57
Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark one)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934.
For the Quarterly Period Ended March 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934.
For the transition period from ________ to ________
Commission File Number: 0-27058
PAREXEL International Corporation
(Exact name of registrant as specified in its charter)
Massachusetts 04-2776269
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
195 West Street, Waltham, MA 02154
(Address of principal executive offices) (Zip code)
(781) 487-9900
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
As of May 11, 1998, there were shares of 24,584,452
PAREXEL International Corporation common stock outstanding.
PAREXEL INTERNATIONAL CORPORATION
INDEX
Page
Part I. Financial Information
Item I. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets -
March 31, 1998 and June 30, 1997 3
Condensed Consolidated Statements of
Operations - Three months ended March 31,
1998 and 1997; Nine months ended March
31, 1998 and 1997 4
Condensed Consolidated Statements of Cash
Flows- Nine months ended March 31, 1998
and 1997 5
Notes to Condensed Consolidated Financial
Statements 6
Item II. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 10
Risk Factors 19
Part II. Other Information
Item 2. Changes in Securities and Use of Proceeds 25
Item 6. Exhibits and Reports on Form 8-K 25
Signatures 27
Part I. Financial Information
Item 1 - Financial Statements
PAREXEL INTERNATIONAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(Unaudited)
March 31, June 30,
ASSETS 1998 1997
Current assets:
Cash and cash equivalents:
Unrestricted $ 54,628 $ 36,626
Restricted 1,663 1,967
Marketable securities 32,164 67,713
Accounts receivable, net 102,103 82,827
Other current assets 18,014 15,260
Total current assets 208,572 204,393
Property and equipment, net 44,115 33,508
Other assets 6,908 2,643
$259,595 $240,544
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 989 $ 2,236
Accounts payable 10,393 10,425
Advance billings 54,634 46,170
Other current liabilities 28,230 31,431
Total current liabilities 94,246 90,262
Long-term debt 24 136
Other liabilities 1,950 2,565
Total liabilities 96,220 92,963
Stockholders' equity:
Preferred stock - $0.01 par value; shares
authorized: 5,000,000, none issued -- --
Common stock - $0.01 par value; shares
authorized: 50,000,000 at March 31, 1998
and June 30, 1997; shares issued:
24,606,767 at March 31, 1998 and
24,139,324 at June 30, 1997; shares
outstanding: 24,577,355 at March 31, 1998
and 24,109,912 at June 30, 1997 246 241
Additional paid-in capital and other
stockholders' equity 148,620 135,838
Retained earnings 14,509 11,502
Total stockholders' equity 163,375 147,581
$259,595 $240,544
See notes to condensed consolidated financial statements.
PAREXEL INTERNATIONAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(in thousands, except per share data)
Three months ended Nine months ended
March 31, March 31,
1998 1997 1998 1997
Revenue $96,728 $72,773 $268,472 $192,920
Reimbursed costs (23,661) (19,189) (64,423) (48,947)
Net revenue 73,067 53,584 204,049 143,973
Costs and expenses:
Direct costs 47,364 35,243 132,925 95,710
Selling, general and
administrative 16,743 11,702 44,054 31,418
Depreciation and
amortization 5,241 2,013 11,038 5,144
Acquisition-related charges 6,173 -- 10,273 --
75,521 48,958 198,290 132,272
Income (loss) from operations (2,454) 4,626 5,759 11,701
Other income, net 905 1,379 2,944 2,661
Income (loss) before
provision for income taxes (1,549) 6,005 8,703 14,362
Provision for income taxes 817 2,360 4,827 5,665
Net income(loss) $(2,366) $ 3,645 $ 3,876 $ 8,697
Earnings (loss) per common
share:
Basic $ (0.10) $ 0.16 $ 0.16 $ 0.41
Diluted $ (0.10) $ 0.15 $ 0.16 $ 0.40
Shares used in computing
earnings (loss) per common
share:
Basic 24,114 23,168 23,846 21,052
Diluted 24,114 23,830 24,776 21,633
See notes to condensed consolidated financial statements.
PAREXEL INTERNATIONAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)
Nine months ended
March 31,
Cash flows from operating activities: 1998 1997
Net income $ 3,876 $ 8,697
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 11,038 5,144
Acquisition-related charges 10,273 --
Change in operating assets and liabilities,
net of effects from acquisitions (20,818) (6,994)
Net cash provided by operating activities 4,369 6,847
Cash flows from investing activities:
Purchase of marketable securities (90,217) (77,268)
Proceeds from sale of marketable securities 124,803 74,436
Cash related to acquisition activities 33 781
Other investing activities (1,410) --
Purchase of plant and equipment (22,358) (16,027)
Net cash provided (used) by investing
Activities 10,851 (18,078)
Cash flows from financing activities:
Proceeds from issuance of common stock 4,453 61,052
Net borrowings (repayments) under line of credit (497) 239
Proceeds from long-term debt -- 233
Repayments of long-term debt (386) (3,243)
Dividends paid by acquired companies (1,289) --
Net cash provided by financing activities 2,281 58,281
Elimination of net cash activities of acquired
Companies 672 (21)
Effect of exchange rate changes on unrestricted
cash and cash equivalents (171) (1,572)
Net increase in unrestricted cash and cash
Equivalents 18,002 45,457
Unrestricted cash and cash equivalents at
beginning of period 36,626 21,875
Unrestricted cash and cash equivalents at end of
Period $54,628 $ 67,332
See notes to condensed consolidated financial statements.
PAREXEL INTERNATIONAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 - Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of
the Company have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions of Form 10-Q and Article 10 of Regulation S-X. Accordingly,
they do not include all of the information and notes required by generally
accepted accounting principles for complete financial statements. In the
opinion of management, all adjustments (primarily consisting of normal
recurring adjustments) considered necessary for a fair presentation have
been included. Operating results for the nine months ended March 31, 1998,
are not necessarily indicative of the results that may be expected for the
fiscal year ending June 30, 1998. For further information, refer to the
consolidated financial statements and notes thereto included in the
Company's Prospectus on Form S-3, dated January 27, 1998.
The Company's stock is currently quoted on the NASDAQ National Market under
the symbol "PRXL."
Note 2 - Acquisitions
In December, 1997, the Company acquired Kemper-Masterson, Inc. ("KMI), a
leading regulatory consulting firm based in Massachusetts in a business
combination accounted for as a pooling of interests. The Company issued
581,817 shares of common stock in exchange for all of the outstanding
shares of KMI. The Company's historical consolidated financial statements
have been retroactively restated to include the financial position and
results of operations of KMI for all periods prior to the date of
acquisition.
In March, 1998, the Company acquired, in separate transactions, PPS Europe
Limited ("PPS"), a leading marketing and clinical communications firm,
based in the U.K., servicing the international pharmaceutical industry
based in the U.K. and MIRAI B.V. ("MIRAI"), a full service, pan-European
contract research organization based in the Netherlands. The Company
issued 2,774,813 shares of common stock in exchange for all of the
outstanding ordinary shares of PPS and 134,995 common stock options in
exchange for all of the outstanding ordinary share options of PPS based on
the exchange ratio for the acquisition. The Company issued 682,345 shares
of common stock in exchange for all of the outstanding shares of MIRAI.
Both acquisitions were accounted for as poolings of interests and,
accordingly, the Company's historical consolidated financial statements
have been retroactively restated to include the financial position and
results of operations of PPS and MIRAI for all periods prior to the date of
the acquisitions.
Also in March, 1998, the Company acquired, in separate transactions,
Genesis Pharma Strategies Limited ("Genesis"), a physician-focused
marketing and clinical communications firm servicing the international
pharmaceutical industry and LOGOS GmbH ("LOGOS"), a provider of regulatory
services to pharmaceutical manufacturers. The Company issued 91,667 and
93,152 shares of common stock in exchange for all of the outstanding
capital stock of Genesis and LOGOS, respectively. Both acquisitions were
accounted for as poolings of interests. The aggregate historical results
of operations and financial position of Genesis and LOGOS are not material,
individually or in aggregate, to the Company's historical financial
statements. Therefore, prior period amounts have not been retroactively
restated and results of operations of Genesis and LOGOS have been included
in the consolidated results since acquisition. Pro forma results of
operations of the Company, assuming the above acquisitions were recorded at
the beginning of each period presented would not be materially different
from actual results presented.
Due to the differing fiscal year ends of PPS (November 30) and MIRAI
(December 31), financial information for dissimilar fiscal years has been
combined with the consolidated accounts of the Company for periods prior to
the date of acquisition. The consolidated statement of operations for
fiscal 1997 combines the Company's results of operations for the year ended
June 30, 1997 with the results of operations of PPS and MIRAI for their
respective fiscal years ended November 30 and December 31, 1997. Likewise,
the consolidated statement of operations of the Company for the nine months
ended March 31, 1997 includes the results of operations of PPS and MIRAI
for the nine months ended August 31 and September 30, 1997, respectively.
Effective in March 1998, the Company changed the fiscal year end of PPS
from November 30 to May 31 and the fiscal year end of MIRAI from December
31 to June 30. As such, the statement of operations for the nine months
ended March 31, 1998 combines the results of operations of the Company for
the nine months ended March 31, 1998 and the results of operations of PPS
and MIRAI for the nine months ended February 28 and March 31, 1998,
respectively. As a result of conforming fiscal year ends of the acquired
companies, the results of operations of PPS and MIRAI for the three months
ended August 31 and September 30, 1997, respectively, are repeated in the
combined statement of operations.
The following represents the repeated amounts included in both the results
of operations for the nine months ended March 31, 1998 and 1997 (in
thousands). The repeated net income amounts have been eliminated from
stockholders' equity.
