10-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2003

Commission file number 000-23520

Quintiles Transnational Corp.

(Exact name of registrant as specified in its charter)

North Carolina	56-1714315
(State of incorporation)	(I.R.S. Employer Identification Number)
4709 Creekstone Drive, Suite 200 Durham, North Carolina (Address of principal executive office)	27703-8411 (Zip Code)

Registrant’s telephone number, including area code: (919) 998-2000

Securities registered pursuant to Section 12(b) of the Act:

None.

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $.01 par value per share

(Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes þ          No o

          Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment of this Form 10-K.     þ

          Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).     Yes þ          No o

          The aggregate market value of the registrant’s Common Stock at June 30, 2003 held by those persons deemed by the registrant to be non-affiliates was approximately $1,566,418,759.

          As of March 1, 2004 (the latest practicable date), there were 125,000,000 shares of the registrant’s Common Stock, $.01 par value per share, outstanding.

QUINTILES TRANSNATIONAL CORP.

Form 10-K Annual Report

INDEX

			Page
PART I
	Item  1.	Business		2
	Item  2.	Properties		19
	Item  3.	Legal Proceedings		19
	Item  4.	Submission of Matters to a Vote of Security Holders		21
PART II
	Item  5.	Market for Registrant’s Common Equity and Related Stockholder Matters		22
	Item  6.	Selected Consolidated Financial Data		23
	Item  7.	Management’s Discussion and Analysis of Financial Condition and Results of Operation		25
	Item  7A.	Quantitative and Qualitative Disclosures about Market Risk		53
	Item  8.	Financial Statements and Supplementary Data		54
	Item  9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		121
	Item  9A.	Controls and Procedures		121
PART III
	Item  10.	Directors and Executive Officers of the Registrant		122
	Item  11.	Executive Compensation		126
	Item  12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		139
	Item  13.	Certain Relationships and Related Transactions		144
	Item  14.	Principal Accountant Fees and Services		147
PART IV
	Item  15.	Exhibits, Financial Statement Schedules, and Reports on Form 8-K		148

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PART I

      Information set forth in this Annual Report on Form 10-K contains various “forward looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Forward-looking statements represent our judgment concerning the future and are subject to risks and uncertainties that could cause our actual operating results and financial position to differ materially. Such forward looking statements can be identified by the use of forward-looking terminology such as “may,” “will,” “expect,” “anticipate,” “estimate,” “believe,” “continue,” or “target” or the negative thereof or other variations thereof or comparable terminology.

      We caution you that any such forward looking statements are further qualified by important factors that could cause our actual operating results to differ materially from those in the forward-looking statements, including without limitation, the risk that the market for our products and services will not grow as we expect, the risk that our PharmaBio Development transactions will not generate revenues, profits or return on investment at the rate or levels we expect or that royalty revenues under our PharmaBio Development arrangements may not be adequate to offset our upfront and on-going expenses in providing sales and marketing services or in making milestone and marketing payments, our ability to efficiently distribute backlog among project management groups and match demand to resources, our actual operating performance, the risk that our substantial indebtedness could adversely affect our financial condition, the limitations on the operation of our business imposed by the covenants contained in our senior subordinated notes and our senior secured credit facility, variations in the actual savings and operating improvements resulting from our restructurings, our ability to maintain large customer contracts or to enter into new contracts, delays in obtaining or failure to receive required regulatory approvals of our customers’ products or projects, changes in trends in the pharmaceutical industry, our ability to operate successfully in new lines of business, the risk that Verispan, our joint venture with McKesson Corporation relating to the informatics business, will not be successful, changes in existing, and the adoption of new, regulations affecting the pharmaceutical industry and liability risks associated with our business which could result in losses or indemnity to others not covered by insurance. See “Risk Factors” below for additional factors that could cause actual results to differ.

Item 1. Business

General

      Founded in 1982 by Dennis B. Gillings, Ph.D.,we have grown to become a market leader in providing a full range of integrated product development and commercial development solutions to the pharmaceutical, biotechnology and medical device industries. Based on our competitors’ press releases and public filings with the United States Securities and Exchange Commission, or the SEC, we are the largest company in the pharmaceutical outsourcing services industry as ranked by 2003 gross revenues. We also provide market research services and strategic analyses to support healthcare decisions and healthcare policy consulting to governments and other organizations worldwide. This broad range of services helps our customers lower their costs, reduce the length of time from the beginning of development to peak sales of a new drug or medical device and increase the sales of their products.

      Our business is organized into three segments: the Product Development Group, the Commercial Services Group and the PharmaBio Development Group. The combination of these three business segments, together with Verispan, LLC, our joint venture with McKesson Corporation, which provides research and market data to help drug sponsors better market their products, enables us to provide a broad range of outsourcing services to the pharmaceutical and biotechnology industries. We believe this comprehensive suite of services offers customers the opportunity to outsource through Quintiles all key phases of a product’s development and sales from the preclinical phase through patent expiration and beyond.

      Product Development Group. Our Product Development Group provides global expertise in drug development from early compound analysis through regulatory submission. Our capabilities span preclinical

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and all phases of clinical testing with particular strength in Phase I, Phase II and Phase III clinical studies. The Product Development Group has been divided into two lines of business: Early Development and Laboratory Services, which focuses on early stage pharmaceutical development and laboratory services for the later phases, and Clinical Development Services, which specializes in clinical trials for regulatory approval of products under investigation. We also emphasize and target strong opportunity in Phase IIIb and Phase IV clinical and marketing studies, traditionally known as Late Phase studies, which are developing into a third line of business in the Product Development Group called Strategic Research Services, or SRS. Late Phase studies may be recommended by regulators and utilized by our customers’ marketing departments to assess safety issues and responses to drug therapy for commonly occurring patient profiles.

      Commercial Services Group. Our Commercial Services Group provides our customers with a comprehensive range of specialized pre-launch, launch and post-launch fee-for-service contract sales and strategic marketing services. The Commercial Services Group is comprised of our Commercialization business and our Medical Communications and Consulting business. Our Commercial Services Group not only provides contract sales, but also provides contract marketing and other services. This group delivers integrated, strategic and tactical solutions in sales and marketing across the product life cycle for pharmaceutical and biotechnology companies as well as for other entities across the healthcare spectrum. In addition, our Commercial Services Group provides strategic health and human services consulting for customers including hospitals, long-term care facilities, foundations, managed care organizations, employers, the military and federal and state governments.

      PharmaBio Development Group. Our PharmaBio Development Group enters into partnering transactions with certain of our customers. These transactions typically involve providing funding to the customer, either through direct payments or loans (sometimes convertible into capital stock of the customer) to help customers develop and/or market their particular drug(s). We also may invest in customers’ equity and/or provide services through our Commercial Services Group. Furthermore, the transactions often grant us royalties or commissions based on sales of the customer’s product. We believe these partnering transactions allow us to explore new opportunities and areas for incremental growth in a controlled manner that draws upon our skill and industry knowledge. Our professional clinical staff numbers in the thousands and provides a very broad base of knowledge and experience with considerable numbers of pharmaceutical products. This expertise enables us to conduct an in-depth assessment of a product’s potential in the marketplace before we enter into a partnering transaction with any of our customers. At the end of 2001, the PharmaBio Development Group expanded its scope of activities to include the acquisition of rights to market products and has significantly expanded the sales of a number of these products.

Pharma Services Transaction

      On September 25, 2003, Pharma Services Holding, Inc., or Pharma Services, acquired all of the issued and outstanding shares of our common stock. Pharma Services Intermediate Holding Corp., or Intermediate Holding, currently holds 99.2% of our outstanding common stock with Pharma Services owning the remainder. Intermediate Holding is wholly owned by Pharma Services. Pharma Services was formed for purposes of the going private transaction by Dennis B. Gillings, Ph.D., our Executive Chairman, Chief Executive Officer and founder, and One Equity Partners LLC, or One Equity, the private equity arm of Bank One Corporation. Pharma Services’ acquisition of our common stock is sometimes referred to in this Annual Report on Form 10-K as the Pharma Services transaction. Financing for the Pharma Services transaction was provided by:

•  equity investments from One Equity, TPG Advisors III, Inc., or TPG, and Temasek Holdings, or Temasek, among others;

•  equity rollovers of our common stock and options to purchase our common stock, including shares and options held by Dr. Gillings and his affiliates, as well as certain of our executive officers;

•  a six-year $310.0 million senior term loan as part of a $385.0 million senior credit facility;

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•  the issuance of $450.0 million principal amount of senior subordinated notes; and

•  our available cash.

Services

      We provide globally integrated contract research, sales, marketing and healthcare policy consulting and health information management services to the worldwide pharmaceutical, biotechnology, medical device and healthcare industries. Additionally, we offer our customers the possibility of a strategic partnering relationship. We can support our customers through the entire life cycle of a drug from initial testing to patent expiration. We currently operate in three reportable segments: Product Development, Commercial Services, and PharmaBio Development. We provide our customers with a continuum of services that spans these three segments. We believe that the broad scope of our services allows us to help our customers rapidly assess the viability of a growing number of new drugs, cost-effectively accelerate development of the most promising drugs, launch new drugs to the market quickly and evaluate their impact on healthcare. Note 26 of the notes to our consolidated financial statements, included in Item 8 of this Form 10-K, provides financial information regarding each segment.

      The following discussion describes our service offerings in greater detail.

Product Development Offerings

      Our Product Development Group has historically been divided into two lines of business: Early Development and Laboratory Services, which focuses on early stage pharmaceutical development and laboratory services for the later phases, and Clinical Development Services, which specializes in clinical trials for regulatory approval of products under investigation. We also emphasize and target a strong opportunity in Phase IIIb and Phase IV clinical and marketing studies, traditionally known as Late Phase studies, which are developing into a third line of business in the Product Development Group, known as SRS. SRS studies may be recommended by regulators and utilized by our customers’ marketing departments to assess safety issues and responses to drug therapy for commonly occurring patient profiles.

Early Development and Laboratory Services

      Preclinical Services. Our preclinical unit provides customers with a wide array of early development services. These services are designed to produce the data required to identify, quantify and evaluate the risks to humans resulting from the manufacture or use of pharmaceutical and biotechnology products. Such services include general toxicology, carcinogenicity testing, pathology, efficacy and safety pharmacology, bioanalytical chemistry, drug metabolism and pharmacokinetics. During 2001, we opened a safety pharmacology unit in Kansas City, Missouri. The development of this capability in the United States, in combination with our Edinburgh, Scotland unit, has allowed us to provide full service safety pharmacology to our U.S. customers while further strengthening our global position.

      Pharmaceutical Services. We offer services in the design, development, analytical testing and commercial manufacture of pharmaceutical dose forms. We provide study medications for preclinical and clinical studies along with necessary good manufacturing practice, or GMP, chemistry, manufacturing and controls, or CMC, and regulatory documentation. We recently completed construction of a new GMP sterile clinical supplies manufacturing facility in Kansas City, Missouri.

      Clinical Trial Services. At our clinical trial supplies facilities, medications for use in clinical (both pre- and post-marketing) studies are received, packaged according to the appropriate protocol, labeled and distributed globally. We also provide services to reconcile these drugs in connection with a particular clinical trial. These services can expedite the drug development process because clinical trials are often postponed by delays in the manufacture and distribution of study drug materials.

      Phase I Services. Phase I clinical trials involve testing a new drug on a limited number of healthy individuals. Our Phase I services include dose ranging, bioavailability/bioequivalence studies,

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pharmacokinetic/pharmacodynamic modeling, first administration to humans, multiple dose tolerance, dose effect relationship and metabolism studies.

      Centralized Clinical Trial Laboratories. Our centralized laboratories provide globally integrated clinical laboratory services to support all phases of clinical trials with facilities in the United States, Europe, South Africa and Singapore. Services include the provision of protocol-specific study materials, customized lab report design and specimen archival and management for study sponsors. In addition to providing comprehensive safety and efficacy testing for clinical trials, our centralized laboratories allow for global standardization of clinical testing, database development and electronic data transfer and provide direct electronic integration of laboratory data into safety and efficacy reports for new drug application, or NDA, submissions.

Clinical Development Services

      Clinical Trial Services. We offer comprehensive clinical trial services throughout the life cycle of a product. This life cycle includes the following steps to obtaining FDA approval:

•  Pre-clinical, which involves testing to identify, quantify and evaluate biological activity and safety;

•  Phase I, which involves determining how a drug is processed by the body and the duration of the drug’s actions on the body;

•  Phase II, which involves controlled testing of a drug to determine the safe dosage range of a drug and a broader safety profile;

•  Phase IIIa, which involves extensive testing to confirm the effectiveness and safety of a drug;

•  Phase IIIb, which involves conducting additional studies following submission to the FDA and/or foreign regulatory authorities and agencies; and

•  Phase IV, which involves conducting additional studies to further evaluate the effectiveness, side effects and cost effectiveness of a drug following regulatory approval.

      In addition to Phase I through III clinical studies, which are the basis for obtaining initial regulatory approval for drugs and medical devices, we provide expertise in the development and execution of Phase IIIb and IV clinical and marketing studies, which includes drug safety, regulatory affairs, clinical trial supplies, central laboratory services, quality assurance, health economics, data management and biostatistics. On a global basis, our employees are aligned with key customers to provide a full range of management and scientific services tailored to their specific requirements.

      We coordinate our offerings through a customer-centric project management structure. We have over 200 project managers with Phase II-IV drug development and medical device experience spanning the therapeutic areas of the cardiovascular, central nervous system, allergy/respiratory, genitourinary, anti-infectives, ophthalmology, gastrointestinal, oncology, endocrinology, immunology and dermatology. Other specialized offerings include development services in neonatal, pediatric and adolescent care. Our project management processes and training are based on the Project Management Institute standard. Because of our global presence and ability to coordinate clinical staff to service customers on an international basis, we are experienced in managing trials involving several thousand patients at hundreds of sites concurrently in the Americas, Europe, the Asia-Pacific region and South Africa.

      We provide our customers with one or more of the following core clinical trial services:

      Study Design. We assist our customers in preparing the study protocol and designing case report forms, or CRFs. The study protocol defines the medical issues to be examined, the number of patients required to produce statistically valid results, the period of time over which they must be tracked, the frequency and dosage of drug administration and the study procedures.

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      Investigator Recruitment. During clinical trials, the drug is administered to patients by physicians, referred to as investigators, at hospitals, clinics or other sites. We have access to several thousand investigators who conduct our clinical trials worldwide.

      Patient Recruitment. We assist our customers in recruiting patients to participate in clinical trials through investigator relationships, media advertising, use of Web-based techniques and other methods. We also help to ensure patients are retained for the duration of the studies.

      Study Monitoring. We provide study monitoring services which include investigational site initiation, patient enrollment assistance, and data collection and clarification. Site visits help to assure the quality of the data, which are gathered according to good clinical practice, or GCP, and International Conference on Harmonization, or ICH, regulations and guidelines, and to meet the sponsors’ and regulatory agencies’ requirements according to the study protocol.

      Clinical Data Management and Biostatistical Services. We have extensive experience in the creation and statistical analysis of scientific databases for all phases of the drug development process. These databases include customized databases to meet customer-specific formats, integrated databases to support NDA submissions and databases in accordance with ICH guidelines.

      Regulatory Affairs Services. We provide comprehensive medical and regulatory services for our pharmaceutical and biotechnology customers. Our medical services include medical oversight of studies, review and interpretation of adverse experiences, medical writing of reports and study protocols and strategic planning of drug development programs. Regulatory services for product registration include regulatory strategy design, document preparation, publishing, consultation and liaison with various regulatory agencies. Our regulatory affairs professionals help to define the steps necessary to obtain registration as quickly as possible. We are one of the few companies able to provide such services in numerous countries, including the key regions of focus for pharmaceutical companies, to meet our customers’ needs to launch products in multiple countries simultaneously.

      Late Phase Clinical Studies. Designed to meet the increasing demand for information from patients, prescribers, payors and regulators for information and to deepen customers’ understanding of physician practices and product adoption patterns, Quintiles Late Phase provides non-registration research and consulting services. SRS specializes in providing strategic Phase IIIb and Phase IV clinical services such as post-marketing pharmacovigilance programs, health outcomes studies and other market-relevant research activities to accelerate the commercialization process. This group also offers specialized reimbursement support services and patient assistance programs to facilitate coverage and payment for treatment, utilizing our proprietary new technologies. SRS studies are developing into a third line of business in the Product Development Group.

      Medical Device Services. We offer medical device services similar to our offerings for the development and introduction of pharmaceutical products. Our core medical device services include identification of regulatory requirements in targeted markets; global clinical study design, planning, management and monitoring, including data management and statistical analysis of report preparations; preparation of regulatory filings and compliance with regulatory requirements for market access; and long range planning for product launches, including pricing strategies.

Commercial Services Offerings

      The Commercial Services Group is comprised of our Innovex-branded commercialization business, which includes the largest global contract sales organization, or CSO, based on reported revenues in 2003 and the integrated strategic solutions business. We entered the CSO industry in 1996 when we acquired Innovex, a U.K.-based company with global operations, and have since grown the business organically as well as through acquisitions. We continue to operate our CSO business under the Innovex brand. We have specialized therapeutic expertise in the areas of cardiovascular, central nervous system, gastrointestinal, women’s health, endocrinology, allergy-respiratory, anti-infectives and oncology.

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Commercialization Offerings

      Our customized sales and marketing services are designed to accelerate the commercial success of pharmaceutical, biotechnology, veterinary and other health-related products.

      Contract Sales. Skilled, Web-integrated primary care, specialty, and innovative promotional alternative sales teams provide our customers with a flexible resource which is able to respond quickly and effectively to a changing marketplace at a variable cost to the customer. We provide our customers with a variety of staffing options, including direct hire, flexible work arrangement, leave of absence, and “strike force” arrangements (in which a team is deployed to a particular territory to capitalize on a market niche opportunity). We use a proprietary review process and a variety of techniques, including our extensive computerized databases and candidate referrals, to recruit candidates for our contract sales teams. Our training and development services integrate traditional and Web-based services. Our contract sales unit helps our customers design or revamp their existing sales programs to meet marketplace demands.

      Customers may contract for dedicated or syndicated sales teams. When dedicated teams are deployed, we take on a primary management role or a supporting role to the customer’s field management, depending on the customer’s needs. In certain circumstances, dedicated teams may be transferred to the customer for an additional placement fee included in the contract. Our syndicated teams promote a number of non-competing drugs for different customers simultaneously. We always maintain direct management of our syndicated sales teams.

      Health Management Services. We also provide teams of healthcare professionals, including nurses, pharmacists and physicians, who are dedicated to assisting customers with disease management issues. Our health management services offer customized clinical solutions to bridge the gap between the clinical and commercial phases of product development and to provide expertise across a broad range of pre-launch, launch and post-launch opportunities. We believe that our clinical and promotional expertise, commercial orientation and international experience enable us to tailor these programs to meet the diverse needs of the global pharmaceutical industry across a wide range of disciplines and local market conditions.

      Marketing Services. We provide customized product marketing services for pharmaceutical and biotechnology companies designed to influence the decisions of patients and physicians and accelerate the acceptance of drugs into treatment guidelines and formularies. We assess markets, conduct research, develop strategies and tactics, assist in discussions with regulatory bodies, identify distribution channels and coordinate vendors in every region of the country. Our industry experts, with experience in many therapeutic areas, can provide marketing insight into a wide range of geographic markets while working to optimize commercial success.

      Internet-based Sales and Marketing Services. Innovex e-Health Solutions Group, launched in October 2001, provides Internet-based sales and marketing services for the pharmaceutical, biotechnology and medical device industries. The group’s first product, iQLearning.com, was launched in January 2002. iQLearning.com is an Internet service portal that further expands our range of healthcare information resources and services to physicians in the United States and currently has a membership of more than 114,000 U.S. physicians. The group’s second and third products were launched in August 2002. The eOP product is an online process for identifying key opinion leaders within designated specialty areas utilizing the iQLearning service portal. Our third product is the iQBroadband program, which leverages the iQLearning service portal to provide state-of-the-art live net meeting software and high speed Internet connectivity for live sales presentations, speaker training meetings and web-based symposia. The group also brought the full capability of the iQLearning service portal to Innovex in the fourth quarter of 2002 by delivering online training and messaging to a contract sales force.

      Training. In various countries around the world we offer industry specific training to professionals working in retail pharmacy, manufacture, distribution, regulatory, sales and marketing. The training in many instances is outcomes based, covers both knowledge and skills, and may be delivered via the Internet or email, as well as hard copy.

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Quintiles Medical Communications and Consulting

      Strategic Marketing Services. Our expert consultants support pharmaceutical and biotechnology product commercialization through a continuum of services. We begin in the conceptualization phase of development with strategic market research. Through a combination of secondary data and qualitative primary research, we assist customers in making development decisions. Once a product proceeds to large scale clinical trials, this group creates product positioning, pricing and formulary access/reimbursement strategies based on extensive primary research with providers, patients, payors and other administrative decision-makers. Finally, in support of product marketing at launch, we create health economic models to justify price to formulary decision-makers, and, post-launch, we track actual product costs and outcomes through medical claims data, medical records and patient interviews. The combination of these services provides our customers with the marketing, economic and reimbursement support they need to help to maximize commercial potential at each stage of the product lifecycle.

      Healthcare Policy Research and Consulting. Our management consulting services focus on improving the quality, availability and cost-effectiveness of healthcare in the highly regulated and rapidly changing healthcare industry. These services include corporate strategic planning and management, program and policy development, financial and cost-effectiveness analyses, evaluation design, microsimulation modeling and data analysis. These services represent the core competencies of The Lewin Group, an internationally recognized management consulting firm with more than three decades of experience solving problems for organizations in the public, non-profit and private sectors.

      Regulatory and Compliance Consulting. We supply regulatory and compliance consulting services to the pharmaceutical, biotechnology, medical device development and manufacturing industries. Services include global regulatory consulting, quality systems and engineering and validation. We assist companies in preparing for interactions with the FDA, and other foreign regulatory authorities or agencies, including inspections and resolution of enforcement actions, complying with current GMP, GCP and quality systems regulations, meeting process and software validation requirements, and bringing new medical devices to market.

      Strategic Medical Communications. Our strategic medical communications group offers a range of pre-launch, launch and post-launch services, beginning in the early stages of product development and continuing until the product reaches peak penetration. Services include communications strategies and planning, product positioning and branding, opinion leader development, faculty training, symposia, continuing medical education programs, promotional programs, sponsored publications, new media-based programs, patient education and clinical experience programs (e.g., patient starter programs and compliance programs). As early as Phase I and Phase II clinical trials, we can begin to disseminate scientific information and develop and present educational forums to help gain opinion leader support for a new drug.

PharmaBio Development Offerings

      Our PharmaBio Development Group manages our investment portfolio and enters into partnering transactions with certain of our customers. These transactions typically involve providing funding to the customer, either through direct payments or loans (sometimes convertible into capital stock of the customer) or through the provision of services to these customers. We also may invest in our customers’ equity and/or provide services through our Commercial Services Group to these customers. Furthermore, these transactions often grant us royalties or commissions based on sales of the customer’s product.

      In all cases, the PharmaBio Development Group engages in a rigorous due diligence and internal review process which involves the relevant aspects of our organization prior to making its investments. This process helps us to develop transaction structures that are designed to balance targeted returns with our perceived risk.

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      In addition to the rigorous due diligence and internal review process, we further attempt to mitigate the risk of PharmaBio Development Group investments by:

•  Focusing primarily on compounds that already have regulatory approval or are in the later stages of clinical development, thus reducing regulatory risk;

•  Structuring all transactions in a prudent manner which, in some instances, may include structuring financial commitments in the form of milestone payments, whereby payments are made based on the successful completion of different stages of the development cycle; and

•  In some instances, requiring an option to reduce our financial commitment if the drug sponsor does not invest a certain minimum amount on promotion of the drug.

      Overall, our revenues and operating income from these transactions depend on the performance of the customer’s capital stock and/or its product. Since we created the PharmaBio Development Group in 2000, it has entered into numerous transactions. In 2003 (combining predecessor and successor), 2002 and 2001, we recognized net gains on PharmaBio Development Group investments of approximately $31.0 million, $13.7 million and $611,000, respectively.

Transaction Models

      Our PharmaBio Development Group enters into the following types of transactions:

•  Risk-Based Commercialization. Risk-based commercialization investments include transactions in which we provide commercialization services in exchange for fees and/or product royalty rights. In such transactions, we receive from our customers the right to royalties on the sales of the products covered by the agreements. We use a variety of contract structures in our risk-based commercialization transactions. Certain transactions may include contractual minimum and/or maximum royalty amounts. In other instances, we may have no guaranteed minimum royalty. Regardless of the structure, we always seek to earn financial returns commensurate with the risks presented by the transaction.

•  Strategic Investments. The PharmaBio Development Group makes a variety of strategic investments, including direct investments in both marketable and non-marketable equities, debt and indirect investments through such vehicles as venture capital funds. In some cases, PharmaBio Development makes investments in connection with risk-based commercialization agreements, such as our arrangements with Columbia Laboratories, Inc. and Discovery Laboratories, Inc. As of December 31, 2003, the PharmaBio Development Group had a total of $106.9 million in such investments, including $48.6 million of investments in marketable equities and $58.3 million of investments in non-marketable equity securities and loans.

