with the
Commission and of each amendment thereto, including financial statements and all
exhibits to the registration statement, (ii) such number of conformed copies of
the registration statement as originally filed and of each amendment thereto,
but without exhibits, as you may request, (iii) such number of copies of the
Incorporated Documents, without exhibits, as you may request, and (iv) five
copies of the exhibits to any documents incorporated by reference in the
Registration Statement, any Prepricing Prospectus, the Prospectus, or any
amendment or supplement thereto (the "Incorporated Documents").
(d) The Company will not file any amendment to the Registration
Statement or make any amendment or supplement to the Prospectus or, prior to the
end of the period of time referred to in the first sentence in subsection (f)
below, file any document which, upon filing becomes an Incorporated Document, of
which you shall not previously have been advised or to which, after you shall
have received a copy of the document proposed to be filed, you shall reasonably
object.
(e) Prior to the execution and delivery of this Agreement, the
Company has delivered to you, without charge, in such quantities as you have
requested, copies of each form of the Prepricing Prospectus. The Company
consents to the use, in accordance with the provisions of the Act and with the
securities or Blue Sky laws of the jurisdictions in which the Shares are offered
by the several Underwriters and by dealers, prior to the date of the Prospectus,
of each Prepricing Prospectus so furnished by the Company.
(f) As soon after the execution and delivery of this Agreement
as possible and thereafter from time to time for such period as in the opinion
of counsel for the Underwriters a prospectus is required by the Act to be
delivered in connection with sales by any Underwriter or dealer, the Company
will expeditiously deliver to each Underwriter and each dealer, without charge,
as many copies of the Prospectus (and of any amendment or supplement thereto) as
you may request. The Company consents to the use of the Prospectus (and of any
amendment or
- 5 -
<PAGE> 6
supplement thereto) in accordance with the provisions of the Act and with the
securities or Blue Sky laws of the jurisdictions in which the Shares are offered
by the several Underwriters and by all dealers to whom Shares may be sold, both
in connection with the offering and sale of the Shares and for such period of
time thereafter as the Prospectus is required by the Act to be delivered in
connection with sales by any Underwriter or dealer. If during such period of
time any event shall occur that in the judgment of the Company or in the opinion
of counsel for the Underwriters is required to be set forth in the Prospectus
(as then amended or supplemented) or should be set forth therein in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading, or if it is necessary to supplement or amend the
Prospectus (or to file under the Exchange Act any document which, upon filing,
becomes an Incorporated Document) in order to comply with the Act or any other
law, the Company will forthwith prepare and, subject to the provisions of
paragraph (d) above, file with the Commission an appropriate supplement or
amendment thereto (or to such document), and will expeditiously furnish to the
Underwriters and dealers a reasonable number of copies thereof. In the event
that the Company and you, as Representatives of the several Underwriters, agree
that the Prospectus should be amended or supplemented, the Company, if requested
by you, will promptly issue a press release announcing or disclosing the matters
to be covered by the proposed amendment or supplement.
(g) The Company will cooperate with you and with counsel for
the Underwriters in connection with the registration or qualification of the
Shares for offering and sale by the several Underwriters and by dealers under
the securities or Blue Sky laws of such jurisdictions as you may designate and
will file such consents to service of process or other documents necessary or
appropriate in order to effect such registration or qualification; provided that
in no event shall the Company be obligated to qualify to do business in any
jurisdiction where it is not now so qualified or to take any action which would
subject it to service of process in suits, other than those arising out of the
offering or sale of the Shares, in any jurisdiction where it is not now so
subject.
(h) The Company will make generally available to its security
holders a consolidated earnings statement, which need not be audited, covering a
twelve-month period commencing after the effective date of the Registration
Statement and ending not later than 15 months thereafter, as soon as practicable
after the end of such period, which consolidated earnings statement shall
satisfy the provisions of Section 11(a) of the Act.
(i) During the period of five years hereafter, the Company
will furnish to you (i) as soon as available, a copy of each report of the
Company mailed to stockholders or filed with the Commission, and (ii) from time
to time such other information concerning the Company as you may request.
(j) If this Agreement shall terminate or shall be terminated
after execution pursuant to any provisions hereof (otherwise than pursuant to
the second paragraph of Section 12 hereof or by notice given by you terminating
this Agreement pursuant to Section 12 or Section 13 hereof) or if this Agreement
shall be terminated by the Underwriters because of any failure or
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<PAGE> 7
refusal on the part of the Company or the Selling Stockholders to comply with
the terms or fulfill any of the conditions of this Agreement, the Company agrees
to reimburse the Representatives for all out-of-pocket expenses (including fees
and expenses of counsel for the Underwriters) incurred by you in connection
herewith.
(k) The Company will apply the net proceeds from the sale of
the Shares to be sold by it hereunder substantially in accordance with the
description set forth in the Prospectus.
(l) If Rule 430A of the Act is employed, the Company will
timely file the Prospectus pursuant to Rule 424(b) under the Act and will advise
you of the time and manner of such filing.
(m) The Company agrees that without the prior written consent
of Smith Barney Inc. the Company will not (and, except as may be disclosed in
the Prospectus, will not announce or disclose any intention to) sell, offer to
sell, solicit an offer to buy, contract to sell, grant any option to purchase,
or otherwise transfer or dispose of, any shares of Common Stock, or any
securities convertible into or exercisable or exchangable for Common Stock, for
a period of 90 days after the date of the final Prospectus relating to the
offering of the Shares to the public by the Underwriters. Prior to the
expiration of such period, the undersigned will not announce or disclose any
intention to do anything after the expiration of such period which the
undersigned is prohibited, as provided in the preceding sentence, from doing
during such period.
(n) The Company has furnished or will furnish to you "lock-up"
letters, in form and substance satisfactory to you, signed by each of its
current officers and directors and each of its stockholders designated by you.
(o) Except as stated in this Agreement and in the Prepricing
Prospectus and Prospectus, the Company has not taken, nor will it take, directly
or indirectly, any action designed to or that might reasonably be expected to
cause or result in stabilization or manipulation of the price of the Common
Stock to facilitate the sale or resale of the Shares.
(p) The Company will use its best efforts to have the shares
of Common Stock which it agrees to sell under this Agreement listed, subject to
notice of issuance, on the Nasdaq National Market on or before the Closing Date.
6. AGREEMENTS OF THE SELLING STOCKHOLDERS. Each of the Selling
Stockholders agrees with the several Underwriters as follows:
(a) Such Selling Stockholder will cooperate to the extent
necessary to cause the registration statement or any post-effective amendment
thereto to become effective at the earliest possible time.
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<PAGE> 8
(b) Such Selling Stockholder will pay all Federal and other
taxes, if any on the transfer or sale of the Shares being sold by the Selling
Stockholder to the Underwriters.
(c) Such Selling Stockholder will do or perform all things
required to be done or performed by the Selling Stockholder prior to the Closing
Date or any Option Closing Date, as the case may be, to satisfy all conditions
precedent to the delivery of the Shares pursuant to this Agreement.
(d) Such Selling Stockholder has executed or will execute a
"lock-up" letter as provided in Section 5(n) above and will not sell, contract
to sell or otherwise dispose of any Common Stock, except for the sale of Shares
to the Underwriters pursuant to this Agreement, prior to the expiration of 180
days after the date of the Prospectus, without the prior written consent of
Smith Barney Inc..
(e) Except as stated in this Agreement and in the Prepricing
Prospectus and the Prospectus, such Selling Stockholder will not take, directly
or indirectly, any action designed to or that might reasonably be expected to
cause or result in stabilization or manipulation of the price of the Common
Stock to facilitate the sale or resale of the Shares.
(f) Such Selling Stockholder will advise you promptly, and if
requested by you, will confirm such advice in writing, within the period of time
referred to in Section 5(f) hereof, of any change in the Company's condition
(financial or other), business, prospects, properties, net worth or results of
operations or of any change in information relating to such Selling Stockholder
or the Company or any new information relating to the Company or relating to any
matter stated in the Prospectus or any amendment or supplement thereto which
comes to the attention of such Selling Stockholder that suggests that any
statement made in the Registration Statement or the Prospectus (as then amended
or supplemented, if amended or supplemented) is or may be untrue in any material
respect or that the Registration Statement or Prospectus (as then amended or
supplemented, if amended or supplemented) omits or may omit to state a material
fact or a fact necessary to be stated therein in order to make the statements
therein not misleading in any material respect, or of the necessity to amend or
supplement the Prospectus (as then amended or supplemented, if amended or
supplemented) in order to comply with the Act or any other law.
7. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to each Underwriter that:
(a) A registration statement on Form S-1 (File No.
333-_______) and a related preliminary prospectus with respect to the Shares
have been prepared and filed with the Commission by the Company in conformity
with the requirements of the Act, and the Company has so prepared and has filed
such amendments thereto, if any, and such amended preliminary prospectuses as
may have been required to the date hereof and will file such additional
amendments thereto and such amended prospectuses as may hereafter be required.
There have
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<PAGE> 9
been or will promptly be delivered to you three signed copies of such
registration statement and amendments, three copies of each exhibit filed
therewith, and conformed copies of such registration statement and amendments
(but without exhibits) and of the related preliminary prospectus or prospectuses
and final forms of prospectus for each of the Underwriters.