PPS MIRAI TOTAL
Net revenue $6,518 $2,204 $8,722
Operating income 691 186 877
Net income 336 162 498
Revenue and net income for the previously separate companies are as follows
(in thousands):
Year ended June 30, Six months ended
December 31,
1997 1996 1997 1996
Net revenue
PAREXEL $159,679 $ 88,006 $106,363 $ 70,199
KMI 10,676 9,355 6,523 4,965
PPS 24,881 18,522 13,205 11,677
MIRAI 8,440 9,170 4,891 3,548
$203,676 $125,053 $130,982 $ 90,389
Net income
PAREXEL $10,848 $4,599 $4,478 $4,209
KMI 189 94 725 117
PPS 1,201 1,721 697 501
MIRAI 565 242 342 225
$12,803 $6,656 $6,242 $5,052
Note 3 - Acquisition-related and Other Charges
In connection with the acquisition of KMI during the second fiscal quarter
of 1998, the Company incurred charges totaling $4.1 million, primarily
related to noncash compensation expense recorded at the acquisition date
attributable to incentive stock options previously granted to certain KMI
key employees. These options contained formula-value repurchase terms
which required periodic revaluation of the compensation expense over the
vesting period of the options. These options fully vested upon the
acquisition and no future compensation expense will be recorded.
In connection with the several acquisitions during the third fiscal quarter
ended March 31, 1998, the Company incurred acquisition-related charges
totaling $6.2 million. These charges are comprised of legal, accounting,
and transaction fees pertaining to the acquisition, as well as noncash
compensation charges related to employee stock options previously granted
by PPS, and an accelerated compensation payment to a PPS executive pursuant
to a pre-existing employment agreement.
In addition, the Company recorded a $1.6 million provision during the
fiscal quarter ended March 31, 1998, to increase the accounts receivable
reserves of PPS and MIRAI to conform reserve estimates with company policy
which has been reflected in selling, general and administrative expense in
the accompanying consolidated statement of operations. In addition, the
Company recorded a $1.7 million charge to depreciation and amortization
expense resulting from a change in estimate of the remaining service lives
of certain computer equipment arising from integration activities
associated with acquisitions and a company-wide program implemented to
upgrade and standardize its information technology platform. The aggregate
effect of these changes in estimates was an increase in operating expenses
of $3.3 million and a decrease in both basic and diluted earnings per share
of $0.09 for the nine months ended March 31, 1998.
Note 4 - Earnings per Share
Earnings per share has been calculated in accordance with Statement of
Financial Accounting Standards No. 128, "Earnings per Share." The
following table outlines the basic and diluted earnings per common share
computations (in thousands, except per share data):
Three Nine
months months
ended ended
March March
31, 31,
1998 1997 1998 1997
Net income (loss) attributable to
Common shares $(2,366) $3,645 $3,876 $8,697
Basic Earnings (Loss) Per Common Share
Computation:
Weighted Average common shares
Outstanding 24,114 23,168 23,846 21,052
Basic earnings (loss) per common
Share $(0.10) $0.16 $0.16 $0.41
Diluted Earnings (Loss) Per Common Share
Computation:
Weighted average common shares
outstanding:
A. Shares attributable to common
Stock outstanding 24,114 23,168 23,846 21,052
B. Shares attributable to common
Stock options -- 662 930 581
24,114 23,830 24,776 21,633
Diluted earnings (loss) per
Common share $(0.10) $0.15 $0.16 $0.40
Item II.
Management's Discussion and Analysis of Financial Condition and
Results of Operations
The financial information discussed below is derived from the Condensed
Consolidated Financial Statements included herein. The financial
information set forth and discussed below is unaudited but, in the opinion
of management, reflects all adjustments (primarily consisting of normal
recurring adjustments) necessary for a fair presentation of such
information. The Company's results of operations for a particular quarter
may not be indicative of results expected during subsequent fiscal quarters
or for the entire year.
Overview
The Company is a leading contract research and medical marketing
organization providing a broad range of knowledge-based product development
and product launch services to the worldwide pharmaceutical, biotechnology
and medical device industries. The Company's primary objective is to help
clients quickly obtain the necessary regulatory approvals of their products
and, ultimately, optimize the market penetration of those products. The
Company's service offerings include: clinical trials management, data
management, biostatistical analysis, medical marketing, clinical
pharmacology, regulatory and medical consulting, performance improvement,
industry training and publishing, and other drug development consulting
services.
The Company's contracts are typically fixed price, multi-year contracts
that require a portion of the fee to be paid at the time the contract is
entered into, with the balance of the fee paid in installments during the
contract's duration. Net revenue from 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.
As is customary in the industry, the Company routinely subcontracts with
third party investigators in connection with clinical trials and other
third party service providers for laboratory analysis and other specialized
services. These and other reimbursable costs, which vary from contract to
contract, are paid by the client and, in accordance with industry practice,
are included in 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 primarily consist of compensation and related fringe benefits
for project-related employees, other project-related costs not reimbursed
and allocated facilities and information systems costs. Selling, general
and administrative expenses primarily 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.
Results of Operations
Impact of Acquisition-related and Other Charges
In December 1997, the Company consummated its acquisition of Kemper-
Masterson, Inc. ("KMI") and in March 1998, the Company acquired, in
separate transactions, PPS Europe Limited ("PPS")and Genesis Pharma
Strategies Limited ("Genesis"), MIRAI B.V. ("MIRAI") and LOGOS GmbH
("LOGOS") in business combinations accounted for as poolings of interests.
As described in Note 3 to the Condensed Consolidated Financial Statements,
the Company's results of operations for the three and nine months ended
March 31, 1998 were significantly impacted by certain acquisitions-related
and other charges.
These charges included $4.1 million and $6.2 million recorded in the second
and third fiscal quarters, respectively, consisting of legal, accounting
and transaction fees pertaining to the acquisitions, noncash compensation
expense related to employee stock options previously granted by KMI and
PPS, an accelerated compensation payment to a PPS executive pursuant to a
pre-existing employment agreement.
In addition to these transaction-specific costs, the Company also recorded
a $1.6 million provision to increase accounts receivable reserves of PPS
and MIRAI to conform such estimates with the Company's policy, and a $1.7
million charge resulting from a change in estimate of the remaining service
lives of certain computer equipment arising from integration activities and
a company-wide program to upgrade and standardize its information
technology platform.
The following tables represent the effect of such charges for the three and
nine-month comparative periods ended March 31, 1998 and 1997 (in
thousands):
1997 1998 Fiscal 1998
as before 1998 as
reported charges charges reported
Three months ended March 31,
Net revenue $53,584 $73,067 $ -- $73,067
Direct costs 35,243 47,364 -- 47,364
SG&A 11,702 15,133 1,610 16,743
Depreciation & amortization 2,013 3,557 1,684 5,241
Acquisition-related charges -- -- 6,173 6,173
Total costs 48,958 66,054 9,467 75,521
Income(loss)from operations $ 4,626 $ 7,013 $(2,454)
Percent of net revenue 8.6% 9.6%
Nine months ended March 31,
Net revenue $143,973 $204,049 $ -- $204,049
Direct costs 95,710 132,925 -- 132,925
SG&A 31,418 42,444 1,610 44,054
Depreciation & amortization 5,144 9,354 1,684 11,038
Acquisition-related charges -- -- 10,273 10,273
Total costs 132,272 184,723 13,567 198,290
Income(loss)from operations $ 11,701 $ 19,326 $ 5,759
Percent of net revenue 8.1% 9.5%
Three Months Ended March 31, 1998 Compared to Three Months Ended March 31,
1997
Net revenue increased by $19.5 million, or 36.4%, from $53.6 million for
the three months ended March 31, 1997, to $73.1 million for the three
months ended March 31, 1998. This net revenue growth was primarily
attributable to an increase in the volume and average contract value of
contract research projects serviced by the Company. For the three months
ended March 31, 1998, net revenue from North American and European
operations increased by $14.1 million and $5.4 million, respectively, over
the corresponding prior year period. There can be no assurance that the
Company can sustain this rate of increase in net revenue from continuing
operations in future periods. See "Risk Factors."
Direct costs increased by $12.1 million, or 34.4%, from $35.2 million for
the three months ended March 31, 1997, to $47.4 million for the three
months ended March 31, 1998. This increase in direct costs was due to the
increase in the number of project-related personnel, hiring expenses,
facilities and information system costs necessary to support the increased
level of operations. Direct costs as a percentage of net revenue decreased
from 65.8% for the three months ended March 31, 1997, to 64.8% for the
three months ended March 31, 1998.
Selling, general and administrative expenses increased by $5.0 million,
from $11.7 million for the three months ended March 31, 1997, to $16.7
million for the three months March 31, 1998. This increase was due to
increased selling and administrative personnel, hiring expenses, and
facilities costs necessary to accommodate the Company's growth and a
noncash charge of $1.6 million recorded to increase the accounts receivable
reserves of recently acquired businesses to conform reserve estimates to
the Company"s policy. Excluding this $1.6 million adjustment, selling,
general and administrative expenses were $15.1 million, an increase of
29.3% over the comparable prior year period. As a percentage of net
revenue, selling, general and administrative expenses before the $1.6
million charge decreased from 21.8% for the three months ended March 31,
1997, to 20.7% for the three months ended March 31, 1998.
Depreciation and amortization expense increased by $3.2 million, from $2.0
million for the three months ended March 31, 1997, to $5.2 million for the
three months ended March 31, 1998. The increase is due to increased
capital spending on computer equipment and facilities to support the
increase in project-related personnel and a $1.7 million noncash charge to
reflect a reduction in expected sersvice lives of certain computer
equipment as a result of integration activities and the Company's program
to upgrade and standardize its information technology platform. Excluding
this charge, depreciation and amortization expense was $3.6 million, an
increase of $1.5 million or 76.7% over the comparable period in the prior
year.