In addition, the PharmaBio Development Group has acquired the rights to market certain pharmaceutical products. We arrange for the manufacture of, and directly market, a number of dermatology compounds, including Solaraze^TM and ADOXA^TM, through our specialty pharmaceuticals subsidiary, Bioglan Pharmaceuticals Company. The PharmaBio Development Group also has acquired the rights to several other products in Europe, via licensing or distribution agreements, which involve a variety of up-front or ongoing payments to the licensors. In these arrangements, third parties manufacture the products for us and Innovex sells the products. In all of these instances, the PharmaBio Development Group recognizes the revenues from the sales of these pharmaceutical products.

•  Risk-Based Development Services. In such transactions, we would provide some or all of the clinical development services costs on behalf of a partner in exchange for royalty rights in the product. We have not consummated any risk-based development transactions.

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Recent Strategic Alliances

      The PharmaBio Development Group has entered into the following recent transactions.

•  In January 2002, we entered into a series of agreements with Kos Pharmaceuticals, Inc. to commercialize in the United States Kos’s treatments for cholesterol disorders, Advicor® and Niaspan®. We provide a dedicated sales force at our own expense who, in combination with Kos’s sales force, commercialized Advicor® and Niaspan® for two years. In return, we received warrants to purchase shares of Kos’s common stock at an agreed price. We will receive commissions, subject to a minimum and maximum amount over the life of the agreement, based on net sales of the product from 2002 through 2006.

•  During the second quarter of 2002, we finalized an agreement with a large pharmaceutical customer to market pharmaceutical products in Belgium, Germany and Italy. We will provide, at our own expense, sales and marketing resources over the five-year life of the agreement, in return for which the customer will pay us royalties on product sales in excess of certain baselines. In the first quarter of 2003 and the third quarter of 2003, the agreements in Germany and Belgium, respectively, were terminated.

•  In July 2002, we entered into an agreement with Eli Lilly and Company, or Lilly, to support its commercialization efforts for Cymbalta^TM in the United States. In return for providing sales representatives and making marketing and milestone payments to Lilly totaling $110 million of which $70 million was paid in 2002 and the remaining $40 million is due in equal installments during each of the four quarters following FDA approval, we will receive an 8.25% percent-of-sales royalty over the five-year service period followed by a three percent royalty over the subsequent three years. On September 29, 2003, Lilly received an approvable letter for Cymbalta^TM from the FDA (Lilly received an initial approvable letter for Cymbalta^TM in September 2002) indicating that approval was contingent upon resolution of manufacturing issues, a pre-approval site inspection at its Indianapolis dry products facility, and the completion of label negotiations. The agency later informed Lilly that its Indianapolis facilities had reached a level of current GMP compliance that would allow for pre-approval inspections as deemed necessary. Furthermore, the FDA has indicated that it does not currently believe a pre-approval site inspection will be required for Cymbalta^TM, however a pre-approval site inspection remains at the discretion of the FDA. Final FDA approval for Cymbalta^TM is now contingent upon completion of label negotiations. The FDA also is reviewing a serious adverse event resulting from a patient’s suicide in February 2004 while participating in a follow-up Phase I study related to Lilly’s application for the drug to treat stress-induced urinary incontinence. Lilly has indicated that, based on what is known so far, it does not believe the subject’s death is related to her participation in the study and has stated that it still anticipates U.S. approval of Cymbalta^TM will occur in the summer of 2004.

•  In July 2002, we entered into a series of agreements with Columbia Laboratories, Inc. to assist them in the U.S. commercialization of the following women’s health products: Prochieve^TM 8%, Prochieve^TM 4%, Advantage-S® and RepHresh^TM Vaginal Gel. Under the terms of these agreements, we purchased shares of Columbia common stock. We have paid Columbia an aggregate of $4.5 million in exchange for royalties on the sales of the four Columbia products for a five-year period beginning in the first quarter of 2003. In addition we will provide to Columbia, at Columbia’s expense on a fee-for-service basis, a sales force to commercialize the products. During January 2004, we restructured the sales force agreement to allow for an accelerated transfer of responsibility to Columbia.

•  In December 2002, we entered into an agreement with a large pharmaceutical customer to market two products in Belgium. Under the terms of the agreement, we acquired the marketing and distribution rights to one of the products and entered into a distribution agreement for the other product.

•  In March 2003, we entered into an additional agreement with Columbia to assist them in the commercialization of Striant^TM, Columbia’s testosterone buccal bioadhesive product, in the United

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	States. We have paid Columbia an aggregate of $12.0 million of a total $15.0 million in exchange for royalties on the sales of StriantTM for a seven-year period beginning in the third quarter of 2003. In addition we will provide to Columbia, at Columbia’s expense on a fee-for-service basis, a sales force to commercialize the products. During January 2004, we restructured the sales force agreement to allow for an accelerated transfer of responsibility to Columbia.
•	In July 2003, we entered into a new agreement with CV Therapeutics, Inc. that superceded our prior agreement. Under the terms of the July 2003 agreement, all rights to RanexaTM reverted back to CV Therapeutics and CV Therapeutics will owe us no royalty payments. Under the July 2003 agreement, we received 200,000 warrants to purchase shares of CV Therapeutics common stock at $32.93 per share during the five-year term commencing July 9, 2003. CV Therapeutics also is obligated to purchase from us, within six months of the approval of RanexaTM, services of at least $10 million in aggregate value or to pay us a lump sum amount equal to 10% of any shortfall from $10 million in purchased services.
•	In February 2004, we entered into an agreement with a large pharmaceutical customer to provide services in connection with the customer’s development and U.S. launch of a Phase III product, or the new product, which is related to one of the customer’s currently marketed pharmaceutical products, or the existing product. The existing product is a multi-hundred million dollar per year product. Under the agreement, we will provide up to $90 million of development and commercialization services for the new and existing products. Our customer has agreed that at least $67.5 million of those services will be performed by our affiliates, at agreed upon rates. The customer, though, may direct us to use third parties to perform up to $22.5 million of the $90 million of services. The agreement contains quarterly limits on our service obligations with a maximum of $10 million of services in any quarter. Our service obligations are anticipated to occur through the end of 2006, but may run longer depending on the customer’s actual use of services and when, and if, FDA approval of the new product occurs. Until the FDA approves the new product, we are obligated to provide no more than $57.5 million in services. In return for performing our obligations, we will receive (1) beginning in the first quarter of 2005, a low, single-digit royalty on U.S. net sales of the existing product and (2) beginning on the U.S. launch of the new product, a declining tiered royalty (beginning in the low teens) on U.S. net sales of the new product. Our royalty period under the agreement lasts for approximately 9 years; however, the agreement limits the amount of royalties we receive each year and also caps the aggregate amount of royalties we can receive under the agreement at $180 million. We will also receive a $20 million payment from the customer upon the U.S. launch of the new product. If the new product is not approved by the FDA or a significant delay occurs in its approval process, we may terminate our remaining service obligations and continue to receive the royalty on the existing product subject to a return ceiling of no less than 8%. The agreement also provides for royalty term extensions, in the event of certain other specified unfavorable circumstances such as product shortages or recalls. The customer may terminate the agreement at any time subject to the customer’s payment to us of the then-present value of its remaining expected royalties.

      We review many candidates for strategic alliances under our PharmaBio Development Group business models. In addition to the transactions already under way, we are continually evaluating new strategic possibilities, and we may enter into additional transactions in the future.

Informatics Offerings

      Prior to May 2002, we had a fourth business segment, consisting of our informatics services. Our informatics group provided a broad range of knowledge-rich products and services for use by the pharmaceutical, biotechnology, and medical and surgical device industries, and healthcare providers, payors and patients to improve the quality of care and to efficiently manage the delivery of care at multiple points along the continuum of healthcare delivery.

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      In May 2002, we completed the formation of our healthcare informatics joint venture, Verispan, with McKesson. The joint venture is designed to leverage the operational strengths of the healthcare information businesses of each company. We are an equal co-owner with McKesson of a majority of the equity of Verispan. A minority portion of the equity in Verispan is owned or to be issued to key providers of de-identified healthcare data in exchange for the data. We contributed the net assets of our informatics group and funded $10.0 million to Verispan.

      Several major data providers have contracted to provide de-identified prescription or medical data to the joint venture. Verispan has licensed its data products to McKesson and us for use in our respective core businesses. Under the license arrangement, we continue to have access to Verispan’s commercially available market information and products, at no further cost to us, to enhance service to and partnering with our customers.

Customers and Marketing

      In order to coordinate the multiple contracts and service offerings we may have with each customer and leverage these into new business opportunities, we operate our business development efforts across our service offerings through integrated business development functions. These integrated business development functions direct the activities of business development personnel in each of our U.S. locations, as well as other key locations throughout Europe, Asia-Pacific, Canada and Latin America. In each of the last four years, we provided services to all of the world’s 20 largest pharmaceutical companies and to many of the world’s leading biotechnology and smaller and mid-sized pharmaceutical companies.

      For the year ended December 31, 2003, approximately 37.3% of our net service revenue from external customers was attributed to operations in the United States and 62.7% to operations outside the United States. Please refer to the notes to our consolidated financial statements included in Item 8 of this Form 10-K for further details regarding our foreign and domestic operations. Approximately 42.6%, 42.5%, and 41.1% of our net revenue was attributed to our clinical development services in 2003, 2002 and 2001, respectively; approximately 17.2%, 17.3% and 15.4% of our net revenue was attributed to our early development and laboratory services in 2003, 2002 and 2001, respectively; and approximately 23.9%, 25.8% and 32.6% of our net revenue was attributed to our commercialization services in 2003, 2002 and 2001, respectively. Neither our medical communications and consulting services, our commercial rights and royalties, nor our informatics services accounted for more than 10% of our net revenue in any of these years.

      In the past, we have derived, and may in the future derive, a significant portion of our service revenue from a relatively limited number of major projects or customers. As pharmaceutical companies continue to outsource large projects and studies to fewer full-service providers, the concentration of business could increase; for example, Aventis S.A. accounted for approximately 11% of our consolidated net service revenue in each of 2002 and 2001. No single customer accounted for 10% of our consolidated net revenue for any 2003 periods presented herein.

Competition

      The market for our product development services is highly competitive, and we compete against traditional contract research organizations, or CROs, and the in-house research and development departments of pharmaceutical companies, as well as universities and teaching hospitals. Among the traditional CROs, there are several hundred small, limited-service providers, several medium-sized firms, and only a few full-service companies with global capabilities. Consolidation among CROs likely will result in greater competition among the larger contract research providers for customers and acquisition candidates. Our primary CRO competitors include Covance Inc., PPD Inc., PAREXEL International Corporation and ICON plc. Competitive factors for product development services include:

•  previous experience,

•  medical and scientific experience in specific therapeutic areas,

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•  the quality of contract research,

•  speed to completion,

•  the ability to organize and manage large-scale trials on a global basis,

•  the ability to manage large and complex medical databases,

•  the ability to provide statistical and regulatory services,

•  the ability to recruit investigators,

•  the ability to deploy and integrate information technology systems to improve the efficiency of contract research,

•  an international presence with strategically located facilities and

•  financial viability and price.

      In our commercial services segment, we compete against the in-house sales and marketing departments of pharmaceutical companies and other CSOs in each country in which we operate. We also compete against national consulting firms offering healthcare consulting and medical communications services, including boutique firms specializing in the healthcare industry and the healthcare departments of large firms. Our primary CSO competitors in the United States include Ventiv Health, Inc. and PDI, Inc. Outside of the United States, we typically compete against single country or regionally-focused commercial service providers. The primary competitive factors affecting commercial services are the proven ability to quickly assemble, train and manage large qualified sales forces to handle broad scale launches of new drugs and price. Competitive factors affecting healthcare consulting and medical communications services include experience, reputation and price.

      Because our PharmaBio Development Group custom tailors its risk-based service solutions to meet our customers’ financial and strategic needs, it is more difficult to assess its potential competitors. Theoretically, a financing party could choose to provide such risk-based commercialization or development efforts, as does the PharmaBio Development Group. However, such a group would have to contract with third parties for the provision of services. We are aware that several commercial service firms, such as Ventiv Health, Inc. and PDI, Inc., have entered into risk-based commercialization transactions. Our PharmaBio Development Group has a large number of competitors for specialty pharmaceutical products. The key competitive factors for PharmaBio Development include access to capital, the quality of the services provided by our other business units in connection with PharmaBio Development’s transactions, and the ability to perform detailed and accurate scientific, strategic, and financial due diligence prior to completing transactions.

      Competitors for our informatics services included IMS Health Incorporated and NDC Health Corporation.

      Notwithstanding all these competitive factors, we believe that the synergies arising from integrating product development services with commercial services, supported by global operations and information technology differentiate us from our competitors.

Employees

      As of January 31, 2004, we had approximately 15,991 full-time equivalent employees, comprised of approximately 5,379 in the Americas, 8,387 in Europe and Africa and 2,225 in the Asia-Pacific region. As of January 31, 2004, our Product Development Group had 9,254 full-time equivalent employees, our Commercial Services Group had 6,027 full-time equivalent employees, and our PharmaBio Development Group had 136 full-time equivalent employees. In addition, 574 full-time equivalent employees were in our centralized operations/corporate office.

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Backlog Reporting

      We report backlog based on anticipated net revenue from uncompleted projects which have been authorized by the customer, through a written contract or otherwise. Once work begins on a project, net revenue is recognized over the duration of the project. Using this method of reporting backlog, at December 31, 2003, backlog was approximately $1.9 billion, as compared to approximately $1.7 billion at December 31, 2002. The backlog at December 31, 2003 and 2002 includes approximately $28.8 million and $87.0 million, respectively, of backlog related to services contracted from our service groups, primarily commercialization, in connection with the strategic alliances forged by our PharmaBio Development Group. Backlog does not include any product revenues, royalties or commissions related to our commercial rights.

      We believe that backlog may not be a consistent indicator of future results because it has been and likely will be affected by a number of factors, including the variable size and duration of projects, many of which are performed over several years. Additionally, projects may be terminated by the customer or delayed by regulatory authorities. Moreover, the scope of work can change during the course of a project. If our product revenues, royalties and commissions related to our commercial rights increase, an increasing proportion of our revenues will not be reflected in our reported backlog.

Potential Liability

      In conjunction with our product development services, we contract with physicians to serve as investigators in conducting clinical trials to test new drugs on human volunteers in those clinical trials. Such testing creates risk of liability for personal injury to or death of participants, particularly to participants with life-threatening illnesses, resulting from adverse reactions to the drugs administered. Although we do not believe we are legally accountable for the medical care rendered by third party investigators, it is possible that we could be held liable for the claims and expenses arising from any professional malpractice of the investigators with whom we contract or in the event of personal injury to or death of persons participating in clinical trials.

      As a result of our Phase I clinical trial facilities, we could be liable for the general risks associated with a Phase I facility including, but not limited to, adverse events resulting from the administration of drugs to clinical trial participants or the professional malpractice of Phase I medical care providers. We also could be held liable for errors or omissions in connection with the services we perform through each of our service groups. For example, we could be held liable for injury, errors or omissions or breach of contract if one of our labs inaccurately reports or fails to report lab results, or if direct or indirect contact with a patient or clinical trial participant causes harm. We believe that some of our risks are reduced by one or more of the following: (1) indemnification provisions and provisions seeking to limit or exclude liability contained in our contracts with customers and investigators, (2) insurance maintained by customers and investigators and by us and (3) various regulatory requirements, including the use of institutional review boards and the procurement of each participant’s informed consent to participate in the study. The contractual indemnifications generally do not fully protect us against certain of our own actions such as negligence. Contractual arrangements are subject to negotiation with customers and the terms and scope of any indemnification or limitation or exclusion of liability may vary from customer to customer and from contract to contract. Additionally, financial performance of these indemnities is not secured. We do, however, seek to ensure through the contracting process that our customers and vendors are contractually obliged to carry certain minimum amounts of applicable liability insurance and provide evidence of insurance upon request or prior to commencement of work. Because of the volume of contracts and geographic breadth of operations, it is not always possible to obtain such certificates of insurance nor do we have ability to confirm that such insurance remains in place or whether it may have been reduced in the aggregate by ongoing claims. Therefore, we bear the risk that the indemnifying party may not have the financial ability to fulfill its indemnification obligations.

      We maintain professional liability insurance that covers our worldwide operations in the countries in which we currently do business. We could be materially and adversely affected if we were required to pay

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damages or bear the costs of defending any claim outside the scope of or in excess of a contractual indemnification provision or beyond the level of insurance coverage or for which coverage is not provided by our insurance program. For example, we are among the defendants in a purported class action by participants in an Alzheimer’s study seeking to hold us liable for alleged damages to the participants arising from the study, since settled by the parties subject to court approval. Our insurance carrier to whom we paid premiums to cover this type of risk has since filed suit against us seeking to rescind the insurance policies or to have coverage denied for some or all of the claims arising from the Alzheimer’s study litigation, which were the only claims outstanding under the policies. We believe both of these claims of our insurance carrier are without merit and intend to contest them vigorously. Please refer to Item 3 of this Form 10-K for a description of our legal proceedings.

      Our rights to commercialize and sell certain pharmaceutical products also expose us to potential liabilities typically associated with pharmaceutical companies. For example, we could face product liability claims in the event users of any of the products we market or distribute now, or in the future, experience negative reactions or adverse side effects or in the event any of these products causes injury or death, is found to be unsuitable for its intended purpose or is otherwise defective. While we believe we currently have adequate insurance in place to protect against these risks, we may nevertheless be unable to satisfy any claims for which we may be held liable as a result of the use or misuse of products which we manufacture or sell. These risks may be augmented by certain risks relating to our outsourcing of the manufacturing and distribution of these products or any pharmaceutical product rights we may acquire in the future. For example, as a result of our decision to outsource the manufacturing and distribution of Solaraze^TM, we are unable to directly monitor quality control in the manufacturing and distribution processes other than through periodic audits that we conduct of the manufacturer and distributor.

Government Regulation

      Our preclinical, laboratory and clinical trial supply services are subject to various regulatory requirements designed to ensure the quality and integrity of the data or products of these services. The industry standard for conducting preclinical laboratory testing is embodied in the good laboratory practice, or GLP, regulations. The requirements for facilities engaging in clinical trial supplies preparation, labeling and distribution are set forth in the current good manufacturing practices, or cGMP, regulations. GLP and cGMP regulations have been mandated by the FDA and the Department of Health in the United Kingdom, and adopted by similar regulatory authorities in other countries. GLP and cGMP stipulate requirements for facilities, equipment, supplies and personnel engaged in the conduct of studies to which these regulations apply. The regulations require adherence to written, standardized procedures during the conduct of studies and the recording, reporting and retention of study data and records. To help assure compliance, we have established quality assurance programs at our preclinical, laboratory and clinical trial supply facilities which monitor ongoing compliance with GLP and cGMP regulations by auditing study data and conducting regular inspections of testing procedures. Our clinical laboratory services, to the extent they are carried out in the United States, are subject to the requirements of the Clinical Laboratory Improvement Amendments of 1988.

      GCP regulations and guidelines contain the industry standard for the conduct of clinical research and development studies. The FDA and many other regulatory authorities require that study results and data submitted to such authorities be based on studies conducted in accordance with GCP provisions. These provisions include:

•  complying with specific regulations governing the selection of qualified investigators,

•  obtaining specific written commitments from the investigators,

•  ensuring the protection of human subjects by verifying that Institutional Review Board or independent Ethics Committee approval and patient informed consent are obtained,

•  instructing investigators to maintain records and reports,

•  verifying drug or device accountability,

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•  reporting of adverse events,

•  adequate monitoring of the study for compliance with GCP requirements and

•  permitting appropriate regulatory authorities access to data for their review.

Records for clinical studies must be maintained for specified periods for inspection by the FDA and other regulators. Significant non-compliance with GCP requirements can result in the disqualification of data collected during the clinical trial. We are also obligated to comply with regulations issued by national and supra-national regulators such as the FDA and the European Medicines Evaluation Agency, or EMEA. By way of example, these regulations include the FDA’s regulations on electronic records and signatures (21 CFR Part 11) which set out requirements for data in electronic format regarding submissions made to the FDA, and the EMEA’s Note For Guidance “Good Clinical Practice for Trials on Medicinal Products in the European Community.”

      We write our standard operating procedures related to clinical studies in accordance with regulations and guidelines appropriate to the region where they will be used, thus helping to ensure compliance with GCP. Within Europe, we perform our work subject to the EMEA’s Note for Guidance “Good Clinical Practice for Trials on Medicinal Products in the European Community.” All clinical trials (other than those defined as “non-international”) to be submitted to the EMEA must meet the requirements of the ICH — GCP. In addition, FDA regulations and guidelines serve as a basis for our North American standard operating procedures. Our offices in the Asia-Pacific region and in Latin America have developed standard operating procedures in accordance with their local requirements and in harmony with our North American and European operations.

      Our commercial services are subject to detailed and comprehensive regulation in each geographic market in which we operate. Such regulation relates, among other things, to the distribution of drug samples, the qualifications of sales representatives and the use of healthcare professionals in sales functions. In the United States, our commercial services are subject to the Prescription Drug Marketing Act, or PDMA, with regard to the distribution of drug samples. In the United Kingdom, they are subject to the Association of the British Pharmaceutical Industry Code of Practice for the Pharmaceutical Industry, which prescribes, among other things, an examination that must be passed by sales representatives within two years of their assuming or beginning employment. We follow similar regulations currently in effect in the other countries where we offer commercial services.

      Our U.S. laboratories are subject to licensing and regulation under federal, state and local laws relating to hazard communication and employee right-to-know regulations, the handling and disposal of medical specimens and hazardous waste and radioactive materials, as well as the safety and health of laboratory employees. All of our U.S. laboratories are subject to applicable federal and state laws and regulations relating to the storage and disposal of all laboratory specimens including the regulations of the Environmental Protection Agency, the Nuclear Regulatory Commission, the Department of Transportation, the National Fire Protection Agency and the Resource Conservation and Recovery Act. Companies holding or distributing controlled substances are subject to regulation by the United States Drug Enforcement Agency, or DEA. For example, accounting for controlled substances is subject to regulation by the DEA. Some of our facilities have been audited by the DEA. In one case, the DEA indicated that it found that we miscounted certain drugs, which was resolved to the DEA’s satisfaction by our providing a corrected accounting of these drugs to the DEA. Since the inspection, we have reviewed and strengthened our procedures relating to the handling, storage and record keeping for controlled drugs. These new procedures have been reviewed at our request by a reputed firm of independent experts. The regulations of the United States Department of Transportation, the Public Health Service and the Postal Service apply to the surface and air transportation of laboratory specimens. Our laboratories also are subject to International Air Transport Association regulations, which govern international shipments of laboratory specimens. Furthermore, when the materials are sent to a foreign country, the transportation of such materials becomes subject to the laws, rules and regulations of such foreign country. Our laboratories outside the United States are subject to applicable national laws governing matters such as licensing, the

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handling and disposal of medical specimens, hazardous waste and radioactive materials, as well as the health and safety of laboratory employees.

      Moreover, from time to time, including the present, one or more of our customers are investigated by regulatory authorities or enforcement agencies with respect to regulatory compliance of their clinical trials and programs. In these situations, we often have provided services to our customers with respect to the trials and programs being investigated, and we are called upon to respond to requests for information by these authorities and agencies. There is a risk that either our customers or regulatory authorities could claim that we performed our services improperly or that we are responsible for trial or program compliance. For example, our customer Biovail Corporation recently became the subject of government inquiries relating to the Cardizem LA P.L.A.C.E., late phase clinical program, and has asserted publicly that we have warranted that this program complies with all laws and regulations, to which we have taken exception. If our customers or regulatory authorities make such claims against us and prove them, we could be subject to substantial damages, fines or penalties.

      In addition to its comprehensive regulation of safety in the workplace, the United States Occupational Safety and Health Administration has established extensive requirements relating to workplace safety for healthcare employers whose workers may be exposed to blood-borne pathogens such as HIV and the hepatitis B virus. These regulations, among other things, require work practice controls, protective clothing and equipment, training, medical follow-up, vaccinations and other measures designed to minimize exposure to chemicals, and transmission of blood-borne and airborne pathogens. Furthermore, certain employees receive initial and periodic training to ensure compliance with applicable hazardous materials regulations and health and safety guidelines. Although we believe that we are currently in compliance in all material respects with such federal, state and local laws, failure to comply with such laws could subject us to denial of the right to conduct business, fines, criminal penalties and other enforcement actions.

      Our disease management and healthcare information management services relate to the diagnosis and treatment of disease and are, therefore, subject to substantial governmental regulation. In addition, the confidentiality of patient-specific information and the circumstances under which such patient-specific records may be released for inclusion in our databases or used in other aspects of our business are heavily regulated. Legislation has been proposed at both the state and federal levels that may require us to implement security measures that could involve substantial expenditures or limit our ability to offer some of our products and services. In addition, privacy legislation in non-U.S. jurisdictions could have a limiting effect on some of our services, including, for example, the European Data Protection Directive, the Directive, which applies in each member state of the European Union, or EU. The Directive seeks to protect the personal data of individuals and, among other things, places restrictions on the manner in which such personal data can be collected, processed and disclosed and the purposes for which such data can be used.

      The Health Insurance Portability and Accountability Act of 1996, or HIPAA, requires the use of standard transactions, privacy and security standards and other administrative simplification provisions by covered entities, that is healthcare providers, health plans and healthcare clearinghouses. The U.S. law instructs the Secretary of the Department of Health and Human Services, or HHS, to promulgate regulations implementing these standards in the United States.