Such registration statement (as amended, if applicable) at the time
it becomes effective and the prospectus constituting a part thereof (including
the information, if any, deemed to be part thereof pursuant to Rule 430A(b)
and/or Rule 434), as from time to time amended or supplemented, are hereinafter
referred to as the "Registration Statement," and the "Prospectus," respectively,
except that if any revised prospectus shall be provided to the Underwriters by
the Company for use in connection with the offering of the Shares which differs
from the Prospectus on file at the Commission at the time the Registration
Statement became or becomes effective (whether or not such revised prospectus is
required to be filed by the Company pursuant to Rule 424(b)), the term
Prospectus shall refer to such revised prospectus from and after the time it was
provided to the Underwriters for such use. If the Company elects to rely on Rule
434 of the Act, all references to "Prospectus" shall be deemed to include,
without limitation, the form of prospectus and the term sheet, taken together,
provided to the Underwriters by the Company in accordance with Rule 434 of the
Act ("Rule 434 Prospectus"). Any registration statement (including any amendment
or supplement thereto or information which is deemed part thereof) filed by the
Company under Rule 462(b) ("Rule 462(b) Registration Statement") shall be deemed
to be part of the "Registration Statement" as defined herein, and any prospectus
(including any amendment or supplement thereto or information which is deemed
part thereof) included in such registration statement shall be deemed to be part
of the "Prospectus", as defined herein, as appropriate. The Securities Exchange
Act of 1934, as amended, and the rules and regulations of the Commission
thereunder are hereinafter collectively referred to as the "Exchange Act."
(b) The Commission has not issued any order preventing or
suspending the use of any preliminary prospectus, and each preliminary
prospectus has conformed in all material respects with the requirements of the
Act and, as of its date, has not included any untrue statement of a material
fact or omitted to state a material fact necessary to make the statements
therein not misleading; and when the Registration Statement became or becomes
effective, and at all times subsequent thereto, up to the First Closing Date or
the Second Closing Date hereinafter defined, as the case may be, the
Registration Statement, including the information deemed to be part of the
Registration Statement at the time of effectiveness pursuant to Rule 430A(b), if
applicable, and the Prospectus and any amendments or supplements thereto,
contained or will contain all statements that are required to be stated therein
in accordance with the Act and in all material respects conformed or will in all
material respects conform to the requirements of the Act, and neither the
Registration Statement nor the Prospectus, nor any amendment or supplement
thereto, included or will include any untrue statement of a material fact or
omitted or will omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided, however, that
the Company makes no representation or warranty as to information contained in
or omitted from any preliminary prospectus, the Registration Statement, the
Prospectus or any such amendment or supplement in reliance upon and in
conformity with
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<PAGE> 10
written information furnished to the Company by or on behalf of any Underwriter
through the Representatives specifically for use in the preparation thereof.
(c) The Company and its subsidiaries have been duly incorporated
and are validly existing as corporations in good standing under the laws of
their respective places of incorporation, with corporate power and authority to
own their properties and conduct their business as described in the Prospectus;
the Company and each of its subsidiaries are duly qualified to do business as
foreign corporations under the corporation law of, and are in good standing as
such in, each jurisdiction in which they own or lease substantial properties,
have an office, or in which substantial business is conducted and such
qualification is required, except in any such case where the failure to so
qualify or be in good standing would not have a material adverse effect upon the
Company and its subsidiaries taken as a whole; and no proceeding of which the
Company has knowledge has been instituted in any such jurisdiction, revoking,
limiting or curtailing, or seeking to revoke, limit or curtail, such power and
authority or qualification. Each of the Company and its subsidiaries are in
possession of and operating in compliance with all authorizations, licenses,
certificates, consents, orders and permits from state, federal and other
regulatory authorities which are material to the conduct of its business, all of
which are valid and in full force and effect.
(d) Except as disclosed in the Registration Statement, the
Company owns directly or indirectly 100 percent of the issued and outstanding
capital stock of each of its subsidiaries, free and clear of any claims, liens,
encumbrances or security interests and all of such capital stock has been duly
authorized and validly issued and is fully paid and nonassessable. The Company
does not own or control, directly or indirectly, any corporation, association or
other entity other than Barnett International Corporation, a Massachusetts
corporation; PAREXEL International Holding Corporation, a Delaware corporation;
PAREXEL International Securities Corporation, a Massachusetts corporation;
PAREXEL International, Inc., a Delaware corporation; PAREXEL GmbH Independent
Pharmaceutical Research Organization, a corporation organized under the laws of
Germany; PAREXEL Unternehens beteilung GmbH, a corporation organized under the
laws of Germany; PAREXEL International Limited, a corporation organized under
the laws of the United Kingdom; AFB CLINLAB Laborleistungs -
Organisationgesellschaft mbH, a corporation organized under the laws of Germany;
PAREXEL, International, a corporation organized under the laws of France;
PAREXEL International SRL, a corporation organized under the laws of Italy; and
PAREXEL International Pty Ltd, a corporation organized under the laws of
Australia.
(e) The issued and outstanding shares of capital stock of the
Company as set forth in the Prospectus have been duly authorized and validly
issued, are fully paid and nonassessable, and conform to the description thereof
contained in the Prospectus (which description correctly states the
capitalization of the Company).
(f) The Shares to be sold by the Company have been duly
authorized and when issued, delivered and paid for pursuant to this Agreement,
will be validly issued, fully paid and nonassessable, and will conform to the
description thereof contained in the Prospectus (which
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<PAGE> 11
description correctly states the capitalization of the Company). No preemptive
right, co-sale right, registration right, right of first refusal or other
similar right of shareholders exists with respect to any of the Common Stock or
Additional Shares or the issuance and sale thereof other than those that have
been expressly waived prior to the date hereof and those that will automatically
expire upon the consummation of the transactions contemplated on the Closing
Date. No further approval or authorization of any shareholder, the Board of
Directors or others is required for the issuance and sale or transfer of the
Shares except as may be required under the Act, the Exchange Act or under state
or other securities or blue sky laws.
(g) The Company has full legal right, power and authority to
enter into this Agreement and perform the transactions contemplated hereby. The
making and performance by the Company of this Agreement has been duly authorized
by all necessary corporate action and will not violate any provision of the
charter or bylaws of the Company or any of its Subsidiaries and will not result
in the breach of any provision of any material agreement, franchise, license,
indenture, mortgage, deed of trust, or other instrument to which the Company or
any subsidiary is a party or by which the Company, any subsidiary or the
property of any of them may be bound or affected, or any material order, rule or
regulation applicable to the Company or any subsidiary of any court or
regulatory body, administrative agency or other governmental body having
jurisdiction over the Company or any subsidiary or any of their respective
properties except in any such case for any violation which would not have a
material adverse effect upon the Company and its subsidiaries taken as a whole.
No consent, approval, authorization or other order of any court, regulatory
body, administrative agency or other governmental body is required for the
execution and delivery of this Agreement or the consummation of the transactions
contemplated herein or therein, except for compliance with the 1933 Act and blue
sky laws applicable to the public offering of the Shares by the several
Underwriters and clearance of such offering with the National Association of
Securities Dealers, Inc. ("NASD"). This Agreement has been duly executed and
delivered by the Company.
(h) The accountants who have expressed their opinions with
respect to certain of the financial statements and schedules included in the
Registration Statement are, to the best of the Company's knowledge, independent
accountants as required by the Act.
(i) The consolidated financial statements and schedules of the
Company included in the Registration Statement (A) present fairly the
consolidated financial position of the Company as of the respective dates of
such financial statements, and the consolidated results of operations and cash
flows of the Company for the respective periods covered thereby, all in
conformity with generally accepted accounting principles consistently applied
throughout the periods involved, except as disclosed in the Prospectus; and (B)
present fairly the information required to be stated in the Registration
Statement. The financial information set forth in the Prospectus under "Selected
Consolidated Financial Data" presents fairly, on the basis stated in the
Prospectus, the information set forth therein. No other financial statement or
schedules are required to be included in the Registration Statement.
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<PAGE> 12
(j) Neither the Company nor any subsidiary is in violation of
its charter or in default under any consent decree, or in default with respect
to any material provision of any lease, loan agreement, franchise, license,
permit or other contract obligation to which it is a party; and there does not
exist any state of facts which constitutes an event of default as defined in
such documents or which, with notice or lapse of time or both, would constitute
such an event of default except, in each case, for defaults which neither singly
nor in the aggregate would have a material adverse effect on the Company and its
subsidiaries taken as a whole.
(k) There are no material legal or governmental proceedings
pending, or to the Company's knowledge, threatened to which the Company or any
subsidiary is or may be a party or of which material property owned or leased by
the Company or any subsidiary is or may be subject, or related to environmental
or discrimination matters which are not disclosed in the Prospectus, or which
question the validity of this Agreement or any action taken or to be taken
pursuant hereto or thereto, or might prevent consummation of the transactions
contemplated hereby.
(l) There are no holders of securities of the Company having
rights to registration thereof or preemptive rights to purchase Common Stock
except as disclosed in the Prospectus. Holders of registration rights who are
not Selling Stockholders have waived such rights with respect to the offering
being made by the Prospectus.
(m) The Company and each of its subsidiaries have good and
marketable title to all the properties and assets reflected as owned in the
financial statements hereinabove described (or elsewhere in the Prospectus),
subject to no lien, mortgage, pledge, charge or encumbrance of any kind except
those, if any, reflected in such financial statements (or elsewhere in the
Prospectus) or which are not material to the Company and its subsidiaries taken
as a whole. The Company and each of its subsidiaries hold their respective
leased properties which are material to the Company and its subsidiaries taken
as a whole under valid, enforceable and binding leases except as enforcement may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws relating to or affecting creditors' rights generally or by
general equitable principles. The agreements to which the Company or one of its
subsidiaries is a party described in the Prospectus are valid agreements,
enforceable by the Company and its subsidiaries (as applicable), except as the
enforcement thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors' rights
generally or by general equitable principles and, to their knowledge, the other
contracting party or parties thereto are not in material breach or material
default under any of such agreements.