Income from operations for the three months ended March 31, 1998, includes
acquisition-related charges of $6.2 million (Note 3 of Notes to Condensed
Consolidated Financial Statements), as well as the $1.6 million charge to
selling general and administrative expenses (accounts receivable reserves)
and the $1.7 million charge to depreciation expense discussed above.
Excluding the impact of these charges, income from operations increased
$2.4 million or 51.6% from $4.6 million (or 8.6% of net revenue) for the
three months ended March 31, 1998, to $7.0 million (or 9.6% of net revenue)
for the three months ended March 31, 1997.
Other income, net decreased by $474,000 from $1,379,000 for the three
months ended March 31, 1997, to $905,000 for the three months ended March
31, 1998. This decrease resulted from lower average balances of cash, cash
equivalents, and marketable securities due primarily to increased capital
spending on computer equipment and facilities to support the increase in
project-related and administrative personnel.
The Company had an income tax provision of $817,000 despite a pre-tax loss
primarily due to certain non-deductible acquisition-related costs.
Excluding the effect of such acquisition-related charges, the effective
income tax rate for the three months ended March 31, 1998, would have been
35.0% compared to 35.7% for the three months ended March 31, 1997. This
decrease was due to changes in the mix of taxable income from the different
jurisdictions in which the Company operates and the impact of tax-exempt
interest income from securities held by the Company.
Nine Months Ended March 31, 1998 Compared to Nine Months Ended March 31,
1997
Net revenue increased by $60.1 million, or 41.7%, from $144.0 million for
the nine months ended March 31, 1997, to $204.0 million for the nine months
ended March 31, 1998. This net revenue growth was primarily attributable to
an increase in the volume and average contract value of contract research
projects serviced by the Company. For the nine months ended March 31, 1998,
net revenue from North American, European and Asian operations increased by
$43.3 million, $15.8 million and $1.0 million, respectively, over the prior
year period. There can be no assurance that the Company can sustain this
rate of increase in net revenue from continuing operations in future
periods. See "Risk Factors."
Direct costs increased by $37.2 million, or 38.9%, from $95.7 million for
the nine months ended March 31, 1997, to $132.9 million for the nine months
ended March 31, 1998. This increase in direct costs was due to the
increase in the number of project-related personnel, hiring expenses,
facilities and information system costs necessary to support the increased
level of operations. Direct costs as a percentage of net revenue decreased
from 66.5% for the nine months ended March 31, 1997, to 65.1% for the nine
months ended March 31, 1998.
Selling, general and administrative expenses increased by $12.6 million,
from $31.4 million for the nine months ended March 31, 1997, to $44.1
million for the nine months ended March 31, 1998. This increase was due to
increased selling and administrative personnel, hiring and facilities
costs, in line with increasing infrastructure to accommodate the Company's
growth, and a noncash charge of $1.6 million recorded to increase the
accounts receivable reserves of recently acquired businesses to conform
reserve estimates to the Company's policies. Excluding this $1.6 million
adjustment, selling, general and administrative expenses were $42.4
million, an increase of 35.1% over the comparable prior year period. As a
percentage of net revenue, selling, general and administrative expenses
before the $1.6 million charge decreased from 21.8% for the nine months
ended March 31, 1997, to 20.8% for the nine months ended March 31, 1998.
Depreciation and amortization expense increased by $5.9 million, from $5.1
million for the nine months ended March 31, 1997 to $11.0 million for the
nine months ended March 31, 1998. The increase is due to increased capital
spending on computer equipment and facilities to support the increase in
project-related personnel and a $1.7 million noncash charge to reflect a
reduction in expected service lives of certain computer equipment as a
result of integration activities and the Company's program to upgrade and
standardize its information technology platform. Excluding this charge,
depreciation and amortization expense was $9.4 million, an increase of $4.2
million, or 81.8%, over the comparable period in the prior year.
Income from operations for the nine months ended March 31, 1998, includes
acquisition-related charges of $10.3 million in aggregate, incurred during
the second and third fiscal quarters of fiscal 1998 (Note 3 of Notes to
Condensed Consolidated Financial Statements), as well as the $1.6 million
charge to selling, general and administrative expenses (accounts receivable
reserves) and $1.7 million of charges to depreciation incurred in the third
quarter of fiscal 1998 as discussed above. Excluding the impact of all of
these charges, income from operations increased $7.6 million, or 65.2%,
from $11.7 million (or 8.1% of net revenue) for the nine months ended March
31, 1997 to $19.3 million (or 9.5% of net revenue) for the nine months
ended March 31, 1998.
Other income, net increased by $283,000 from $2,661,000 for the nine months
ended March 31, 1997, to $2,944,000 for the nine months ended March 31,
1998. This increase resulted from higher average balances of cash, cash
equivalents and marketable securities.
The Company's effective tax rate was 55.5% for the nine months ended March
31, 1998. Excluding the effect of certain non-deductible acquisition-
related charges, the effective income tax rate for the nine months ended
March 31, 1998 would have been 35.0% compared to 39.4% for the nine months
ended March 31, 1997. This decrease was due to changes in the mix of
taxable income from the different jurisdictions in which the Company
operates and the impact of tax-exempt interest income from securities held
by the Company.
Liquidity and Capital Resources
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
consist 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,
usually on a milestone achievement basis. Revenue from the contracts is
generally recognized on a percentage of completion basis as work is
performed. Accordingly, cash receipts do not necessarily correspond to
costs incurred and revenue recognized on contracts. The Company's
operating cash flow is influenced by changes in the levels of billed and
unbilled receivables and advance billings. These account balances and the
number of days revenue outstanding in accounts receivable, net of advance
billings, can vary based on contractual milestones and the timing and size
of cash receipts. The number of days revenue outstanding in accounts
receivable, net of advance billings, was 44 days at March 31, 1998 compared
to 42 days at June 30, 1998. The increase in days revenue outstanding from
June 30, 1997 to March 31, 1997, was primarily due to the timing of certain
project milestone billings and related payments, partially offset by an
increase in advance billings. Accounts receivable, net of the allowance
for doubtful accounts, increased from $82.8 million at June 30, 1997, to
$102.1 million at March 31, 1998. Advance billings increased from $46.2
million at June 30, 1997, to $54.6 million at March 31, 1998.
Unrestricted cash and cash equivalents increased by $18.0 million during
the nine months ended March 31, 1998, as a result of $4.4 million, $10.9
million, and $2.3 million in cash provided by operating activities,
investing activities, and financing activities, respectively.
Net cash provided by operating activities of $4.4 million resulted from net
income, excluding noncash expenses, of $25.2 million and an increase in
advance billings of $8.3 million, partially offset by increases in accounts
receivable and other current assets of $25.2 million and $3.4 million,
respectively.
Net cash provided by investing activities of $10.9 million consisted
primarily of net proceeds from sales of marketable securities of $34.6
million, partially offset by capital expenditures of $22.4 million related
to facility expansions and investments in information technology.
Financing activities consisted primarily of net proceeds from the issuance
of common stock of $4.5 million, partially offset by dividends of $1.3
million paid by acquired companies prior to acquisition.
The Company has domestic and foreign line of credit arrangements with banks
totaling approximately $16.0 million and a capital lease line of credit
with a U.S. bank for $2.4 million. At March 31, 1998, the Company had
approximately $17.8 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 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 and global
presence. Any such acquisitions may require additional external financing
and the Company may from time to time seek to obtain funds from public or
private issuances of equity or debt securities. 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
differences 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.
YEAR 2000
The Company recognizes that it must ensure that its services and operations
will not be adversely affected by Year 2000 software failures (the "Year
2000 issue") which can arise in time-sensitive software applications with
two-year digits to define the applicable year. In such applications, a
date using "00" as the year may be recognized as the year 1900 rather than
the year 2000. The Company is in the process of replacing many of its
business and computer operating systems with software which, when upgraded,
are Year 2000 compatible. The Company is planning to complete all
necessary Year 2000 upgrades of its major systems and is currently
identifying and developing conversion strategies for its remaining systems
that may be impacted by the Year 2000 issue.
Recently Issued Accounting Standards
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income", and SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information." SFAS No. 130 establishes standards for reporting and
display of comprehensive income and its components in the consolidated
financial statements. SFAS No. 131 establishes standards for reporting
information on operating segments in interim and annual financial
statements. Both statements are effective for the Company for fiscal 1999.
In November 1997, the Emerging Issues Task Force (EITF) reached a consensus
on issue 97-13, "Accounting for Costs Incurred in Connection with a
Consulting Contract or an Internal Project that Combines Business Process
Reengineering and Information Technology Transformation" (EITF 97-13) that
the costs of business process reengineering activities, whether done
internally or by third parties, is to be expensed as incurred. The
consensus also applies to the costs of business process reengineering
activities conducted in conjunction with a project to acquire, develop, or
implement internal-use software. The transition provisions of EITF 97-13
require unamortized previously capitalized costs for business process
reengineering activities to be written off in the Company's fiscal quarter
ending December 31, 1997 and reported as a cumulative effect of a change in
accounting principle. The Company has assessed the impact of EITF 97-13
and accordingly, has charged an immaterial amount to the results of
operations for the three months ended December 31, 1997.
RISK FACTORS
In addition to the other information in this report, the following risk
factors should be considered carefully in evaluating the company and its
business. Information provided by the Company from time to time may
contain certain "forward-looking" information, as that term is defined by
(i) the Private Securities Litigation Reform Act of 1995 (the "Act") and
(ii) in releases made by the Securities and Exchange Commission (the
"SEC"). These risk factors are being provided pursuant to the provisions
of the Act and with the intention of obtaining the benefits of the "safe
harbor" provisions of the Act.
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, such as
for economic reasons, insufficient patient enrollment or investigator
recruitment or production problems resulting in shortages of the drug. In
addition, the Company believes that cost-containment and competitive
pressures 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
contract research organizations. 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.