      On December 28, 2000, the Secretary issued the final rule on Standards for Privacy of Individually Identifiable Health Information to implement the privacy requirements for HIPAA. These regulations, as amended on August 14, 2002, generally (1) impose standards for covered entities transmitting or maintaining protected data in an electronic, paper or oral form with respect to the rights of individuals who are the subject of protected health information; and (2) establish procedures for (a) the exercise of those individuals’ rights, (b) the uses and disclosure of protected health information by the covered entity, and (c) the methods permissible for de-identification of health information. The final rule had an effective date of April 14, 2001 and a compliance date of April 14, 2003. The final regulation for the HIPAA security standards was issued by HHS on February 20, 2003.

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      We are not a “covered entity” under the HIPAA Standards for Privacy of Individually Identifiable Health Information (also known as the HIPAA Privacy Rule). We do receive identifiable health information from various sources, including from investigators on research studies who are covered entities or who are employed by covered entities. In order for covered entities to disclose identifiable health information to us for research purposes, there must be an applicable permission from the research participant or an exception under the HIPAA Privacy Rule. Depending on the facts, the possible permissions include where a research participant signs an authorization for research; an institutional review board waives the authorization requirement; the review of the information is conducted under specific conditions preparatory to research or with respect to decedents or other exception; or the information is stripped of direct identifiers and is disclosed to us pursuant to a limited use agreement. Covered entities may also provide “deidentified” health information to us. We are engaged in ongoing communications with HIPAA covered entities from whom we receive identifiable health information with respect to coordination of disclosure of such information to us and the covered entities’ compliance with the HIPAA Privacy Rule. Based on our communications with our investigators and other covered entities from whom we receive identifiable health information, we believe that we will continue to be able to obtain such information, consistent with requirements of the Privacy Rule. However, if the covered entities do not understand the permissions for disclosure of information for research purposes, it is possible that they could object to providing identifiable health information to us, which could have an adverse effect on our ability to obtain such information in a timely manner for our business operations relating to research.

      The impact of such legislation and regulations relating to identifiable health information in the United States cannot be predicted. Other countries have or are in the process of putting privacy laws into place affecting similar areas of our business. For instance, the Directive applies standards for the protection of all personal data, not just health information, in the EU and requires the EU member states to enact national laws implementing the Directive. Such legislation or regulations could materially affect our business.

      Various aspects of the U.S. Medicare program may also apply to certain drug and device research and marketing practices. In 1977, Congress adopted the Medicare and Medicaid Anti-Fraud and Abuse Amendments of 1977, or the Anti-Fraud and Abuse Law, which have been strengthened by subsequent amendments and the creation of the Office of Inspector General, or OIG, to enforce compliance with the statute, as amended. The Anti-Fraud and Abuse Law prohibits the knowing and willful offer, payment, solicitation, or receipt of any remuneration in any form as an inducement or reward for either the referral of patients or the arranging for reimbursable services. For example, the Anti-Fraud and Abuse Law prohibits the use of research grants or clinical trials if the purpose is to induce the purchase or prescription of products or services paid for by Medicare or Medicaid, rather than the collection of research data. A violation of the statute may result in criminal and/or civil penalties, including exclusion from the Medicare program, even if no criminal prosecution is initiated.

      HHS has issued regulations from time to time setting forth so-called “safe harbors,” which would protect certain limited types or arrangements from prosecution under the statute. To date, twenty-one final safe harbors have been developed. Failure to comply with each element of a particular safe harbor does not mean that an arrangement is per se in violation of the Anti-Fraud and Abuse Law. Nevertheless, if an arrangement implicates the Anti-Fraud and Abuse Law and no safe harbor is available, we risk greater scrutiny from OIG and, potentially, civil and/or criminal sanctions. Federal law also provides for minimum periods of exclusion from federal and state healthcare programs for certain offenses and frauds.

      In addition to the Anti-Fraud and Abuse Law, the federal Civil False Claims Act may apply to certain drug and device research and marketing practices. The Civil False Claims Act prohibits knowingly presenting or causing to be presented a false, fictitious or fraudulent claim for payment to the United States. Actions under the Civil False Claims Act may be brought by the Attorney General or as a qui tam action by a private individual in the name of the government. Violations of the Civil False Claims Act can result in significant monetary penalties. The federal government is using the Civil False Claims Act, and the threat of significant liability, in its investigations of healthcare providers, suppliers and drug and device manufacturers throughout the country for a wide variety of drug and device marketing and research practices, and has obtained multi-million dollar settlements. The government may continue to devote

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substantial resources toward investigating healthcare providers’, suppliers’ and drug and device manufacturers’ compliance with the Civil False Claims Act and other fraud and abuse laws.

Available Information

      We maintain a Web site at the address www.quintiles.com. We are not including the information contained on our Web site as a part of, or incorporating it by reference into, this Annual Report on Form 10-K. We make available free of charge through our Web site our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, and amendments to these reports, as soon as reasonably practicable after we electronically file such material with, or furnish such material to, the SEC.

Item 2. Properties

      As of February 16, 2004 we had approximately 110 offices located in 50 countries. Our executive headquarters is located adjacent to Research Triangle Park, North Carolina. We maintain substantial offices serving our product development group in Durham, North Carolina; Kansas City, Missouri; Smyrna, Georgia; Bracknell, England; Irene, South Africa; Tokyo, Japan; and Singapore. We also maintain substantial offices serving our commercial services group in Parsippany, New Jersey; Falls Church, Virginia; Hawthorne, New York; Bracknell, England; and Tokyo, Japan. We own facilities that serve our product development group in Lenexa, Kansas; Kansas City, Missouri; Riccarton, Scotland; Bathgate, Scotland; Glasgow, Scotland; Livingston, Scotland; Freiburg, Germany; and Pretoria, South Africa. We also own a facility in Gotenba City, Japan, which is subject to a mortgage, that serves our product development and commercial services groups. All of our other offices are leased. We believe that our facilities are adequate for our operations and that suitable additional space will be available when needed.

Item 3. Legal Proceedings

      On January 26, 2001, a purported class action lawsuit was filed in the State Court of Richmond County, Georgia, naming Novartis Pharmaceuticals Corp., Pharmed Inc., Debra Brown, Bruce I. Diamond and Quintiles Laboratories Limited, one of our subsidiaries, on behalf of 185 Alzheimer’s patients who participated in drug studies involving an experimental drug manufactured by defendant Novartis and their surviving spouses. The complaint alleges claims for breach of fiduciary duty, civil conspiracy, unjust enrichment, misrepresentation, Georgia RICO violations, infliction of emotional distress, battery, negligence and loss of consortium as to class member spouses. The complaint seeks unspecified damages, plus costs and expenses, including attorneys’ fees and experts’ fees. On September 27, 2003, the parties entered into a settlement memorandum following a mediated settlement conference. The parties are in the process of preparing final settlement documents, which would memorialize payments by several defendants to individual study participants or their representatives. We believe that our contribution will be covered by insurance or, in the alternative, will not represent a material amount to us.

      On January 22, 2002, Federal Insurance Company, or Federal, and Chubb Custom Insurance Company, or Chubb, filed suit against us, Quintiles Pacific, Inc. and Quintiles Laboratories Limited, two of our subsidiaries, in the United States District Court for the Northern District of Georgia. In the suit, Chubb, our primary commercial general liability carrier for coverage years 2000-2001 and 2001-2002, and Federal, our excess liability carrier for coverage years 2000-2001 and 2001-2002, seek to rescind the policies issued to us based on an alleged misrepresentation by us on our policy application. Alternatively, Chubb and Federal seek a declaratory judgment that there is no coverage under the policies for some or all of the claims asserted against us and our subsidiaries in the class action lawsuit filed on January 26, 2001 and described above and, if one or more of such claims is determined to be covered, Chubb and Federal request an allocation of the defense costs between the claims they contend are covered and non-covered claims. We have filed an answer with counterclaims against Federal and Chubb in response to their complaint. Additionally, we have amended our pleadings to add AON Risk Services as a counterclaim defendant, as an alternative to our position that Federal and Chubb are liable under the policies. In order to preserve our rights, on March 27, 2003, we also filed a separate action against AON

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Risk Services in the United States District Court for the Middle District of North Carolina. We believe the allegations made by Federal and Chubb are without merit and are defending this case vigorously.

      In October 2002, seven purported class action lawsuits were filed in Superior Court, Durham County, North Carolina by certain of our shareholders seeking to enjoin the consummation of the initial transaction proposed by Pharma Services (a company among whom the controllers is Dennis Gillings) to acquire all of our outstanding shares for $11.25 per share in cash. All of the lawsuits were subsequently transferred to the North Carolina Business Court. The lawsuits named as defendants Dr. Gillings, other members of our board of directors, us and, in some cases Pharma Services. The complaints alleged, among other things, a breach of fiduciary duties by the directors with respect to the proposal. The complaints sought to enjoin the transaction proposed by Pharma Services, and the plaintiffs sought to recover damages. On November 11, 2002, a special committee of our board of directors announced its rejection of the proposal by Pharma Services and its intention to investigate strategic alternatives available to us for purposes of enhancing shareholder value, including the possibility of a sale and alternatives that would keep us independent and publicly owned. On January 6, 2003, the North Carolina Business Court entered a Case Management Order consolidating all seven lawsuits for all purposes and staying the lawsuits until March 29, 2003 or until we provided notice of a change-of-control transaction.

      On March 28, 2003, the Court entered an Order Maintaining the Status Quo, which continued its prior Case Management Order in all respects until the earlier of a date selected by the Court or until we provide the notice contemplated by the Case Management Order. On April 10, 2003, our board of directors approved a merger agreement with Pharma Services which provided for payment to our shareholders of $14.50 per share in cash. On June 25, 2003, counsel for the parties signed a Memorandum of Understanding, in which they agreed upon the terms of a settlement of the litigation, which would include the dismissal with prejudice of all claims against all defendants including us and our board of directors. On August 28, 2003, lead counsel for the plaintiffs and counsel for the defendants executed a formal Stipulation and Agreement of Compromise, Settlement and Release, referred to as the Stipulation of Settlement. On August 29, 2003, the Court entered an Order for Notice and Hearing on Settlement of Class Action, or the Order for Notice, and a Notice of Pendency of Class Action, Preliminary and Proposed Class Action Certification, Proposed Settlement of Class Action, Settlement Hearing and Right to Appear, or the Class Notice. The Class Notice set a hearing date of October 10, 2003, the Settlement Hearing, to determine whether the Court should approve the settlement as fair, adequate and in the best interest of the settlement class, end the action, and to consider other matters including a request by plaintiffs’ counsel for attorneys’ fees and reimbursement of costs, in an amount not to exceed a total of $450,000. In accordance with the terms of the Order of Notice, we mailed the Class Notice to the record holders of our common stock and options, as of the record date of August 19, 2003. A special meeting of the shareholders was held September 25, 2003, at which time the shareholders approved the proposed transaction and the merger was consummated. On October 10, 2003, the Court certified a class for purposes of the settlement, approved the settlement as fair and reasonable and entered an Order and Final Judgment dismissing the lawsuit with prejudice. The Court also awarded plaintiff’s counsel $450,000 in attorneys’ fees and costs, which have been paid pursuant to the terms of the settlement. No other payments are required from us or any other party under the terms of the settlement and the Court’s Order.

      On June 13, 2003, ENVOY Corporation, or ENVOY, and Federal filed suit against us, in the United States District Court for the Middle District of Tennessee. One or both plaintiffs in this case have alleged claims for breach of contract, contractual subrogation, equitable subrogation, and equitable contribution. Plaintiffs reached settlement in principle, in the amount of $11 million, of the case pending in the same court captioned In Re Envoy Corporation Securities Litigation, Case No. 3-98-0760. Plaintiffs claim that we are responsible for payment of the settlement amount and associated fees and costs in the Envoy securities litigation based on merger and settlement agreements between WebMD Corporation, ENVOY and us. We have filed a motion to dismiss the suit, and the plaintiffs have filed motions for summary judgment. These motions are pending before the court. All parties have agreed to a stay of discovery. We believe that the allegations made by ENVOY and Federal are without merit and intend to defend the case vigorously.

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      We are also party to other legal proceedings incidental to our business. While we currently believe that the ultimate outcome of these proceedings, individually and in the aggregate, will not have a material adverse effect on our consolidated financial statements, litigation is subject to inherent uncertainties. Were an unfavorable ruling to occur, there exists the possibility of a material adverse impact on the results of operations for the period in which the ruling occurs.

Item 4. Submission of Matters to a Vote of Security Holders

      Not applicable.

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PART II

Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters

Market Prices

      There is no established public trading market for our common stock. We are an indirect wholly-owned subsidiary of Pharma Services. Our common stock was traded on The Nasdaq Stock Market under the symbol “QTRN” until the Pharma Services transaction. The following table shows, for the periods indicated through the date of the Pharma Services transaction, the high and low sale prices per share on The Nasdaq Stock Market, based on published financial sources.

Calendar Period	High		Low
Quarter ended March 31, 2002	$	19.300	$	14.680
Quarter ended June 30, 2002		17.700		11.300
Quarter ended September 30, 2002		12.457		8.350
Quarter ended December 31, 2002		12.360		7.650
Quarter ended March 31, 2003		13.210		11.990
Quarter ended June 30, 2003		14.250		12.190
July 1, 2003 through September 25, 2003	$	14.490	$	13.660

Dividend Policies

      Prior to the Pharma Services transaction, we had not declared or paid any cash dividends on our common stock. Following the Pharma Services transaction, our senior secured credit facility and the indenture governing our 10% senior subordinated notes place significant restrictions on our ability to pay dividends on our common stock. In compliance with these restrictions, we intend to pay dividends in an amount necessary, not to exceed $5,000,000 per year, to pay the general corporate and overhead expenses of Pharma Services and Intermediate Holding. We also intend to pay dividends in the amounts necessary, not to exceed $5,000,000 per year, for Pharma Services to exercise applicable stock repurchase rights under the Pharma Services Holding, Inc. Stock Incentive Plan, or the Pharma Services Plan.

Recent Sales of Unregistered Securities

      Not applicable.

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Item 6. Selected Consolidated Financial Data

      The selected Consolidated Statement of Operations Data set forth below for the periods from January 1, 2003 through September 25, 2003 and September 26, 2003 through December 31, 2003 and for each of the years in the two-year period ended December 31, 2002 and the Consolidated Balance Sheet Data set forth below as of December 31, 2003 and 2002 are derived from our audited consolidated financial statements and notes thereto as included elsewhere herein. The selected Consolidated Statement of Operations Data set forth below for the years ended December 31, 2000 and 1999, and the Consolidated Balance Sheet Data set forth below as of December 31, 2001, 2000 and 1999 are derived from our consolidated financial statements not included herein. During 2000, we completed the sale of our electronic data interchange unit, ENVOY, and as such the results of ENVOY, for all periods presented, have been reported separately as a discontinued operation in the consolidated financial statements. The selected consolidated financial data presented below should be read in conjunction with our audited consolidated financial statements and notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

		September 26,			January 1,
		2003 through			2003 through		Year ended December 31,
		December 31,			September 25,
		2003			2003		2002		2001			2000			1999
		Successor			Predecessor		Predecessor		Predecessor			Predecessor			Predecessor
		(In thousands, except per share data)
Gross revenues		$	547,165		$	1,498,822	$	1,992,409	$	1,883,912		$	1,871,077		$	1,830,365
Income (loss) from continuing operations before income taxes			3,395			65,341		123,660		(262,496	)		(51,005	)		115,910
Income (loss) from continuing operations			(7,427	)		37,161		81,664		(175,873	)		(34,174	)		73,168
Income (loss) from discontinued operation, net of income taxes			—			—		—		—			16,770			36,123
Extraordinary gain from sale of discontinued operation, net of income taxes			—			—		—		142,030			436,327			—
Cumulative effect on prior years (to December 31, 2001) of changing to a different method of recognizing deferred income taxes			—			—		45,659		—			—			—
Net (loss) income available for common shareholders		$	(7,427	)	$	37,161	$	127,323	$	(33,843	)	$	418,923		$	109,291
Basic net (loss) income per share:
	(Loss) income from continuing operation	$	(0.06	)	$	0.31	$	0.69	$	(1.49	)	$	(0.29	)	$	0.64
	Income from discontinued operation		—			—		—		—			0.14			0.32
	Extraordinary gain from sale of discontinued operation		—			—		—		1.20			3.76			—
	Cumulative effect of change in accounting principle		—			—		0.39		—			—			—
	Basic net (loss) income per share	$	(0.06	)	$	0.31	$	1.08	$	(0.29	)	$	3.61		$	0.96
Diluted net (loss) income per share:
	(Loss) income from continuing operations	$	(0.06	)	$	0.31	$	0.69	$	(1.49	)	$	(0.29	)	$	0.63
	Income from discontinued operation		—			—		—		—			0.14			0.31
	Extraordinary gain from sale of discontinued operation		—			—		—		1.20			3.76			—
	Cumulative effect of change in accounting principle		—			—		0.39		—			—			—
	Diluted net (loss) income per share	$	(0.06	)	$	0.31	$	1.07	$	(0.29	)	$	3.61		$	0.94
Weighted average shares outstanding:
	Basic		125,000			118,358		118,135		118,223			115,968			113,525
	Diluted		125,000			119,050		118,458		118,223			115,968			115,687

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	As of December 31,
	2003		2002		2001		2000		1999
	Successor		Predecessor		Predecessor		Predecessor		Predecessor
	(In thousands, except employee data)
Cash and cash equivalents	$	375,163	$	644,284	$	565,063	$	330,214	$	191,653
Working capital, excluding discontinued operation		133,462		568,473		617,552		308,684		78,039
Total assets		1,992,711		2,054,195		1,853,794		1,961,578		1,607,565
Long-term debt and capital leases including current portion		794,314		40,574		37,866		38,992		185,765
Shareholders’ equity	$	535,098	$	1,598,386	$	1,455,088	$	1,404,706	$	991,759
Full-time equivalent employees		15,662		15,801		17,639		18,060		20,496

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation

Overview

      Quintiles Transnational Corp. helps improve healthcare worldwide by providing a broad range of professional services, information and partnering solutions to the pharmaceutical, biotechnology and healthcare industries. Based on our competitors’ press releases and public filings with the SEC, we are the largest company in the pharmaceutical outsourcing services industry as ranked by 2003 gross revenues. The revenues of the second largest company were approximately $1.07 billion less than our 2003 revenues.

      On April 10, 2003, following the unanimous recommendation of a special committee of independent directors, our Board of Directors approved a merger transaction with Pharma Services for our public shareholders to receive $14.50 per share in cash. In order to finance the Pharma Services transaction, Pharma Services sold equity units consisting of preferred and common stock for $390.5 million. In addition, we entered into a secured credit facility which consists of a $310.0 million principal senior term loan and a $75.0 million revolving loan facility. We also issued $450.0 million principal amount of 10% senior subordinated notes due 2013. Pharma Services also used approximately $558.3 million of our existing cash to fund the Pharma Services transaction.

      The Pharma Services transaction was completed on September 25, 2003, after receiving regulatory and shareholder approval. As a result of the Pharma Services transaction, Pharma Services Acquisition Corp., a subsidiary of Pharma Services, was merged with and into us, and, we as the surviving corporation, became an indirect wholly owned subsidiary of Pharma Services. Consequently, our results of operations, financial position and cash flows prior to the date of the Pharma Services transaction are presented as the “predecessor.” The financial effects of the Pharma Services transaction and our results of operations, financial position and cash flows as the surviving corporation following the Pharma Services transaction are presented as the “successor.” To clarify and emphasize that the successor company has been presented on an entirely new basis of accounting, we have separated predecessor and successor operations with a vertical black line, where appropriate.

Results of Operations

      In accordance with generally accepted accounting principles in the United States, or GAAP, our predecessor results have not been aggregated with our successor results and, accordingly, our Condensed Consolidated Financial Statements do not show results of operations or cash flows for the twelve months ended December 31, 2003. However, in order to facilitate an understanding of our results of operations for the twelve months ended December 31, 2003 in comparison with the twelve months ended December 31, 2002, we present and discuss our predecessor results and our successor results on a combined basis. The combined results of operations are non-GAAP financial measures and should not be used in isolation or substitution of the predecessor and successor results.

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      Below is a reconciliation of the combined results for the year ended December 31, 2003:

	September 26, 2003			January 1, 2003
	through			through			Year ended
	December 31, 2003			September 25, 2003			December 31, 2003
	Successor			Predecessor			Combined
Gross revenues	$	547,165		$	1,498,822		$	2,045,987
Costs, expenses and other:
Costs of revenues		375,598			997,822			1,373,420
General and administrative		154,688			397,318			552,006
Interest (income) expense, net		15,890			(10,374	)		5,516
Other (income) expense, net		(2,406	)		(5,433	)		(7,839	)
Transaction and restructuring		—			54,148			54,148
		543,770			1,433,481			1,977,251
Income (loss) before income taxes		3,395			65,341			68,736
Income tax expense (benefit)		10,712			28,184			38,896
Income (loss) before equity in earnings of unconsolidated affiliates and other		(7,317	)		37,157			29,840
Equity in earnings of unconsolidated affiliates and other		(110	)		4			(106	)
Net (loss) income	$	(7,427	)	$	37,161		$	29,734

      Below is a reconciliation of the results by segment on a combined basis for the year ended December 31, 2003:

		September 26, 2003			January 1, 2003
		through			through			Year ended
		December 31, 2003			September 25, 2003			December 31, 2003
		Successor			Predecessor			Combined
Net revenues:
	Product development	$	270,247		$	734,729		$	1,004,976
	Commercial services		141,163			392,050			533,213
	PharmaBio Development		49,958			133,137			183,095
	Eliminations		(10,458	)		(29,777	)		(40,235	)
		$	450,910		$	1,230,139		$	1,681,049
Contribution:
	Product development	$	141,046		$	375,125		$	516,171
	Commercial services		55,353			142,144			197,497
	PharmaBio Development		9,736			43,001			52,737
		$	206,135		$	560,270		$	766,405

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      Below is a reconciliation of certain items of the combined statement of cash flows for the year ended December 31, 2003:

		September 26, 2003			January 1, 2003
		through			through			Year ended
		December 31, 2003			September 25, 2003			December 31, 2003
		Successor			Predecessor			Combined
Net cash provided by operating activities		$	105,615		$	169,869		$	275,484
Investing activities:
	Acquisition of property, equipment and software		(14,894	)		(39,682	)		(54,576	)
	Repurchase of common stock in Transaction		(1,617,567	)		—			(1,617,567	)
	Payment of transaction costs in Transaction		(64,734	)		(2,896	)		(67,630	)
	Acquisition of businesses, net of cash acquired		(3,363	)		(1,379	)		(4,742	)
	Acquisition of intangible assets		—			(4,519	)		(4,519	)
	Acquisition of commercial rights and royalties		(3,000	)		(17,710	)		(20,710	)
	Proceeds from disposition of property and equipment		1,960			6,219			8,179
	Proceeds from (purchases of) debt securities, net		(886	)		25,267			24,381
	Purchases of equity securities and other investments		(6,020	)		(10,830	)		(16,850	)
	Proceeds from sale of equity securities and other investments		7,633			61,926			69,559
Net cash used in (provided by) investing activities			(1,700,871	)		16,396			(1,684,475	)
Financing activities:
	Borrowings, net of costs, in Transaction		733,433			—			733,433
	Capital contribution in Transaction		390,549			—			390,549
	Principal payments on credit arrangements, net		(5,647	)		(13,219	)		(18,866	)
	Issuance of common stock (predecessor)		—			7,042			7,042
Net cash provided by (used in) financing activities			1,118,335			(6,177	)		1,112,158

Year Ended December 31, 2003 Compared with Year Ended December 31, 2002

      Gross Revenues. Gross revenues for the year ended December 31, 2003 were $2.05 billion versus $1.99 billion for the year ended December 31, 2002. Gross revenues include service revenues, revenues from commercial rights and royalties and revenues from investments. Net revenues exclude reimbursed

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service costs. Reimbursed service costs may fluctuate due, in part, to the payment provisions of the respective service contract. Below is a summary of revenues (in thousands):

	2003		2002
Service revenues	$	1,862,892	$	1,868,324
Less: reimbursed service costs		364,938		399,650
Net service revenues		1,497,954		1,468,674
Commercial rights and royalties		152,162		110,381
Investments		30,933		13,704
Total net revenues	$	1,681,049	$	1,592,759
Reimbursed service costs		364,938		399,650
Gross revenues	$	2,045,987	$	1,992,409

•  Service Revenues. Service revenues were $1.86 billion for 2003 compared to $1.87 billion for 2002. Service revenues less reimbursed service costs, or net service revenues, for 2003 were $1.50 billion, an increase of $29.3 million or 2.0% over net service revenues of $1.47 billion in 2002. Included in net service revenues for 2002 was $20.3 million from our informatics group, which was transferred to a joint venture during May 2002 and, therefore, there were no net service revenues from that group for 2003. Net service revenues for 2003 were positively impacted by approximately $98.7 million due to the effect of the weakening of the U.S. Dollar relative to the euro, the British pound, the South African Rand and the Japanese yen. Net service revenues increased in the Asia Pacific region $44.3 million or 23.0% to $237.5 million, which was positively impacted by approximately $17.8 million due to the effect of foreign currency fluctuations. Net service revenues decreased $2.0 million or (0.3%) to $656.7 million in the Europe and Africa region, although they were positively impacted by $80.0 million due to the effect of foreign currency fluctuations. During 2003, our commercial services group experienced difficult business conditions due to the under-utilization of its syndicated sales forces in primarily two markets, the United Kingdom and France. Net service revenues decreased $13.1 million or (2.1%) to $603.7 million in the Americas primarily as a result of increased competition in the product development group and a decrease in commercial services provided under our PharmaBio contracts during 2003.