(n) The Company has not taken and will not take, directly or
indirectly, any action designed to or which has constituted or which might
reasonably be expected to cause or result, under the Exchange Act or otherwise,
in stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Shares.
(o) Subsequent to the respective dates as of which information
is given in the Registration Statement and Prospectus, and except as
contemplated by the Prospectus, the
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<PAGE> 13
Company and its subsidiaries, taken as a whole, have not incurred any material
liabilities or obligations, direct or contingent, paid or declared a dividend
(except as contemplated by the Registration Statement), nor entered into any
material transactions not in the ordinary course of business and there has not
been any material adverse change in their condition (financial or otherwise) or
results of operations nor any material change in their capital stock, short-term
debt or long-term debt.
(p) There is no material document of a character required to
be described in the Registration Statement or the Prospectus or to be filed as
an exhibit to the Registration Statement which is not described or has not been
filed as required.
(q) The Company, together with its subsidiaries, owns and
possesses all right, title and interest in and to, or has duly licensed from
third parties, all trademarks, copyrights and other proprietary rights ("Trade
Rights") material to the business of the Company and each of its subsidiaries
taken as a whole. Neither the Company nor any of its subsidiaries has received
any notice of infringement, misappropriation or conflict from any third party as
to such material Trade Rights which has not been resolved or disposed of and
neither the Company nor any of its subsidiaries has infringed, misappropriated
or otherwise conflicted with material Trade Rights of any third parties, which
infringement, misappropriation or conflict would have a material adverse effect
upon the Company and its subsidiaries taken as a whole.
(r) The conduct of the business of the Company and each of its
subsidiaries is in compliance in all respects with applicable federal, state,
local and foreign laws and regulations, except where the failure to be in
compliance would not have a material adverse effect upon the Company and its
subsidiaries taken as a whole.
(s) Other than the stock sold in connection with the Company's
initial public offering and second public offering pursuant to registration
statements on Form S-1 (File Nos. 33- 97406 and 333-01180) or pursuant to a
registration statement on Form S-8 (File No. 33-80301), all offers and sales of
the Company's capital stock prior to the date hereof were at all relevant times
exempt from the registration requirements of the Act and were duly registered
with or the subject of an available exemption from the registration requirements
of the applicable state securities or blue sky laws.
(t) The Company has filed all necessary federal and state
income and franchise tax returns and has paid all taxes shown as due thereon,
and there is no tax deficiency that has been, or to the knowledge of the Company
might be, asserted against the Company or any of its properties or assets that
would or could be expected to have a material adverse affect upon the Company
and its subsidiaries taken as a whole. All tax liabilities of the Company and
its subsidiaries are adequately provided for on the books of the Company and its
subsidiaries.
(u) A registration statement relating to the Common Stock has
been declared effective by the Commission pursuant to the Exchange Act and the
Common Stock is duly
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<PAGE> 14
registered thereunder. The Shares have been listed on the Nasdaq National Market
subject to notice of issuance or sale of the Shares, as the case may be.
(v) The Company is not, and does not intend to conduct its
business in a manner in which it would become, an "investment company" as
defined in Section 3(a) of the Investment Company Act of 1940, as amended (the
"Investment Company Act").
(w) The Company and its subsidiaries maintain insurance of the
types and in the amounts generally deemed adequate for their respective
businesses and consistent with insurance coverage maintained by similar
companies in similar businesses in similar geographic areas, including but not
limited to, insurance covering real and personal property owned or leased by the
Company or its subsidiaries against theft, damage, destruction, acts of
vandalism and all other risks customarily insured against (including without
limitation errors and omissions), all of which insurance is in full force and
effect.
(x) To the best of the Company's knowledge, no labor
disturbance by the employees of the Company or any of its subsidiaries exists or
is imminent; and the Company is not aware of any existing or imminent labor
disturbance by the employees of any of its principal suppliers that might be
expected to have a material adverse effect on the condition (financial or
otherwise), earnings, operations, business or business prospects of the Company
and its subsidiaries taken as a whole. No collective bargaining agreement exists
with any of the Company's or any of its subsidiaries' employees and, to the
Company's knowledge, no such agreement is imminent.
(y) The Company has not distributed and will not distribute
prior to the Closing Date or any date on which Option Shares are to be
purchased, as the case may be, any offering material in connection with the
offering and sale of the Shares other than the Prospectus, the Registration
Statement and the other materials permitted by the Act.
(z) Neither the Company nor any of its subsidiaries has at any
time during the last five years (i) made any unlawful contribution to any
candidate for foreign office, or failed to disclose fully any contribution in
violation of law, or (ii) made any payment to any federal or state governmental
officer or official, or other person charged with similar public or quasi-public
duties, other than payments required or permitted by the laws of the United
States or any jurisdiction thereof.
(aa) The Company confirms as of the date hereof that it is in
compliance with all provisions of Section 1 of Laws of Florida, Chapter 92-198,
AN ACT RELATING TO DISCLOSURE OF DOING BUSINESS WITH CUBA, and the Company
further agrees that if it commences engaging in business with the government of
Cuba or with any person or affiliate located in Cuba after the date the
Registration Statement becomes or has become effective with the Commission or
with the Florida Department of Banking and Finance (the "Department"), whichever
date is later, or if the information reported in the Prospectus, if any,
concerning the Company's business with Cuba or with any person or affiliate
located in Cuba changes in any material way, the Company will
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<PAGE> 15
provide the Department notice of such business or change, as appropriate, in a
form acceptable to the Department.
(bb) The Company has complied with all registration, filing,
and reporting requirements of the Exchange Act and the Nasdaq National Market.
8. REPRESENTATIONS AND WARRANTIES OF THE SELLING STOCKHOLDERS. Each
Selling Stockholder represents and warrants to each Underwriter that:
(a) Subject to the rights of the Custodian under the Custody
Agreement, such Selling Stockholder on the First Closing Date or the Second
Closing Date, as hereinafter defined, as the case may be, will have, valid
marketable title to the Shares proposed to be sold by such Selling Stockholder
hereunder on such date and full right, power and authority to enter into this
Agreement and to sell, assign, transfer and deliver such Shares hereunder, free
and clear of all voting trust arrangements, liens, encumbrances, equities,
claims and community property rights; and upon delivery of and payment for such
Shares hereunder, the Underwriters will acquire valid marketable title thereto,
free and clear of all voting trust arrangements, liens, encumbrances, equities,
claims and community property rights.
(b) Such Selling Stockholder has not taken and will not take,
directly or indirectly, any action designed to or which might be reasonably
expected to cause or result, under the Exchange Act or otherwise, in
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Shares.
(c) Such Selling Stockholder has executed and delivered a
Custody Agreement and Power of Attorney (the "Custody Agreement and Power of
Attorney") among the Selling Stockholder, [ ] as custodian (the
"Custodian"), [ ], (the "Agents"), naming the Agents as such
Selling Stockholder's attorneys-in-fact (and, by the execution by any Agent of
this Agreement, such Agent hereby represents and warrants that he has accepted
his appointment as attorney-in-fact by the Selling Stockholders pursuant to the
Custody Agreement and Power of Attorney) for the purpose of entering into and
carrying out this Agreement, and the Custody Agreement and Power of Attorney has
been duly executed by such Selling Stockholder and a copy thereof has been
delivered to you.
(d) Such Selling Stockholder further represents, warrants and
agrees that such Selling Stockholder has deposited in custody, under the Custody
Agreement and Power of Attorney, certificates in negotiable form for the Shares
to be sold hereunder by such Selling Stockholder, for the purpose of further
delivery pursuant to this Agreement. Each Agent has been authorized by such
Selling Stockholder to execute and deliver this Agreement and the Custodian has
been authorized to receive and acknowledge receipt of the proceeds of sale of
the Shares to be sold by such Selling Stockholder against delivery thereof and
otherwise act on behalf of such Selling Stockholder.
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<PAGE> 16
(e) All authorizations, approvals, consents and orders
necessary for the execution and delivery by such Selling Stockholder of the
Custody Agreement and Power of Attorney, the execution and delivery by or on
behalf of such Selling Stockholder of this Agreement and the sale and delivery
of the Selling Stockholder Shares under this Agreement (other than, at the time
of the execution hereof (if the Registration Statement has not yet been declared
effective by the Commission), the issuance of the order of the Commission
declaring the Registration Statement effective and such authorizations,
approvals or consents as may be necessary under state or other securities or
Blue Sky laws) have been obtained and are in full force and effect; such Selling
Stockholder, if other than a natural person, has been duly organized and is
validly existing and in good standing under the laws of the jurisdiction of its
organization as the type of entity that it purports to be; and such Selling
Stockholder has full right, power and authority to enter into and perform its
obligations under this Agreement and such Custody Agreement and Power of
Attorney, and to sell, assign, transfer and deliver the Shares to be sold by
such Selling Stockholder under this Agreement.
(f) This Agreement has been duly authorized by such Selling
Stockholder that is not a natural person and has been duly executed and
delivered by or on behalf of such Selling Stockholder and is a valid and binding
agreement of such Selling Stockholder, enforceable in accordance with its terms,
except as the indemnification and contribution provisions hereunder may be
limited by applicable law and except as the enforcement hereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting creditors' rights generally or by general equitable
principles; and the performance of this Agreement and the consummation of the
transactions herein contemplated will not result in a breach of or default under
any material bond, debenture, note or other evidence of indebtedness, or any
material contract, indenture, mortgage, deed of trust, loan agreement, lease or
other agreement or instrument to which such Selling Stockholder is a party or by
which such Selling Stockholder or any Selling Stockholder Shares hereunder may
be bound or to which any of the property of such Selling Stockholders is
subject, to the best of such Selling Stockholders' knowledge, result in any
violation of any law, order, rule, regulation, writ, injunction or decree of any
court or governmental agency or body or, if such Selling Stockholder is other
than a natural person, result in any violation of any provisions of the charter,
bylaws or other organizational documents of such Selling Stockholder.