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, progress, or cancellation of significant projects,
exchange rate fluctuations, the mix of services offered, the opening of new
offices and other internal expansion costs, the costs associated with
integrating acquisitions and the startup costs incurred in connection with
the introduction of new products and services. 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
client projects can cause material adverse variations in quarterly
operating 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 companies to outsource
large clinical research projects. A reversal or slowing of this trend
would have a material adverse effect on the Company. In fiscal 1997 and
for the nine months ended March 31, 1998 the Company's top five clients
accounted for 39% and 37%, respectively, of the Company's consolidated net
revenue. In fiscal 1997, no single customer accounted for more than 10% of
the Company's consolidated net revenue; however, one client accounted for
12% and 14% of consolidated net revenue for the three months and the nine
months ended March 31, 1998, respectively. The loss of business from a
significant client could have a material adverse effect on the Company.
Management of Business Expansion; Need for Improved Systems; Assimilation
of Foreign Operations
The Company's business and operations have recently experienced substantial
expansion. 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 personnel, and overcoming language barriers. In the
event that the operation of an acquired business does not meet
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. 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 and will continue to review
future acquisition opportunities. In particular, the Company has recently
made several acquisitions. 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 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 meet 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. There can be no
assurance that any acquisition will be successfully integrated into the
Company's operations.
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
drug approval process. 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.
Japan also legislated GCP and legitimatized the use of contract research
organizations in April 1997. Changes in regulation, including a 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.
Competition; CRO Industry Consolidation
The Company primarily competes against in-house departments of
pharmaceutical companies, other CROs, and, to a lesser extent,
universities, teaching hospitals and other site organizations. Some of
these competitors have 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 services, 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 and patients, 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. There can be no assurance that the Company will be able to compete
favorably in these areas.
The CRO industry is 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 third largest
full-service CRO in the world, based on comparable annualized net revenue.
Other large CROs include Quintiles Transnational Corporation, Covance Inc.,
Pharmaceutical Product Development, Inc., IBAH, Inc. and ClinTrials
Research, Inc. 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 pharmaceutical companies outsourcing to a fewer number of preferred
CROs has led to heightened competition for CRO contracts.
Potential Volatility of Stock Price
The market price of the Company's common stock could be subject to wide
fluctuations in response to quarter-to-quarter variations in operating
results, prediction and forecasts of industry 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 volatility.
Potential Adverse Impact of Health Care Reform
Numerous governments have 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
US 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 were adopted, health care reform
may again be addressed by the US 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.
Many European governments have also reviewed or undertaken health care
reform. For example, German health care reform legislation implemented in
January 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 $11.3 million non-cash write-down
due to the impairment of long-lived assets of PAREXEL GmbH, the Company's
German subsidiary. The Company cannot predict the impact that any pending
or future health care reform proposals may have on the Company's business
in Europe.
Dependence on Personnel; Ability to Attract and Retain 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
certain 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.
Potential Liability; Possible Insufficiency of Insurance
Clinical research services involve the testing of new drugs on consenting
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.
Adverse Effect of Exchange Rate Fluctuations
Approximately 43% and 39% of the Company's net revenue for fiscal 1997 and
the nine months ended March 31, 1998, respectively, was 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 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.
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.
Part II. Other Information
Item 2. Changes in Securities and Use of Proceeds
(a) Not applicable.
(b) Not applicable.
(c) In March, 1998, the Company, in separate
transactions, acquired all of the outstanding capital
stock of PPS Europe Limited and its subsidiary Creative
Communications Solutions, Ltd. (collectively, "PPS") and
Genesis Pharma Strategies Limited ("Genesis"), MIRAI
B.V. ("MIRAI") and LOGOS GmbH ("LOGOS"). As part of the
transactions, the former stockholders of PPS, MIRAI and
LOGOS received anaggregate of approximately 3,668,560 shares
of Common stockof the Company ( the "Shares") in exchange
for all of the outstanding capital stock of PPS, Genesis and
MIRAI andLOGOS. The Shares were issued in reliance upon
anexemption from the registration provisions of the
Securities Act of 1933, as amended (the "Act") set forth
inSection 4(2) thereof and Rule 506 of Regulation D of
theGeneral Rules and Regulations promulgated by the
Securitiesand Exchange Commission("Regulation D"). The
Company reasonably believes that there were less than 35
purchases of the Shares calculated in accordance with Rule
502(a) of Regulation D. In connection with the issuances of
the Shares, the former stockholders of PPS, Genesis, MIRAI
and LOGOS made certain representations to the Company as to
their investment intent and possessed a sufficient level of
sophistication and access to information. The Shares issued
are subject to restrictions on transfer absent registration
under the Act or exemption therefrom.
(d) Not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27--Financial Data Schedule
(b) Reports on Form 8-K
The Company filed a Current Report on Form 8-K dated January
27, 1998 reporting financial results for the three months
ended December 31, 1997.
The Company filed a Current Report on Form 8-K dated
March 2,1998 announcing the acquisitions of, in separate
transactions to be accounted for as poolings of interests,
PPS, Genesis, MIRAI B.V., and LOGOS GmbH.
The Company filed a Current Report on Form 8-K dated
March 1, 1998 reporting the acquisition of PPS Europe
Limited.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized, on this 11th day of May, 1998.
PAREXEL International Corporation
By: /s/ Josef H. von Rickenbach
Josef H. von Rickenbach
President, Chief Executive Officer and
Chairman
By: /s/ William T. Sobo, Jr.
William T. Sobo, Jr.
Senior Vice President, Chief Financial
Officer
Exhibit No. Description
10.1 Agreement dated June 30, 1993 between Prof. Dr.
med. Werner M. Herrmann and PARAEXEL GmbH Independent
Pharmaceutical Research Organization, as amended, as
of April 1, 1997
10.2 Letter agreement effective as of July 1, 1997 between
Prof. Dr. med. Werner M. Herrmann and the Company, as
amended, as of April 1, 1998
10.3 Letter Agreement between A. Joseph Eagle and PPS Europe
Limited dated as of April 17, 1997, as amended
27 Financial Data Schedule
Exhibit 10.1
AMENDMENT NO. 2 TO THE FREELANCE AGREEMENT
BETWEEN
PROF. DR. MED. WERNER M. HERRMANN
AND PAREXEL GmbH INDEPENDENT PHARMACEUTICAL RESEARCH ORGANIZATION
This Amendment No. 2 , effective April 1, 1998, is an Amendment to
the Freelance Agreement between Prof. Dr. med. Werner M. Herrmann (the
"Manager") and PAREXEL GmbH Independent Pharmaceutical Research
Organization ("PAREXEL") dated June 30, 1993 and amended effective July 1,
1997 (the "Agreement").
WHEREAS, PAREXEL and the Manager wish to amend the Agreement in order
to adjust Manager's salary to reflect Manager's transition to full time
employment;
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt of which is hereby acknowledged, the
parties hereto agree as follows:
Section 2, Paragraph 1 shall be deleted in its entirety and replaced
with the following:
`Prof. Dr. Herrmann will receive a fee of DM 300 per hour for a
maximum of four hundred and eighty (480) hours per year. This rate
will be reviewed annually by the Chairman of PAREXEL International
within the first three (3) months of each fiscal year and adjusted,
if appropriate.'
All other terms and conditions set forth in the Agreement shall remain
in full force and effect.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Amendment
effective the day and year first above-written.
PROF. DR. MED. WERNER M. HERRMANN
BY: /s/Werner M. Herrmann
PAREXEL GmbH
INDEPENDENT PHARMACEUTICAL RESEARCH ORGANIZATION
BY: /s/Josef von Rickenbach
AMENDMENT NO. 1 TO FREELANCE AGREEMENT
between
PAREXEL GmbH
Independent Pharmaceutical Research Organization
Klinikum Westend, Haus 18
Spandauer Damm 130
14050 Berlin
represented by its sole shareholder
PAREXEL Unternehmensbeteiligung GmbH
("PAREXEL")
and
Prof. Dr. med. Werner M. Herrmann
Alt-Marienfielde 14
12278 Berlin
("Prof. Dr. Hermann")
Reference is made to the Freelance Agreement dated as of June 30, 1993
between PAREXEL Prof. Dr. Hermann (the "Agreement"). The parties
acknowledge and agree that the June 27, 1996 notice terminating the
Agreement effective June 30, 1997 is hereby rescinded and that the
Freelance Agreement should be amended to extend the term beyond June 30,
1997 and make certain other changes set forth below which shall be
effective as of July 1, 1997. The parties agree as follows:
1. Section 1, Paragraph 3 of the Agreement shall be deleted in its
entirety and replaced with the following:
"Prof. Dr. Hermann is presently a member of the Board of Directors of
PAREXEL International Corporation ("PAREXEL International") with a
term expiring in November 1999 and will hold such office until his
successor has been duly elected and qualified or until his earlier
resignation or removal."
2. Section 1, Paragraph 6 (Amendment)
"Prof. Dr. Hermann is Senior Vice President, Worldwide Clinical
Pharmacology, of PAREXEL International."
3. Section 1, Paragraph 7 (Amendment)
"Prof. Dr. Hermann is Worldwide Head of Clinical Pharmacology of
PAREXEL International."
4. Section 2, Paragraph 1 shall be deleted in its entirety and replaced
with the following:
"Prof. Dr. Hermann will receive a fee of DM 300 per hour for a maximum
of three hundred sixty (360) hours per year. This rate will be
reviewed annually by the Chairman of PAREXEL International within the
first three (3) months of each fiscal year and adjusted, if
appropriate."
5. Section 2, Paragraph 7 shall be deleted in its entirety and replaced
with the following:
"Prof. Dr. Hermann should participate in the success of PAREXEL
International and therefore will be eligible to participate in the
Management Incentive Plan in accordance with the terms of such plan,
as in effect at the time with an amount of 30% of his base
compensation. Specific performance objectives will be mutually agreed
upon and will remain in effect until they are revised."
