-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VMjv9qaGc8LtCi7GtAS6MfBI6pEoS19P5E2FYN9pIS/w5YkwSjUMDCOyeXmfCZ2h 36UckwtS/kvaWjUYRoHCkw== 0000799729-98-000001.txt : 19980121 0000799729-98-000001.hdr.sgml : 19980121 ACCESSION NUMBER: 0000799729-98-000001 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 9 FILED AS OF DATE: 19980120 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: PAREXEL INTERNATIONAL CORP CENTRAL INDEX KEY: 0000799729 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMMERCIAL PHYSICAL & BIOLOGICAL RESEARCH [8731] IRS NUMBER: 042776269 STATE OF INCORPORATION: MA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: S-3 SEC ACT: SEC FILE NUMBER: 333-44541 FILM NUMBER: 98509478 BUSINESS ADDRESS: STREET 1: 195 WEST ST CITY: WALTHAM STATE: MA ZIP: 02154 BUSINESS PHONE: 6174879900 MAIL ADDRESS: STREET 1: 195 WEST ST CITY: WALTHAM STATE: MA ZIP: 02154 S-3 1 As filed with the Securities and Exchange Commission on January 20, 1998 Registration No. 333-_________ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 _______________ FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 _______________ PAREXEL INTERNATIONAL CORPORATION (Exact name of registrant as specified in its charter) Massachusetts 8731 04-2776269 (State or other (Primary Standard (I.R.S. Employer Jurisdiction Industrial Identification Number) of incorporation Classification Code Number) organization) 195 WEST STREET Waltham, Massachusetts 02154 (781) 487-9900 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) JOSEF H. VON RICKENBACH PRESIDENT, CHIEF EXECUTIVE OFFICER AND CHAIRMAN PAREXEL INTERNATIONAL CORPORATION 195 West Street Waltham, Massachusetts 02154 (781) 487-9900 (Name, address, including zip code, and telephone number, including area code, of agent for service) Copies to: WILLIAM J. SCHNOOR, JR. HEATHER M. STONE TESTA, HURWITZ & THIBEAULT, LLP High Street Tower, 125 High Street Boston, Massachusetts 02110 (617) 248-7000 _______________ Approximate Date Of Commencement Of Proposed Sale To The Public: As soon as practicable after this registration statement becomes effective. If the only securities being registered on this form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. ___ If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. x If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ____ If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ____ If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. __ CALCULATION OF REGISTRATION FEE Title of Amount Proposed Proposed Amount of Shares to be Maximum Maximum Registration to be Registe Offering Price Aggregate Fee(2) Registered red Per Share(1) Offering Price(1) Common 295,944 $34.13 $10,100,568.00 $2,979.67 Stock, $.01 par value per share (1) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457 under the Securities Act of 1933. (2) Pursuant to Rule 457(c) under the Securities Act of 1933, the registration fee has been calculated based upon the average of the high and low prices per share of Common Stock on the Nasdaq National Market on January 14, 1998. The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. 295,944 Shares PAREXEL INTERNATIONAL CORPORATION Common Stock This prospectus relates to the resale of up to 295,944 shares (the "Shares") of common stock, par value $.01 per share (the "Common Stock"), of PAREXEL International Corporation ("PAREXEL" or the "Company") by certain selling stockholders of the Company (collectively, the "Selling Stockholders"). The Shares may be sold from time to time by any or all of the Selling Stockholders in brokers' transactions, to market makers or in block placements at market prices prevailing at the time of sale or at prices otherwise negotiated. See "Selling Stockholders" and "Plan of Distribution." The Company will not receive any of the proceeds from the resale of the Shares. The Company has agreed to bear all of the expenses in connection with the registration and resale of the Shares (other than selling commissions and the fees and expenses of counsel or other advisors to the Selling Stockholders). The Shares include (i) 290,909 shares of Common Stock issued to former stockholders of Kemper-Masterson Inc. ("KMI") in connection with the merger of a wholly-owned subsidiary of the Company with and into KMI pursuant to an Agreement and Plan of Reorganization and Merger dated October 22, 1997, leaving KMI a wholly-owned subsidiary of the Company (the "KMI Merger"); and (ii) 5,035 shares of Common Stock issued to Perceptive Systems, Inc., a Colorado corporation doing business as Hayden Image Processing Group ("Hayden"), in connection with the purchase by the Company of substantially all of the assets of Hayden in exchange for shares of Common Stock of the Company pursuant to an Asset Purchase Agreement dated September 26, 1997 (the " Hayden Acquisition"). The Company has agreed to register up to 290,908 additional shares of Common Stock issued to certain of the Selling Stockholders approximately 180 days after the date of this Prospectus. The Common Stock of the Company is quoted on the Nasdaq National Market under the symbol "PRXL". On January 14, 1998, the last reported sale price for the Common Stock on the Nasdaq National Market was $33.75 per share. See "Risk Factors," on page 7 for information that should be considered by prospective investors. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any State in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such State. The date of this Prospectus is January 20, 1998 AVAILABLE INFORMATION The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files reports, proxy statements and other information with the Securities and Exchange Commission (the "Commission"). Reports, proxy statements and other information filed by the Company may be inspected and copied at the public reference facilities maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 and at the Commission's regional offices located at Seven World Trade Center, New York, New York 10048, and at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies may also be obtained from the Public Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. In addition, the Commission maintains a Worldwide Web site (http://www.sec.gov) that contains reports, proxy and information statements and other information regarding registrants that file electronically with the Commission. The Common Stock of the Company is quoted on the Nasdaq National Market. Reports, proxy statements and other information concerning the Company may be inspected at the offices of the National Association of Securities Dealers, Inc. located at 1735 K Street, N.W., Washington, D.C. 20006. The Company has filed with the Commission a Registration Statement on Form S-3 (including all amendments thereto, the "Registration Statement") under the Securities Act of 1933, as amended (the "Securities Act"), with respect to the Common Stock offered hereby. This Prospectus does not contain all information set forth in the Registration Statement, certain parts of which are omitted in accordance with the rules and regulations of the Commission. For further information regarding the Company and the Common Stock offered hereby, reference is hereby made to the Registration Statement and to the exhibits and schedules filed therewith. Statements contained in this Prospectus regarding the contents of any agreement or other document filed as an exhibit to the Registration Statement are not necessarily complete, and in each instance reference is made to the copy of such document filed as an exhibit to the Registration Statement for a more complete description of the matters involved. The Registration Statement, including the exhibits and schedules thereto, may be inspected and copied at the public reference facilities maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 or through its Worldwide Web site (http://www.sec.gov). The Company will provide without charge to each person to whom a Prospectus is delivered, on the written or oral request of any such person, a copy of any or all of the documents incorporated by reference herein (other than exhibits to such documents unless such exhibits are specifically incorporated by reference into such documents). Requests for such copies should be directed to PAREXEL International Corporation, Attention: Investor Relations Department, 195 West Street, Waltham, Massachusetts, 02154, telephone number (781) 487-9900. PAREXEL is a registered service mark of the Company. INCORPORATION OF CERTAIN INFORMATION BY REFERENCE The following documents filed by the Company with the Commission pursuant to the Exchange Act are incorporated in this Prospectus by reference (File No. 0-27058): 1. The Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1997. 2. The Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1997. 3.The Company's Current Reports on Form 8-K dated August 7, 1997 and October 23, 1997. 4.The description of the Company's Common Stock, $.01 par value per share, contained in the Registration Statement on Form 8-A filed under the Exchange Act and declared effective on November 21, 1995, including any amendment or report filed for the purpose of updating such description. All documents subsequently filed by the Company pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act, prior to the termination of the offering of the Shares, shall be deemed to be incorporated by reference in this Prospectus and made a part hereof from the date of filing of such documents. Any statement contained in a document incorporated or deemed to be incorporated by reference in this Prospectus shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein or in any Prospectus Supplement modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. SUMMARY The following summary is qualified in its entirety by the more detailed information appearing elsewhere or incorporated by reference in this Prospectus. This Prospectus 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) releases made by the Securities and Exchange Commission. Such information involves risks and uncertainties. The Company's actual results may differ materially from the results discussed in the forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed in "Risk Factors." In December 1997, the Company acquired Kemper-Masterson, Inc. ("KMI") in a business combination accounted for as a pooling of interests. The accompanying supplemental consolidated financial statements have been retroactively restated to combine the accounts and operations of KMI with those of the Company for all periods presented. THE COMPANY PAREXEL International Corporation ("PAREXEL" or the "Company") is a leading contract research organization ("CRO") 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. Over the past fifteen years, PAREXEL has developed significant expertise in disciplines supporting this strategy. 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 believes that its integrated services, therapeutic area depth, and sophisticated information technology, along with its experience in global drug development and product launch services, represent key competitive strengths. The Company complements the research and development ("R&D") functions, as well as the marketing functions, of pharmaceutical and biotechnology companies. Through its high quality clinical research and medical marketing services, PAREXEL helps clients maximize the return on their significant investments in research and development by reducing the time and cost of clinically testing their products and launching those products into the commercial marketplace. By outsourcing these types of services, clients are provided with a variable cost alternative to the fixed costs associated with internal drug development and product marketing. Clients no longer need to staff to peak periods, and can benefit from PAREXEL's technical resource pool, broad therapeutic area expertise, global infrastructure designed to expedite parallel, multi-country clinical trials, and other expertise-oriented advisory services focused on accelerating time-to-market. Headquartered near Boston, Massachusetts, the Company has 25 offices in 10 countries, and employs over 3,000 individuals. The Company has established footholds in the major health care markets around the world, including the United States, Japan, Germany, the United Kingdom ("U.K."), France, Italy, Spain, Sweden, Australia, and Israel. During fiscal 1997, PAREXEL derived 33% of its revenues from its international operations, distinguishing the Company from many of its competitors. The CRO industry derives substantially all of its revenue from the pharmaceutical and biotechnology industries. The Company believes that the following trends will cause the CRO industry to continue to grow: (i) the worldwide research and development expenditures for new drugs, including amounts spent on services of the type provided by CROs, have experienced substantial growth in recent years as a result of pressures to develop new drugs for an aging population and for the treatment of life threatening diseases and chronic disorders; (ii) many pharmaceutical companies, in response to competitive pressures to accelerate time to market and contain costs, have turned to CROs as a means of adding more flexible drug development capacity to accommodate their full product pipelines, thereby shifting fixed costs to variable costs; (iii) pharmaceutical and biotechnology companies increasingly are attempting to maximize profits from a given drug by pursuing regulatory approvals in multiple countries in parallel, rather than sequentially, by outsourcing to CROs with global capabilities; (iv) as regulatory requirements in many jurisdictions have become more complex, the pharmaceutical and biotechnology industries are increasingly outsourcing to certain CROs to take advantage of their regulatory expertise, data management capabilities and global presence; and (v) the growth of the biotechnology industry has increased the demand for expertise and services provided by outside sources, including CROs. There can be no assurance, however, that these trends will result in growth in the CRO industry. Central to PAREXEL's success has been the Company's focused strategy on building its platform of knowledge in the pursuit of outstanding client service. This includes a focus on its core clinical research business; a focus on continuous process improvement, efficiency gains and leveraging internal expertise, resources and infrastructure; a focus on managing the Company's strong internal growth while augmenting the Company's knowledge base through strategic acquisitions; a focus on deeply and broadly penetrating key client accounts by offering a full spectrum of clinical development and medical marketing services; and always, a focus on outstanding quality and superior client service. The Company's service philosophy involves a flexible approach which allows its clients to use the Company's services on an individual or bundled basis. The Company believes its expertise in conducting scientifically demanding trials and its ability to coordinate complicated global trials are significant competitive strengths. The Company continues to devote significant resources to developing innovative methodologies and sophisticated information systems designed to allow the Company to more effectively manage its business operations and deliver services to its clients. The Company has executed a focused growth strategy embracing internal expansion and strategic acquisitions to expand or enhance the Company's portfolio of services, geographic presence, therapeutic area knowledge, information technology, and client relationships. The Company was incorporated in The Commonwealth of Massachusetts in 1983. Unless the context otherwise requires, the terms "PAREXEL" and "the Company" refer to PAREXEL International Corporation and its subsidiaries. The Company's principal executive offices are located at 195 West Street, Waltham, Massachusetts 02154, and its telephone number is (781) 487-9900. RECENT DEVELOPMENTS KMI Merger. Pursuant to an Agreement and Plan of Reorganization and Merger dated October 22, 1997 by and among the Company, Kemper-Masterson, Inc., a Delaware corporation ("KMI"), KMI Acquisition Corporation, a Massachusetts corporation and a wholly-owned subsidiary of the Company, and the individual stockholders named therein (the "Merger Agreement"), KMI Acquisition Corporation merged with and into KMI and KMI became a wholly- owned subsidiary of the Company (the "KMI Merger"). In connection with the KMI Merger, the Company issued an aggregate of 581,817 shares of Common Stock to the stockholders of KMI, of which 290,909 shares are being offered hereby. PAREXEL is obligated to use commercially reasonable efforts to maintain the effectiveness of this Registration Statement until October 22, 1998, subject to certain conditions and limitations set forth in a Registration Rights Agreement among the Company and the former stockholders of KMI. Pursuant to the terms and provisions of the Registration Rights Agreement, the Company has agreed to register the remaining 290,908 shares of Common Stock issued to such former stockholders of KMI approximately 180 days after the date of this Prospectus. The KMI Merger is intended to qualify as a reorganization under Section 368 of the Internal Revenue Code of 1986, as amended. The Merger has been accounted for as a pooling of interests for financial accounting purposes. KMI is a management consulting firm providing consulting services on FDA and other regulatory matters to the worldwide pharmaceutical, biotechnology and medical device industries. Hayden Acquisition. Pursuant to an Asset Purchase Agreement by and among the Company, Perceptive Systems, Inc., a Colorado corporation doing business as Hayden Image Processing Group ("Hayden"), and Howard W. Foster, the sole stockholder of Hayden, (the "Asset Purchase Agreement"), the Company acquired substantially all of the assets of Hayden in exchange for shares of the Company's Common Stock (the "Hayden Acquisition"). In connection with the closing of the Hayden Acquisition, the Company issued 5,035 shares of Common Stock to Hayden as consideration for the sale of assets, all of which are being offered hereby. In connection with the anticipated dissolution of Hayden, the 5,035 shares of Common Stock issued to Hayden were subsequently transferred to Howard W. Foster, the sole stockholder of Hayden. As additional consideration for the Hayden Acquisition and pursuant to the Asset Purchase Agreement, the Company has agreed to issue additional shares of Common Stock, with a value in the aggregate not to exceed $228,000, over a three year period representing contingent payments calculated as a percentage of net receipts received by the Company and attributable to certain of the assets purchased in connection with the Hayden Acquisition (the "Contingent Shares"). Pursuant to the terms and provisions of a Registration Rights Agreement between the Company and Hayden, the Company has granted certain "piggyback" rights with respect to the Contingent Shares which would allow the registration of the Contingent Shares on future registration statements filed by the Company. The Hayden Acquisition has been accounted for as a purchase for financial accounting purposes. Hayden developed, serviced and sold software products that enable radiologists to measure and analyze high resolution medical images, such as x-rays and magnetic resonance images. RISK FACTORS In addition to the other information in this Registration Statement, 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 CROs. The loss or delay of a large contract or the loss or delay of multiple contracts could have a material adverse effect on the financial performance of the Company. 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. In addition, during the third quarter of fiscal 1995 and 1993, the Company's results of operations were affected by a noncash write-down due to the impairment of long-lived assets and a noncash restructuring charge, respectively. See "Risks Associated with Acquisitions." Because a high percentage of the Company's operating costs are relatively fixed, variations in the initiation, completion, delay or loss of contracts, or in the progress of 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, 1996, and 1995, and the three months ended September 30, 1997, the Company's top five clients accounted for 39%, 30%, 23%, and 37%, respectively, of the Company's consolidated net revenue. For the three months ended September 30, 1997, one client accounted for 16% of the Company's net revenue. In fiscal 1997, 1996, and 1995, no single customer accounted for more than 10% of net revenue. 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 experienced substantial expansion over the past 15 years. The Company believes that such expansion places a strain on operational, human and financial resources. In order to manage such expansion, the Company must continue to improve its operating, administrative and information systems, accurately predict its future personnel and resource needs to meet client contract commitments, track the progress of ongoing client projects and attract and retain qualified management, professional, scientific and technical operating personnel. Expansion of foreign operations also may involve the additional risks of assimilating differences in foreign business practices, hiring and retaining qualified personnel, and overcoming language barriers. In the event that the operation of an acquired business does not live up to expectations, the Company may be required to restructure the acquired business or write-off the value of some or all of the assets of the acquired business. 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. 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 live up to expectations, the Company may be required to restructure the acquired business or write-off the value of some or all of the assets of the acquired business. In fiscal 1993 and 1995, the Company's results of operations were materially and adversely affected by write-offs associated with the Company's acquired German operations. There can be no assurance that any acquisition will be successfully integrated into the Company's operations. Dependence on Government Regulation The Company's business depends on the comprehensive government regulation of the drug development process. In the United States, the general trend has been in the direction of continued or increased regulation, although the FDA recently announced regulatory changes intended to streamline the approval process for biotechnology products by applying the same standards as are in effect for conventional drugs. In Europe, the general trend has been toward coordination of common standards for clinical testing of new drugs, leading to changes in the various requirements currently imposed by each country. Japan also legislated GCP and legitimatized the use of CRO's 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, full service 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. Large CROs against whom PAREXEL competes include Quintiles Transnational Corporation, Covance Inc., IBAH, Inc., Pharmaceutical Product Development, 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, changes in earnings estimates by analysts, market conditions in the industry, prospects of health care reform, changes in government regulation and general economic conditions. In addition, the stock market has from time to time experienced significant price and volume fluctuations that have been unrelated to the operating performance of particular companies. These market fluctuations may adversely affect the market price of the Company's Common Stock. Because the Company's Common Stock currently trades at a relatively high price-earnings multiple, due in part to analysts' expectations of continued earnings growth, even a relatively small shortfall in earnings from, or a change in, analysts' expectations may cause an immediate and substantial decline in the Company's stock price. Investors in the Company's Common Stock must be willing to bear the risk of such fluctuations in earnings and stock price. 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 U.S. Congress. The intent of the proposals was, generally, to expand health care coverage for the uninsured and reduce the growth of total health care expenditures. While none of the proposals were adopted, health care reform may again be addressed by the U.S. Congress. Implementation of government health care reform may adversely affect research and development expenditures by pharmaceutical and biotechnology companies, resulting in a decrease of the business opportunities available to the Company. Management is unable to predict the likelihood of health care reform proposals being enacted into law or the effect such law would have on the Company. 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 non-cash write-down due to the impairment of long-lived assets of PAREXEL GmbH, the Company's German subsidiary, of approximately $11.3 million. The Company cannot predict the impact that any pending or future health care reform proposals may have on the Company's business in Europe. 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 33% of the Company's net revenue for fiscal 1997, 35% for fiscal 1996 and 1995, and 30% for the three months ended September 30, 1997, 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. USE OF PROCEEDS The Company will not receive any proceeds from the resale of the Shares of Common Stock by the Selling Stockholders hereunder. See "Selling Stockholders" and "Plan of Distribution." The principal purpose of this offering is to effect an orderly disposition of the Selling Stockholders' Shares. SELECTED SUPPLEMENTAL CONSOLIDATED FINANCIAL DATA(1) The selected supplemental consolidated financial data set forth below at and for each of the three years in the period ended June 30, 1997 are derived from, and are qualified by reference to, the Company's financial statements audited by Price Waterhouse LLP, independent accountants. The audited balance sheet at June 30, 1997 and 1996 and the related statements of operations, of stockholders' equity and of cash flows for each of the three years in the period ended June 30, 1997 and related notes thereto appear elsewhere in this Prospectus. The financial data set forth below for the years ended June 30, 1994 and 1993 have been derived from the unaudited supplemental consolidated financial statements of the Company. The balance sheet data at September 30, 1997 and the statement of operations data for the three months ended September 30, 1997 and 1996 are derived from, and qualified by reference to, the Company's unaudited supplemental financial statements which appear elsewhere in the Prospectus, and, in the opinion of management, include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the financial position and results of operations for these periods. The operating results for the three months ended September 30, 1997 are not necessarily indicative of the results that may be expected for the fiscal year ending June 30, 1998. The selected supplemental consolidated financial data set forth below should be read in conjunction with, and are qualified by reference to, "Management's Discussion and Analysis of Financial Condition and Results of Operations'" and the Company's financial statements and related notes included elsewhere in this Prospectus. ` For the Year Ended June 30, Three Months Ended September 30, (in thousands, except share 1997 1996 1995 1994 1993 1997 1996 data and number of employees) STATEMENT OF OPERATIONS DATA Net revenue $170,355 $97,361 $67,093 $64,416 $59,428 $54,77 $35,244 Income (loss) 14,052 6,627 (10,447)(4) 3,896 842(2)4,953 2,770 from operations Net income 11,037 4,693 (10,671) 2,665(3)(1,797) 3,841 1,985 (loss) Net income $ 0.57 $0.33 $(4.90) $0.22 $(0.94) $0.18 $0.11 (loss) per share BALANCE SHEET DATA Cash, cash equivalents and marketable $97,250 $45,597 $6,841 $3,085 $8,791 $88,109 $37,227 securities Working 110,876 53,829 11,587 10,885 7,398 111,757 54,586 capital Total assets 205,501 106,327 46,378 47,779 47,313 205,192 111,398 Long-term debt 72 410 750 436 317 26 367 Stockholders' $139,164 $62,268 $16,149 $25,718 $22,383 144,522 67,079 equity OTHER DATA Investment in property and Equipment $22,430 $5,219 $1,867 $2,204 $1,809 $6,629 $2,679 Depreciation 5,354 2,636 2,430 2,535 2,589 2,027 958 and amortization Number of 2,506 1,423 806 791 696 2,920 1,679 employees Average common and common Equivalent 19,497 14,080 2,177 11,993 1,916 21,073 17,776 shares (5) (1) The Company merged with KMI in a transaction accounted for as a pooling of interests in December 1997. The selected supplemental consolidated financial data gives retroactive effect to the merger for all periods presented. (2) Income from operations includes a $3.3 million charge in connection with a restructuring of operations in Germany. (3) Net income includes $500,000 related to the cumulative effect of adopting Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes." (4) Loss from operations includes an $11.3 million noncash charge due to the write-down of impaired long-lived assets of the Company's German operations. Income from operations on a pro forma basis excluding the impact of this charge was $303,000. See Note 3 to Supplemental consolidated Financial Statements entitled, "Impairment of Long-Lived Assets," to Supplemental consolidated Financial Statements for a description of this matter. (5) For the years ended June 30, 1993 and 1995, weighted average common shares outstanding exclude common share equivalents (primarily convertible preferred stock), as the inclusion of which would have had an anti-dilutive effect.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS As described in Notes 2 and 16 to the supplemental consolidated financial statements, the Company consummated a business combination with Kemper- Masterson, Inc. in December 1997 which was accounted for as a pooling of interests. All financial data in this discussion and analysis is reported as though the companies were combined for all periods. OVERVIEW The Company is a leading contract research organization ("CRO") providing a broad range of knowledge-based product development and product launch services on a contract basis to the worldwide pharmaceutical, biotechnology, and medical device industries. The Company has developed expertise in such disciplines as: clinical trials management, biostatistical analysis and data management, medical marketing, clinical pharmacology, regulatory and medical consulting, information technology, industry training and publishing, and other drug development consulting services. Founded in 1983, the Company has built its business through internal expansion and acquisitions. The Company's services contracts are generally fixed price with some variable components and range in duration from a few months to several years. A portion of the fee is typically required to be paid at the time the contract is entered into and the balance in installments over the duration of the contract, in some cases on a milestone-achievement basis. Revenue from the contracts is generally recognized on a percentage-of- completion basis as work is performed. Most of the Company's contracts are terminable upon 60 to 90 days' notice by the client. Clients terminate or delay contracts for a variety of reasons, including, among others, the failure of products being tested to satisfy safety requirements, unexpected or undesired clinical results of the product, the client's decision to forego a particular study, insufficient patient enrollment or investigator recruitment, or production problems resulting in shortages of the drug. As is customary in the industry, the Company routinely subcontracts with third party investigators in connection with clinical trials and with other third party service providers for laboratory analysis and other specialized services. These and other reimbursable costs are paid by the Company and reimbursed by clients and, in accordance with industry practice, are included in gross revenue. Reimbursed costs vary from contract to contract. Accordingly, the Company views net revenue, which consists of gross revenue less reimbursed costs, as its primary measure of revenue growth. Direct costs 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 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. GLOBAL OPERATIONS The following table presents, for the periods indicated, net revenue by geographic region and the percentage of total net revenue represented by each region. FOR THE YEARS ENDED JUNE 30, FOR THE THREE MONTHS ENDED SEPTEMBER 30 $ In 1997 % OF 1996 % OF 1995 % OF 1997 % OF 1998 % OF Thous TOTAL TOTAL TOTAL TOTAL TOTAL ands Net Reven ue: $113,589 67% $63,534 65% $43,557 65% $38,282 70% $24,078 68% North Ameri ca 53,599 31% 32,834 34% 23,443 35% 14,930 28% 10,720 31% Europ e 3,167 2% 993 1% 93 - 1,058 2% 446 1% Asia- Pacif ic Total $170,355 100% $97,361 100% $67,093 100% $54,270 100% $35,244 100%
The Company's foreign subsidiaries generally enter into contracts denominated in the local currency of the foreign subsidiary. Because expenses of the foreign subsidiaries are generally paid in the local currency, such foreign subsidiaries' local currency earnings are not materially affected by fluctuations in exchange rates. However, changes in the exchange rates between these local currencies and the U.S. dollar will affect the translation of such subsidiaries' financial results into U.S. dollars for the purposes of reporting the Company's supplemental consolidated financial results. In cases where the Company contracts for a multi-country clinical trial and a significant portion of the contract expenses are in a currency other than the contract currency, the Company seeks to contractually shift to its client the effect of fluctuations in the relative values of the contract currency and the currency that the expenses are incurred. To the extent the Company is unable to shift to its clients the effects of currency fluctuations, these fluctuations could have a material effect on the Company's results of operations. The Company does not currently hedge against the risk of exchange rate fluctuations. As the Company conducts operations on a global basis, the Company's effective tax rate has depended, and will continue to depend, upon the distribution of its revenue among geographic locations with varying tax rates. The Company's results of operations may be affected by changes in the tax rates of the various jurisdictions. In particular, from period to period, as the geographic mix of the Company's results of operations among various tax jurisdictions changes, the Company's effective tax rate may vary significantly. RESULTS OF OPERATIONS As an aid to understanding the Company's operating results, the following table indicates the percentage relationships of income and expense items included in the Supplemental Consolidated Statements of Operations for the three years ended June 30, 1997, and the three months ended September 30, 1997, and 1996, and the percentage changes in those items for such periods:
Net revenue 100% 100% 100% 100% 100% 75.0% 45.1% 54.0% Costs and expenses: Direct costs 67.9% 68.0% 71.6% 66.9% 68.7% 74.8% 37.9% 50.0% Selling, general 20.7% 22.5% 23.6% 20.2% 20.7% 61.0% 38.6% 50.4% and administrative Depreciation and 3.1% 2.7% 3.6% 3.8% 2.7% 103.1% 8.5% 111.6% amortization Impairment of long- - 16.8% * lived assets - - - - - Income (loss) from 8.3% 6.8% (15.6) 9.1% 7.9% 112.1% * 78.8% operations %
* not meaningful THREE MONTHS ENDED SEPTEMBER 30, 1997, COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 1996 Net revenue increased by $19.0 million, or 54.0%, from $35.2 million for the three months ended September 30, 1996, to $54.3 million for the three months ended September 30, 1997. This net revenue growth was primarily attributable to an increase in the volume and average contract value of clinical research projects serviced by the Company. For the three months ended September 30, 1997, net revenue from North American and European operations increased by $14.2 million and $4.2 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 50.0%, from $24.2 million for the three months ended September 30, 1996, to $36.3 million for the three months ended September 30, 1997. This increase in direct costs was due to the increase in the number of project-related personnel, hiring, facilities and information system costs necessary to support the increased level of operations. Direct costs as a percentage of net revenue decreased from 68.7% for the three months ended September 30, 1996, to 66.9% for the three months ended September 30, 1997, primarily due to improved performance of the Company's North American operations. Selling, general and administrative expenses increased by $3.7 million, or 50.4%, from $7.3 million for the three months ended September 30, 1996 to $11.0 million for the three months ended September 30, 1997. This increase was primarily due to increased administrative personnel, hiring, and facilities costs necessary to accommodate the Company's growth. Selling, general and administrative expenses as a percentage of net revenue decreased slightly from 20.7% for the three months ended September 30, 1996, to 20.2% for the three months ended September 30, 1997. Depreciation and amortization expense increased by $1.1 million, or 111.6%, from $958,000 for the three months ended September 30, 1996 to $2.0 million for the three months ended September 30, 1997. The increase is primarily due to increased capital spending on computer equipment and facilities to support the increase in project-related personnel. Income from operations for the three months ended September 30, 1997, increased by $2.2 million, or 78.8%, from $2.8 million for the three months ended September 30, 1996, to $5.0 million for the three months ended September 30, 1997. Interest income increased by $549,000 from $439,000 for the three months ended September 30, 1996, to $988,000 for the three months ended September 30, 1997. This increase resulted from higher average balances of cash, cash equivalents and marketable securities due primarily to proceeds from the Company's December 1996 public offering. The Company's effective income tax rate was 35.0% for the three months ended September 30, 1997, compared to 36.8% for the three months ended September 30, 1996. 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. FISCAL YEAR ENDED JUNE 30, 1997, COMPARED TO FISCAL YEAR ENDED JUNE 30, 1996 Net revenue increased $73.0 million, or 75.0%, from $97.4 million for fiscal 1996 to $170.4 million for 1997. This growth in revenue was primarily attributable to an increase in the volume and average contract value of clinical research projects serviced by the Company and to a lesser extent, the Company's acquisitions since June 1996. In fiscal 1997, net revenue in North America and in Europe increased $50.1 million and $20.8 million, respectively, over the prior year. Direct costs increased $49.5 million, or 74.8%, from $66.2 million for fiscal 1996 to $115.7 million for 1997. This increase in direct costs was due to the increase in the number of project-related personnel, hiring, facilities, and information system costs necessary to support the increased level of operations. As a percentage of net revenue, direct costs remained essentially unchanged, decreasing slightly from 68.0% in fiscal 1996 to 67.9% in 1997. Selling, general, and administrative expenses increased $13.4 million, or 61.0%, from $21.9 million for fiscal 1996 to $35.3 million for 1997. This increase was primarily due to increased costs associated with additional administrative personnel, greater hiring and selling costs, and additional facilities to accommodate the Company's growth. As a percentage of net revenue, selling, general, and administrative expenses decreased from 22.5% in fiscal 1996 to 20.7% in 1997, primarily due to leveraging of infrastructure over an expanding revenue base. Depreciation and amortization expense increased $2.7 million, or 103.1% from $2.6 million for fiscal 1996 to $5.4 million for 1997. This increase was primarily due to increased capital spending on computer equipment and facilities to support the increase in project-related personnel required to support the increased level of operations. Income from operations increased $7.4 million, or 112.1%, from $6.6 million for fiscal 1996 to $14.1 million in 1997. As a percentage of net revenue, income from operations increased to 8.3% in fiscal 1997, compared to 6.8% in 1996. Interest income increased $2.2 million in fiscal 1997 as a result of higher average balances of cash and investments. This increase was due to proceeds from the Company's public offering and cash generated from operations. The Company's effective income tax rate decreased from 39.7% in fiscal 1996 to 36.2% in fiscal 1997. This decrease was attributable to changes in the mix of taxable income from the different geographic jurisdictions that the Company operated in fiscal 1997 compared to 1996. FISCAL YEAR ENDED JUNE 30, 1996, COMPARED TO FISCAL YEAR ENDED JUNE 30, 1995 Net revenue increased $30.3 million, or 45.1%, from $67.1 million for fiscal 1995 to $97.4 million for 1996. This net revenue growth was attributable to an increase in the number and average contract value of clinical research projects serviced by the Company. Direct costs increased $18.1 million, or 37.8%, from $48.1 million for fiscal 1995 to $66.2 million for 1996. This increase in direct costs was due to the increase in the number of project-related personnel, facilities, and information system costs necessary to support the increased level of operations. Direct costs as a percentage of net revenue decreased from 71.6% for 1995 to 68.0% for 1996, primarily due to improved workforce and facility utilization. Selling, general and administrative expenses increased $6.1 million, or 38.6%, from $15.8 million for fiscal 1995 to $21.9 million for 1996. This increase was primarily due to increased costs associated with additional administrative personnel, greater hiring and selling costs, and additional facilities to support the Company's growth and operation as a publicly held company. Selling, general and administrative expenses as a percentage of net revenue decreased from 23.6% for fiscal 1995 to 22.5% for 1996, primarily due to leveraging of infrastructure over an expanded revenue base. Depreciation and amortization expense increased $206,000, or 8.5%, from $2.4 million for fiscal 1995 to $2.6 million for 1996. The change resulted from an increase in depreciation associated with increased capital expenditures, offset by a decrease in depreciation and amortization due to the write-down of impaired long-lived assets of the Company's German operations. See Note 3 to the Supplemental Consolidated Financial Statements entitled, "Impairment of Long Lived Assets." Depreciation and amortization expense in fiscal 1995 includes approximately $588,000 related to long-lived assets which were written-down and did not recur in 1996. Income from operations for fiscal 1996 was $6.6 million, compared to a loss from operations of $10.4 million for 1995. Results for 1995 included an $11.3 million noncash charge related to the write-down of impaired long- lived assets of the Company's German operations. Income from operations for 1995, excluding the impact of the asset impairment charge, was approximately $221,000. Interest income increased by $1.1 million in fiscal 1996. This increase resulted from higher average balances of cash and investments due primarily to proceeds from the Company's public offerings in November 1995 and March 1996. The Company's effective income tax rate was 39.7% for fiscal 1996. The effective tax rate in fiscal 1995, excluding the effect of the $11.3 million noncash, nondeductible write-down due to the impairment of long- lived assets, would have been 101.0%. The effective income tax rate may vary with changes in the mix of taxable income from the different geographic jurisdictions in which the Company operates. SUPPLEMENTAL QUARTERLY RESULTS The following table presents unaudited supplemental quarterly operating results for the Company for each of the ten most recent fiscal quarters in the period ended September 30, 1997. In the opinion of the Company, this information has been prepared on the same basis as the supplemental consolidated financial statements appearing elsewhere in this Prospectus and reflects all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of results of operations for those periods. This quarterly financial data should be read in conjunction with the Supplemental Consolidated Financial Statements and Notes thereto appearing elsewhere in this Prospectus. The operating results for any quarter are not necessarily indicative of the results of any future period.