(g) Such Selling Stockholder has not distributed and will not
distribute any prospectus or other offering material in connection with the
offering and sale of the Shares.
(h) Such Selling Stockholder will review the Prospectus and
will comply with all agreements and satisfy all conditions on its part to be
complied with or satisfied pursuant to this Agreement on or prior to the Closing
Date and will advise one of its Attorneys prior to the Closing Date if any
statement to be made on behalf of such Selling Stockholder in any certificate
required by this Agreement would be inaccurate if made as of the Closing Date.
(i) Such Selling Stockholder does not have, or has waived
prior to the date hereof, any preemptive right, co-sale right or right of first
refusal or other similar right to
- 16 -
<PAGE> 17
purchase any of the Shares that are to be sold by the Company or any of the
other Selling Stockholders to the Underwriters pursuant to this Agreement; and
such Selling Stockholder does not own any warrants, options or similar rights to
acquire, and does not have any right or arrangement to acquire, any capital
stock, rights, warrants, options or other securities from the Company, other
than those described in the Registration Statement and the Prospectus.
(j) Such Selling Stockholder is not aware (without having
conducted any investigation or inquiry) that any of the representations and
warranties of the Company above is untrue or inaccurate in any material respect.
(k) Each preliminary prospectus, insofar as it has related to
such Selling Stockholder and, to the knowledge of such Selling Stockholder
(without having conducted any investigation or inquiry) in all other respects,
as of its date, has conformed in all material respects with the requirements of
the Act and, as of its date, has not included any untrue statement of a material
fact or omitted to state a material fact necessary to make the statements
therein not misleading; and at the time of effectiveness of the Registration
Statement, and at all times subsequent thereto, up to the First Closing Date or
the Second Closing Date hereinafter defined, as the case may be, (1) such parts
of the Registration Statement and the Prospectus and any amendments or
supplements thereto as relate to such Selling Stockholder, and the Registration
Statement and the Prospectus and any amendments or supplements thereto, to the
knowledge of such Selling Stockholder (without having conducted any
investigation or inquiry) in all other respects, contained or will contain all
statements that are required to be stated therein in accordance with the 1933
Act and in all material respects conformed or will in all material respects
conform to the requirements of the 1933 Act, and (2) neither the Registration
Statement nor the Prospectus, nor any amendment or supplement thereto, as it
relates to such Selling Stockholder, and, to the knowledge of such Selling
Stockholder (without having conducted any investigation or inquiry) in all other
respects, included or will include any untrue statement of a material fact or
omitted or will omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading; provided that neither
clause (1) nor (2) shall have any effect if information has been given by such
Selling Stockholder to the Company and the Representatives in writing which
would eliminate or remedy any such untrue statement or omission.
(l) Such Selling Stockholder agrees with the Company and the
Underwriters to execute and deliver a Lock-up Letter in substantially the form
attached as Exhibit ___ hereto.
In order to document the Underwriter's compliance with the reporting and
withholding provisions of the Internal Revenue Code of 1986, as amended, with
respect to the transactions herein contemplated, each of the Selling
Stockholders agrees to deliver to you prior to or on the First Closing Date, as
hereinafter defined, a properly completed and executed United States Treasury
Department Form W-8 or W-9 (or other applicable form of statement specified by
Treasury Department regulations in lieu thereof).
- 17 -
<PAGE> 18
9. INDEMNIFICATION AND CONTRIBUTION. (a) The Company agrees to
indemnify and hold harmless each Underwriter and each person, if any, who
controls any Underwriter within the meaning of the Act or the Exchange Act
against any losses, claims, damages or liabilities, joint or several, to which
such Underwriter or such controlling person may become subject under the Act,
the Exchange Act or other federal or state statutory law or regulation, at
common law or otherwise (including in settlement of any litigation if such
settlement is effected with the written consent of the Company, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement, including the information
deemed to be part of the Registration Statement at the time of effectiveness
pursuant to Rule 430A and/or Rule 434, if applicable, any preliminary
prospectus, the Prospectus, or any amendment or supplement thereto, or arise out
of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading; and will reimburse each Underwriter and each such
controlling person for any legal or other expenses reasonably incurred by such
Underwriter or such controlling person in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that the Company will not be liable in any such case to the extent that (i) any
such loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
the Registration Statement, any preliminary prospectus, the Prospectus or any
amendment or supplement thereto in reliance upon and in conformity with written
information furnished to the Company by or on behalf of any Underwriter through
the Representatives, specifically for use therein; or (ii) if such statement or
omission was contained or made in any preliminary prospectus and corrected in
the Prospectus and (1) any such loss, claim, damage or liability suffered or
incurred by any Underwriter (or any person who controls any Underwriter)
resulted from an action, claim or suit by any person who purchased Shares which
are the subject thereof from such Underwriter in the offering and (2) such
Underwriter failed to deliver or provide a copy of the Prospectus to such person
at or prior to the confirmation of the sale of such Shares in any case where
such delivery is required by the Act. In addition to its other obligations under
this Section 9(a), the Company agrees that, as an interim measure during the
pendency of any claim, action, investigation, inquiry or other proceeding
arising out of or based upon any statement or omission, or any alleged statement
or omission, described in this Section 9(a), it will reimburse the Underwriters
on a monthly basis for all reasonable legal and other expenses incurred in
connection with investigating or defending any such claim, action,
investigation, inquiry or other proceeding, notwithstanding the absence of a
judicial determination as to the propriety and enforceability of the Company's
obligation to reimburse the Underwriters for such expenses and the possibility
that such payments might later be held to have been improper by a court of
competent jurisdiction. This indemnity agreement will be in addition to any
liability which the Company may otherwise have.
(b) Each Selling Stockholder, severally in proportion to the
number of Shares to be sold by such Selling Stockholder as compared to the total
number of Shares offered hereby, agrees to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter within the
meaning of the Act or the Exchange Act against any losses, claims, damages or
liabilities, joint or several, to which such Underwriter or such controlling
person may
- 18 -
<PAGE> 19
become subject under the Act, the Exchange Act or other federal or state
statutory law or regulation, at common law or otherwise (including in settlement
of any litigation if such settlement is effected with the written consent of
such Selling Stockholders), insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
the Registration Statement, including the information deemed to be part of the
Registration Statement at the time of effectiveness pursuant to Rule 430A and/or
Rule 434, if applicable, any preliminary prospectus, the Prospectus, or any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading; and will
reimburse each Underwriter and each such controlling person for any legal or
other expenses reasonably incurred by such Underwriter or such controlling
person in connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that no Selling Stockholder will
be liable in any such case to the extent that (i) any such loss, claim, damage
or liability arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in the Registration
Statement, any preliminary prospectus, the Prospectus or any amendment or
supplement thereto in reliance upon and in conformity with written information
furnished to the Company by or on behalf of any Underwriter through the
Representatives, specifically for use therein; or (ii) if such statement or
omission was contained or made in any preliminary prospectus and corrected in
the Prospectus and (1) any such loss, claim, damage or liability suffered or
incurred by any Underwriter (or any person who controls any Underwriter)
resulted from an action, claim or suit by any person who purchased Shares which
are the subject thereof from such Underwriter in the offering and (2) such
Underwriter failed to deliver or provide a copy of the Prospectus to such person
at or prior to the confirmation of the sale of such Shares in any case where
such delivery is required by the Act. In addition to their other obligations
under this Section 9(a), the Selling Stockholders agree that, subject to the
limitations set forth in the immediately succeeding paragraph and as an interim
measure during the pendency of any claim, action, investigation, inquiry or
other proceeding arising out of or based upon any statement or omission, or any
alleged statement or omission, described in this Section 9(a), they will
reimburse the Underwriters on a monthly basis for all reasonable legal and other
expenses incurred in connection with investigating or defending any such claim,
action, investigation, inquiry or other proceeding, notwithstanding the absence
of a judicial determination as to the propriety and enforceability of the
Selling Stockholders' obligation to reimburse the Underwriters for such expenses
and the possibility that such payments might later be held to have been improper
by a court of competent jurisdiction. This indemnity agreement will be in
addition to any liability which the Selling Stockholders may otherwise have.
Without limiting the full extent of the Company's agreement to
indemnify each Underwriter, as provided in Section 9(a), each Selling
Stockholder shall be liable under the indemnity agreements contained in this
Section only for an amount not exceeding the initial public offering price of
the Shares sold by such Selling Stockholder to the Underwriters minus the amount
for the underwriting discount paid thereon to the Underwriters by such Selling
Stockholder. In addition, each Underwriter agrees with each of the Selling
Stockholders that any claim for indemnity or reimbursement pursuant to this
Section 9(b) shall be first sought to be
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<PAGE> 20
satisfied by the Company and shall be only then sought to be satisfied by the
Selling Stockholders in accordance with this Section 9(b) if, and to the extent
that, such claim for indemnity has not been satisfied in full by the Company.
Notwithstanding the foregoing, each Underwriter agrees that it will not seek to
satisfy any claim for indemnity or reimbursement against the Selling
Stockholders listed in Schedule I until after such Underwriter has obtained a
court-approved settlement or a final adjudication in a court of competent
jurisdiction against the Company.