6. Section 3 shall be deleted and replaced with the following:
"This contract will extend until June 30, 2001, at which point the
contract will end without further notice. An earlier termination of
the contract is not possible. The right to terminate for exceptional
reasons is not affected."
PAREXEL
By: /s/Werner M. Herrmann
Prof. Dr. med. Werner M. Herrmann
Title: Director
Employment Agreement
between
AFB Arzneimittelforschung GmbH in Berlin
Europa-Center (Eingang Breitscheidplatz), 1000 Berlin 30
- in the following: AFB -
and
Mr. Professor Dr. med. Werner M. Herrmann,
Specialist for Clinical Psycho-physiology
at Freie Universitat Berlin,
Visiting Professor Dr. of Psychiatry and Member of the
Voluntary Faculty, State University of New York at Stony Brook
(SUNY at Stony Brook), New York
Section 1
Realm of Responsibility
(1) Professor Dr. W.M. Herrmann as a Free Lancer of the AFB
Arzneimittelforschung GmbH in Berlin is occupied with the scientific
leadership of the company and its subsidiaries. He is obliged to co-
ordinate with the second Managing Director of the AFB and the President of
the shareholder of PAREXEL, who holds the majority (President and CEO).
(2) Professor Dr. W.M. Herrmann is obliged to further improve his
knowledge on what he is responsible for and to be informed of any new
development in this realm.
(3) Professor Dr. W.M. Herrmann is a member of the Board of Directors
of Parexel International Corporation Boston, USA.
(4) Professor Dr. W.M. Herrmann is Chief Scientific Officer of the
Parexel International Corporation, Boston, and bears the responsibility for
the scientific side of Parexel International's and its subsidiaries' doing.
(5) Professor Dr. W.M. Herrmann is Chairman of the International
Quality Management Committee.
(6) Professor Dr. W.M. Herrmann is member of the European Executive
Committee and is responsible for the realization of its decisions as far as
they are drawn up in the minutes.
(7) Professor Dr. W.M. Herrmann is responsible for the setting-up of
the Institutional Review Board (IRB) for the Clinical Pharmacology and of
the International Advisory Board (IAB) for the world-wide Clinical Research
and supervises their function.
Section 2
Compensation
(1) Professor Dr. W.M. Herrmann will receive a fee of DM 450.00 per
hour.
(2) This fee is payable cashless at the end of the month after
Professor Dr. W.M. Herrmann has given his invoice by Parexel International
or by the subsidiary he had been working for. Professor Dr. W.M. Herrmann
will name a banc account. If his work is submitted to the VAT, it will be
restored by the company.
(3) Professor Dr. W.M. Herrmann has to pay his taxes and social
insurance fees himself.
(4) Professor Dr. W.M. Herrmann has to effect an adequate health
insurance.
(5) The AFB confirms that there is an agreement of December 21, 1981
between Professor Dr. W.M. Herrmann and the GfA (Gessellsehaft fur
Arzneimittelprufungen GmbH) concerning his Pension (attached as No. 2 and
3). The AFB reimburses Professor Dr. W.M. Herrmann for the cost of his
life insurance/pension plan with Barmenia.
(6) The agreement of November 11, 1991 between Professor Dr. W.M.
Herrmann and the AFB concerning, in which the Barmenia life insurance has
been pledged to Professor Dr. W.M. Herrmann for the case of insolvency,
remains valid.
Section 3
Duration of the Contract
This contract is concluded for the period of April 1, 1991 through
June 30, 1996.
Section 4
Expenses
The AFB will reimburse Professor Dr. W.M. Herrmann for expenditures
for business trips on the basis of the respective company policies.
Section 5
Use of a Company Car
The AFB makes a car of the kind of Ford Scorpio or comparable
available to Professor Dr. W.M. Herrmann.
Section 6
Working Time, working place
(1) Professor Dr. W.M. Herrmann is free in the choice of the working
time.
(2) Professor Dr. W.M. Herrmann is free in the choice of his working
place and instruments.
(3) Professor Dr. W.M. Herrmann is obliged to join the meetings and
conferences at AFB/ PAREXEL, GmbH, Berlin, at PAREXEL Ltd., London, and at
PAREXEL International Corporation, Boston, if it is necessary for him to
attend them.
Section 7
Additional Employment
(1) Professor Dr. W.M. Herrmann shall not during the term of this
contract work as an advisor of any sort for a company which is a direct or
an indirect competitor either of the AFB and its subsidiaries or of PAREXEL
and its subsidiaries.
(2) In case of breach of this obligation Professor Dr. W.M. Herrmann
shall pay damages.
(3) In the cases of paragraph 1 Professor Dr. W.M. Herrmann may work
as an advisor with a written allowance of the AFB.
(4) The AFB has regard for obligations of Professor Dr. W.M.
Herrmann, which are due to his parttime job as a C-3 Professor Dr. for
Clinical Psycho-Physiology at the Freie Universitat Berlin and to the
Cooperation Contract between the Freie Universitat and AFB.
Section 8
Duty of Secrecy
(1) Both parties of the Contract realise that Professor Dr. W.M.
Herrmann will come to know highly confidential informations during his
work. He is obliged to handle them with special care.
(2) Professor Dr. W.M. Herrmann shall not disclose to any third party
any business matters - in particular business secrets - of the Company or
any company related to the Company which may come to his knowledge during
the course of his services and activities for the Company. The secrecy
obligation survives on termination of this agreement and continues to be
binding upon Professor Dr. W.M. Herrmann even after the end of this
agreement.
(3) In case of breach of this obligation Professor Dr. W.M. Herrmann
shall pay damages.
Section 9
Handling of Documents
(1) Professor Dr. W.M. Herrmann is responsible to treat all business
documents and personal notes which have been given to him by the company
properly and to take care that no third party can gain knowledge of them.
All such documents shall be handled over to the Company immediately upon
termination of this contract without request.
(2) This is also valid for all other documents (f.i. drafts and
personal notes), which refer to business matters of the Company.
(3) Professor Dr. W.M. Herrmann has no right whatsoever to retain
these documents.
Section 10
Handing-over of the Contract
Both parties of the contract confess the reception of a copy of this
agreement both in English and in German. In case of controversies the
German version is valid.
Section 11
Modifications
(1) Oral modifications of this agreement are not allowed.
(2) Modifications of and supplements to this contract need to be in
writing.
Section 12
Miscellaneous
(1) If a part of this contract is or becomes legally invalid, the
validity of the remaining provisos shall not thereby be affected. The
contracting parties are obliged to replace the invalid provisos by a
legally valid proviso which achieves or virtually achieves the purpose of
the invalid proviso.
(2) The laws of the Federal Republic of Germany shall govern this
agreement. Venue for controversies arising from this agreement shall be
Berlin.
BERLIN,
AFB
Arzneimittelforschung GmbH Vertragspartner
in Berlin
/s/Josef von Rickenbach /s/Werner M. Herrmann
Josef von Rickenbach Prof. Dr. W.M. Herrmann
This contract is accessed by:
PAREXEL International Corporation
/s/Josef con Rickenbach
Josef von Rickenbach
President,
Chief Executive Officer
Exhibit 10.2
AMENDMENT NO. 1 TO THE EMPLOYMENT AGREEMENT
BETWEEN
PROFESSOR DR. MED. W.M. HERRMANN
AND
PAREXEL INTERNATIONAL CORPORATION
This Amendment No. 1 , effective April 1, 1998, is an Amendment to the
Employment Agreement between Professor Dr. med. W.M. Herrmann (the
"Manager") and PAREXEL International Corporation ("PAREXEL") dated, July 1,
1997 (the "Agreement").
WHEREAS, PAREXEL and the Manager wish to amend the Agreement in order
to adjust Manager's salary to reflect Manager's transition to full time
employment;
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt of which is hereby acknowledged, the
parties hereto agree as follows:
Section 2, Paragraph 1 shall be deleted in its entirety and replaced
with the following:
`The Manager will receive an annual salary of $92,800.00. Such
salary covers any overtime work performed by the Manager. This
salary will be reviewed annually by the Chairman of PAREXEL
International within the first three (3) months of each fiscal year
and adjusted, if appropriate.'
All other terms and conditions set forth in the Agreement shall remain
in full force and effect.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Amendment
effective the day and year first above-written.
PROFESSOR DR. MED. W.M. HERRMANN
BY: /s/Werner M. Herrmann
PAREXEL INTERNATIONAL CORPORATION
BY: /s/Josef von Rickenbach
EMPLOYMENT AGREEMENT
between
PAREXEL International Corporation
(hereinafter referred to as the "Company")
195 West Street
Waltham, Massachusetts 02154
and
Professor Dr. med. W.M. Herrmann
(hereinafter referred to as the "Manager")
Section 1
Appointment and Management Authorization
1. Effective July 1, 1997, the Manager is appointed Senior Vice
President, Clinical Pharmacology of the Company. As such, he will
report directly to the CEO of the Company and will have the job
responsibilities defined in a separate document.
2. The Manager shall dedicate his entire business efforts to the Company
and its subsidiaries and will execute and be bound by the Company's
Key Employee Confidentiality and Non-Competition Agreement (the "Key
Employee Agreement"). The Key Employee Agreement is incorporated
herein by reference.
3. The parties acknowledge the employment agreement between the Manager
and PAREXEL GmbH Independent Pharmaceutical Research Organization.
Section 2
Compensation
1. The Manager will receive a monthly gross salary of $5,800.00 payable
at the end of each calendar month. Such salary covers any overtime
work performed by the Manager.
2. The Manager will be eligible to receive an incentive bonus of up to
30% of his salary in accordance with the provisions of the Company's
Management Incentive Plan.