For the quarters ended Sep. June March Dec Sep 30, June March Dec. Sep. June 30, 30, 30, 31, 1996 30, 31, 31, 30, 30, 1997 1997 1997 1996 1996 1996 1995 1995 1995 (in thousands) Net revenue $54,270 $50,328 $44,863 $39,920 $35,244 $29,661 $24,721 $22,726 $20,253 $18,341 Costs and expenses: Direct costs 36,310 34,038 30,244 27,198 24,215 19,953 16,548 15,810 13,885 13,558 Selling, general 10,980 10,072 9,460 8,421 7,301 6,685 5,685 4,918 4,614 3,802 and administrative Depreciation and amortization 2,027 1,913 1,410 1,073 958 762 691 593 590 483 Total costs and 49,317 46,023 41,114 36,692 32,474 27,400 22,924 21,321 19,089 17,843 expenses Income from $4,953 $4,305 $3,749 $3,228 $2,770 $2,261 $1,797 $1,405 $1,164 $498 operations Net income $3,841 $3,564 $3,147 $2,341 $1,985 $1,672 $1,346 $929 $746 $399
LIQUIDITY AND CAPITAL RESOURCES Since its inception, the Company has financed its operations and growth, including acquisition costs, with cash flow from operations and the proceeds from the sale of equity securities. Investing activities primarily reflect capital expenditures for information systems enhancements, leasehold improvements, and net purchases of marketable securities. The Company's clinical research and development contracts are generally fixed price with some variable components, and range in duration from a few months to several years. The cash flows from contracts typically consists of a down payment required to be paid at the time the contract is entered into and the balance in installments over the contract's duration, in some cases on a milestone-achievement basis. Revenue from contracts is recognized on a percentage-completion basis as the work is performed. Accordingly, cash receipts do not necessarily correspond to costs incurred and revenue recognized on contracts. The Company's cash flow is influenced by the changes in levels of billed and unbilled accounts receivable, net of amounts advance billed representing unearned revenue. As a result, the number of days outstanding in accounts receivable, net of advance billings, and the related dollar values of these accounts can vary due to the achievement of contractual milestones and the timing and size of cash receipts. The number of days revenue outstanding, net of advance billings, was 48 days at June 30, 1996, 45 days at June 30, 1997, and 55 days at September 30, 1997. The increase in days revenue outstanding from June 30, 1997, to September 30, 1997, was primarily due to the timing of the achievement of project milestones and related billings. Accounts receivable, net of the allowance for doubtful accounts, increased from $42.1 million at June 30, 1996, to $66.1 million at June 30, 1997, and $70.3 million at September 30, 1997; while advance billings increased from $20.7 million at June 30, 1996, to $33.4 million at June 30, 1997, and decreased to $29.7 million at September 30, 1997. During the three months ended September 30, 1997, unrestricted cash and cash equivalents increased by $19.5 million as a result of $22.7 million and $1.6 million in cash provided by investing and financing activities, respectively, partially offset by $4.3 million in cash used by operating activities and a $411,000 unfavorable effect of exchange rate changes. Net cash used by operating activities resulted from increases in accounts receivable of $5.2 million and decreases in advance billings, accounts payable, and other current liabilities of $3.0 million, $1.3 million, and $891,000, respectively, partially offset by net income, excluding noncash expenses, of $5.9 million. Cash provided by investing activities consisted primarily of net proceeds from sales of marketable securities of $29.3 million, partially offset by capital expenditures of $6.6 million related to facility expansion and investments in information technology. Financing activities consisted primarily of net proceeds from the exercise of stock options of $1.4 million. Unrestricted cash and cash equivalents increased by $12.1 million during fiscal 1997 as a result of $15.6 million of cash provided by operations and $56.6 million provided by financing activities, offset by $59.1 million of cash used for investing activities and a $968,000 unfavorable effect of exchange rate changes. Net cash provided by operating activities resulted primarily from net income, excluding noncash expenses, of $16.4 million and increases in advance billings and other current liabilities of $12.4 million and $12.8 million, respectively. Cash used by operating activities included increases in accounts receivable and other current assets of $21.6 million and $3.0 million, respectively. Financing activities consisted primarily of net proceeds of approximately $57.2 million from the Company's December 1996 follow-on public offering of 2,516,300 shares of common stock net of repayments of long-term debt of $3.5 million. Debt repayments included $2.3 million to retire third party debt assumed during the August 1996 acquisition of State and Federal Associates, Inc. Investing activities consisted of net purchases of marketable securities of $37.5 million and capital expenditures. The Company has invested approximately $22.4 million in fiscal 1997 for capital expenditures related to facility expansion and investments in information systems technology and expects to invest approximately $25.0 million in the next twelve months. The Company has domestic and foreign lines of credit with banks totaling approximately $14.4 million, and a capital lease line of credit with a U.S. bank for $2.4 million. At September 30, 1997, the Company had approximately $15.1 million in available credit under these arrangements. The Company's primary short-term and long-term cash needs are for the payment of the salaries and fringe benefits, hiring and recruiting expenses, business development costs, capital expenditures and facility- related expenses. The Company believes that its existing capital resources together with cash flows from operations and borrowing capacity under existing lines of credit will be sufficient to meet its foreseeable cash needs. In the future, the Company will consider acquiring businesses to enhance its service offerings, therapeutic base, 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 financing will be available on terms acceptable to the Company. The statements included in Management's Discussion and Analysis of Financial Condition and Results of Operations include forward-looking statements which involve risks and uncertainties. The Company's actual experience may differ materially from that discussed above. Factors that might cause such a difference include, but are not limited to, the loss or delay of large contracts, the Company's dependence on certain industries and clients and government regulation of such industries and clients, competition or consolidation within the industry, as well as those discussed in "Risk Factors" herein and in the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1997. INFLATION The Company believes the effects of inflation generally do not have a material adverse impact on its operations or financial condition. 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 February 1997, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings per Share." This statement establishes and simplifies standards for computing and presenting earnings per share. SFAS No. 128 will be effective for the Company's second quarter of fiscal 1998 and requires the restatement of all previously reported earnings per share data presented. Early adoption of this Statement is not permitted. SFAS No. 128 replaces primary and fully diluted earnings per share with basic and diluted earnings per share. The Company expects that basic and diluted earnings per share amounts will not be materially different from the Company's primary and fully diluted earnings per share amounts. 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 supplemental 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 is in the process of assessing the impact of EITF 97-13 and does not expect that it will have a material affect on its results of operations for the quarter ending December 31, 1997. SELLING STOCKHOLDERS The following table sets forth certain information regarding beneficial ownership of the Shares as of January 14, 1998 and the number of Shares which may be offered by or for the account of the Selling Stockholders or their transferees or distributes from time to time. Because the Selling Stockholders may sell all or any part of their Shares pursuant to this Prospectus, no estimate can be given as to the number of Shares that will be held by the Selling Stockholders upon termination of this offer. See "Plan of Distribution." Shares Shares offered Shares Owned Pursuant to this Owned before offering Prospectus after offering (1) Selling Stockholders Number Percent(2)Number(2) Percent(2) Number Percent(2) Clarence A. Kemper 231,339 1.1% 115,670 * 115,669 * P. Michael Masterson 231,038 1.1% 115,519 * 115,519 * Mark A. Lester 52,017 * 26,008 * 26,009 * Ronald F. Tetzlaff 52,017 * 26,008 * 26,009 * Alan R. Parenteau 5,779 * 2,890 * 2,889 * Jon R. Voss 5,779 * 2,890 * 2,889 * Warren Handren 1,924 * 962 * 962 * David Hyde 1,924 * 962 * 962 * Howard W. Foster 5,035 * 5,035 * 0 * 586,852 2.8% 295,944 1.4% 290,908 1.4% ___________________*Less than 1% of the outstanding Common Stock. (1) Assuming all of the Shares owned by each Selling Stockholder and offered pursuant to this Prospectus are sold. (2) As of January 14, 1998, there were 20,804,987 shares of Common Stock outstanding. None of the Selling Stockholders has had any material relationship with the Company or any of its affiliates within the past three years except as described below. Each of Clarence A. Kemper, P. Michael Masterson, Mark A. Lester, Ronald F. Tetzlaff, Alan R. Parenteau, Jon Voss, Warren Handren and David Hyde (the "KMI Stockholders") acquired his Shares in connection with the merger of KMI Acquisition Corporation, a Massachusetts corporation and wholly-owned subsidiary of the Company, with and into Kemper-Masterson, Inc., a Delaware corporation ("KMI") (the "KMI Merger"), pursuant to an Agreement and Plan of Reorganization and Merger dated October 22, 1997 by and among KMI, KMI Acquisition Corporation, the Company and the KMI Stockholders (the "Merger Agreement"). Pursuant to the terms of a Registration Rights Agreement dated December 1, 1997 by and among the KMI Stockholders and the Company, 290,909 of the 581,817 shares of Common Stock issued to the KMI Stockholders in connection with the KMI Merger are being offered hereby. The Company has agreed to register the remaining 290,908 shares of Common Stock issued to the KMI Stockholders approximately 180 days after the date of this Prospectus. Such rights are more fully described in the Registration Rights Agreement filed as Exhibit 4.3 herewith. An aggregate of 55,706 shares of Common Stock issued to the KMI Stockholders are being held in escrow pursuant to the Merger Agreement. Of the 55,706 shares being held in escrow, an aggregate of 25,297 shares are being held back until the earlier of (i) December 1, 1998 or (ii) the delivery of an audit report relating to the Company's financial statements for the fiscal year ended June 30, 1998. These shares will be used to satisfy any indemnification claims which may be brought by the Company based upon a breach of the representations or warranties of KMI or the KMI Stockholders as set forth in the Merger Agreement. An aggregate of 30,409 shares held in escrow will be used if necessary to satisfy certain tax withholding obligations of the KMI Stockholders. These shares will be distributed to the KMI Stockholders, to the extent not used to satisfy such tax withholding obligations, within approximately 25 days after the date the shares are no longer subject to restriction on transfer pursuant to the pooling of interests accounting rules. Each of the KMI Stockholders has sole authority to hold or dispose of, and to vote all securities held by him, including those shares held in escrow by the Company but issued in the name of the KMI Stockholder. Each of the KMI Stockholders is presently employed by KMI in its capacity as a wholly-owned subsidiary of the Company, including Mr. Masterson, who serves as KMI's President. The KMI Merger was accounted for as a pooling of interests for financial accounting purposes. Perceptive Systems, Inc., a Colorado corporation doing business as Hayden Image Processing Group ("Hayden") acquired its Shares in connection with the acquisition by the Company of substantially all of the assets of Hayden pursuant to an Asset Purchase Agreement dated September 26, 1997 by and among the Company, Hayden and Howard W. Foster, the sole stockholder of Hayden (the "Asset Purchase Agreement"). In connection with the anticipated dissolution of Hayden, the 5,035 shares of Common Stock issued to Hayden were subsequently transferred to Howard W. Foster, the sole stockholder of Hayden. Pursuant to the terms of a Registration Rights Agreement dated September 26, 1997 by and between Hayden and the Company, all of the 5,035 shares of Common Stock issued upon the closing of the Hayden Acquisition are being offered hereby. In addition, the Company has granted certain "piggyback" rights with respect to the Contingent Shares which would allow the registration of the Contingent Shares on future registration statements filed by the Company. Such rights are more fully described in the Registration Rights Agreement filed as Exhibit 4.5 herewith. Howard Foster is currently the Director of Medical Imaging Research and Development at the Company. Each of the Selling Stockholders represented to the Company, in connection with the completion of the KMI Merger and the Hayden Acquisition, that he or it was acquiring the Shares from the Company without any present intention of effecting a distribution of those Shares. In recognition of the fact that the Selling Stockholders may want to be able to sell their shares when they consider appropriate, the Company agreed to file with the Commission a Registration Statement on Form S-3 (the "Registration Statement") (of which this Prospectus is a part) to permit the public sale of the Shares by the Selling Stockholders from time to time and to use its commercially reasonable efforts to keep the Registration Statement effective until the earlier of the sale of all of the Shares pursuant to this Registration Statement or October 22, 1998. The Company will prepare and file such amendments and supplements to the Registration Statement as may be necessary to keep it effective until the earlier of the sale of all Shares pursuant to the registration statement or until October 22, 1998. Pursuant to the Registration Rights Agreements by and between the Company and each of the Selling Stockholders (collectively, the "Registration Rights Agreements"), the Company has agreed to bear all expenses in connection with the registration and resale of the Shares (other than underwriting discounts and selling commissions and the fees and expenses of counsel and other advisors to the Selling Stockholders). See "Plan of Distribution." The Registration Rights Agreements provide that the Company will indemnify the Selling Stockholders for any losses incurred by them in connection with actions arising from any untrue statement of a material fact in the Registration Statement or any omission of a material fact required to be stated therein, unless such statement or omission was made in reliance upon written information furnished to the Company by the Selling Stockholder. Similarly, the Registration Rights Agreements provide that each Selling Stockholder will indemnify the Company and its officers and directors for any losses incurred by them in connection with any action arising from any untrue statement of material fact in the Registration Statement or any omission of a material fact required to be stated therein, if such statement or omission was made in reliance on written information furnished to the Company by such Selling Stockholder. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers or persons controlling the registrant pursuant to the foregoing provisions, the Company has been informed that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is therefore unenforceable. DESCRIPTION OF CAPITAL STOCK The current authorized capital stock of the Company is 50,000,000 shares of Common Stock, par value $.01 per share, and 5,000,000 shares of Preferred Stock, par value $.01 per share. Common Stock As of January 14, 1998, there were 20,804,987 shares of Common Stock outstanding and held of record by 108 stockholders. Holders of Common Stock are entitled to one vote for each share held on all matters submitted to a vote of stockholders. Holders of Common Stock do not have cumulative voting rights. Accordingly, holders of a majority of the shares of Common Stock entitled to vote in any election of directors may elect all of the directors standing for election. Holders of Common Stock are entitled to receive ratably such dividends, if any, as may be declared by the Board of Directors out of funds legally available therefor, subject to any preferential dividend rights of any outstanding Preferred Stock. Upon the liquidation, dissolution or winding up of the Company, the holders of Common Stock are entitled to receive ratably the net assets of the Company available after the payment of all debts and other liabilities and subject to the prior rights of any outstanding Preferred Stock. Holders of the Common Stock have no preemptive, subscription, redemption or conversion rights. The outstanding shares of Common Stock are, and the shares offered by the Company in this offering will be, when issued and paid for, fully paid and nonassessable. The rights, preferences and privileges of holders of Common Stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of Preferred Stock which the Company may designate and issue in the future. Preferred Stock The Board of Directors is authorized, subject to certain limitations prescribed by law, without further stockholder approval, to issue from time to time up to an aggregate of 5,000,000 shares of Preferred Stock in one or more series and to fix or alter the designations, preferences, rights and any qualifications, limitations or restrictions of the shares of each such series thereof, including the dividend rights, dividend rates, conversion rights, voting rights, terms of redemption (including sinking fund provisions), redemption price or prices, liquidation preferences and the number of shares constituting any series or designations of such series. The issuance of Preferred Stock may have the effect of delaying, deferring or preventing a change of control of the Company. There are no shares of Preferred Stock outstanding. The Company has no present plans to issue any shares of Preferred Stock. Massachusetts Law and Certain Provisions of the Company's Restated Articles of Organization and By-Laws The Company believes that it has more than 200 beneficial stockholders, thus making it subject to Chapter 110F of the Massachusetts General Laws, an anti-takeover law. In general, this statute prohibits a publicly held Massachusetts corporation from engaging in a "business combination" with an "interested stockholder" for a period of three years after the date of the transaction in which the person becomes an interested stockholder, unless (i) the interested stockholder obtains the approval of the board of directors prior to becoming an interested stockholder, (ii) the interested stockholder acquires 90% of the outstanding voting stock of the corporation (excluding shares held by certain affiliates of the corporation) at the time it becomes an interested stockholder, or (iii) the business combination is approved by both the board of directors and the holders of two-thirds of the outstanding voting stock of the corporation (excluding shares held by the interested stockholder). An "interested stockholder" is a person who, together with its affiliates and associates, owns (or at any time within the prior three years did own) 5% or more of the outstanding voting stock of the corporation. A "business combination" includes a merger, a stock or asset sale, and certain other transactions resulting in a financial benefit to the interested stockholder. . There are no shares of Preferred Stock outstanding. The Company may at any time elect not to be governed by Chapter 110F by vote of a majority of its stockholders, but such an amendment would not be effective for twelve months and would not apply to a business combination with any person who became an interested stockholder prior to the adoption of the amendment. The Massachusetts Business Corporation Law generally requires that publicly-held Massachusetts corporations have a classified board of directors consisting of three classes as nearly equal in size as possible, unless those corporations elect to opt out of the statute's coverage. By vote of the Board of Directors, the Company has elected to opt out of the classified board provisions of this statute and has adopted separate classified Board provisions in its Restated Articles of Organization. The Company's By-Laws include a provision that excludes the Company from the applicability of Massachusetts General Laws Chapter 110D, entitled "Regulation of Control Share Acquisitions." In general, this statute provides that any stockholder of a corporation subject to this statute who acquires 20% or more of the outstanding voting stock of a corporation may not vote such stock unless the stockholders of the corporation so authorize. The Board of Directors may amend the Company's By-Laws at any time to subject the Company to this statute prospectively. The Company's By-Laws require that nominations for the Board of Directors made by a stockholder comply with certain notice procedures. A notice by a stockholder of a planned nomination must be given not less than 60 and not more than 90 days prior to a scheduled meeting, provided that if less than 70 days' notice is given of the date of the meeting, a stockholder will have ten days within which to give such notice. The stockholder's notice of nomination must include particular information about the stockholder, the nominee and any beneficial owner on whose behalf the nomination is made. The Company may require any proposed nominee to provide such additional information as is reasonably required to determine the eligibility of the proposed nominee. The By-Laws also require that a stockholder seeking to have any business conducted at a meeting of stockholders give notice to the Company not less than 60 and not more than 90 days prior to the scheduled meeting, provided that if less than 70 days' notice is given of the date of the meeting, a stockholder will have ten days within which to give such notice. The notice from the stockholder must describe the proposed business to be brought before the meeting and include information about the stockholder making the proposal, any beneficial owner on whose behalf the proposal is made, and any other stockholder known to be supporting the proposal. The By- Laws require the Company to call a special stockholders' meeting at the request of stockholders holding at least 33 1/3% of the voting power of the Company. The Company's Restated Articles of Organization include provisions eliminating the personal liability of the Company's directors for monetary damages resulting from breaches of their fiduciary duty to the extent permitted by the Massachusetts Business Corporation Law. Additionally, the Company's Restated Articles of Organization provide that the Company shall indemnify each person who is or was a director or officer of the Company, and each person who is or was serving or has agreed to serve at the request of the Company as a director or officer of, or in a similar capacity with, another organization or in any capacity with respect to any employee benefit plan of the Company, against all liabilities, costs and expenses reasonably incurred by any such persons in connection with the defense or disposition of or otherwise in connection with or resulting from any action, suit or other proceeding in which they may be involved by reason of being or having been such a director or officer, or by reason of any action taken or not taken in such capacity, except with respect to any matter as to which such person shall have been finally adjudicated by a court of competent jurisdiction not to have acted in good faith in the reasonable belief that his or her action was in the best interests of the Company or, to the extent such matter relates to service with respect to an employee benefit plan, in the best interests of the participants or beneficiaries of such employee benefit plan. The Restated Articles of Organization provide that certain transactions, such as the sale, lease or exchange of all or substantially all of the Company's property and assets and the merger or consolidation of the Company into or with any other corporation, may be authorized by the approval of the holders of a majority of the shares of each class of stock entitled to vote thereon, rather than by two-thirds as otherwise provided by statute, provided that the transactions have been authorized by a majority of the members of the Board of Directors and the requirements of any other applicable provisions of the Restated Articles of Organization have been met. Certain of the provisions of the Restated Articles of Organization and By-Laws discussed above would discourage or make more difficult a proxy contest or the assumption of control by a holder of a substantial block of the Company's stock. Such provisions could also have the effect of discouraging a third party from making a tender offer or otherwise attempting to obtain control of the Company, even though such an attempt might be beneficial to the Company and its stockholders. In addition, since the Restated Articles of Organization and By-Laws are designed to discourage accumulations of large blocks of the Company's stock by purchasers whose objective is to have stock repurchased by the Company at a premium, such provisions could tend to reduce the temporary fluctuations in the market price of the Company's stock which are caused by such accumulations. Accordingly, stockholders could be deprived of certain opportunities to sell their stock at a temporarily higher market price. Transfer Agent and Registrar The Transfer Agent and Registrar for the Common Stock is BankBoston, N.A. PLAN OF DISTRIBUTION The Shares offered hereby may be sold from time to time by the Selling Stockholders for their own accounts. The Company will receive none of the proceeds from this offering. The Selling Stockholders will pay or assume brokerage commissions or other charges and expenses incurred in the resale of the Shares. Resales of the Shares by the Selling Stockholders are not subject to any underwriting agreement. The Shares covered by this Prospectus may be sold by the Selling Stockholders or by pledgees, donees, transferees or other successors in interest. The Shares offered by each Selling Stockholder may be sold from time to time at market prices prevailing at the time of sale, at prices relating to such prevailing market prices or at negotiated prices. Such sales may be effected in the over-the-counter market, on the Nasdaq National Market, or on any exchange on which the Shares may then be listed. The Shares may be sold by one or more of the following: (a) one or more block trades in which a broker or dealer so engaged will attempt to sell all or a portion of the Shares held by the Selling Stockholders as agent but may position and resell a portion of the block as principal to facilitate the transaction; (b) purchases by a broker or dealer as principal and resale by such broker or dealer for its account pursuant to this Prospectus; (c) ordinary brokerage transactions and transactions in which the broker solicits purchasers; (d) in negotiated transactions, and (e) through other means. The Selling Stockholders may effect such transactions by selling Shares through customary brokerage channels, either through broker-dealers acting as agents or brokers, or through broker-dealers acting as principals, who may then resell the Shares, or at private sales or otherwise, at market prices prevailing at the time of sale, at prices related to such prevailing market prices or at negotiated prices. The Selling Stockholders may effect such transactions by selling Shares to or through broker-dealers, and such broker-dealers may receive compensation in the form of underwriting discounts, concessions, commissions, or fees from the Selling Stockholders and/or purchasers of the Shares for whom such broker-dealers may act as agent or to whom they sell as principal, or both (which compensation to a particular broker-dealer might be in excess of customary commissions). Any broker-dealers that participate with the Selling Stockholders in the distribution of the Shares may be deemed to be underwriters and any commissions received by them and any profit on the resale of the Shares positioned by them might be deemed to be underwriting compensation, within the meaning of the Securities Act, in connection with such sales. The Company intends to maintain the effectiveness of this Prospectus until October 22, 1998 or such period as is required to satisfy the Company's obligations under the Registration Rights Agreements by and among the Selling Stockholders and the Company; provided, however, that the rights of the Selling Stockholders to resell the Shares pursuant to this Registration Statement may be suspended by the Company under certain circumstances, as set forth in the Registration Rights Agreements. The Company will inform the Selling Stockholders that the antimanipulation rules under the Securities Exchange Act of 1934 (Regulation M - Rule 102) may apply to sales in the market and will furnish the Selling Stockholders upon request with a copy of these Rules. The Company will also inform the Selling Stockholders of the need for delivery of copies of this Prospectus. Any Shares covered by the Prospectus that qualify for resale pursuant to Rule 144 under the Securities Act may be sold under Rule 144 rather than pursuant to this Prospectus. The Common Stock is quoted on the Nasdaq National Market under the symbol "PRXL." LEGAL MATTERS Certain legal matters with respect to the issuance of the Shares are being passed upon for the Company and the Selling Stockholders by Testa, Hurwitz & Thibeault, LLP, Boston, Massachusetts. EXPERTS The supplemental consolidated financial statements of the Company as of June 30, 1997 and 1996 and for each of the three years in the period ended June 30, 1997 included in this Prospectus and the Company's consolidated financial statements as of June 30, 1997 and 1996 and for each of the three years in the period ended June 30 1997 incorporated in this Prospectus by reference to the Company's 1997 Annual Report on Form 10-K have been so included and incorporated in reliance on the reports of Price Waterhouse LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting. Supplemental Consolidated Financial Statements The following supplemental consolidated financial statements give effect to the business combination between the Company and Kemper- Masterson, Inc. ("KMI") consummated in December 1997 and accounted for as a pooling of interests. These supplemental financial statements will become the restated historical financial statements of the Company upon publication of the combined results of the companies covering a period subsequent to the combination. The supplemental financial statements assume that the business combination occurred at the earliest period presented. Due to the differing year ends of the Company and KMI, financial information for dissimilar fiscal years has been combined in the supplemental consolidated financial statements for the Company's fiscal year 1996 and 1995. KMI's results of operations for its fiscal years ended December 31, 1996 and 1995 were combined with the Company's results of operations for the fiscal years ended June 30, 1996 and 1995, respectively. Balance sheet information as of June 30, 1996 includes the financial position of KMI as of December 31, 1996 and the Company as of June 30, 1996. Accordingly, KMI's results of operations for the six months ended December 31, 1996 (including revenue, operating income, and net income of $5.0 million, $167,000, and $117,000, respectively) were duplicated in the combined statements of operations for fiscal 1997 and 1996. Therefore, KMI's net income for one of the six month periods ended December 31, 1996, was eliminated from stockholders' equity. Supplemental consolidated earnings per share is based on the combined weighted average number of shares of common stock of the Company, and common stock issued by the Company to the former shareholders of KMI. The supplemental consolidated balance sheets reflect the issuance of shares of common stock of the Company in exchange for all of the outstanding shares of KMI. PAREXEL INTERNATIONAL CORPORATION INDEX TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS Report of independent accountants F-2 Supplemental consolidated statements of operations for the three years ended June 30, 1997 and unaudited for the three months ended September 30, 1997 and 1996 F-3 Supplemental consolidated balance sheets at June 30, 1997 and 1996 and unaudited at September 30, 1997 F-4 Supplemental consolidated statements of stockholders' equity for the three years ended June 30, 1997 and unaudited for the three months ended September 30, 1997 F-5 Supplemental consolidated statements of cash flows for the three years ended June 30, 1997 and unaudited for the three months ended September 30, 1997 and 1996 F-7 Notes to supplemental consolidated financial F-9 Report of Independent Accountants To the Board of Directors and Stockholders of PAREXEL International Corporation: In our opinion, the accompanying supplemental consolidated balance sheets and the related supplemental consolidated statements of operations, of stockholders' equity and of cash flows present fairly, in all material respects, the financial position of PAREXEL International Corporation and its subsidiaries at June 30, 1997 and 1996, and the results of their operations and their cash flows for each of the three years in the period ended June 30, 1997, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. As described in Note 16, on December 1, 1997, the Company merged with Kemper-Masterson, Inc. in a transaction accounted for as a pooling of interests. The accompanying supplemental consolidated financial statements give retroactive effect to the merger of the Company with Kemper-Masterson, Inc. PRICE WATERHOUSE LLP Boston, Massachusetts August 6, 1997, except as to Note 16 and the pooling of Interests with Kemper-Masterson, Inc., which is as of December 1, 1997
PAREXEL INTERNATIONAL CORPORATION SUPPLEMENTAL CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) For the three months For the year ended June 30, ended September 30, 1997 1996 1995 1997 1996 (unaudited) Revenue $220,511 $132,880 $90,453 $66,765 $45,704 Reimbursed costs (50,156) (35,519) (23,360) (12,495) (10,460) Net revenue 170,355 97,361 67,093 54,270 35,244 Costs and expenses 115,695 66,196 48,056 36,310 24,215 Direct costs 35,254 21,902 15,801 10,980 7,301 Selling, general and administrative Depreciation and 5,354 2,636 2,430 2,027 958 amortization Impairment of - - 11,253 - - long-lived assets 156,303 90,734 77,540 49,317 32,474 Income (loss) 14,052 6,627 (10,447) 4,953 2,770 from operations Interest Income 3,465 1,297 225 988 439 Interest expenses (212) (165) (172) (38) (55) Other income (7) 22 14 7 (14) expense),net 3,246 1,154 67 957 370 Income (loss) before 17,298 7,781 (10,380) 5,910 3,140 provision for income taxes Provision for income 6,261 3,088 291 2,069 1,155 income taxes Net income (loss) $11,037 $4,693 ($10,671) $3,841 $1,985 Net income $0.57 $0.33 ($4.90) $0.18 $0.11 (loss per share) Weighted average common and common equivalent shares outstanding 19,497 14,080 2,177 21,173 17,776 The accompanying notes are an integral part of the supplemental consolidated financial statements.
PAREXEL INTERNATIONAL CORPORATION SUPPLEMENTAL CONSOLIDATED BALANCE SHEETS (in thousands except share data) September June 30, 30, 1997 1997 1996 (unaudited) ASSETS Current assets: Cash and cash equivalents: $47,879 $28,392 $16,278 Unrestricted 2,752 1,967 858 Restricted Marketable 37,478 66,891 29,319 securities Accounts 70,336 66,061 42,113 receivable, net Other current 12,271 12,106 7,171 assets Total 170,716 175,417 95,739 current assets Property and 32,586 28,222 8,777 equipment, net Other assets 1,890 1,862 1,810 $205,192 $205,501 $106,326 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Notes payable and current portion $1,116 $1,698 $1,468 of long-term debt Accounts 6,737 8,127 7,309 payable Advance 29,678 33,369 20,690 billings Other current 21,428 21,347 12,442 liabilities Total 58,959 64,541 41,909 current liabilities Long term 26 72 410 debt Other liabilities 1,685 1,724 1,739 Total liabilities 60,670 66,337 44,058 Commitments and and contingencies Stockholders' equity Preferred stock - $.01 par value; - - - shares authorized; 5,000,000 Common stock - $.01 par value; shares authorized 50,000,000 at September 30, 1997, and at June 30, 1997, and 25,000,000 at June 30, 1996; shares issued: 20,620,864 at September 30, 1997, 20,563,924 at June 30, 1997, and 16,151,277 at June 30, 1996; shares outstanding: 20,601,452 at September 30, 1997, 20,534,512 at June 30, 1997 and 16,121,865 at June 30, 1996 206 205 161 Additional paid-in capital 133,973 132,543 67,124 Retained earnings 10,899 7,189 (5,059) (accumulated deficit) Cumulative translation (556) (773) 42 adjustment Total stockholders' equity 144,522 139,164 62,268 $205,192 $205,501 $106,326 The accompanying notes are an integral part of the supplemental consolidated financial statements.
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY Convertible Preferred Stock Common Stock Number of Issuance Number of Par Additional Retained Stock Cumula- Total Shares Price,Net Shares Value Paid-In Earnings Sub- tive Stock- Net Capital (accumu- Scrip- Trans- Holder lated tions Lation Equity deficit) Receiv- Adjust- Able Ment Balance at June 30, 1994 2,327,744 $23,683 2,137,367 $21 $741 $1,891 $(163)$(454)$25,719 Shares issued 43,972 2 64 66 under stock option plans Deferred 183 183 compensation 183 Repurchase of (17) common shares (2,746) (17) Proceeds from stock subscriptions 6 6 receivable Foreign currency translation 863 863 Net loss (10,671) (10,671) Balance at June 2,327,744 23,683 2,178,593 23 971 (8,780) (157) 409 16,149 30, 1995 Convertible preferred stock 176,887 1,769 1,769 issue upon Exercise of warrants Proceeds from stock 157 subscriptions 157 receivable Conversion of preferred stock into common upon (2,504,631) (25,452) 8,956,016 88 25,364 - initial public offering Payment of accrued preferred stock (940) (940) dividends Net proceeds from 4,200,000 42 36,845 36,887 public offerings Shares issued under stock option plans Deferred compensation Acquisitions 625,620 6 405 411 337 337 161,636 2 144 (76) 70 Income tax benefit from exercise of 3,058 3,058 stock options Net unrealized 44 44 gain on marketable securities Foreign currency (367) (367) translation Net income 4,693 4,693 Balance at June 30, 1996 - - 16,121,865 161 67,124 (5,059) - 42 62,268
The accompanying notes are an integral part of the supplemental consolidated financial statements.
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY Balance at June 30, 1996 - - 16,121,865 161 67,124 (5,059) - 42 62,268 Net proceeds from public offering 2,516,300 25 57,161 57,186 Shares issued under stock option plans 529,902 5 1,427 1,432 Shares issued under employee stock Purchase plan 154,384 2 1,743 1,745 Deferred compensation 492 492 Income tax benefit from exercise of stock Options 4,527 4,527 Income tax benefit from building acquisition 320 320 Net unrealized gain on marketable securities 97 97 Acquisitions (note 4) 1,217,841 12 30 1,231 1,273 Foreign currency translation (815) (815) Elimination of KMI's net activity for the (5,780) (281) (117) (398) six months ended (398) December 31, 1996 Net income 11,037 11,037 Balance at June 30, 1997 - - 20,534,512 205 132,543 7,189 - (773) 139,164 Shares issued under 16,540 146 146 stock option plans Shares issued under employee stock 45,365 1 1,084 1,085 Purchase plan Acquisitions (note 16) 5,035 200 200 Net unrealized loss on marketable securities (131) (131) Foreign currency translation 217 217 Net income 3,841 3,841 Balance at September 30, 1997 (Unaudited) - - 20,601,452 $206 $133,973 $10,899- $(556) $144,522 The accompanying notes are an integral part of the supplemental consolidated financial statements.
PAREXEL INTERNATIONAL CORPORATION SUPPLEMENTAL CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands,except per share data) For the three months ended For the September 30, year ended June 30, 1997 1996 1995 1997 1996 (unaudited) Cash flows from operating activities: Net income (loss) $11,037 $4,693 ($10,671) $3,841 $1,985 Adjustments to reconcile net income (loss) to net 5,354 2,636 2,430 2,027 958 Depreciation and amortization - (135) (683) - - Impairment of Long- lived assets - - 11,253 - - Stock compensation expense 492 337 184 - - Change in assets and liabilities,net of effects from acquisitions: Restricted cash (1,109) 502 (929) (780) (511) Accounts receivable(net) (21,559) (15,684) (1,279) (5,190) (8,686) Other current assets (3,004) (76) (1,474) 543 637 Other assets (1,107) (317) (53) (5) (72) Accounts payable (397) 4,377 680 (1,292) 1,347 Advance billings 12,387 6,507 4,512 (3,047) (1,067) Other current liabilities 12,762 3,227 2,234 (891) (763) Other liabilities 791 65 56 482 35 Net cash provided (used 15,647 6,132 6,260 (4,312) (6,137) by operating activities Cash flows from investing activities (118,698) (131,903) (3,510) (39,020) (10,849) Purchase of marketable securities 81,223 104,128 2,710 68,302 13,773 Proceeds from sale of marketable securities 781 52 - - 251 Cash related to acquisition activities (22,430) (5,219) (1,867) (6,629) (2,679) Net cash provided (used) (59,124) 32,942) (2,667) 22,653 496 by investing activities Cash flows from financing activities: Proceeds from issuance of convertible preferred stock - 1,769 - - - Proceeds from issuance of common stock 60,363 37,298 66 1,431 1,429 Cash receoved from stock - 157 6 - - subscriptions Purchase of treasury stock - - (17) - - Net proceeds (repayments) under line of credit (318) 619 (275) 224 211 Proceeds from long term debt - - 200 - - Repayments of long term debt (3,464) (1,001) (751) (98) (2,784) Dividends on convertible preferred stock - (940) - - - Net cash provided (used) 56,581 37,902 (771) 1,557 (1,144) by financing activities Elimination of KMI's net cash activities for the six months ended 12/31/96 (21) - - - - Effect of Exchange rate changes on unrestricted cash and cash equivalents (969) (155) 134 (411) (40) Net increase (decrease) in unrestricted cash and cash equivalents 12,114 10,937 2,956 19,487 (6,825) Unrestricted cash and 16,278 5,341 2,385 28,392 16,257 cash equivalents at beginning of period Unrestricted cash and cash equivalents at end of period $28,392 $16,278 $5,341 $47,879 $9,432 The accompanying notes are an integral part of the supplemental consolidated financial statements.