•  Commercial Rights and Royalties Revenues. Commercial rights and royalties revenues, which include product revenues, royalties and commissions, for 2003 were $152.2 million, an increase of $41.8 million over 2002 commercial rights and royalties revenues of $110.4 million. Commercial rights and royalties revenues were positively impacted by approximately $14.6 million due to the effect of foreign currency fluctuations related to the weakening of the U.S. Dollar relative to the euro. Commercial rights and royalties revenues for 2003 were reduced by approximately $3.5 million versus $19.8 million for 2002, for payments made by us to our customers. These payments are considered incentives and are amortized against revenues over the service period of the contract. The $41.8 million increase in commercial rights and royalties revenues is primarily the result of (1) our March 2002 acquisition of certain assets of Bioglan Pharma, Inc., or Bioglan, and its successful launch of dermatology products which contributed approximately $53.2 million of revenues for 2003 versus $22.4 million for 2002, (2) our contracts with Kos and Columbia, which contributed approximately $36.9 million of revenues for 2003 versus $22.3 million for 2002, and (3) our contracts in Europe with two large pharmaceutical customers which contributed approximately $40.4 million of revenues for 2003 versus $18.9 million for 2002. These increases were partially offset by a reduction in revenue of approximately $25.6 million as a result of the completion of the services portion of our Scios, Inc., or Scios, contract during the fourth quarter of 2002. For 2003, approximately 34.9% of our commercial rights and royalties revenues was attributable to our suite of dermatology products, approximately 26.6% was attributable to our contracts with two large pharmaceutical customers in Europe, approximately 24.2% was attributable

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to our contracts with Kos and Columbia, approximately 10.5% was attributable to the termination of the Scios contract, and the remaining 3.8% was attributable to miscellaneous contracts and activities.

•

Investment Revenues. Investment revenues related to our PharmaBio Development group’s financing arrangements, which include gains and losses from the sale of equity securities and impairments from other than temporary declines in the fair values of our direct and indirect investments, were $30.9 million for 2003 versus $13.7 million for 2002. Investment revenues for 2003 included $23.6 million of gain on the sale of equity investments in Triangle Pharmaceuticals, Inc., or Triangle, The Medicines Company and CV Therapeutics, and a $12.1 million gain on warrants to acquire 700,000 shares of Scios as a result of the acquisition of Scios by Johnson & Johnson, Inc. During 2003 and 2002, we recognized $11.8 million and $4.3 million, respectively, of impairment losses on investments whose decline in fair value was considered to be other than temporary.

      Cost of Revenues. Costs of revenues were $1.37 billion in both 2003 and 2002. Below is a summary of these costs (in thousands):

	2003		2002
Reimbursed service costs	$	364,938	$	399,650
Service costs		784,286		775,447
Commercial rights and royalties costs		130,358		106,146
Investment costs		—		320
Depreciation and amortization		93,838		86,148
	$	1,373,420	$	1,367,711

•  Reimbursed Service Costs. Reimbursed service costs were $364.9 million and $399.7 million for 2003 and 2002, respectively.

•  Service Costs. Service costs, which include compensation and benefits for billable employees, and certain other expenses directly related to service contracts, were $784.3 million or 52.4% of 2003 net service revenues versus $775.4 million or 52.8% of 2002 net service revenues. Service costs were negatively impacted by approximately $52.3 million from the effect of foreign currency fluctuations. Bonus expense included in service costs increased approximately $3.2 million in 2003 as compared to 2002 as a result of our migration to a cash-based incentive program for our employees. The reduction in service costs, as a percentage of net service revenues, is primarily a result of the residual effect of our process enhancements and cost reduction efforts.

•  Commercial Rights and Royalties Costs. Commercial rights and royalties costs, which include compensation and related benefits for employees, amortization of commercial rights, infrastructure costs of the PharmaBio Development group and other expenses directly related to commercial rights and royalties, were $130.4 million for 2003 versus $106.1 million for 2002. These costs include services and products provided by third parties, as well as services provided by our other service groups totaling approximately $40.2 million for 2003 and $54.5 million for 2002. The year 2003 includes twelve months of expenses of our Bioglan operations, which we acquired in March 2002, and approximately $7.6 million of expenses relating to Cymbalta^TM, as well as the costs related to the launch and marketing of Solaraze^TM and ADOXA^TM and our contracts in Europe with two large pharmaceutical customers.

•  Investment Costs. Investment costs, which include costs directly related to direct and indirect investments in our customers or other strategic partners as part of the PharmaBio Development group’s financing arrangements, were $320,000 in 2002.

•  Depreciation and Amortization. Depreciation and amortization, which include depreciation of our property and equipment and amortization of our definite-lived intangible assets except commercial

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rights, increased to $93.8 million for 2003 versus $86.1 million for 2002. Amortization expense increased approximately $14.3 million as a result of the amortization of the identifiable intangible assets with finite lives that was recorded in connection with the Pharma Services transaction. This increase was partially offset by a decrease in depreciation expense of approximately $6.7 million primarily resulting from the transfer of our informatics group to Verispan.

      General and administrative expenses, which include compensation and benefits for administrative employees, non-billable travel, professional services, and expenses for advertising, information technology and facilities, were $552.0 million or 32.8% of total net revenues in 2003 versus $508.1 million or 31.9% of total net revenues in 2002. General and administrative expenses increased approximately $43.9 million primarily due to a negative impact of approximately $34.9 million as a result of the effect of foreign currency fluctuations and a $4.0 million increase in expenses associated with changes to our employee cash-based incentive program. These increases offset the reduction of approximately $8.6 million due to the transfer of our informatics group into the Verispan joint venture.

      Interest income increased slightly in 2003 to $16.9 million as compared to $16.7 million in 2002.

      Interest expense was $22.4 million in 2003 as compared to $2.6 million in 2002. The increase is a result of the interest on the debt we incurred at the end of September, 2003, totaling approximately $760.0 million, to fund the Pharma Services transaction.

      Other income was $7.8 million in 2003 versus other expense of $3.8 million in 2002. Included in 2003 were approximately $6.4 million in foreign currency translation gains compared to $5.2 million in 2002. Included in 2002 are approximately $2.7 million of expenses associated with the formation of the Verispan joint venture.

      We recognized $54.l million of transaction expenses and restructuring charges in 2003 as compared to $3.4 million during 2002. These amounts included $48.7 million and $3.4 million of transaction related expenses including expenses of the special committee of our Board of Directors and its financial and legal advisors during 2003 and 2002, respectively. In addition, 2003 included a $5.5 million restructuring charge. During the third quarter of 2003, in connection with the Pharma Services transaction, we reviewed our estimates of the restructuring plans adopted in prior years. This review resulted in a net increase of approximately $5.5 million in our accruals, including an increase of $6.8 million in exit costs for abandoned leased facilities and a decrease of approximately $1.3 million for severance payments. The increase in exit costs was due to several factors including: (1) an increase in our estimated time required to sublet, (2) a decrease in the expected price per square foot to sublet or (3) an increase in the estimated cost to otherwise terminate our obligations under those leases brought about by prolonged stagnant conditions in local real estate markets. The decrease in severance payments was a result of an increase in the number of actual voluntary employee terminations beyond our estimates.

      Income before income taxes was $68.7 million or 4.1% of total net revenues for 2003 versus $123.7 million or 7.8% of total net revenues for 2002.

      The effective income tax rate was 56.6% for 2003 (on a combined basis) versus 33.5% for 2002. Our effective income tax rate for the period from January 1, 2003 through September 25, 2003 was 43.1% due to the negative impact of transaction related expenses which are not deductible for income tax purposes. Our effective income tax rate for the period from September 26, 2003 through December 31, 2003 was 315.5%. Our effective income tax rate was negatively impacted by providing deferred income taxes on earnings of our foreign subsidiaries and transaction related expenses which were not deductible for income tax purposes. Due to the Pharma Services transaction, we no longer consider the undistributed earnings of our foreign subsidiaries to be indefinitely reinvested. Accordingly, in connection with recording the Pharma Services transaction, we provided a deferred income tax liability related to those undistributed earnings. Since we conduct operations on a global basis, our effective income tax rate may vary. See “Income Taxes.”

      During 2003 and 2002, respectively, we recognized ($106,000) and ($569,000) of earnings (losses) from equity in unconsolidated affiliates and other, which represents our pro rata share of the net loss of

30

unconsolidated affiliates, primarily Verispan’s net income (loss), net of a minority interest in a consolidated subsidiary.

      Effective January 2002, we changed our method for calculating deferred income taxes related to our multi-jurisdictional tax transactions. Under the previous method, we followed an incremental approach to measuring the deferred income tax benefit of our multi-jurisdictional transactions. Under this approach, we considered the income tax benefit from the step-up in tax basis, net of any potential incremental foreign income tax consequences determined by projecting taxable income, foreign source income, foreign tax credit provisions and the interplay of these items among and between their respective tax jurisdictions, based on different levels of intercompany foreign debt. Under the new method, we record deferred income taxes only for the future income tax impact of book and tax basis differences created as a result of multi-jurisdictional transactions. We believe the new method has become more widely used in practice and is preferable because it eliminates the subjectivity and complexities involved in determining the timing and amount of the release or reversal of the valuation allowance under the prior method. In order to effect this change, we recorded a cumulative effect adjustment of $45.7 million in 2002 which represents the reversal of the valuation allowance related to deferred income taxes on these multi-jurisdictional income tax transactions.

      Net income was $29.7 million for 2003 versus $127.3 million for 2002.

Analysis by Segment:

      The following table summarizes the operating activities for our reportable segments for the years ended December 31, 2003 and 2002, respectively. We do not include reimbursed service costs, general and administrative expenses, depreciation and amortization except amortization of commercial rights, interest (income) expense, other (income) expense and income tax expense (benefit) in our segment analysis. Intersegment revenues have been eliminated and the profit on intersegment revenues is reported within the service group providing the services (dollars in millions).

	Total Net Revenues									Contribution
												% of Net					% of Net
	2003			2002			Growth %			2003		Revenues			2002		Revenues
Product Development	$	l,005.0		$	944.9			6.4	%	$	516.2		51.4	%	$	477.5		50.5	%
Commercial Services		533.2			558.0			(4.4	)		197.5		37.0			207.7		37.2
PharmaBio Development		183.1			124.1			47.6			52.7		28.8			17.6		14.2
Informatics		—			20.3			(100.0	)		—		—			8.0		39.4
Eliminations		(40.2	)		(54.5	)		(26.2	)		—		—			—		—
	$	1,681.0		$	1,592.8			5.5	%	$	766.4		45.6	%	$	710.8		44.6	%

      Product Development Group. Net service revenues for the Product Development Group were $1.01 billion for 2003 compared to $944.9 million for 2002. Net services revenues for 2003 were positively impacted by approximately $62.0 million due to the effect of foreign currency fluctuations. Net service revenues increased in the Asia Pacific region $16.0 million or 16.3% to $114.2 million including a positive impact of approximately $8.4 million due to the effect of foreign currency fluctuations. Net service revenues increased $55.8 million or 14.7% to $435.8 million in the Europe and Africa region primarily as a result of the positive impact of approximately $52.0 million due to the effect of foreign currency fluctuations. Net service revenues decreased $11.6 million or (2.5%) to $455.0 million in the Americas region including a positive impact of approximately $1.6 million due to the effect of the strengthening U.S. dollar relative to the Canadian dollar, primarily as a result of increased competition.

      Contribution for the Product Development Group was $516.2 million for 2003 compared to $477.5 million for 2002. As a percentage of net service revenues, contribution margin was 51.4% for 2003 compared to 50.5% for 2002. Our Product Development Group experiences slight fluctuations in contribution as a percent of net service revenues from period to period as a result of executed contract scope changes and the timing of project expenses for which revenue is not recognized, such as start-up or

31

setup costs. We believe this group has realized most of the efficiencies that we originally set out to achieve from the prior years’ restructurings.

      Commercial Services Group. Net service revenues for the Commercial Services Group were $533.2 million for 2003 compared to $558.0 million for 2002. Net service revenues for 2003 were positively impacted by approximately $37.9 million due to the effect of foreign currency fluctuations. Net service revenues increased in the Asia Pacific region $29.1 million or 34.2% to $113.9 million, primarily as a result of a positive impact of foreign currency fluctuations. Net service revenues decreased $5.2 million or (2.2%) to $231.3 million in the Europe and Africa region, although it was positively impacted by $29.5 million due to the effect of foreign currency fluctuations. Difficult business conditions due to the under-utilization of our syndicated sales forces in primarily two of the markets, the United Kingdom and France, contributed to the decrease in net revenues for this region in 2003. Net service revenues decreased $48.7 million or (20.6%) to $188.0 million in the Americas region primarily as a result of a decrease in the services provided under our PharmaBio contracts during the year including the effect of the settlement of the services element of our contract with Scios.

      Contribution for the Commercial Services Group was $197.5 million for 2003 compared to $207.7 million for 2002. As a percentage of net service revenues, contribution margin was 37.0% for 2003 compared to 37.2% for 2002.

      PharmaBio Development Group. Net revenues for the PharmaBio Development Group increased approximately $59.0 million during 2003 as compared to 2002 due to a $41.8 million increase in commercial rights and royalties revenues and a $17.2 million increase in investment revenues. Although distributor inventory levels for the products sold by our Bioglan business unit remained at normal levels at the end of 2003, we experienced significant fluctuations in the distributor purchasing patterns during the year. This variation resulted in increased commercial rights and royalties revenues during the first half of 2003, followed by reduced revenues in the third quarter, as the distributors normalized their inventory levels. The commercial rights and royalties costs increased approximately $24.2 million due to the following key factors: approximately $17.4 million of costs associated with the marketing of Solaraze™ and ADOXA™ during 2003 as compared to $9.3 million during 2002, approximately $7.6 million of expenses relating to Cymbalta™ and an increase of approximately $7.8 million of expenses relating to our risk-sharing contracts in Europe, including the 2003 termination of the contracts in Germany and Belgium. These increases were partially offset by a $25.7 million decrease in service costs provided by our Commercial Services Group resulting primarily from the termination of the services portion of our contract with Scios in the fourth quarter of 2002.

      The contribution for the PharmaBio Development Group increased by $35.1 million from 2002 to 2003. The commercial rights and royalties revenues (net of related costs) in 2003 increased the contribution of this group by approximately $17.6 million when compared to 2002 due to the successful launch of the dermatology products and the successful performance of our commercial rights and royalties contracts. The contribution from the commercial rights and royalties revenues was negatively impacted by costs of approximately $7.6 million related to the Cymbalta™ contract for which no revenues are being recognized. Investment revenues (net of related costs) in 2003 increased the contribution of this group by approximately $17.5 million when compared to 2002.

      The informatics group was transferred into the Verispan joint venture in May 2002 and is no longer a segment in 2003.

Year Ended December 31, 2002 Compared with Year Ended December 31, 2001

      We adopted Emerging Issues Task Force Issue 01-14 on January 1, 2002, as required. This new accounting guidance requires us to report reimbursed service costs as part of service revenues. Our reimbursed service costs include such items as payments to investigators and travel expenses for our clinical monitors and sales representatives. Historically, we have not reported these reimbursed service costs as service revenues since we do not earn a profit on these costs. In accordance with this new accounting guidance, we have reclassified reimbursed service costs to service revenues for all periods

32

presented. However, it was impracticable to identify and reclassify certain prior period commercialization reimbursed service costs and, accordingly, historical results have not been restated for these costs. These commercialization reimbursed service costs totaled approximately $60.4 million for the year ended December 31, 2002.

      Gross Revenues. Gross revenues for the year ended December 31, 2002 were $1.99 billion versus $1.88 billion for the year ended December 31, 2001. Below is a summary of revenues (in thousands):

	2002		2001
Service revenues	$	1,868,324	$	1,857,509
Less: reimbursed service costs		399,650		263,429
Net service revenues		1,468,674		1,594,080
Commercial rights and royalties		110,381		25,792
Investments		13,704		611
Total net revenues	$	1,592,759	$	1,620,483
Reimbursed service costs		399,650		263,429
Gross revenues	$	1,992,409	$	1,883,912

•  Services Revenues. Service revenues were $1.87 billion for 2002 compared to $1.86 billion for 2001. Net service revenues for 2002 were $1.47 billion, a decrease of $125.4 million or (7.9%) over net service revenues of $1.59 billion in 2001. Included in net service revenues for 2002 was $20.3 million from our informatics group as compared to $58.2 million from that group for 2001. Our informatics group was transferred to a joint venture during May 2002, therefore revenues for this group are not included in our net service revenues since the date of transfer. Net service revenues for 2002 were positively impacted by approximately $15.2 million due to the effect of foreign currency fluctuations. The positive foreign currency fluctuation due to the weakening of the U.S. Dollar relative to the euro and the British pound was partially offset by the strengthening of the U.S. Dollar relative to the South African Rand and the Japanese yen. Net service revenues increased in the Asia Pacific region $29.4 million or 18.0% to $193.2 million, which was negatively impacted by $2.2 million due to the effect of foreign currency fluctuations. Net service revenues increased $67.9 million or 11.5% to $658.7 million in the Europe and Africa region, which was positively impacted by $18.2 million due to the effect of foreign currency fluctuations. Net service revenues decreased $222.7 million or (26.5%) to $616.8 million in the Americas region primarily as a result of the decline in the commercial services group revenues.

•  Commercial Rights and Royalties Revenues. Commercial rights and royalties revenues for 2002 were $110.4 million, an increase of $84.6 million over 2001 commercial rights and royalties revenues of $25.8 million. Commercial rights and royalties revenues were positively impacted by approximately $3.8 million due to the effect of foreign currency fluctuations related to the weakening of the U.S. Dollar relative to the euro. These revenues include products for which we acquired certain commercial rights, such as the dermatology products, Solaraze^TM and ADOXA^TM. Commercial rights and royalties revenues for 2002 were reduced by approximately $19.8 million versus $8.1 million for 2001 for amortization of payments made by us to our customers. The 2001 amount reflects the Scios contract becoming operational in the third quarter of 2001. These payments are considered incentives and are amortized against revenues over the service period of the contract. The $84.6 million increase in commercial rights and royalties revenues is primarily the result of (1) our 2002 acquisition of certain assets of Bioglan and its suite of dermatology products, which contributed approximately $22.4 million of 2002 revenues, (2) a new risk sharing contract in Europe with a large pharmaceutical customer which contributed approximately $18.9 million of 2002 revenues, and (3) our contracts with Scios and Kos, which contributed $61.3 million of 2002 revenues versus $12.9 million of 2001 revenues. These increases were partially offset by a decrease of approximately $5.1 million in the revenues attributable to miscellaneous contracts and activities.

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For the year ended December 31, 2002, approximately 55.5% of our commercial rights and royalties revenues was attributable to the contracts with Scios and Kos, approximately 17.2% was attributable to the risk sharing contract in Europe, approximately 20.3% was attributable to the suite of dermatology products and the remaining 7.0% was attributable to miscellaneous contracts and activities. In December 2002, we agreed to permit Scios to hire the sales force we had previously provided under contract to them, effective December 31, 2002 in return for (1) Scios reimbursing us for the operating profit that we would have earned between December 31, 2002 and the first date on which Scios would have been permitted to hire the sales force under the contract terms and (2) advancing from May 31, 2003 to December 31, 2002, our ability to exercise the remaining unexercisable warrants. The early settlement of our service obligation resulted in an accelerated recognition of revenues of approximately $9.3 million in the fourth quarter of 2002.

•

Investment Revenues. Investment revenues related to our PharmaBio Development Group’s financing arrangements for 2002 were $13.7 million versus $611,000 for 2001. Included in 2002 and 2001 are $4.3 million and $14.0 million, respectively, of impairment losses on investments whose decline in fair value was considered to be other than temporary.

      Cost of Revenues. Costs of revenues were $1.37 billion for 2002 versus $1.32 billion in 2001. Below is a summary of these costs (in thousands):

	2002		2001
Reimbursed service costs	$	399,650	$	263,429
Service costs		775,447		931,029
Commercial rights and royalties costs		106,146		26,800
Investment costs		320		1,914
Depreciation and amortization		86,148		95,095
	$	1,367,711	$	1,318,267

•  Reimbursed Service Costs. Reimbursed service costs were $399.7 million and $263.4 million for 2002 and 2001, respectively. It was impracticable to identify and reclassify certain commercialization reimbursed service costs, and accordingly, the 2001 results have not been restated for these costs. These commercialization reimbursed service costs totaled approximately $60.4 million for 2002.

•  Service Costs. Service costs were $775.4 million or 52.8% of 2002 net service revenues versus $931.0 million or 58.4% of 2001 net service revenues. This reduction is primarily a result of the continued effect of our process enhancements and cost reduction efforts.

•  Commercial Rights and Royalties Costs. Commercial rights and royalties costs were $106.1 million for 2002 versus $26.8 million for 2001. These costs include services and products provided by third parties, as well as services provided by our other service groups totaling approximately $54.5 million for 2002 and $12.9 million for 2001. The year 2002 also includes costs to launch and market Solaraze^TM and ADOXA^TM and expenses relating to the risk sharing contract in Europe.

•  Investment Costs. Investment costs were $320,000 in 2002 versus $1.9 million in 2001.

•  Depreciation and Amortization. Depreciation and amortization decreased to $86.1 million for 2002 versus $95.1 million for 2001. This decrease is primarily due to the adoption of Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets,” which requires that all goodwill and indefinite-lived intangible assets no longer be amortized but reviewed at least annually for impairment. In addition, depreciation expense decreased $2.9 million as a result of the transfer of our informatics group to Verispan. During 2002, we completed the goodwill transitional impairment test as of January 1, 2002, as required, and the annual impairment test as of July 31, 2002, in which no goodwill impairment was deemed necessary at either date.

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      General and administrative expenses were $508.1 million or 31.9% of total net revenues in 2002 versus $520.7 million or 32.1% of total net revenues in 2001. General and administrative expenses decreased $12.6 million primarily due to realization of the benefits from our restructurings, including efficiencies created through the implementation of our shared service centers, and the deployment of our Internet initiative products into day-to-day operations resulting in our research and development expenses decreasing to $2.1 million in 2002 from $18.1 million in 2001. These decreases were partially offset by increases in Japan and Europe primarily due to the effect of foreign currency fluctuations.

      Net interest income was $14.2 million in 2002 versus $16.7 million in 2001. Although we had an increase in our investable funds during 2002, we experienced a decrease in interest income due to a decline in interest rates.

      Other expense was $3.8 million in 2002 versus $489,000 in 2001. The increase is a result of several factors, including the effects of foreign currency translations and disposals of assets. Included in 2002 are approximately $2.7 million of expenses associated with the formation of the Verispan joint venture.

      We recognized $3.4 million of transaction expenses in 2002 and $54.2 million of restructuring charges in 2001. Included in 2002 were expenses relating to the activities of the special committee of our Board of Directors and its financial and legal advisors. In 2001 we announced a strategic plan that has been implemented across each service line and geographic area of our business which we believe will allow us to meet the changing needs of our customers and to increase our opportunity for growth by committing ourselves to innovation, quality and efficiency. In connection with this plan, we recognized $54.2 million of restructuring charges in 2001 which included approximately $1.1 million relating to a 2000 restructuring plan. In 2002, we revised our estimates of the restructuring plan which we adopted during 2001. This review resulted in a reduction of $9.1 million in our accruals, including $5.7 million in severance payments and $3.4 million in exit costs. However, also during 2002, we recognized $9.1 million of restructuring charges as a result of the continued implementation of the strategic plan we announced during 2001. This restructuring charge included revisions to the 2001 and 2000 restructuring plans of approximately $2.5 million and $1.9 million, respectively, due to a revision in the estimates for the exit costs relating to the abandoned leased facilities.

      In 2001, we recognized a $325.6 million impairment on our investment in WebMD Corporation, or WebMD, common stock. This included a $334.0 million write-down in the third quarter of 2001 of our cost basis in our investment in WebMD whose decline in fair value was considered to be other than temporary. In the fourth quarter of 2001 we recognized an $8.5 million gain on our investment in WebMD as a result of the sale of all 35 million shares of WebMD common stock to WebMD.

      During 2001, we recognized $83.2 million of income from the settlement of litigation between WebMD and us. We received $185.0 million in cash for all 35 million shares of WebMD common stock we owned and to resolve the remaining disputes. Also as part of the settlement, WebMD surrendered the warrant to purchase 10 million shares of our common stock.

      During 2001, we recognized a $27.1 million charge to write-off goodwill and other operating assets primarily relating to goodwill recorded in four separate acquisitions in our commercial services segment and personal computers including desktops and laptops that were no longer in service. The goodwill was deemed impaired and written-off due to changing business conditions and strategic direction.

      Income before income taxes was $123.7 million or 7.8% of total net revenues for 2002 versus a loss before income taxes of $262.5 million for 2001.

      The effective income tax rate was 33.5% for 2002 versus (33.0%) for 2001. Since we conduct operations on a global basis, our effective income tax rate may vary. See “Income Taxes.”

      During 2002, we recognized $569,000 of losses from equity in unconsolidated affiliates and other which represents our pro rata share of net losses of unconsolidated affiliates, primarily Verispan’s net loss since its formation in May 2002, net of minority interest in a consolidated subsidiary.