Section 3
Duration of the Contract, Termination
1. The term of this agreement is from July 1, 1997 through June 30, 2001,
provided that the Company may terminate this agreement at any time
without prior notice for cause, or in the event of a breach of this
Agreement or the Key Employee Agreement by the Manager.
4
Miscellaneous
1. Modifications of and supplements to this contract need to be in
writing.
2. If a provision of this contract is or legally becomes invalid, the
validity of the remaining provisions shall not thereby be affected.
The contracting parties are obligated to replace the invalid provision
by a legally valid provision which achieves, or virtually achieves,
the purpose of the invalid provision.
3. This agreement is governed under the laws of the Commonwealth of
Massachusetts.
PAREXEL INTERNATIONAL CORPORATION
By: /s/ Josef H. von Rickenbach
Josef H. von Rickenbach
Chairman, CEO
/s/ Prof. Dr. med. W.M. Herrmann
Prof. Dr. med. W.M. Herrmann
May 12, 1997
Date
EXHIBIT 10.3
Mr. A. Joseph Eagle
33 Park Crescent
Brighton
East Sussex
BN2 3HB
Subject: Modifications to your Employment Agreement
This letter shall serve to notify you of the amendments to your
Employment Agreement dated 17 April 1997, which shall become effective only
upon the completion of the transaction with PAREXEL. All other terms and
conditions shall remain in full force and effect. All references to
specific clauses listed below pertain to the clauses in the above noted
agreement. All references to PAREXEL shall refer to PAREXEL International
Corporation.
2.1 The Appointee agrees to act as Managing Director of the Company
in lieu of Chief Executive.
PAREXEL may require you to resign from the boards of all
subsidiaries and as an executive officer from any associated of
affiliated company which you agree to do without any form of
compensation.
2.2 The following shall serve as the new clause 2.2:
The contract shall be of a fixed term for two (2) years
commencing on 1 March 1998. The Agreement shall continue in
force until terminated by the Company giving the Appointee not
less than twelve calendar months notice prior, or by the
Appointee giving to the Company not less than twelve calendar
months prior notice, and no such notice shall be given before 1
March 1999.
4.1 The Appointee shall also keep the Executive Committees and the
Board of Directors of PAREXEL International Corporation informed
as to his conduct of the business or affairs of the Company.
5.1 The Company intends to keep its principal office during the term
of the agreement in Worthing.
5.2 If the Company moves its principal office more than 35 miles, the
Company has the obligation to assist the Appointee in accordance
with its relocation policy.
8. The Appointee will be allowed to provide services tot he
following companies during employment with the Company tot he
extent that these services do not compete or interfere in any way
with employment activities at the Company:
Huelens Properties Limited and its subsidiaries.
The Appointee will be allowed to act a as trustee for any trusts
during employment with the Company to the extent that these
activities do not compete or interfere with employment activities
in any way at the Company.
9.1 The Appointee shall also endeavor to comply where relevant with
every rule of the Nasdaq and the U.S. Securities Exchange
Commission.
13.1 The Appointee shall receive a salary during his appointment of
130,000 pounds sterling per year effective from 1 March 1998.
The salary shall be inclusive of any and all fees from serving as
a Director in any associated or affiliated company. Starting on
1 July 1998 the Appointee shall be enrolled in PAREXEL's
Management Incentive Plan, with terms and targets to be agreed
with senior executives of PAREXEL. The maximum bonus pay out to
the Appointee shall be forty (40%) percent of his salary
depending upon his actual performance under the plan. The
performance targets will be weighted approximately as follows:
seventy-five (75%) percent based on the revenue and operating
performance of the Contract Marketing Services Division of
PAREXEL, and the remaining twenty-five (25%) percent based on the
revenue and operating margins of PAREXEL as a whole.
13.2 The Appointee's salary shall be reviewed from time to time in
accordance with PAREXEL's policies.
14.1 The Appointee shall be entitled to remain a member of the
Company's Norwich Union money purchase pension scheme (or its
successor) for which the Company makes a 9% salary contribution.
16.1 The Appointee shall reimburse the company for the full trade-in
value of the company car presently used by him upon his purchase
of a new vehicle, which has been ordered by him at a local car
dealership. Appointee shall be responsible for any sales,
transfer tax or duty associated with this transaction.
Starting in the next full calendar month following the receipt of
the trade-in value from the Appointee and continuing during the
course of this Agreement, the Company shall provide the Appointee
with a monthly car allowance at the top rate afforded to
PAREXEL's executives operating in the UK and the allowance shall
be paid directly to him. In addition, the Company will be
responsible for all costs included in running and maintaining
this car including private mileage.
18.1 In addition to public holidays, the Appointee shall be entitled
to a maximum of 30 working days of paid holiday in each year from
1st January to 31st December to be taken at such time or times as
agreed with PAREXEL. There shall be no further increases to
holiday entitlements.
21.1 The period of the post termination obligation shall be changed
from six months to twelve months.
Schedule 1: The revised Annual Rate of Salary in Column 1 shall be
130,000 pounds sterling with the Effective Date of Increase in column
2 to be changed to 1.3.98. There are no scheduled increases in salary
planned at this time.
Would you please sign below to confirm your acceptance of these
amendments to your Employment Agreement and return a copy to Malcolm Hall.
Yours sincerely,
Greg Caswill
Finance Director
I hereby agree to the above amendments to my Employment Agreement, and
I further agree that none of these changes or amendments shall be
considered an alteration to the terms and conditions of my employment with
the Company.
ACCEPTED AND AGREED:
Signed: /s/A. Joseph Eagle Date: 1 March 1998
A. Joseph Eagle
Signed: /s/William T. Sobo, Jr.
William T. Sobo, Jr.
Chief Financial Officer
PAREXEL International Corporation
EMPLOYMENT AGREEMENT
DATE: 17 April 1997
PARTIES: The Employer PPS EUROPE LIMITED whose registered office is
situated at Wicker House, High Street, Worthing, West Sussex and `The
Appointee' Joe Eagle of:
33 Park Crescent
Brighton
East Sussex
BN2 3HB
Operative Provisions:
1. Interpretation
1.1 The headings and marginal headings to the clauses are for convenience
only and have no legal effect.
1.2 Any reference in this Agreement to any Act or delegated legislation
includes any statutory modification or re-enactment of it or the
provision referred to.
1.3 In this Agreement:
`ASSOCIATED COMPANY' means any company which for the time being is:
a. a company having an ordinary share capital (as defined in
Section 832 of the Income and Corporation Taxes Act 1988) of
which not less than 25 per cent is owned directly or indirectly
by the Company or its holding company applying the provisions of
Section 838 of the Income and Corporation Taxes Act 1988 in the
determination of ownership;
b. a holding company (as defined in section 736 of the Companies Act
1985) of the Company; or
c. a subsidiary (as defined in section 736 of the Companies Act
1989) of any such holding company
`THE BOARD' means the Board of Directors of the Company and includes
any committee of the Board duly appointed by it
`COMPANY INVENTION' means any improvement, invention or discovery made
by the Appointee which applying the provisions of section 39 of the
Patents Act 1977 in the determination of ownership is, as between the
parties, the property of the Company.
`MANAGING DIRECTOR' means any person or persons jointly holding such
office of the Company from time to time and includes any person(s)
exercising substantially the functions of a managing director or chief
executive officer of the Company
`PENSION SCHEME' means the PPS Europe Limited Pension Scheme
2. Appointment and Duration
2.1 The Company appoints the Appointee and the Appointee agrees to act as
Chief Executive or in such other appointment as the Company may from
time to time direct. The Appointee accepts that the Company may at
its discretion require him to perform other reasonable and lawful
duties or tasks not within the scope of his normal duties and the
Appointee agrees to perform those duties or undertake tasks as if they
were specifically required under this Agreement.
2.2 The appointment commenced on 1 January 1986 and shall continue
(subject to earlier termination as provided in this Agreement) until
terminated by the Company giving to the Appointee not less than twelve
calendar months prior notice or by the Appointee giving to the Company
not less than twelve calendar months prior notice.
2.3 The Company may from time to time appoint any other person or persons
to act jointly with the Appointee in his appointment.
2.4 The Appointee warrants that by virtue of entering into this Agreement
or the other agreements or arrangements made or to be made between the
Company or any Associated Company he will not be in breach of any
express or implied terms of any contract with or of any other
obligation to any third party binding upon him.
3. Duties of Appointee
3.1 The Appointee shall:
3.1.1 Devote the whole of his time, attention and ability to the
duties of his appointment;
3.1.2 Faithfully and diligently perform those duties and exercise
such powers consistent with them which are from time to time
assigned to or vested in him;
3.1.3 Obey all lawful and reasonable directions of the Board;
3.1.4 Use his best endeavors to promote the interests of the
Company and its Associated Companies
3.2 The Appointee shall (without further remuneration) if and for so long
as the Company requires:
3.2.1 Carry out duties on behalf of any Associated Company
3.2.2 Act as an officer of any Associated Company or hold any
other appointment or office as nominee or representative of the
Company or any Associated Company;
3.2.3 Carry out such duties and the duties attendant on any such
appointment as if they were duties to be performed by him on
behalf of the Company
4. Reporting
4.1 The Appointee shall keep the PPS Europe Ltd Board informed (in writing
if so requested) of his conduct of the business or affairs of the
Company and its Associated Companies and provide such explanations as
the Board may require.
5. Place of Work
5.1. The Appointee shall perform his duties at the principal office of the
Company or such other place of business of the Company or of any
Associated Company as the Company requires whether inside or outside
the United Kingdom but the Company shall not without his prior consent
require him to go to or reside anywhere outside the United Kingdom
except for occasional visits in the ordinary course of his duties.