PAREXEL INTERNATIONAL CORPORATION SUPPMENTAL CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands, except per share data) For the Three months year Ended ended September 30, June 30, 1997 1996 1995 1997 1996 (unaudited) Supplmental disclosures of cash flow information: Cash paid during the year for: Interest $265 $247 $260 $26 $74 Income Taxes $1,576 $1,649 $565 $421 $392 Supplemental disclosures of noncash financing activities: Property and equipment - $536 $1,265 - - acquired under capital lease obligations Income tax benefit from exercise of stock options $4,527 $3,058 - - - Income tax benefit from building acquisition $320 - - - $320
The accompanying notes are an integral part of the supplemental consolidated financial statements. NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. DESCRIPTION OF BUSINESS The Company is a leading contract research organization ("CRO") providing a broad range of knowledge-based product development and product launch services on a contract basis to the worldwide pharmaceutical, biotechnology, and medical device industries. The Company has developed expertise in such disciplines as: clinical trials management, biostatistical analysis and data management, medical marketing, clinical pharmacology, regulatory and medical consulting, information technology, industry training and publishing, and other drug development consulting services. NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Supplemental Financial Information The accompanying supplemental consolidated financial statements have been prepared to give retroactive effect to the acquisition of Kemper- Masterson, Inc. (KMI) by the Company accounted for as a pooling of interests which occurred in December 1997 (Note 16). Generally accepted accounting principles prohibit giving effect to a consummated business combination accounted for as a pooling of interests in financial statements that do not include the date of consummation; accordingly, these financial statements are supplemental information. The accompanying supplemental consolidated financial statements do not extend through the date of consummation; however, they will become the historical consolidated financial statements of the Company after financial statements covering the date of consummation of the business combination are issued. Principles of Consolidation The supplemental consolidated financial statements include the accounts of PAREXEL International Corporation and its wholly-owned domestic and foreign subsidiaries. In fiscal year 1997, the Company's French subsidiary changed its fiscal year end to June 30, which resulted in a 13-month year. The additional month is included in the fiscal year 1997 results of operations and does not materially affect the Company's supplemental consolidated financial statements. For fiscal year 1997, the Company's German subsidiary operated on a fiscal year that ended May 31. For fiscal years 1996 and 1995, the Company's German and French subsidiaries operated on a fiscal year that ended May 31. All significant intercompany accounts and transactions have been eliminated. Accounting Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and disclosure of contingent assets and liabilities. Actual results may differ from those estimates. Interim Financial Data (Unaudited) The interim financial data included in the accompanying supplemental consolidated financial statements and notes thereto, is unaudited; however, in the opinion of the Company, the interim financial data include all adjustments, consisting only of normal recurring adjustments necessary for a fair presentation of the results for the interim periods. The interim financial data are not necessarily indicative of the results of operations for a full fiscal year. Revenue Fixed price contract revenue is recognized using the percentage-of- completion method based on the ratio that costs incurred to date bear to estimated total costs at completion. Revenue from other contracts is recognized as services are provided. Revenue related to contract modifications is recognized when realization is assured and the amounts are reasonably determinable. Adjustments to contract cost estimates are made in the periods in which the facts that require the revisions become known. When the revised estimate indicates a loss, such loss is provided in the current period in its entirety. "Unbilled accounts receivable" represents revenue recognized in excess of amounts billed. "Advance billings" represents amounts billed in excess of revenue recognized. Investigator Fees Investigator fees are accrued as investigator services are rendered. The timing of payments to investigators is determined by reference to predetermined contractual arrangements, which may differ from the accrual of the expense. Payments to investigators in excess of amounts accrued are classified as prepaid expenses included in other current assets, and accrued expenses in excess of amounts paid are classified as other current liabilities. Cash, Cash Equivalents, Marketable Securities, and Financial Instruments The Company considers all highly liquid debt instruments purchased with original maturities of three months or less to be cash equivalents. Marketable securities include securities purchased with original maturities of greater than three months. Cash equivalents and marketable securities are classified as "available for sale" and are carried at fair market value. Any unrealized gains or losses are recorded as part of stockholders' equity. Restricted cash consists of advances and deposits from customers subject to certain restrictions. The Company occasionally purchases securities with seven-day put options that allow the Company to sell the underlying securities in seven days at par value. The Company uses these derivative financial instruments on a limited basis to shorten contractual maturity dates, thereby managing interest rate risk. Approximately $2.7 million of securities were subject to seven-day put options at June 30, 1997, and $1.0 million at June 30, 1996. The Company does not hold derivative instruments for trading purposes. Concentration of Credit Risk Financial instruments which potentially expose the Company to concentrations of credit risk include trade accounts receivable. However, such risk is limited due to the large number of clients and their international dispersion. In addition, the Company maintains reserves for potential credit losses and such losses, in the aggregate, have not exceeded management expectations. One customer accounted for 11% of the Company's supplemental consolidated net revenue for the year ended June 30, 1997. No single customer accounted for more than 10% of the Company's supplemental consolidated net revenue for the years ended June 30, 1996 and 1995. Property and Equipment Property and equipment is stated at cost. Depreciation is provided on the straight-line method over the estimated useful lives of the assets ranging from three to eight years. Leasehold improvements are amortized over the lesser of the estimated useful lives of the improvements or the remaining lease term. Repair and maintenance costs are charged to expense as incurred. Intangible Assets Intangible assets consist principally of goodwill, customer lists, covenants not to compete, and other intangible assets attributable to businesses acquired. Goodwill represents the excess of the cost of businesses acquired over the fair value of the related net assets at the date of acquisition. Intangible assets are amortized using the straight-line method over their expected useful lives. Goodwill and other intangibles are currently being amortized over five to ten years. Impairment of Long-Lived Assets The Company periodically assesses the recoverability of the carrying amount of long-lived assets, including intangible assets. A loss is recognized when expected future cash flows (undiscounted and without interest) are less than the carrying amount of the asset. The amount of the impairment loss is determined as the difference by which the carrying amount of the asset exceeds the fair value of the asset. Income Taxes The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards No. 109. Deferred tax assets and liabilities are recognized for the expected future tax consequences, utilizing current tax rates, of temporary differences between the carrying amounts and the tax bases of assets and liabilities. Deferred tax assets are recognized, net of any valuation allowance, for the estimated future tax effects of deductible temporary differences and tax operating loss and credit carryforwards. Deferred income tax expense represents the change in the net deferred tax asset and liability balances. Foreign Currency Assets and liabilities of the Company's international operations are translated into U.S. dollars at exchange rates in effect at the balance sheet date. Income and expense items are translated at average exchange rates prevailing during the year. Translation adjustments are accumulated in a separate component of stockholders' equity. Realized gains and losses recorded in the statements of operations were not material for each period presented. Net Income (Loss) Per Share Net income (loss) per share is calculated based on the weighted average number of common shares and common equivalent shares assumed outstanding during the period. Pursuant to Securities and Exchange Commission Staff Accounting Bulletin No. 83, certain common and common equivalent shares issued by the Company during the twelve months immediately preceding the initial filing of the registration statement relating to the Company's initial public offering have been included in the calculation of weighted average shares, using the treasury stock method and the initial public offering price, as if these shares were outstanding for all periods prior to the initial public offering. Stock-Based Compensation In October 1995, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation." As permitted by SFAS No. 123, the Company has elected to continue to follow the accounting provisions of Accounting Principles Board Opinion (APBO) No. 25, "Accounting for Stock Issued to Employees," and furnish pro forma disclosures. Recently Issued Accounting Standards In February 1997, the FASB issued SFAS No. 128, "Earnings per Share." This statement replaces primary and fully diluted earnings per share with basic and diluted earnings per share. SFAS No. 128 will be effective for the Company's second quarter of fiscal 1998 and requires the restatement of all previously reported earnings per share data presented. Early adoption of this Statement is not permitted. The Company expects that basic and diluted earnings per share amounts will not be materially different from the Company's primary and fully diluted earnings per share amounts. 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 supplemental 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. NOTE 3. IMPAIRMENT OF LONG-LIVED ASSETS In the third quarter of fiscal 1995, PAREXEL GmbH's operations suffered a decline in net revenue resulting in a net loss for the period. Also during the third quarter, drug development regulations in Germany and Europe were modified and further changes were being contemplated, all of which were expected to have a detrimental impact on PAREXEL GmbH's operations. Considering the cumulative impact of the above-described factors, management assessed the realizability of the long-lived assets of PAREXEL GmbH. In accordance with its accounting policy for impaired long-lived assets, management prepared a forecast of PAREXEL GmbH's expected future cash flows on an undiscounted basis and without interest charges, based upon assumptions developed by management using PAREXEL GmbH's historical experience as well as the best estimate of future trends and events. The sum of the forecasted cash flows from management's model was less than the carrying amount of PAREXEL's investment in PAREXEL GmbH. To assess the fair value of PAREXEL GmbH, a discounted cash flow valuation technique was utilized with a discount rate of approximately 19.5% based upon PAREXEL GmbH's calculated cost of capital. The results of this calculation indicated a de minimus valuation; and accordingly, the Company recorded an impairment loss on long-lived assets of $11.3 million in fiscal 1995. NOTE 4. ACQUISITIONS In February 1997, the Company acquired, in separate transactions, RESCON, Inc., a medical marketing consulting business located in the Washington, D.C. area, and Sheffield Statistical Services, Ltd. (S- Cubed), a company located in the United Kingdom that specializes in biostatistical analysis. The Company issued a total of 209,537 shares of common stock in exchange for all the outstanding shares of RESCON and S-Cubed. In August 1996, the Company acquired, in separate transactions, Lansal Clinical Pharmaceutics, Limited (Lansal), a contract research organization located in Israel, and State and Federal Associates, Inc. (S&FA), a medical marketing business located in the Washington, D.C. area. The Company issued 1,008,304 shares of common stock in exchange for all of the outstanding shares of Lansal and S&FA. In June 1996, the Company acquired, in separate transactions, Sitebase Clinical Systems, Inc. (Sitebase), a provider of remote data entry technology, and Caspard Consultants (Caspard), a Paris-based biostatistical and data management consulting company. The Company issued a total of 161,636 shares of common stock in exchange for all of the outstanding shares of Sitebase and Caspard. All of these transactions were accounted for as poolings of interests. The aggregate historical results of operations and financial position of the above acquisitions were not material to the Company's supplemental consolidated financial statements. Therefore, prior period amounts have not been restated and results of operations of the acquired companies have been included since the period of acquisition. Pro forma results of the Company, assuming the above acquisitions were made at the beginning of each period presented, would not be materially different from the actual results reported. NOTE 5. INVESTMENTS Available-for-sale securities included in cash and cash equivalents as of June 30, 1997 and 1996, consisted of the following: ($in thousands) 1997 1996 Money market $ 988 $ 2,492 Municipal securities 1,000 10,000 Repurchase agreements 20,210 1,141 $22,198 $13,633 Available-for-sale securities included in marketable securities at June 30, 1997, consisted of the following: Amortized Unrealized Fair ($ in Cost Gains Losses Value thousands) Municipal securities $3,785 $ 5 $(2) $3,788 Federal government - securities 23,400 (1) 23,399 Corporate debt securities 39,565 140 (1) 39,704 $66,750 $145 $(4) $66,891 Available-for-sale securities included in marketable securities at June 30, 1996, consisted of the following: Amortized Unrealized Fair ($ in Cost Gains Losses Value thousands) Municipal securities $16,972 $3 $(34) $16,941 Federal government 10,344 66 (1) 10,409 securities Corporate debt securities 1,959 10 - 1,969 $29,275 $79 $(35) $29,319 The contractual maturity of available-for-sale securities at June 30, 1997, was $67.3 million within one year, $19.1 million over one year and less than five years, and $2.7 million over five years. Proceeds from the maturities and sales of available-for-sale securities amounted to approximately $1.9 billion for the year ended June 30, 1997, $568 million for the year ended June 30, 1996, and $3 million for the year ended June 30, 1995. Purchases amounted to approximately $1.9 billion for the year ended June 30, 1997, $607 million for the year ended June 30, 1996, and $4 million for the year ended June 30, 1995. Gains and losses realized upon the sale of securities (the cost of which is based upon the specific identification method) were not significant. NOTE 6. ACCOUNTS RECEIVABLE Accounts receivable at June 30, 1997 and 1996, consisted of the following: ($ in thousands) 1997 1996 Billed $40,819 23,854 Unbilled 28,228 19,889 Allowance for doubtful (2,986) (1,630) accounts $66,061 $42,113 NOTE 7. PROPERTY AND EQUIPMENT Property and equipment at June 30, 1997 and 1996, consisted of the following: ($ in thousands) 1997 1996 Computer and office equipment $24,172 $11,431 Computer software 5,351 1,767 Furniture and fixtures 9,167 3,342 Leasehold improvements 2,311 677 Building 2,757 - 43,758 17,217 Less accumulated depreciation and 15,536 8,440 amortization $28,222 $ 8,777 Included in the above amounts is computer and office equipment acquired under capital lease obligations of approximately $3.6 million at June 30, 1997 and 1996. Accumulated depreciation on computer and office equipment under capital leases totaled approximately $2.4 million and $1.8 million at June 30, 1997 and 1996, respectively. Depreciation and amortization expense relating to property and equipment was approximately $5.2 million, $2.4 million, and $1.9 million for the years ended June 30, 1997, 1996, and 1995, respectively, of which $560,000, $634,000, and $427,000 related to amortization of property and equipment under capital leases. NOTE 8. OTHER CURRENT LIABILITIES Other current liabilities at June 30, 1997 and 1996, consisted of the following: ($ in thousands) 1997 1996 Accrued compensation and withholdings $ 9,679 $ 5,012 Accrued investigator fees 350 1,565 Other 11,318 5,865 $21,347 $12,442 NOTE 9. CREDIT ARRANGEMENTS The Company has domestic and foreign line of credit arrangements with banks totaling approximately $14.5 million. The lines are collateralized by accounts receivable, payable on demand, and bear interest at varying rates that differ from country to country (resulting in interest rates ranging from 4.9% to 9.5% at June 30, 1997). The lines of credit expire at various dates through April 1998 and are renewable. There was approximately $1.3 million and $600,000 outstanding under these lines of credit at June 30, 1997 and 1996, respectively. The Company has a $2.4 million capital lease line of credit with a U.S. bank for the financing of property and equipment. This line is collateralized by property and equipment. Borrowings under this line are payable over a three-year term with interest fixed at the five- year U.S. Treasury note rate plus 2.5% (8.03% at June 30, 1997). This line of credit expires on November 30, 1997, and is renewable annually. Available capacity under this line was approximately $2.0 million at June 30, 1997. Long-term debt at June 30, 1997 and 1996, consisted of borrowings under the capital lease line. The fair value of debt is estimated based on the market value for similar debt and approximates carrying value at June 30, 1997 and 1996. Aggregate lease obligations bear a weighted average interest rate of approximately 8.3% at June 30, 1997, and 7.9% at June 30, 1996. Long-term debt matures as follows: $43,000 in fiscal 1999 and $29,000 in fiscal 2001. NOTE 10. STOCKHOLDERS' EQUITY On January 28, 1997, the Board of Directors of the Company declared a two-for-one stock split of the Company's common stock, payable in the form of a 100% stock dividend to be distributed to stockholders of record as of the close of business on February 7, 1997. All share and per share data, including stock and stock option, stock purchase plan, and market price information, included in these supplemental consolidated financial statements have been restated to reflect the two-for-one stock split. As of June 30, 1997 and 1996, there were 5 million shares of preferred stock, $0.01 per share, authorized, but none were issued or outstanding. Preferred stock may be issued at the discretion of the Board of Directors (without stockholder approval) with such designations, rights and preferences, as the Board of Directors may determine. There were 29,412 shares of common stock held in treasury as of June 30, 1997 and 1996, at a cost of $17,430. NOTE 11. STOCK AND EMPLOYEE BENEFIT PLANS Common Stock Options In September 1995, the Company adopted the 1995 Stock Plan (1995 Plan), which provided for the grant of incentive stock options for the purchase of up to an aggregate of 1,000,000 shares of common stock to directors, officers, employees, and consultants of the Company. In November 1996, the Company's stockholders approved an increase in the number of shares issuable under the 1995 Plan from 1,000,000 to 2,000,000 shares. The Stock Option Committee of the Board of Directors is responsible for the administration of the Company's stock option plans and determines the term of each option, the option exercise price, number of shares granted, and the rate that options vest. Options generally expire eight to ten years from the date of grant and generally vest over four to five years. In September 1995, the Company adopted the 1995 Non-Employee Director Stock Option Plan (Director Plan) under which options to purchase an aggregate of 600,000 shares of common stock may be granted to nonemployee directors. On November 21, 1995, nonemployee directors were granted an aggregate of 173,000 options (initial options). The initial options became exercisable on June 30, 1996. Other options granted under the Director Plan vest ratably in three equal annual installments beginning on the first anniversary of the date of grant, subject to certain requirements as defined in the Director Plan. In September 1995, the Board of Directors voted to grant no further options under the 1986 Incentive Stock Option Plan, the 1987 Stock Plan, and the 1989 Stock Plan and to reduce the number of shares authorized for those plans to the number of options outstanding at that time. In January 1994, the Kemper-Masterson, Inc. Stock Option Plan (the "Plan") was adopted which provides for the grant of stock options for the purchase of up to an aggregate of 138,714 shares of Class B common stock to key employees of KMI. Options under the Plan generally expire ten years from the date of grant. In accordance with the provisions of the Plan, KMI grants options under which the underlying Class B common stock acquired upon exercise of such options may be subject to repurchase by KMI at certain times or upon certain events pursuant to the respective stock option agreements. For certain options granted ("Formula Options"), KMI has the right, but not the obligation to repurchase any shares obtained through the exercise of options granted at the formula price prescribed in the underlying stock option agreements. In the event KMI does not initially elect to repurchase the stock acquired through Formula Options, the stockholder can sell such stock to a third party subject to KMI's right of first refusal. KMI has also granted options under which KMI is obligated to repurchase upon termination ("Repurchase Options"), shares acquired through the exercise of previously issued options at the exercise price. All options have been granted with an exercise price of $0.17 per share. All options are being accounted for as a variable options. For Formula Options, compensation cost is recognized for the difference between the formula value of the stock at the date of option exercise and the exercise price. Prior to option exercise, compensation cost is recognized based on the estimated formula value and accrued over the vesting period. Changes in the formula value of the stock result in a change to the measurement of compensation for the options. For Repurchase Options, compensation cost is recognized as the difference between the amount for which the common stock is repurchased by KMI and the exercise price. Aggregate compensation expense related KMI's stock options was $491,000 and $337,000 for fiscal 1997 and 1996 respectively. Vesting of both the Formula and Repurchase options is accelerated upon a change in control of KMI. Because the exercise price of the Formula and Repurchase options is considered non-substantive, compensation expense will be recognized for these options and the related common shares upon a change in control. Accordingly, the Company expects to incur compensation expense of approximately $4.1 million in December 1997, the time at which the Company acquired KMI in a transaction accounted for as a pooling of interests (Note 16). Aggregate stock option activity for the two years ended June 30, 1997, was as follows: Weighted Average Options Exercise Price Outstanding at June 1,303,805 $ 1.57 30, 1995 Granted 899,647 12.71 Canceled ( 52,146) 5.03 Exercised (625,620) 0.61 Outstanding at June 30, 1996 1,525,686 $ 8.42 Granted 410,500 24.38 Canceled (31,260) 19.98 Exercised (524,122) 2.75 Outstanding at June 30, 1997 380,804 $15.05 Exercisable at June 30, 1997 560,711 $ 8.12 Available for future grant at June 30, 1,431,426 1997 Summary information related to options outstanding and exercisable as of June 30, 1997, is as follows: Options Outstanding Options Exercisable Weighted Outstanding Average Weighted Exercisable Weighted Range Of As Of Remaining Average As Of Average Exercise 6/30/97 Contractual Exercise 6/30/97 Exercise Prices Life Price Price (Years) $ 0.17 - 556,954 7.36 $ 5.43 458,694 $ 5.12 10.00 10.01 - 406,650 8.79 18.50 49,750 18.31 20.00 20.01 - 417,200 9.30 24.54 52,267 24.69 27.25 1,380,804 8.37 $15.05 560,711 $ 8.12 The fair value for options granted was estimated at the time of the grant using the Black-Scholes option pricing model with the following weighted-average assumptions for the two years ended June 30, 1997: Risk free interest rate of 6.18%, dividend yield of 0.0%, volatility factor of the expected market price of the Company's common stock of 45%, and an average expected life of the option of one year from the date of vesting. Under these assumptions, the estimated weighted- average fair value of options granted during the fiscal years ended June 30, 1997 and 1996, was $12.18 and $7.56, respectively. Employee Stock Purchase Plan In September 1995, the Company adopted the 1995 Employee Stock Purchase Plan (the Purchase Plan). Under the Purchase Plan, employees have the opportunity to purchase common stock at 85% of the average market value on the first or last day of the plan period (as defined by the Purchase Plan), whichever is lower, up to specified limits. An aggregate of 600,000 shares may be issued under the Purchase Plan. Had compensation cost for the Company's stock options and the Purchase Plan been determined based on the fair value at the date of grant, as prescribed in SFAS 123, the Company's net income and net income per share would have been as follows: ($ in thousands, 1997 1996 except per share data) Pro forma net income $8,631 $3,224 Pro forma net income $ 0.44 $ 0.23 per share As stock options vest over several years and additional stock option grants are expected to be made each year, the above pro forma disclosures are not necessarily representative of pro forma effects on reported operations for future years. 401(k) Plan The Company sponsors an employee savings plan (the Plan) as defined by Section401(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. The Company matches 100% of each participant's voluntary contributions up to 3% of gross salary per payroll period. Company contributions vest to the participants in 20% increments for each year of employment and become fully vested after five years of continuous employment. Company contributions to the Plan were $1,053,000, $526,000, and $327,000 for the years ended June 30, 1997, 1996, and 1995, respectively. NOTE 12. INCOME TAXES Domestic and foreign income (loss) before income taxes for the three years ended June 30, 1997, are as follows: ($ in thousands) 1997 1996 1995 Domestic $11,189 $5,655 $ 280 Foreign 6,109 2,126 (10,660) $17,298 $7,781 $(10,380) The provision for income taxes for the three years ended June 30, 1997, are as follows: ($ in thousands) 1997 1996 1995 Current: Federal $4,468 $2,364 $403 State 1,121 684 232 Foreign 1,444 78 427 7,033 3,475 713 Deferred: Federal (432) (297) (315) State (146) (87) (102) Foreign (194) (3) (5) (772) (387) (422) $ 6,261 $3,088 $291 The Company's supplemental consolidated effective income tax rate differed from the U.S. federal statutory income tax rate as set forth below: ($ in thousands) 1997 1996 1995 Income tax expense (benefit) at the federal $ 6,055 $2,646 $(3,529) statutory rate State income taxes, net of federal benefit 998 474 87 Foreign rate differential 107 (234) (108) Utilization of foreign net operating losses (1,118) - - carryforwards Nondeductible amortization of intangible assets 45 45 169 Nondeductible impairment of assets - - 3,348 Foreign operating losses without current benefit 142 26 334 Other 32 131 (10) $6,261 $3,088 $ 291 Provision has not been made for U.S. or additional foreign taxes on undistributed earnings of foreign subsidiaries as those earnings have been permanently reinvested. Such taxes, if any, are not expected to be significant. Significant components of the Company's net deferred tax asset as of June 30, 1997 and 1996, are as follows: ($ in thousands) 1997 1996 Deferred tax assets: Foreign loss carryforwards $5,173 $6,048 Accrued expenses 1,121 566 Property and equipment - 486 Allowance for doubtful accounts 878 528 Other 756 648 Gross deferred tax assets 7,928 8,276 Deferred tax asset valuation (3,372) (5,926) allowance Total deferred tax 4,556 2,350 assets Deferred contract profit (803) (274) Property and equipment (739) (83) Other (96) (292) Total deferred tax (1,638) (649) liabilities $2,918 $ 1,701 The net deferred tax assets are included in the supplemental consolidated balance sheet as of June 30, 1997 and 1996, as follows: ($ in 1997 1996 thousands) Other current $3,251 $1,361 assets Other assets - 423 Other current (240) - liabilities Other liabilities (93) (83) $2,918 $1,701 The net deferred tax asset includes the tax effect of approximately $11 million of pre-acquisition and post-acquisition foreign tax loss carryforwards available to offset future liabilities for foreign income tax. Substantially all of the foreign tax losses are carried forward indefinitely, subject to certain limitations. A valuation allowance has been established for the future foreign income tax benefits primarily related to income tax loss carryforwards and temporary differences based on management's assessment that it is more likely than not that such benefits will not be realized. Principally due to the use of previously reserved foreign net operating loss carryforwards, the Company's valuation allowance decreased to approximately $3.4 million at June 30, 1997, from approximately $5.9 million at June 30, 1996. The ultimate realization of the remaining loss carryforwards is dependent upon the generation of sufficient taxable income in respective jurisdictions, primarily Germany. NOTE 13. GEOGRAPHIC INFORMATION The Company's operations involve a single industry segment providing clinical research and development services. The principal financial information by geographic area for the three years ended June 30, 1997, is as follows: ($ in thousands) 1997 1996 1995 Net revenue: North America $113,589 $63,534 $43,557 Europe 53,599 32,834 23,443 Asia/Pacific 3,167 993 93 $170,355 $97,361 $67,093 Income (loss) from operations: North America $10,240 $5,537 $1,084 Europe 3,639 1,266 (11,531) Asia/Pacific 173 (176) - $ 14,052 $6,627 $(10,447) Identifiable assets: North America $175,189 $81,418 $28,416 Europe 29,619 24,752 17,927 Asia/Pacific 693 156 35 $205,501 $106,326 $46,378 NOTE 14. LEASES The Company leases its facilities under operating leases which include renewal and escalation clauses. Total rent expense was approximately $8.4 million, $5.5 million, and $4.7 million for years ended June 30, 1997, 1996, and 1995, respectively. Future minimum lease payments due under noncancelable operating leases and capital lease obligations are as follow: Capital ($ in thousands) leases Operating leases 1998 $352 $12,475 1999 26 11,726 2000 - 9,478 2001 30 8,154 2002 - 4,204 Thereafter - 1,033 Total 408 $47,070 obligations Less amount 16 representing interest $ 392 NOTE 15. RELATED PARTY TRANSACTIONS Certain of the Company's Directors are related with certain of the Company's customers. Net revenue recognized from these customers was $13.1 million, $8.1 million, and $3.0 million in fiscal 1997, 1996, and 1995, respectively. Amounts included in accounts receivable at June 30, 1997 and 1996, were $3.3 million and $1.9 million, respectively. Related party amounts included in accounts receivable are on standard terms and manner of settlement. NOTE 16. SUBSEQUENT EVENTS On September 26, 1997, the Company acquired substantially all of the assets of Perceptive Systems, Inc., a Colorado corporation doing business as Hayden Image Processing Group ("Hayden") in exchange for 5,035 shares of the Company's common stock. In addition, Hayden will receive three annual contingent payments (not exceeding $228,000 in aggregate) of the Company's common stock, based onnet receipts generated by certain acquired assets. The transaction was accounted for as a purchase for financial accounting purposes. In November 1997, the stockholders of the Company approved an amendment to the Company's 1995 Stock Plan (the "1995 Plan"). In connection therewith, the Company terminated the 1995 Non-Employee Director Stock Option Plan (the "Director Plan") and transferred all remaining shares under the Director Plan to the 1995 Plan, without increasing the aggregate number of shares available for grant under all of the Company's stock option plans. The amendment also provides for the annual formula grant of options to purchase up to 15,000 shares of common stock of the Company to non-employee directors dependent upon the attendance by such non-employee directors at meetings of the Board of Directors and committees thereof. In December 1997, the Company acquired Kemper-Masterson, Inc. ("KMI") in a business combination accounted for as a pooling of interests. The accompanying supplemental consolidated financial statements have been retroactively restated to combine the accounts and operations of KMI with those of the Company for all periods presented. Due to the differing year ends of the Company and KMI, financial information for dissimilar fiscal years has been combined for the Company's fiscal year 1996 and 1995. KMI's results of operations for its fiscal years ended December 31, 1996 and 1995 were combined with the Company's results of operations for the fiscal years ended June 30, 1996 and 1995, respectively. Balance sheet information as of June 30, 1996 includes the financial position of KMI as of December 31, 1996 and the Company as of June 30, 1996. Accordingly, KMI's results of operations for the six months ended December 31, 1996 (including revenue, operating income, and net income of $5.0 million, $167,000, and $117,000, respectively) were duplicated in the combined statements of operations for fiscal 1997 and 1996. Therefore, KMI's net income for one of the six month periods ended December 31, 1996, was eliminated from stockholders' equity. Revenues and net income (loss) for each of the two previously separate companies for the period prior to the KMI Acquisition are as follows: Year Ended Three June 30, Months 1996 Ended September 30, 1997 1997 1996 1995 1997 1996 Net Revenues: PAREXEL $159,679 $88,006 $58,573 $51,211 $33,033 KMI 10,676 9,355 8,520 3,059 2,214 $170,355 $97,361 $67,093 $54,270 $35,244 Net Income (loss) PAREXEL $10,848 $ 4,599 ($10,630) $ 3,628 $ 1,936 KMI 189 94 (41) 213 49 $11,037 $ 4,693 ($10,671) $ 3,841 $ 1,985 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 is in the process of assessing the impact of EITF 97-13 and does not expect that it will have a material affect on its results of operations for the quarter ending December 31, 1997. No dealer, sales representative or any other person has been authorized to give any information or to make any 295,944 Shares representations in connection with this offering other than those contained in this prospectus, and, if given or PAREXEL INTERNATIONAL made, such information or CORPORATION representations must not be relied upon as having been authorized by the company, any Common Stock of the selling stockholders or any of the underwriters. This prospectus does not constitute an offer to sell, or a solicitation of an offer to buy, any securities other than the registered securities to which it relates or an offer to, or a solicitation of, any person in _______________________ any jurisdiction where such offer or solicitation would be PROSPECTUS unlawful. Neither the delivery of this prospectus nor any sale made hereunder shall, under any circumstances, create any ________________________ implication that there has been no change in the affairs of the company since the date hereof or that the information contained herein is correct as of any time subsequent to the date hereof. _________________________ TABLE OF CONTENTS PAGE Available Information 2 Incorporation of Certain Information by Reference 3 The Company 4 Risk Factors 7 Use of Proceeds 11 Management's Discussion and Analysis of Financial Condition 12 Description of Capital Stock 20 Plan of Distribution 25 Legal Matters 26 Experts 26 Index to Supplemental consolidated Financial Statements F-1 PART II INFORMATION NOT REQUIRED IN PROSPECTUS Item 14. Other Expenses of Issuance and Distribution. Estimated expenses payable in connection with the sale of the Common Stock offered hereby are as follows: SEC Registration fee $ 2,979.67 Nasdaq Additional Listing fee 13,637 Legal fees and expenses 20,000 Accounting fees and expenses 15,000 Total $51,616.67 The Company will bear all expenses shown above. All amounts other than the SEC Registration fee and the Nasdaq Additional Listing fee are estimated solely for the purpose of this offering. Item 15. Indemnification of Directors and Officers. Article 6 of the Company's Restated Articles of Organization provides that the Company shall indemnify each person who is or was a director or officer of the Company, and each person who is or was serving or has agreed to serve at the request of the Company as a director or officer of, or in a similar capacity with, another organization against all liabilities, costs and expenses reasonably incurred by any such persons in connection with the defense or disposition of or otherwise in connection with or resulting from any action, suit or other proceeding in which they may be involved by reason of being or having been such a director or officer or by reason of any action taken or not taken in such capacity, except with respect to any matter as to which such person shall have been finally adjudicated by a court of competent jurisdiction not to have acted in good faith in the reasonable belief that his or her action was in the best interests of the Company. Section 67 of Chapter 156B of the Massachusetts Business Corporation Law authorizes a corporation to indemnify its directors, officers, employees and other agents unless such person shall have been adjudicated in any proceeding not to have acted in good faith in the reasonable belief that such action was in the best interests of the corporation. Reference is hereby made to Section 10 of the Registration Rights Agreements filed as Exhibits 4.3 and 4.5 to this Registration Statement, for a description of indemnification arrangements between the Company and the Selling Stockholders, pursuant to which the Selling Stockholders are obligated, under certain circumstances, to indemnify directors, officers and controlling persons of the Company against certain liabilities, including liabilities under the Securities Act of 1933, as amended. Item 16. Exhibits. Exhibits: 4.1 Specimen certificate representing the Common Stock (filed as Exhibit 4.1 to Registrant's Registration Statement on Form S-1 (File No. 33-97406) and incorporated herein by reference). 4.2 Agreement and Plan of Reorganization and Merger dated as of October 22, 1997 by and among the Company, Kemper-Masterson, Inc., KMI Acquisition Corporation, Clarence A. Kemper, P. Michael Masterson, Mark A. Lester, Ronald F. Tetzlaff, Alan R. Parenteau, Jon Voss, Warren Handren and David Hyde. 4.3 Registration Rights Agreement dated as of December 1, 1997 by and among the Company and each of Clarence A. Kemper, P. Michael Masterson, Mark A. Lester, Ronald F. Tetzlaff, Alan R. Parenteau, Jon Voss, Warren Handren and David Hyde. 4.4 Asset Purchase Agreement dated as of September 26, 1997 by and among the Company, Perceptive Systems, Inc. and Howard W. Foster. 4.5 Registration Rights Agreement dated as of September 26, 1997 by and between the Company and Perceptive Systems, Inc. 5.1 Opinion of Testa, Hurwitz & Thibeault, LLP. 11.1 Statement re Computation of Per Share Earnings 27.1 Financial Data Schedule 23.1 Consent of Price Waterhouse LLP. 23.2 Consent of Testa, Hurwitz & Thibeault, LLP (included in Exhibit 5.1). 24.1 Power of Attorney (included as part of the signature page to this Registration Statement). Item 17. Undertakings. (a) The undersigned Registrant hereby undertakes: (1) to file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement; (i) to include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) to reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement; (iii) to include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (b) The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (c) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue. SIGNATURES Pursuant to the requirements of the Securities Act of 1993, as amended, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement on Form S-3 to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Waltham, Commonwealth of Massachusetts on January __, 1998. PAREXEL INTERNATIONAL CORPORATION By: /s/Josef H. von Rickenbach Josef H. von Rickenbach President, Chief Executive Officer and Chairman POWER OF ATTORNEY AND SIGNATURES We, the undersigned officers and directors of PAREXEL International Corporation, hereby severally constitute and appoint Josef H. von Rickenbach, William T. Sobo, Jr. and William J. Schnoor, Jr., and each of them singly, as true and lawful attorneys, with full power to them and each of them singly, to sign for us in our names in the capacities indicated below, any and all pre-effective and post- effective amendments to this Registration Statement on Form S-3, and generally to do all things in our names and on our behalf in such capacities to enable PAREXEL International Corporation to comply with the provisions of the Securities Act of 1933, as amended, and all requirements of the Securities and Exchange Commission. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Signature Title(s) Date /s/ Josef H. von President, Chief Executive January 20, Rickenbach Officer and Chairman 1998 Josef H. von Rickenbach (principal executive officer) /s/ William T. Sobo, Jr. Senior Vice President and January 20, William T. Sobo, Jr. Treasurer (principal 1998 financial and accounting officer) /s/A. Dana Callow, Jr. Director January 20, A. Dana Callow, Jr. 1998 /s/Patrick J. Fortune Director January 20, Patrick J. Fortune 1998 /s/Werner M. Herrmann Director January 20, Werner M. Herrman 1998 /s/Serge Okun Director January 20, Serge Okun 1998 /s/James A. Saalfield Director January 20, James A. Saalfield 1998 Schedule II PAREXEL INTERNATIONAL CORPORATION VALUATION AND QUALIFYING ACCOUNTS AND RESERVES Balance at Charged to Balance at beginning costs and Charged Deductions end of Description of period expenses to other and write- period accounts offs ALLOWANCE FOR DOUBTFUL ACCOUNTS Year ended June $ 590,000 $1,106,000 -- $(349,000) $1,347,000 30, 1995 Year ended June 1,347,000 5 -- (290,000) 1,6 30, 1996 73,000 30,000 Year ended June 1,630,000 384,000 30, 1997 1,617,000 (645,000) 2,986,000 DEFERRED TAX ASSET VALUATION ALLOWANCE Year ended June 6,071,000 -- (200,000) 7,4 30, 1995 1,620,000 91,000 Year ended June 7,491,000 -- -- (1,565,000) 5,9 30, 1996 26,000 Year ended June 5,926,000 -- -- (2,554,000) 30, 1997 3,372,000 EXHIBIT INDEX Exhibit No. Description of Exhibit 4.1 Specimen certificate representing the Common Stock (filed as Exhibit 4.1 to Registrant's Registration Statement on Form S-1 (File No. 33-97406) and incorporated herein by reference). 4.2 Agreement and Plan of Reorganization and Merger dated as of October 22, 1997 by and among the Company, Kemper-Masterson, Inc., KMI Acquisition Corporation, Clarence A. Kemper, P. Michael Masterson, Mark A. Lester, Ronald F. Tetzlaff, Alan R. Parenteau, Jon Voss, Warren Handren and David Hyde. 4.3 Registration Rights Agreement dated as of December 1, 1997 by and among the Company and each of Clarence A. Kemper, P. Michael Masterson, Mark A. Lester, Ronald F. Tetzlaff, Alan R. Parenteau, Jon Voss, Warren Handren and David Hyde. 4.4 Asset Purchase Agreement dated as of September 26, 1997 by and among the Company, Perceptive Systems, Inc. and Howard W. Foster. 4.5 Registration Rights Agreement dated as of September 26, 1997 by and between the Company and Perceptive Systems, Inc. 5.1 Opinion of Testa, Hurwitz & Thibeault, LLP. 11.1 Statement re Computation of Per Share Earnings 27.1 Financial Data Schedule 23.1 Consent of Price Waterhouse LLP. 23.2 Consent of Testa, Hurwitz & Thibeault, LLP (included in Exhibit 5.1). 24.1 Power of Attorney (included as part of the signature page to this Registration Statement). EX-4 2 Exhibit 4.2 AGREEMENT AND PLAN OF REORGANIZATION AND MERGER BY AND AMONG PAREXEL INTERNATIONAL CORPORATION, KMI ACQUISITION CORPORATION, KEMPER-MASTERSON, INC., CLARENCE A. KEMPER, P. MICHAEL MASTERSON, MARK A. LESTER, RONALD F. TETZLAFF, ALAN R. PARENTEAU, WARREN HANDREN, DAVID HYDE AND JON R. VOSS Dated as of October 22, 1997 TABLE OF CONTENTS PAGE ARTICLE I 2 DEFINITIONS 2 1.01. DEFINITIONS 2 ARTICLE II 5 REORGANIZATION AND MERGER 5 2.01. THE MERGER. 5 2.02. CLOSING 6 2.03. CERTIFICATES FOR PARENT STOCK 7 2.04. TRANSFER TAXES 7 2.05. BOOKS AND RECORDS 7 2.06. RESIGNATIONS 7 2.07. NO FRACTIONAL SHARES 7 ARTICLE III 8 REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE STOCKHOLDERS 8 3.01. CORPORATE EXISTENCE AND POWER 8 3.02. CORPORATE AUTHORIZATION 8 3.03. GOVERNMENTAL AUTHORIZATION; CONSENTS 8 3.04. NON-CONTRAVENTION 9 3.05. CAPITALIZATION 9 3.06. SUBSIDIARIES 9 3.07. FINANCIAL STATEMENTS 10 3.08. ABSENCE OF CERTAIN CHANGES 10 3.09. PROPERTY AND EQUIPMENT 12 3.10. NO UNDISCLOSED MATERIAL LIABILITIES 12 3.11. LITIGATION 12 3.12. MATERIAL CONTRACTS 12 3.13. INSURANCE COVERAGE 14 3.14. COMPLIANCE WITH LAWS; NO DEFAULTS 14 3.15. FINDERS' FEES 14 3.16. INTELLECTUAL PROPERTY 14 3.17. INVENTORIES 16 3.18. RECEIVABLES 16 3.19. TAXES 16 3.20. ENVIRONMENTAL COMPLIANCE 17 3.21. CUSTOMERS AND SUPPLIERS 18 3.22. TRANSACTIONS WITH AFFILIATES 18 3.23. OTHER INFORMATION 18 3.24. INTERCOMPANY ARRANGEMENTS 18 3.25. EMPLOYEES 19 ARTICLE IV 19 ADDITIONAL REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS 19 4.01. TITLE TO AND VALIDITY OF SHARES 19 4.02. AUTHORITY 19 4.03. PURCHASE FOR INVESTMENT 19 4.04. POWER TO ACT AS TRUSTEE OR EXECUTOR 20 4.05. NO LEGAL PROCEEDINGS 20 ARTICLE V 20 REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB 20 5.01. ORGANIZATION AND EXISTENCE 20 5.02. CORPORATE AUTHORIZATION 20 5.03. GOVERNMENTAL AUTHORIZATION 20 5.04. LITIGATION 20 5.05. REPORTS AND FINANCIAL STATEMENTS 21 5.06. FINDER'S FEES 21 5.07. NON-CONTRAVENTION 21 ARTICLE VI 22 COVENANTS OF THE COMPANY AND EACH STOCKHOLDER 22 6.01. CONFIDENTIALITY 22 6.02. AFFILIATE AGREEMENTS 22 6.03. EXPENSES 23 6.04. SATISFACTION OF PARENT'S WITHHOLDING OBLIGATION 23 ARTICLE VII 23 COVENANTS OF PARENT 23 7.01. ACCESS 23 7.02. QUARTERLY REPORT ON FORM 10-Q 24 7.03. AFFILIATE AGREEMENTS 24 7.04. REORGANIZATION STATUS 24 7.05. BUSINESS CONTINUITY 24 7.06. CONFIDENTIALITY 24 7.07. PUBLICATION OF INTERIM FINANCIAL RESULTS 25 7.08. NASDAQ NATIONAL MARKET ADDITIONAL SHARES NOTIFICATION 25 ARTICLE VIII 25 COVENANTS OF ALL PARTIES 25 8.01. BEST EFFORTS 25 8.02. CERTAIN FILINGS 25 8.03. PUBLIC ANNOUNCEMENTS 25 8.04. POOLING 26 ARTICLE IX 26 EMPLOYEE BENEFITS 26 9.01. EMPLOYEE BENEFITS DEFINITIONS 26 9.02. ERISA REPRESENTATIONS 27 9.03. NO THIRD PARTY BENEFICIARIES 28 ARTICLE X 29 CONDITIONS TO CLOSING 29 10.01. CONDITIONS TO THE OBLIGATIONS OF EACH PARTY 29 10.02. CONDITIONS TO OBLIGATIONS OF PARENT AND SUB 29 10.03. CONDITIONS TO OBLIGATIONS OF THE COMPANY 31 ARTICLE XI 32 SURVIVAL; INDEMNIFICATION 32 11.01. SURVIVAL 32 11.02. INDEMNIFICATION 32 11.03. PROCEDURES 33 11.04. HOLDBACK AND WITHHOLDING SHARES 34 11.05. HOLDBACK TERMINATION 34 11.06. WITHHOLDING TERMINATION 34 ARTICLE XII 35 MISCELLANEOUS 35 12.01. NOTICES 35 12.02. AMENDMENTS; NO WAIVERS 37 12.03. EXPENSES 37 12.04. SUCCESSORS AND ASSIGNS 37 12.05. FURTHER ASSURANCES 37 12.06. GOVERNING LAW 38 12.07. COUNTERPARTS; EFFECTIVENESS 38 12.08. ENTIRE AGREEMENT 38 12.09. CAPTIONS 38 12.10. JURISDICTION 38 SCHEDULES SCHEDULE 2.01 LIST OF STOCKHOLDERS SCHEDULE 3.03 REQUIRED CONSENTS SCHEDULE 3.05 COMPANY OPTIONS SCHEDULE 3.06 LIST OF SUBSIDIARIES SCHEDULE 3.07 FINANCIAL STATEMENTS SCHEDULE 3.08 ABSENCE OF CHANGES SCHEDULE 3.10 NO UNDISCLOSED MATERIAL LIABILITIES SCHEDULE 3.11 LITIGATION SCHEDULE 3.12 MATERIAL CONTRACTS SCHEDULE 3.14 PERMITS SCHEDULE 3.16 INTELLECTUAL PROPERTY SCHEDULE 3.18 RECEIVABLES SCHEDULE 3.19 TAXES AND AUDITS SCHEDULE 3.21 CUSTOMERS SCHEDULE 3.22 TRANSACTIONS WITH AFFILIATES SCHEDULE 3.24 INTERCOMPANY ARRANGEMENTS SCHEDULE 3.25 EMPLOYEES SCHEDULE 5.03 GOVERNMENTAL AUTHORIZATION SCHEDULE 9.02 EMPLOYEE PLANS AND BENEFIT ARRANGEMENTS EXHIBITS EXHIBIT A ARTICLES OF MERGER TO BE FILED WITH THE SECRETARY OF STATE OF THE COMMONWEALTH OF MASSACHUSETTS EXHIBIT B CERTIFICATE OF MERGER TO BE FILED WITH THE SECRETARY OF STATE OF THE STATE OF DELAWARE EXHIBIT C REGISTRATION RIGHTS AGREEMENT EXHIBIT D LETTER AGREEMENT BETWEEN PARENT ON THE ONE HAND AND KEMPER AND MASTERSON ON THE OTHER HAND EXHIBIT E AFFILIATE AGREEMENT OF THE COMPANY'S AFFILIATES EXHIBIT F COMPANY COUNSEL OPINION EXHIBIT G AFFILIATE AGREEMENT OF PARENT'S AFFILIATES EXHIBIT H NON-COMPETITION, EMPLOYEE AND KEY EMPLOYEE AGREEMENTS AGREEMENT AND PLAN OF REORGANIZATION AND MERGER AGREEMENT dated as of October 22, 1997 by and among PAREXEL International Corporation, a Massachusetts corporation ("Parent"), KMI Acquisition Corporation, a Massachusetts corporation ("Sub"), Kemper-Masterson, Inc., a Delaware corporation (the "Company"), Clarence A. Kemper ("Kemper"), P. Michael Masterson ("Masterson"), Mark A. Lester ("Lester"), Ronald Tetzlaff ("Tetzlaff"), Alan R. Parenteau ("Parenteau"), Warren Handren ("Handren"), David Hyde ("Hyde") and Jon R. Voss ("Voss"). Kemper and Masterson are hereinafter referred to collectively as the "Principal Stockholders" and the Principal Stockholders, Lester, Tetzlaff, Parenteau, Handren, Hyde and Voss are hereinafter referred to collectively as the "Stockholders". W I T N E S S E T H : WHEREAS, subject to and in accordance with the terms and conditions of this Agreement and pursuant to the Massachusetts Articles of Merger attached hereto as Exhibit A (the "Massachusetts Articles of Merger") and the Delaware Certificate of Merger attached hereto as Exhibit B (the "Delaware Certificate of Merger"), the respective boards of directors of Parent, Sub and the Company, and Parent as sole stockholder of Sub, have approved the merger of Sub with and into the Company (the "Merger"), whereby each issued and outstanding share of Class A and Class B common stock, no par value per share, of the Company (the "Shares") will be converted into the right to receive common stock, $.01 par value per share, of Parent as provided herein; WHEREAS, for federal income tax purposes, it is intended that (i) the Merger shall qualify as a reorganization, and (ii) this Agreement (and the other agreements entered into in connection herewith) shall qualify as a plan or reorganization within the meaning of the regulations issued pursuant to Section 368 of the Internal Revenue Code of 1986, as amended (the "Code"); WHEREAS, the Merger is intended to be treated as a "pooling of interests" transaction for accounting purposes under generally accepted accounting principles, and Price Waterhouse LLP has confirmed to Parent in writing that it has reviewed to the extent it deemed necessary the terms and structure of the Merger, that it has reviewed this Agreement, the Articles of Merger and such other documents as it has requested as necessary for its review and that, as of the date of this Agreement, it knows of nothing that will prohibit the Merger from being treated as a "pooling of interests" transaction for accounting purposes; and WHEREAS, the parties hereto desire to set forth certain representations, warranties and covenants made by each to the other as an inducement to the consummation of the Merger. NOW, THEREFORE, in reliance on the foregoing recitals and in and for the consideration and mutual covenants set forth herein, and for other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: ARTICLE I DEFINITIONS 1.01. Definitions. (a) The following terms, as used herein, have the following meanings: "Affiliate" means, with respect to any Person, any Person directly or indirectly controlling, controlled by, or under common control with such Person. "Ancillary Agreements" means the Registration Rights Agreement attached hereto as Exhibit C, the Letter Agreement attached hereto as Exhibit D, the Affiliate Agreement attached hereto as Exhibit E and the non-competition, employee and key employee agreements, forms of which are attached hereto as Exhibit H. "Balance Sheet" means the balance sheet of the Company as of June 27, 1997 referred to in Section 3.07. "Balance Sheet Date" means June 27, 1997. "Closing Date" means the date of the Closing. "Company" means KMI Masterson, Inc., a Delaware corporation. "Company Counsel" means the law firm of Carey & Levin, Holliston, Massachusetts. "Conversion Ratio" means Parent Stock divided by the total number of Shares and Option Shares outstanding on the Closing Date. "Intellectual Property Right" means any trademark, trade name, trade dress, service mark, service name, logo, and corporate name, registration thereof or application for registration therefor; invention, patent, patent application, patent disclosure and any related continuation, continuation-in- part, divisional, reissue, re-examination, utility, model, certificate of invention and design patent, patent application, registration and application for registration; mask work and registration and application for registration thereof; computer software, data and documentation; trade secret, know-how, and confidential business information, whether patentable or nonpatentable and whether or not reduced to practice, know-how, manufacturing and product processes and techniques, research and development information, copyrightable works, financial, marketing and business data, pricing and cost information, business and marketing plans and customer and supplier lists and information; copyright, copyright registration, application for copyright registration; or any other similar type of proprietary intellectual property right, (including without limitation associated goodwill and remedies against infringements thereof and rights of protection of an interest therein under the laws of all jurisdictions) in each case which is owned or licensed by the Company and used or held for use by the Company. "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest, restriction or encumbrance of any kind in respect of such asset. "Material Adverse Change" means a material adverse change in the business, assets, condition (financial or otherwise), results of operations or prospects of the Company, including but not limited to the departure of a key employee or a significant deterioration in backlog or earnings. "Massachusetts Articles of Merger" means the Articles of Merger to be filed with the Secretary of State of the Commonwealth of Massachusetts on the Closing Date, in the form set forth in Exhibit A. "Material Adverse Effect" means a material adverse effect on the business, assets, condition (financial or otherwise), results of operations or prospects of the Company, which effect shall be deemed to have occurred upon, among other things, the departure of a key employee or a significant deterioration in backlog or earnings. "Merger" means the merger of Sub with and into the Company. "1934 Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder. "Option Shares" means the shares of the Company's capital stock issuable upon the exercise of Company Options (as defined in Section 3.05), all of which are set forth in Schedule 3.05. "Parent" means PAREXEL International Corporation, a Massachusetts corporation. "Parent Common Stock" means the common stock, $.01 par value per share, of Parent. "Parent Stock" means the number of shares of Parent Common Stock as is determined by dividing $23,000,000 by the average of the last reported sale price of Parent's Common Stock on the Nasdaq National Market on each of the twenty business days up to and including the second business day preceding the date of this Agreement (subject to appropriate adjustment in the event of a stock split or reverse stock split) (the "Parent Stock Price"); provided, however, that if the Parent Stock Price is less than $34.00, then the Parent Stock Price shall be $34.00 and if the Parent Stock Price is greater than $40.00, then the Parent Stock Price shall be $40.00. Accordingly, in no event shall the Parent Stock Price be less than $34.00 or greater than $40.00. "Parent's Counsel" means the law firm of Testa, Hurwitz & Thibeault, LLP, Boston, Massachusetts. "Person" means an individual, corporation, partnership, association, trust or other entity or organization, including a government or political subdivision or an agency or instrumentality thereof. "Principal Stockholders" means Kemper and Masterson, collectively. "Registration Rights Agreement" means the Registration Rights Agreement between the Stockholders and Parent in the form set forth in Exhibit C. "Shares" means all outstanding shares of capital stock of the Company, all of which are set forth on Schedule 2.01. "Stockholders" means Kemper, Masterson, Lester, Tetzlaff, Parenteau, Handren, Hyde and Voss, collectively. "Sub" means KMI Acquisition Corporation, a Massachusetts corporation. "Subsidiary" means any entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are owned directly or indirectly by the Company. "Delaware Certificate of Merger" means the Certificate of Merger to be filed with the Secretary of State of the State of Delaware on the Closing Date, in the form set forth in Exhibit B. "Working Capital" means cash and cash equivalents (on hand or in bank accounts), plus accounts receivable (net of any allowance for doubtful accounts), minus current liabilities. (b) Each of the following terms is defined in the Section set forth opposite such term: Term Section Affiliate 6.02 Agreements Benefit Arrangement 9.01 Claims 11.02 Closing 2.02 Code Preamble Company Affiliate 6.02 Company Option 3.05 Company Securities 3.05 Damages 11.02 Effective Date 2.02 Employee Plans 9.01 Environmental Laws 3.20 Environmental 3.20 Liabilities ERISA 9.01 ERISA Affiliate 9.01 Financial 3.07 Statements Holdback Shares 2.02 Indemnified Party 11.03 Indemnifying Party 11.03 Parent Group 11.02 Multiemployer Plan 9.01 Permit 3.14 Reports 5.05 Return 3.19 Returns 3.19 Surviving 2.01 Corporation Tax 3.19 Taxes 3.19 ARTICLE II REORGANIZATION AND MERGER 2.01. The Merger. Subject to the terms and conditions of this Agreement, the Massachusetts Articles of Merger and the Delaware Certificate of Merger, Sub shall be merged with and into the Company in accordance with the applicable provisions of the laws of the Commonwealth of Massachusetts and the State of Delaware and with the terms and conditions of this Agreement, the Massachusetts Articles of Merger and the Delaware Certificate of Merger so that: (a) At the Effective Date, Sub shall be merged with and into the Company. As a result of the Merger, the separate corporate existence of Sub shall cease and the Company shall continue as the surviving corporation (sometimes referred to herein as the "Surviving Corporation") and shall succeed to and assume all of the rights and obligations of the Company in accordance with the laws of the Commonwealth of Massachusetts and the State of Delaware. (b) The articles of organization and bylaws of the Company in effect immediately prior to the Effective Date shall be the articles of organization and bylaws, respectively, of the Surviving Corporation after the Effective Date unless and until further amended as provided by law. (c) The directors and officers of Sub immediately prior to the Effective Date shall be the directors and officers of the Surviving Corporation after the Effective Date. Such directors and officers shall hold their positions until the election and qualification of their respective successors or until their tenures are otherwise terminated in accordance with the bylaws of Surviving Corporation. The Shares that are issued and outstanding immediately prior to the Effective Date will, by virtue of the Merger and at the Effective Date, automatically and without further action on the part of the Stockholders, be converted into such number of shares of Parent Stock as is equal to the number of Shares held by each Stockholder (as set forth on Schedule 2.01) multiplied by the Conversion Ratio (rounded down to the largest whole number of shares of Parent Stock pursuant to Section 2.07 below). Each option evidencing the right to purchase the Option Shares (each a "Company Option") that is outstanding immediately prior to the Effective Date shall be exercised by the holder thereof contemporaneously with the Closing (as hereinafter defined) and the Option Shares that are outstanding as a result of such exercise will, by virtue of the Merger and at the Effective Date, automatically and without further action on the part of such holder, be converted into such number of shares of Parent Stock as is equal to the number of Option Shares held by such Stockholder (as set forth on Schedule 2.01) multiplied by the Conversion Ratio (rounded down to the largest whole number of shares of Parent Stock pursuant to Section 2.07 below). 