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      Effective January 2002, we changed our method for calculating deferred income taxes related to our multi-jurisdictional transactions. Under the previous method, we followed an incremental approach to measuring the deferred income tax benefit of our multi-jurisdictional transactions. Under this approach, we considered the income tax benefit from the step-up in tax basis, net of any potential incremental foreign income tax consequences determined by projecting taxable income, foreign source income, foreign tax credit provisions and the interplay of these items among and between their respective tax jurisdictions, based on different levels of intercompany foreign debt. Under the new method, we record deferred income taxes only for the future income tax impact of book and tax basis differences created as a result of multi-jurisdictional transactions. We believe the new method has become more widely used in practice and is preferable because it eliminates the subjectivity and complexities involved in determining the timing and amount of the release or reversal of the valuation allowance under the prior method. In order to effect this change, we recorded a cumulative effect adjustment of $45.7 million which represents the reversal of the valuation allowance related to deferred income taxes on these multi-jurisdictional income tax transactions.

      Because the original acquisition of ENVOY, our electronic data interchange unit, qualified as a tax-free reorganization, our tax basis in the acquisition is allowed to be determined by substituting the tax basis of the previous shareholders of ENVOY. However, when we sold ENVOY to WebMD during 2000, the tax basis of the previous shareholders was not available to us since ENVOY had been a publicly traded corporation at the time of the original acquisition. Therefore, we had to estimate our tax basis in ENVOY by reviewing financial statements, tax returns and other public documents which were available to us at that time. We used the estimated tax basis to calculate the extraordinary gain on the sale of ENVOY, net of income taxes, as reported in our 2000 financial statements. In September 2001, we received the results of a tax basis study completed by our external tax advisors, which was prepared so that we could prepare and file our 2000 U.S. Corporate income tax return. Based on this study, we adjusted the estimate of our tax basis in ENVOY, resulting in an approximate $142.0 million reduction in the income taxes. This change in estimate resulted in an increase for the same amount in the extraordinary gain on the sale of ENVOY. In January 2004, we received a communication from the Internal Revenue Service proposing an increase in our income taxes owed for 2000 by approximately $153.1 million. The increase relates to the Internal Revenue Service challenging our method for determining the basis that we applied to the sale of ENVOY. We are contesting the Internal Revenue Service’s proposed increase.

      Net income was $127.3 million for 2002 versus a net loss of $33.8 million for 2001.

Analysis by Segment:

      During the first quarter of 2002, we transferred the portion of the operations of our Late Phase, primarily Phase IV, clinical group that was in the Commercial Services Group to the Product Development Group in order to consolidate the operational and business development activities. All historical information presented has been revised to reflect this change.

      The following table summarizes the operating activities for our reportable segments for the years ended December 31, 2002 and 2001, respectively. We do not include reimbursed service costs, general and administrative expenses, depreciation and amortization except amortization of commercial rights, interest (income) expense, other (income) expense and income tax expense (benefit) in our segment analysis. Intersegment revenues have been eliminated and the profit on intersegment revenues is reported within the service group providing the services (dollars in millions).

	Total Net Revenues									Contribution
												% of Net					% of Net
	2002			2001			Growth %			2002		Revenues		2001			Revenues
Product Development	$	944.9		$	913.9			3.4%		$	477.5		50.5%	$	438.4			48.0	%
Commercial Services		558.0			634.9			(12.1	)		207.7		37.2		197.5			31.1
PharmaBio Development		124.1			26.4			370.0			17.6		14.2		(2.3	)		(8.8	)
Informatics		20.3			58.2			(65.0	)		8.0		39.4		27.2			46.7
Eliminations		(54.5	)		(12.9	)		—			—		—		—			—
	$	1,592.8		$	1,620.5			(1.7	)%	$	710.8		44.6%	$	660.7			40.8	%

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      Product Development Group. Net service revenues for the Product Development Group were $944.9 million for 2002 compared to $913.9 million for 2001. Net service revenues for 2002 were positively impacted by approximately $6.7 million due to the effect of foreign currency fluctuations. Net service revenues increased in the Asia Pacific region $21.2 million or 27.5% to $98.2 million including a negative impact of approximately $1.3 million due to the effect of foreign currency fluctuations. Net service revenues increased $18.8 million or 5.2% to $380.0 million in the Europe and Africa region, which was positively impacted by $8.4 million due to the effect of foreign currency fluctuations. Net service revenues decreased $9.0 million or (1.9%) to $466.6 million in the Americas region primarily as a result of increased competition.

      Contribution for the Product Development Group was $477.5 million for 2002 compared to $438.4 million for 2001. As a percentage of net service revenues, contribution margin was 50.5% for 2002 compared to 48.0% for 2001. Although billable headcount remained relatively constant for the product development group, billable headcount decreased approximately 3% in the clinical development, or CDS, line of business while billable headcount increased approximately 11% in the early development and laboratory services, or EDLS, line of business. Service costs in our EDLS line of business tend to be proportional to net revenues. The improvement of $39.1 million and 250 basis points in contribution margin was directly related to our reduction in billable headcount in CDS, as well as the realignment of our billable headcount in CDS from higher cost countries such as the United States to lower cost countries, such as South Africa.

      Commercial Services Group. Net service revenues for the Commercial Services Group were $558.0 million for 2002 compared to $634.9 million for 2001. Net service revenues for 2002 were positively impacted by approximately $8.7 million due to the effect of foreign currency fluctuations. Net service revenues increased in the Asia Pacific region $7.7 million or 9.9% to $84.9 million, which was negatively impacted by $935,000 due to the effect of foreign currency fluctuations. Net service revenues increased $15.7 million or 7.1% to $236.5 million in the Europe and Africa region, which was positively impacted by $10.0 million due to the effect of foreign currency fluctuations. Net service revenues decreased $100.2 million or (29.8%) to $236.6 million in the Americas region primarily as a result of a reduction in new product launches and an increase in the number of drugs losing patent protection.

      Contribution for the Commercial Services Group was $207.7 million for 2002 compared to $197.5 million for 2001. As a percentage of net service revenues, contribution margin was 37.2% for 2002 compared to 31.1% for 2001. The improvement of $10.3 million and 610 basis points in contribution margin was directly related to our reduction in billable headcount of approximately 22.2%, as we migrated from being dependent on large primary care sales forces with low margins to a balanced mix of strategic consulting services and specialty sales forces with greater margins.

      PharmaBio Development Group. Net revenues for the PharmaBio Development Group increased approximately $97.7 million during 2002 as compared to 2001 due to the $84.6 million increase in commercial rights and royalties revenues and the $13.1 million increase in investment revenues. The commercial rights and royalties costs increased approximately $79.3 million during the same period primarily as a result of several factors including an approximate $41.6 million increase in service costs provided by our commercial services group relating primarily to our contracts with Scios and Kos, $9.3 million of costs associated with the launch and marketing of Solaraze^TM and ADOXA^TM and $25.8 million of expenses relating to our risk sharing contracts in Europe. The investment costs decreased approximately $1.6 million during 2002 as compared to 2001. The contribution for this segment increased by $19.9 million from 2001 to 2002. The commercial rights and royalties revenues (net of related costs) increased the contribution of this group by approximately $5.2 million when compared to 2001 due to the successful launch of the dermatology products and the successful performance of our commercial rights and royalties contracts. The investment revenues (net of related costs) increased the contribution of this group by approximately $14.7 million when compared to 2001.

      Informatics Group. Net revenues, service costs and contribution for the informatics group decreased approximately $37.9 million, $18.7 million and $19.2 million, respectively, during 2002 as compared to

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2001. These decreases are primarily due to the transfer of this group into the joint venture in May 2002; therefore, the 2002 results include only five months of revenues and service costs for the informatics group.

Liquidity and Capital Resources

      Cash and cash equivalents were $375.2 million at December 31, 2003 as compared to $644.3 million at December 31, 2002.

      Cash provided by operations were $275.5 million in 2003 versus $246.5 million and $247.4 million in 2002 and 2001, respectively. Increasing cash from operations in 2001 was $63.2 million related to the settlement of the litigation with WebMD and $56.2 million for income tax refunds.

      Cash used in investing activities during 2003, 2002, and 2001 were $1.68 billion, $152.3 million, and $16.4 million, respectively. Investing activities in 2003 consisted primarily of the payments relating to the Pharma Services transaction including the repurchase of our common stock and the payment of transaction costs. Investing activities also included the purchases and sales of equity securities and other investments, capital asset purchases, and the acquisition of commercial rights.

      Capital asset purchases required cash outlays of $54.6 million, $40.2 million, and $134.0 million in 2003, 2002 and 2001, respectively. Capital asset purchases by our informatics group were $666,000 in 2002 versus $10.0 million in 2001. The decrease in 2002 was due, in part, to the transfer of this group to Verispan. The $134.0 million capital asset purchases in 2001 included the final payment of $58 million in connection with our 1999 acquisition of Aventis S.A.’s Drug Innovation and Approval Facility, $19.9 million for the implementation of the shared service centers and $5.7 million for our informatics group’s data center.

      During 2003, cash used to acquire commercial rights and royalties related assets was $25.2 million versus $88.3 million during 2002 and $36.7 million during 2001. The 2003 acquisitions included payments of $14.3 million for the contracts with Columbia, $6.5 million for the contract with Scios, $3.2 million for the contract with a large pharmaceutical customer in Belgium and approximately $1.3 million for the acquisition of product and marketing rights. The 2002 acquisitions included $70.0 million of advances to a customer representing payments under our agreement with Lilly. In 2001, we acquired the rights to market for 14 years in the United States, Canada and Mexico SkyePharma’s Solaraze^TM, a treatment of actinic keratosis, for $26.7 million.

      Cash used in the acquisition of businesses, net of cash acquired was $4.7 million during 2003 versus $28.0 million and $6.6 million in 2002 and 2001, respectively. In 2002, we acquired certain assets of Bioglan Pharma, Inc., including its management team and sales force and approximately $1.6 million in cash, for approximately $27.9 million.

      Purchases of equity securities and other investments required an outlay of cash of $19.4 million for 2003 compared to an outlay of $19.7 million for 2002 and $52.9 million for 2001. Proceeds from the sale of equity securities and other investments were $96.5 million during 2003 as compared to $27.9 million for 2002 and $206.3 million for 2001. The proceeds received during 2003 included approximately $22.7 million from the sale of our investment in Triangle (which was acquired by Gilead Sciences, Inc. in January 2003), approximately $17.5 million from warrants to acquire Scios stock (which was acquired by Johnson & Johnson, Inc. in May 2003), and the sale of other equity investments, including The Medicines Company and CV Therapeutics. In 2001, we jointly announced with WebMD the settlement of litigation between the companies and the resolution of our disputes. As part of the settlement, WebMD paid us $185.0 million in cash for all 35 million shares of WebMD common stock we held and to resolve the remaining disputes. The proceeds were allocated as follows: $63.2 million related to the settlement of litigation was reported as cash flows provided by operations and $121.8 million related to the sale of WebMD common stock was reported as cash flows from investing activities. We will also receive an additional payment from WebMD if, on or before June 30, 2004, WebMD is acquired for a price greater than $4.00 per share or its ENVOY subsidiary is acquired for a price greater than $500 million. Also as

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part of the settlement, WebMD surrendered the warrant it held to purchase 10 million shares of our common stock.

      The following table is a summary of our net service receivables outstanding (dollars in thousands except days):

	December 31,			December 31,
	2003			2002
Trade accounts receivable, net	$	122,496		$	129,748
Unbilled services		102,802			120,383
Unearned income		(190,918	)		(141,710	)
Net service receivables outstanding	$	34,380		$	108,421
Number of days of service revenues outstanding		7			21

The decrease in the number of days of service revenues outstanding is a result of our continued focus on the fundamentals of our business and efficiencies generated by our shared service centers, as well as an increased effort to negotiate for and receive upfront payments. Although we intend to continue to focus on these business objectives, it may be difficult to maintain the number of days of service revenues outstanding at the December 31, 2003 level.

      Investments in debt securities were $11.0 million at December 31, 2003 versus $36.7 million at December 31, 2002. Our investments in debt securities consist primarily of state and municipal securities. The decrease is a result of the redemption of our investments in debt securities, primarily money funds.

      Investments in marketable equity securities decreased $6.6 million to $58.3 million at December 31, 2003 as compared to $64.9 million at December 31, 2002 primarily as a result of sales of equity securities which was partially offset by an increase in the market value of the securities.

      Investments in non-marketable equity securities and loans at December 31, 2003 were $48.6 million, as compared to $46.4 million at December 31, 2002. In accordance with our policy to review the carrying values of our non-marketable equity securities and loans if the facts and circumstances suggest that a potential impairment, representing an other than temporary decline in fair value, may have occurred, we recorded losses totaling approximately $11.8 million in 2003 to establish a new cost basis for certain investments.

      Investments in unconsolidated affiliates, primarily Verispan, were $121.2 million at December 31, 2003 as compared to $121.l million at December 31, 2002.

      On September 25, 2003, we completed the Pharma Services transaction for a total purchase price of approximately $1.88 billion. We used approximately $558.3 million of cash to fund this transaction and received $390.5 million in cash for capital contributions. In addition, we entered into a secured credit facility which consists of a $310.0 million principal senior term loan and a $75.0 million revolving loan facility. We also issued $450.0 million principal amount of 10% senior subordinated notes due 2013. As of December 31, 2003, we did not have any outstanding balance on the revolving loan facility.

      Our various long-term debt agreements contain usual and customary negative covenants that, among other things, place limitations on our ability to (1) incur additional indebtedness, including capital leases and liens; (2) pay dividends and repurchase our capital stock; (3) enter into mergers, consolidations, acquisitions, asset dispositions and sale-leaseback transactions; (4) make capital expenditures; and (5) issue capital stock of our subsidiaries. The agreements also contain financial covenants requiring us to maintain minimum interest coverage ratios and maximum consolidated leverage and senior leverage ratios, as defined therein.

      We also have available to us a £1.5 million (approximately $2.6 million) general bank facility with a U.K. bank. At December 31, 2003 and 2002, we did not have any outstanding balance on the facility.

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      Below is a summary of our future payment commitments by year under contractual obligations as of December 31, 2003 (in thousands):

	2004		2005		2006		2007		2008		Thereafter		Total
Long-term debt	$	5,583	$	5,370	$	5,038	$	4,185	$	3,907	$	744,857	$	768,940
Obligations held under capital leases		15,939		7,759		1,825		679		266		132		26,600
Operating leases		61,866		42,688		31,510		25,258		17,579		74,235		253,136
Service Agreements		30,860		25,532		22,424		21,131		15,848		—		115,795
PharmaBio funding commitments in various commercial rights and royalties:
Milestone payments		3,000		—		—		—		—		—		3,000
Sales force commitments		16,548		15,069		3,806		3,916		403		—		39,742
Licensing and distribution rights		2,346		1,500		—		—		—		—		3,846
PharmaBio funding commitments to purchase non-marketable equity securities and loans:
Venture capital funds		15,164		1,582		—		—		—		—		16,746
Convertible loans		66		—		—		—		—		—		66
Loans		6,055		—		—		—		—		—		6,055
Total	$	157,427	$	99,500	$	64,603	$	55,169	$	38,003	$	819,224	$	1,233,926

      We also have additional future PharmaBio funding commitments that are contingent upon satisfaction of certain milestones by the third party such as receiving FDA approval, obtaining funding from additional third parties, agreement of a marketing plan and other similar milestones. Due to the uncertainty of the amounts and timing of these commitments, they are not included in the commitment amounts above. If all of these contingencies were satisfied over approximately the same time period, then we estimate these commitments to be a minimum of approximately $90-110 million per year for a period of five to six years, subject to certain limitations and varying time periods.

      In March 2001, the Board of Directors authorized us to repurchase up to $100 million of our common stock from time to time until March 1, 2002 which was subsequently extended to March 1, 2003. During the first half of 2002, we entered into agreements to repurchase approximately 1.6 million shares for an aggregate price of $22.2 million. We did not enter into any agreements to repurchase our common stock during the second half of 2002 or during the period from January 1, 2003 through September 25, 2003. During 2001, we entered into agreements to repurchase approximately 1.7 million shares for an aggregate price of $27.5 million.

      Shareholders’ equity at December 31, 2003 was $535.1 million (on a successor basis) versus $1.598 billion (on a predecessor basis) at December 31, 2002. The difference results from the effect of the Pharma Services transaction.

      Based on our current operating plan, we believe that our available cash and cash equivalents, together with future cash flows from operations and borrowings available under our revolving portion of our senior credit facility and line of credit agreements will be sufficient to meet our foreseeable cash needs in connection with our operations and debt repayment obligations. As part of our business strategy, we review many acquisition candidates in the ordinary course of business, and in addition to acquisitions already made, we are continually evaluating new acquisition and expansion possibilities. In addition, as part of our business strategy going forward, we intend to review and consider opportunities to acquire additional commercial rights, which may include product rights, as appropriate. We may from time to time seek to obtain debt or equity financing in our ordinary course of business or to facilitate possible acquisitions or expansion. Any such acquisitions or equity or debt financings may be limited by the terms and restrictions contained in the credit agreement governing the senior secured facility or the indenture.

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Critical Accounting Policies

      As we believe these policies require difficult, subjective and complex judgments, we have identified the following critical accounting policies which we use in the preparation of our financial statements.

Revenue Recognition

      We recognize revenue for service contracts based upon (1) the ratio of outputs or performance obligations completed to the total contractual outputs or performance obligations to be provided for fixed-fee contracts, (2) contractual per diem or hourly rate basis as work is performed for fee-for-service contracts or (3) completion of units of service for unit-of-service contracts. We do not recognize revenue with respect to start-up activities associated with contracts, which include contract and scope negotiation, feasibility analysis and conflict of interest review. We expense these costs as incurred. We estimate the total expected revenues, costs, profitability, duration of the contract and outputs for each contract to evaluate for anticipated losses. If anticipated losses result from this evaluation, we recognize the loss in earnings in the period identified. These estimates are reviewed periodically and, if any of these estimates change then an adjustment for the anticipated loss is recorded. These adjustments could have a material effect on our results of operations.

      Certain of our commercial rights and royalty contracts provide for us to receive minimum guaranteed payments. These contracts often contain provisions requiring us to make payments to the customer and to receive payments from the customer. We account for the contracts as single element contracts. We recognize revenue over the related service period of the contract based on the present value of the guaranteed payments. As revenues are recognized and payments are made between the customer and us, we record an asset, which represents the obligation owed to us by the customer. Milestone payments, which we make to the customer, are amortized as a reduction to revenue over the service period of the contract. We also impute interest on the asset balance and record interest income as the contract progresses. We will fully realize the asset balance when we receive the guaranteed minimum level of cash flows. We recognize revenues in excess of the guaranteed minimums as the products are sold. The inherent subjectivity of determining the present values of the guaranteed payments could have a significant impact on the revenues recognized in any period.

      We recognize product revenues upon shipment when title passes to the customer. Revenues are net of allowances for estimated returns, rebates and discounts. We are obligated to accept from customers the return of products that are nearing or have reached their expiration date. We also monitor product ordering patterns, actual returns and analyze wholesale inventory levels to estimate potential product return rates. When we lack a sufficient historical basis to estimate return rates, we recognize revenues and the related cost of revenues when we receive end-user prescription data from third-party providers. Although we believe the product return allowances are adequate, if actual product returns exceed our estimates our results of operations could be adversely affected.

Accounts Receivable and Unbilled Services

      Accounts receivable represents amounts billed to customers. Revenues recognized in excess of billings are classified as unbilled services. The realization of these amounts is based on the customer’s willingness and ability to pay us. We have an allowance for doubtful accounts based on management’s estimate of probable incurred losses resulting from a customer failing to pay us. If any of these estimates change or actual results differ from expected results, then an adjustment is recorded in the period in which they become reasonably estimable. These adjustments could have a material effect on our results of operations.

Marketable Debt and Equity Investments

      We have investments in debt securities and investments in marketable equity securities. Periodically, we review our investments for declines in fair value that we believe may be other than temporary. When we identify such a decline in fair value we record a loss through earnings to establish a new cost basis for the investment. In addition, we may experience future material declines in the fair value of our

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investments which would require us to record additional losses. These adjustments could have a material adverse effect on our results of operations.

Non-Marketable Equity Investments and Loans

      We have investments in non-marketable equity securities and loans. These arrangements typically involve funding, either by direct investment or in the form of a loan, which we commit to provide. Any securities we may acquire as a result of our investment or upon conversion of the loan may not be readily marketable, and we will bear the risk of carrying these investments for an indefinite period of time. We may not be able to recover our cost of the investment or loan at any time in the future, and we could experience an impairment in the carrying value of these investments, which would require us to record additional losses, which could have a material adverse effect on our results of operations.

Income Taxes

      Certain items of income and expense are not recognized on our income tax returns and financial statements in the same year, which creates timing differences. The income tax effect of these timing differences results in (1) deferred income tax assets that create a reduction in future income taxes and (2) deferred income tax liabilities that create an increase in future income taxes. Recognition of deferred income tax assets is based on management’s belief that it is more likely than not that the income tax benefit associated with certain temporary differences, income tax operating loss and capital loss carry forwards and income tax credits, would be realized. We recorded a valuation allowance to reduce our deferred income tax assets for those deferred income tax items for which it was more likely than not that realization would not occur. We determined the amount of the valuation allowance based, in part, on our assessment of future taxable income and in light of our ongoing prudent and feasible income tax strategies. Due to the significant debt service requirements and other costs relating to the Pharma Services transaction, we changed our estimate of the valuation allowance for deferred income tax assets. Accordingly, in connection with recording the Pharma Services transaction, we increased the valuation allowance substantially. If our estimate of future taxable income or tax strategies change at any time in the future, we would record an adjustment to our valuation allowance; recording such an adjustment could have a material effect on our financial condition. Prior to the Pharma Services transaction, we considered undistributed earnings of our foreign subsidiaries to be indefinitely reinvested and, accordingly, no deferred income tax liabilities were recorded. Due to the significant debt service requirements and other costs relating to the Pharma Services transaction, we no longer consider the undistributed earnings of our foreign subsidiaries to be indefinitely reinvested. Accordingly, in connection with recording the Pharma Services transaction, we provided a deferred income tax liability related to those undistributed earnings.

Foreign Currencies

      We derive a large portion of our net revenue from international operations. Our financial statements are denominated in U.S. dollars; thus, factors associated with international operations, including changes in foreign currency exchange rates, could significantly affect our results of operations and financial condition. Exchange rate fluctuations between local currencies and the U.S. dollar create risk in several ways, including the risk of translating revenues and expenses of foreign operations into U.S. dollars, known as translation risk, and the risk that we incur expenses in a currency other than that in which the contract revenues are paid, known as transaction risk. Gains and losses on foreign currency transactions are reported in results of operations, while translation adjustments are reported as a component of accumulated other comprehensive income within shareholders’ equity. If certain balances owed by our foreign subsidiaries are deemed to be not of a long-term investment nature, then the translation effect related to those balances would not be classified as translation adjustments but rather transaction adjustments, which could have a material effect on our results of operations.

Goodwill, Tangible and Identifiable Intangible Assets

      In connection with recording the Pharma Services transaction, we conducted a study of the fair value of tangible and identifiable intangible assets as of September 25, 2003. Accordingly, the excess of the cost

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over the fair value of the net assets acquired, known as goodwill, was recorded and allocated to our reportable business segments. The recoverability of the goodwill is evaluated annually for impairment or if and when events or circumstances indicate a possible impairment. Goodwill and indefinite-lived intangible assets are not amortized. Other identifiable intangible assets are amortized over their estimated useful lives. The inherent subjectivity of applying a market comparables approach to valuing our assets and liabilities could have a significant impact on our analysis. Any future impairment could have a material adverse effect on our financial condition or results of operations.

      Periodically, we review the carrying values of property and equipment if the facts and circumstances suggest that a potential impairment may have occurred. If this review indicates that carrying values will not be recoverable, as determined based on undiscounted cash flows over the remaining depreciation or amortization period, we will reduce carrying values to estimated fair value. The inherent subjectivity of our estimates of future cash flows could have a significant impact on our analysis. Any future write-offs of long-lived assets could have a material adverse effect on our financial condition or results of operations.

Employee Stock Compensation

      Prior to the Pharma Services transaction, we had stock options and elected to follow Accounting Principles Board Opinion No. 25, “Accounting for Stock Options Issued to Employees”, or APB 25, and related interpretations in accounting for our employee stock options because the alternative fair value accounting provided for under Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation”, as amended by SFAS No. 148, or SFAS 123, requires use of option valuation models that were not developed for use in valuing employee stock options. Because the exercise price equals the market price of the underlying stock on the date of the grant, no compensation expense is recognized. Although we do not have any stock options outstanding subsequent to the Pharma Services transaction, Pharma Services has issued options to purchase its stock to certain of our employees. We account for these stock options in accordance with APB 25. Because the exercise price equaled or exceeded the estimated market value of the underlying stock on the date of the grant, no compensation expense was recognized. If we accounted for Pharma Services’ or our stock options under SFAS 123, we would have recorded additional compensation expense for the stock option grants to employees.

Backlog Reporting

      We report revenue backlog based on anticipated net revenue from uncompleted projects that our customers have authorized. We report only service-related revenue as backlog, and we do not include product revenue or commercial rights-related revenue (royalties and commissions) in backlog. Our backlog is calculated based upon our estimate of forecasted currency exchange rates. Annually, we adjust the beginning balance of our backlog to reflect changes in our forecasted currency exchange rates. Our backlog at anytime can be affected by:

•  the variable size and duration of projects,

•  the loss or delay of projects, and

•  a change in the scope of work during the course of a project.

If customers delay projects, the projects will remain in backlog, but will not generate revenue at the rate originally expected. Accordingly, historical indications of the relationship of backlog to revenues may not be indicative of the future relationship. The reporting of revenue backlog is not authoritatively prescribed, therefore practices tend to vary among competitors and reported amounts are not necessarily comparable.

Inflation

      We believe the effects of inflation generally do not have a material adverse impact on our operations or financial condition.