(c) If any action, suit or proceeding shall be brought against
any Underwriter or any person controlling any Underwriter in respect of which
indemnity may be sought against the Company or any Selling Stockholder, such
Underwriter or such controlling person shall promptly notify the parties against
whom indemnification is being sought (the "indemnifying parties"), and such
indemnifying parties shall assume the defense thereof, including the employment
of counsel and payment of all fees and expenses. Such Underwriter or any such
controlling person shall have the right to employ separate counsel in any such
action, suit or proceeding and to participate in the defense thereof, but the
fees and expenses of such counsel shall be at the expense of such Underwriter or
such controlling person unless (i) the indemnifying parties have agreed in
writing to pay such fees and expenses, (ii) the indemnifying parties have failed
to assume the defense and employ counsel, or (iii) the named parties to any such
action, suit or proceeding (including any impleaded parties) include both such
Underwriter or such controlling person and the indemnifying parties and such
Underwriter or such controlling person shall have been advised by its counsel
that representation of such indemnified party and any indemnifying party by the
same counsel would be inappropriate under applicable standards of professional
conduct (whether or not such representation by the same counsel has been
proposed) due to actual or potential differing interests between them (in which
case the indemnifying party shall not have the right to assume the defense of
such action, suit or proceeding on behalf of such Underwriter or such
controlling person). It is understood, however, that the indemnifying parties
shall, in connection with any one such action, suit or proceeding or separate
but substantially similar or related actions, suits or proceedings in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the reasonable fees and expenses of only one separate firm of
attorneys (in addition to any local counsel) at any time for all such
Underwriters and controlling persons not having actual or potential differing
interests with you or among themselves, which firm shall be designated in
writing by Smith Barney Inc., and that all such fees and expenses shall be
reimbursed as they are incurred. The indemnifying parties shall not be liable
for any settlement of any such action, suit or proceeding effected without their
written consent, but if settled with such written consent, or if there be a
final judgment for the plaintiff in any such action, suit or proceeding, the
indemnifying parties agree to indemnify and hold harmless any Underwriter, to
the extent provided in the preceding paragraph, and any such controlling person
from and against any loss, claim, damage, liability or expense by reason of such
settlement or judgment.
(d) Each Underwriter agrees, severally and not jointly, to
indemnify and hold harmless the Company, its directors, its officers who sign
the Registration Statement, each Selling Stockholder, and any person who
controls the Company within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act, to the same extent as the foregoing indemnity from
the
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<PAGE> 21
Company and the Selling Stockholders to each Underwriter, but only with respect
to information relating to such Underwriter furnished in writing by or on behalf
of such Underwriter through you expressly for use in the Registration Statement,
the Prospectus or any Prepricing Prospectus, or any amendment or supplement
thereto. If any action, suit or proceeding shall be brought against the Company,
any of its directors, any such officer, any Selling Stockholder, or any such
controlling person based on the Registration Statement, the Prospectus or any
Prepricing Prospectus, or any amendment or supplement thereto, and in respect of
which indemnity may be sought against any Underwriter pursuant to this paragraph
(d), such Underwriter shall have the rights and duties given to the Company by
paragraph (c) above (except that if the Company shall have assumed the defense
thereof such Underwriter shall not be required to do so, but may employ separate
counsel therein and participate in the defense thereof, but the fees and
expenses of such counsel shall be at such Underwriter's expense), and the
Company, its directors, any such officer, the Selling Stockholders, and any such
controlling person shall have the rights and duties given to the Underwriters by
paragraph (c) above. The foregoing indemnity agreement shall be in addition to
any liability which any Underwriter may otherwise have.
(e) If the indemnification provided for in this Section 9 is
unavailable to an indemnified party under paragraphs (a) or (d) hereof in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then an indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities or expenses (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company and the Selling Stockholders on the one hand and the Underwriters on the
other hand from the offering of the Shares, or (ii) if the allocation provided
by clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Company and the Selling Stockholders on
the one hand and the Underwriters on the other in connection with the statements
or omissions that resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations. The relative
benefits received by the Company and the Selling Stockholders on the one hand
and the Underwriters on the other shall be deemed to be in the same proportion
as the total net proceeds from the offering (before deducting expenses) received
by the Company and the Selling Stockholders bear to the total underwriting
discounts and commissions received by the Underwriters, in each case as set
forth in the table on the cover page of the Prospectus. The relative fault of
the Company and the Selling Stockholders on the one hand and the Underwriters on
the other hand shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
Company or the Selling Stockholders on the one hand or by the Underwriters on
the other hand and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
(f) The Company, the Selling Stockholders and the Underwriters
agree that it would not be just and equitable if contribution pursuant to this
Section 9 were determined by a pro rata allocation (even if the Underwriters
were treated as one entity for such purpose) or by any other method of
allocation that does not take account of the equitable considerations referred
to
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<PAGE> 22
in paragraph (e) above. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages, liabilities and expenses referred to in
paragraph (e) above shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating any claim or defending any such action,
suit or proceeding. Notwithstanding the provisions of this Section 9, no
Underwriter shall be required to contribute any amount in excess of the amount
by which the total price of the Shares underwritten by it and distributed to the
public exceeds the amount of any damages which such Underwriter has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations to contribute pursuant to this
Section 9 are several in proportion to the respective numbers of Firm Shares set
forth opposite their names in Schedule II hereto (or such numbers of Firm Shares
increased as set forth in Section 12 hereof) and not joint.
(g) No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement of any pending or
threatened action, suit or proceeding in respect of which any indemnified party
is or could have been a party and indemnity could have been sought hereunder by
such indemnified party, unless such settlement includes an unconditional release
of such indemnified party from all liability on claims that are the subject
matter of such action, suit or proceeding.
(h) Any losses, claims, damages, liabilities or expenses for
which an indemnified party is entitled to indemnification or contribution under
this Section 9 shall be paid by the indemnifying party to the indemnified party
as such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 9 and the
representations and warranties of the Company and the Selling Stockholders set
forth in this Agreement shall remain operative and in full force and effect,
regardless of (i) any investigation made by or on behalf of any Underwriter or
any person controlling any Underwriter, the Company, its directors or officers
or the Selling Stockholders or any person controlling the Company, (ii)
acceptance of any Shares and payment therefor hereunder, and (iii) any
termination of this Agreement. A successor to any Underwriter or any person
controlling any Underwriter, or to the Company, its directors or officers, or
any person controlling the Company, shall be entitled to the benefits of the
indemnity, contribution and reimbursement agreements contained in this Section
9.
10. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The several obligations
of the Underwriters to purchase the Firm Shares hereunder are subject to the
following conditions:
(a) If, at the time this Agreement is executed and delivered,
it is necessary for the registration statement or a post-effective amendment
thereto to be declared effective before the offering of the Shares may commence,
the registration statement or such post-effective amendment shall have become
effective not later than 5:30 P.M., New York City time, on the date hereof, or
at such later date and time as shall be consented to in writing by you, and all
filings, if any,
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<PAGE> 23
required by Rules 424 and 430A under the Act shall have been timely made; no
stop order suspending the effectiveness of the registration statement shall have
been issued and no proceeding for that purpose shall have been instituted or, to
the knowledge of the Company or any Underwriter, threatened by the Commission,
and any request of the Commission for additional information (to be included in
the registration statement or the prospectus or otherwise) shall have been
complied with to your satisfaction.
(b) Subsequent to the effective date of this Agreement, there
shall not have occurred (i) any change, or any development involving a
prospective change, in or affecting the condition (financial or other),
business, properties, net worth, or results of operations of the Company or the
Subsidiaries not contemplated by the Prospectus, which in your opinion, as
Representatives of the several Underwriters, would materially adversely affect
the market for the Shares, or (ii) any event or development relating to or
involving the Company or any officer or director of the Company or any Selling
Stockholder which makes any statement made in the Prospectus untrue or which, in
the opinion of the Company and its counsel or the Underwriters and their
counsel, requires the making of any addition to or change in the Prospectus in
order to state a material fact required by the Act or any other law to be stated
therein or necessary in order to make the statements therein not misleading, if
amending or supplementing the Prospectus to reflect such event or development
would, in your opinion, as Representatives of the several Underwriters,
materially adversely affect the market for the Shares.