2.02. Closing. The closing (the "Closing") of the transactions contemplated hereunder shall take place at the offices of Parent's Counsel in Boston, Massachusetts as soon as possible after satisfaction of the conditions set forth in Article X, but in no event later than 11:59 p.m., Boston time, on December 1, 1997, or at such other time or place as Parent and the Company may agree. Simultaneously with the Closing, the Massachusetts Articles of Merger shall be filed in the office of the Secretary of State of the Commonwealth of Massachusetts and the Delaware Certificate of Merger shall be filed in the office of the Secretary of State of the State of Delaware. The Merger shall become effective immediately upon the date stamped by the Massachusetts Secretary of State on the Massachusetts Articles of Merger (such date is referred to as the "Effective Date"). At the Closing, Parent shall deliver to each Stockholder certificates representing the number of shares of Parent Stock to which such Stockholder is entitled pursuant to Section 2.01 hereof, less such Stockholder's portion of the "Holdback Shares" and the "Withholding Shares" (as hereinafter defined). Each certificate shall be duly endorsed by the Parent's transfer agent and registered in the name of each such Stockholder, as is determined in accordance with Section 2.01. At the Closing, Parent shall retain in accordance with the provisions of Section 11.04 certificates representing the number of shares of Parent Stock worth $1,000,000 (calculated using the Parent Stock Price) (rounded up to the nearest whole number of shares) (the "Holdback Shares") and certificates representing the number of shares of Parent Stock worth $1,202,093 (calculated using the Parent Stock Price) (rounded up to the nearest whole number of shares (the "Withholding Shares"), to be held by the Parent in accordance with the provisions of Sections 11.04, 11.05 and 11.06. 2.03. Certificates for Parent Stock. Each certificate for Parent Stock issued to the Stockholders as part of the Merger shall bear the following legend: "The securities represented hereby have not been registered under the Securities Act of 1933, as amended, and may not be sold, transferred or otherwise disposed of except in accordance with the terms thereof and unless registered with the Securities and Exchange Commission of the United States and the securities regulatory authorities of certain states or unless an exception from such registration is available." 2.04. Transfer Taxes. The Stockholders shall pay any and all sales, documentary, use, filing, transfer and other taxes payable as a result of the Merger. 2.05. Books and Records. On or before the Closing Date, the Company and the Stockholders shall deliver to Parent, or its representatives, where located, all minute books, stock record books and corporate seals of the Company, and the original copies of all books of account, leases, other agreements, securities, customer lists, files and other documents, instruments and papers of any kind or nature belonging to or relating to the Company or its business. 2.06. Resignations. The Company will deliver to Parent the resignations of all officers and directors of the Company from their positions with the Company at or prior to the Closing Date, unless otherwise specified by Parent. 2.07. No Fractional Shares. No certificates or scrip for fractional shares of Parent Stock will be issued, no Parent stock split or dividend shall be paid in respect of any fractional share interest, and no such fractional share interests shall entitle the owner thereof to vote or to any rights of or as a stockholder of Parent. In lieu of such fractional shares, any holder of shares of Common Stock of the Company who would otherwise be entitled to a fraction of a share of Parent Stock (after aggregating all fractional shares of Parent Stock to be received by such holder) will be paid the cash value of such fraction, which shall be equal to the fraction multiplied by the Parent Stock Price (subject to appropriate adjustment in the event of a stock split or reverse stock split). ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE PRINCIPAL STOCKHOLDERS The Company and the Principal Stockholders hereby jointly and severally represent and warrant to Parent and Sub as of the date hereof that: 3.01. Corporate Existence and Power. The Company is a corporation duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation, and has all corporate powers and all governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted. The Company is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction in the United States where the character of the property owned or leased by it or the nature of its activities make such qualification necessary, except for those jurisdictions where failure to be so qualified would not, individually or in the aggregate, have a Material Adverse Effect. The Company has heretofore delivered to Parent true and complete copies of the corporate charter and bylaws, and all amendments thereto, of the Company. 3.02. Corporate Authorization. The execution, delivery and performance by the Company of this Agreement and the consummation by the Company of the transactions contemplated hereby are within the Company's corporate powers and have been duly authorized by all necessary corporate action on the part of the Company. This Agreement constitutes a valid and binding agreement of the Company. 3.03. Governmental Authorization; Consents. (a) The execution and delivery of this Agreement by the Company and the Stockholders, and the performance by the Company and the Stockholders of their obligations under this Agreement, require no action by or in respect of, or filing with, any governmental body, agency, official or authority or any other Person, other than the Massachusetts Articles of Merger and the Delaware Certificate of Merger. (b) Except as set forth on Schedule 3.03, no consent, approval, waiver or other action by any Person under any contract, agreement, indenture, lease, instrument or other document to which the Company is a party or by which it is bound is required or necessary for the execution and delivery of this Agreement by the Company and the Stockholders, the performance by the Company and the Stockholders of their obligations under this Agreement or the consummation of the transactions contemplated hereby. 3.04. Non-Contravention. The execution and delivery of this Agreement by the Company and the Stockholders, the performance by the Company and the Stockholders of their obligations under this Agreement and the consummation of the transactions contemplated hereby do not and will not (i) contravene or conflict with the corporate charter or bylaws of the Company, (ii) contravene or conflict with or constitute a violation of any provision of any law, regulation, judgment, injunction, order or decree binding upon or applicable to the Company; (iii) constitute a default under or give rise to any right of termination, cancellation or acceleration of any right or obligation of the Company or to a loss of any benefit to which the Company is entitled under any provision of any agreement, contract or other instrument binding upon the Company or any permit held by the Company or (iv) assuming the receipt of all required consents, result in the creation or imposition of any Lien on any asset of the Company. 3.05. Capitalization. The authorized capital stock of the Company consists of 90,000 shares of Class A Common Stock, no par value, and 30,000 shares of Class B Common Stock, no par value. As of the date hereof, there were outstanding 80,000 shares of Class A Common Stock and 6,000 shares of Class B Common Stock. All outstanding shares of capital stock of the Company have been duly authorized and validly issued and are fully paid and are owned by the Stockholders as shown on Schedule 2.01. As of the date hereof, 14,666 shares of the Company's Class B Common Stock were reserved for issuance upon exercise of stock options granted pursuant to the Company's Stock Option Plan (the "Company Options") and 9,334 shares of the Company's Class B Common Stock were reserved for issuance upon exercise of future grants of stock options. Except for the Company Options, all of which are listed on Schedule 3.05, there are no options, warrants or other rights, agreements, arrangements or commitments of any character to which the Company is a party or by which the Company is bound relating to the issued or unissued capital stock of the Company or obligating the Company to issue or sell any shares of capital stock of, or other equity interests in, the Company. All shares of Company Common Stock subject to issuance as aforesaid, upon issuance prior to the Effective Time on the terms and conditions specified in the instruments pursuant to which they are issuable, will be duly authorized, validly issued, fully paid and nonassessable. There are no outstanding contractual obligations of the Company to repurchase, redeem or otherwise acquire any shares of Company Common Stock. Except as set forth in this Section 3.05, there are no outstanding (i) shares of capital stock, other securities or phantom or other equity interests of the Company, (ii) securities of the Company convertible into or exchangeable for shares of capital stock or other securities of the Company or (iii) options or other rights to acquire from the Company any capital stock, other securities or phantom or other equity interests of the Company (the items in clauses (i), (ii) and (iii) being referred to collectively as the "Company Securities"). There are no outstanding obligations of the Company, actual or contingent, to issue or deliver or to repurchase, redeem or otherwise acquire any Company Securities. 3.06. Subsidiaries. The Company does not have any Subsidiaries or any ownership or equity interest in or control of (direct or indirect) any other person. Except as set forth on Schedule 3.06, the Company has never had any Subsidiaries or any ownership or equity interest in or control of (direct or indirect) any other person. The Subsidiaries set forth on Schedule 3.06 have been duly dissolved in accordance with the laws of their respective jurisdictions of incorporation, in each case without any liability to the Company. 3.07. Financial Statements. The Company has previously furnished Parent with a true and complete copy of the balance sheets of the Company as of December 31, 1995 and 1996 and June 27, 1997 and the statements of operations, and changes in stockholders' equity of the Company for the respective years or period then ended, (collectively, the "Financial Statements"), which are attached hereto as Schedule 3.07. Each of the balance sheets included in the Financial Statements fairly presents in all material respects the financial position of the Company as of its date, and the other statements included in the Financial Statements fairly present in all material respects the results of operations and stockholders' equity, as the case may be, of the Company for the periods therein set forth, in each case in accordance with generally accepted accounting principles consistently applied during the periods involved. 3.08. Absence of Certain Changes. Except as set forth in Schedule 3.08, since the Balance Sheet Date, the Company has conducted its business in the ordinary course consistent with past practices and there has not been: (a) any Material Adverse Change or any event, occurrence, development or state of circumstances or facts which could reasonably be expected to result in a Material Adverse Change; (b) any declaration, setting aside or payment of any dividend or other distribution with respect to any Company Securities or any repurchase, redemption or other acquisition by the Company of any outstanding shares of capital stock or other securities of, or other ownership interests in, the Company; (c) any amendment of any outstanding security of the Company; (d) any incidence, assumption or guarantee by the Company of any indebtedness for borrowed money other than in the ordinary course of business and in amounts and on terms consistent with past practices; (e) any creation or assumption by the Company of any Lien on any asset; (f) any making of any loan, advance or capital contributions to or investment in any Person; (g) any damage, destruction or other casualty loss (whether or not covered by insurance) affecting the business or assets of the Company which, individually or in the aggregate, has had or would reasonably be expected to have a Material Adverse Effect; (h) any transaction or commitment made, or any contract or agreement entered into, by the Company relating to its assets or business (including the acquisition or disposition of any assets) or any relinquishment by the Company of any contract or other right, in either case, material to the Company, other than transactions and commitments in the ordinary course of business consistent with past practices and those contemplated by this Agreement; (i) any change in any method of accounting or accounting practice by the Company; (j) any (i) grant of any severance or termination pay to any director, officer or employee of the Company, (ii) entering into of any employment, deferred compensation or other similar agreement (or any amendment to any such existing agreement) with any director, officer or employee of the Company, (iii) change in benefits payable under existing severance or termination pay policies or employment agreements or (iv) change in compensation, bonus or other benefits payable to directors, officers or employees of the Company; (k) any change in the business or operations or in the manner of conducting the business or operations of the Company other than changes in ordinary course of business; (l) except as reflected on the Balance Sheet, any mortgage, pledge or subjection of any properties or assets to any claim, Lien or liability, except claims, Liens or liabilities for taxes not yet due; (m) any write-down of the value of any inventory, or write-off of any notes or accounts receivable or any portion thereof as uncollectible, other than valuation reserves established for inventory and receivables; (n) any cancellation or release of any other debts or claims, or waivers of any rights; (o) any sale, transfer or conveyance of any property or assets, except in the ordinary course of business consistent with past practice; (p) any disposition of, or lapse, or other failure to preserve the exclusive rights of the Company to any Intellectual Property Right; (q) any payments, loans or advances of any amount to or in respect of, or sale, transfer or lease of any properties or assets to, or the entering into of any agreement, arrangement or transaction with any of the Stockholders, officers or directors of the Company, any Affiliate or associate of any of the Stockholders, the Company or any officer or director of the Company, or any business or entity in which any of the Stockholders or the Company, or any Affiliate or associate of any such person, has any direct or material indirect interest; (r) any lease of real or personal property or any capital expenditures or commitments for additions to property, plant, equipment or capital assets; or (s) any agreement, whether in writing or otherwise, to take any action described in this Section 3.08. 3.09. Property and Equipment. The Company has marketable title to, or in the case of leased property has valid leasehold interests in, all property and assets (whether real or personal, tangible or intangible) reflected on the Balance Sheet or acquired after the Balance Sheet Date. None of such properties or assets is subject to any Liens, except Liens for taxes not yet due or being contested in good faith (and for which adequate accruals or reserves have been established on the Balance Sheet), Liens disclosed on the Balance Sheet or Liens which do not materially detract from the value of such property or assets as now used, or materially interfere with any present or intended use of such property or assets. 3.10. No Undisclosed Material Liabilities. There are no liabilities of the Company of any kind whatsoever, whether accrued, contingent, absolute, determined, determinable or otherwise, and there is no existing condition, situation or set of circumstances which could reasonably be expected to result in such a liability, other than: (i) liabilities disclosed on Schedule 3.10 or in any other Schedule hereto or provided for in the Balance Sheet; and (ii) liabilities incurred in the ordinary course of business consistent with past practice since the Balance Sheet Date, which in the aggregate are not material to the Company. 3.11. Litigation. Other than as disclosed on Schedule 3.11, there is no action, suit, investigation or proceeding pending against, or to the knowledge of the Company and Principal Stockholders threatened against or affecting, the Company or any of its properties or the transactions contemplated hereby before any court or arbitrator or any governmental body, agency, official or authority. 3.12. Material Contracts. (a) Except for agreements, contracts, plans, leases, arrangements or commitments disclosed in Schedule 3.12, the Company is not a party to or subject to: (i) any lease providing for annual rentals of $5,000 or more; (ii) any contract for the purchase of materials, supplies, goods, services, equipment or other assets in an amount exceeding $1,000; (iii) any partnership, joint venture or other similar arrangement or agreement or any license agreement under which the Company is the licensee, or any agency, distributor, dealer, franchise, sales representative or other similar contract or commitment; (iv) except for trade indebtedness incurred in the ordinary course of business, any loan or credit agreements or any instrument evidencing or related in any way to indebtedness incurred in the acquisition of any asset, business, company or other entity or indebtedness for borrowed money by way of direct loan, sale of debt securities, purchase money obligation, conditional sale, guarantee, or otherwise, or agreement relating to the mortgaging, pledging or otherwise placing a lien on any assets of the Company or any guaranty of indebtedness or performance of others by the Company; (v) any contract or other document that limits the freedom of the Company to compete in any line of business or with any Person or in any area or which would so limit the freedom of the Company after the Closing Date; (vi) any guarantees; (vii) any contract for personal services or employment (including without limitation contracts with directors, officers, employees, agents, consultants, advisors, salesmen, sales representatives, distributors or dealers); (viii) any agreement or arrangement providing for the sale of any of the assets, properties or rights of the Company (other than in the ordinary course of business) or for the grant of a preferential right to purchase any of the Company's assets, properties or rights or which required the consent of any third party to the transfer and assignment of any of its assets, properties or rights; and (ix) any other agreements, contracts, leases, licenses or commitments to which the Company is a party (or under which the Company may be obligated or which the Company or any of its rights, properties or assets may be subject or bound) and which is material to the financial condition, results of operations, business, property or prospects of the Company or is not made in the ordinary course of business that is material to the Company. (b) Each agreement, contract, plan, lease, arrangement and commitment disclosed in any schedule to this Agreement or required to be disclosed pursuant to Section 3.12(a) is a valid and binding agreement of the Company and is in full force and effect, and neither the Company, nor, to the knowledge of the Company and the Stockholders, any other party thereto is in default in any material respect under the terms of any such agreement, contract, plan, lease, arrangement or commitment. 3.13. Insurance Coverage. The Company has furnished to Parent a list of, and true and complete copies of, all insurance policies covering the assets, business, equipment, properties, operations, employees, officers and directors of the Company. There is no claim by the Company pending under any of such policies as to which coverage has been questioned, denied or disputed by the underwriters of such policies. All premiums payable under all such policies have been paid and the Company is otherwise in full compliance with the terms and conditions of all such policies. Such policies are of the type and in amounts customarily carried by Persons conducting businesses similar to those of the Company. 3.14. Compliance with Laws; No Defaults. (a) The Company is not currently in violation of, and since its inception has not violated, any applicable provisions of any laws, statutes, ordinances or regulations except for violations that have not had and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. (b) Schedule 3.14 correctly describes each license and permit (a "Permit") material to the business of the Company, together with the name of the governmental agency or entity issuing such license or permit. Such licenses and permits are valid and in full force and effect in accordance with their terms and none of such licenses or permits will be terminated or impaired or become terminable as a result of the transactions contemplated hereby. (c) The Company is not in default under, and no condition exists that with notice or lapse of time or both would constitute a default under, (i) any mortgage, loan agreement, indenture or evidence of indebtedness for borrowed money to which the Company is a party or by which the Company or any material amount of its assets is bound or (ii) any judgment, order or injunction of any court, arbitrator or governmental body, agency, official or authority which defaults or potential defaults individually or in the aggregate would reasonably be expected to have a Material Adverse Effect. 3.15. Finders' Fees. There is no investment banker, broker, finder or other intermediary which has been retained by or is authorized to act on behalf of the Stockholders or the Company who might be entitled to any fee or commission from Parent, Sub, the Company or any of their respective Affiliates upon consummation of the transactions contemplated by this Agreement. 3.16. Intellectual Property. (a) Schedule 3.16 includes a list of all Intellectual Property Rights specifying as to each, as applicable: (i) the nature of such Intellectual Property Right; (ii) the owner of such Intellectual Property Right; (iii) the jurisdictions by or in which such Intellectual Property Right has been registered or in which an application for such registration has been filed, including the respective registration or application numbers; and (iv) licenses, sublicenses and other agreements as to which the Company or any of its Affiliates is a party and pursuant to which any Person is authorized to use such Intellectual Property Right, including the identity of all parties thereto, a description of the nature and subject matter thereof, the applicable royalty and the term thereof. (b) The Company has not since its inception been charged in writing with or been a defendant in any claim, suit, action or proceeding relating to its business that has not been finally terminated prior to the date hereof and that involves a claim of infringement of any patents, trademarks, service marks or copyrights. The Company and the Principal Stockholders have no knowledge of any other claim or infringement by the Company, or no knowledge of any continuing infringement by any other Person of any Intellectual Property Rights. To the knowledge of the Company and the Principal Stockholders, no Intellectual Property Right is subject to any outstanding order, judgment, decree, stipulation or agreement restricting the use thereof by the Company or restricting the licensing thereof by the Company to any Person. The Company has not entered into any agreement to indemnify any other Person against any charge of infringement of any patent, trademark, service mark or copyright. (c) None of the Intellectual Property Rights of the Company, the value of which to the Company is contingent upon maintenance of the confidentiality thereof, has been disclosed by the Company or by any of the Stockholders or, to the knowledge of the Company and the Principal Stockholders, by any employee of the Company to any Person other than Persons who are parties to confidentiality agreements with the Company. (d) To the knowledge of the Company and the Principal Stockholders, no third party has asserted any claim, or has threatened to assert any claim, against the Company with respect to (i) the continued employment by, or association with, the Company of any of the present officers, employees of or consultants to the Company or (ii) the use by the Company or any of such Persons in connection with their activities for or on behalf of the Company of any information which the Company or any of such Persons would be prohibited from using under any prior agreements or arrangements or any laws applicable to unfair competition, trade secrets or proprietary information. (e) None of the former or present employees, officers, directors, consultants or contractors of the Company holds any right, title or interest, directly or indirectly, in whole or in part, in or to any of the Intellectual Property Rights which the Company is currently using or the use of which is necessary for the business of the Company as presently conducted. To the best knowledge of the Company and the Principal Stockholders, no employee of the Company is in violation of any term of any employment contract, patent disclosure agreement or any other contract or agreement relating to the relationship of any such employee with the Company or any other party because of the nature of the business conducted by the Company. No person has any so-called "moral rights," including any right to identification of authorship, rights of approval of modifications or limitations on subsequent modifications, in or to any of the Intellectual Property Rights owned by the Company. Nothing prohibits the Company from (i) modifying, changing, altering, adapting, revising, translating, adding to or subtracting from any of the Intellectual Property Rights owned by the Company, (ii) doing any of the foregoing without obligation to name the author of any of the Intellectual Property Rights owned by the Company or to give credit to any person in connection therewith or (iii) leasing, licensing, distributing or marketing any of the Intellectual Property Rights owned by the Company without the consent of any person. 3.17. Inventories. The Company has no inventories. 3.18. Receivables. Except as set forth on Schedule 3.18, all accounts, notes receivable and other receivables (other than receivables collected since the Balance Sheet Date) reflected on the Balance Sheet are, and all accounts and notes receivable of the Company at the Closing Date will be, valid, genuine and fully collectible (using commercially reasonable collection efforts) within ninety (90) days in the aggregate amount thereof, less any reserves for doubtful accounts recorded on the Balance Sheet. All accounts, notes receivable and other receivables of the Company at the Balance Sheet Date have been included in the Balance Sheet. 3.19. Taxes. (a) The term "Taxes" as used herein means all federal, state, local, foreign and other net income, gross income, gross receipts, sales, use, ad valorem, transfer, franchise, profits, license, lease, service, service use, withholding, payroll, employment, excise, severance, stamp, occupation, premium, property, windfall profits, customs duties, or other Taxes, fees, assessments or other charges of any kind whatever, together with any interest and any penalties, additions to Tax or additional amounts with respect thereto, and the term "Tax" means any one of the foregoing taxes. The term "Returns" as used herein, means all returns, declarations, reports, statements and other documents required to be filed in respect of Taxes, and "Return" means any one of the foregoing Returns. All citations to the Code, or the Treasury regulations promulgated thereunder, shall include any amendments or any substitute or successor provisions thereto. (b) The Company has filed all Returns required to be filed by the due date for such Return and has paid all Taxes owed (whether or not shown as due on such returns), including, without limitation, all Taxes which the Company is obligated to withhold for amounts owing to employees, creditors and third parties. All such Returns were complete and correct in all respects. All Taxes with respect to which the Company has become obligated pursuant to elections made by it in accordance with generally accepted practice have been paid and adequate reserves have been established for all Taxes accrued but not yet payable. No issues have been raised (and are currently pending) by any taxing authority in connection with any of the Returns and the Return, have never been audited by any state or federal authorities. No waivers of statutes of limitation with respect to any of the Returns have been given by or requested from the Company. All deficiencies asserted or assessments made as a result of any examinations have been fully paid, or are fully reflected as a liability in the financial statements of the Company, or are being contested and an adequate reserve therefor has been established and is fully reflected in the financial statements of the Company. There are no liens for Taxes (other than for current Taxes not yet due and payable) upon the assets of the Company. All material elections with respect to Taxes affecting the Company, as of the date hereof, are set forth in the financial statements of the Company, or are set forth on Schedule 3.19. The Company has not agreed to make any adjustment under Section 481(a) of the Code by reason of a change in accounting method or otherwise, and the Company will not be required to make any such adjustment as a result of the transactions set forth in this Agreement. Except as set forth on Schedule 3.19, the Company does not have and has not had a permanent establishment in any foreign country, as defined in any applicable Tax treaty or convention between the United States of America and such foreign country. The Company is not a party to any agreement, contract, arrangement or plan that has resulted or would result, separately or in the aggregate, in (i) the payment of any "excess parachute payments" within the meaning of Section 280G of the Code (without regard to the exception in Sections 280G(b)(4) and 280G(b)(5) of the Code) or (ii) any payments or other transactions that would be, in whole or in part, nondeductible under Sections 162 or 404 of the Code. The Company is not a party to any tax sharing or similar agreement with any Person. The Company has never been a member of an affiliated group (within the meaning of Section 1504 of the Code) filing a consolidated federal Return (other than a group the common parent of which was the Company). The Company does not have any liability for Taxes of any Person (other than the Company) under Treasury Regulation Section 1.1502-6 (or any similar provision of state, local, or foreign law), as a transferee or successor, by contract, or otherwise. The Company has never filed a consent pursuant to Section 341(f) of the Code, relating to collapsible corporations. 3.20. Environmental Compliance. (i) The Stockholders and the Company have complied with all federal, state and local laws (including without limitation case law, rules, regulations, orders, judgments, decrees, permits, licenses and governmental approvals) which are intended to protect the environment and/or human health or safety (collectively, "Environmental Laws") and the Stockholders and the Company have not received any notice of non-compliance with Environmental Laws; (ii) none of the Stockholders or the Company have handled, generated, used, stored, transported or disposed of any substance or waste which is regulated by Environmental Laws, except for reasonable amounts of ordinary office and/or office-cleaning supplies which have been used in compliance with Environmental Laws; and (iii) there are no "Environmental Liabilities". For purposes of this Agreement, "Environmental Liabilities" are any liabilities which (y) arise out of or in any way relate to the Company or any real estate at any time owned, used or leased by the Company, or the Company's or any Stockholder's use or ownership thereof, whether vested or unvested, contingent or fixed, actual or potential, and (z) arise from or relate to actions occurring (including any failure to act) or conditions existing on or before the Closing Date. 3.21. Customers and Suppliers. Schedule 3.21 sets forth an accurate list of the Company's twenty (20) largest customers by revenue. The Company and the Stockholders have not received notice from or otherwise have knowledge that any group of customers who are under common ownership or control and who accounted as a group for a material percentage of the aggregate products and services furnished by the Company during the past 18 months has stopped or intends to stop purchasing the Company's products or services nor has the Company lost any supplier or group of suppliers, which accounted for a material percentage of the aggregate supplies purchased by the Company during the past 18 months. 3.22. Transactions with Affiliates. Except as set forth on Schedule 3.22, there are no loans, leases, royalty agreements or other continuing transactions between the Company and any Stockholder, any Affiliate of any Stockholder, or any member of any Stockholder's family. Except as set forth on Schedule 3.22, to the best knowledge of the Company and the Principal Stockholders, none of the officers or directors of the Company or Stockholder (a) has any material direct or indirect interest in any entity which does business with the Company; (b) has any direct or indirect interest in any property, asset or right which is used by the Company in the conduct of its business; or (c) has any contractual relationship with the Company other than such relationships which occur from being an officer, director or stockholder of the Company. 3.23. Other Information. None of the documents or information delivered to Parent in connection with the transactions contemplated by this Agreement contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained therein not misleading. The Kemper-Masterson, Inc. August 15, 1997 Forecast and accompanying information relating to the projected future performance of the Company delivered to Parent constitute the Company's and the Principal Stockholders' best estimate of the information purported to be shown therein, and the Company and the Principal Stockholders are not aware of any fact or information that would lead them to believe that such projections are incorrect or misleading in any material respect. The results forecast in the above-referenced document are estimates and the Company and the Principal Stockholders cannot guarantee that any particular result will be achieved. 3.24. Intercompany Arrangements. Except as set forth on Schedule 3.24, the Company does not own any note, bond, debenture or other indebtedness, and is not otherwise a creditor, of any Stockholder or any of his or its Affiliates. Since the Balance Sheet Date there has not been any payment by the Company to any Stockholder or any of his or its Affiliates, charge by any Stockholder or any of his or its Affiliates to the Company or other transaction between the Company and any Stockholder and any of his or its Affiliates, except in any such case in the ordinary course of business of the Company consistent with past practice. 3.25. Employees. Schedule 3.25 sets forth a true and complete list of (a) the names, titles, annual salaries and other compensation of all employees of the Company and (b) the wage rates for non-salaried employees of the Company (by classification). None of such employees and no other employee of the Company has indicated to the Company or any Stockholder that he intends to resign, retire or file a claim or otherwise bring an action against the Company, Parent or Sub as a result of the transactions contemplated by this Agreement or otherwise. ARTICLE IV ADDITIONAL REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS Each Stockholder represents and warrants to, and agrees with, Parent and Sub as follows: 4.01. Title to and Validity of Shares. The Stockholder now has, and on the Closing Date will have (or, with respect to a Stockholder who has Option Shares, on the Closing Date only will have), good and marketable title to and unrestricted power to vote and sell the Shares designated as owned by such Stockholder opposite such Stockholder's name on Schedule 2.01 and Schedule 3.05, free and clear of any Lien. All Shares owned by such Stockholder have been duly authorized and validly issued and are fully paid and non-assessable. 4.02. Authority. Such Stockholder has the legal power, right and authority to enter into and perform this Agreement and each of the Ancillary Agreements, and to perform each of his or its obligations hereunder and thereunder. The execution, delivery and performance of this Agreement and each of the Ancillary Agreements by such Stockholder does not contravene, or constitute a default under, any provision of applicable law or regulation or of any agreement, judgment, injunction, order, decree or any other instrument binding upon such Stockholder. This Agreement and each of the Ancillary Agreements have been duly executed and delivered by such Stockholder and constitute valid and binding obligations of such Stockholder, enforceable in accordance with their respective terms. 4.03. Purchase for Investment. Such Stockholder is acquiring the shares of Parent Stock for investment for his or its own account and not with a view to, or for sale in connection with, any distribution thereof. Such Stockholder agrees that the shares of Parent Stock acquired by such Stockholder may not be sold, transferred or otherwise disposed of unless such shares are registered with the Securities and Exchange Commission and the securities regulatory authorities of certain states or unless an exemption from such registration is available. 4.04. Power To Act as Trustee or Executor. If such Stockholder is serving as trustee or executor with respect to its Shares, such Stockholder is the only such trustee or executor and is duly authorized and empowered by the instruments creating such trust or trusts or by the will of which such Stockholder is acting as executor and under applicable law to enter into this Agreement with respect to the Shares held by such Stockholder and to consummate the transactions contemplated herein. 4.05. No Legal Proceedings. There is no action, suit, investigation or proceeding pending against, or to the knowledge of such Stockholder, threatened against or affecting, the Stockholder or any of his property or the transactions contemplated hereby before any court or arbitrator or any governmental body, agency, official or authority. ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB Parent and Sub jointly and severally represent and warrant to the Company and the Stockholders that: 5.01. Organization and Existence. Parent and Sub are corporations duly incorporated, validly existing and in good standing under the laws of the Commonwealth of Massachusetts and have all corporate powers and all material governmental licenses, authorizations, consents and approvals required to carry on their businesses as now conducted. 5.02. Corporate Authorization. The execution, delivery and performance by Parent and Sub of this Agreement and by Parent of the Registration Rights Agreement and the consummation by Parent and Sub of the transactions contemplated hereby and thereby are within the corporate powers of Parent and Sub and have been duly authorized by all necessary corporate action on the part of Parent and Sub. This Agreement constitutes a valid and binding agreement of Parent and Sub and the Registration Rights Agreement constitutes a valid and binding agreement of Parent. 5.03. Governmental Authorization. Except as set forth on Schedule 5.03, the execution, delivery and performance by Parent and Sub of this Agreement require no action by or in respect of, or filing with, any governmental body, agency, official or authority. 5.04. Litigation. There is no action, suit, investigation or proceeding pending against, or to the knowledge of Parent or Sub threatened against, Parent or Sub before any court or arbitrator or any governmental body, agency or official which in any manner challenges or seeks to prevent, enjoin, alter or materially delay the transactions contemplated hereby. 5.05. Reports and Financial Statements. Parent has previously furnished to the Company copies of its (i) Annual Report on Form 10-K for the fiscal year ended June 30, 1996; (ii) 1996 Annual Report; (iii) Proxy Statement dated October 8, 1996; (iv) Prospectus dated December 6, 1996; (v) Current Report on Form 8-K dated January 28, 1997 and (vi) Quarterly Report on Form 10-Q for the quarter ended March 31, 1997 (collectively, the "Reports"). Taken together, the reports do not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained therein, in light of the circumstances in which they were made, not misleading. The Reports complied as to form, at the time such form, document or report was filed, in all material respects with the applicable requirements of the Federal securities laws and the rules and regulations promulgated thereunder. Since March 31, 1997, Parent has filed all forms, reports and documents with the Commission required to be filed by it pursuant to the Federal securities laws and the rules and regulations promulgated thereunder, each of which complied as to form, at the time such form, document or report was filed, in all material respects with the applicable requirements of the Federal securities laws and the rules and regulations promulgated thereunder. 5.06. Finder's Fees. There is no investment banker, broker, finder or other intermediary which has been retained by or is authorized to act on behalf of Parent or Sub who might be entitled to any fee or commission from the Company, the Stockholders or any of their respective Affiliates upon consummation of the transactions contemplated by this Agreement. 5.07. Non-Contravention. The execution and delivery of this Agreement by the Parent and Sub, the performance by the Parent and Sub of their obligations under this Agreement and the consummation of the transactions contemplated hereby do not and will not (i) contravene or conflict with the corporate charter or bylaws of the Parent or Sub, (ii) contravene or conflict with or constitute a violation of any provision of any law, regulation, judgment, injunction, order or decree binding upon or applicable to the Parent or Sub; (iii) constitute a default under or give rise to any right of termination, cancellation or acceleration of any right or obligation of the Parent or Sub or to a loss of any benefit to which the Parent or Sub is entitled under any provision of any agreement, contract or other instrument binding upon the Parent or Sub or any permit held by the Parent or Sub or (iv) assuming the receipt of all required consents, result in the creation or imposition of any Lien on any asset of the Parent or Sub. ARTICLE VI COVENANTS OF THE COMPANY AND EACH STOCKHOLDER The Company and each Stockholder agree that: 6.01. Confidentiality. The Company, such Stockholder and their Affiliates will hold, and will use reasonable efforts to cause their respective officers, directors, employees, accountants, counsel, consultants, advisors and agents to hold, in confidence, unless compelled to disclose by judicial or administrative process or by other requirements of law, all confidential documents and information concerning Parent or Sub furnished to the Company, such Stockholder or their Affiliates in connection with the transactions contemplated by this Agreement, and (after the Closing Date) all confidential documents and information concerning the Company, except to the extent that such information can be shown to have been (i) previously known on a nonconfidential basis by such Stockholder, (ii) in the public domain through no fault of such Stockholder or (iii) later lawfully acquired by such Stockholder from sources other than the Company, Parent or Sub; provided that the Company and such Stockholder may disclose such information to their respective officers, directors, employees, accountants, counsel, consultants, advisors and agents in connection with the transactions contemplated by this Agreement so long as such persons are informed by the Company and such Stockholder of the confidential nature of such information and are directed by the Company and such Stockholder to treat such information confidentially. The obligation of the Company, such Stockholder and their Affiliates to hold any such information in confidence shall be satisfied if they exercise the same care with respect to such information as they would take to preserve the confidentiality of their own similar information. If this Agreement is terminated, the Company, such Stockholder and their Affiliates will, and will use their best efforts to cause their respective officers, directors, employees, accountants, counsel, consultants, advisors and agents to, destroy or deliver to Parent, upon request, all documents and other materials, and all copies thereof, obtained by the Company, such Stockholder or their Affiliates or on their behalf from Parent or Sub in connection with this Agreement that are subject to such confidence. 6.02. Affiliate Agreements. The Company shall deliver to Parent on or prior to the date of this Agreement a letter from Company Counsel, satisfactory in form and substance to Parent's Counsel, which, based upon discussion with the Company and such inquiries as such firm deems necessary, shall identify all persons who, at the date of this Agreement, such firm believes may be deemed to be "affiliates" of the Company as such term is used in and for the purposes of Accounting Series Releases 130 and 135, as amended, of the Securities and Exchange Commission, and defined in Rule 144(a)(1) of the Securities Act of 1933, as amended, and who will become the beneficial owners of shares of Parent Stock pursuant to the transactions contemplated by this Agreement (each such person being referred to as a "Company Affiliate"). The Company shall deliver to Parent on or prior to the Closing Date a letter from Company Counsel, satisfactory in form and substance to Parent's Counsel, which shall identify all Company Affiliates as of the Closing Date. The Company shall cause each of the Company Affiliates to execute and deliver to Parent (i) on the date of this Agreement and (ii) on the Closing Date, a written agreement (the "Affiliate Agreement") satisfactory to Parent and substantially in the form of Exhibit E hereto, including provisions indicating that such Company Affiliate (i) has not offered to sell, sold or otherwise disposed of any Shares in the 30 day period prior to the date hereof, (ii) will not offer to sell, sell or otherwise dispose of any shares of Parent Stock, except pursuant to an effective registration statement or in compliance with an available exemption from the registration requirements of the Securities Act (for which Stockholder shall provide Parent with an opinion of counsel satisfactory to Parent that the securities being sold thereby may be publicly sold without registration under the Securities Act), and (iii) will not offer to sell, sell or otherwise dispose of any shares of Parent Stock until Parent shall have publicly released financial results covering a period of at least 30 days of post-closing combined operations of Parent and the Company. 