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Market Risk

      Market risk is the potential loss arising from adverse changes in market rates and prices, such as foreign currency rates, interest rates and other relevant market rate or price changes. In the ordinary course of business, we are exposed to various market risks, including changes in foreign currency exchange rates, interest rates and equity price changes, and we regularly evaluate our exposure to such changes. Our overall risk management strategy seeks to balance the magnitude of the exposure and the cost and availability of appropriate financial instruments. From time to time, we have utilized forward exchange contracts to manage our foreign currency exchange rate risk. The following analyses present the sensitivity of our financial instruments to hypothetical changes in interest and foreign currency exchange rates that are reasonably possible over a one-year period.

Foreign Currency Exchange Rates

      Approximately 61.6%, 56.4% and 49.7% of our total net revenues for the years ended December 31, 2003, 2002, and 2001, respectively, was derived from our operations outside the United States. We do not have significant operations in countries in which the economy is considered to be highly-inflationary. Our financial statements are denominated in U.S. dollars and, accordingly, changes in the exchange rate between foreign currencies and the U.S. dollar will affect the translation of our subsidiaries’ financial results into U.S. dollars for purposes of reporting our consolidated financial results. Accumulated currency translation adjustments recorded as a separate component (reduction) of shareholders’ equity were $19.8 million at December 31, 2003 as compared to ($18.4) million at December 31, 2002.

      We may be subject to foreign currency transaction risk when our service contracts are denominated in a currency other than the currency in which we earn fees or incur expenses related to such contracts. At December 31, 2003, our most significant foreign currency exchange rate exposures were in the British pound, Japanese yen and the euro. We limit our foreign currency transaction risk through exchange rate fluctuation provisions stated in our contracts with customers, or we may hedge our transaction risk with foreign currency exchange contracts or options. There were no open foreign exchange contracts or options relating to service contracts at December 31, 2003 or 2002.

Interest Rates

      We are subject to market risk associated with changes in interest rates. Our principal interest rate exposure relates to the term loans outstanding under our senior secured credit facility. At December 31, 2003, we have $309.2 million outstanding under the senior secured credit facility subject to variable rates. Each quarter point increase or decrease in the applicable interest rate would change our interest expense by approximately $775,000 per year.

      At December 31, 2003, our investment in debt securities portfolio consists primarily of U.S. Government securities, of which most are callable by the issuer at par, and money funds. The portfolio is primarily classified as available-for-sale and therefore these investments are recorded at fair value in the financial statements. These securities are exposed to market price risk which also takes into account interest rate risk. As of December 31, 2003, the fair value of the investment portfolio was $11.0 million, based on quoted market prices. The potential loss in fair value resulting from a hypothetical decrease of 10% in quoted market price is approximately $1.1 million.

Equity Prices

      At December 31, 2003, we had investments in marketable equity securities. These investments are classified as available-for-sale and are recorded at fair value in the financial statements. These securities are subject to equity price risk. As of December 31, 2003, the fair value of these investments was $58.3 million, based on quoted equity prices. The potential loss in fair value resulting from a hypothetical decrease of 10% in quoted equity price is approximately $5.8 million.

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Recently Issued Accounting Standards

      In January 2003, the Financial Accounting Standards Board issued Interpretation No. 46 (“FIN 46”), “Consolidation of Variable Interest Entities”, which requires the assets, liabilities and results of operations of variable interest entities (“VIE”) be consolidated into the financial statements of the company that has controlling financial interest. FIN 46 also provides the framework for determining whether a VIE should be consolidated based on voting interest or significant financial support provided to the VIE. We adopted these provisions, as required, with respect to VIEs created after January 31, 2003. The effective date for applying the provisions of FIN 46 for interests held by public entities in VIEs or potential VIEs created before February 1, 2003 has been deferred and will be effective as of March 31, 2004 except for interests in special purpose entities. We do not have interests in special purpose entities. We are currently evaluating the impact of FIN 46 on any such VIEs held prior to February 1, 2003.

Risk Factors

      In addition to the other information provided in this Annual Report on Form 10-K, you should consider the following factors carefully in evaluating our business and us. Additional risks and uncertainties not presently known to us, that we currently deem immaterial or that are similar to those faced by other companies in our industry or business in general, such as competitive conditions, may also impair our business operations. If any of the following risks occur, our business, financial condition, or results of operations could be materially adversely affected.

Our substantial debt could adversely affect our financial condition and prevent us from fulfilling our obligations under our senior subordinated notes.

      As of December 31, 2003, we had outstanding debt of approximately $794.3 million. Of the total debt, approximately $344.3 million is secured, and an additional $75.0 million in loans available under our senior credit facility also is secured, if drawn upon.

      Our substantial indebtedness and the significant reduction in our available cash resulting from the financing of the Pharma Services transaction could adversely affect our financial condition and thus make it more difficult for us to satisfy our obligations with respect to our senior subordinated notes, or the notes, as well as our obligations under our senior secured credit facility. Our substantial indebtedness and significant reduction in available cash could also:

•  increase our vulnerability to adverse general economic and industry conditions;

•  require us to dedicate a substantial portion of our cash flows from operations to payments on our indebtedness, thereby reducing the availability of our cash flows to fund working capital, investments, capital expenditures, research and development efforts and other general corporate purposes;

•  limit our ability to make required payments under our existing contractual commitments (See “Results of Operations — Liquidity and Capital Resources”);

•  limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;

•  place us at a competitive disadvantage compared to our competitors that have less debt;

•  increase our exposure to rising interest rates because a portion of our borrowings is at variable interest rates; and

•  limit our ability to borrow additional funds on terms that are satisfactory to us or at all.

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The senior subordinated notes and the senior secured credit facility contain covenants that limit our flexibility and prevent us from taking certain actions.

      The indenture governing the notes and the credit agreement governing the senior secured credit facility include a number of significant restrictive covenants. These covenants could adversely affect us by limiting our ability to plan for or react to market conditions, meet our capital needs and execute our business strategy. These covenants will, among other things, limit our ability and the ability of our restricted subsidiaries to:

•  incur additional debt;

•  pay dividends on, redeem or repurchase capital stock;

•  issue capital stock of restricted subsidiaries;

•  make certain investments;

•  enter into certain types of transactions with affiliates;

•  engage in unrelated businesses;

•  create liens; and

•  sell certain assets or merge with or into other companies.

      These covenants may significantly limit our operating and financial flexibility and limit our ability to respond to changes in our business or competitive activities. In addition, the senior secured credit facility includes other and more restrictive covenants and prohibits us from prepaying our other debt, including the notes, while borrowings under our senior secured credit facility are outstanding. The senior secured credit facility also requires us to maintain certain financial ratios and meet other financial tests. Our failure to comply with these covenants could result in an event of default, which, if not cured or waived, could result in our being required to repay these borrowings before their scheduled due date. If we were unable to make this repayment or otherwise refinance these borrowings, the lenders under the senior secured credit facility could elect to declare all amounts borrowed under the senior secured credit facility, together with accrued interest, to be due and payable, which, in some instances, would be an event of default under the indenture governing the notes. In addition, these lenders could foreclose on our assets. If we were unable to refinance these borrowings on favorable terms, our results of operations and financial condition could be adversely impacted by increased costs and less favorable terms, including interest rates and covenants. Any future refinancing of the senior secured credit facility is likely to contain similar restrictive covenants and financial tests.

Despite our level of indebtedness, we and our parent companies are able to incur substantially more debt. Incurring such debt could further exacerbate the risks to our financial condition.

      Although the indenture governing the notes and the credit agreement governing our senior secured credit facility each contain restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of qualifications and exceptions and the indebtedness incurred in compliance with these restrictions could be substantial. To the extent new debt is added to our current debt levels, our substantial leverage risks would increase. In addition, to the extent new debt is incurred by Pharma Services or Intermediate Holding, we may be required to generate sufficient cash flow to satisfy such obligations.

      While the indenture and the credit agreement also contain restrictions on our ability to make investments, these restrictions are subject to a number of qualifications and exceptions and the investments incurred in compliance with these restrictions could be substantial. The restrictions do not prevent us from incurring certain expenses in connection with our PharmaBio Development Group transactions, including expenses incurred to provide sales forces for the products of our PharmaBio Development customers.

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Changes in aggregate spending, research and development budgets and outsourcing trends in the pharmaceutical and biotechnology industries could adversely affect our operating results and growth rate.

      Economic factors and industry trends that affect our primary customers, pharmaceutical and biotechnology companies, also affect our business. For example, the practice of many companies in these industries has been to hire outside organizations like us to conduct large clinical research and sales and marketing projects. This practice grew substantially during the 1990’s and we benefited from this trend. Some industry commentators believe that the rate of growth of outsourcing will tend to decrease. If these industries reduce their outsourcing of clinical research and sales and marketing projects, our operations and financial condition could be materially and adversely affected. We also believe we have been negatively impacted recently by mergers and other factors in the pharmaceutical industry, which appear to have slowed decision making by our customers and delayed certain trials. We believe our commercialization services have been particularly affected by recent reductions in new product launches and increases in the number of drugs losing patent protection. A continuation of these trends would have an ongoing adverse effect on our business. In addition, U.S. federal and state legislatures and numerous foreign governments have considered various types of healthcare reforms and have undertaken efforts to control growing healthcare costs through legislation, regulation and voluntary agreements with medical care providers and pharmaceutical companies. If future regulatory cost containment efforts limit the profitability of new drugs, our customers may reduce their research and development spending, which could reduce the business they outsource to us. We cannot predict the likelihood of any of these events or the effects they would have on our business, results of operations or financial condition.

If we are unable to successfully develop and market potential new services, our growth could be adversely affected.

      A key element of our growth strategy is the successful development and marketing of new services that complement or expand our existing business. If we are unable to succeed in (1) developing new services and (2) attracting a customer base for those newly developed services, we will not be able to implement this element of our growth strategy, and our future business, results of operations and financial condition could be adversely affected.

Our plan to strengthen and web-enable the technology platform for our product development and commercialization services may negatively impact our results in the short term.

      We are currently developing an Internet platform for our product development and commercialization services. We have entered into agreements with certain vendors for them to provide systems development and integration services to help us develop this platform. If such vendors fail to perform as required or if there are substantial delays in developing and implementing this platform, we may have to make substantial further investments, internally or with third parties, to achieve our objectives. Meeting our objectives is dependent on a number of factors which may not take place as we anticipate, including obtaining adequate technology enabled services, creating web-enablement services which our customers will find desirable and implementing our business model with respect to these services. Also, these expenditures are likely to negatively impact our profitability, at least until our web-enabled products are operationalized. Over time, we envision continuing to invest in extending and enhancing our Internet platform in other ways to further support and improve our services. We cannot assure you that any improvements in operating income resulting from our Internet capabilities will be sufficient to offset our investments in the Internet platform. Our results could be further negatively impacted if our competitors are able to execute their services on a web-based platform before we can launch our Internet services or if they are able to structure a platform that attracts customers away from our services.

We may not be able to derive the benefits we hope to achieve from Verispan, our joint venture with McKesson.

      In May 2002, we completed the formation of a joint venture, Verispan, with McKesson designed to leverage the operational strengths of the healthcare information business of each party. As part of the

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formation of Verispan, we contributed our former informatics business. As a result, Verispan remains subject to the risks to which our informatics business was exposed. If Verispan is not successful or if it experiences any of the difficulties described below, there could be an adverse effect on our results of operations and financial condition, as Verispan is a pass-through entity and, as such, its results are reflected in our financial statements to the extent of our interest in Verispan. We may not achieve the intended benefits of Verispan if it is not able to secure additional data in exchange for equity. Verispan also could encounter other difficulties, including:

•  its ability to obtain continuous access to de-identified healthcare data from third parties in sufficient quantities to support its informatics products;

•  its ability to process and use the volume of data received from a variety of data providers;

•  its ability to attract customers, besides Quintiles and McKesson, to purchase its products and services;

•  the risk of changes in healthcare information privacy laws and regulations that could create a risk of liability, increase the cost of Verispan’s business or limit its service offerings;

•  the risk that industry regulation may restrict Verispan’s ability to analyze and disseminate pharmaceutical and healthcare data; and

•  the risk that it will not be able to effectively and cost-efficiently replace services previously provided to the contributed businesses by the former parent corporations.

      Although we have a license to use Verispan’s commercially available data products and we may pay Verispan to create customized data products for us, if Verispan is unable to provide us with the quality and character of data products that we need to support those services, we would need to seek other strategic alternatives to achieve our goals.

      In contributing our former informatics business to Verispan, we assigned certain contracts to Verispan. Verispan has agreed to indemnify us against any liabilities we may incur in connection with these contracts after contributing them to Verispan, but we still may be held liable under the contracts to the extent Verispan is unable to satisfy its obligations, either under the contracts or to us.

The potential loss or delay of our large contracts could adversely affect our results.

      Many of our customers can terminate their contracts with us upon 15-90 days’ notice. In the event of termination, our contracts often provide for fees for winding down the project, but these fees may not be sufficient for us to maintain our margins, and termination may result in lower resource utilization rates. In addition, we may not realize the full benefits of our backlog of contractually committed services if our customers cancel, delay or reduce their commitments under their contracts with us. Thus, the loss or delay of a large contract or the loss or delay of multiple contracts could adversely affect our net revenue and profitability. We believe that this risk of loss or delay of multiple contracts potentially has greater effect as we pursue larger outsourcing arrangements with global pharmaceutical companies. Also, over the past two years we have observed that customers may be more willing to delay, cancel or reduce contracts more rapidly than in the past. If this trend continues, it could become more difficult for us to balance our resources with demands for our services and our financial results could be adversely affected.

Underperformance of our commercial rights strategies could have a negative impact on our financial performance.

      As part of our PharmaBio Development group’s business strategy, we enter into transactions with customers in which we take on some of the risk of the potential success or failure of the customer’s product. These transactions may include making a strategic investment in a customer, providing financing to a customer, or acquiring an interest in the revenues from a customer’s product. For example, we may build or provide a sales organization for a biotechnology customer to commercialize a new product in exchange for a share in the revenues of the product. We anticipate that in the early periods of many of

48

these relationships, our expenses will exceed revenues from these arrangements, particularly where we are providing a sales force for the product at our own cost. Aggregate royalty or other payments made to us under these arrangements may not be adequate to offset our total expenditure in providing a sales force or in making milestone or marketing payments to our customers. We carefully analyze and select the customers and products with which we are willing to structure our risk-based deals. Products underlying our commercial rights strategies may not complete clinical trials, receive FDA approval or achieve the level of market acceptance or consumer demand that we expect, in which case we might not be able to earn a profit or recoup our investment with regard to a particular transaction. In addition, the timing of regulatory approval and product launch, such as with respect to the pending review of Cymbalta^TM, and the achievement of other milestones are generally beyond our control and can affect our actual return from these investments. The potential negative effect to us could increase depending on the nature and timing of these transactions and the length of time before it becomes apparent that the product will not achieve commercial success. Our financial results would be adversely affected if our customers or their products do not achieve the level of success that we anticipate and/or our return or payment from the product investment or financing is less than our costs with respect to these transactions.

Our rights to market and sell certain pharmaceutical products expose us to product risks typically associated with pharmaceutical companies.

      Our acquisition of the rights to market and sell Solaraze^TM and the rights to other dermatology products acquired from Bioglan Pharma, Inc. at the end of 2001, as well as any other product rights we may hold in the future, subject us to a number of risks typical to the pharmaceutical industry. For example, we could face product liability claims in the event users of these products, or of any other pharmaceutical product rights we may acquire in the future, experience negative reactions or adverse side effects or in the event such products cause injury, are found to be unsuitable for their intended purpose or are otherwise defective. While we believe we currently have adequate insurance in place to protect against these risks, we may nevertheless be unable to satisfy any claims for which we may be held liable as a result of the use or misuse of products which we manufacture or sell, and any such product liability claim could adversely affect our business, operating results or financial condition. In addition, like pharmaceutical companies, our commercial success in this area will depend in part on our obtaining, securing and defending our intellectual property rights covering our pharmaceutical product rights.

      These risks may be augmented by certain risks relating to our outsourcing of the manufacturing and distribution of these products or any pharmaceutical product rights we may acquire in the future. For example, as a result of our decision to outsource the manufacturing and distribution of Solaraze^TM, we are unable to directly monitor quality control in the manufacturing and distribution processes.

      Our plans to market and sell Solaraze^TM and other pharmaceutical products also subject us to risks associated with entering into a new line of business in which we have limited experience. If we are unable to operate this new line of business as we expect, the financial results from this new line of business could have a negative impact on our results of operations as a whole. The risk that our results may be affected if we are unable to successfully operate our pharmaceutical operations may increase in proportion with (1) the number of products or product rights we license or acquire in the future, (2) the applicable stage of the drug approval process of the products and (3) the levels of outsourcing involved in the development, manufacture and commercialization of such products.

If we lose the services of Dennis Gillings or other key personnel, our business could be adversely affected.

      Our success substantially depends on the performance, contributions and expertise of our senior management team, led by Dennis B. Gillings, Ph.D., our Executive Chairman and Chief Executive Officer. In connection with and following the Pharma Services transaction, we have experienced some turnover in our senior management. For instance, our Executive Vice President and Chief Financial Officer recently announced his intention to retire from this position. Our performance also depends on our ability to identify, attract and retain qualified management and professional, scientific and technical operating staff, as well as our ability to recruit qualified representatives for our contract sales services. The departure of

49

Dr. Gillings or any key executive, or our inability to continue to attract and retain qualified personnel, or to replace any departed personnel in a timely fashion could have a material adverse effect on our business, results of operations or financial condition.

Our product development services could result in potential liability to us.

      We contract with drug companies to perform a wide range of services to assist them in bringing new drugs to market. Our services include supervising clinical trials, data and laboratory analysis, electronic data capture, patient recruitment and other related services. The process of bringing a new drug to market is time-consuming and expensive. If we do not perform our services to contractual or regulatory standards, the clinical trial process could be adversely affected. Additionally, if clinical trial services such as laboratory analysis or electronic data capture and related services do not conform to contractual or regulatory standards, trial participants or trial results could be affected. These events would create a risk of liability to us from the drug companies with whom we contract or the study participants. Similar risks apply to our product development services relating to medical devices.

      We also contract with physicians to serve as investigators in conducting clinical trials. Such testing creates risk of liability for personal injury to or death of volunteers, particularly to volunteers with life-threatening illnesses, resulting from adverse reactions to the drugs administered during testing. It is possible third parties could claim that we should be held liable for losses arising from any professional malpractice of the investigators with whom we contract or in the event of personal injury to or death of persons participating in clinical trials. We do not believe we are legally accountable for the medical care rendered by third party investigators, and we would vigorously defend any such claims. However, such claims may still be brought against us, and it is possible we could be found liable for these types of losses. For example, we are among the defendants named in a purported class action by participants in an Alzheimer’s study seeking to hold us liable for alleged damages to the participants arising from the study.

      In addition to supervising tests or performing laboratory analysis, we also own a number of facilities where Phase I clinical trials are conducted. Phase I clinical trials involve testing a new drug on a limited number of healthy individuals, typically 20 to 80 persons, to determine the drug’s basic safety. We also could be liable for the general risks associated with ownership of such a facility. These risks include, but are not limited to, adverse events resulting from the administration of drugs to clinical trial participants or the professional malpractice of Phase I medical care providers.

      We also provide some clinical trial packaging services. We could be held liable for any problems that result from the trial drugs we package, including any quality control problems in our packaging facilities. For example, accounting for controlled substances is subject to regulation by the DEA and some of our facilities have been audited by the DEA. In one case, the DEA indicated that it found that we miscounted certain drugs, which was resolved to DEA’s satisfaction by our providing a corrected accounting of these drugs to the DEA.

      We also could be held liable for errors or omissions in connection with our services. For example, we could be held liable for errors or omissions or breach of contract if one of our laboratories inaccurately reports or fails to report lab results. Although we maintain insurance to cover ordinary risks, insurance would not cover the risk of a customer deciding not to do business with us as a result of poor performance, which could adversely affect our results of operations and financial condition.

Our insurance may not cover all of our indemnification obligations and other liabilities associated with our operations.

      We maintain insurance designed to cover ordinary risks associated with our operations and our ordinary indemnification obligations. This insurance might not be adequate coverage or may be contested by our carriers. For example, our insurance carrier, to whom we paid premiums to cover risks associated with our product development services, filed suit against us seeking to rescind the insurance policies or to have coverage denied for some or all of the claims arising from class action litigation involving an Alzheimer’s study. The availability and level of coverage provided by our insurance could have a material

50

impact on our profitability if we suffer uninsured losses or are required to indemnify third parties for uninsured losses.

      As part of the formation of Verispan, Verispan assumed our obligation under our settlement agreement with WebMD to indemnify WebMD for losses arising out of or in connection with the (1) canceled Data Rights Agreement with WebMD, (2) our data business, which was contributed to the joint venture, (3) the collection, accumulation, storage or use of data by ENVOY for the purpose of transmitting or delivering data to us, (4) any actual transmission or delivery by ENVOY of data to us or (5) violations of law or contract attributable to any of the events described in (1) through (4) above. These indemnity obligations are limited to 50.0% for the first $20 million in aggregate losses, subject to exceptions for certain indemnity obligations that were not transferred to Verispan. Although Verispan has assumed our indemnity obligations to WebMD relating to our former data business, Verispan may have insufficient resources to satisfy these obligations or may otherwise default with respect thereto. In addition, WebMD may seek indemnity from us, and we would have to proceed against Verispan.

      In addition, we remain subject to other indemnity obligations to WebMD, including for losses arising out of the settlement agreement itself or out of the sale of ENVOY to WebMD. In particular, we could be liable for losses which may arise in connection with a class action lawsuit filed against ENVOY prior to its purchase by us and subsequent sale to WebMD. ENVOY and its insurance carrier, Federal, filed a lawsuit in June 2003 against us alleging that we should be responsible for payment of the settlement amount of $11 million and related fees and costs in connection with the recent settlement of the class action lawsuit. Our indemnity obligation with regard to losses arising from the sale of ENVOY to WebMD including ENVOY’s class action lawsuit is not subject to the limitation on the first $20 million of aggregate losses described above.

Changes in government regulation could decrease the need for the services we provide.

      Governmental agencies throughout the world, but particularly in the United States, highly regulate the drug development/approval process. A large part of our business involves helping pharmaceutical and biotechnology companies through the regulatory drug approval process. Any relaxation in regulatory approval standards could eliminate or substantially reduce the need for our services, and, as a result, our business, results of operations and financial condition could be materially adversely affected. Potential regulatory changes under consideration in the United States and elsewhere include mandatory substitution of generic drugs for patented drugs, relaxation in the scope of regulatory requirements or the introduction of simplified drug approval procedures. These and other changes in regulation could have an impact on the business opportunities available to us.

Failure to comply with existing regulations could result in a loss of revenue.

      We are subject to a wide range of government regulations and review by a number of regulatory agencies including, in the United States, the FDA, DEA, Department of Transportation and similar regulatory agencies throughout the world. Any failure on our part to comply with applicable regulations could materially impact our ability to perform our services. For example, non-compliance could result in the termination of ongoing clinical research or sales and marketing projects or the disqualification of data for submission to regulatory authorities, either of which could have a material adverse effect on us. If we were to fail to verify that informed consent is obtained from patient participants in connection with a particular clinical trial, the data collected from that trial could be disqualified, and we could be required to redo the trial under the terms of our contract at no further cost to our customer, but at substantial cost to us. Moreover, from time to time, including the present, one or more of our customers are investigated by regulatory authorities or enforcement agencies with respect to regulatory compliance of their clinical trials and programs. In these situations, we often have provided services to our customers with respect to the trials and programs being investigated and we are called upon to respond to requests for information by the authorities and agencies. There is a risk that either our customers or regulatory authorities could claim that we performed our services improperly or that we are responsible for trial or program compliance. For example, our customer, Biovail Corporation, is the subject of government inquiries relating to the

51

Cardizem LA P.L.A.C.E. late phase clinical program, and has asserted publicly that we have warranted that this program complies with all laws and regulations, to which we have taken exception. If our customers or regulatory authorities make such claims against us and prove them, we could be subject to substantial damages, fines or penalties.

Our services are subject to evolving industry standards and rapid technological changes.

      The markets for our services are characterized by rapidly changing technology, evolving industry standards and frequent introduction of new and enhanced services. To succeed, we must continue to:

•  enhance our existing services;

•  introduce new services on a timely and cost-effective basis to meet evolving customer requirements;

•  integrate new services with existing services;

•  achieve market acceptance for new services; and

•  respond to emerging industry standards and other technological changes.

Exchange rate fluctuations may affect our results of operations and financial condition.

      We derive a large portion of our net revenue from international operations. Our financial statements are denominated in U.S. dollars; thus, factors associated with international operations, including changes in foreign currency exchange rates, could significantly affect our results of operations and financial condition. Exchange rate fluctuations between local currencies and the U.S. dollar create risk in several ways, including:

•  Foreign Currency Translation Risk. The revenue and expenses of our foreign operations are generally denominated in local currencies.

•  Foreign Currency Transaction Risk. Our service contracts may be denominated in a currency other than the currency in which we incur expenses related to such contracts.

      We try to limit these risks through exchange rate fluctuation provisions stated in our service contracts, or we may hedge our transaction risk with foreign currency exchange contracts or options. Although we may hedge our transaction risk, there were no open foreign exchange contracts or options relating to service contracts at December 31, 2003. Despite these efforts, we may still experience fluctuations in financial results from our operations outside the United States, and we cannot assure you that we will be able to favorably reduce our currency transaction risk associated with our service contracts.