5.2 The Appointee shall at all times reside within a radius of 35 miles
from his place of work from time to time. If the Company shall change
his place of work such that the Appointee has to relocate his
residence to remain within that radius, the Company shall pay him his
removal and other incidental expenses in accordance with its then
current policy for relocation of executives.
6. Inventions
6.1 If any time during his appointment the Appointee (whether alone or
with any other person or persons) makes any invention, whether
relating directly or indirectly to the business of the Company, the
Appointee shall promptly disclose to the Company full details,
including drawing and models, of such invention to enable the Company
to determine whether it is a Company Invention. If the invention is
not a Company Invention the Company shall treat all information
disclosed to it by the Appointee as confidential information the
property of the Appointee.
6.2 If the Invention is a Company Invention the Appointee shall hold it in
trust for the Company, and at the request and expense of the Company
do all things necessary or desirable to enable the Company, or its
nominee, to obtain the benefit of the company Invention and to secure
patent or other appropriate forms of protection for it throughout the
World.
6.3 Decisions as to patenting and exploitation of any Company Invention
shall be in the sole discretion of the Company.
6.4 The Appointee irrevocably appoints the Company to be his Attorney in
his name and on his behalf to execute, sign and do all such
instruments or things and generally to use the Appointee's name for
the purpose of giving to the Company or its nominee the full benefit
of the provisions of clause 6.2 and a certificate in writing signed by
any Director or the Secretary of the Company, that any instrument or
act falls within the authority hereby conferred, shall be conclusive
evidence that such is the case so far as any third party is concerned.
7. Copyright
7.1 The Appointee shall promptly disclose to the Company all copyright
works originated conceived written or made by him alone or with others
(except only those works originated conceived written or made by him
wholly outside his normal working hours and wholly unconnected with
his appointment) and shall until such rights shall be fully and
absolutely vested in the Company hold them in trust for the Company.
7.2 The Appointee hereby assigns to the Company by way of future
assignment all copyright and other proprietary rights if any for the
full terms thereof throughout the World in respect of all copyright
works originated, conceived, written or made by the Appointee (except
only those works originated, conceived, written or made by the
Appointee wholly outside his normal working hours and wholly
unconnected with his appointment).
7.3 It is agreed that for the purpose of the proviso to s2(1) of the
Registered Designs Act 1949 the covenants on the part of the Company
in this Agreement shall as between the Company and the Appointee be
treated as good consideration and the Company shall for the purpose of
that Act be the proprietor of any design to which clause 7.2 applies.
7.4 The Appointee will at the request and expense of the Company do all
things necessary or desirable to substantiate the rights of the
Company under clauses 7.2 and 7.3.
8. Conflict of Interest
8.1 During this Agreement the Appointee shall not (except as a
representative or nominee of the Company or any Associated Company or
otherwise with the prior consent in writing of the Board) be directly
or indirectly engaged concerned or interested in any other business
which:
8.1.1 is wholly or partly in competition with business carried on by
the Company or any Associated Companies or any of the
foregoing by itself or themselves or in partnership common
ownership or as a joint venture with any third party; or
8.1.2 as regards any goods or services is a supplier to or customer
of any such company;
Provided that the Appointee may hold (directly or through
nominees) any units of any authorised unit trust and up to
five percent of the issued shares, debentures or other
securities of any class of any company whose shares are listed
on a Recognised Investment Exchange or in respect of which
dealing takes place in The International Stock Exchange of the
United Kingdom and Republic of Ireland or the Unlisted
Securities Market or the Third Market. The prior written
consent of the Board shall be required before the Appointee
shall hold in excess of five percent of the issued shares,
debentures or other securities of any class of any one such
company.
8.2 Subject to any regulations from time to time issued by the Company
which may apply to him, the Appointee shall not receive or obtain
directly or indirectly any discount rebate commission or other
inducement in respect of any sale or purchase of any goods or services
effected or other business transacted (whether or not by him) by or on
behalf of the Company or any Associated Company and if he (or any firm
or company in which he is directly or indirectly engaged, concerned or
interested) shall obtain any such discount rebate commission or
inducement he shall immediately account to the Company for the amount
received by him or the amount received by such firm or company. For
the purpose of this clause the Appointee shall be deemed not to be
engaged, concerned or interested in such a company as is referred to
in the proviso to clause 8.1 and the requirement in that proviso for
prior consent shall be ignored.
9. Share Dealings
9.1 The Appointee shall endeavor to comply where relevant with every rule
of law, every regulation of The International Stock Exchange of the
United Kingdom and Republic of Ireland and every regulation of the
Company from time to time in force in relation to dealings in shares,
debentures or other securities of the Company or any Associated
Company and unpublished price sensitive information affecting the
shares, debentures or other securities of any other company. Provided
always that in relation to overseas dealings the Appointee shall also
endeavor to comply with all laws of the state and all regulations of
the stock exchange, market or dealing system in which such dealings
take place.
10. Confidentiality
10.1 The Appointee shall not either during his appointment or at any time
after its termination:
10.1.1 disclose to any person or persons (except to those authorised
by the company to know);
10.1.2 use for his own purpose or for any purposes other than those
of the Company;
10.1.3 through any failure to exercise all due care and diligence
cause any unauthorised disclosure of;
any private confidential or secret information of the Company
(including in particular lists or details of customers of the
Company or relating to the working of any process or invention
carried on or used by the Company or any Company Invention) or
which he has obtained by virtue of his appointment or in
respect of which the Company is bound by an obligation of
confidence to a third party. These restrictions shall cease
to apply to information or knowledge which may (otherwise than
through the default of the Appointee) become available to the
public generally.
10.2 The provisions of clause 10.1 shall apply mutatis mutandis in relation
to the private, confidential or secret information of each Associated
Company which the Appointee may have received or obtained during his
appointment and the Appointee shall upon request enter into an
enforceable agreement with any such company to the like effect.
10.3 All notes, memoranda, records and writing made by the Appointee
relating to the business of the Company or its Associated Companies
shall be and remain the property of the Company or Associated Company
to whose business they relate and shall be delivered by him to the
company to which they belong forthwith upon request.
11. Statements
11.1 The Appointee shall not at any time make any untrue or misleading
statement in relation to the Company or any Associated Company.
12. Medical Examination
12.1 The Appointee shall, if so requested, at the expense of the Company
submit bi-annually to a medical examination by a registered medical
practitioner nominated by the Company and shall authorize such medical
practitioner to disclose to and discuss with the Company's medical
advisor the results of the examination and the matters which arise
from it so that the Company's medical adviser can notify the Company
of any matters he considers might impair the Appointee from properly
discharging his duties.
13. Pay
13.1 During his appointment the Company shall pay to the Appointee: a
salary at the rate of 93,000 pounds sterling per year effective
from 1 July 1996, which shall accrue day-to-day and be payable by
equal monthly installments. The salary shall be deemed to include
any fees receivable by the Appointee as a Director of the Company
or any Associated Company, or of any other company or unincorporated
body in which he holds office as nominee or representative of the
Company or Associated Company.
13.2 The Appointee's salary shall be reviewed by the Board from time to
time and the rate of salary may be increased by the Company each year
in accordance with the provisions of Schedule 1.
13.3 Notwithstanding the provisions of sub-clause 13.2 the Company shall
not be required to increase the Appointee's salary if and to the
extent only that the increased payment would be unlawful under the
provisions of any legislation then in force during his appointment, or
if the Increased payment would not be allowable cost for the purpose
of increasing prices under the provisions of any legislation
controlling prices or price increases.
14. Pension
14.1 The Appointee shall be entitled to be and remain a member of the
Professional Postgraduate Services Europe Limited Pension Scheme
subject to the terms of its Deed and Rules from time to time. The
Company shall be entitled at any time to terminate the Scheme or the
Appointee's membership of it subject to providing him with the benefit
of an equivalent pension scheme ("the New Scheme") each and every
benefit of which shall not be less favorable than the benefits
provided to the Appointee under the existing scheme and to ensuring
that the Appointee is fully credited in the New Scheme for his
pensionable service in the existing scheme as if such pensionable
service had been under the New Scheme.
15. Insurances
15.1 The Appointee shall be entitled to participate at the Company's
expense in the Company's permanent health insurance scheme and in the
Company's private medical expenses insurance scheme, subject always to
the rules of such schemes.
16. Car (where applicable)
16.1 Subject to the Appointee holding a current full driving license the
Company shall provide the Appointee with:
16.1.1 a car of make and model determined by reference to the
Company's car policy in effect from time to time for his sole
business use and private use in accordance with that policy.
16.2 The Company shall:
16.2.1 bear all standing and running expenses of the car (except for
any additional insurance costs incurred to permit the
Appointee to use the car outside the United Kingdom for
private purposes).
16.3 The Appointee shall always comply with all regulations laid down by
the Company from time to time with respect to company cars, and on the
termination of his appointment for whatever reason and whether
lawfully or unlawfully the Appointee shall forthwith return his
company car to the Company.
17. Expenses
17.1 The Company shall reimburse to the Appointee upon delivery of an
authorized expense form all traveling, hotel, entertainment motor,
petrol and other expenses reasonably incurred by him in the proper
performance of his duties subject to the Appointee complying with such
guidelines or regulations issued by the Company from time to time in
this respect and to the production to the Company of such vouchers or
other evidence of actual payment of the expenses as the Company may
reasonably require.
18. Holiday
18.1 In addition to public holidays the Appointee is entitled to 30 working
days paid holiday in each holiday year from 1st January to 31st
December to be taken at such time or times as are agreed with the
Board. Holiday entitlement increases by 1 extra day per annum for
each full calendar year of service completed, up to a maximum of 5
extra days. The Appointee shall not without the consent of the Board
carry forward any unused part of his holiday entitlement to a
subsequent year.