6.03. Expenses. The Stockholders shall pay, prior to or at the Closing, all costs and expenses incurred by the Company or the Stockholder in connection with this Agreement. 6.04. Satisfaction of Parent's Withholding Obligation. Each of the Stockholders covenants and agrees that he shall pay to Parent, in immediately available funds (through wire transfer or federal funds check) not later than 12:00 noon, Eastern Standard Time, on the tenth business day after the Lapse Date (as defined below), the federal, state, local and foreign tax withholding amounts attributable to the Parent Stock issued to him with respect to the Option Shares, including without limitation federal, state, local and foreign income tax, Social Security and Medicare tax withholding and similar amounts (excluding the employer's portion of such amounts), at the applicable tax withholding rates, all as determined by Parent and its accountants. Each Stockholder agrees to cooperate fully and to follow any reasonable instructions with respect to such tax withholding obligation, and each understands that the fair market value of the Parent Stock received in exchange for the Option Shares must be reported as compensation for tax purposes, such compensation being reported as of the Lapse Date. For purposes of this Section 6.04, Lapse Date shall mean the first business day following the date the Parent Stock issued to such person pursuant to this Agreement is no longer subject to a restriction on transfer pursuant to the "pooling of interests" accounting rules. ARTICLE VII COVENANTS OF PARENT Parent agrees that: 7.01. Access. After the Closing Date, Parent agrees to give each Stockholder reasonable access to the books and records provided by the Company and such Stockholder pursuant to Section 2.07 hereof to enable such Stockholder to make required filings with, and respond to any inquiries from, state or federal tax or other regulatory authorities. 7.02. Quarterly Report on Form 10-Q . Parent agrees to file in a timely manner all reports and other documents required of Parent under the Securities Exchange Act of 1934, including, without limitation, its Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 1997. 7.03. Affiliate Agreements. Parent shall use its best efforts to cause each person who, at the date of this Agreement, Parent believes may be deemed to be "affiliates" of Parent as such term is used in and for the purposes of Accounting Series Releases 130 and 135, as amended, of the Securities and Exchange Commission, and defined in Rule 144(a)(1) of the Securities Act of 1933, as amended (each a "Parent Affiliate"), to execute and deliver on the Closing Date, an Affiliate Agreement substantially in the form of Exhibit G hereto. 7.04. Reorganization Status. Parent shall consistently treat for all United States federal income tax purposes the Merger as a reorganization, within the meaning of Section 368(a) of the Code. 7.05. Business Continuity. Parent shall either continue to conduct the historic business of the Company or shall continue to use the historic assets of the Company in a business. 7.06. Confidentiality. Until the Closing Date, Parent and Sub and their Affiliates will hold, and will use reasonable efforts to cause their respective officers, directors, employees, accountants, counsel, consultants, advisors and agents to hold, in confidence, unless compelled to disclose by judicial or administrative process or by other requirements of law, all confidential documents and information concerning the Company furnished to the Parent or Sub or their Affiliates in connection with the transactions contemplated by this Agreement, except to the extent that such information can be shown to have been (i) previously known on a nonconfidential basis by Parent or Sub, (ii) in the public domain through no fault of Parent or Sub or (iii) later lawfully acquired by Parent or Sub from sources other than the Company; provided that the Parent and Sub may disclose such information to their respective officers, directors, employees, accountants, counsel, consultants, advisors and agents in connection with the transactions contemplated by this Agreement so long as such persons are informed by the Parent or Sub of the confidential nature of such information and are directed by the Parent or Sub to treat such information confidentially. The obligation of the Parent and Sub and their Affiliates to hold any such information in confidence shall be satisfied if they exercise the same care with respect to such information as they would take to preserve the confidentiality of their own similar information. If this Agreement is terminated, the Parent and Sub and their Affiliates will, and will use their best efforts to cause their respective officers, directors, employees, accountants, counsel, consultants, advisors and agents to, destroy or deliver to the Company, upon request, all documents and other materials, and all copies thereof, obtained by the Parent and Sub or their Affiliates or on their behalf from the Company in connection with this Agreement that are subject to such confidence. 7.07. Publication of Interim Financial Results. Parent will use good faith commercially reasonable efforts to cause interim financial results covering thirty (30) days beginning December 1, 1997 (or December 2, 1997 if the Closing occurs on December 1, 1997) to be published as promptly as reasonably practicable following the Closing. 7.08. Nasdaq National Market Additional Shares Notification. Parent will file an additional share notification with the Nasdaq National Market to approve for listing the shares of Parent Stock to be issued in connection with the Merger, and Parent will exercise good faith reasonable efforts to cause the shares to be approved for listing prior to the effective date of the first Registration Statement to be filed pursuant to the Registration Rights Agreement. ARTICLE VIII COVENANTS OF ALL PARTIES The parties hereto agree that: 8.01. Best Efforts. Subject to the terms and conditions of this Agreement, each party will use commercially reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary or desirable under applicable laws and regulations to consummate the transactions contemplated by this Agreement. Each Stockholder, the Company and Parent agree to execute and deliver such other documents, certificates, agreements and other writings and to take such other actions as may be necessary or desirable in order to consummate or implement expeditiously the transactions contemplated by this Agreement. 8.02. Certain Filings. The Company, each Stockholder and Parent shall cooperate with each other (a) in determining whether any action by or in respect of, or filing with, any governmental body, agency, official or authority is required, or any actions, consents, approvals or waivers are required to be obtained from parties to any material contracts, in connection with the consummation of the transactions contemplated by this Agreement and (b) in taking such actions or making any such filings, furnishing information required in connection therewith and seeking timely to obtain any such actions, consents, approvals or waivers. 8.03. Public Announcements. The Stockholders and the Company shall consult with Parent before issuing any press release or making any public statement with respect to this Agreement or the transactions contemplated hereby and, except as may be required by applicable law or any listing agreement with any national securities exchange, will not issue any such press release or make any such public statement prior to such consultation and approval by Parent. 8.04. Pooling. Each Stockholder, the Company and the Parent shall use commercially reasonable efforts and shall cooperate fully to allow the transactions contemplated by this Agreement to be accounted for as a "pooling of interests" in accordance with generally accepted accounting principles which shall be acceptable to the U.S. Securities and Exchange Commission. ARTICLE IX EMPLOYEE BENEFITS 9.01. Employee Benefits Definitions. The following terms, as used herein, have the following meanings: "Benefit Arrangement" means each employment, severance or other similar contract, arrangement or policy (written or oral) and each plan or arrangement (written or oral) providing for severance benefits, insurance coverage (including any self- insured arrangements), workers' compensation, disability benefits, supplemental unemployment benefits, vacation benefits, retirement benefits or for deferred compensation, profit-sharing, bonuses, stock options, stock appreciation rights or other forms of incentive compensation or post-retirement insurance, compensation or benefits which (i) is not an Employee Plan, (ii) is entered into, maintained or contributed to, as the case may be, by the Company, any Stockholder or any of their Affiliates and (iii) covers any employee or former employee of the Company. "Employee Plans" means each "employee benefit plan", as such term is defined in Section 3(3) of ERISA, that (i) is subject to any provision of ERISA and (ii) is maintained or contributed to by the Company or any of its ERISA Affiliates, as the case may be. "ERISA" means the Employment Retirement Income Security Act of 1974, as amended. "ERISA Affiliate" of any entity means any other entity that, together with such entity, would be treated as a single employer under Section 414 of the Code. "Multiemployer Plan" means each Employee Plan that is a multiemployer plan, as defined in Section 3(37) of ERISA. "PBGC" means the Pension Benefit Guaranty Corporation established and maintained within the United States Department of Labor pursuant to Section 4002 of ERISA. 9.02. ERISA Representations. The Company and each Stockholder, jointly and severally, hereby represent and warrant to Parent that: (a) Schedule 9.02 lists each Employee Plan that covers any employee of the Company, copies and descriptions of all of which have previously been made available or furnished to Parent. With respect to each Employee Plan, the Company has provided the three most recently filed Forms 5500 and an accurate summary description of such plan. The Company has provided Parent with complete age, salary, service and related data as of the most recent practicable date for employees of the Company. (b) Schedule 9.02 also includes a list of each Benefit Arrangement of the Company, copies and descriptions of which have been made available or furnished previously to Parent. (c) None of the Employee Plans or other arrangements listed on Schedule 9.02 covers any non-United States employee or former employee of the Company, except one employee of the Company located in England who is covered by the Employee Plans so designated on Schedule 9.02. (d) No "prohibited transaction", as defined in Section 406 of ERISA or Section 4975 of the Code, has occurred with respect to any Employee Plan. (e) No plan or arrangement listed on Schedule 9.02 is a Multiemployer Plan. Neither the Company nor any Subsidiary or ERISA Affiliate has ever contributed to or had an obligation to contribute to any Multiemployer Plan. (f) Each Employee Plan which is intended to be qualified under Section 401(a) of the Code is so qualified and has been so qualified during the period from its adoption to date, and each trust forming a part thereof is exempt from tax pursuant to Section 501(a) of the Code. The Company has furnished to Parent copies of the most recent Internal Revenue Service determination letters with respect to each such plan. Each Employee Plan has been maintained in compliance with its terms and with the requirements prescribed by any and all statutes, orders, rules and regulations, including but not limited to ERISA and the Code, which are applicable to such plan. (g) Each Benefit Arrangement has been maintained in substantial compliance with its terms and with the requirements prescribed by any and all statutes, orders, rules and regulations which are applicable to such Benefit Arrangement. (h) With respect to the employees and former employees of the Company, there are no employee post-retirement medical or health plans in effect, except as required by Section 4980B of the Code. (i) All contributions and payments accrued under each Employee Plan and Benefit Arrangement, determined in accordance with prior funding and accrual practices, as adjusted to include proportional accruals for the period ending on the Closing Date, will be discharged and paid on or prior to the Closing Date. Except as disclosed in writing to Parent prior to the date hereof, there has been no amendment to, written interpretation of or announcement (whether or not written) by the Company, any Stockholder or any of their ERISA Affiliates relating to, or change in employee participation or coverage under, any Employee Plan or Benefit Arrangement that would increase materially the expense of maintaining such Employee Plan or Benefit Arrangement above the level of the expense incurred in respect thereof for the year ended prior to the date hereof. (j) The Company does not have and has never had any Employee Plan subject to Title IV of ERISA (a "Defined Benefit Plan"). (k) No charge, complaint, action, suit, proceeding, hearing, investigation, claim or demand with respect to the administration or the investment of the assets of any Employee Plan maintained by the Company or to which the Company has contributed or the benefit of any current or former employee of the Company (other than routine claim for benefit) is pending. (l) There is no contract, agreement, plan or arrangement covering any employee or former employee of the Company that, individually or collectively, could give rise to the payment of any amount that would not be deductible pursuant to the terms of Section 280G of the Code. (m) No tax under Section 4980B of the Code has been incurred in respect of any Employee Plan that is a group health plan, as defined in Section 5000(b)(1) of the Code. (n) Except as set forth on Schedule 9.02, no employee of the Company will become entitled to any bonus, retirement, severance or similar benefit or enhanced benefit solely as a result of the transactions contemplated hereby. 9.03. No Third Party Beneficiaries. No provision of this Article IX shall create any third party beneficiary or other rights in any employee or former employee (including any beneficiary or dependent thereof) of the Company in respect of continued employment (or resumed employment) with the Company and no provision of this Article IX shall create any such rights in any such Persons in respect of any benefits that may be provided, directly or indirectly, under any Employee Plan or Benefit Arrangement or any plan or arrangement that may be established by Parent or any of its Affiliates. No provision of this Agreement shall constitute a limitation on rights to amend, modify or terminate after the Closing Date any Employee Plan or Benefit Arrangement. ARTICLE X CONDITIONS TO CLOSING 10.01. Conditions to the Obligations of Each Party. The obligations of Parent, Sub, the Company and the Stockholders to consummate the Closing are subject to the satisfaction or waiver of the following conditions: (a) No proceeding challenging this Agreement or the transactions contemplated hereby or seeking to prohibit, alter, prevent or materially delay the Closing shall have been instituted by any Person before any court, arbitrator or governmental body, agency or official and be pending. (b) All actions by or in respect of or filings with any governmental body, agency, official or authority required to permit the consummation of the Closing shall have been obtained. 10.02. Conditions to Obligations of Parent and Sub. The obligation of Parent and Sub to consummate the Closing is subject to the satisfaction or waiver of the following further conditions: (a)(i) the Company and each Stockholder shall have performed in all material respects all of its or his obligations hereunder required to be performed on or prior to the Closing Date, (ii) the representations and warranties of the Company and each Stockholder contained in this Agreement at the time of its execution and delivery and in any certificate or other writing delivered by the Company or such Stockholder pursuant hereto, disregarding all qualifications and exceptions contained therein relating to materiality or Material Adverse Effect, shall be true at and as of the Closing Date, as if made at and as of such date with only such exceptions as would not in the aggregate reasonably be expected to have a Material Adverse Effect and (iii) Parent shall have received a certificate signed by (A) the President of the Company and (B) each Stockholder to the foregoing effect. (b) No court, arbitrator or governmental body, agency or official shall have issued any order, and there shall not be any statute, rule or regulation, restraining the effective operation by Parent of the business of the Company after the Closing Date, and no proceeding challenging this Agreement or the transactions contemplated hereby or seeking to prohibit, alter, prevent or materially delay the Closing shall have been instituted by any Person before any court, arbitrator or governmental body, agency or official and be pending. (c) Parent shall have received an opinion of Company Counsel, dated the Closing Date, to the effect specified on Exhibit F. In rendering such opinion, such counsel may rely upon certificates of public officers, as to matters governed by the laws of jurisdictions other than the State of Delaware, the Commonwealth of Massachusetts or the federal laws of the United States of America, upon opinions of counsel reasonably satisfactory to Parent, copies of which shall be contemporaneously delivered to Parent, and as to matters of fact, upon certificates of the Stockholders and officers of the Company. (d) Each Stockholder and the Company shall have executed and delivered each of the Ancillary Agreements to be entered into by them or it at the Closing, in each case substantially in the form attached as an exhibit to this Agreement. (e) Parent shall have received all other closing documents specified in Section 2.02 of this Agreement and all other closing documents that it may reasonably request, all in form and substance reasonably satisfactory to Parent. (f) Price Waterhouse LLP shall have delivered to Parent its written opinion that it has no basis for believing that the transactions contemplated by this Agreement shall not be accounted for as a "pooling of interests" in accordance with generally accepted accounting principles, and Parent shall have no reason to believe that such accounting treatment will not be accepted by the Securities and Exchange Commission. (g) The Company shall deliver to Parent a properly executed statement in a form reasonably requested by Parent for purposes of satisfying Parent's obligations under Treasury Regulation 1.1445-2(c)(3). (h) Parent shall have received evidence satisfactory to it of the Stockholder's payment of all costs and expenses incurred by the Company or the Stockholders in connection with this Agreement. (i) Parent shall have received from the Company written evidence that (i) the execution, delivery and performance of the Agreement have been duly and validly approved and authorized by the Company's board of directors and by the stockholders of the Company and (ii) no stockholders of the Company have, or might be able to perfect, dissenters' or appraisal rights in connection with the Merger. (j) Parent shall have received evidence from the Company of its receipt of the exercise price for the Company Options. (k) The Company shall have received all of the consents and waivers set forth on Schedule 3.03, including but not limited to all necessary lender consents. (l) Price Waterhouse LLP shall have completed an audit, to Parent's satisfaction, of the balance sheet of the Company as of June 27, 1997 and the accompanying statements for the period then ended. The Company and the Stockholders shall cooperate fully with Parent and the accountants in connection with such audit. The expenses of such audit shall be shared equally between the Parent on the one hand and the Stockholders on the other hand; provided, however, that the maximum payment to be made by the Stockholders in connection with such audit shall not exceed $20,000 and provided, further, that the expenses of such audit shall be borne exclusively by Parent if the Merger is not consummated. Price Waterhouse LLP shall also have completed a review, to Parent's satisfaction, of the balance sheet of the Company as of October 31, 1997 and the accompanying statements for the period ended October 31, 1997. The Company and the Stockholders shall cooperate fully with Parent and the accountants in connection with such review. The expenses of such review shall be borne exclusively by the Parent. (m) As of the Closing Date, the Company shall have, and the President and Chief Financial Officer of the Company shall certify to the Parent that the Company has, Working Capital of at least $500,000. (n) Parent shall have completed, to its satisfaction, its financial, business and legal due diligence investigation of the Company by November 15, 1997. (o) Parent shall have received from the Company written evidence that all outstanding loans of the Company to the Stockholders have either been paid in full or have been evidenced by a payment schedule that has been approved by Parent. (p) Each of the employees of the Company shall have executed and delivered to Parent a non-competition, key employee or an employee agreement with Parent, as requested by Parent. (q) Parent shall have received from the Company good standing certificates from Delaware and from each state in which the Company is qualified to do business as a foreign corporation. 10.03. Conditions to Obligations of the Company. The obligation of the Company to consummate the Closing is subject to the satisfaction of the following further conditions: (a)(i) Parent and Sub shall have performed in all material respects all of their obligations hereunder required to be performed by them at or prior to the Closing Date, (ii) the representations and warranties of Parent and Sub contained in this Agreement at the time of its execution and delivery and in any certificate or other writing delivered by Parent or Sub pursuant hereto shall be true in all material respects at and as of the Closing Date, as if made at and as of such date and (iii) the Company shall have received a certificate signed by the Chief Financial Officer of Parent and the President of Sub to the foregoing effect. (b) No proceeding challenging this Agreement or the transactions contemplated hereby or seeking to prohibit, alter, prevent or materially delay the Closing shall have been instituted by any Person before any court, arbitrator or governmental body, agency or official and be pending. (c) The Company shall have received an opinion of Parent's Counsel, dated the Closing Date, to the effect specified in Sections 5.01 through 5.04 and that the shares of Parent Stock issued in the Merger will, when issued in accordance with the provisions of this Agreement, be duly authorized, validly issued, fully paid and nonassessable. In rendering such opinion, such counsel may rely upon certificates of public officers, as to matters governed by the laws of jurisdictions other than the Commonwealth of Massachusetts or the federal laws of the United States of America, upon opinions of counsel reasonably satisfactory to the Company, copies of which shall be contemporaneously delivered to the Company, and as to matters of fact, upon certificates of officers of Parent and Sub. (d) Parent and Sub shall have executed and delivered each of the Ancillary Agreements to be entered into by them at the Closing, in each case substantially in the form attached as an exhibit to this Agreement. (e) The Company and the Stockholders shall have received all items specified in Section 2.02 of this Agreement and all other closing documents that they may reasonably request, all in form and substance reasonably satisfactory to them. ARTICLE XI SURVIVAL; INDEMNIFICATION 11.01. Survival. The covenants contained in this Agreement shall survive the Closing and continue until the date set forth in each such covenant. The agreements, representations and warranties contained in this Agreement shall survive the Closing until the earlier of (i) the delivery by Price Waterhouse LLP of its report on Parent's financial statements for the fiscal year ended June 30, 1998 or (ii) the one (1) year anniversary of the Closing Date. Notwithstanding the preceding sentences, any covenant, agreement, representation or warranty in respect of which indemnity may be sought under Section 11.02 shall survive the time at which it would otherwise terminate pursuant to the preceding sentences, if notice of the inaccuracy or breach thereof giving rise to such right to indemnity shall have been given to the party against whom such indemnity may be sought prior to such time. 11.02. Indemnification (a) Each Principal Stockholder, jointly and severally, and each Stockholder who is not a Principal Stockholder, severally, hereby indemnifies Parent, Sub, and their respective subsidiaries, directors, officers, agents and affiliates and, effective at the Closing, without duplication, the Company (collectively, the "Parent Group") against and agrees to defend and hold them harmless from any and all damage, loss, liability and expense (including without limitation reasonable expenses of investigation and reasonable attorneys' fees and expenses in connection with any action, suit or proceeding) ("Damages") incurred or suffered by Parent, Sub or the Company arising out of (i) any inaccuracy in or breach or alleged breach of any agreement, representation or warranty of the Company (with respect to the Principal Stockholders only) or such Stockholder contained in or made pursuant to this Agreement or any certificate or other writing delivered pursuant hereto or in connection herewith, (ii) any failure by such Stockholder or the Company (with respect to the Principal Stockholders only) to perform any of their respective obligations or covenants as set forth in this Agreement or any certificate or other writing delivered pursuant hereto or in connection herewith, (iii) any and all actions, suits, litigation, arbitrations, proceedings, investigations or claims arising out of any of the foregoing and based on facts that have occurred on or prior to the Closing Date even though such action, suit, litigation, arbitration, proceeding, investigation or claim may not be filed or come to light until after the Closing Date and (iv) any and all actions, suits, litigation, arbitrations, proceedings, investigations or claims filed or made by Paul Stanovich, L.G.M. Technical Enterprises, Ltd., Bruce Fowler, Ken Chapman or Drumbeat Dimensions, Inc. (collectively, the "Claims"); provided that the Stockholders shall not be liable under this Section 11.02(a) unless the aggregate amount of Damages with respect to all matters referred to in this Section 11.02(a) exceeds $25,000; provided, further, that (i) once the Damages exceed $25,000, the Parent Group shall be entitled to indemnification for the full amount of such Damages and (ii) such indemnity obligations shall be satisfied by the Stockholders by transferring to Parent shares of Parent's common stock owned by the Stockholders having a value, as of the date hereof, equal to the amount of such Damages (any deficiency to be paid by such Stockholder in cash). The maximum liability of all the Stockholders, in the aggregate, pursuant to this Section 11.02(a) shall be the number of shares of Parent Stock received by the Stockholders (or the value thereof as of the Closing Date if previously sold) having an aggregate value, as of the date hereof, of $10,000,000. (b) The Stockholders shall have no right of indemnification, contribution or subrogation against the Company with respect to any indemnification by the Stockholders under this Section 11.02 if the transactions contemplated by this Agreement are consummated. (c) Parent hereby indemnifies the Stockholders, their respective agents and affiliates (the "Selling Group") against and agrees to defend and hold them harmless from any and all Damages incurred or suffered by the Selling Group arising out of any misrepresentation or breach of warranty, covenant or agreement made or to be performed by Parent pursuant to this Agreement, such indemnity obligations to be satisfied by Parent by issuing shares of its common stock having a value, as of the date hereof, equal to the amount of such Damages, provided, however, that such amount in the aggregate shall in no event exceed $10,000,000. 11.03. Procedures. The party seeking indemnification under Section 11.02 (the "Indemnified Party") agrees to give prompt notice to the party against whom indemnity is sought (the "Indemnifying Party") of the assertion of any claim, or the commencement of any suit, action or proceeding in respect of which indemnity may be sought under such Section. The Indemnifying Party may, and at the request of the Indemnified Party shall, participate in and control the defense of any third party suit, action or proceeding at its own expense. The Indemnifying Party shall not be liable under Section 11.02 for any settlement effected without its consent (which may not be unreasonably withheld or delayed) of any claim, litigation or proceeding in respect of which indemnity may be sought hereunder. 11.04. Holdback and Withholding Shares. At the Closing, the Stockholders shall be deemed to have directed Parent to withhold from delivery the Holdback Shares and the Withholding Shares. The Holdback Shares and the Withholding Shares shall be issued to the Stockholders but held in escrow by Parent subject to the terms and conditions hereinafter set forth. Holdback Shares and the Withholding Shares shall be considered issued and outstanding shares of capital stock of Parent and the Stockholders shall be entitled to vote such shares and receive any and all dividends or distributions payable with respect to such shares. 11.05. Holdback Termination. The Holdback Shares shall be distributed to the Stockholders as follows: (a) Within 30 days after the earlier to occur of (i) the delivery by Price Waterhouse LLP of its report on Parent's financial statements for the fiscal year ended June 30, 1998 or (ii) the one (1) year anniversary of the Closing Date, the Holdback Shares shall be distributed to the Stockholders, except that the portion of the Holdback Shares having a value as of the date hereof most nearly equal to the Damages incurred by Parent as to which a Claim shall have been previously and duly delivered to the Stockholders shall continue to be withheld in escrow. (b) The value of a Holdback Share as of the date hereof shall be equal to the Parent Stock Price (subject to appropriate adjustment in the event of a stock split or reverse stock split). The amount of such Damages shall be based upon a written certification of the Chief Executive Officer of Parent to the Stockholders as to the amount of Damages incurred, together with supporting documentation. If the Stockholders disagree with the amount of Damages set forth in such certificate, and if the Stockholders and Parent cannot reach a mutually satisfactory understanding with regard to the amount of Damages within five (5) business days after delivery of the certificate to the Stockholders, the matter shall be promptly submitted to binding arbitration in Boston, Massachusetts in accordance with the rules of the American Arbitration Association. The balance of the Holdback Shares not so withheld shall be distributed to the Stockholders. (c) The Holdback Shares not so distributed to the Stockholders pursuant to subsection 11.05(a) and 11.05(b) shall be retained by Parent in escrow until such pending Claims are resolved; provided, however, that upon the disposition of any such Claim prior to the disposition of all such Claims, Parent shall distribute to the Stockholders that amount of the Holdback Shares having a value as of the date hereof in excess of 100% of the aggregate amounts of the remaining Damages incurred as determined above. 11.06. Withholding Termination. (a) Within 25 business days after the Lapse Date (as defined in Section 6.04), the Withholding Shares shall be distributed to the Stockholders, except that the portion of the Withholding Shares having a value as of the date hereof most nearly equal to the Damages incurred by Parent as a result of or relating to a breach of the provisions of Section 6.04 hereof shall continue to be held in escrow. (b) The value of the Withholding Shares as of the date hereof shall be equal to the Parent Stock Price (subject to appropriate adjustment in the event of a stock split or reverse stock split). The amount of such Damages shall be based upon a written certification of the Chief Executive Officer of Parent to the Stockholders as to the amount of Damages incurred, together with supporting documentation. If the Stockholders disagree with the amount of Damages set forth in such certificate, and if the Stockholders and Parent cannot reach a mutually satisfactory understanding with regard to the amount of Damages within five (5) business days after delivery of the certificate to the Stockholders, the matter shall be promptly submitted to binding arbitration in Boston, Massachusetts in accordance with the rules of the American Arbitration Association. The balance of the Withholding Shares not so withheld shall be distributed to the Stockholders. (c) The Withholding Shares not so distributed to the Stockholders pursuant to subsection 11.06(a) and 11.06(b) shall be retained by Parent in escrow until such pending Claims are resolved; provided, however, that upon the disposition of any such Claim prior to the disposition of all such Claims, Parent shall distribute to the Stockholders that amount of the Withholding Shares having a value as of the date hereof in excess of 100% of the aggregate amounts of the remaining Damages incurred as determined above. ARTICLE XII MISCELLANEOUS 12.01. Notices. All notices and other communications which by any provision of this Agreement are required or permitted to be given shall be given in writing and shall be (a) mailed by first-class or express mail, postage prepaid, (b) sent by telex, telegram, telecopy or other form of rapid transmission, confirmed by mailing (by first class or express mail, postage prepaid) written confirmation at substantially the same time as such rapid transmission, or (c) personally delivered to the receiving party (which if other than an individual shall be an officer or other responsible party of the receiving party). All such notices and communications shall be mailed, sent or delivered as follows: if to Parent, Sub, or the Company to: PAREXEL International Corporation 195 West Street Waltham, MA 02154 Attn: William T. Sobo, Jr. Senior Vice President and Chief Financial Officer Telecopy: (617) 487-9931 with a copy to: William J. Schnoor, Jr. Testa, Hurwitz & Thibeault, LLP High Street Tower 125 High Street Boston, MA 02110 Telecopy: (617) 248-7100 if to the Stockholders to: Clarence A. Kemper 51 Baskin Road Lexington, MA 02173 P. Michael Masterson 217 Plymouth Road Newton, MA 02161 Mark A. Lester 5 Grantland Road Wellesley, MA 02181 Ronald Tetzlaff 3505 Goldenrod Drive Alpharetta, GA 30202 Alan R. Parenteau 8 Captain Forbush Lane Acton, MA 01720 Warren Handren 77 Winsor Avenue Johnston, RI 02919 David Hyde 27 Katherine Way Plaistow, NH 03865 Jon R. Voss 37 Hall Avenue Somerville, MA 02144 with a copy to: James E. Levin Carey & Levin 13 Water Street Holliston, MA 01746 Telecopy: (508) 429-8444 Notices shall be deemed duly delivered three business days after being sent by first class mail, postage prepaid, or one business day after being sent via a reputable nationwide express mail service. Notices delivered via any other means shall be deemed duly delivered upon actual receipt by the individual for whom such notice is intended. Any notice sent to a party hereto shall be sent simultaneously, by the same means, to such party's counsel, as set forth above. 12.02. Amendments; No Waivers. (a) Any provision of this Agreement may be amended or waived prior to the Closing Date if, and only if, such amendment or waiver is in writing and signed by Parent, Sub and the Company. (b) No failure or delay by either party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. 12.03. Expenses. All costs and expenses incurred in connection with this Agreement shall be paid by the party incurring such cost or expense; provided, however, that if the Closing shall occur all such costs and expenses incurred by the Company and the Stockholders shall be paid or reimbursed by the Stockholders. 12.04. Successors and Assigns. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns; provided that no party may assign, delegate or otherwise transfer any of his or its rights or obligations under this Agreement without the consent of the other parties hereto. 12.05. Further Assurances. From time to time after the Closing, at the request of Parent and without further consideration, the Stockholders will execute and deliver to Parent such other documents, and take such other action, at Parent's cost and expense, as Parent may reasonably request in order to consummate more effectively the transactions contemplated hereby. 12.06. Governing Law. This Agreement shall be construed in accordance with and governed by the law of the Commonwealth of Massachusetts, without regard to the conflicts of law rules of such state. 12.07. Counterparts; Effectiveness. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement shall become effective when each party hereto shall have received a counterpart hereof signed by the other parties hereto. 12.08. Entire Agreement. This Agreement (including the exhibits and schedules hereto) constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements, understandings and negotiations, whether written or oral, between the parties with respect to the subject matter hereof. No representation, inducement, promise, understanding, condition or warranty not set forth herein has been made or relied upon by either party hereto. Neither this Agreement nor any provision hereof is intended to confer upon any Person other than the parties hereto any rights or remedies hereunder. 12.09. Captions. The captions herein are included for convenience of reference only and shall be ignored in the construction or interpretation hereof. 12.10. Jurisdiction. Any action or proceeding seeking to enforce any provision of, or based on any right arising out of, this Agreement may be brought against any of the parties in the courts of the Commonwealth of Massachusetts, and each of the parties hereby consents to the jurisdiction of such courts (and of the appropriate appellate courts) in any such action or proceeding and waives any objection to venue laid therein. Process in any such action or proceeding may be served on any party anywhere in the world, whether within or without the Commonwealth of Massachusetts. IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written. PAREXEL INTERNATIONAL CORPORATION By: /s/ Josef H. von Rickenbach Name: Josef H. von Rickenbach Title: Chief Executive Officer KMI ACQUISITION CORPORATION By: /s/ Josef H. von Rickenbach Name: Josef H. von Rickenbach Title: Chief Executive Officer KEMPER-MASTERSON, INC. By: Clarence A. Kemper Name: Clarence A. Kember Title: President Clarence A. Kemper Clarence A. Kemper P. Michael Masterson P. Michael Masterson Warren Handren Warren Handren David Hyde David Hyde Mark A. Lester Mark A. Lester Alan R. Parenteau Alan R. Parenteau Ronald Tetzlaff Ronald Tetzlaff Jon R. Voss Jon R. Voss EX-4 3 Exhibit 4.3 REGISTRATION RIGHTS AGREEMENT AGREEMENT dated as of December 1, 1997 among PAREXEL International Corporation, a Massachusetts corporation (the "Company") and Clarence A. Kemper, P. Michael Masterson, Mark A. Lester, Ronald Tetzlaff, Alan R. Parenteau, Warren Handren, David Hyde and Jon R. Voss (individually, a "Stockholder," and collectively, the "Stockholders"). W I T N E S S E T H : WHEREAS, pursuant to the Agreement and Plan of Reorganization and Merger dated as of October 22, 1997 (the "Merger Agreement") among the Company, KMI Acquisition Corporation, a Massachusetts corporation ("Sub"), Kemper-Masterson, Inc., a Delaware corporation ("KMI") and the other parties named therein, Sub will be merged with and into KMI and KMI will become a wholly-owned subsidiary of the Company; WHEREAS, in connection therewith, the Stockholders will receive unregistered shares of Common Stock of the Company (the "Shares"); and WHEREAS, the Company and the Stockholders wish to set forth certain rights and obligations with regard to the registration of the Shares; NOW, THEREFORE, the parties hereto agree as follows: 1. Certain Definitions. As used in this Agreement, the following terms shall have the following respective meanings: "Commission" shall mean the Securities and Exchange Commission, or any other federal agency at the time administering the Securities Act. "Shares" shall mean the shares of Common Stock of the Company issued to the Stockholders on even date herewith pursuant to the Merger Agreement. "Common Stock" shall mean the Common Stock, $.01 par value, of the Company, as constituted as of the date of this Agreement. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, or any successor federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. "Registration Expenses" shall mean the expenses so described in Section 9. "Securities Act" shall mean the Securities Act of 1933, as amended, or any successor federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. "Selling Expenses" shall mean the expenses so described in Section 9. 2. Compliance with Securities Laws. The Stockholders represent and warrant that they: (a) have paid no brokerage or similar commissions in connection with the acquisition of the Shares. (b) are acquiring such Shares solely for their own account. (c) have provided such information as may reasonably have been requested by the Company in order for the Company or its counsel to evaluate the availability of an exemption under the Securities Act for the issuance of the Shares to the Stockholders. 3. Securities Act Matters. The Stockholders acknowledge and agree that the Shares have not been registered under the Securities Act or under the securities laws of any state, in reliance upon certain exemptive provisions of such statutes. The Stockholders recognize and acknowledge that such claims of exemption are based, in part, upon the Stockholders' representations contained in this Agreement. The Stockholders further recognize and acknowledge that, because the Shares are unregistered under federal and state laws, they are not presently eligible for public resale, and may only be resold in the future pursuant to an effective registration statement under the Securities Act and any applicable state securities laws, or pursuant to a valid exemption from such registration requirements. The Stockholders recognize and acknowledge that Rule 144 (which facilitates routine sales of securities in accordance with the terms and conditions of that Rule, including a holding period requirement) is not now available for resale of the Shares, and the Stockholders recognize and acknowledge that, in the absence of the availability of Rule 144, a sale pursuant to a claim of exemption from registration under the Securities Act would require compliance with some other exemption under the Securities Act, which may not be available for resale of the Shares. The Stockholders recognize and acknowledge that, except as set forth in this Agreement, the Company is under no obligation to register the Shares, either pursuant to the Securities Act or the securities laws of any state. 4. Restrictive Legend. Each certificate representing Shares shall, except as otherwise provided in this Section 4 or in Section 5, be stamped or otherwise imprinted with a legend substantially in the following form: "The Securities represented hereby have not been registered under the Securities Act of 1933, as amended, and may not be sold, transferred or otherwise disposed of except in accordance with the terms thereof and unless registered with the Securities and Exchange Commission of the United States and the securities regulatory authorities of certain states or unless an exemption from such registration is available." Such certificates shall not bear such legend if in the opinion of counsel satisfactory to the Company the securities being sold thereby may be publicly sold without registration under the Securities Act or if such securities have been sold pursuant to Rule 144, any other exemption under the Securities Act or an effective registration statement. 5. Notice of Proposed Transfer. Prior to any proposed transfer of any Shares before the expiration of the applicable holding period set forth in Rule 144, each Stockholder shall give written notice to the Company of his intention to effect such transfer. Prior to any registration statement described in Section 6 becoming effective, each such notice shall describe the manner of the proposed transfer and, if requested by the Company, shall be accompanied by an opinion of counsel satisfactory to the Company to the effect that the proposed transfer may be effected without registration under the Securities Act, whereupon the Stockholder shall be entitled to transfer such security in accordance with the terms of his notice. Each certificate for Shares transferred as above provided shall bear the legend set forth in Section 4, except that such certificate shall not bear such legend if (i) such transfer is in accordance with the provisions of Rule 144 (or any other rule permitting public sale without registration under the Securities Act), (ii) such transfer is pursuant to a registration under the Securities Act, or (iii) the opinion of counsel referred to above is to the further effect that the transferee and any subsequent transferee (other than an affiliate of the Company) would be entitled to transfer such securities in a public sale without registration under the Securities Act. 6. Required Registration. The Company agrees to use commercially reasonable efforts to (i) cause a registration statement on Form S-3 (the "Initial Registration Statement") or any successor form thereto under the Securities Act relating to the resale of fifty percent (50%) of the Shares to be filed no later than the 90th day following the date of the Merger Agreement; (ii) cause a registration statement on Form S-3 or any successor form thereto under the Securities Act (or an amendment to the Initial Registration Statement) relating to the resale of the remaining fifty percent (50%) of the Shares (including all of the Holdback Shares) to be filed approximately 180 days after the filing date of the Initial Registration Statement; and (iii) cause the Initial Registration Statement to become effective as soon as practicable after the filing of the Initial Registration Statement and thereafter remain effective until the earlier of (A) one year after the date of the Merger Agreement or (B) the sale of all Shares covered thereby. Anything to the contrary herein notwithstanding, the Company shall not be required to take any action to cause any registration statement to be declared effective by the Commission at any time prior to the publication by the Company of financial results including at least thirty (30) days' post-closing combined operating results of the Company and KMI (the "Pooling Restricted Period"), and the Company may suspend sales in accordance with Section 8 at any time under any registration statement immediately upon written notice to the Stockholders at their last known address, for any of the reasons and for the time periods set forth in Section 8. 7. Registration Procedures. If and whenever the Company is required by the provisions of Section 6 to use commercially reasonable efforts to effect the registration of any Shares under the Securities Act, the Company will, as expeditiously as possible: (a) prepare and file with the Commission such amendments and supplements to the applicable registration statement, and the prospectus used in connection therewith, as may be necessary to comply with the Securities Act; (b) furnish to the Stockholders such number of copies of the relevant registration statement and each amendment and supplement thereto (in each case including exhibits) and the prospectus included therein (including each preliminary prospectus) as they reasonably may request in order to facilitate the public sale or other disposition of the Shares covered by such registration statement; (c) register or qualify the Shares covered by the applicable registration statement under the securities or "blue sky" laws of the jurisdictions where the Company is currently registered or qualified, provided, however, that the Company shall not for any such purpose be required to qualify generally to transact business as a foreign corporation in any jurisdiction where it is not so qualified or to consent to general service of process in any such jurisdiction; (d) have the Shares covered by the applicable registration statement subject to quotation on the Nasdaq National Market; and (e) promptly notify each Stockholder (at his last known address) (i) of the effective date of the applicable registration statement and the date when any post-effective amendment to such registration statement becomes effective, (ii) of any stop order or notification from the Commission or any other jurisdiction as to the suspension of the effectiveness of such registration statement, or (iii) of the institution and ending of any suspension under Section 8. 8. Suspension. (a) The rights of the Stockholders to resell the Shares pursuant to this Agreement and the applicable registration statement may be suspended by the Company on the occurrence of any of the following events: (i) the Company has made a determination to conduct a public offering; (ii) the Company is about to make a public disclosure of information of a material nature; (iii) there then exists material, non-public information relating to the Company which, in the good faith determination of its Board of Directors, the disclosure of which would not be in the interests of the Company or its stockholders during that time; or (iv) the Company is engaged in any activity at any time that, in the good faith determination of its Board of Directors, would be adversely affected by the continued compliance with this Agreement or the continued distribution of the Shares by the Stockholders. (b) The Company shall use commercially reasonable efforts to minimize the length of any suspension: (i) under Section 8(a)(i), to a period of thirty (30) days, beginning on the day that notice of a suspension is given to the Stockholders and ending on the earlier of: (A) the date of disclosure of the public offering, or (B) the date which is 30 days after the beginning of the suspension, provided that during such suspension, the Company will proceed with commercially reasonable efforts to file the appropriate documentation in respect of, and otherwise complete, such public offering as expeditiously as practicable; (ii) under Section 8(a)(ii), to a period of three (3) business days; (iii) under Section 8(a)(iii) or 8(a)(iv), if the activity is a prospective acquisition by the Company, to a period beginning when the notice of suspension is given to the Stockholders and ending on the earliest of: (A) the date on which the Company publicly announces the acquisition, (B) the closing of the transaction and the making of all required filings under the Securities Act or Exchange Act, or (C) the date on which discussions regarding the acquisition are terminated; and (iv) under Section 8(a)(iii) or 8(a)(iv), for any reason other than a prospective acquisition by the Company, to a period beginning when the notice of suspension is given to the Stockholders and ending on the earlier of: (A) the disclosure of the activity, or (B) the reason is no longer operative (provided, however, that the Company shall not avail itself of the suspension rights contained in Section 8(a)(iv) more than once in every six (6) month period commencing on the date of effectiveness of the Registration Statement). 9. Expenses. All expenses incurred by the Company in complying with Section 6, including, without limitation, all registration and filing fees, printing expenses, fees and disbursements of counsel and independent public accountants for the Company, fees and expenses incurred in connection with complying with state securities or "blue sky" laws, fees of the National Association of Securities Dealers, Inc., transfer taxes, fees of transfer agents and registrars, and costs of issuance, but excluding any Selling Expenses, are called "Registration Expenses". All underwriting discounts (if any) and selling commissions applicable to the sale of the Shares covered by any registration statement, as well as all professional service fees incurred by the Stockholders, are called "Selling Expenses". All Selling Expenses shall be borne by the Stockholders. The Company will pay all Registration Expenses in connection with the preparation and filing of each registration statement. The Company shall not be obligated to pay any Registration Expenses in connection with the preparation and filing of any registration statement if such registration statement is withdrawn, delayed or abandoned for any reason by the Stockholders. 