We face other risks in connection with our international operations.

      We have significant operations in foreign countries. As a result, we are subject to certain risks inherent in conducting business internationally, including the following:

•  foreign countries could change regulations or impose currency restrictions and other restraints;

•  political changes and economic crises may lead to changes in the business environment in which we operate; and

•  international conflict, including terrorist acts, could significantly impact our financial condition and results of operations.

New and proposed laws and regulations regarding confidentiality of patients’ information could result in increased risks of liability or increased cost to us, or could limit our service offerings.

      The confidentiality and release of patient-specific information are subject to governmental regulation. Under HIPAA, the U.S. Department of Health and Human Services has issued regulations mandating heightened privacy and confidentiality protections. Similarly, the EU and its member states, as well as

52

other countries, continue to issue new regulations. National and U.S. state governments are contemplating or have proposed or adopted additional legislation governing the possession, use and dissemination of medical record information and other personal health information. In particular, proposals being considered by state governments may contain privacy and security protections that are more burdensome than the federal regulations. In order to comply with these regulations, we may need to implement new security measures, which may require us to make substantial expenditures or cause us to limit the products and services we offer. In addition, if we violate applicable laws, regulations or duties relating to the use, privacy or security of health information, we could be subject to civil or criminal penalty and could be forced to alter our business practices.

We may be adversely affected by customer concentration.

      Although we did not have one customer that accounted for 10% or greater of net service revenues for any period presented for 2003, one customer accounted for approximately 11% of our net service revenues for the year ended December 31, 2002 due, in part, to the effect of a long term contract that expired as of the end of 2003. If any large customer decreases or terminates their relationship with us, our business, results of operations or financial condition could be materially adversely affected.

      If we are unable to submit electronic records to the FDA according to FDA regulations, our ability to perform services for our customers which meet applicable regulatory requirements could be adversely affected.

      If we were unable to produce electronic records, which meet the requirements of FDA regulations, our customers may be adversely affected when they submit the data concerned to the FDA in support of an application for approval of a product, which could harm our business. The FDA published 21 CFR Part 11 “Electronic Records; Electronic Signatures; Final Rule” (“Part 11”) in 1997. Part 11 became effective in August 1997 and defines the regulatory requirements that must be met for FDA acceptance of electronic records and/or electronic signatures in place of the paper equivalents. Further, in August 2003, the FDA issued a “Guidance for Industry: Part 11, Electronic Records; Electronic Signatures — Scope and Application” that addressed the FDA’s current thinking on this topic. Part 11 requires that those utilizing such electronic records and/or signatures employ procedures and controls designed to ensure the authenticity, integrity and, as appropriate, confidentiality of electronic records and, Part 11 requires those utilizing electronic signatures to ensure that a person appending an electronic signature cannot readily repudiate the signed record. Pharmaceutical, medical device and biotechnology companies are increasing their utilization of electronic records and electronic signatures and are requiring their service providers and partners to do likewise. Becoming compliant with Part 11 involves considerable complexity and cost. Our ability to provide services to our customers in full compliance with applicable regulations includes a requirement that, over time, we become compliant and maintain compliance with the requirements of Part 11. We are making steady and documented progress in bringing our critical computer applications into compliance according to written enhancement plans that have been reviewed and approved by third party authorities. Lower-priority systems are, likewise, being reviewed and revalidated. If we are unable to complete these compliance objectives, our ability to provide services to our customers which meet FDA requirements may be adversely affected.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

      This information is included under Item 7 of this report under the caption “Market Risk.”

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Item 8. Financial Statements and Supplementary Data

QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

			September
			26, 2003			January 1,
			through			2003 through			Year ended			Year ended
			December 31,			September			December 31,			December 31,
			2003			25, 2003			2002			2001
			Successor			Predecessor			Predecessor			Predecessor
			(In thousands, except per share data)
Gross revenues			$	547,165		$	1,498,822		$	1,992,409		$	1,883,912
Costs, expenses and other:
		Costs of revenues		375,598			997,822			1,367,711			1,318,267
		General and administrative		154,688			397,318			508,103			520,680
		Interest income		(4,761	)		(12,112	)		(16,739	)		(19,844	)
		Interest expense		20,651			1,738			2,551			3,172
		Other expense (income), net		(2,406	)		(5,433	)		3,764			489
		Transaction and restructuring		—			54,148			3,359			54,169
		Impairment on investment in WebMD common stock		—			—			—			325,553
		Settlement of litigation		—			—			—			(83,200	)
		Write-off of goodwill and other assets		—			—			—			27,122
				543,770			1,433,481			1,868,749			2,146,408
Income (loss) from continuing operations before income taxes				3,395			65,341			123,660			(262,496	)
Income tax expense (benefit)				10,712			28,184			41,427			(86,623	)
(Loss) income before equity in (losses) earnings of unconsolidated affiliates and other				(7,317	)		37,157			82,233			(175,873	)
Equity in (losses) earnings of unconsolidated affiliates and other				(110	)		4			(569	)		—
(Loss) income from continuing operations				(7,427	)		37,161			81,664			(175,873	)
Extraordinary gain from sale of discontinued operation, net of income taxes				—			—			—			142,030
Cumulative effect on prior years (to December 31, 2001) of changing to a different method of recognizing deferred income taxes				—			—			45,659			—
Net (loss) income			$	(7,427	)	$	37,161		$	127,323		$	(33,843	)
Basic net (loss) income per share:
	(Loss) income from continuing operations		$	(0.06	)	$	0.31		$	0.69		$	(1.49	)
	Extraordinary gain from sale of discontinued operation			—			—			—			1.20
	Cumulative effect of change in accounting principle			—			—			0.39			—
	Basic net (loss) income per share		$	(0.06	)	$	0.31		$	1.08		$	(0.29	)
Diluted net (loss) income per share:
	(Loss) income from continuing operations		$	(0.06	)	$	0.31		$	0.69		$	(1.49	)
	Extraordinary gain from sale of discontinued operation			—			—			—			1.20
	Cumulative effect of change in accounting principle			—			—			0.39			—
	Diluted net (loss) income per share		$	(0.06	)	$	0.31		$	1.07		$	(0.29	)
Shares used in computing net (loss) income per share:
	Basic			125,000			118,358			118,135			118,223
	Diluted			125,000			119,050			118,458			118,223

The accompanying notes are an integral part of these consolidated financial statements.

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QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

			December 31,
			2003			2002
			Successor			Predecessor
			(In thousands,
			except share data)
Assets
Current assets:
	Cash and cash equivalents		$	375,163		$	644,284
	Trade accounts receivable and unbilled services, net			239,994			255,647
	Investments in debt securities			611			27,218
	Prepaid expenses			20,663			22,516
	Other current assets			56,775			42,654
		Total current assets		693,206			992,319
Property and equipment:
	Land, buildings and leasehold improvements			167,426			202,465
	Equipment			88,315			190,312
	Furniture and fixtures			20,435			44,094
	Motor vehicles			25,325			38,672
				301,501			475,543
	Less accumulated depreciation			(15,134	)		(213,385	)
				286,367			262,158
Intangibles and other assets:
	Investments in debt securities			10,426			9,453
	Investments in marketable equity securities			58,294			64,926
	Investments in non-marketable equity securities and loans			48,556			46,449
	Investments in unconsolidated affiliates			121,176			121,101
	Commercial rights and royalties			12,528			1,786
	Accounts receivable — unbilled			40,107			59,750
	Advances to customer			70,000			70,000
	Goodwill			181,327			70,133
	Other identifiable intangibles, net			414,246			142,715
	Deferred income taxes			4,093			174,534
	Deposits and other assets			52,385			38,871
				1,013,138			799,718
		Total assets	$	1,992,711		$	2,054,195

The accompanying notes are an integral part of these consolidated financial statements.

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QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS — (Continued)

				December 31,
				2003			2002
				Successor			Predecessor
Liabilities and Shareholders’ Equity
Current liabilities:
	Accounts payable			$	62,411		$	57,535
	Accrued expenses				255,348			180,734
	Unearned income				191,255			141,718
	Income taxes payable				26,875			20,067
	Current portion of obligations held under capital leases				15,103			18,372
	Current portion of long-term debt				5,583			3,347
	Other current liabilities				3,169			2,073
			Total current liabilities		559,744			423,846
Long-term liabilities:
	Obligations held under capital leases, less current portion				10,271			10,645
	Long-term debt, less current portion				763,357			8,210
	Deferred income taxes				99,622			405
	Other liabilities				24,619			12,703
					897,869			31,963
			Total liabilities		1,457,613			455,809
Commitments and contingencies
Shareholders’ equity:
	Preferred stock, none issued and outstanding at December 31, 2003 and 2002				—			—
	Common stock and additional paid-in capital, 125,000,000 and 117,850,597 shares issued and outstanding at December 31, 2003 and 2002, respectively				521,725			881,927
	(Accumulated deficit) retained earnings				(7,427	)		716,465
	Accumulated other comprehensive income (loss)				20,800			(6	)
		Total shareholders’ equity			535,098			1,598,386
			Total liabilities and shareholders’ equity	$	1,992,711		$	2,054,195

The accompanying notes are an integral part of these consolidated financial statements.

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QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

			September 26,			January 1,
			2003 through			2003 through			Year ended			Year ended
			December 31,			September 25,			December 31,			December 31,
			2003			2003			2002			2001
			Successor			Predecessor			Predecessor			Predecessor
			(In thousands)
Operating activities:
	Net (loss) income		$	(7,427	)	$	37,161		$	127,323		$	(33,843	)
	Extraordinary gain from sale of discontinued operation, net of tax						—			—			(142,030	)
	Cumulative effect on prior years (to December 31, 2001) of changing to a different method of recognizing deferred income taxes			—			—			(45,659	)		—
	(Loss) income from continuing operations			(7,427	)		37,161			81,664			(175,873	)
Adjustments to reconcile (loss) income from continuing operations to net cash provided by operating activities:
	Depreciation and amortization			38,117			65,871			89,824			96,103
	Amortization expense of debt issuance costs			878			—			—			—
	Restructuring (payments) accrual and write-off of other assets, net			(1,942	)		283			(21,158	)		42,975
	Transaction costs			—			44,057			—			—
	(Gain) loss on sale of property and equipment, net			—			(383	)		2,399			287
	Loss (gain) on investments, net			(2,952	)		(27,363	)		(13,710	)		304,942
	Provision for (benefit from) deferred income taxes			705			12,592			2,464			(64,360	)
	Change in operating assets and liabilities:
		Accounts receivable and unbilled services		14,696			116,322			63,827			(24,705	)
		Prepaid expenses and other assets		16,511			42,132			(5,639	)		6,935
		Accounts payable and accrued expenses		19,793			(16,144	)		12,966			19,263
		Unearned income		21,771			(85,360	)		26,048			16,203
		Income taxes payable and other liabilities		5,795			(18,778	)		7,807			25,139
	Other			(330	)		(521	)		—			447
Net cash provided by operating activities				105,615			169,869			246,492			247,356
Investing activities:
	Acquisition of property, equipment and software			(14,894	)		(39,682	)		(40,157	)		(133,983	)
	Repurchase of common stock in Transaction			(1,617,567	)		—			—			—
	Payment of transaction costs in Transaction			(64,734	)		(2,896	)		—			—
	Acquisition of businesses, net of cash acquired			(3,363	)		(1,379	)		(27,968	)		(6,620	)
	Acquisition of intangible assets			—			(4,519	)		(2,541	)		(26,735	)
	Advances to customer			—			—			(70,000	)		—
	Acquisition of commercial rights and royalties			(3,000	)		(17,710	)		(15,790	)		(10,000	)
	Proceeds from disposition of property and equipment			1,960			6,219			6,290			7,548
	Maturities of held-to-maturity investments			326			245			397			437
	Purchase of available-for-sale investments			(1,212	)		(1,353	)		(1,611	)		—
	Proceeds from sale of available-for-sale investments			—			26,375			—			71,422
	Purchase of equity securities			(5,900	)		(10,645	)		(6,616	)		(22,660	)
	Proceeds from sale of equity securities			7,633			61,926			26,853			134,379
	Purchase of other investments			(120	)		(185	)		(11,483	)		(30,247	)
	Proceeds from other investments			—			—			608			103
	Advances to unconsolidated affiliates			—			—			(10,328	)		—
Net cash (used in) provided by investing activities				(1,700,871	)		16,396			(152,346	)		(16,356	)

The accompanying notes are an integral part of these consolidated financial statements.

57

QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS — (Continued)

		September 26,			January 1,
		2003 through			2003 through			Year ended			Year ended
		December 31,			September 25,			December 31,			December 31,
		2003			2003			2002			2001
		Successor			Predecessor			Predecessor			Predecessor
		(In thousands)
Financing activities:
	Proceeds from issuance of debt, net of costs, in Transaction	$	733,433		$	—		$	—		$	—
	Capital contribution in Transaction		390,549			—			—			—
	(Decrease) increase in lines of credit, net		—			—			—			(44	)
	Repayment of debt		(2,568	)		(1,832	)		(2,487	)		(3,263	)
	Principal payments on capital lease obligations		(3,079	)		(11,387	)		(12,987	)		(10,618	)
	Issuance of common stock		—			7,042			9,641			48,439
	Repurchase of common stock		—			—			(27,024	)		(22,694	)
Net cash provided by (used in) financing activities			1,118,335			(6,177	)		(32,857	)		11,820
Effect of foreign currency exchange rate changes on cash			9,788			17,924			17,932			(7,971	)
(Decrease) increase in cash and cash equivalents			(467,133	)		198,012			79,221			234,849
Cash and cash equivalents at beginning of period			842,296			644,284			565,063			330,214
Cash and cash equivalents at end of period		$	375,163		$	842,296		$	644,284		$	565,063
Supplemental Cash Flow Information:
	Interest paid	$	7,689		$	1,785		$	2,633		$	2,724
	Income taxes paid (refunded), net		2,263			37,571			19,466			(56,243	)
Non-cash Investing and Financing Activities:
	Acquisition of property and equipment utilizing capital leases		2,568			3,144			9,903			14,578
	Equity impact of mergers, acquisitions and dispositions		—			—			—			(20,952	)
	Equity impact of rollovers in Transaction		107,062			—			—			—
	Transfer of assets to joint venture		—			—			112,136			—
	Unrealized gain (loss) on marketable securities, net of income tax	$	976		$	19,637		$	6,026		$	(124,182	)

The accompanying notes are an integral part of these consolidated financial statements.

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QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

												Accumulated
									(Accumulated			Other
			Number of						Deficit)			Comprehensive								Additional
			Common			Comprehensive			Retained			Income			Preferred		Common			Paid-In
			Shares			Income			Earnings			(Loss)			Stock		Stock			Capital			Total
			(In thousands, except share data)
Predecessor:
Balance, December 31, 2000				115,933,182					$	622,985		$	(94,686	)	$	—	$	1,158		$	875,249		$	1,404,706
Issuance of common stock				4,392,987						—			—			—		46			48,393			48,439
Repurchase of common stock				1,702,500						—			—			—		(14	)		(22,680	)		(22,694	)
Cancellation of stock warrants										—			—			—		—			(20,000	)		(20,000	)
Tax benefit from the exercise of non-qualified stock options										—			—			—		—			15,871			15,871
Other equity transactions										—			—			—		—			(948	)		(948	)
Comprehensive income:
		Net loss				$	(33,843	)		(33,843	)		—			—		—			—			(33,843	)
		Unrealized loss on marketable securities, net of tax					(124,182	)		—			(124,182	)		—		—			—			(124,182	)
		Reclassification adjustment, net of tax					206,151			—			206,151			—		—			—			206,151
		Foreign currency adjustments					(18,412	)		—			(18,412	)		—		—			—			(18,412	)
Comprehensive income for year ended December 31, 2001						$	29,714
Balance, December 31, 2001				118,623,669						589,142			(31,129	)		—		1,190			895,885			1,455,088
Issuance of common stock				796,928						—			—			—		9			9,610			9,619
Repurchase of common stock				1,570,000						—			—			—		(19	)		(27,005	)		(27,024	)
Tax benefit from the exercise of non-qualified stock options										—			—			—		—			857			857
Other										—			—			—		—			1,400			1,400
Comprehensive income:
		Net income				$	127,323			127,323			—			—		—			—			127,323
		Unrealized gain on marketable securities, net of tax					6,026			—			6,026			—		—			—			6,026
		Reclassification adjustment, net of tax					(17,097	)		—			(17,097	)		—		—			—			(17,097	)
		Foreign currency adjustments					42,194			—			42,194			—		—			—			42,194
Comprehensive income for year ended December 31, 2002						$	158,446
Balance, December 31, 2002				117,850,597						716,465			(6	)		—		1,180			880,747			1,598,386
Issuance of common stock				849,181						—			—			—		8			7,803			7,811
Tax benefit from the exercise of non-qualified stock options										—			—			—		—			1,092			1,092
Other				(73,266	)					—			—			—		(1	)		(346	)		(347	)
Comprehensive income:
	Net income					$	37,161			37,161			—			—		—			—			37,161
	Unrealized gain on marketable securities, net of tax						19,637			—			19,637			—		—			—			19,637
	Reclassification adjustment, net of tax						(11,103	)		—			(11,103	)		—		—			—			(11,103	)
	Minimum pension liability, net of tax						(3,098	)		—			(3,098	)		—		—			—			(3,098	)
	Foreign currency adjustments						25,178			—			25,178			—		—			—			25,178
Comprehensive income for the period from January 1, 2003 through September 25, 2003						$	67,775
Balance, September 25, 2003				118,626,512					$	753,626		$	30,608		$	—	$	1,187		$	889,296		$	1,674,717
Successor:
Balance, September 25, 2003									$	—		$	—		$	—	$	—		$	—		$	—
Issuance of common stock				125,000,000						—			—			—		1,250			520,475			521,725
Comprehensive income:
	Net loss					$	(7,427	)		(7,427	)		—			—		—			—			(7,427	)
	Unrealized gain on marketable securities, net of tax						1,968			—			1,968			—		—			—			1,968
	Unrealized loss on derivative instruments, net of tax						(992	)		—			(992	)		—		—			—			(992	)
	Foreign currency adjustments						19,824			—			19,824			—		—			—			19,824
Comprehensive income for the period from September 26, 2003 through December 31, 2003						$	13,373
Balance, December 31, 2003				125,000,000					$	(7,427	)	$	20,800		$	—	$	1,250		$	520,475		$	535,098

The accompanying notes are an integral part of these consolidated financial statements.

59

QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

1. Summary of Significant Accounting Policies

The Company

      Quintiles Transnational Corp. (the “Company”) helps improve healthcare worldwide by providing a broad range of professional services, information and partnering solutions to the pharmaceutical, biotechnology and healthcare industries.

Principles of Consolidation

      The accompanying consolidated financial statements include the accounts and operations of the Company and its subsidiaries. All material intercompany accounts and transactions have been eliminated in consolidation.

Basis of Presentation

      On September 25, 2003, the Company completed its merger transaction with Pharma Services Holding, Inc. (“Pharma Services”) pursuant to which Pharma Services Acquisition Corp. (“Acquisition Corp.”) was merged with and into the Company, with the Company continuing as the surviving corporation and an indirect wholly owned subsidiary of Pharma Services (the “Transaction”) as further described in Note 3. As a result of the Transaction, the Company’s results of operations, financial position and cash flows prior to the date of the Transaction are presented as the “Predecessor.” The financial effects of the Transaction and the Company’s results of operations, financial position and cash flows as the surviving corporation following the Transaction are presented as the “Successor.” To clarify and emphasize that the Successor Company has been presented on an entirely new basis of accounting, the Company has separated Predecessor and Successor operations with a vertical black line, where appropriate.

      The Transaction has been accounted for as a purchase of the Company by Pharma Services with the related purchase accounting pushed-down to the Company’s separate financial statements.

Use of Estimates

      The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Foreign Currencies

      Assets and liabilities recorded in foreign currencies on the books of foreign subsidiaries are translated at the exchange rate on the balance sheet date. Revenues, costs and expenses are recorded at average rates of exchange during the year. Translation adjustments resulting from this process are charged or credited to equity. Gains (losses) on foreign currency transactions of approximately $2.2 million, $4.2 million, $5.2 million and ($362,000) are included in other (income) expense for the periods from September 26, 2003 through December 31, 2003, January 1, 2003 through September 25, 2003 and the years ended December 31, 2002 and 2001, respectively.

Foreign Currency Hedging

      The Company may use foreign exchange contracts and options to hedge the risk of changes in foreign currency exchange rates associated with contracts in which the expenses for providing services are incurred in one currency and paid for by the customer in another currency. There were no open foreign exchange contracts or options relating to service contracts at December 31, 2003 or 2002.

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QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

Cash Equivalents and Investments

      The Company considers all highly liquid investments with an initial maturity of three months or less when purchased to be cash equivalents. The Company does not report in the accompanying balance sheets cash held for customers for investigator payments in the amount of $658,000 and $712,000 at December 31, 2003 and 2002, respectively, that pursuant to agreements with these customers, remains the property of the customers.

      The Company’s investments in debt securities are classified as either held-to-maturity or available-for-sale. Investments classified as held-to-maturity are recorded at amortized cost. Investments classified as available-for-sale are measured at market value and net unrealized gains and losses are recorded as a component of shareholders’ equity until realized. Any gains or losses on sales of debt investments are computed by specific identification.

      Investments in marketable equity securities are classified as available-for-sale and measured at market value with net unrealized gains and losses recorded as a component of shareholders’ equity until realized. The market value is based on the closing price as quoted by the respective stock exchange or Nasdaq. In addition, the Company has investments in equity securities of and advances to companies for which there are not readily available market values and for which the Company does not exercise significant influence or control; such investments are accounted for using the cost method. Any gains or losses from the sales of investments or an other than temporary decline in fair value are computed by specific identification.

Derivatives

      From time to time the Company may use derivative instruments to manage exposures to equity prices and interest rates. The Company also holds freestanding warrants and other embedded derivatives (conversion options in financing arrangements). Derivatives meeting the criteria established by SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended by SFAS No. 138, are recorded in the balance sheet at fair value at each balance sheet date utilizing pricing models for non-exchange traded contracts. When the derivative instrument is entered into, the Company designates whether or not the derivative instrument is an effective hedge of an asset, liability or firm commitment which is then classified as either a cash flow hedge or a fair value hedge. If determined to be an effective cash flow hedge, changes in the fair value of the derivative instrument are recorded as a component of accumulated other comprehensive income (loss) until realized. Changes in fair value of effective fair value hedges are recorded in earnings as an offset to the changes in the fair value of the related hedge item. Changes in the fair values of derivative instruments that are not an effective hedge are recognized in earnings. The Company has, and may in the future, enter into derivative contracts (calls or puts, for example) related to its investments in marketable equity securities. While these contracts may not qualify for hedge accounting, the Company utilizes these transactions to mitigate its economic exposure to market price fluctuations.

Billed and Unbilled Services

      In general, prerequisites for billings and payments are established by contractual provisions including predetermined payment schedules, submission of appropriate billing detail or the achievement of contract milestones, depending on the type of contract. Unbilled services arise when services have been rendered but customers have not been billed.

Long-Lived Assets

      Property and equipment owned as of September 25, 2003 are carried at its estimated fair value determined as part of the Transaction and property and equipment acquired subsequent to the Transaction

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QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

are carried at historical cost. Property and equipment are depreciated using the straight-line method over the shorter of the asset’s estimated useful life or the lease term as follows:

Buildings and leasehold improvements	3 - 50 years
Equipment	3 - 10 years
Furniture and fixtures	5 - 10 years
Motor vehicles	3 - 5 years

      Prior to 2002, the excess cost over the fair value of net assets acquired (“goodwill”) had been amortized on a straight-line basis over periods from five to 40 years. Effective January 1, 2002, the Company adopted SFAS No. 142 and no longer amortizes goodwill or other indefinite-lived intangible assets but reviews these assets at least annually for impairment.

      Identifiable intangible assets with finite lives are amortized over their estimated remaining useful lives as follows:

Trademarks and trade names	30 years
Product licensing and distribution rights	4 - 11 years
Contract backlog and customer relationships	3 - 9 years
Software and related	3 - 5 years
Covenants not-to-compete	1 - 2 years

      Indefinite lived identifiable intangible assets consist of certain trademarks and trade names that are not amortized but tested for impairment annually, or more frequently if events or changes in circumstances indicate an impairment.

      The carrying values of property, equipment and intangible assets are reviewed if the facts and circumstances suggest that a potential impairment may have occurred. If this review indicates that carrying values will not be recoverable, as determined based on undiscounted cash flows over the remaining depreciation and amortization period, the Company will reduce carrying values to estimated fair value.

Revenue Recognition

      Many of the Company’s contracts for services are fixed price, with some variable components, and range in duration from a few months to several years. The Company is also party to fee-for-service and unit-of-service contracts. The Company recognizes revenue primarily based upon (1) the ratio of outputs or performance obligations completed to the total contractual outputs or performance obligations to be provided for fixed-fee contracts, (2) contractual per diem or hourly rate basis as work is performed under fee-for-service contracts or (3) completion of units of service for unit-of-service contracts. The Company does not recognize revenue with respect to start-up activities associated with contracts, which include contract and scope negotiation, feasibility analysis and conflict of interest review. The costs for these activities are expensed as incurred.

      The Company’s contracts for clinical research services provide for price renegotiation upon scope of work changes. The Company recognizes revenue related to these scope changes when the underlying services are performed according to a binding commitment. Most contracts may be terminated upon 15 — 90 days’ notice by the customer. In the event of termination, contracts typically require payment for services rendered through the date of termination, as well as for subsequent services rendered to close out the contract. Any anticipated losses resulting from contract performance are charged to earnings in the period identified.