(c) You shall have received on the Closing Date, an opinion of
Testa, Hurwitz & Thibeault, LLP, counsel for the Company and for [designated
Selling Shareholders], dated the First Closing Date or the Second and addressed
to you, as Representatives of the several Underwriters, to the effect that:
(i) the Company has been duly incorporated and is
validly existing as a corporation in good standing under the laws of its
jurisdiction of incorporation with corporate power and authority to own its
properties and conduct its business as described in the Prospectus; and the
Company has been duly qualified to do business as a foreign corporation under
the corporation law of, and is in good standing as such in, the jurisdictions
listed in an exhibit to such opinion;
(ii) an opinion to the same general effect as clause (1)
of this subparagraph (i) in respect of each direct and indirect subsidiary of
the Company, as well as an opinion that the execution and performance of this
Agreement will not violate such subsidiary's charter or bylaws (except that such
opinion with respect to PAREXEL unternehens beteilung GmbH, PAREXEL
International SRL, PAREXEL GmbH Independent Pharmaceutical Research
Organization, PAREXEL International Limited, AFB CLINLAB Laborleistungs
- - Organisationgesellschaft mbH, PAREXEL International Pty Ltd and PAREXEL,
International shall be based solely upon opinions of local counsel and that the
portion of such opinion addressing the due qualification of PAREXEL
International, Inc. shall be based solely on an opinion of local counsel);
- 23 -
<PAGE> 24
(iii) to such counsel's knowledge, the Company does not
own or control, directly or indirectly, any corporation, association or other
entity other than Barnett International Corporation, a Massachusetts
corporation; PAREXEL International Holding Corporation, a Delaware corporation;
PAREXEL International Securities Corporation, a Massachusetts corporation;
PAREXEL International, Inc., a Delaware corporation; PAREXEL unternehens
beteilung GmbH, a corporation organized under the laws of Germany; PAREXEL
International SRL, a corporation organized under the laws of Italy; PAREXEL GmbH
Independent Pharmaceutical Research Organization, a corporation organized under
the laws of Germany; PAREXEL International Limited, a corporation organized
under the laws of the United Kingdom; AFB CLINLAB Laborleistungs -
Organisationgesellschaft mbH, a corporation organized under the laws of Germany;
PAREXEL, International, a corporation organized under the laws of France; and
PAREXEL International Pty Ltd, a corporation organized under the laws of
Australia;
(iv) all of the issued and outstanding capital stock of
each subsidiary of the Company has been duly authorized, validly issued and is
fully paid and nonassessable, and, except as disclosed in the Registration
Statement, the Company owns directly or indirectly 100 percent of the
outstanding capital stock of each subsidiary, and to the best knowledge of such
counsel, such stock is owned free and clear of any claims, liens, encumbrances
or security interests;
(v) the authorized capital stock of the Company, of
which there is outstanding the amount set forth in the Registration Statement
and Prospectus (except for subsequent issuances, if any, pursuant to stock
options or other rights referred to in the Prospectus), conforms as to legal
matters in all material respects to the description thereof in the Registration
Statement and Prospectus;
(vi) the issued and outstanding capital stock of the
Company has been duly authorized and validly issued and is fully paid and
nonassessable and has not been issued in violation of any preemptive right,
co-sale right, registration right, right of first refusal or other similar
right;
(vii) the certificates for the Shares to be delivered
hereunder are in due and proper form, and when duly countersigned by the
Company's transfer agent and delivered to you or upon your order against payment
of the agreed consideration therefor in accordance with the provisions of this
Agreement and the Pricing Agreement, the Shares represented thereby will be duly
authorized and validly issued, fully paid and nonassessable and will not be
issued in violation of any preemptive right, registration right, co-sale right,
right of first refusal or other similar right and the stockholders of the
Company have no preemptive or, to such counsel's knowledge, other rights to
purchase any of the Shares;
(viii) the Registration Statement has become effective
under the Act, and, to the best knowledge of such counsel, no stop order
suspending the effectiveness of the Registration Statement has been issued and
no proceedings for that purpose have been instituted or are pending or
contemplated under the Act, and the Registration Statement (including the
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<PAGE> 25
information deemed to be part of the Registration Statement at the time of
effectiveness pursuant to Rule 430A(b) and/or Rule 434, if applicable), the
Prospectus and each amendment or supplement thereto (except for the financial
statements and other statistical or financial data included therein as to which
such counsel need express no opinion) comply as to form in all material respects
with the requirements of the Act; the statements in the Registration Statement
and the Prospectus summarizing statutes, rules and regulations are, to the best
knowledge of such counsel, accurate and fairly and correctly present the
information required to be presented by the Act or the rules and regulations
thereunder, in all material respects and such counsel does not know of any
statutes, rules and regulations required to be described or referred to in the
Registration Statement or the Prospectus that are not described or referred to
therein as required; and such counsel does not know of any legal or governmental
proceedings pending or threatened required to be described in the Prospectus
which are not described as required, nor of any contracts or documents of a
character required to be described in the Registration Statement or Prospectus
or to be filed as exhibits to the Registration Statement which are not described
or filed, as required;
(ix) the statements under the captions "Management,"
"Certain Relationships and Related Transactions" and "Description of Capital
Stock" in the Prospectus, insofar as such statements constitute a summary of
documents referred to therein or matters of law, are accurate summaries and
fairly and correctly present, in all material respects, the information called
for with respect to such documents and matters;
(x) this Agreement and the Pricing Agreement and the
performance of the Company's obligations hereunder have been duly authorized by
all necessary corporate action and this Agreement and the Pricing Agreement have
been duly executed and delivered by and on behalf of the Company; and no
approval, authorization or consent of any public board, agency, or
instrumentality of the United States or of any state or other jurisdiction is
necessary in connection with the issue or sale of the Shares by the Company
pursuant to this Agreement (other than under the Act, applicable blue sky laws
and the rules of the NASD) or the consummation by the Company of any other
transactions contemplated hereby;
(xi) the execution and performance of this Agreement will
not violate the Company's charter or bylaws, or contravene any of the provisions
of, or result in a default under, any agreement filed as an exhibit to the
Registration Statement (except that such opinion with respect to Exhibits [10.6,
10.18, 10.22 AND 10.23] shall be based solely upon an opinion of local counsel)
or, so far as is known to such counsel, violate any material statute, order,
rule or regulation of any regulatory or governmental body having jurisdiction
over the Company or any of its subsidiaries, except in any such case for any
violation which would not have a material adverse effect upon the Company and
its subsidiaries taken as a whole;
(xii) to such counsel's knowledge, other than stock sold
in connection with the Company's initial public offering and second public
offering pursuant to registration statements on Form S-1 (File No. 33-97406 and
33-01180) or pursuant to a registration statement
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<PAGE> 26
on Form S-8 (File No. 333-80301), all offers and sales of the Company's capital
stock were at all relevant times exempt from the registration requirements of
the Act;
(xiii) with respect to each Selling Stockholder, this
Agreement has been duly executed and delivered by or on behalf of each such
Selling Stockholder and the Agents and the Custodian for each such Selling
Stockholder have been duly and validly authorized to carry out all transactions
contemplated herein on behalf of each such Selling Stockholder; and the
performance of this Agreemente Selling Stockholder to the Shares being purchased
from such Selling Stockholder) and the consummation of the transactions herein
contemplated by such Selling Stockholders will not result in a breach or
violation of any of the terms and provisions of, or constitute a default under,
any statute, any indenture, mortgage, deed of trust, note agreement or other
agreement or instrument known to such counsel to which any of such Selling
Stockholders is a party or by which any are bound or to which any of the
property of such Selling Stockholders is subject, or any order, rule or
regulation known to such counsel of any court or governmental agency or body
having jurisdiction over any of such Selling Stockholders or any of their
properties; and no consent, approval, authorization or order of any court or
governmental agency or body is required for the consummation of the transactions
contemplated by this Agreement in connection with the sale of Shares to be sold
by such Selling Stockholders hereunder, except such as have been obtained under
the Act and such as may be required under applicable blue sky laws in connection
with the purchase and distribution of such Shares by the Underwriters and the
clearance of such offering with the NASD;
(xiv) each Selling Stockholder has full right, power and
authority to enter into this Agreement and to sell, transfer and deliver the
Shares to be sold on the First Closing Date or the Second Closing Date, as the
case may be, by such Selling Stockholder hereunder and good and marketable title
to such Shares so sold, free and clear of all voting trust arrangements, liens,
encumbrances, equities, claims and community property rights whatsoever, has
been transferred to the Underwriters (who counsel may assume to be bona fide
purchasers, without notice of any defect in the title of any such who have
purchased such Shares hereunder; and
(xv) the Company is not an "investment company" or a
person "controlled by" an "investment company" within the meaning of the
Investment Company Act.
In addition, such counsel shall state that, although they have not
verified the accuracy or completeness of the statements contained in the
Registration Statement or the Prospectus, nothing has come to the attention of
such counsel which causes them to believe that, at the time the Registration
Statement became effective, the Registration Statement (other than the financial
statements, including supporting schedules and financial data derived therefrom,
as to which such counsel need express no comment) contained any untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, or at the First
Closing Date or any later date on which the Options Shares are to be purchased,
as the case may be, the Prospectus (except as aforesaid) contained an untrue
statement of a material fact or omitted to state
- 26 -
<PAGE> 27
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
In rendering such opinion, such counsel may state that they are
relying solely upon the certificate of [THE FIRST NATIONAL BANK OF BOSTON], the
transfer agent for the Common Stock, as to the number of shares of Common Stock
at any time or times outstanding, and, with regard to the factual basis for the
opinion set forth in clause (xiii), solely upon a certificate of such Selling
Stockholder. It is understood that such counsel will not render opinions under
clauses (xiii) and (xiv) insofar as such clauses relate to Mr. Herrmann and
involve matters of German law. Such counsel may also rely, as to questions of
law not involving the laws of the United States or The Commonwealth of
Massachusetts or the General Corporation Law of the State of Delaware, solely
upon the opinions of local counsel and, as to factual matters, solely on
certificates of the Selling Stockholders and of officers of the Company and of
state officials, in which case their opinion is to state that they are so doing
and copies of said opinions or certificates are to be attached to the opinion
unless said opinions or certificates (or, in the case of certificates, the
information therein) have been furnished to the Representatives in other form.
(d) An opinion of counsel to each of the Selling Stockholders
other than the Selling Stockholders represented by Testa, Hurwitz & Thibeault,
LLP, dated the First Closing Date or the Second Closing Date, as the case may
be, with respect to the matters set forth in subsections (f)(i)(xiii) and (xiv),
above. In rendering this opinion, such counsel may state that they are relying
solely upon a certificate of such Selling Stockholder for the factual basis of
the opinion.