10. Indemnification and Contribution. (a) In connection with the registration of the Shares under the Securities Act pursuant to Section 6, the Company will indemnify and hold harmless each Stockholder, each underwriter of such Shares thereunder and each other person, if any, who controls such underwriter within the meaning of the Securities Act, against any losses, claims, damages or liabilities, joint or several, to which such Stockholder, underwriter or controlling person may become subject under the Securities Act, Exchange Act, state securities laws or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon (i) any untrue statement or alleged untrue statement of material fact contained in the registration statement under which such Shares were registered under the Securities Act pursuant to Section 6, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereto, (ii) the omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading or (iii) any violation by the Company or its agents of any rule or regulation promulgated under the Securities Act, Exchange Act or state securities laws applicable to the Company or its agents and relating to action or inaction required of the Company in connection with such registration, and the Company will reimburse each such Stockholder, each such underwriter and each such controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action, as such expenses are incurred, provided, however, that the Company will not be liable in any such case if and to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission so made based upon information furnished by any such Stockholder, any such underwriter or any such controlling person. (b) In connection with the registration of the Shares under the Securities Act pursuant to Section 6, the Stockholders will indemnify and hold harmless the Company, each person, if any, who controls the Company within the meaning of the Securities Act, each officer of the Company who signs such registration statement, each director of the Company, each underwriter and each person who controls any underwriter within the meaning of the Securities Act, against all losses, claims, damages or liabilities, joint or several, to which the Company or such officer, director, underwriter or controlling person may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon (i) the failure of the Stockholders to comply with the provisions of Section 13 herein or (ii) any untrue statement or alleged untrue statement of any material fact contained in the registration statement, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereto, or (iii) the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse the Company and each such officer, director, underwriter and controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action, as such expenses are incurred, provided, however, that the Stockholders will be liable hereunder in any such case if and only to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in reliance upon and based upon information pertaining to the Stockholders, furnished by or for the Stockholders in writing. (c) Promptly after receipt by an indemnified party hereunder of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party hereunder, notify the indemnifying party in writing thereof, but the omission so to notify the indemnifying party shall not relieve it from any liability which it may have to such indemnified party other than under this Section 10 and shall only relieve it from any liability which it may have to such indemnified party under this Section 10 if and to the extent the indemnifying party is prejudiced by such omission. In case any such action shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate in and, to the extent it shall wish, to assume and undertake the defense thereof with counsel satisfactory to such indemnified party, and, after notice from the indemnifying party to such indemnified party of its election so to assume and undertake the defense thereof and the approval by the indemnified party of the counsel chosen by the indemnifying party, the indemnifying party shall not be liable to such indemnified party under this Section 10 for any legal expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation and of liaison with counsel so selected, provided, however, that, if the defendants in any such action include both the indemnified party and the indemnifying party and if the interests of the indemnified party reasonably may be deemed to conflict with the interests of the indemnifying party, the indemnified party shall have the right to select a separate counsel and to assume such legal defenses and otherwise to participate in the defense of such action, with the expenses and fees of such separate counsel and other expenses related to such participation to be reimbursed by the indemnifying party as incurred. (d) In order to provide for just and equitable contribution to joint liability in any case in which either (i) a Stockholder exercises rights under this Agreement and makes a claim for indemnification pursuant to this Section 10 but it is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case notwithstanding the fact that this Section 10 provides for indemnification in such case, or (ii) contribution under the Securities Act may be required on the part of the Stockholder in circumstances for which indemnification is provided under this Section 10; then, and in each such case, the Company and the Stockholders will contribute to the aggregate losses, claims, damages or liabilities to which they may be subject (after contribution from others) in proportion to the relative fault of the Company, on the one hand, and the Stockholders, on the other hand; provided, however, that, in any such case, no person or entity guilty of fraudulent misrepresentation (within the meaning of Section 10(f) of the Securities Act) will be entitled to contribution from any person or entity who was not guilty of such fraudulent misrepresentation. (e) The indemnities provided in this Section 10 shall survive the transfer of any Shares by the Stockholder. 11. Reports Under Securities Exchange Act of 1934. With a view to making available to each of the Stockholders the benefits of Rule 144 promulgated under the Securities Act and any other rule or regulation thereunder that may at any time permit any such Stockholder to sell securities of the Company to the public without registration, the Company agrees to: (a) make and keep public information available, as those terms are understood and defined in Rule 144; (b) maintain registration of its Common Stock under Section 12 of the Exchange Act; (c) file in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act; and (d) furnish to any such Stockholder, so long as the Stockholder owns any Shares, forthwith upon request: (i) a written statement by the Company that it has complied with the reporting requirements of Rule 144, (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company; and (iii) such other information as may be reasonably requested in availing the Stockholder of any rule or regulation under the Securities Act which permits the selling of any such securities without registration or pursuant to such form. 12. Changes in Common Stock. If, and as often as, there is any change in the Common Stock by way of a stock split, stock dividend, combination or reclassification, or through a merger, consolidation, reorganization or recapitalization, or by any other means, appropriate adjustment shall be made in the provisions hereof so that the rights and privileges granted hereby shall continue with respect to the Shares as so changed. 13. Stockholder's Conduct. With respect to any sale of Shares covered by a registration statement, each Stockholder understands and agrees as follows: (a) Each Stockholder will carefully review the information concerning him contained in any registration statement and will promptly notify the Company if such information is not complete and accurate in all respects, including having properly disclosed any position, office or other material relationship within the past three years with the Company or its affiliates; (b) Each Stockholder agrees to sell Shares only in the manner set forth in (i) the applicable registration statement (or in compliance with Section 5 hereof), (ii) the Affiliate Agreement (as defined in the Merger Agreement) and (iii) Section 14; (c) Each Stockholder agrees to comply with the anti- manipulation rules under the Exchange Act in connection with purchases and sales of securities of the Company during the time any registration statement remains effective; (d) Each Stockholder agrees to only sell Shares in a jurisdiction after counsel for the Company has advised that such sale is permissible under the applicable state securities or "Blue Sky" laws; (e) Each Stockholder agrees to comply with the prospectus delivery requirements of the Securities Act; (f) Each Stockholder agrees to promptly notify the Company of any and all planned sales and completed sales of Shares; and (g) Each Stockholder agrees to suspend sales during the periods when sales are to be suspended pursuant to Section 8. (h) In connection with the registration of the Shares, each Stockholder will furnish to the Company in writing such information requested by the Company with respect to himself and the proposed distribution by him as shall be necessary in order to comply with federal and applicable state securities laws. (i) Each Stockholder hereby agrees that he will not sell, exchange, transfer, pledge, dispose or otherwise reduce his risk relative to any Shares owned by him during the period which begins on the date hereof and ends at such time as the Company publicly announces financial results covering at least thirty days of combined operations of the Company and KMI. The Company, at its discretion, may cause stop transfer orders to be placed with its transfer agent with respect to the certificates representing the Shares, provided that such stop transfer orders are consistent with the other provisions of this Agreement. 14. Selling Procedures. (a) Each Stockholder will notify the Company of his intention to sell Shares under any registration statement not less than five (5) business days prior to the expected date of such sale by faxing the "Takedown Request" attached hereto as Exhibit A to: Testa, Hurwitz & Thibeault, LLP 125 High Street High Street Tower Boston, Massachusetts 02110 Attn: William J. Schnoor, Jr. Phone: (617) 248-7278 Facsimile: (617) 248-7100 During this period, the Company will review the prospectus to determine if a suspension pursuant to Section 8 is necessary or appropriate. If the Company does not notify the Stockholder of a suspension pursuant to Section 8, the Stockholder may conclude the proposed sale, on the proposed date of sale, strictly in accordance with the Takedown Request. (b) Each Stockholder will notify the Company of each sale under any registration statement in accordance with the Takedown Request within 24 hours of the sale by faxing the "Notification of Sale" attached hereto as Exhibit B to: Testa, Hurwitz & Thibeault, LLP 125 High Street High Street Tower Boston, Massachusetts 02110 Attn: William J. Schnoor, Jr. Phone: (617) 248-7278 Facsimile: (617) 248-7100 Based on the information set forth on the Notification of Sale, the Company will prepare or cause to be prepared the appropriate notifications to its Transfer Agent to remove the legend described in Section 4 from the Shares so sold. 15. Representations and Covenants. Each Stockholder hereby represents and warrants to the Company as follows: (a) THE STOCKHOLDER UNDERSTANDS THAT HIS INVESTMENT IN THE SHARES INVOLVES RISK. (b) THE STOCKHOLDER HAS CONSULTED HIS OWN ATTORNEY(S), ACCOUNTANT(S) OR INVESTMENT ADVISOR(S) WITH RESPECT TO THE INVESTMENT CONTEMPLATED HEREBY AND ITS SUITABILITY FOR THE STOCKHOLDER. ANY SPECIFIC ACKNOWLEDGMENT SET FORTH BELOW WITH RESPECT TO ANY STATEMENT OR INFORMATION FURNISHED TO THE STOCKHOLDER SHALL NOT BE DEEMED TO LIMIT THE GENERALITY OF THIS REPRESENTATION AND WARRANTY. (c) The Stockholder understands that he must bear the economic risk of this investment until such time as the Shares are registered; that the Shares are not currently registered under the Securities Act, and, therefore, cannot be resold unless they are subsequently registered under the Securities Act or unless an exemption from such registration is available; that the Stockholder is purchasing the Shares with no present view toward resale or other distribution thereof; and that the Stockholder agrees not to resell or otherwise dispose of all or any part of the Shares, except as permitted by law, including, without limitation, any and all applicable provisions of the Merger Agreement and this Agreement and any regulations under the Securities Act and applicable state securities laws. (d) The Stockholder has adequate means of providing for his current needs and personal contingencies and has no need for liquidity in connection with this investment in the Shares. (e) The Stockholder has reviewed the representations and warranties of the Company set forth in the Merger Agreement, as well as the information provided to the Stockholder by the Company pursuant to Section 5.05 of the Merger Agreement and has consulted with his personal legal and financial advisors in evaluating the merits and risks of the investment in the Shares. (f) The Stockholder received an offer concerning the Shares and first learned of this investment in the state or other jurisdiction listed in the Stockholder's residence address on the signature page hereto, and intends that the state securities laws of that state or other jurisdiction alone govern this transaction. (g) The Stockholder hereby acknowledges receipt of the documents described in Section 5.05 of the Merger Agreement, which documents each Stockholder has reviewed. The Stockholder further acknowledges and warrants that, prior to the execution of this Agreement, he has had the opportunity to ask questions and receive answers from the Company and KMI concerning the terms and conditions of the transactions contemplated by the Merger Agreement and the issuance of the Shares, and concerning any of the documents identified above, and to obtain such additional further information from the Company and KMI as he has deemed necessary to verify the accuracy of the information contained in the documents identified above or any other information furnished to the Stockholder. (h) The Stockholder has been advised that, as of the date hereof, he may be deemed to be an "affiliate" of KMI, as the term "affiliate" is used in and for purposes of Accounting Series Releases 130 and 135, as amended, of the Commission. (i) The Stockholder understands that the representations, warranties and covenants set forth herein will be relied upon by KMI, the Company, the stockholders of the Company and their respective counsel and accounting firms. (j) The Stockholder hereby represents and warrants that he has not sold, exchanged, transferred, pledged, disposed or otherwise reduced his risk relative to any shares of KMI common stock owned by him during the 30 day period preceding the date hereof. 16. Miscellaneous. (a) All covenants and agreements contained in this Agreement by or on behalf of any of the parties hereto shall bind and inure to the benefit of the respective successors and assigns of the parties hereto (including without limitation transferees of any Shares, provided, that such transferee executes a counterpart signature page to this Agreement), whether so expressed or not. (b) All notices and other communications which by any provision of this Agreement are required or permitted to be given shall be given in writing and shall be (a) mailed by first-class or express mail, postage prepaid, (b) sent by telex, telegram, telecopy or other form of rapid transmission, confirmed by mailing (by first class or express mail, postage prepaid) written confirmation at substantially the same time as such rapid transmission, or (c) personally delivered to the receiving party (which if other than an individual shall be an officer or other responsible party of the receiving party). All such notices and communications shall be mailed, sent or delivered as follows: if to the Company, to: PAREXEL International Corporation 195 West Street Waltham, MA 02154 Attn: William T. Sobo, Jr. Senior Vice President and Chief Financial Officer Telecopy: (617) 487-9931 with a copy to: William J. Schnoor, Jr. Testa, Hurwitz & Thibeault, LLP 125 High Street High Street Tower Boston, MA 02110 Telecopy: (617) 248-7100 if to the Stockholders, to: Clarence A. Kemper 51 Baskin Road Lexington, MA 02173 P. Michael Masterson 217 Plymouth Road Newton, MA 02161 Mark A. Lester 5 Grantland Road Wellesley, MA 02181 Ronald Tetzlaff 3505 Goldenrod Drive Alpharetta, GA 30202 Alan R. Parenteau 8 Captain Forbush Lane Acton, MA 01720 Warren Handren 77 Winsor Avenue Johnston, RI 02919 David Hyde 27 Katherine Way Plaistow, NH 03865 Jon R. Voss 37 Hall Avenue Somerville, MA 02144 with a copy to: James E. Levin, Esq. Carey & Levin 13 Water Street Holliston, MA 01746 Telecopy: (508) 429-8444 if to any subsequent holder of Shares, to it at such address as may have been furnished to the Company in writing by such Stockholder; or, in any case, at such other address or addresses as shall have been furnished in writing to the Company (in the case of a Stockholder) or to the Stockholders (in the case of the Company) in accordance with the provisions of this paragraph. Notices shall be deemed duly delivered three business days after being sent by first class mail, postage prepaid, or one business day after being sent via a reputable nationwide express mail service. Notices delivered via any other means shall be deemed duly delivered upon actual receipt by the individual for whom such notice is intended. Any notice delivered to a party hereunder shall be sent simultaneously, by the same means, to such party's counsel as set forth above. (c) This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts. (d) This Agreement may be amended or modified, and provisions hereof may be waived, with the written consent of the Company and the holders of at least a majority of the outstanding Shares. (e) This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. (f) If any provision of this Agreement shall be held to be illegal, invalid or unenforceable, such illegality, invalidity or unenforceability shall attach only to such provision and shall not in any manner affect or render illegal, invalid or unenforceable any other provision of this Agreement, and this Agreement shall be carried out as if any such illegal, invalid or unenforceable provision were not contained herein. IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written. PAREXEL International Corporation By: Josef H. von Rickenbach Name: Josef H. von Rickenbach Title: President and CEO Clarence A. Kemper Clarence A. Kemper P. Micheal Masterson P. Michael Masterson Mark A. Lester Mark A. Lester Ronald Tetzlaff Ronald Tetzlaff Alan R. Parenteau Alan R. Parenteau Warren Handren Warren Handren David Hyde David Hyde Jon R. Voss Jon R. Voss [You must complete pages _____ of this Agreement] CLARENCE A. KEMPER Principal Residence Address: Note: Non-principal residence addresses and post office boxes cannot be accepted. _______________________________________________ (Number and Street) _______________________________________________ (City, State) (Zip Code) _______________________________________________ (Residence Telephone) Mailing Address (if different from above): _______________________________________________ (Number and Street) _______________________________________________ (City, State) (Zip Code) Citizenship:_____________________________________ Social Security or Taxpayer I.D. No.:_________________ If the Stockholder is a natural person and is an accredited investor described by category 12 or 13 (or both) set forth on the attached Exhibit C, please check this box. If the Stockholder has not checked the box above, please check this box if at least one of the categories set forth on the attached Exhibit C describes you. P. MICHAEL MASTERSON Principal Residence Address: Note: Non-principal residence addresses and post office boxes cannot be accepted. _______________________________________________ (Number and Street) _______________________________________________ (City, State) (Zip Code) _______________________________________________ (Residence Telephone) Mailing Address (if different from above): _______________________________________________ (Number and Street) _______________________________________________ (City, State) (Zip Code) Citizenship:_____________________________________ Social Security or Taxpayer I.D. No.:_________________ If the Stockholder is a natural person and is an accredited investor described by category 12 or 13 (or both) set forth on the attached Exhibit C, please check this box. If the Stockholder has not checked the box above, please check this box if at least one of the categories set forth on the attached Exhibit C describes you. MARK A. LESTER Principal Residence Address: Note: Non-principal residence addresses and post office boxes cannot be accepted. _______________________________________________ (Number and Street) _______________________________________________ (City, State) (Zip Code) _______________________________________________ (Residence Telephone) Mailing Address (if different from above): _______________________________________________ (Number and Street) _______________________________________________ (City, State) (Zip Code) Citizenship:_____________________________________ Social Security or Taxpayer I.D. No.:_________________ If the Stockholder is a natural person and is an accredited investor described by category 12 or 13 (or both) set forth on the attached Exhibit C, please check this box. If the Stockholder has not checked the box above, please check this box if at least one of the categories set forth on the attached Exhibit C describes you. RONALD TETZLAFF Principal Residence Address: Note: Non-principal residence addresses and post office boxes cannot be accepted. _______________________________________________ (Number and Street) _______________________________________________ (City, State) (Zip Code) _______________________________________________ (Residence Telephone) Mailing Address (if different from above): _______________________________________________ (Number and Street) _______________________________________________ (City, State) (Zip Code) Citizenship:_____________________________________ Social Security or Taxpayer I.D. No.:_________________ If the Stockholder is a natural person and is an accredited investor described by category 12 or 13 (or both) set forth on the attached Exhibit C, please check this box. If the Stockholder has not checked the box above, please check this box if at least one of the categories set forth on the attached Exhibit C describes you. ALAN R. PARENTEAU Principal Residence Address: Note: Non-principal residence addresses and post office boxes cannot be accepted. _______________________________________________ (Number and Street) _______________________________________________ (City, State) (Zip Code) _______________________________________________ (Residence Telephone) Mailing Address (if different from above): _______________________________________________ (Number and Street) _______________________________________________ (City, State) (Zip Code) Citizenship:_____________________________________ Social Security or Taxpayer I.D. No.:_________________ If the Stockholder is a natural person and is an accredited investor described by category 12 or 13 (or both) set forth on the attached Exhibit C, please check this box. If the Stockholder has not checked the box above, please check this box if at least one of the categories set forth on the attached Exhibit C describes you. WARREN HANDREN Principal Residence Address: Note: Non-principal residence addresses and post office boxes cannot be accepted. _______________________________________________ (Number and Street) _______________________________________________ (City, State) (Zip Code) _______________________________________________ (Residence Telephone) Mailing Address (if different from above): _______________________________________________ (Number and Street) _______________________________________________ (City, State) (Zip Code) Citizenship:_____________________________________ Social Security or Taxpayer I.D. No.:_________________ If the Stockholder is a natural person and is an accredited investor described by category 12 or 13 (or both) set forth on the attached Exhibit C, please check this box. If the Stockholder has not checked the box above, please check this box if at least one of the categories set forth on the attached Exhibit C describes you. DAVID HYDE Principal Residence Address: Note: Non-principal residence addresses and post office boxes cannot be accepted. _______________________________________________ (Number and Street) _______________________________________________ (City, State) (Zip Code) _______________________________________________ (Residence Telephone) Mailing Address (if different from above): _______________________________________________ (Number and Street) _______________________________________________ (City, State) (Zip Code) Citizenship:_____________________________________ Social Security or Taxpayer I.D. No.:_________________ If the Stockholder is a natural person and is an accredited investor described by category 12 or 13 (or both) set forth on the attached Exhibit C, please check this box. If the Stockholder has not checked the box above, please check this box if at least one of the categories set forth on the attached Exhibit C describes you. JON R. VOSS Principal Residence Address: Note: Non-principal residence addresses and post office boxes cannot be accepted. _______________________________________________ (Number and Street) _______________________________________________ (City, State) (Zip Code) _______________________________________________ (Residence Telephone) Mailing Address (if different from above): _______________________________________________ (Number and Street) _______________________________________________ (City, State) (Zip Code) Citizenship:_____________________________________ Social Security or Taxpayer I.D. No.:_________________ If the Stockholder is a natural person and is an accredited investor described by category 12 or 13 (or both) set forth on the attached Exhibit C, please check this box. If the Stockholder has not checked the box above, please check this box if at least one of the categories set forth on the attached Exhibit C describes you. EX-4 4 Exhibit 4.3 REGISTRATION RIGHTS AGREEMENT AGREEMENT dated as of December 1, 1997 among PAREXEL International Corporation, a Massachusetts corporation (the "Company") and Clarence A. Kemper, P. Michael Masterson, Mark A. Lester, Ronald Tetzlaff, Alan R. Parenteau, Warren Handren, David Hyde and Jon R. Voss (individually, a "Stockholder," and collectively, the "Stockholders"). W I T N E S S E T H : WHEREAS, pursuant to the Agreement and Plan of Reorganization and Merger dated as of October 22, 1997 (the "Merger Agreement") among the Company, KMI Acquisition Corporation, a Massachusetts corporation ("Sub"), Kemper-Masterson, Inc., a Delaware corporation ("KMI") and the other parties named therein, Sub will be merged with and into KMI and KMI will become a wholly-owned subsidiary of the Company; WHEREAS, in connection therewith, the Stockholders will receive unregistered shares of Common Stock of the Company (the "Shares"); and WHEREAS, the Company and the Stockholders wish to set forth certain rights and obligations with regard to the registration of the Shares; NOW, THEREFORE, the parties hereto agree as follows: 1. Certain Definitions. As used in this Agreement, the following terms shall have the following respective meanings: "Commission" shall mean the Securities and Exchange Commission, or any other federal agency at the time administering the Securities Act. "Shares" shall mean the shares of Common Stock of the Company issued to the Stockholders on even date herewith pursuant to the Merger Agreement. "Common Stock" shall mean the Common Stock, $.01 par value, of the Company, as constituted as of the date of this Agreement. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, or any successor federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. "Registration Expenses" shall mean the expenses so described in Section 9. "Securities Act" shall mean the Securities Act of 1933, as amended, or any successor federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. "Selling Expenses" shall mean the expenses so described in Section 9. 2. Compliance with Securities Laws. The Stockholders represent and warrant that they: (a) have paid no brokerage or similar commissions in connection with the acquisition of the Shares. (b) are acquiring such Shares solely for their own account. (c) have provided such information as may reasonably have been requested by the Company in order for the Company or its counsel to evaluate the availability of an exemption under the Securities Act for the issuance of the Shares to the Stockholders. 3. Securities Act Matters. The Stockholders acknowledge and agree that the Shares have not been registered under the Securities Act or under the securities laws of any state, in reliance upon certain exemptive provisions of such statutes. The Stockholders recognize and acknowledge that such claims of exemption are based, in part, upon the Stockholders' representations contained in this Agreement. The Stockholders further recognize and acknowledge that, because the Shares are unregistered under federal and state laws, they are not presently eligible for public resale, and may only be resold in the future pursuant to an effective registration statement under the Securities Act and any applicable state securities laws, or pursuant to a valid exemption from such registration requirements. The Stockholders recognize and acknowledge that Rule 144 (which facilitates routine sales of securities in accordance with the terms and conditions of that Rule, including a holding period requirement) is not now available for resale of the Shares, and the Stockholders recognize and acknowledge that, in the absence of the availability of Rule 144, a sale pursuant to a claim of exemption from registration under the Securities Act would require compliance with some other exemption under the Securities Act, which may not be available for resale of the Shares. The Stockholders recognize and acknowledge that, except as set forth in this Agreement, the Company is under no obligation to register the Shares, either pursuant to the Securities Act or the securities laws of any state. 4. Restrictive Legend. Each certificate representing Shares shall, except as otherwise provided in this Section 4 or in Section 5, be stamped or otherwise imprinted with a legend substantially in the following form: "The Securities represented hereby have not been registered under the Securities Act of 1933, as amended, and may not be sold, transferred or otherwise disposed of except in accordance with the terms thereof and unless registered with the Securities and Exchange Commission of the United States and the securities regulatory authorities of certain states or unless an exemption from such registration is available." Such certificates shall not bear such legend if in the opinion of counsel satisfactory to the Company the securities being sold thereby may be publicly sold without registration under the Securities Act or if such securities have been sold pursuant to Rule 144, any other exemption under the Securities Act or an effective registration statement. 5. Notice of Proposed Transfer. Prior to any proposed transfer of any Shares before the expiration of the applicable holding period set forth in Rule 144, each Stockholder shall give written notice to the Company of his intention to effect such transfer. Prior to any registration statement described in Section 6 becoming effective, each such notice shall describe the manner of the proposed transfer and, if requested by the Company, shall be accompanied by an opinion of counsel satisfactory to the Company to the effect that the proposed transfer may be effected without registration under the Securities Act, whereupon the Stockholder shall be entitled to transfer such security in accordance with the terms of his notice. Each certificate for Shares transferred as above provided shall bear the legend set forth in Section 4, except that such certificate shall not bear such legend if (i) such transfer is in accordance with the provisions of Rule 144 (or any other rule permitting public sale without registration under the Securities Act), (ii) such transfer is pursuant to a registration under the Securities Act, or (iii) the opinion of counsel referred to above is to the further effect that the transferee and any subsequent transferee (other than an affiliate of the Company) would be entitled to transfer such securities in a public sale without registration under the Securities Act. 6. Required Registration. The Company agrees to use commercially reasonable efforts to (i) cause a registration statement on Form S-3 (the "Initial Registration Statement") or any successor form thereto under the Securities Act relating to the resale of fifty percent (50%) of the Shares to be filed no later than the 90th day following the date of the Merger Agreement; (ii) cause a registration statement on Form S-3 or any successor form thereto under the Securities Act (or an amendment to the Initial Registration Statement) relating to the resale of the remaining fifty percent (50%) of the Shares (including all of the Holdback Shares) to be filed approximately 180 days after the filing date of the Initial Registration Statement; and (iii) cause the Initial Registration Statement to become effective as soon as practicable after the filing of the Initial Registration Statement and thereafter remain effective until the earlier of (A) one year after the date of the Merger Agreement or (B) the sale of all Shares covered thereby. Anything to the contrary herein notwithstanding, the Company shall not be required to take any action to cause any registration statement to be declared effective by the Commission at any time prior to the publication by the Company of financial results including at least thirty (30) days' post-closing combined operating results of the Company and KMI (the "Pooling Restricted Period"), and the Company may suspend sales in accordance with Section 8 at any time under any registration statement immediately upon written notice to the Stockholders at their last known address, for any of the reasons and for the time periods set forth in Section 8. 7. Registration Procedures. If and whenever the Company is required by the provisions of Section 6 to use commercially reasonable efforts to effect the registration of any Shares under the Securities Act, the Company will, as expeditiously as possible: (a) prepare and file with the Commission such amendments and supplements to the applicable registration statement, and the prospectus used in connection therewith, as may be necessary to comply with the Securities Act; (b) furnish to the Stockholders such number of copies of the relevant registration statement and each amendment and supplement thereto (in each case including exhibits) and the prospectus included therein (including each preliminary prospectus) as they reasonably may request in order to facilitate the public sale or other disposition of the Shares covered by such registration statement; (c) register or qualify the Shares covered by the applicable registration statement under the securities or "blue sky" laws of the jurisdictions where the Company is currently registered or qualified, provided, however, that the Company shall not for any such purpose be required to qualify generally to transact business as a foreign corporation in any jurisdiction where it is not so qualified or to consent to general service of process in any such jurisdiction; (d) have the Shares covered by the applicable registration statement subject to quotation on the Nasdaq National Market; and (e) promptly notify each Stockholder (at his last known address) (i) of the effective date of the applicable registration statement and the date when any post-effective amendment to such registration statement becomes effective, (ii) of any stop order or notification from the Commission or any other jurisdiction as to the suspension of the effectiveness of such registration statement, or (iii) of the institution and ending of any suspension under Section 8. 8. Suspension. (a) The rights of the Stockholders to resell the Shares pursuant to this Agreement and the applicable registration statement may be suspended by the Company on the occurrence of any of the following events: (i) the Company has made a determination to conduct a public offering; (ii) the Company is about to make a public disclosure of information of a material nature; (iii) there then exists material, non-public information relating to the Company which, in the good faith determination of its Board of Directors, the disclosure of which would not be in the interests of the Company or its stockholders during that time; or (iv) the Company is engaged in any activity at any time that, in the good faith determination of its Board of Directors, would be adversely affected by the continued compliance with this Agreement or the continued distribution of the Shares by the Stockholders. (b) The Company shall use commercially reasonable efforts to minimize the length of any suspension: (i) under Section 8(a)(i), to a period of thirty (30) days, beginning on the day that notice of a suspension is given to the Stockholders and ending on the earlier of: (A) the date of disclosure of the public offering, or (B) the date which is 30 days after the beginning of the suspension, provided that during such suspension, the Company will proceed with commercially reasonable efforts to file the appropriate documentation in respect of, and otherwise complete, such public offering as expeditiously as practicable; (ii) under Section 8(a)(ii), to a period of three (3) business days; (iii) under Section 8(a)(iii) or 8(a)(iv), if the activity is a prospective acquisition by the Company, to a period beginning when the notice of suspension is given to the Stockholders and ending on the earliest of: (A) the date on which the Company publicly announces the acquisition, (B) the closing of the transaction and the making of all required filings under the Securities Act or Exchange Act, or (C) the date on which discussions regarding the acquisition are terminated; and (iv) under Section 8(a)(iii) or 8(a)(iv), for any reason other than a prospective acquisition by the Company, to a period beginning when the notice of suspension is given to the Stockholders and ending on the earlier of: (A) the disclosure of the activity, or (B) the reason is no longer operative (provided, however, that the Company shall not avail itself of the suspension rights contained in Section 8(a)(iv) more than once in every six (6) month period commencing on the date of effectiveness of the Registration Statement). 9. Expenses. All expenses incurred by the Company in complying with Section 6, including, without limitation, all registration and filing fees, printing expenses, fees and disbursements of counsel and independent public accountants for the Company, fees and expenses incurred in connection with complying with state securities or "blue sky" laws, fees of the National Association of Securities Dealers, Inc., transfer taxes, fees of transfer agents and registrars, and costs of issuance, but excluding any Selling Expenses, are called "Registration Expenses". All underwriting discounts (if any) and selling commissions applicable to the sale of the Shares covered by any registration statement, as well as all professional service fees incurred by the Stockholders, are called "Selling Expenses". All Selling Expenses shall be borne by the Stockholders. The Company will pay all Registration Expenses in connection with the preparation and filing of each registration statement. The Company shall not be obligated to pay any Registration Expenses in connection with the preparation and filing of any registration statement if such registration statement is withdrawn, delayed or abandoned for any reason by the Stockholders. 10. Indemnification and Contribution. (a) In connection with the registration of the Shares under the Securities Act pursuant to Section 6, the Company will indemnify and hold harmless each Stockholder, each underwriter of such Shares thereunder and each other person, if any, who controls such underwriter within the meaning of the Securities Act, against any losses, claims, damages or liabilities, joint or several, to which such Stockholder, underwriter or controlling person may become subject under the Securities Act, Exchange Act, state securities laws or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon (i) any untrue statement or alleged untrue statement of material fact contained in the registration statement under which such Shares were registered under the Securities Act pursuant to Section 6, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereto, (ii) the omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading or (iii) any violation by the Company or its agents of any rule or regulation promulgated under the Securities Act, Exchange Act or state securities laws applicable to the Company or its agents and relating to action or inaction required of the Company in connection with such registration, and the Company will reimburse each such Stockholder, each such underwriter and each such controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action, as such expenses are incurred, provided, however, that the Company will not be liable in any such case if and to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission so made based upon information furnished by any such Stockholder, any such underwriter or any such controlling person. (b) In connection with the registration of the Shares under the Securities Act pursuant to Section 6, the Stockholders will indemnify and hold harmless the Company, each person, if any, who controls the Company within the meaning of the Securities Act, each officer of the Company who signs such registration statement, each director of the Company, each underwriter and each person who controls any underwriter within the meaning of the Securities Act, against all losses, claims, damages or liabilities, joint or several, to which the Company or such officer, director, underwriter or controlling person may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon (i) the failure of the Stockholders to comply with the provisions of Section 13 herein or (ii) any untrue statement or alleged untrue statement of any material fact contained in the registration statement, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereto, or (iii) the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse the Company and each such officer, director, underwriter and controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action, as such expenses are incurred, provided, however, that the Stockholders will be liable hereunder in any such case if and only to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in reliance upon and based upon information pertaining to the Stockholders, furnished by or for the Stockholders in writing. (c) Promptly after receipt by an indemnified party hereunder of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party hereunder, notify the indemnifying party in writing thereof, but the omission so to notify the indemnifying party shall not relieve it from any liability which it may have to such indemnified party other than under this Section 10 and shall only relieve it from any liability which it may have to such indemnified party under this Section 10 if and to the extent the indemnifying party is prejudiced by such omission. In case any such action shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate in and, to the extent it shall wish, to assume and undertake the defense thereof with counsel satisfactory to such indemnified party, and, after notice from the indemnifying party to such indemnified party of its election so to assume and undertake the defense thereof and the approval by the indemnified party of the counsel chosen by the indemnifying party, the indemnifying party shall not be liable to such indemnified party under this Section 10 for any legal expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation and of liaison with counsel so selected, provided, however, that, if the defendants in any such action include both the indemnified party and the indemnifying party and if the interests of the indemnified party reasonably may be deemed to conflict with the interests of the indemnifying party, the indemnified party shall have the right to select a separate counsel and to assume such legal defenses and otherwise to participate in the defense of such action, with the expenses and fees of such separate counsel and other expenses related to such participation to be reimbursed by the indemnifying party as incurred. (d) In order to provide for just and equitable contribution to joint liability in any case in which either (i) a Stockholder exercises rights under this Agreement and makes a claim for indemnification pursuant to this Section 10 but it is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case notwithstanding the fact that this Section 10 provides for indemnification in such case, or (ii) contribution under the Securities Act may be required on the part of the Stockholder in circumstances for which indemnification is provided under this Section 10; then, and in each such case, the Company and the Stockholders will contribute to the aggregate losses, claims, damages or liabilities to which they may be subject (after contribution from others) in proportion to the relative fault of the Company, on the one hand, and the Stockholders, on the other hand; provided, however, that, in any such case, no person or entity guilty of fraudulent misrepresentation (within the meaning of Section 10(f) of the Securities Act) will be entitled to contribution from any person or entity who was not guilty of such fraudulent misrepresentation. (e) The indemnities provided in this Section 10 shall survive the transfer of any Shares by the Stockholder. 11. Reports Under Securities Exchange Act of 1934. With a view to making available to each of the Stockholders the benefits of Rule 144 promulgated under the Securities Act and any other rule or regulation thereunder that may at any time permit any such Stockholder to sell securities of the Company to the public without registration, the Company agrees to: (a) make and keep public information available, as those terms are understood and defined in Rule 144; (b) maintain registration of its Common Stock under Section 12 of the Exchange Act; (c) file in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act; and (d) furnish to any such Stockholder, so long as the Stockholder owns any Shares, forthwith upon request: (i) a written statement by the Company that it has complied with the reporting requirements of Rule 144, (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company; and (iii) such other information as may be reasonably requested in availing the Stockholder of any rule or regulation under the Securities Act which permits the selling of any such securities without registration or pursuant to such form. 12. Changes in Common Stock. If, and as often as, there is any change in the Common Stock by way of a stock split, stock dividend, combination or reclassification, or through a merger, consolidation, reorganization or recapitalization, or by any other means, appropriate adjustment shall be made in the provisions hereof so that the rights and privileges granted hereby shall continue with respect to the Shares as so changed. 13. Stockholder's Conduct. With respect to any sale of Shares covered by a registration statement, each Stockholder understands and agrees as follows: (a) Each Stockholder will carefully review the information concerning him contained in any registration statement and will promptly notify the Company if such information is not complete and accurate in all respects, including having properly disclosed any position, office or other material relationship within the past three years with the Company or its affiliates; (b) Each Stockholder agrees to sell Shares only in the manner set forth in (i) the applicable registration statement (or in compliance with Section 5 hereof), (ii) the Affiliate Agreement (as defined in the Merger Agreement) and (iii) Section 14; (c) Each Stockholder agrees to comply with the anti- manipulation rules under the Exchange Act in connection with purchases and sales of securities of the Company during the time any registration statement remains effective; (d) Each Stockholder agrees to only sell Shares in a jurisdiction after counsel for the Company has advised that such sale is permissible under the applicable state securities or "Blue Sky" laws; (e) Each Stockholder agrees to comply with the prospectus delivery requirements of the Securities Act; (f) Each Stockholder agrees to promptly notify the Company of any and all planned sales and completed sales of Shares; and (g) Each Stockholder agrees to suspend sales during the periods when sales are to be suspended pursuant to Section 8. (h) In connection with the registration of the Shares, each Stockholder will furnish to the Company in writing such information requested by the Company with respect to himself and the proposed distribution by him as shall be necessary in order to comply with federal and applicable state securities laws. (i) Each Stockholder hereby agrees that he will not sell, exchange, transfer, pledge, dispose or otherwise reduce his risk relative to any Shares owned by him during the period which begins on the date hereof and ends at such time as the Company publicly announces financial results covering at least thirty days of combined operations of the Company and KMI. The Company, at its discretion, may cause stop transfer orders to be placed with its transfer agent with respect to the certificates representing the Shares, provided that such stop transfer orders are consistent with the other provisions of this Agreement. 14. Selling Procedures. (a) Each Stockholder will notify the Company of his intention to sell Shares under any registration statement not less than five (5) business days prior to the expected date of such sale by faxing the "Takedown Request" attached hereto as Exhibit A to: Testa, Hurwitz & Thibeault, LLP 125 High Street High Street Tower Boston, Massachusetts 02110 Attn: William J. Schnoor, Jr. Phone: (617) 248-7278 Facsimile: (617) 248-7100 During this period, the Company will review the prospectus to determine if a suspension pursuant to Section 8 is necessary or appropriate. If the Company does not notify the Stockholder of a suspension pursuant to Section 8, the Stockholder may conclude the proposed sale, on the proposed date of sale, strictly in accordance with the Takedown Request. (b) Each Stockholder will notify the Company of each sale under any registration statement in accordance with the Takedown Request within 24 hours of the sale by faxing the "Notification of Sale" attached hereto as Exhibit B to: Testa, Hurwitz & Thibeault, LLP 125 High Street High Street Tower Boston, Massachusetts 02110 Attn: William J. Schnoor, Jr. Phone: (617) 248-7278 Facsimile: (617) 248-7100 Based on the information set forth on the Notification of Sale, the Company will prepare or cause to be prepared the appropriate notifications to its Transfer Agent to remove the legend described in Section 4 from the Shares so sold. 15. Representations and Covenants. Each Stockholder hereby represents and warrants to the Company as follows: (a) THE STOCKHOLDER UNDERSTANDS THAT HIS INVESTMENT IN THE SHARES INVOLVES RISK. (b) THE STOCKHOLDER HAS CONSULTED HIS OWN ATTORNEY(S), ACCOUNTANT(S) OR INVESTMENT ADVISOR(S) WITH RESPECT TO THE INVESTMENT CONTEMPLATED HEREBY AND ITS SUITABILITY FOR THE STOCKHOLDER. ANY SPECIFIC ACKNOWLEDGMENT SET FORTH BELOW WITH RESPECT TO ANY STATEMENT OR INFORMATION FURNISHED TO THE STOCKHOLDER SHALL NOT BE DEEMED TO LIMIT THE GENERALITY OF THIS REPRESENTATION AND WARRANTY. (c) The Stockholder understands that he must bear the economic risk of this investment until such time as the Shares are registered; that the Shares are not currently registered under the Securities Act, and, therefore, cannot be resold unless they are subsequently registered under the Securities Act or unless an exemption from such registration is available; that the Stockholder is purchasing the Shares with no present view toward resale or other distribution thereof; and that the Stockholder agrees not to resell or otherwise dispose of all or any part of the Shares, except as permitted by law, including, without limitation, any and all applicable provisions of the Merger Agreement and this Agreement and any regulations under the Securities Act and applicable state securities laws. (d) The Stockholder has adequate means of providing for his current needs and personal contingencies and has no need for liquidity in connection with this investment in the Shares. (e) The Stockholder has reviewed the representations and warranties of the Company set forth in the Merger Agreement, as well as the information provided to the Stockholder by the Company pursuant to Section 5.05 of the Merger Agreement and has consulted with his personal legal and financial advisors in evaluating the merits and risks of the investment in the Shares. (f) The Stockholder received an offer concerning the Shares and first learned of this investment in the state or other jurisdiction listed in the Stockholder's residence address on the signature page hereto, and intends that the state securities laws of that state or other jurisdiction alone govern this transaction. (g) The Stockholder hereby acknowledges receipt of the documents described in Section 5.05 of the Merger Agreement, which documents each Stockholder has reviewed. The Stockholder further acknowledges and warrants that, prior to the execution of this Agreement, he has had the opportunity to ask questions and receive answers from the Company and KMI concerning the terms and conditions of the transactions contemplated by the Merger Agreement and the issuance of the Shares, and concerning any of the documents identified above, and to obtain such additional further information from the Company and KMI as he has deemed necessary to verify the accuracy of the information contained in the documents identified above or any other information furnished to the Stockholder. (h) The Stockholder has been advised that, as of the date hereof, he may be deemed to be an "affiliate" of KMI, as the term "affiliate" is used in and for purposes of Accounting Series Releases 130 and 135, as amended, of the Commission. (i) The Stockholder understands that the representations, warranties and covenants set forth herein will be relied upon by KMI, the Company, the stockholders of the Company and their respective counsel and accounting firms. (j) The Stockholder hereby represents and warrants that he has not sold, exchanged, transferred, pledged, disposed or otherwise reduced his risk relative to any shares of KMI common stock owned by him during the 30 day period preceding the date hereof. 