18.2 For the year during which his appointment commences or terminates, the
Appointee is entitled to 2 working days holiday for each calendar
month completed in the employment of the Company for that year. On
the termination of his appointment for whatever reason the Appointee
shall be entitled to pay in lieu of outstanding holiday entitlement
and shall be required to repay to the company any salary received for
holiday taken in excess of his actual entitlement. The basis for
payment shall be 1/253 annual salary for each day.
19. Incapacity
19.1 If the Appointee shall be prevented by illness (including mental
disorder) accident or other incapacity from properly performing his
duties hereunder he shall report this fact forthwith to the Company
Secretary's office and if the Appointee is so prevented for seven or
more consecutive days he shall provide a medical practitioner's
statement on the eighth day and weekly thereafter. Immediately
following his return to work after a period of absence the Appointee
shall complete a self-certification form available from the Company
Secretary's office detailing the reason for his absence.
19.2 If the Appointee shall be absent from his duties hereunder due to
illness (including mental disorder) accident or other incapacity duly
certified in accordance with the provisions of sub-clause 19.1 hereof
he shall be paid his full remuneration hereunder (including bonus and
commission) for up to 180 working days absence in any period of 12
months and thereafter such remuneration if any as the Board shall in
its discretion from time to time allow provided that there shall be
deducted from or set off against such remuneration any Statutory Sick
Pay to which the Appointee is entitled under the provisions of the
Social Security and Housing Benefits Act 1982 and Social Security
Sickness Benefit or other benefits recoverable by the Appointee
(whether or not recovered).
19.3 For Statutory Sick Pay purposes the Appointee's qualifying days shall
be his normal working days.
19.4 The company undertakes to pay the appropriate premium for a Permanent
Health Insurance scheme, full details of which are available from the
Company Secretary.
20. Termination of Agreement
20.1 Automatic termination
This Agreement shall automatically terminate without prejudice to the
rights of the employee in respect of the terms of severance contained
in this agreement.
20.1.1 on the Appointee reaching retirement age as defined in the
Rules of the Pension Scheme; or
20.1.2 if the Appointee during the course of his employment commits
any act and as a result becomes prohibited by law from being a
director;
20.1.3 if he resigns his office; or
20.1.4 if the office of director of the Company held by the Appointee
is vacated pursuant to the Company's Articles of Association
save if the vacation shall be caused by illness (including
mental disorder) or injury.
20.2 Suspension
In order to investigate a complaint against the Appointee of
misconduct the Company is entitled to suspend the Appointee on full
pay for so long as may be necessary to carry out a proper
investigation and hold a disciplinary hearing.
20.3 Immediate dismissal
The Company may by notice terminate this Agreement with immediate
effect if the Appointee:
20.3.1 commits any act of gross misconduct or repeats or continues
(after written warning) any other material breach of his
obligations under the Agreement; or
20.3.2 is guilty of any conduct which in the opinion of the Board
brings him, the Company or any Associated Company into
disrepute; or
20.3.3 is convicted of any criminal offense (excluding an offense
under road traffic legislation in the United Kingdom or
elsewhere for which he is not sentenced to any term of
imprisonment whether immediate or suspended); or
20.3.4 commits any act of dishonesty whether relating to the Company,
any Associated Company, any of its or their employees or
otherwise; or
20.3.5 is in the opinion of the Board incompetent in the performance
of his duties.
20.4 Dismissal on short notice
20.4.1 the Company may terminate this Agreement as follows:
20.4.2 notwithstanding clause 20.2 by not less than three months'
prior notice given at any time while the Appointee is
incapacitated by ill-health or accident from performing his
duties under this Agreement and he has been so incapacitated
for a period or periods aggregating - six calendar months in
the preceding 12 months. Provided that the Company shall
withdraw any such notice if during the currency of the notice
the Appointee returns to full time duties and provides a
medical practitioner's certificate satisfactory to the Board
to the effect that he has fully recovered his health and that
no recurrence of his illness or incapacity can reasonably be
anticipated.
20.4.3 by not less than one month's prior notice if the Appointee has
been offered but has refused to agree to the transfer of the
Agreement by way of anovation to a person, firm or company
which has acquired or agreed to acquire the whole or
substantially the whole of the under-taking (as defined in the
Transfer of Undertaking (protection of Employment Regulations
1981) in which he is employed.
20.5 Pay in Lieu
On serving notice for any reason to terminate this Agreement the
Company shall be entitled to pay to the Appointee his salary (at the
rate then current), plus pension, bonus and all other benefits thereby
foregone for the unexpired portion of the duration of his appointment
or entitlement to notice as may be the case.
20.6 Miscellaneous
On the termination of this Agreement for whatever reason, the
Appointee shall:
20.6.1 at the request of the Company;
a.resign from office as a Director of the Company and from all
offices held by him in any Associated Company and from all
other appointments or offices which he holds as nominee or
representative of the Company or any Associated Company; and
b.transfer without payment to the Company or as the Company
may direct any qualifying shares provided by it to him;
and if he should fail to do so within seven days the Company
is hereby irrevocably authorized to appoint some person in his
name and on his behalf to sign any documents or do any things
necessary or requisite to give effect to these. Such
resignation(s) shall be without prejudice to any claims which
the Appointee may have against any company arising out of this
Agreement or the termination thereof.
20.6.2 Immediately deliver to the Company or to its order all books,
documents, papers (including copies), materials, credit cards,
keys and other property of or relating to the business of the
Company or its Associated Companies then in his possession or
which are or were last under his power or control.
21. Post Termination Obligations of the Appointee
21.1 The Appointee covenants with the Company that he will not for the
period of six months after ceasing to be employed under this
Agreement, without the prior written consent of the Board in
connection with the carrying on of any business similar to or in
competition with the business of the Company or any of its Associated
Companies on his own behalf or on behalf of any person, firm or
Company directly or indirectly:
(a) Seek to procure orders from or do business with any person, firm
or Company who is at any time during the period of six months
immediately preceding such cesser done business with the Company,
or,
(b) Endeavor to entice away from the Company any person who has at
any time during the six months immediately preceding such cesser
been employed or engaged by the Company.
PROVIDED THAT nothing in this Clause shall prohibit the seeking or
procuring of orders or the doing of business not relating or similar to the
business of the Company.
21.2 The Appointee covenants with the Company that he will not:
21.2.1 with a radius of 35 miles from the Worthing Office or from any
other Office of which the employee has been employed in the
last one year of his employment and for the period of eight
months after ceasing to be employed under this Agreement
(without the prior written consent of the Board) either alone
or jointly or as Manager, Agent, Consultant or employee of any
person, Firm or Company directly or indirectly carry on or be
engaged in any activity or business which shall be in the
competition with the business of the Company or any of its
Associates.
21.2.2 Solicit or entice or endeavor to solicit or entice away from
the Company or its subsidiaries any person employed by the
Company or its subsidiaries in an executive technical or sales
capacity at the date of such termination for whom the
Appointee is responsible.
21.3 The parties agree that the covenants set out above are separate and
separable and enforceable accordingly and the parties further agree
that the restrictions hereby imposed are considered by the parties to
be reasonable in all the circumstances and necessary for the proper
protection of the Company's business.
Signed on behalf of the Employer
I acknowledge the provisions included in this agreement and in the attached
Schedules 1 and 2 and confirm my agreement thereto.
/s/A. Joseph Eagle
Date: 23/4/97
Schedule 1
INCREASE IN SALARY
By their respective signatures in Columns 4 and 5 set opposite the relevant
entry in Column 1 on the dated stated in Column 3 the parties agree that
the Appointee's salary payable under 13.1 is increased to the annual rate
stated in Column 1 with effect from the date stated in Column 2.
1 2 3 4 5
Revised Effective Date of Signed on Signed by
Annual Rate Date of This Entry Behalf of the
of Salary Increase the Appointee
Company
93,000 1.7.97 22.7.97 /s/________ /s/________
pounds
Schedule 2
PART 1 EMPLOYMENT PROTECTION (CONSOLIDATION ACT 1978)
The following information is given to supplement the information given in
the body of the Agreement in order to comply with the requirements of Part
1 of the Act.
1. The Appointee's employment by the Company commenced on 1 January 1986.
2. No employment of the Appointee with a previous employer counts as part
of the Appointee's continuous employment with the Company and his
continuous employment began on 1 January 1986.
3. The Appointee's hours of work are the normal hours of the Company from
9:00 a.m. to 5:30 p.m. Monday to Friday each week together with such
additional hours as maybe necessary so as properly to fulfill his
duties.
4. No Contracting-Out Certificate pursuant to the provisions of the
Social Security Pensions Act 1975 is in force in respect of the
Appointee's employment.
5. The Appointee is subject to the Company's Disciplinary Rules and
Disciplinary procedures, copies of which have been given to the
Appointee.
6. If the Appointee has any grievance relating to his employment (other
than one relating to a disciplinary decision) he should refer such
grievance to the Managing Director and if the grievance is not
resolved by discussion with him it will be referred to the Board for
resolution.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 56,291
<SECURITIES> 32,164
<RECEIVABLES> 106,453
<ALLOWANCES> 4,350
<INVENTORY> 0
<CURRENT-ASSETS> 208,572
<PP&E> 75,520
<DEPRECIATION> 31,405
<TOTAL-ASSETS> 259,595
<CURRENT-LIABILITIES> 94,246
<BONDS> 0
0
0
<COMMON> 246
<OTHER-SE> 163,129
<TOTAL-LIABILITY-AND-EQUITY> 259,595
<SALES> 0
<TOTAL-REVENUES> 204,049
<CGS> 0
<TOTAL-COSTS> 132,925
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,640
<INTEREST-EXPENSE> 138
<INCOME-PRETAX> 8,703
<INCOME-TAX> 4,827
<INCOME-CONTINUING> 3,876
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,876
<EPS-PRIMARY> 0.16
<EPS-DILUTED> 0.16
</TABLE>