(e) You shall have received on the Closing Date, an opinion of
[ ] Esq., corporate counsel for the Company, dated the Closing Date and
addressed to you, as Representatives of the several Underwriters, to the effect
that:
(i) the Company and each of the Subsidiaries has full
corporate power and authority, and all necessary governmental authorizations,
approvals, orders, licenses, certificates, franchises and permits of and from
all governmental regulatory officials and bodies (except where the failure so to
have any such authorizations, approvals, orders, licenses, certificates,
franchises or permits, individually or in the aggregate, would not have a
material adverse effect on the business, properties, operations or financial
condition of the Company and the Subsidiaries taken as a whole), to own their
respective properties and to conduct their respective businesses as now being
conducted, as described in the Prospectus;
(ii) except as disclosed in the Prospectus, the Company
owns of record, directly or indirectly, all the outstanding shares of capital
stock of each of the Subsidiaries free and clear of any lien, adverse claim,
security interest, equity, or other encumbrance;
(iii) other than as described or contemplated in the
Prospectus (or any supplement thereto), there are no legal or governmental
proceedings pending or threatened against the Company or any of the
Subsidiaries, or to which the Company or any of the
- 27 -
<PAGE> 28
Subsidiaries, or any of their property, is subject, which are required to be
described in the Registration Statement or Prospectus (or any amendment or
supplement thereto);
(iv) there are no agreements, contracts, indentures,
leases or other instruments, that are required to be described in the
Registration Statement or the Prospectus (or any amendment or supplement
thereto) or to be filed as an exhibit to the Registration Statement or any
Incorporated Document that are not described or filed as required, as the case
may be;
(v) the Company and the Subsidiaries own all patents,
trademarks, trademark registrations, service marks, service mark registrations,
trade names, copyrights, licenses, inventions, trade secrets and rights
described in the Prospectus as being owned by them or any of them or necessary
for the conduct of their respective businesses, and [corporate counsel for the
Company] is not aware of any claim to the contrary or any challenge by any other
person to the rights of the Company and the Subsidiaries with respect to the
foregoing;
(vi) neither the Company nor any of the Subsidiaries is
in violation of any law, ordinance, administrative or governmental rule or
regulation applicable to the Company or any of the Subsidiaries or of any decree
of any court or governmental agency or body having jurisdiction over the Company
or any of the Subsidiaries;
(vii) except as described in the Prospectus, there are no
outstanding options, warrants or other rights calling for the issuance of, and
such counsel does not know of any commitment, plan or arrangement to issue, any
shares of capital stock of the Company or any security convertible into or
exchangeable or exercisable for capital stock of the Company; and
(viii) except as described in the Prospectus, there is no
holder of any security of the Company or any other person who has the right,
contractual or otherwise, to cause the Company to sell or otherwise issue to
them, or to permit them to underwrite the sale of, the Shares or the right to
have any Common Stock or other securities of the Company included in the
registration statement or the right, as a result of the filing of the
registration statement, to require registration under the Act of any shares of
Common Stock or other securities of the Company.
(f) You shall have received on the Closing Date an opinion of
Ropes & Gray, counsel for the Underwriters, dated the Closing Date and addressed
to you, as Representatives of the several Underwriters, with respect to the
matters referred to in clauses (v), (vii), (viii), (xii) and (xx) of the
foregoing paragraph (d) and such other related matters as you may request.
(g) You shall have received letters addressed to you, as
Representatives of the several Underwriters, and dated the date hereof and the
Closing Date from Price Waterhouse LLP, independent certified public
accountants, substantially in the forms heretofore approved by you.
- 28 -
<PAGE> 29
(h) (i) No stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for that
purpose shall have been taken or, to the knowledge of the Company, shall be
contemplated by the Commission at or prior to the Closing Date; (ii) there shall
not have been any change in the capital stock of the Company nor any material
increase in the short-term or long-term debt of the Company (other than in the
ordinary course of business) from that set forth or contemplated in the
Registration Statement or the Prospectus (or any amendment or Supplement
thereto); (iii) there shall not have been, since the respective dates as of
which information is given in the Registration Statement and the Prospectus (or
any amendment or supplement thereto), except as may otherwise be stated in the
Registration Statement and Prospectus (or any amendment or supplement thereto),
any material adverse change in the condition (financial or other), business,
prospects, properties, net worth or results of operations of the Company and the
Subsidiaries taken as a whole; (iv) the Company and the Subsidiaries shall not
have any liabilities or obligations, direct or contingent (whether or not in the
ordinary course of business), that are material to the Company and the
Subsidiaries, taken as a whole, other than those reflected in the Registration
Statement or the Prospectus (or any amendment or supplement thereto); and (v)
all the representations and warranties of the Company contained in this
Agreement shall be true and correct on and as of the date hereof and on and as
of the Closing Date as if made on and as of the Closing Date, and you shall have
received a certificate, dated the Closing Date and signed by the chief executive
officer and the chief financial officer of the Company (or such other officers
as are acceptable to you), to the effect set forth in this Section 10(h) and in
Section 10(i) hereof.
(i) The Company shall not have failed at or prior to the
Closing Date to have performed or complied with any of its agreements herein
contained and required to be performed or complied with by it hereunder at or
prior to the Closing Date.
(j) All the representations and warranties of the Selling
Stockholders contained in this Agreement shall be true and correct on and as of
the date hereof and on and as of the Closing Date as if made on and as of the
Closing Date, and you shall have received a certificate, dated the Closing Date
and signed by or on behalf of the Selling Stockholders to the effect set forth
in this Section 10(j) and in Section 10(k) hereof.
(k) The Selling Stockholders shall not have failed at or prior
to the Closing Date to have performed or complied with any of their agreements
herein contained and required to be performed or complied with by them hereunder
at or prior to the Closing Date.
(l) Prior to the Closing Date the shares of Common Stock which
the Company agrees to sell pursuant to this Agreement shall have been listed,
subject to notice of issuance, on the Nasdaq National Market.
(m) The Sellers shall have furnished or caused to be furnished
to you such further certificates and documents as you shall have requested.
- 29 -
<PAGE> 30
All such opinions, certificates, letters and other documents will be in
compliance with the provisions hereof only if they are satisfactory in form and
substance to you and your counsel.
Any certificate or document signed by any officer of the Company or any
Attorney-in-Fact or any Selling Stockholder and delivered to you, as
Representatives of the Underwriters, or to counsel for the Underwriters, shall
be deemed a representation and warranty by the Company, the Selling Stockholders
or the particular Selling Stockholder, as the case may be, to each Underwriter
as to the statements made therein.
The several obligations of the Underwriters to purchase Additional
Shares hereunder are subject to the satisfaction on and as of any Option Closing
Date of the conditions set forth in this Section 10, except that, if any Option
Closing Date is other than the Closing Date, the certificates, opinions and
letters referred to in paragraphs (c) through (d) shall be dated the Option
Closing Date in question and the opinions called for by paragraphs (c), (e) and
(f) shall be revised to reflect the sale of Additional Shares.
11. EXPENSES. The Company agrees to pay the following costs and
expenses and all other costs and expenses incident to the performance by it of
its obligations hereunder: (i) the preparation, printing or reproduction, and
filing with the Commission of the registration statement (including financial
statements and exhibits thereto), each Prepricing Prospectus, the Prospectus,
and each amendment or supplement to any of them; (ii) the printing (or
reproduction) and delivery (including postage, air freight charges and charges
for counting and packaging) of such copies of the registration statement, each
Prepricing Prospectus, the Prospectus, the Incorporated Documents, and all
amendments or supplements to any of them, as may be reasonably requested for use
in connection with the offering and sale of the Shares; (iii) the preparation,
printing, authentication, issuance and delivery of certificates for the Shares,
including any stamp taxes in connection with the original issuance and sale of
the Shares; (iv) the printing (or reproduction) and delivery of this Agreement,
the preliminary and supplemental Blue Sky Memoranda and all other agreements or
documents printed (or reproduced) and delivered in connection with the offering
of the Shares; (v) the listing of the Shares on the Nasdaq National Market; (vi)
the registration or qualification of the Shares for offer and sale under the
securities or Blue Sky laws of the several states as provided in Section 5(g)
hereof (including the reasonable fees, expenses and disbursements of counsel for
the Underwriters relating to the preparation, printing or reproduction, and
delivery of the preliminary and supplemental Blue Sky Memoranda and such
registration and qualification); (vii) the filing fees and the fees and expenses
of counsel for the Underwriters in connection with any filings required to be
made with the National Association of Securities Dealers, Inc.; (viii) the
transportation and other expenses incurred by or on behalf of Company
representatives in connection with presentations to prospective purchasers of
the Shares; and (ix) the fees and expenses of the Company's accountants and the
fees and expenses of counsel (including local and special counsel) for the
Company and the Selling Stockholders.
12. EFFECTIVE DATE OF AGREEMENT. This Agreement shall become effective:
(i) upon the execution and delivery hereof by the parties hereto; or (ii) if, at
the time this Agreement is executed and delivered, it is necessary for the
registration statement or a post-effective amendment
- 30 -
<PAGE> 31
thereto to be declared effective before the offering of the Shares may commence,
when notification of the effectiveness of the registration statement or such
post-effective amendment has been released by the Commission. Until such time as
this Agreement shall have become effective, it may be terminated by the Company,
by notifying you, or by you, as Representatives of the several Underwriters, by
notifying the Company and the Selling Stockholders.
If any one or more of the Underwriters shall fail or refuse to
purchase Shares which it or they are obligated to purchase hereunder on the
Closing Date, and the aggregate number of Shares which such defaulting
Underwriter or Underwriters are obligated but fail or refuse to purchase is not
more than one-tenth of the aggregate number of Shares which the Underwriters are
obligated to purchase on the Closing Date, each non-defaulting Underwriter shall
be obligated, severally, in the proportion which the number of Firm Shares set
forth opposite its name in Schedule II hereto bears to the aggregate number of
Firm Shares set forth opposite the names of all non-defaulting Underwriters or
in such other proportion as you may specify in accordance with Section 20 of the
Master Agreement Among Underwriters of Smith Barney Inc., to purchase the Shares
which such defaulting Underwriter or Underwriters are obligated, but fail or
refuse, to purchase. If any one or more of the Underwriters shall fail or refuse
to purchase Shares which it or they are obligated to purchase on the Closing
Date and the aggregate number of Shares with respect to which such default
occurs is more than one-tenth of the aggregate number of Shares which the
Underwriters are obligated to purchase on the Closing Date and arrangements
satisfactory to you and the Company for the purchase of such Shares by one or
more non-defaulting Underwriters or other party or parties approved by you and
the Company are not made within 36 hours after such default, this Agreement will
terminate without liability on the part of any non-defaulting Underwriter or the
Company. In any such case which does not result in termination of this
Agreement, either you or the Company shall have the right to postpone the
Closing Date, but in no event for longer than seven days, in order that the
required changes, if any, in the Registration Statement and the Prospectus or
any other documents or arrangements may be effected. Any action taken under this
paragraph shall not relieve any defaulting Underwriter from liability in respect
of any such default of any such Underwriter under this Agreement. The term
"Underwriter" as used in this Agreement includes, for all purposes of this
Agreement, any party not listed in Schedule II hereto who, with your approval
and the approval of the Company, purchases Shares which a defaulting Underwriter
is obligated, but fails or refuses, to purchase.
