STOCK AND EMPLOYEE BENEFIT PLANS

Stock-Based Compensation

We account for stock-based compensation under ASC 718, “Compensation-Stock Compensation.” The stock option compensation cost calculated under the fair value approach is recognized over the vesting period of the stock options (generally over four years). All stock option grants are subject to graded vesting as services are rendered. The fair value for granted options is estimated at the time of the grant using the Black-Scholes option-pricing model. Expected volatilities are based on historical volatilities and PAREXEL uses historical data to estimate option exercise behavior. The expected term represents an estimate of the period of time we expect the options to remain outstanding based on historical exercise and post-vesting termination data. The dividend yield equals the most recent dividend payment over the market price of the stock at the beginning of the period. The risk-free interest rate is the rate at the date of grant for a zero-coupon U.S. Treasury bond with a term that approximates the expected term of the option. The following weighted average assumptions were used in the Black-Scholes option-pricing model for awards issued during the respective periods:



	Years ended June 30,
	2012		2011		2010
Dividend yield	0.0	%	0.0	%	0.0	%
Expected volatility	56.9	%	55.9	%	55.4	%
Risk-free interest rate	0.9	%	1.6	%	2.3	%
Expected term (in years)	5.1		5.1		5.0

For the last three fiscal years, we recognized the following stock-based compensation expense:



	Years ended June 30,
(in thousands)	2012		2011		2010
Direct costs related	$	1,815	$	1,582	$	2,062
Selling, general and administrative related	9,316		8,580		4,955
Total stock-based compensation	$	11,131	$	10,162	$	7,017

For Fiscal Years 2012, 2011, and 2010, the tax benefit related to stock compensation expense that we recognized was $3.8 million, $3.5 million, and $2.3 million, respectively. As of June 30, 2012, unearned stock-based compensation expense related to unvested awards (stock options and restricted stock) was approximately $18.0 million, which will be recognized over a weighted-average period of 2.8 years.

Stock Options

The Compensation Committee of the Board of Directors is responsible for the administration of PAREXEL’s stock option plans and determines the term of each option, the option exercise price, the number of option shares granted, and the rate at which options become exercisable.

We adopted stock incentive plans in December 2010, December 2007, and September 2005, each of which provides for the grant of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock, restricted stock units and other stock-based award grants of up to 6,000,000 shares in aggregate to employees, officers, directors, consultants, and advisors. The granting of awards under these plans is discretionary and the individuals who may become participants and receive awards under these plans, and the number of shares they may acquire, are not determinable.

In September 2001, we adopted the 2001 Stock Incentive Plan (“2001 Plan”), which provides for the grant of incentive and non-qualified stock options for the purchase of up to an aggregate of 2,000,000 shares of common stock to employees, officers, directors, consultants, and advisors (and any individuals who have accepted an offer for employment) of PAREXEL. Options under the 2001 Plan expire no more than ten years from the date of grant and the expiration date and vesting period may vary at the Board of Directors’ discretion.

The following table summarizes information related to stock option activity for the respective periods:



	Years ended June 30,
(in thousands, except per share data)	2012	2011	2010
Weighted-average fair value of options granted per share	$10.07	$10.81	$7.09
Intrinsic value of options exercised	$11,170	$5,246	$5,228
Cash received from options exercised	$12,992	$5,671	$4,884

Stock option activity for the year ended June 30, 2012 was:



	Number of Options		Weighted-Average Exercise Price
Balance at June 30, 2011	3,729,214		$	16.46
Granted	1,115,400		$	20.46
Exercised	(1,000,230	)	$	12.99
Canceled	(86,100	)	$	17.13
Balance at June 30, 2012	3,758,284		$	18.55

Options that were outstanding, exercisable, and expected to vest as of June 30, 2012 are as follows:



	Number of Options	Weighted-Average Exercise Price		Weighted- Average Remaining Contractual Life In Years	Aggregate Intrinsic Value (In Thousands)
Outstanding	3,758,284	$	18.55	5.14	$	36,948
Exercisable	1,817,927	$	17.85	3.72	$	19,287
Expected to vest	1,793,701	$	19.16	6.44	$	16,416

Restricted Stock

PAREXEL uses restricted stock awards (“RSAs”) and restricted stock units (“RSUs”), granted under the plans described above, as a component of compensation for executive officers and non-employee members of the Board of Directors. In Fiscal Year 2012, we granted RSAs and RSUs that will vest at the end of a three-year service period for executive officers or one-year service period for non-employee members of the Board. The fair values of the 2012 restricted stock awards and restricted stock units were based upon the closing stock prices on the day of the grants. Restricted stock activity for the year ended June 30, 2012 was:



	Shares		Weighted-Average Grant- Date Fair Value
Unvested Balance at June 30, 2011	596,158		$	20.26
Granted	218,572		$	18.87
Vested	(180,258	)	$	28.79
Unvested Balance at June 30, 2012	634,472		$	17.36

Employee Stock Purchase Plan

PAREXEL sponsors an employee stock purchase plan (the “Purchase Plan”). The Purchase Plan allows eligible employees to purchase common stock at 95% of the fair market value of the stock on the last day of each purchase period (as defined by the Purchase Plan). The Purchase Plan also includes the automatic enrollment of contributions whereby an eligible employee’s compensation would be reduced and automatic enrollment contributions made on his/her behalf unless an affirmative election not to do so was made. The Purchase Plan is non-compensatory, and as such, no stock based compensation is recorded. An aggregate of approximately 1,800,000 shares may be issued under the Purchase Plan.

The following table summarizes the purchases under the Purchase Plan for the last three fiscal years:



	Shares Purchased	Average Purchase Price
Fiscal Year 2012	86,735	$	21.81
Fiscal Year 2011	102,551	$	19.65
Fiscal Year 2010	131,880	$	14.65

Savings Plan

PAREXEL sponsors an employee savings plan (“the Plan”) as defined by Section 401(k) of the Internal Revenue Code of 1986, as amended. The Plan covers substantially all employees in the U.S. who elect to participate. Participants have the opportunity to invest on a pre-tax basis in a variety of mutual fund options and PAREXEL stock. We match 100% of each participant’s voluntary contributions up to 3% of gross salary per payroll period subject to an annual cap of $3,000. PAREXEL contributions vest to the participants in 20% increments for each year of employment and become fully vested after five years of continuous employment. Our contributions to the Plan were approximately $6.1 million, $5.2 million, and $4.4 million for the Fiscal Years 2012, 2011, and 2010, respectively.