16. Miscellaneous. (a) All covenants and agreements contained in this Agreement by or on behalf of any of the parties hereto shall bind and inure to the benefit of the respective successors and assigns of the parties hereto (including without limitation transferees of any Shares, provided, that such transferee executes a counterpart signature page to this Agreement), whether so expressed or not. (b) All notices and other communications which by any provision of this Agreement are required or permitted to be given shall be given in writing and shall be (a) mailed by first-class or express mail, postage prepaid, (b) sent by telex, telegram, telecopy or other form of rapid transmission, confirmed by mailing (by first class or express mail, postage prepaid) written confirmation at substantially the same time as such rapid transmission, or (c) personally delivered to the receiving party (which if other than an individual shall be an officer or other responsible party of the receiving party). All such notices and communications shall be mailed, sent or delivered as follows: if to the Company, to: PAREXEL International Corporation 195 West Street Waltham, MA 02154 Attn: William T. Sobo, Jr. Senior Vice President and Chief Financial Officer Telecopy: (617) 487-9931 with a copy to: William J. Schnoor, Jr. Testa, Hurwitz & Thibeault, LLP 125 High Street High Street Tower Boston, MA 02110 Telecopy: (617) 248-7100 if to the Stockholders, to: Clarence A. Kemper 51 Baskin Road Lexington, MA 02173 P. Michael Masterson 217 Plymouth Road Newton, MA 02161 Mark A. Lester 5 Grantland Road Wellesley, MA 02181 Ronald Tetzlaff 3505 Goldenrod Drive Alpharetta, GA 30202 Alan R. Parenteau 8 Captain Forbush Lane Acton, MA 01720 Warren Handren 77 Winsor Avenue Johnston, RI 02919 David Hyde 27 Katherine Way Plaistow, NH 03865 Jon R. Voss 37 Hall Avenue Somerville, MA 02144 with a copy to: James E. Levin, Esq. Carey & Levin 13 Water Street Holliston, MA 01746 Telecopy: (508) 429-8444 if to any subsequent holder of Shares, to it at such address as may have been furnished to the Company in writing by such Stockholder; or, in any case, at such other address or addresses as shall have been furnished in writing to the Company (in the case of a Stockholder) or to the Stockholders (in the case of the Company) in accordance with the provisions of this paragraph. Notices shall be deemed duly delivered three business days after being sent by first class mail, postage prepaid, or one business day after being sent via a reputable nationwide express mail service. Notices delivered via any other means shall be deemed duly delivered upon actual receipt by the individual for whom such notice is intended. Any notice delivered to a party hereunder shall be sent simultaneously, by the same means, to such party's counsel as set forth above. (c) This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts. (d) This Agreement may be amended or modified, and provisions hereof may be waived, with the written consent of the Company and the holders of at least a majority of the outstanding Shares. (e) This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. (f) If any provision of this Agreement shall be held to be illegal, invalid or unenforceable, such illegality, invalidity or unenforceability shall attach only to such provision and shall not in any manner affect or render illegal, invalid or unenforceable any other provision of this Agreement, and this Agreement shall be carried out as if any such illegal, invalid or unenforceable provision were not contained herein. IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written. PAREXEL International Corporation By: Josef H. von Rickenbach Name: Josef H. von Rickenbach Title: President and CEO Clarence A. Kemper Clarence A. Kemper P. Micheal Masterson P. Michael Masterson Mark A. Lester Mark A. Lester Ronald Tetzlaff Ronald Tetzlaff Alan R. Parenteau Alan R. Parenteau Warren Handren Warren Handren David Hyde David Hyde Jon R. Voss Jon R. Voss [You must complete pages _____ of this Agreement] CLARENCE A. KEMPER Principal Residence Address: Note: Non-principal residence addresses and post office boxes cannot be accepted. _______________________________________________ (Number and Street) _______________________________________________ (City, State) (Zip Code) _______________________________________________ (Residence Telephone) Mailing Address (if different from above): _______________________________________________ (Number and Street) _______________________________________________ (City, State) (Zip Code) Citizenship:_____________________________________ Social Security or Taxpayer I.D. No.:_________________ If the Stockholder is a natural person and is an accredited investor described by category 12 or 13 (or both) set forth on the attached Exhibit C, please check this box. If the Stockholder has not checked the box above, please check this box if at least one of the categories set forth on the attached Exhibit C describes you. P. MICHAEL MASTERSON Principal Residence Address: Note: Non-principal residence addresses and post office boxes cannot be accepted. _______________________________________________ (Number and Street) _______________________________________________ (City, State) (Zip Code) _______________________________________________ (Residence Telephone) Mailing Address (if different from above): _______________________________________________ (Number and Street) _______________________________________________ (City, State) (Zip Code) Citizenship:_____________________________________ Social Security or Taxpayer I.D. No.:_________________ If the Stockholder is a natural person and is an accredited investor described by category 12 or 13 (or both) set forth on the attached Exhibit C, please check this box. If the Stockholder has not checked the box above, please check this box if at least one of the categories set forth on the attached Exhibit C describes you. MARK A. LESTER Principal Residence Address: Note: Non-principal residence addresses and post office boxes cannot be accepted. _______________________________________________ (Number and Street) _______________________________________________ (City, State) (Zip Code) _______________________________________________ (Residence Telephone) Mailing Address (if different from above): _______________________________________________ (Number and Street) _______________________________________________ (City, State) (Zip Code) Citizenship:_____________________________________ Social Security or Taxpayer I.D. No.:_________________ If the Stockholder is a natural person and is an accredited investor described by category 12 or 13 (or both) set forth on the attached Exhibit C, please check this box. If the Stockholder has not checked the box above, please check this box if at least one of the categories set forth on the attached Exhibit C describes you. RONALD TETZLAFF Principal Residence Address: Note: Non-principal residence addresses and post office boxes cannot be accepted. _______________________________________________ (Number and Street) _______________________________________________ (City, State) (Zip Code) _______________________________________________ (Residence Telephone) Mailing Address (if different from above): _______________________________________________ (Number and Street) _______________________________________________ (City, State) (Zip Code) Citizenship:_____________________________________ Social Security or Taxpayer I.D. No.:_________________ If the Stockholder is a natural person and is an accredited investor described by category 12 or 13 (or both) set forth on the attached Exhibit C, please check this box. If the Stockholder has not checked the box above, please check this box if at least one of the categories set forth on the attached Exhibit C describes you. ALAN R. PARENTEAU Principal Residence Address: Note: Non-principal residence addresses and post office boxes cannot be accepted. _______________________________________________ (Number and Street) _______________________________________________ (City, State) (Zip Code) _______________________________________________ (Residence Telephone) Mailing Address (if different from above): _______________________________________________ (Number and Street) _______________________________________________ (City, State) (Zip Code) Citizenship:_____________________________________ Social Security or Taxpayer I.D. No.:_________________ If the Stockholder is a natural person and is an accredited investor described by category 12 or 13 (or both) set forth on the attached Exhibit C, please check this box. If the Stockholder has not checked the box above, please check this box if at least one of the categories set forth on the attached Exhibit C describes you. WARREN HANDREN Principal Residence Address: Note: Non-principal residence addresses and post office boxes cannot be accepted. _______________________________________________ (Number and Street) _______________________________________________ (City, State) (Zip Code) _______________________________________________ (Residence Telephone) Mailing Address (if different from above): _______________________________________________ (Number and Street) _______________________________________________ (City, State) (Zip Code) Citizenship:_____________________________________ Social Security or Taxpayer I.D. No.:_________________ If the Stockholder is a natural person and is an accredited investor described by category 12 or 13 (or both) set forth on the attached Exhibit C, please check this box. If the Stockholder has not checked the box above, please check this box if at least one of the categories set forth on the attached Exhibit C describes you. DAVID HYDE Principal Residence Address: Note: Non-principal residence addresses and post office boxes cannot be accepted. _______________________________________________ (Number and Street) _______________________________________________ (City, State) (Zip Code) _______________________________________________ (Residence Telephone) Mailing Address (if different from above): _______________________________________________ (Number and Street) _______________________________________________ (City, State) (Zip Code) Citizenship:_____________________________________ Social Security or Taxpayer I.D. No.:_________________ If the Stockholder is a natural person and is an accredited investor described by category 12 or 13 (or both) set forth on the attached Exhibit C, please check this box. If the Stockholder has not checked the box above, please check this box if at least one of the categories set forth on the attached Exhibit C describes you. JON R. VOSS Principal Residence Address: Note: Non-principal residence addresses and post office boxes cannot be accepted. _______________________________________________ (Number and Street) _______________________________________________ (City, State) (Zip Code) _______________________________________________ (Residence Telephone) Mailing Address (if different from above): _______________________________________________ (Number and Street) _______________________________________________ (City, State) (Zip Code) Citizenship:_____________________________________ Social Security or Taxpayer I.D. No.:_________________ If the Stockholder is a natural person and is an accredited investor described by category 12 or 13 (or both) set forth on the attached Exhibit C, please check this box. If the Stockholder has not checked the box above, please check this box if at least one of the categories set forth on the attached Exhibit C describes you. EX-4 5 Exhibit 4.4 ASSET PURCHASE AGREEMENT dated as of September 26, 1997 among PAREXEL International Corporation Perceptive Systems, Inc. and Howard W. Foster TABLE OF CONTENTS ARTICLE I DEFINITIONS 1 1.01. Definitions 1 ARTICLE II PURCHASE AND SALE 3 2.01. Purchase and Sale 3 2.02. Excluded Assets 5 2.03. Assumption of Liabilities 5 2.04. Excluded Liabilities 5 2.05. Assignment of Contracts and Rights 6 2.06. Purchase Price; Allocation of Purchase Price 7 2.07. Closing 7 2.08. Certificates for Parent Stock 9 ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER AND FOSTER 9 3.01. Corporate Existence and Power 9 3.02. Authority 10 3.03. Governmental Authorization 10 3.04. Non-Contravention 10 3.05. Required Consents 10 3.06. Financial Statements 10 3.07. Absence of Certain Changes 11 3.08. Property and Equipment 12 3.09. Sufficiency of Purchased Assets 12 3.10. Title to Purchased Assets 12 3.11. No Undisclosed Material Liabilities 12 3.12. Litigation 13 3.13. Material Contracts 13 3.14. Licenses and Permits 14 3.15. Insurance Coverage 14 3.16. Compliance with Laws 14 3.17. Inventories 14 3.18. Receivables 14 3.19. Proprietary Rights 15 3.20. Products 16 3.21. Finders' Fees 16 3.22. Other Information 17 3.23. Environmental Compliance 17 3.24. Representations 17 3.25. Purchase for Investment 17 3.26. Consultants 17 3.27. Site Licenses 17 3.28 Source Code Licenses 17 3.29 Other Licenses 18 3.30 Resellers, Distributors, etc. 18 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER 18 4.01. Organization and Existence 18 4.02. Corporate Authorization 18 4.03. Governmental Authorization 18 4.04. Non-Contravention 18 4.05. Common Stock 19 ARTICLE V COVENANTS OF SELLER 19 5.01. Conduct of the Business 19 5.02. Access to Information 19 5.03. Notices of Certain Events 20 5.04. Noncompetition and Nonsolicitation 20 5.05. Confidentiality 21 5.06. Trademarks; Tradenames 21 5.07. No Negotiation with Third Parties 22 5.08. Use of Proprietary Rights 22 5.09. Continuing Disclosure 22 ARTICLE VI COVENANTS OF BUYER 23 6.01. Confidentiality 23 6.02 Software Engineer 23 ARTICLE VII COVENANTS OF BOTH PARTIES 23 7.01. Best Efforts; Further Assurances 23 7.02. Certain Filings 24 ARTICLE VIII TAX MATTERS 24 8.01. Tax Definitions 24 8.02. Tax Matters 25 8.03. Tax Cooperation; Allocation of Taxes 25 ARTICLE IX EMPLOYEE BENEFITS 26 9.01. Employee Benefits Representations 26 9.02. No Third Party Beneficiaries 27 ARTICLE X CONDITIONS TO CLOSING 27 10.01. Conditions to the Obligations of Each Party 27 10.02. Conditions to Obligation of Buyer 28 10.03. Conditions to Obligations of Seller and Foster 29 ARTICLE XI SURVIVAL, INDEMNIFICATION 29 11.01. Survival 29 11.02. Indemnification 29 11.03. Environmental Indemnification 30 11.04. Procedures; No Waiver 30 ARTICLE XII TERMINATION 31 12.01. Grounds for Termination. 31 12.02. Effect of Termination 32 ARTICLE XIII MISCELLANEOUS 32 13.01. Notices 32 13.02. Amendments; No Waivers 33 13.03. Expenses 33 13.04. Successors and Assigns 33 13.05. Governing Law 33 13.06. Counterparts; Effectiveness 33 13.07. Entire Agreement 33 13.08. Bulk Sales Laws 34 13.09. Captions 34 13.10. Jurisdiction 34 13.11. Other Remedies; Specific Performance 34 Exhibits Exhibit A -- Letter Agreement between Buyer and Howard W. Foster Exhibit B -- Form of Assignment and Assumption Agreement and Bill of Sale and General Assignment Exhibit C -- Form of Assignment of Trademarks Exhibit D -- Form of Assignment of Lease Exhibit E -- Registration Rights Agreement between Buyer and Seller Schedules Schedule 2.02 Excluded Assets Schedule 2.03 Assumed Liabilities Schedule 2.07(e) Software Schedule 3.03 Governmental Authorization Schedule 3.04 Non Contravention Schedule 3.05 Required Consents Schedule 3.06 Financial Statements Schedule 3.08 Property and Equipment Schedule 3.13 Material Contracts Schedule 3.14 Licenses and Permits Schedule 3.18 Receivables Schedule 3.19 (a) and (b) Proprietary Rights Schedule 3.26 Consultants Schedule 3.27 Site Licenses Schedule 3.29 Other Licenses Schedule 3.30 Resellers, Distributors, etc. Schedule 9.01 Employee Benefits ASSET PURCHASE AGREEMENT AGREEMENT dated as of September 26, 1997 among PAREXEL International Corporation, a Massachusetts corporation ("Buyer"), Perceptive Systems, Inc. a Colorado corporation doing business as Hayden Image Processing Group ("Seller"), and Howard W. Foster, sole stockholder of Seller ("Foster"). W I T N E S S E T H : WHEREAS, Seller develops, produces and markets image analysis and related software (including without limitation, whether commercially available or under development, software known as CHESHIRE and ALICE) and provides consulting and product development services to clients (the "Business"); WHEREAS, Buyer desires to purchase substantially all of the assets of the Business from Seller, and Seller desires to sell substantially all of the assets of the Business to Buyer, upon the terms and subject to the conditions hereinafter set forth; NOW, THEREFORE, in consideration of the foregoing and the representations, warranties, covenants and agreements herein contained, the parties hereto agree as follows: ARTICLE I DEFINITIONS Section 1.01. Definitions. (a) The following terms, as used herein, have the following meanings: "Affiliate" means, with respect to any Person, any Person directly or indirectly controlling, controlled by, or under common control with such other Person. "Ancillary Agreements" means the Letter Agreement between Buyer and Foster attached hereto as Exhibit A, the Bill of Sale and General Assignment in the form attached hereto as Exhibit B, the Assignment of Trademarks in the form attached hereto as Exhibit C, the Assignment of Lease in the form attached hereto as Exhibit D and the Registration Rights Agreement in the form attached hereto as Exhibit E. "Balance Sheet" means the unaudited balance sheet of the Business as of June 30, 1997 found in Schedule 3.06. "Balance Sheet Date" means June 30, 1997. "Closing Date" means the date of the Closing. "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset except for (a) mechanic's materialmen's, and similar liens, (b) liens for taxes not yet due and payable or for taxes that the taxpayer is contesting in good faith through appropriate proceedings, (c) purchase money liens and securing rental payments under capital lease arrangements, and (d) other liens arising in the ordinary course of business and not incurred in connection with the borrowing of money. "Material Adverse Change" means a material adverse change in the business, assets, condition (financial or otherwise), results of operations or prospects of the Business taken as a whole. "Material Adverse Effect" means a material adverse effect on the business, assets, condition (financial or otherwise), results of operations or prospects of the Business taken as a whole. "Person" means an individual, corporation, partnership, association, trust or other entity or organization, including a government or political subdivision or an agency or instrumentality thereof. "Proprietary Rights" means all (A) patents, patent applications, patent disclosures and all related continuation, continuation-in-part, divisional, reissue, re-examination, utility, model, certificate of invention and design patents, patent applications, registrations and applications for registrations, (B) trademarks, service marks, trade dress, logos, tradenames, service names and corporate names and registrations and applications for registration thereof, (C) copyrights and registrations and applications for registration thereof, (D) mask works and registrations and applications for registration thereof, (E) computer software, data and documentation, (F) trade secrets and confidential business information, whether patentable or nonpatentable and whether or not reduced to practice, know- how, manufacturing and product processes and techniques, research and development information, copyrightable works, financial, marketing and business data, pricing and cost information, business and marketing plans and customer and supplier lists and information, (G) other proprietary rights relating to any of the foregoing (including without limitation associated goodwill and remedies against infringements thereof and rights of protection of an interest therein under the laws of all jurisdictions) and (H) copies and tangible embodiments thereof. "Seller's Proprietary Rights" means all Proprietary Rights relating to the Business and listed on Schedule 3.19(a) attached hereto. (b) Each of the following terms is defined in the Section set forth opposite such term: Term Section Allocation Statement 2.06 Apportioned Obligations 8.03 Assumed Liabilities 2.03 Buyer Common Stock 2.06 Closing 2.07 Code 8.01 Contracts 2.01 Environmental Liabilities 3.23 ERISA 9.01 Excluded Assets 2.02 Excluded Liabilities 2.04 Financial Statements 3.06 Indemnified Party 11.04 Indemnifying Party 11.04 Loss 11.02 Permit 3.14 Petty Cash 2.01 Post-Closing Tax Period 8.01 Pre-Closing Tax Period 8.01 Purchased Assets 2.01 Purchase Price 2.06 Required Consent 3.05 Software 2.07 Taxes 8.01 ARTICLE II PURCHASE AND SALE 2.01. Purchase and Sale. Upon the terms and subject to the conditions of this Agreement, Buyer agrees to purchase from Seller and Seller and Foster agree to sell, transfer, assign and deliver, or cause to be sold, transferred, assigned and delivered, to Buyer at Closing, free and clear of all Liens, all of the assets, properties and business, other than the Excluded Assets, of every kind and description, wherever located, real, personal or mixed, tangible or intangible, owned, held or used in the conduct of the Business of Seller as the same shall exist on the Closing Date, including without limitation all assets shown on the Balance Sheet and not disposed of in the ordinary course of business, and all assets of the Business acquired by Seller and Foster between the Balance Sheet Date and the Closing Date (the "Purchased Assets"), and including, without limitation, all right, title and interest of Seller, its Affiliates and Foster in, to and under such of the foregoing as are more specifically described below: (i) all real property and leases of, and other interests in, real property, in each case together with all buildings, fixtures, and improvements erected thereon; (ii) all personal property and interests therein, including machinery, equipment, furniture, office equipment, communications equipment, vehicles, storage tanks, spare and replacement parts, fuel and other tangible property, including without limitation the items listed on Schedule 3.08; (iii) all raw materials, work-in-process, finished goods, supplies and other inventories, wherever situated; (iv) all rights under all contracts, agreements, leases, licenses, sales and purchase orders and other instruments, including without limitation the items listed on Schedule 3.13 (collectively, the "Contracts"); (v) all accounts, notes and other receivables of the Seller; (vi) all prepaid expenses and deposits including without limitation ad valorem taxes, leases and rentals; (vii) all of Seller's cash and cash equivalents on hand and in banks as of the Closing Date and all petty cash located at operating facilities of the Business ("Petty Cash"); (viii) all of Seller's rights, claims, credits, causes of action or rights of set-off against third parties relating to the Purchased Assets, including, without limitation, unliquidated rights under manufacturers' and vendors' warranties; (ix) all of Seller's Proprietary Rights owned, licensed or used in the Business including without limitation the items listed on Schedule 3.19 (such software in source code and object code forms, fully documented including any and all related technical and user documentation); (x) all transferable licenses, permits or other governmental authorizations affecting, or relating in any way to, the Business, including without limitation the items listed on Schedule 3.14; (xi) all books, records, files and papers, whether in hard copy or computer format, including, without limitation, engineering information, sales and promotional literature, manuals and data, sales and purchase correspondence, lists of present and former suppliers, lists of present and former customers, personnel and employment records, and any information relating to Taxes imposed on the Purchased Assets; and (xii) all right, title and interest of Seller and Foster in or to any prototypes, enhancements, improvements, or other tangible work product, technology or process developed, created or otherwise acquired in connection with the design, research and development, implementation, market research or marketing of products of the Business; and (xiii) all goodwill associated with the Business or the Purchased Assets, together with the right to represent to third parties that Buyer is the successor to the Business. 2.02. Excluded Assets. Buyer expressly understands and agrees that Buyer is acquiring substantially all of the assets of Seller and that the following assets and properties of Seller (the "Excluded Assets") shall be excluded from the Purchased Assets: (i) rights under those contracts, agreements and commitments listed on Schedule 2.02 and under this Agreement; (ii) the right of Seller and Foster to receive the purchase price; and (iii) any Purchased Assets sold or otherwise disposed of in the ordinary course of the operation of the Business and not in violation of any provisions of this Agreement during the period from the date hereof until the Closing Date. 2.03. Assumption of Liabilities. Upon the terms and subject to the conditions of this Agreement, Buyer agrees, effective at the time of Closing, to assume the following liabilities (the "Assumed Liabilities"): (i) all operating liabilities accrued on the Balance Sheet; and (ii) all liabilities arising out of or relating primarily to the Business, and incurred in the ordinary course of Business since the Balance Sheet Date, but only to the extent listed on Schedule 2.03; (iii) all liabilities and obligations of Seller arising under the Contracts (other than liabilities or obligations attributable to any failure by Seller to comply with the terms thereof); (iv) all obligations of Seller and Foster under that certain Vectra Bank Building Lease by and among the Colorado Building Group, Seller and Foster dated as of September 23, 1994 and extended by that certain letter agreement dated September 27, 1996; provided, however, that the foregoing Assumed Liabilities shall be in the aggregate no greater than $5,000. 2.04. Excluded Liabilities. Notwithstanding any provision in this Agreement or any other writing to the contrary, Buyer is assuming only the Assumed Liabilities and is not assuming any other liability or obligation of Seller or Foster or any Affiliate of Seller (or any predecessor owner of all or part of its business and assets) of whatever nature whether presently in existence or arising or asserted hereafter. All such other liabilities and obligations shall be retained by and remain obligations and liabilities of Seller or its Affiliate (all such liabilities and obligations not being assumed being herein referred to as the "Excluded Liabilities"). Without limiting the foregoing, none of the following shall be Assumed Liabilities for the purposes of this Agreement: (i) except to the extent of the specific reserves on the Balance Sheet, any obligation or liability for Tax arising from or with respect to the Purchased Assets or the operation of the Business which is incurred in or attributable to any Pre-Closing Tax Period; (ii) except to the extent provided in Article IX, any liabilities or obligations relating to employee benefits or compensation arrangements existing as of the end of the day on the day preceding the Closing Date, including, without limitation, any liabilities or obligations under any of Seller's employee benefit agreements, plans or other arrangements listed on Schedule 9.01; (iii) any liability or obligation for damages (whether based on negligence, breach of warranty, strict liability or any other theory) caused by or arising out of or resulting from, directly or indirectly, the sale by Seller or its Affiliates of any products or services prior to the Closing Date; (iv) all liabilities and obligations relating to any claim, dispute or litigation asserted or threatened or governmental proceeding or investigation instituted or threatened, arising out of, or in connection with, any alleged violation or noncompliance by Seller of, or failure to perform any obligations imposed upon Seller in its conduct of the Business under any statute, rule, regulation or ordinance pertaining to protection of the environment (including any Environmental Law), employee or occupational safety and health, wage and hour, Hazardous Substances, civil rights, customs and export control and zoning, which alleged violation, noncompliance or failure to perform occurred or existed on or prior to the Closing Date, but only to the extent of such pre-existing violation, noncompliance or failure to perform; (v) all liabilities and obligations relating to any products manufactured or sold by the Business on or prior to the Closing Date, including without limitation warranty obligations and product liability claims; (vi) any Environmental Liability; (vii) any liability or obligation relating to an Excluded Asset; and (viii) Assumed Liabilities which in the aggregate exceed $5,000, as permitted by Section 2.03. 2.05. Assignment of Contracts and Rights. Notwithstanding, anything in this Agreement to the contrary, this Agreement shall not constitute an agreement to assign any Purchased Asset or any claim or right or any benefit arising thereunder or resulting therefrom if an attempted assignment thereof, without consent of a third party thereto, would constitute a breach or other contravention thereof or in any way adversely affect the rights of Buyer or Seller thereunder. Seller and Foster agree to use their commercially reasonable best efforts (but without any payment of money by Seller or Buyer) to obtain the consent of the other parties to any such Purchased Asset or claim or right or any benefit arising thereunder for the assignment thereof to Buyer as Buyer may reasonably request. If such consent is not obtained, or if an attempted assignment thereof would be ineffective or would adversely affect the rights of Seller thereunder so that Buyer would not in fact receive all such rights, Seller and Buyer will cooperate in a mutually agreeable arrangement under which Buyer would obtain the benefits and assume the obligations thereunder in accordance with this Agreement, including subcontracting, sub-licensing, or subleasing to Buyer, or under which Seller or Foster would enforce for the benefit of Buyer, with Buyer assuming Seller's obligations, any and all rights of Seller or Foster against a third party thereto. Seller or Foster will promptly pay to Buyer when received all monies received by Seller under any Purchased Asset or any claim or right or any benefit arising thereunder, except to the extent the same represents an Excluded Asset. In such event, Seller, Foster and Buyer shall, to the extent the benefits therefrom and obligations thereunder have not been provided by alternate arrangements satisfactory to Buyer, Seller and Foster, negotiate in good faith an adjustment in the consideration paid by Buyer for the Purchased Assets. 2.06. Purchase Price; Allocation of Purchase Price. (a) The purchase price for the Purchased Assets (the "Purchase Price") is (i) $200,000 to be paid in shares of common stock of the Buyer, $.01 par value per share ("Buyer Common Stock"), and issued at the Closing; such number of shares to be determined in accordance with Section 2.07(a) below; (ii) the contingent payments as provided for in Section 2.07(e); and (iii) the assumption of the Assumed Liabilities. (b) Seller and Buyer agree that $10,000 of the Purchase Price shall be allocated as consideration for the covenant not to compete set forth in Section 5.04 of this Agreement. 2.07. Closing. The closing (the "Closing") of the purchase and sale of the Purchased Assets and the assumption of the Assumed Liabilities hereunder shall take place at the offices of Testa, Hurwitz & Thibeault, LLP, High Street Tower, 125 High Street, Boston, Massachusetts 02110 at a time and on a date mutually agreeable to Buyer, Seller and Foster as soon as practicable after satisfaction of the conditions set forth in Article X, but in no event later than September 30, 1997, or at such other time or place as Buyer, Seller and Foster may agree. At the Closing, (a) Buyer shall deliver to Seller a stock certificate representing the number of shares of Buyer Common Stock as is determined by dividing $200,000 by the average of the last reported sale price of the Buyer Common Stock on the Nasdaq National Market on each of the ten (10) business days up to and including the second business day preceding the Closing Date (subject to appropriate adjustment in the event of a stock split, reverse stock split, stock dividend or recapitalization by the Company). The certificate shall be duly endorsed by the Buyer's transfer agent and registered in the name of the Seller; (b) Seller shall have delivered to Buyer via courier or by hand all source code and object code of the software forming part of the Purchased Assets, fully documented, including any and all related technical and user documentation; (c) Seller, Foster and Buyer shall enter into the Ancillary Agreements and Seller and Foster shall deliver to Buyer such bills of sale, endorsements, consents, assignments and other good and sufficient instruments of conveyance and assignment (the "Conveyance Documents") as the parties and their respective counsel shall deem reasonably necessary or appropriate to vest in Buyer all right, title and interest in, to and under the Purchased Assets. (d) Seller and Buyer shall also execute and deliver all such instruments, documents and certificates as may be reasonably requested by the other party that are necessary, appropriate or desirable for the consummation at the Closing of the transactions contemplated by this Agreement. (e) In addition to the payment of stock issued on the Closing Date as provided for in Section 2.07(a), Buyer shall issue to Seller up to three (3) additional stock certificates representing contingent payments from Buyer over the three year period set forth below. The number of shares of Buyer Common Stock issued with respect to each contingent payment will be determined by dividing the dollar value of the contingent payment, calculated as set forth below, by the average of the last reported sale price of Buyer Common Stock on the Nasdaq National Market on each of the ten (10) business days up to and including the last day of each Annual Payment Period (as defined below), subject to appropriate adjustment in the event of a stock split, reverse stock split, stock dividend or recapitalization by the Company. The dollar value of each contingent payment will be calculated as a percentage of "net receipts" (as defined below) collected by the Buyer during the period to which the payment relates (the "Annual Payment Period") and attributable to all licenses, and complete or partial sales or dispositions by the Buyer of the software products listed on Schedule 2.07(e), and their "upgrades" (as defined below), (collectively, the "Software"), according to the following schedule: During the period beginning with the Closing Date 7.0% of "net and ending September 30, 1998 : receipts" During the period beginning October 1, 1998 and 5.0% of "net ending September 30, 1999: receipts" During the period beginning October 1, 1999 and 3.0% of "net ending September 30, 2000: receipts" Such contingent payments will be paid to Seller along with a statement indicating in detail sufficient for Seller to determine the calculation of such payment, once per year, within 45 days of the last day of each Annual Payment Period beginning with the period ending September 30, 1998. For purposes of this Section 2.07(e), "net receipts" shall mean all payments actually received by the Buyer with respect to the Software (including, but not limited to, royalties, licensing fees, and proceeds of the complete or partial sale or other disposition of the Software, but excluding consulting fees, maintenance fees or any other service fees paid to Buyer in connection with the Software) net of all sales tax or other similar amounts properly paid or accrued by the Buyer with respect to such payments so received and any amounts refunded or rebated by Buyer to payers of amounts which might otherwise constitute "net receipts". Notwithstanding anything in this Section 2.07 to the contrary at such time as Buyer has issued Common Stock to Seller pursuant to this Section 2.07(e) with a value in the aggregate of $228,000, Buyer's obligation to issue any additional shares of Common under this Section 2.07(e) shall cease. Seller and Foster agree that Buyer shall use its commercially reasonable best efforts to market and distribute the Software and continue the sale and promotion of the Software until at least September 30, 2000; provided, however, Buyer shall have complete authority related to all decisions with respect to pricing, shipment terms, return policies, distribution discounts and all other marketing related factors in connection with the marketing and distribution of the Software and shall have no liability to Seller or Foster if Buyer's commercially reasonable best efforts to market and distribute the Software are unsuccessful or result in fewer sales than Seller or Foster expect. The term "upgrades" shall mean any modification, enhancement, improvement or version release of the Software as may be generally commercially licensed by the Buyer to third parties. 2.08. Certificates for Parent Stock. Each certificate for Buyer Common Stock issued to the Seller pursuant to this Agreement shall bear the following legend: "The securities represented hereby have not been registered under the Securities Act of 1933, as amended, and may not be sold, transferred or otherwise disposed of except in accordance with the terms thereof and unless registered with the Securities and Exchange Commission of the United States and the securities regulatory authorities of certain states or unless an exemption from such registration is available." ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER AND FOSTER Seller and Foster hereby jointly and severally represent and warrant to Buyer as of the date hereof and as of the Closing Date that: 3.01. Corporate Existence and Power. Seller is a corporation duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation, and has all corporate powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted. Seller is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction where the character of the property owned or leased by it or the nature of its activities make such qualification necessary, except for those jurisdictions where failure to be so qualified would not, individually or in the aggregate, have a Material Adverse Effect. Seller has heretofore delivered to Buyer true and complete copies of the corporate charter and bylaws of Seller as currently in effect and no action has been taken or authorized to amend any of such documents. 3.02. Authority. (a) The execution, delivery and performance by Seller of this Agreement and each of the Ancillary Agreements, and the consummation by Seller of the transactions contemplated hereby and thereby are within Seller's corporate powers and have been duly authorized by all necessary corporate action on the part of Seller. This Agreement and each of the Ancillary Agreements to which Seller is a party constitute valid and binding agreements of Seller. (b) Foster has the legal power, right and authority to enter into and perform this Agreement, and to perform each of his obligations hereunder. The execution, delivery and performance of this Agreement by Foster does not contravene, or constitute a default under, any provision of applicable law or regulation or of any agreement, judgment, injunction, order, decree or any other instrument binding upon Foster. This Agreement has been duly executed and delivered by Foster and constitutes a valid and binding obligation of Foster, enforceable in accordance with its terms. 3.03. Governmental Authorization. Except as set forth on Schedule 3.03, to the knowledge of Seller or Foster, the execution, delivery and performance by Seller and Foster of this Agreement and each of the Ancillary Agreements do not require any action by or in respect of, or filing with, any governmental body, agency, official or authority. 3.04. Non-Contravention. Except as set forth on Schedule 3.04, to the knowledge of Seller or Foster, the execution, delivery and performance by Seller and Foster of this Agreement and each of the Ancillary Agreements and the consummation of the transactions contemplated hereby do not and will not (i) contravene or conflict with the corporate charter or bylaws of Seller, (ii) contravene or conflict with or constitute a violation of any provision of any law, regulation, judgment, injunction, order or decree binding upon or applicable to Seller or the Business; (iii) assuming the receipt of all Required and other Consents, constitute a default under or give rise to any right of termination, cancellation or acceleration of any right or obligation of Seller or to a loss of any benefit relating to the Business to which Seller is entitled under any provision of any agreement, contract or other instrument binding upon Seller or by which any of the Purchased Assets is or may be bound, or any Permit (as defined below) or (iv) result in the creation or imposition of any Lien on any Purchased Asset. 3.05. Required Consents. Schedule 3.05 sets forth each agreement, contract or other instrument binding upon Seller or Foster or any Permit requiring a consent or any consent that may be required from any former employees or shareholders of Seller, as a result of the execution, delivery and performance of this Agreement and the Ancillary Agreements or the consummation of the transactions contemplated hereby and thereby (each such consent, a "Required Consent"). 3.06. Financial Statements. Seller has previously furnished Buyer with a true and complete copy of the Balance Sheet and the related unaudited statements of operations for the Business taken as a whole for the years ended December 31, 1996, the unaudited interim balance sheet relating to the Business for the six months ended June 30, 1997, and the related unaudited interim statement of operations for the Business taken as a whole for the six months ended June 30, 1997, (collectively, the "Financial Statements") of the Business. The Financial Statements fairly present in all material respects the financial position of the Business as of the dates thereof and its results of operations for the period then ended. The Financial Statements were prepared in accordance with the books and records of the Seller and are attached hereto as Schedule 3.06. 3.07. Absence of Certain Changes. Since the Balance Sheet Date, Seller has conducted the Business in the ordinary course consistent with past practices, and there has not been: (a) Any Material Adverse Change or any event, occurrence, development or state of circumstances or facts which could reasonably be expected to result in a Material Adverse Change; (b) any declaration, setting aside or payment of any dividend or other distribution with respect to any Seller ownership interest, except Seller may declare, set aside or pay a cash dividend to Foster, provided, however, that Seller maintains cash of at least $5,000 on and as of the Closing Date; (c) any incurrence, assumption or guarantee by Seller of any indebtedness for borrowed money with respect to the Business other than in the ordinary course of business and in amounts and on terms consistent with past practices; (d) any creation , assumption or other incurrence by Seller of any Lien on any Purchased Asset; (e) any damage, destruction or other casualty loss (whether or not covered by insurance) affecting the Business or any Purchased Asset which, individually or in the aggregate, has had or could reasonably be expected to have a Material Adverse Effect; (f) any transaction, contract, agreement or other instrument entered into, or commitment made, by Seller relating to the Business or any Purchased Asset (including the acquisition or disposition of any assets) or any relinquishment by Seller of any contract or other right, in either case, material to the Business taken as a whole, other than transactions and commitments in the ordinary course of business consistent with past practices and those contemplated by this Agreement; (g) any change in any method of accounting or accounting or collection practice by Seller with respect to the Business; (h) any (i) grant of any severance or termination pay to any director, officer or employee of the Business, (ii) entering into of any employment, deferred compensation or other similar agreement (or any amendment to any such existing agreement) with any employee of the Business, (iii) change in benefits payable under an existing severance or termination pay policies or employment agreements or (iv) change in compensation, bonus or other benefits payable to employees of the Business; (i) any lease of real or personal property or any capital expenditure, or commitment for a capital expenditure, for additions or improvements to property, plant and equipment; (j) any making of any loan, advance or capital contributions to or investment in any Person; (k) any change in the business or operations or in the manner of conducting the business or operations of the Seller other than changes in the ordinary course of business; (l) any mortgage, pledge or subjection of any properties or assets to any claim, Lien or liability, except claims, Liens or liabilities for taxes not yet due; (m) any write-down of the value of any inventory, or write- off of any notes or accounts receivable or any portion thereof as uncollectible, other than valuation reserves established for inventory and receivables; (n) any cancellation or release of any other debts or claims, or waivers of any rights; (o) any sale, transfer or conveyance of any property or assets, except in the ordinary course of business consistent with past practice; (p) any disposition of, or lapse, or other failure to preserve the exclusive rights of Seller to any Proprietary Rights; or (q) any agreement, whether in writing or otherwise, to take any action described in this Section 3.07. 3.08. Property and Equipment. The Company has good title to, or in the case of leased property has valid leasehold interests in, all property and assets (whether real or personal, tangible or intangible) used regularly in the conduct of the Business . Except as disclosed on Schedule 3.08, none of such properties or assets is subject to any Liens. 3.09. Sufficiency of Purchased Assets. The Purchased Assets and the Excluded Assets together constitute, and on the Closing Date will constitute, all of the assets or property necessary to operate the Business. 3.10. Title to Purchased Assets. Upon consummation of the transactions contemplated hereby, Buyer will have acquired good and marketable title in and to, or a valid leasehold interest in, each of the Purchased Assets, free and clear of all Liens. 3.11. No Undisclosed Material Liabilities. To the knowledge of Seller or Foster, there are no liabilities of the Business of any kind whatsoever, whether accrued, contingent, absolute, determined, determinable or otherwise, and there is no existing condition, situation or set of circumstances which could reasonably be expected to result in such a liability, other than: (i) liabilities disclosed in any Schedule hereto or provided for in the Balance Sheet; and (ii) liabilities incurred in the ordinary course of business consistent with past practices since the Balance Sheet Date, which in the aggregate are not material to the Business, taken as a whole. 3.12. Litigation. There is no action, suit, or proceeding (or to the knowledge of Seller or Foster, any investigation or basis therefor) pending against, or to the knowledge of Seller or Foster, threatened against or affecting, the Business or any Purchased Asset before any court or arbitrator or any governmental body, agency, official or authority. 3.13. Material Contracts. (a) Except for this Agreement, any Ancillary Agreement entered into by Seller or Foster in connection herewith, or the Contracts disclosed in Schedule 3.13 or any other Schedule to this Agreement, with respect to the Business, Seller is not a party to or subject to: (i) any lease providing for annual rental; (ii) any contract or the purchase of materials, supplies, goods, services, equipment or other assets; (iii) any sales, distribution or other similar agreement providing for the sale by Seller of materials, supplies, goods, services, equipment or other assets; (iv) any partnership, joint venture or other similar contract, arrangement or agreement; (v) any contract relating to indebtedness for borrowed money or the deferred purchase price of property (whether incurred, assumed, guaranteed or secured by an asset), except contracts relating to indebtedness incurred in the ordinary course of business; (vi) any license agreement, franchise agreement or agreement in respect of similar rights granted to or held by Seller; (vii) any agency, dealer, sales representative or other similar agreement; (viii) any agreement, contract or commitment that substantially limits the freedom of Seller to compete in any line of business or with any Person or in any area or to own, operate, sell, transfer, pledge or otherwise dispose of or encumber any Purchased Asset or that would so limit the freedom of the Buyer after the Closing Date; (ix) any agreement, contract or commitment which is or relates to an agreement with or for the benefit of any Affiliate of Seller; or (x) any other agreement, contract or commitment not made in the ordinary course of business which is material to the Business taken as a whole. (b) Each Contract disclosed in any Schedule to this Agreement or required to be disclosed pursuant to Section 3.13(a) is valid and binding agreement of Seller and is in full force and effect, and neither Seller nor, to the knowledge of Seller and Foster, any other party thereto is in default in any material respect under the terms of any such Contract, nor, to the knowledge of Seller and Foster, has any event or circumstance occurred that, with notice or lapse of time or both, would constitute any event of default thereunder. 3.14. Licenses and Permits. To the knowledge of Seller and Foster, Schedule 3.14 correctly describes each license, franchise, permit or other similar authorization affecting, or relating in any way to, the Business, together with the name of the government agency or entity issuing such license or permit (the "Permits"). Such Permits are valid and in full force and effect and, assuming the related Required Consents have been obtained prior to the Closing Date, are transferable by Seller and will not be terminated or impaired or become terminable as a result of the transactions contemplated hereby. Upon consummation of such transactions, Buyer will, assuming the related Required Consents have been obtained prior to the Closing Date, have all of the right, title and interest in all the Permits. 3.15. Insurance Coverage. Seller maintains no insurance coverage with respect to the Purchased Assets, the business and operations of the Business and its employees. 3.16. Compliance with Laws. Seller is not in violation of, has not violated, and to Seller's and Foster's knowledge is not under investigation with respect to and has not been threatened to be charged with or given notice of any violation of, any law, rule, ordinance or regulation, or judgment, order or decree entered by any court, arbitrator or governmental authority, domestic or foreign, applicable to the Purchased Assets or the conduct of the Business, except for violations that have not had and could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. 3.17. Inventories. The Seller has no inventories. 3.18. Receivables. Except as set forth on Schedule 3.18, all accounts, notes receivable and other receivables (other than receivables collected since the Balance Sheet Date) reflected on the Balance Sheet are, and all accounts and notes receivable arising from or otherwise relating to the Business at the Closing Date will be, valid, genuine and fully collectible in the aggregate amount thereof, subject to normal and customary trade discounts. All accounts, notes receivable and other receivables arising out of or relating to the Business at the Balance Sheet Date have been included in the Balance Sheet. 