Any notice under this Section 12 may be given by telegram, telecopy or
telephone but shall be subsequently confirmed by letter.
13. TERMINATION OF AGREEMENT. This Agreement shall be subject to
termination in your absolute discretion, without liability on the part of any
Underwriter to the Company or any Selling Stockholder, by notice to the Company,
if prior to the Closing Date or any Option Closing Date (if different from the
Closing Date and then only as to the Additional Shares), as the case may be, (i)
trading in securities generally on the New York Stock Exchange, the American
Stock Exchange or the Nasdaq National Market shall have been suspended or
materially limited, (ii) a general moratorium on commercial banking activities
in New York or Massachusetts shall have been
- 31 -
<PAGE> 32
declared by either federal or state authorities, or (iii) there shall have
occurred any outbreak or escalation of hostilities or other international or
domestic calamity, crisis or change in political, financial or economic
conditions, the effect of which on the financial markets of the United States is
such as to make it, in your judgment, impracticable or inadvisable to commence
or continue the offering of the Shares at the offering price to the public set
forth on the cover page of the Prospectus or to enforce contracts for the resale
of the Shares by the Underwriters. Notice of such termination may be given to
the Company by telegram, telecopy or telephone and shall be subsequently
confirmed by letter.
14. INFORMATION FURNISHED BY THE UNDERWRITERS. The statements set forth
in the last paragraph on the cover page, the stabilization legend on the inside
cover page, and the statements in the first and third paragraphs under the
caption "Underwriting" in any Prepricing Prospectus and in the Prospectus,
constitute the only information furnished by or on behalf of the Underwriters
through you as such information is referred to in Sections 7(b) and 9 hereof.
15. MISCELLANEOUS. Except as otherwise provided in Sections 5, 12 and
13 hereof, notice given pursuant to any provision of this Agreement shall be in
writing and shall be delivered (i) if to the Company, at the office of the
Company at 195 West Street, Waltham, Massachusetts 02154, Attention: Mr. Josef
H. von Rickenbach, President, Chief Executive Officer and Chairman, with a copy
to William J. Schnoor, Jr. of Testa, Hurwitz & Thibeault, LLP, High Street
Tower, 125 High Street, Boston, Massachusetts 02110; or (ii) if sent to the
Selling Stockholders mailed or delivered to the Agents and the Custodian at such
address as they have previously furnished to the Company, with a copy to William
J. Schnoor, Jr. of Testa, Hurwitz & Thibeault, LLP, High Street Tower, 125 High
Street, Boston, Massachusetts 02110; or (iii) if to you, as Representatives of
the several Underwriters, care of Smith Barney Inc., 388 Greenwich Street, New
York, New York 10013, Attention: Manager, Investment Banking Division.
This Agreement has been and is made solely for the benefit of the
several Underwriters, the Company, its directors and officers, and the other
controlling persons referred to in Section 9 hereof and their respective
successors and assigns, to the extent provided herein, and no other person shall
acquire or have any right under or by virtue of this Agreement. Neither the term
"successor" nor the term "successors and assigns" as used in this Agreement
shall include a purchaser from any Underwriter of any of the Shares in his
status as such purchaser.
16. APPLICABLE LAW; COUNTERPARTS. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York applicable to
contracts made and to be performed within the State of New York.
This Agreement may be signed in various counterparts which together
constitute one and the same instrument. If signed in counterparts, this
Agreement shall not become effective unless at least one counterpart hereof
shall have been executed and delivered on behalf of each party hereto.
- 32 -
<PAGE> 33
Please confirm that the foregoing correctly sets forth the agreement
among the Company, the Selling Stockholders and the several Underwriters.
Very truly yours,
PAREXEL INTERNATIONAL CORPORATION
By ........................
Chairman of the Board
Each of the Selling Stockholders
named in Schedule I hereto
By ........................
Attorney-in-Fact
By ........................
Attorney-in-Fact
Confirmed as of the date first
above mentioned on behalf of
themselves and the other several
Underwriters named in Schedule II
hereto.
SMITH BARNEY INC.
As Representatives of the Several Underwriters
By SMITH BARNEY INC.
By ..........................
Managing Director
- 33 -
<PAGE> 34
<TABLE>
SCHEDULE I
PAREXEL INTERNATIONAL CORPORATION
<CAPTION>
Number of
Selling Stockholders Firm Shares
-------------------- -----------
<S> <C>
Martin J. Miller 125,000
Josef M. von Rickenbach 30,000
Howard M. Tag 15,700
A. Dana Callow, Jr. 15,000
Peter B. Malamas 7,500
Veronica Jordan 5,000
William T. Sabo, Jr. 5,000
Peter Barton Hutt 3,600
Laurie M. Hughes 1,300
- ------------------------------------------------------------------------
Total........ 208,100
-------
</TABLE>
- 34 -
<PAGE> 35
<TABLE>
SCHEDULE II
PAREXEL INTERNATIONAL CORPORATION
<CAPTION>
Additional
Underwriter Firm Shares Firm Shares
- ----------- ----------- -----------
<S> <C> <C>
Smith Barney Inc.....................
William Blair & Company, L.L.C.......
Lehman Brothers Inc. ................
Adams, Harkness & Hill, Inc..........
- ----------------------------------------------------------------------------
Total................................ 1,275,000 191,250
</TABLE>
- 35 -
<PAGE> 1
EXHIBIT 5.1
October 21, 1996
PAREXEL International Corporation
195 West Street
Waltham, MA 02154
RE: Registration Statement on Form S-1
Relating to 1,466,250 shares of Common Stock
Dear Sir or Madam:
This opinion relates to an aggregates of 1,466,250 shares of Common Stock,
par value $.01 per share (the "Common Stock"), of PAREXEL International
Corporation (the "Company"), which are the subject matter of a Registration
Statement on Form S-1 filed with the Securities and Exchange Commission on
October 22, 1996 (the "Registration Statement").
The 1,466,250 shares of Common Stock covered by the Registration Statement
consist of 1,275,000 shares being sold by the Company and certain Selling
Stockholders to be named in the prospectus (the "Prospectus") included in the
Registration Statement and an additional 191,250 shares subject to an
overallotment option granted to the underwriters by the Company.
Based upon such investigation as we have deemed necessary, we are of the
opinion that when the shares of Common Stock to be sold by the Company and the
Selling Stockholders pursuant to the Prospectus have been issued or sold and
paid for in accordance with the terms described in the Prospectus, such shares
of Common Stock will have been validly issued and will be fully paid and
nonassessable.
We hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement and to the reference to our firm in the Prospectus under
caption "Legal Matters."
Very truly yours,
TESTA, HURWITZ & THIBEAULT, LLP
<PAGE> 1
EXHIBIT 11.1
PAREXEL INTERNATIONAL CORPORATION
STATEMENT RE COMPUTATION OF NET INCOME (LOSS) PER COMMON SHARE
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED JUNE 30, SEPTEMBER 30,
-------------------------- ---------------
1994 1995 1996 1995 1996
------ -------- ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net income (loss)................................... $2,423 $(10,630) $4,599 $ 742 $1,936
Net interest income pursuant to APB 15, paragraph
38(b)............................................. 123 -- -- 47 --
------ -------- ------ ------ ------
Net income (loss) attributable to common shares..... $2,546 $(10,630) $4,599 $ 789 $1,936
====== ======== ====== ====== ======
Weighted average common shares outstanding:
a. Shares attributable to common stock
outstanding.................................. 750 842 6,452 844 8,385
b. Shares attributable to convertible preferred
stock outstanding............................ 4,200 -- -- 4,237 --
c. Shares attributable to common stock options
and preferred stock warrants pursuant to APB
15, paragraph 38(b).......................... 796 -- 328 652 243
d. Shares attributable to common stock options
pursuant to SAB 83........................... 1 1 -- 1 --
------ -------- ------ ------ ------
Weighted average common shares outstanding.......... 5,747 843 6,780 5,734 8,628
====== ======== ====== ====== ======
Net income (loss) per share......................... $ 0.44 $ (12.61) $ 0.68 $ 0.14 $ 0.22
====== ======== ====== ====== ======
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our report dated August 22, 1996 relating
to the financial statements of PAREXEL International Corporation, which appears
in such Prospectus. We also consent to the application of such report to the
Financial Statement Schedule for the three years ended June 30, 1996 listed
under Item 16(b) of this Registration Statement when such schedule is read in
conjunction with the financial statements referred to in our report. The audits
referred to in such report also included this schedule. We also consent to the
references to us under the headings "Experts" and "Selected Consolidated
Financial Data" in such Prospectus. However, it should be noted that Price
Waterhouse LLP has not prepared or certified such "Selected Consolidated
Financial Data."
PRICE WATERHOUSE LLP
Boston, Massachusetts
October 21, 1996