3.19. Proprietary Rights. (a) Schedule 3.19(a) contains a list of all of Seller's Proprietary Rights, including but not limited to: (i) computer software, data and documentation; (ii) patents and patent applications; (iii) trademarks, tradenames and service marks and registrations thereof and applications therefor; (iv) registered copyrights and applications for copyright registration; and (v) logos; as well as licenses relating to any of the foregoing. Schedule 3.19(a) identifies the owner of each item listed thereon and, in the case of registrations and applications, the application or registration number and date. (b) Seller or Foster owns or has the right to use all of Seller's Proprietary Rights. Upon execution and delivery by Seller and Foster to Buyer of the instruments of conveyance contemplated by this Agreement, each item of Seller's Proprietary Rights will be owned or available for use by Buyer on identical terms and conditions immediately following the Closing, except as otherwise indicated on Schedule 3.19(b). Seller has taken reasonable measures to protect the proprietary nature of Seller's Proprietary Rights and to maintain in confidence the trade secrets and confidential information that it owns or uses in the Business. To Seller's and Foster's knowledge, no other Person has any rights to any item of Seller's Proprietary Rights or has any rights to any of Seller's Proprietary Rights, except that the items of Seller's Proprietary Rights identified on Schedule 3.19(a) as licensed to Seller are owned by the respective owners identified on Schedule 3.19(a), and, to Seller's or Foster's knowledge, no other Person is infringing, violating or misappropriating any of Seller's Proprietary Rights, except as otherwise indicated on Schedule 3.19(b). (c) Except as set forth in Schedule 3.19(b), to Seller's knowledge, none of the activities or business presently conducted by the Business infringes or violates, or constitutes a misappropriation of, any Proprietary Rights of any other person or entity. Except as set forth in Schedule 3.19(b), the Seller has not received any complaint, claim or notice alleging any such infringement, violation or misappropriation. (d) Except as set forth in Schedule 3.19(b), with respect to each item of Seller's Proprietary Rights: (i) Seller possesses all right, title and interest in and to such item; (ii) such item is not subject to any outstanding judgment, order, decree, stipulation, injunction or any other encumbrance; and (iii) Neither Seller nor Foster has agreed to indemnify any person or entity for or against any infringement, misappropriation or other conflict with respect to such item. (e) Schedule 3.19(a) also identifies each item of Seller's Proprietary Rights used in the operation of the Business that is owned by a party other than Seller. All licenses or other agreements pursuant to which Seller uses such items are listed on Schedule 3.19(a). Except as set forth in Schedule 3.19(b), with respect to each such item: (i) the license or other agreement, covering such item is legal, valid, binding, enforceable and in full force and effect with respect to Seller and Foster, and, to Seller's and Foster's knowledge, with respect to every other party thereto; (ii) except as set forth in Schedule 3.19(b), each such license or other agreement to which Seller or Foster is a party is assignable by Seller or Foster to Buyer without the consent or approval of or any payment to any party, and all such licenses and other agreements will continue to be legal, valid, binding, enforceable and in full force and effect immediately following the Closing in accordance with the terms thereof as in effect immediately prior to the Closing, and the consummation of the transactions contemplated herein will not conflict with, result in a violation or breach of or constitute a default under (or would result in a violation, breach or default with the giving of notice or the passage of time or both) any such license or other agreement; (iii) except as set forth in Schedule 3.19(b), neither Seller or Foster, nor, to Seller's or Foster's knowledge, any other party is in breach or default under any such license or other agreement, and no event has occurred which, with notice and/or lapse of time, would constitute such a breach or default or permit termination, modification or acceleration thereunder; (iv) to Seller's and Foster's knowledge, the underlying item of Seller's Proprietary Rights is not subject to any outstanding judgment, order, decree, stipulation or injunction; and (v) Seller or Foster has not agreed to indemnify any Person for or against any interference, infringement, misappropriation or other conflict with respect to such item. 3.20. Products. Each of the products produced or sold by Seller in connection with the Business (i) is, and at all times has been, in compliance in all material respects with all applicable federal, state, local and foreign laws and regulations and (ii) is, and at all relevant times has been, fit for the ordinary purposes for which it is intended to be used and conforms in all material respects to any promises or affirmation of fact made on the container or liable for such products or in connection with its sale. To Seller's or Fosters' knowledge, there is no design defect with respect to any of such products. 3.21. Finders' Fees. There is no investment banker, broker, finder or other intermediary which has been retained by or is authorized to act on behalf of Seller or Foster who might be entitled to any fee or commission from Buyer or Seller or any of their respective Affiliates upon consummation of the transactions contemplated by this Agreement. 3.22. Other Information. To Seller's or Foster's knowledge, none of the documents or information delivered to Buyer in connection with the transactions contemplated by this Agreement and the Ancillary Agreements contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained therein not misleading. 3.23. Environmental Compliance. (i) Seller and Foster have materially complied with all applicable foreign, national, federal, state and/or local laws (including without limitation case law, rules, regulations, orders, judgments, decrees, permits, licenses and governmental approvals) that are intended to protect the environment and/or human health or safety (collectively, "Environmental Laws"); (ii) neither Seller nor Foster has handled, generated, used, stored, transported or disposed of any substance or waste which is regulated by Environmental Laws, except for reasonable amounts of ordinary office supplies and/or office-cleaning supplies which have been handled in compliance with Environmental Laws; and (iii) to the knowledge of Seller or Foster, there are no "Environmental Liabilities." For purposes of this Agreement, "Environmental Liabilities" are any liabilities which (y) arise out of or in any way relate to Seller or any real estate at any time owned, used or leased by Seller, or Seller's or Foster's use or ownership thereof, whether vested or unvested, contingent or fixed, actual or potential, and (z) arise from or relate to actions occurring (including any failure to act) or conditions existing on or before the Closing Date. 3.24. Representations. The representations and warranties of Seller and Foster contained in this Agreement, as modified by the corresponding schedules hereto, disregarding all qualifications and exceptions contained therein relating to materiality or Material Adverse Effect, are true and correct with only such exceptions as would not in the aggregate reasonably be expected to have a Material Adverse Effect. 3.25. Purchase for Investment. The Seller is acquiring the shares of Buyer Common Stock for investment for its own account and not with a view to, or for sale in connection with, any distribution thereof. The Seller agrees that the shares of Buyer Common Stock acquired by the Seller may not be sold, transferred or otherwise disposed of unless such shares are registered with the Securities and Exchange Commission and the securities regulatory authorities of certain states or unless an exemption from such registration is available. 3.26. Consultants. Except as set forth on Schedule 3.26, there have been no consultants hired by Seller or employed by Seller in connection with the Business. 3.27. Site Licenses. Except as set forth on Schedule 3.27, there have been no site licenses granted in connection with the Business by Seller to any third party. 3.28. Source Code Licenses. There have been no source code licenses of the core module granted by Seller of any Software manufactured and developed in connection with the Business. 3.29. Other Licenses. Except as set forth on Schedule 3.29, there have been no source code licenses of task, tools and reader software modules granted by Seller in connection with the Business. 3.30. Resellers, Distributors, etc. Except as set forth on Schedule 3.30, there have been no distributors, representatives or resellers of any software used in connection with the Business and purchased by the Buyer. Furthermore, except for the Seller, no other Person is authorized or licensed to distribute source code, developed or used in connection with the Business, to a third party. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER Buyer hereby represents and warranties to Seller that: 4.01. Organization and Existence. Buyer is a corporation duly incorporated, validly existing and in good standing under the laws of Massachusetts and has all corporate powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted. 4.02. Corporate Authorization. The execution delivery and performance by Buyer of this Agreement and of each of the Ancillary Agreements and the consummation by Buyer of the transactions contemplated hereby and thereby are within the corporate powers of Buyer and have been duly authorized by all necessary corporate action on the part of Buyer. This Agreement and each of the Ancillary Agreements to which Buyer is a party constitute valid and binding agreements of Buyer. 4.03. Governmental Authorization. The execution, delivery and performance by Buyer of this Agreement and each of the Ancillary Agreements require no action by or in respect of, or filing with, any governmental body, agency, official or authority. 4.04. Non-Contravention. The execution and delivery of this Agreement by the Buyer, the performance by the Buyer of its obligations under this Agreement and the consummation of the transactions contemplated hereby do not and will not (i) contravene or conflict with the corporate charter or bylaws of the Buyer, (ii) contravene or conflict with or constitute a violation of any provision of any law, regulation, judgment, injunction, order or decree binding upon or applicable to the Buyer; (iii) constitute a default under or give rise to any right of termination, cancellation or acceleration of any right or obligation of the Buyer or to a loss of any benefit to which the Buyer is entitled under any provision of any agreement, contract or other instrument binding upon the Buyer or any permit held by the Buyer or (iv) assuming the receipt of all required consents, result in the creation or imposition of any Lien on any asset of the Buyer. 4.05. Common Stock. Buyer covenants and agrees that the Common Stock to be delivered to Seller in connection with this Agreement will, at the time of such delivery, be validly issued and outstanding and be fully paid and nonassessable. ARTICLE V COVENANTS OF SELLER AND FOSTER Seller and Foster jointly and severally agree that: 5.01. Conduct of the Business. From the date hereof until the Closing Date, Seller shall conduct the Business in the ordinary course consistent with past practice, use its best efforts to preserve intact the business organization and relationships with third parties of the Business, and to keep available the services of the present employees of the Business. Without limiting the generality of the foregoing, from the date hereof until the Closing Date, Seller will not: (a) merge or consolidate with any other Person or acquire a material amount of assets from any other Person; (b) sell, lease, license or otherwise dispose of any Purchased Assets except (i) pursuant to existing contracts or commitments and (ii) in the ordinary course consistent with past practice; (c) declare, set aside or pay any dividend or make any other distribution of assets of any kind whatsoever with respect to any Seller ownership interests, except that Seller may declare, set aside or pay to Foster a cash dividend provided, however, Seller maintains cash of at least $5,000 on and as of the Closing Date; (d) adopt or propose any change in its constitutional documents; or (e) agree or commit to do any of the foregoing. Seller will not (i) take or agree or commit to take any action that would make any representation and warranty of Seller hereunder inaccurate in any respect at, or as of any time prior to, the Closing Date or (ii) omit or agree or commit to omit to take any action necessary to prevent any such representation or warranty from being inaccurate in any respect at any such time. 5.02. Access to Information. From the date hereof until the Closing Date, Seller (a) will give Buyer, its counsel, financial advisors, financing sources, auditors and other authorized representatives full access to the offices, properties, books and records of Seller related to the Business, (b) will furnish to Buyer, its counsel, financial advisors, financing sources, auditors and other authorized representatives such financial and operating data and other information relating to the Business as such Persons may reasonably request and (c) will instruct the employees, counsel and financial advisors of Seller to cooperate with Buyer in its investigation of the Business; provided that no investigation pursuant to this Section shall affect any representation or warranty given by Seller hereunder; and provided further that any investigation pursuant to this Section shall be conducted in such manner as not to interfere unreasonably with the conduct of the business of Seller. 5.03. Notices of Certain Events. Seller shall promptly notify Buyer of: (i) any notice or other communication from any Person alleging that the consent of such Person is or may be required in connection with the transactions contemplated by this Agreement; (ii) any notice or other communication from any governmental or regulatory agency or authority in connection with the transactions contemplated by this Agreement; and (iii) any actions, suits, claims, investigations or proceedings commenced or, to the best of its knowledge threatened against, relating to or involving or otherwise affecting Seller or Foster or the Business that, if pending on the date of this Agreement, would have been required to have been disclosed pursuant to Section 3.12 or that relate to the consummation of the transactions contemplated by this Agreement. 5.04. Noncompetition and Nonsolicitation. (a) Seller and Foster agree that for a period of one (1) full year from the Closing Date, neither Seller, Foster nor any of their respective Affiliates shall: (i) without the Buyer's prior written consent, directly or indirectly, alone or as a partner, joint venturer, officer, director, employee, consultant, agent, independent contractor, unpaid volunteer or stockholder of any company or business, engage in any business activity which is or may be directly or indirectly in competition with any of the products or services developed, marketed, licensed, distributed, planned or sold by Seller or Buyer. The ownership by Seller or Foster of not more than two percent of the shares of stock of any corporation having a class of equity securities actively traded on a national securities exchange or on Nasdaq shall not be deemed, in and of itself, to violate the prohibitions of this paragraph. (ii) solicit, divert or take away, directly or indirectly, whether alone or as a sole proprietor, partner, officer, director, consultant, employee, joint venturer, agent, representative, unpaid volunteer or independent contractor, whether for the Seller's or Foster's own interest or for the interest of any other person or entity, existing customers or business of Seller or Buyer or hire or attempt to hire, or solicit, receive or accept the performance of services by, or discuss with any employee of Seller or Buyer the employment of such employee by, any company, business organization or any other entity that develops, licenses, produces or manufactures any product or provides services that directly or indirectly compete with those developed, produced, licensed, manufactured or marketed by Seller or Buyer. (b) If any provision contained in this Section shall for any reason by held invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Section, but this Section shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein. It is the intention of the parties that if any of the restrictions or covenants contained herein is held to cover a geographic area or to be for a length of time which is not permitted by applicable law, or in any way construed to be too broad or to any extent invalid, such provision shall not be construed to be null, void and of no effect, but to the extent such provision would be valid or enforceable under applicable law, a court of competent jurisdiction shall construe and interpret or reform this Section to provide for a covenant having the maximum enforceable geographic area, time period and other provisions (not greater than those contained herein) as shall be valid and enforceable under such applicable law. Seller acknowledges that Buyer would be irreparably harmed by any breach of this Section and that there would be no adequate remedy at law or in damages to compensate Buyer for any such breach. Seller agrees that Buyer shall be entitled to injunctive relief requiring specific performance by Seller of this Section, and Seller consents to the entry thereof. 5.05. Confidentiality. Seller and Foster will hold, and will use its or his commercially reasonable best efforts to cause Seller's officers, directors, employees, accountants, counsel, consultants, advisors and agents to hold, in confidence, unless compelled to disclose by judicial or administrative process or by other requirements of law, all confidential documents and information concerning Buyer or the Business furnished to Seller or Foster in connection with the transactions contemplated by this Agreement, and (after the Closing Date) all confidential documents and information concerning Seller, except to the extent that such information can be shown to have been (i) previously known on a nonconfidential basis by Seller or Foster, (ii) in the public domain through no fault of Seller or Foster or (iii) later lawfully acquired by Seller or Foster from sources other than Seller or Buyer; provided that Seller may disclose such information to Seller's officers, directors, employees, accountants, counsel, consultants, advisors and agents in connection with the transactions contemplated by this Agreement so long as such persons are informed by Seller or Foster of the confidential nature of such information and are directed by Seller or Foster to treat such information confidentially. The obligation of Seller and Foster to hold any such information in confidence shall be satisfied if they exercise the same care with respect to such information as they would take to preserve the confidentiality of their own similar information but in no event less than a reasonable degree of care. If this Agreement is terminated, Seller and Foster will, and will use their best efforts to cause Seller's officers, directors, employees, accountants, counsel, consultants, advisors and agents to, destroy or deliver to Buyer, upon request, all documents and other materials, and all copies thereof, obtained by Seller or Foster, or on their behalf from Buyer in connection with this Agreement that are subject to such confidence. 5.06. Trademarks; Tradenames. As soon as practicable after the Closing Date, Seller shall eliminate the use of all of the trademarks, tradenames, service marks and service names used in the Business, in any of their forms or spellings, on all advertising, stationery, business cards, checks, purchase orders and acknowledgments, customer agreements and other contracts and all business documents. 5.07. No Negotiation with Third Parties. From the date hereof until the Closing, Seller and Foster agree not to, directly or indirectly, through agent, representative, stockholder or otherwise: (i) solicit or entertain offers from, negotiate with or in any manner encourage, discuss, accept or consider, any proposal of any third party relating to an investment in Seller or the acquisition of Seller, its capital stock, its assets (or rights thereto) or its business, in whole or in part, whether through direct purchase, merger, consolidation or business combination or licensing transaction (all such transactions being referred to herein as "Acquisition Proposals"); (ii) disclose to any third party any non-published information concerning Seller, its business, or financial condition in connection with an acquisition or investment in Seller, provided, however; Seller may disclose such information to its accountants and legal counsel, or (iii) withdraw their intention to engage in a transaction with Buyer. If Seller or Foster or any of Seller's employees, stockholders, agents, or representatives receive any unsolicited inquiry (however preliminary), offer or proposal, Seller or Foster shall promptly notify Buyer. 5.08. Use of Proprietary Rights. Seller and Foster shall not use any source materials (any source code, algorithms, computer program designs, subroutines, system specifications and other technical information relating to the development and architecture of the software included in the Purchased Assets and the design, configuration, programming or protocol relating to such software) transferred as part of the Purchased Assets for its own benefit, or for the benefit of others, except, in the case of Foster who is a natural person, in his capacity as an employee of Buyer or for inadvertent and incidental uses as may be due to memories related to aspects of such source materials. 5.09. Continuing Disclosure. Until the Closing, Seller and Foster shall have the continuing obligation promptly to advise Buyer with respect to any matter hereafter arising or discovered that, if existing or known at the date of this Agreement, would have been required to be set forth or described in a schedule to this Agreement, or that constitutes a breach or prospective breach of this Agreement by Seller or Foster. The delivery of any such notice shall not affect Buyer's remedies hereunder. ARTICLE VI COVENANTS OF BUYER Buyer agrees that: 6.01. Confidentiality. Prior to the Closing Date and after any termination of this Agreement, Buyer and its Affiliates will hold, and will use their commercially reasonable best efforts to cause their respective officers, directors, employees, accountants, counsel, consultants, advisors and agents to hold, in confidence, unless compelled to disclose by judicial or administrative process or by other requirements of law, all confidential documents and information concerning the Business or Seller furnished to Buyer or its Affiliates in connection with the transactions contemplated by this Agreement, except to the extent that such information can be shown to have been (i) previously known on a nonconfidential basis by Buyer, (ii) in the public domain through no fault of Buyer or (iii) later lawfully acquired by Buyer from sources other than Seller; provided that Buyer may disclose such information to its officers, directors, employees, accountants, counsel, consultants, advisors and agents in connection with the transactions contemplated by this Agreement so long as such persons are informed by Buyer of the confidential nature of such information and are directed by Buyer to treat such information confidentially. The obligation of Buyer and its Affiliates to hold any such information in confidence shall be satisfied if they exercise the same care with respect to such information as they would take to preserve the confidentiality of their own similar information but in no event less than a reasonable degree of care. If this Agreement is terminated, Buyer and its Affiliates will, and will use their best efforts to cause their respective officers, directors, employees, accountants, counsel, consultants, advisors and agents to, destroy or deliver to Seller, upon request, all documents and other materials, and all copies thereof, obtained by Buyer or its Affiliates or on their behalf from Seller in connection with this Agreement that are subject to such confidence. 6.02. Software Engineer Support. Following the closing, the Buyer agrees to hire a full-time software engineer and make such engineer available to support the Software purchased by the Buyer. ARTICLE VII COVENANTS OF BOTH PARTIES The parties hereto agree that: 7.01. Best Efforts; Further Assurances. (a) Subject to the terms and conditions of this Agreement, each party will use its commercially reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary or desirable under applicable laws and regulations to consummate the transactions contemplated by this Agreement. Seller and Buyer each agree to execute and deliver such other documents, certificates, agreements and other writings and to take such other actions as may be necessary in order to consummate or implement expeditiously the transactions contemplated by this Agreement and to vest in Buyer good and marketable title to the Purchased Assets. (b) Seller hereby constitutes and appoints, effective as of the Closing Date, Buyer and its successors and assigns as the true and lawful attorney of Seller with full power of substitution in the name of Buyer or in the name of Seller, but for the benefit of Buyer (i) to collect for the account of Buyer any items of Purchased Assets and (ii) to institute and prosecute all proceedings which Buyer may in its sole discretion deem proper in order to assert or enforce any right, title or interest in, to or under the Purchased Assets, and to defend or compromise any and all actions, suits or proceedings in respect of the Purchased Assets. Buyer shall be entitled to retain for its account any amounts collected pursuant to the foregoing powers, including any amounts payable as interest in respect thereof. 7.02. Certain Filings. Seller and Buyer shall cooperate with one another (a) in determining whether any action by or in respect of, or filing with, any governmental body, agency, official or authority is required, or any actions, consents, approvals or waivers are required to be obtained from parties to any material contracts, in connection with the consummation of the transactions contemplated by this Agreement and (b) in taking such actions or making any such filings, furnishing information required in connection therewith and seeking timely to obtain any such actions, consents, approvals or waivers. ARTICLE VIII TAX MATTERS 8.01. Tax Definitions. The following terms, as used herein, have the following meanings: "Code" means the Internal Revenue Code of 1986, as amended. "Post-Closing Tax Period" means any Tax period (or portion thereof) ending after the Closing Date. "Pre-Closing Tax Period" means any Tax period (or portion thereof) ending on or before the close of business on the date preceding the Closing Date. "Taxes" means all federal, state, local, foreign and other net income, gross income, gross receipts, sales, use, ad valorem, transfer, franchise, profits, license, lease, service, service use, withholding, payroll, employment, excise, severance, stamp, occupation, premium, property, windfall profits, customs duties, or other Taxes, fee, assessments or other charges of any kind whatsoever, together with any interest or any penalty, addition to tax or additional amount imposed by any governmental authority (foreign or domestic), and the term "Tax" means any one of the foregoing taxes. The term "Returns" as used herein, means all returns, declarations, reports, statements and other documents required to be filed in respect of Taxes, and "Return" means any one of the foregoing Returns. 8.02. Tax Matters. Seller and Foster jointly and severally hereby represent and warrant to Buyer that: (a) Seller has timely paid all Taxes, and all interest and penalties due thereon and payable by it, for the Pre-Closing Tax Period which will have been required to be paid on or prior to the Closing Date. (b) Seller has established, in accordance with generally accepted accounting principles applied on a basis consistent with that of preceding periods, adequate reserves for the payment of, and will timely pay all Tax liabilities, assessments, interest and penalties which arise from or with respect to the Purchased Assets or the operation of the Business and are incurred in or attributable to the Pre-Closing Tax Period. (c) Seller has filed any and all necessary elections and has received confirmation that Seller is an "S Corporation" and has been an "S Corporation" (within the meaning of Section 1361(a)(1)) at all times from inception through the Closing Date. Foster has timely paid (or will pay) all Taxes arising from or with respect to the Purchased Assets or the operation of the Business, the nonpayment of which would result in a Lien on any Purchased Asset, would otherwise affect the Business or would result in Buyer becoming liable therefor. (d) There has not been any audit of any Return filed by the Seller with respect to, or which may relate to, items of income, gain, deduction, loss or credit of Seller, and no such audit of Seller is in progress and Foster has not received notice from any Tax authority that any such audit is contemplated or pending. 8.03. Tax Cooperation; Allocation of Taxes. (a) Buyer and Seller agree to furnish or cause to be furnished to each other, upon request, as promptly as practicable, such information and assistance relating to the Purchased Assets and the Business as is reasonably necessary for the filing of all Tax returns, and making of any election related to Taxes, the preparation for any audit by any taxing authority, and the prosecution or defense of any claim, suit or proceeding relating to any Tax return. Seller and Buyer shall cooperate with each other in the conduct of any audit or other proceeding related to Taxes involving the Business and each shall execute and deliver such powers of attorney and other documents as are necessary to carry out the intent of this paragraph (a) of Section 8.03. (b) All real property taxes, personal property taxes and similar ad valorem obligations levied with respect to the Purchased Assets for a taxable period which includes (but does not end on) the Closing Date (collectively, the "Apportioned Obligations") shall be apportioned between Seller and Buyer as of the Closing Date based on the number of days of such taxable period included in the Pre-Closing Tax Period and the number of days of such taxable period included in the Post-Closing Tax Period. Seller shall be liable for the proportionate amount of such taxes that is attributable to the Pre-Closing Tax Period. Within 90 days after the Closing, Seller and Buyer shall present a statement to the other setting forth the amount of reimbursement to which each is entitled under this Section 8.03(b) together with such supporting evidence as is reasonably necessary to calculate the proration amount. The proration amount shall be paid by the party owing it to the other within 10 days after delivery of such statement. Thereafter, Seller shall notify Buyer upon receipt of any bill for real or personal property taxes relating to the Purchased Assets, part or all of which are attributable to the Post-Closing Tax Period, and shall promptly deliver such bill to Buyer who shall pay the same to the appropriate taxing authority, provided that if such bill covers the Pre-Closing Tax Period, Seller shall also remit prior to the due date of assessment to Buyer payment for the proportionate amount of such bill that is attributable to the Pre- Closing Tax Period. If either Seller or Buyer shall thereafter make a payment for which it is entitled to reimbursement under this Section 8.03(b), the other party shall make such reimbursement promptly but in no event later than 30 days after the presentation of a statement setting forth the amount of reimbursement to which the presenting party is entitled along with such supporting evidence as is reasonably necessary to calculate the amount of reimbursement. Any payment required under this Section and not made within 10 days of delivery of the statement shall bear interest at the rate per annum determined, from time to time, under the provisions of Section 6621(a)(2) of the Code for each day until paid. (c) Any transfer, documentary, sales, use or other Taxes assessed upon or with respect to the transfer of the Purchased Assets to Buyer and any recording or filing fees with respect thereto shall be the responsibility of Seller. (d) The parties shall treat for all United States federal income tax purposes the transaction evidenced by this Agreement as a reorganization within the meaning of 368(a)(i)(c) of the Code. ARTICLE IX EMPLOYEE BENEFITS 9.01. Employee Benefits Representations. Seller and Foster hereby represent and warrant to Buyer that: (a) Seller does not maintain, administer or contribute to, nor did Seller at any time in the past maintain, administer or contribute to, any (A) employee pension benefit plan (as defined in Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")); (B) employee welfare benefit plan (as defined in Section 3(1) of ERISA; or (C) benefit arrangement, including but not limited to a contract, arrangement or policy providing for severance, insurance coverage (including any self- insured arrangements), workers' compensation, disability benefits, supplemental unemployment benefits, vacation benefits, pension or retirement benefits or for deferred compensation, profit-sharing, bonuses, stock options, stock appreciation rights or other forms of incentive compensation or post-retirement insurance, compensation or benefits. (b) No employee of the Seller will become entitled to any bonus, retirement, severance or similar benefit or enhanced benefit solely as a result of the transactions contemplated hereby. (c) Except as disclosed in Schedule 9.01 hereto, there are no oral or written agreements or other arrangements with respect to present or former employees or consultants to which Seller is a party, or by which Seller is bound, and the employment of each employee of Seller is at-will. 9.02. No Third Party Beneficiaries. No provision of this Article shall create any third party beneficiary or other rights in any employee or former employee (including any beneficiary or dependent thereof) of Seller in respect of continued employment (or resumed employment) with either Buyer or the Business or any of their Affiliates and no provision of this Article IX shall create any such rights in any such Persons in respect of any benefits that may be provided, directly or indirectly, under any benefit plan or arrangement that may be established by Buyer or any of its Affiliates. No provision of this Agreement shall constitute a limitation on rights to amend, modify or terminate after the Closing Date any such plans or arrangements of Buyer or any of its Affiliates. ARTICLE X CONDITIONS TO CLOSING 10.01. Conditions to the Obligations of Each Party. The obligations of Buyer, Seller and Foster to consummate the Closing are subject to the satisfaction or waiver of the following conditions: (a) No provision of any applicable law or regulation and no judgment, injunction, order or decree shall prohibit the consummation of the Closing. (b) No proceeding challenging this Agreement or the transactions contemplated hereby or seeking to prohibit, alter, prevent or materially delay the Closing shall have been instituted by any Person before any court, arbitrator or governmental body, agency or official and be pending. (c) Each of Buyer, Seller and Foster shall have executed and delivered to the other each of the Ancillary Agreements to be entered into at Closing, in each case substantially in the form attached as an Exhibit to this Agreement. (d) All actions by or in respect of or filings with any governmental body, agency, official or authority required to permit the consummation of the Closing shall have been obtained. 10.02. Conditions to Obligation of Buyer. The obligation of Buyer to consummate the Closing is subject to the satisfaction or waiver of the following further conditions: (a)(i) Seller and Foster shall have performed in all material respects all of their respective obligations hereunder required to be performed by them at or prior to the Closing Date, (ii) the representations and warranties of Seller contained in this Agreement as of the date hereof shall be true and correct in all material respects at and as of the Closing Date as if made at and as of such date and (iii) Buyer shall have received certificates signed by the President of Seller and Foster to the foregoing effect. (b) No provision of any applicable law or regulation and no judgment, injunction, order or decree shall restrain, prohibit or otherwise interfere with the effective operation or enjoyment by Buyer of all or any material portion of the Purchased Assets. (c) Execution and delivery of other relevant agreements, including non-compete, employment agreements, trademark or software licenses, leases, supply, service or administrative agreements or other transition agreements. (d) Seller shall have received all Required Consents, all consents required under and referred to in Section 2.05, and all consents, authorizations or approvals from the governmental agencies referred to in Section 3.03, in each case in form and substance reasonably satisfactory to Buyer, and no such consent, authorization or approval shall have been withdrawn. (e) Buyer shall have received such closing documents as it may reasonably request, all in form and substance reasonably satisfactory to Buyer. (f) Assumed Liabilities shall be in the aggregate no greater than $5,000. (g) Buyer shall have physically received all source code and object code of all software forming part of the Purchased Assets, fully documented, including all related technical and user documentation. (h) Buyer shall have physically received a bank check in an amount equal to all of Seller's cash, petty cash and cash equivalents on hand and in banks, such amount to be not less than $5,000 in the aggregate. (i) Seller and Foster shall have executed and delivered each of the Ancillary Agreements to be entered into by each of them at the closing, in each case substantially in the form attached as an exhibit to this Agreement. (j) Buyer shall have received all proper authorization to enter into this Agreement and the Ancillary Agreements. 10.03. Conditions to Obligations of Seller and Foster. The obligation of Seller and Foster to consummate the Closing is subject to the satisfaction or waiver of the following further conditions: (a) (i) Buyer shall have performed in all material respect all of its obligations hereunder required to be performed by it at or prior to the Closing Date, (ii) the representations and warranties of Buyer contained in this Agreement as of the date hereof and in any certificate or other writing delivered by Seller pursuant hereto shall be true and correct in all material respects at and as of the Closing Date, as if made at and as of such date and (iii) Seller shall have received a certificate signed by the Chief Financial Officer of Buyer to the foregoing effect. (b) Execution and delivery of other relevant agreements, including non-compete, employment agreements, trademark or software licenses, leases, supply, service or administrative agreement or other transition agreements. (c) Buyer shall have received all consents, authorizations or approvals from governmental agencies referred to in Section 4.03, in each case in form and substance reasonably satisfactory to Seller, and no such consent, authorization or approval shall have been removed. (d) Seller shall have received all other closing documents it may reasonably request, all in form and substance reasonably satisfactory to Seller. ARTICLE XI SURVIVAL; INDEMNIFICATION 11.01. Survival. The covenants, agreements, representations and warranties of the parties hereto contained in this Agreement or in any certificate or other writing delivered pursuant hereto or in connection herewith shall survive the Closing until the third anniversary of the Closing Date or (i) in the case of Sections 5.04 and 5.05, for the period set forth therein, (ii) in the case of Sections 5.05 and 6.01, indefinitely; and (iii) in the case of the covenants, agreements, representations and warranties contained in Articles VIII or IX, until expiration of the applicable statutory period of limitations (giving effect to any waiver, mitigation or extension thereof), if later. Notwithstanding the preceding sentence, any covenant, agreement, representation or warranty in respect of which indemnity may be sought under Sections 11.02 or 11.03 shall survive the time at which it would otherwise terminate pursuant to the preceding sentence, if notice of the inaccuracy or breach thereof giving rise to such right to indemnity shall have been given to the party against whom such indemnity may be sought prior to such time. 11.02. Indemnification. (a) Seller and Foster hereby jointly and severally indemnify Buyer and its directors, officers, stockholders and Affiliates against and agrees to hold each of them harmless from any and all damage, loss, liability and expense (including, without limitation, reasonable expenses of investigation and reasonable attorneys' fees and expenses in connection with any action, suit or proceeding) (collectively, "Loss") incurred or suffered by Buyer or any of its directors, officers, stockholders and Affiliates arising out of: (i) any misrepresentation or breach of warranty, covenant or agreement made or to be performed by Seller and Foster pursuant to this Agreement (determined without regard to any materiality qualification contained in any representation, warranty or covenant giving rise to the claim for indemnity hereunder and whether or not discovered by Buyer prior to Closing); or (ii) the failure of Seller to assume full responsibility for any Excluded Liability or any obligation or liability of the Business relating to the Excluded Assets; provided however that Seller and Foster shall not be liable under this Section 11.02(a) unless the aggregate amount of Loss with respect to all matters referred to in this Section 11.02(a) exceeds $10,000; provided, further, that once the Loss exceeds $10,000, the Buyer shall be entitled to indemnification for the full amount of such Loss. The maximum liability of the Seller and Foster, in the aggregate, pursuant to this Section 11.02(a) shall be $190,000 plus the dollar value of all contingent payments calculated and issued to the Seller pursuant to Section 2.07(e). (b) Buyer hereby indemnifies Seller and Foster, their respective agents and affiliates against and agrees to defend and hold them harmless from any and all Loss incurred or suffered arising out of any misrepresentation or breach of warranty, covenant or agreement made or to be performed by Buyer pursuant to this Agreement. The maximum liability of the Buyer pursuant to this Section 11.02(b) shall be $190,000 plus the dollar value of all contingent payments calculated and issued to the Seller pursuant to Section 2.07(e). 11.03. Environmental Indemnification. On the terms and subject to the conditions of this Article XI, Seller hereby agrees to indemnify, defend and hold harmless Buyer and its directors, officers, stockholders and affiliates from and against any and all Losses (including reasonable expenses of investigation (including, but not by way of limitation, investigation by engineers, environmental consultants and similar technical personnel)) incurred or suffered by Buyer or any of its directors, officers, stockholders and Affiliates arising out of, in respect of or in connection with Environmental Liabilities. 11.04. Procedures; No Waiver. (a) The party seeking indemnification under Section 11.02 or 11.03 (the "Indemnified Party") agrees to give prompt notice to the party against whom indemnity is sought (the "Indemnifying Party") of the assertion of any claim, or the commencement of any suit, action or proceeding in respect of which indemnity may be sought under such Section. The Indemnifying Party may, and at the request of the Indemnified Party shall, participate in and control the defense of any such third party suit, action or proceeding at its own expense. The Indemnifying Party shall not be liable under Section 11.02 or 11.03 for any settlement effected without its consent of any claim, litigation or proceeding in respect of which indemnity may be sought hereunder. (b) No waiver of a closing condition by either Buyer or Seller shall limit its rights under Section 11.02. ARTICLE XII TERMINATION 12.01. Grounds for Termination. This Agreement may be terminated at any time prior to the Closing: (i) by mutual written agreement of Seller, Foster and Buyer; (ii) by either Seller or Buyer if the Closing shall not have been consummated on or before 11:59 p.m., Boston time, on September 30, 1997; provided, however, that the right to terminate this Agreement under this Section 12.01 shall not be available to any party whose action or failure to act has been a principal cause of or resulted in the failure of the Closing to occur on or before such date and such action or failure to act constitutes a breach of this Agreement; (iii) by either Seller or Buyer if there shall be any law or regulation that makes the consummation of the transactions contemplated hereby illegal or otherwise prohibited or if consummation of the transactions contemplated hereby would violate any nonappealable final order, decree or judgment of any court or governmental body having competent jurisdiction; (iv) by Buyer, if there shall have occurred any Material Adverse Change in the financial condition, results of operations, business, properties, assets or operations of Seller since the date of this Agreement; (v) by Buyer, upon breach of any representation, warranty, covenant or agreement on the part of Seller or Foster set forth in this Agreement, or if any representation or warranty of Seller or Foster shall have become untrue, in either case such that the conditions set forth in Section 10.02(a) would not be satisfied as of the time of such breach or as of the time such representation or warranty shall have become untrue; (vi) by Seller, upon a breach of any representation, warranty, covenant or agreement on the part of Buyer set forth in this Agreement, or if any representation or warranty of Buyer shall have become untrue, in either case such that the conditions set forth in Section 10.03(a) would not be satisfied as of the time of such breach or as of the time such representation or warranty shall have become untrue. The party desiring to terminate this Agreement pursuant to this Section 12.01 shall give notice of such termination to the other party. 12.02. Effect of Termination. If this Agreement is terminated as permitted by Section 12.01, such termination shall be without liability of either party (or any shareholder, director, officer, employee, agent, consultant or representative of such party) to the other party to this Agreement; provided that if such termination shall result from the willful failure of either party to fulfill a condition to the performance of the obligations of the other party or to perform a covenant of this Agreement or from a willful breach by either party to this Agreement, such party shall be fully liable for any and all Losses incurred or suffered by the other party as a result of such failure or breach. The provisions of Sections 6.01 and 13.03 shall survive any termination hereof pursuant to Section 12.01. ARTICLE XIII MISCELLANEOUS 13.01. Notices. All notices, requests and other communications to either party hereunder shall be in writing (including telex, telecopy or similar writing) and shall be given, if to Buyer, to: PAREXEL International Corporation 195 West Street Waltham, MA 02154 Attn: William T. Sobo, Jr. Telecopy: (617) 487-9931 with a copy to: William J. Schnoor, Jr. Testa, Hurwitz & Thibeault, LLP High Street Tower, 125 High Street Boston, MA 02110 Telecopy: (617) 248-7100 if to Seller, to: Perceptive Systems, Inc. P.O. Box 654 Boulder, CO 80306-0654 Attention: Mr. Howard Foster Telecopy: with a copy to: Robert W. Planchard, Esq. Holland & Hart 1050 Walnut Street Suite 500 Boulder, CO 80302 Telecopy: (303) 473-2720 if to Foster, to: Mr. Howard Foster 1333 Wildwood Court Boulder, CO 80303 or such other address or addresses as may be specified by written notice given in accordance with this provision. 13.02. Amendments; No Waivers. (a) Any provision of this Agreement may be amended or waived prior to the Closing Date if, and only if, such amendment or waiver is in writing and signed by the Buyer, Seller and Foster, (b) No failure or delay by either party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. 13.03. Expenses. Except as otherwise provided herein, all costs and expenses incurred in connection with this Agreement shall be paid by the party incurring such cost or expense; provided, however, all costs and expenses incurred by Seller shall be paid or reimbursed by Foster. 13.04. Successors and Assigns. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns; provided that no party may assign, delegate or otherwise transfer any of his or its rights or obligations under this agreement without the consent of the other parties hereto. 13.05. Governing Law. This Agreement shall be construed in accordance with and governed by the law of the Commonwealth of Massachusetts, without regard to the conflicts of law rules of such state. 13.06. Counterparts; Effectiveness. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement shall become effective when each party hereto shall have received a counterpart hereof signed by the other party hereto. 13.07. Entire Agreement. This Agreement (including the exhibits and schedules hereto) and the Ancillary Agreements between Seller, Foster and Buyer constitute the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements, understandings and negotiations, both written and oral, between the parties with respect to the subject matter of this Agreement. No representation, inducement, promise, understanding, condition or warranty not set forth herein has been made or relied upon by either party hereto. Neither this Agreement, nor the Ancillary Agreements, nor any provision hereof or thereof, is intended to confer upon any Person other than the parties hereto any rights or remedies hereunder. 13.08. Bulk Sales Laws. Buyer and Seller each hereby waive compliance by Seller with the provisions of the "bulk sales", "bulk transfer" or similar laws of any state. Seller agrees to indemnify and hold Buyer harmless against any and all claims, losses, damages, liabilities, costs and expenses incurred by Buyer or any of its Affiliates as a result of any failure to comply with any such "bulk sales", "bulk transfer" or similar laws. 13.09. Captions. The captions herein are included for convenience of reference only and shall be ignored in the construction or interpretation hereof. 13.10. Jurisdiction. Any action or proceeding seeking to enforce any provision of, or based on any right arising out of, this Agreement may be brought against any of the parties in the federal courts of the Commonwealth of Massachusetts, and each of the parties hereby consents to the jurisdiction of such courts (and of the appropriate appellate courts) in any such action or proceeding and waives any obligation to venue laid therein. Process in any such action or proceeding may be served on any party anywhere in the world, whether within or without the Commonwealth of Massachusetts. 13.11. Other Remedies; Specific Performance. Any and all remedies herein expressly conferred upon a party will be deemed cumulative and not exclusive of any other remedy conferred hereby, or by law or equity upon such party, and the exercise by a party of any one remedy will not preclude the exercise of any other remedy. The parties hereto agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof in any court of the United States or any state having jurisdiction, this being in addition to any other remedy to which they are entitled at law or in equity. IN WITNESS WHEREOF, the parties hereto here caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. PAREXEL INTERNATIONAL CORPORATION By: Josef H. von Rickenbach Name: Josef H. von Rickenbach Title: President and CEO PERCEPTIVE SYSTEMS, INC. By: Howard W. Foster Name: Howard Foster Title: President EX-5 6 425MTH6463/27.461607-1 EXHIBIT 5.1 January 15, 1998 PAREXEL International Corporation 195 West Street Waltham, MA 02154 RE: Registration Statement on Form S-3 Relating to 295,944 shares of Common Stock Dear Sir or Madam: We are counsel to PAREXEL International Corporation, a Massachusetts corporation (the "Company"), and have represented the Company in connection with the preparation and filing of the Company's Registration Statement on Form S- 3 (the "Registration Statement"), covering the resale to the public of up to 295,944 shares of the Company's Common Stock, $.01 par value per share, by certain stockholders of the Company (the "Shares"). We have reviewed the corporate proceedings taken by the Board of Directors of the Company with respect to the authorization and issuance of the Shares. We have also examined and relied upon originals or copies, certified or otherwise authenticated to our satisfaction, of all corporate records, documents, agreements or other instruments of the Company and have made all investigations of law and have discussed with the Company's officers all questions of fact that we have deemed necessary or appropriate. Based upon and subject to the foregoing, we are of the opinion that the Shares are legally issued, fully paid and non-assessable. We hereby consent to the filing of this opinion as Exhibit 5.1 to the Registration Statement and to the reference to our firm in the Prospectus contained in the Registration Statement under the caption "Legal Matters." Very truly yours, /s/ Testa, Hurwitz & Thibeault, LLP Testa, Hurwitz & Thibeault, LLP EX-23 7 Exhibit 23.1 Consent of Independent Accountants We hereby consent to the use in the Prospectus constituting part of this Registration Statement on Form S- 3 of our report dated August 16, 1997, except as to the Note 16 and pooling of interests with Kemper-Masterson, Inc., which is as of December 1, 1997, relating to the supplemental financial statements of PAREXEL International Corporation, which appears in such Prospectus. We also consent to the incorporation by reference in the Prospectus constituting part of the Registration Statement Form S-3 of our report dated August 16, 1997, related to the consolidated financial statements of PAREXEL International Corporation, which appears on page 34 of PAREXEL International Corporation's Annual Report to Stockholders, which is incorporated by reference in its 1997 Annual Report on Form 10-K. We also consent to references to us under the heading `Experts" and "Selected Supplemental Consolidated Financial Data" in such Prospectus. However, it should be noted that Price Waterhouse LLP has not prepared or certified such "Selected Supplemental Consolidated Financial Data." PRICE WATERHOUSE LLP Boston, Massachusetts January 20, 1998 EX-11 8 EXHIBIT 11.1 PAREXEL INTERNATIONAL CORPORATION STATEMENT RE COMPUTATION OF NET INCOME (LOSS) COMMON SHARE (in thousands, except per share data) Three months ended Septe mber 30 Year ended June 30, 1997 1996 1995 1997 1996 Net Income (loss) $11,037 $4,693 ($10,671) $3,841 $1,985 Weighted average common shares outstanding: 18,957 13,395 2,175 20,552 17,261 a. Shares attributable to common stock outstanding b. Shares attributable to common stock options and preferred warrants pursuant to APB 15, paragraph 38(b) - - - - - c. Shares attributable to common stock options pursuant to SAB 83 540 685 621 515 Weighted average common shares outstanding - - 2 - - Net income (loss) per share 19,497 14,080 2,177 21,173 17,776 $0.57 $0.33 ($4.90) $0.18 $0.11 EX-27 9 WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE. FINANCIAL DATA SCHEDULE
5 1,000 YEAR JUN-30-1997 JUL-01-1996 JUN-30-1997 30,359 66,891 69,047 2,986 0 175,417 43,758 15,536 205,501 64,541 0 0 0 205 138,959 205,501 0 170,355 0 115,695 0 1,617 212 17,298 6,261 11,037 0 0 0 11,037 0.57 0.57
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