      In certain of the Company’s commercialization contracts, the Company provides services (i.e., a certain number of sales representatives to detail the customer’s product(s) for a given period) in exchange

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QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

for a combination of fixed and variable payments. Each of these agreements is a service agreement that represents a single unit of accounting under EITF Issue No. 00-21, “Revenue Arrangements with Multiple Deliverables.” Fixed payments include guaranteed minimum payments and fee-for-service arrangements. The Company recognizes revenue on the fixed payments when the services are provided and the amounts become fixed and determinable. Variable payments are based on a percentage of product sales. The Company refers to the variable payments as royalty payments. The Company recognizes revenue on the royalty payments when the variable components become fixed and determinable, which only occurs upon the sale of the underlying product(s). All of the consideration the Company receives for providing services, whether via a guaranteed minimum payment, fee-for-service payment, or a variable royalty, is earned and recognized as revenue only after the services are provided to the customer.

      Certain of the Company’s agreements provide for guaranteed minimum payments to the Company. The Company determines the amount of service revenues to be recognized under these agreements by calculating the present value of the fixed and determinable cash flows over the term of the agreement. Accretion of the resulting discount is imputed on the related asset and recorded as interest income over the contract term. The present value of the fixed and determinable cash flows is recognized as revenue in proportion to the services performed based on a measurement of outputs. The Company recognizes revenues in excess of the guaranteed minimum when the amounts become fixed and determinable but only after the related services have been provided. The amounts related to the variable components become fixed and determinable only when the actual sales of the related product(s) have occurred and exceed the guaranteed minimum.

      As the Company records the revenues it earns under such arrangements, it also records a commercial rights and royalties related asset in the accompanying balance sheet. Cash received by the Company from its customers reduces this asset balance.

      The Company treats cash payments to customers under the agreements as incentives to induce the customers to enter into such a service agreement with the Company pursuant to EITF Issue No. 01-09, “Accounting for Consideration Given by a Vendor to a Customer.” These payments are recorded as a commercial rights and royalties related asset in the accompanying balance sheet as long as the Company’s estimated future economic benefits from those customer contracts are expected to exceed the amount of the payments. The related asset is amortized, in proportion to the services performed based on a measurement of outputs, as a reduction of revenue over the service period.

      The Company reviews the carrying value of the commercial rights and royalties related asset at each balance sheet date to determine whether or not there has been an impairment. If this review indicates that the carrying value is not recoverable, based on undiscounted cash flows over the remaining contract period, the Company will reduce the carrying value to the resulting estimated fair value. In the event of contract termination by the customer, in each of the Company’s contracts, all amounts paid and/or recorded as a commercial rights and royalties related asset would be legally recoverable by the Company in accordance with the terms of the contract. In the event of termination initiated by the Company, the amounts generally would not be contractually recoverable.

      Product revenues are recognized upon shipment when title passes to the customer, net of allowances for estimated returns, rebates and discounts. The Company is obligated to accept from customers the return of products that are nearing or have reached their expiration date. The Company monitors product ordering cycles, actual returns and analyzes wholesale inventory levels to estimate potential product return rates. When the Company lacks a sufficient historical basis to estimate return rates, the Company recognizes revenues and the related cost of revenues when end-user prescription data is received from third-party data providers.

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QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

      The Company, through its PharmaBio Development group, has entered into financial arrangements with various customers and other parties in which the Company provides funding in the form of an equity investment in marketable securities, non-marketable securities or loans. Gains and losses from the sale of equity securities and impairments from other than temporary declines in the fair values of these strategic investments are included in the Company’s gross revenues.

Concentration of Credit Risk

      Substantially all revenue for the product development and commercial services groups are earned by performing services under contracts with various pharmaceutical, biotechnology, medical device and healthcare companies. The concentration of credit risk is equal to the outstanding accounts receivable and unbilled services balances, less the unearned income related thereto, and such risk is subject to the financial and industry conditions of the Company’s customers. The Company does not require collateral or other securities to support customer receivables. Credit losses have been immaterial and reasonably within management’s expectations. While no customer accounted for more than 10% of consolidated net service revenue for any 2003 period presented herein, one customer accounted for approximately 11.3% and 10.8% of consolidated net service revenue in 2002 and 2001, respectively. These revenues were derived from the Company’s product development, commercial services and informatics segments.

Research and Development Costs

      Research and development costs relating principally to new software applications and computer technology are charged to expense as incurred. These expenses totaled $201,000 and $1.2 million for the periods from September 26, 2003 through December 31, 2003 and January 1, 2003 through September 25, 2003, respectively, and $2.1 million and $18.1 million in 2002 and 2001, respectively.

      Although the Company has not entered into agreements to fund the development of a customer’s research and development activity, if the Company were to enter into such an arrangement, the Company would expense the amounts funded by the Company as research and development costs as incurred.

Income Taxes

      Income tax expense includes U.S., state and international income taxes. Certain items of income and expense are not reported in income tax returns and financial statements in the same year. The income tax effects of these differences are reported as deferred income taxes. Income tax credits are accounted for as a reduction of income tax expense in the year in which the credits reduce income taxes payable. Valuation allowances are provided to reduce the related deferred income tax assets to an amount which will, more likely than not, be realized.

Net (Loss) Income Per Share

      The Company determines basic net (loss) income per share by dividing net (loss) income by the weighted average number of common shares outstanding during each year. Diluted net (loss) income per share reflects the assumed conversion or exercise of all convertible securities and issued and unexercised stock options, unless the effects would be anti-dilutive to results from continuing operations. A reconciliation of the number of shares used in computing basic and diluted net (loss) income per share is in Note 23.

Employee Stock Compensation

      The Company has elected to follow Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB 25”) and related interpretations in accounting for its employee stock

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QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

options because the alternative fair value accounting provided for under SFAS No. 123, “Accounting for Stock-Based Compensation”, as amended by SFAS No. 148, requires use of option valuation models that were not developed for use in valuing employee stock options. Under APB 25, because the exercise price of the employee stock options equals or exceeds the market price of the underlying stock on the date of grant, no compensation expense is recognized.

      Pharma Services issued options to purchase 3,350,000 shares of its common stock to certain of the Company’s employees during the fourth quarter of 2003. As of December 31, 2003, there are options to acquire 3,350,000 shares of Pharma Services outstanding. There were no outstanding stock options to acquire the Company’s common stock as of December 31, 2003. In addition, the Company suspended its employee stock purchase plan effective April 2003, due to the Transaction.

      Pro forma information regarding net (loss) income and net (loss) income per share is required by SFAS No. 123, as amended by SFAS No. 148, and has been determined as if the Company had accounted for the stock options granted by its parent company, Pharma Services, to the Company’s employees under the fair value method of SFAS No. 123. The per share weighted-average fair value of stock options granted during the period from September 26, 2003 through December 31, 2003 was $0.0025 per share on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions:

	September 26,
	2003 through
	December 31,
	2003
Expected dividend yield		0	%
Risk-free interest rate		3.1	%
Expected volatility		65.0	%
Expected life (in years from end of vesting term)		1.70

      The Black-Scholes option pricing model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are freely transferable. All available option pricing models require the input of highly subjective assumptions including the expected stock price volatility. Because the stock options of Pharma Services granted to the Company’s employees have characteristics significantly different from those of traded options and changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion, the existing models do not provide a reliable single measure of the fair value of the stock options.

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QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

      The Company’s pro forma information follows (in thousands, except for net (loss) income per share information):

		September
		26, 2003			January 1,
		through			2003 through			Year ended			Year ended
		December 31,			September			December			December
		2003			25, 2003			31, 2002			31, 2001
Net (loss) income, as reported		$	(7,427	)	$	37,161		$	127,323		$	(33,843	)
Add: stock based compensation expense included in net (loss) income as reported, net of income tax			—			7,262			—			—
Less: pro forma adjustment for stock-based compensation, net of income tax			—			(18,435	)		(15,957	)		(25,556	)
Pro forma net (loss) income		$	(7,427	)	$	25,988		$	111,366		$	(59,399	)
Basic net (loss) income per share:
	As reported	$	(0.06	)	$	0.31		$	1.08		$	(0.29	)
	Pro forma		(0.06	)		0.22			0.94			(0.50	)
	Effect of pro forma adjustment	$	0.00		$	(0.09	)	$	(0.14	)	$	(0.22	)
Diluted net (loss) income per share:
	As reported	$	(0.06	)	$	0.31		$	1.07		$	(0.29	)
	Pro forma		(0.06	)		0.22			0.94			(0.50	)
	Effect of pro forma adjustment	$	0.00		$	(0.09	)	$	(0.13	)	$	(0.22	)

Comprehensive Income

      The Company includes foreign currency translation adjustments and unrealized gains and losses on the available-for-sale securities in other comprehensive income. Accumulated other comprehensive income at December 31, 2003 was $20.8 million which consisted of $19.8 million in foreign currency translation adjustments and $976,000 in unrealized gains on available-for-sale securities. During the period from January 1, 2003 through September 25, 2003 and the year ended December 31, 2002, the Company reclassified ($11.1) million and ($17.1) million, respectively, of net holding (gains) losses to revenues as the related securities were sold or deemed to be impaired. No such reclassifications were made in the period from September 26, 2003 through December 31, 2003.

Recently Adopted Accounting Standards

      In January 2003, the Financial Accounting Standards Board issued Interpretation No. 46 (“FIN 46”), “Consolidation of Variable Interest Entities”, which requires the assets, liabilities and results of operations of variable interest entities (“VIE”) be consolidated into the financial statements of the company that has controlling financial interest. FIN 46 also provides the framework for determining whether a VIE should be consolidated based on voting interest or significant financial support provided to the VIE. The Company adopted these provisions, as required, with respect to VIEs created after January 31, 2003. The effective date for applying the provisions of FIN 46 for interests held by public entities in VIEs or potential VIEs created before February 1, 2003 has been deferred and will be effective as of March 31, 2004 except for special purpose entities in which FIN 46 must be applied as of December 31, 2003. The Company does not have an interest in any special purpose entities. The Company is currently evaluating the impact of FIN 46 on any such VIEs held prior to February 1, 2003.

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QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

2. Revisions to Prior Financial Statements

      Certain amounts in the 2001 financial statements have been reclassified to conform with the 2002 and 2003 financial statement presentation. These reclassifications had no effect on previously reported net income (loss), shareholders’ equity or net income (loss) per share.

      The Company adopted EITF Issue 01-14 (“EITF 01-14”), “Income Statement Characterization of Reimbursements Received for “Out-of-Pocket’ Expenses Incurred,” which required companies to report reimbursed costs as part of gross revenues. As such, the Company reclassified reimbursed service costs for 2002 and, to the extent determinable, for 2001. These reimbursed service costs totaled $399.7 million and $263.4 million in 2002 and 2001, respectively. However, it was impracticable to identify and reclassify certain prior period commercialization reimbursed service costs and, accordingly, historical results have not been restated for these costs. These commercialization reimbursed service costs totaled approximately $60.4 million for the year ended December 31, 2002.

3. Pharma Services and Financing Transactions

      Pursuant to a merger agreement dated as of April 10, 2003, as amended on August 18, 2003, by and among the Company, Acquisition Corp. and one of its parent companies, Pharma Services, Acquisition Corp. was merged with and into the Company on September 25, 2003, with the Company continuing as the surviving corporation and an indirect wholly owned subsidiary of Pharma Services. Pharma Services was formed for purposes of the Transaction by Dr. Gillings, the Company’s Executive Chairman, Chief Executive Officer and founder, and One Equity Partners LLC (“One Equity”), the private equity unit of Bank One Corporation. Dr. Gillings and certain of his affiliates as well as other selected shareholders, including one Predecessor Company director (in addition to Dr. Gillings) and certain members of senior management (including certain executive officers), exchanged all or a portion of their equity interests in the Company for equity securities of Pharma Services. Pharma Services paid $14.50 in cash for each outstanding share of the Company’s Common Stock, except for shares held by Pharma Services and Acquisition Corp. In addition, Pharma Services paid the excess, if any, of $14.50 over the per share exercise price of each option outstanding at the effective time of the Transaction to purchase the Company’s Common Stock granted under any of the Company’s option plans, other than options held by Dr. Gillings and any other person who exchanged Company options for equity securities of Pharma Services. No merger consideration was paid for shares and/or options to purchase shares that were exchanged for equity securities of Pharma Services.

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Notes to Consolidated Financial Statements — (Continued)

      The purchase price including transaction costs was approximately $1.88 billion. The sources and uses of funds in connection with the acquisition are summarized below (in thousands):

Sources:
Proceeds Senior Term Loan		$	310,000
Proceeds from 10% Senior Subordinated Notes due 2013			450,000
Proceeds from equity investors			424,406
Exchange of equity			107,062
Available cash			592,009
	Total sources	$	1,883,477
Uses:
Purchase price		$	1,736,211
Repayment of certain debt			912
Fees and expenses			146,354
	Total uses	$	1,883,477

      The Company has prepared an allocation of the purchase price to the assets acquired and liabilities assumed based upon their respective fair values as determined by an independent third-party valuation firm as of the date of the acquisition. The allocation of the purchase price to the fair value of net assets acquired is summarized below (in thousands):

Acquired tangible net assets		$	1,121,945
Acquired intangible assets — commercial rights and royalties, licenses and customer relationships			207,829
Acquired intangible assets — trademarks, trade names and other			164,720
Acquired intangible assets — software and related			65,859
Goodwill			175,858
	Total allocation of purchase price	$	1,736,211

      In accordance with Emerging Issues Task Force (“EITF”) Issue No. 88-16, “Basis in Leveraged Buyout Transactions,” Dr. Gillings’ continuing residual interest has been reflected at its original cost, adjusted for his share of the Company’s earnings, losses and equity adjustments since the date of original acquisition (“predecessor basis”). In accordance with EITF Issue No. 90-12, “Allocating Basis to Individual Assets and Liabilities within the Scope of Issue 88-16,” only a partial step-up of assets and liabilities to fair value has been recorded in purchase accounting. The partial step-up has resulted in the Company’s assets and liabilities being adjusted by approximately 93.74% of the difference between their fair value at the date of acquisition and their historical carrying cost.

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Notes to Consolidated Financial Statements — (Continued)

      The following table presents the unaudited pro forma results as if the Transaction and related financing had occurred at the beginning of each of the periods presented (in thousands):

	September 26,			January 1,
	2003 through			2003 through			Year ended
	December 31,			September 25,			December 31,
	2003			2003			2002
Gross revenues	$	547,165		$	1,498,822		$	1,992,409
Loss from continuing operations		(7,427	)		(19,840	)		(10,443	)
Net (loss) income	$	(7,427	)	$	(19,840	)	$	(10,443	)
Basic net (loss) income per share	$	(0.06	)	$	(0.17	)	$	(0.09	)
Diluted net (loss) income per share	$	(0.06	)	$	(0.17	)	$	(0.09	)

      The unaudited pro forma results have been prepared for comparative purposes only and do not purport to be indicative of the results that would have actually been attained if the Transaction and related financing had occurred at the beginning of the periods presented.

      Pharma Services entered into agreements with GF Management Company, Inc., or GFM, and certain of the other equity investors of Pharma Services, including One Equity, pursuant to which Pharma Services paid GFM, a company controlled by Dr. Gillings, the Company’s Executive Chairman, Chief Executive Officer and founder, and One Equity a one-time transaction fee of $5.0 million and $15.0 million, respectively, at the effective time of the Transaction. In addition, Pharma Services agreed to have the Company pay an annual management service fee of approximately $3.75 million to the Pharma Services investor group, of which GFM, TPG Advisors III, Inc. (“TPG”) and Cassia Fund Management Pte Ltd., an affiliate of Temasek Holdings (“Temasek”) each receive approximately $750,000 and One Equity receives approximately $1.5 million until 2008. For the period from September 26, 2003 through December 31, 2003, the Company expensed $938,000 in management fees.

      Pharma Services was also responsible for the fees and expenses of Dr. Gillings, One Equity, Temasek and TPG, and each of their respective affiliates and advisors, related to the Transaction. Pharma Services paid $17.1 million to Dr. Gillings pursuant to this arrangement.

4. Accounts Receivable and Unbilled Services

      Accounts receivable and unbilled services consist of the following (in thousands):

		December 31,
		2003			2002
		Successor			Predecessor
Trade:
	Billed	$	142,890		$	142,407
	Unbilled services		103,216			118,501
			246,106			260,908
Allowance for doubtful accounts			(6,112	)		(5,261	)
		$	239,994		$	255,647

      Substantially all of the Company’s trade accounts receivable and unbilled services are due from companies in the pharmaceutical, biotechnology, medical device and healthcare industries and are a result of contract research, sales, marketing, healthcare consulting and health information management services

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Notes to Consolidated Financial Statements — (Continued)

provided by the Company on a global basis. The percentage of accounts receivable and unbilled services by region is as follows:

					December 31,
Region					2003			2002
					Successor			Predecessor
Americas:
	United States					35	%		40	%
	Other					4			2
				Americas		39			42
Europe and Africa:
		United Kingdom				28			35
			Other			24			15
				Europe and Africa		52			50
Asia — Pacific:
		Japan				8			6
		Other				1			2
				Asia-Pacific		9			8
						100	%		100	%

5. Commercial Rights and Royalties

      Commercial rights and royalties related assets are classified either as a commercial rights and royalties, accounts receivable — unbilled or advances to customers in the non-current asset section of the accompanying balance sheets. Below is a summary of the commercial rights and royalties related assets (in thousands):

	December 31,		December 31,
	2003		2002
	Successor		Predecessor
Commercial rights and royalties	$	12,528	$	1,786
Accounts receivable-unbilled		40,107		59,750
Advances to customer		70,000		70,000
Total	$	122,635	$	131,536

      Below is a brief description of these agreements:

      In May 1999, the Company entered into an agreement with CV Therapeutics, Inc. (“CVTX”) to commercialize Ranexa^TM for angina in the United States and Canada. Under the terms of the May 1999 agreement, the Company purchased 1,043,705 shares of CVTX’s common stock for $5 million; the Company owned no shares of CVTX as of December 31, 2003. The May 1999 agreement also made available a $10 million credit line for pre-launch sales and marketing activities. The May 1999 agreement further provided that if Ranexa^TM, which has been submitted to the United States Food and Drug Administration (“FDA”) under a New Drug Application (“NDA”) for review, were approved, the Company would provide a $10 million milestone payment to CVTX which will be used to pay off any outstanding balances on the credit line. The May 1999 agreement also required the Company to make available an additional line of credit to help fund a portion of the first year sales and marketing expenses. Under the May 1999 agreement, the Company committed to provide a minimum of approximately

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Notes to Consolidated Financial Statements — (Continued)

$14.4 million per year of commercialization services and to fund a minimum of $7.8 million per year of marketing activities, for a period of five years. In return the Company was to receive payment for services rendered by the Company in year one and royalties based on the net sales of Ranexa^TM in years two through five subject to a cap not to exceed 300% of funding by the Company in any year or over the life of the contract. In addition, the Company was also to receive royalties in years six and seven. As of December 31, 2003, the Company had not made any payments to CVTX under the May 1999 agreement in connection with the line of credit or milestone arrangement and had not funded commercialization and marketing activities nor had the Company received any royalties from CVTX. In July 2003, CVTX and the Company entered into a new agreement that superceded the prior agreement. Under the terms of the July 2003 agreement, all rights to Ranexa^TM reverted back to CVTX, and CVTX will owe no royalty payments to the Company. Under the July 2003 agreement, the Company received a warrant to purchase 200,000 shares of CVTX common stock at $32.93 per share during the five-year term commencing July 9, 2003. The Company recorded a gain of approximately $700,000 in connection with the receipt of the warrant. CVTX also is obligated to purchase from the Company, within six months of the approval of Ranexa^TM, services of at least $10 million in aggregate value or to pay the Company a lump sum amount equal to 10% of any shortfall from $10 million in purchased services.

      In December 1999, the Company obtained the distribution rights to market four pharmaceutical products in the Philippines from a large pharmaceutical customer in exchange for providing certain commercialization services amounting to approximately $5.1 million during the two-year period ended December 31, 2001. As of December 31, 2003, the Company has capitalized 251.8 million Philippine pesos (approximately $4.6 million) related to the cost of acquiring these commercial rights, and is amortizing these costs over five years. Under the terms of the agreement, the customer has the option to reacquire the rights to the four products from the Company after seven years for a price to be determined at the exercise date.

      In January 2001, the Company entered into an agreement with Scios Inc. (“SCIO”) to market Natrecor® for acute congestive heart failure in the United States and Canada. Under the terms of the agreement, the Company agreed to provide $30 million in funding over a two and one-half year period for sales and marketing activities following product launch. As of December 31, 2003, the Company had paid $30.0 million. The payments are reported in the accompanying statement of cash flows as an investing activity — acquisition of commercial rights and royalties. In addition to receiving payments on a fee for service basis for providing commercialization services, the Company was to receive royalties based on net sales of the product from 2002 through 2008. The royalty payments were subject to minimum and maximum amounts of $50 million and $65 million, respectively, over the life of the agreement. Through December 31, 2003, the Company received payments totaling approximately $63.6 million, of which approximately $62.7 million was received during 2003. The proceeds are reported in the accompanying statement of cash flows as an operating activity — change in operating assets and liabilities. Initially, the Company also received a warrant to purchase 700,000 shares of SCIO’s common stock at $20 per share, exercisable in installments over two and one-half years. During December 2002, the Company agreed to permit SCIO to hire the sales force the Company had previously provided under the contract effective December 31, 2002 in return for (a) SCIO reimbursing the Company for the operating profit that the Company would have earned between that date and May 31, 2003, the date on which SCIO would be permitted to hire the sales force under the contract, and (b) advancing from May 31, 2003 to December 31, 2002 the Company’s ability to exercise the remaining unexercisable warrant. The early settlement of the Company’s service obligation resulted in accelerating the recognition of revenues of approximately $9.3 million in the fourth quarter of 2002. The early settlement of the Company’s service obligation did not affect the continuing royalty obligation of SCIO. On April 29, 2003, Johnson & Johnson consummated its acquisition of SCIO and the Company received $17.5 million for the warrant that the Company owned (see “Derivatives”). In August 2003, SCIO made a final payment to the Company in the

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Notes to Consolidated Financial Statements — (Continued)

amount of $46.1 million under an agreement reached to terminate the SCIO agreement, including the payment and royalty obligations. This final payment reduced the SCIO commercial rights and royalties balance to zero as of December 31, 2003. Total royalty payments received were $63.6 million. The Company reported income of approximately $15.9 million in 2003, related to the $46.1 million received in settlement of the royalty obligation of SCIO.

      In June 2001, the Company entered into an agreement with Pilot Therapeutics, Inc. (“PLTT”) to commercialize a natural therapy for asthma, AIROZIN^TM, in the United States and Canada. Under the terms of the agreement, the Company will provide commercialization services for AIROZIN^TM and a milestone-based $6 million line of credit which is convertible into PLTT’s common stock, of which $4 million was funded by the Company as of December 31, 2003. Further, based on achieving certain milestones, the Company has committed to funding 50% of sales and marketing activities for AIROZIN^TM over five years with a $6 million limit per year. Following product launch, the Company will receive royalties based on the net sales of AIROZIN^TM. The royalty percentage will vary to allow the Company to achieve a minimum rate of return. The Form 10-QSB filed by PLTT on September 5, 2003 indicated that PLTT will need significant additional financing to continue operations beyond September 15, 2003. As such, the Company has recorded an impairment of $4 million on the loan receivable from PLTT and has reduced its five-year contingent commitment for the sales force and marketing activities to zero at December 31, 2003.

      In December 2001, the Company entered into an agreement with Discovery Laboratories, Inc. (“DSCO”) to commercialize, in the United States, DSCO’s humanized lung surfactant, Surfaxin®, which is currently in Phase III studies. Under the terms of the agreement, the Company acquired 791,905 shares of DSCO’s common stock and a warrant to purchase 357,143 shares of DSCO’s common stock at $3.48 per share for a total of $3 million, and has agreed to make available a line of credit up to $10 million for pre-launch commercialization services as certain milestones are achieved by DSCO. As of December 31, 2003, the Company has made $5.7 million available under the line of credit, of which $2.4 million has been funded. In addition, the Company receives warrants to purchase approximately 38,000 shares of DSCO common stock at an exercise price of $3.03 per share for each million dollars made available by the Company under the line of credit as milestones are achieved. The Company has also agreed to pay the sales and marketing activities of this product up to $10 million per year for seven years. In return, the Company will receive commissions based on net sales of Surfaxin® for meconium aspiration syndrome, infant respiratory distress syndrome and all “off-label” uses for 10 years. The subscription agreements under which the Company acquired its shares of DSCO common stock included participation rights to acquire additional shares of DSCO. The Company exercised its participation rights in two such transactions with DSCO. During November 2002, the Company purchased an additional 266,246 shares of DSCO common stock along with a detachable warrant to purchase 119,811 shares of DSCO common stock for $517,000. Using the cashless exercise feature, the Company exercised the November 2002 warrant and received 83,357 shares of DSCO common stock. During July 2003, the Company purchased an additional 218,059 shares of DSCO common stock along with a detachable warrant to purchase 43,612 shares of DSCO common stock for $1.2 million.

      In December 2001, the Company acquired the license to market SkyePharma’s Solaraze^TM skin treatment in the United States, Canada and Mexico for 14 years from Bioglan Pharma Plc for a total consideration of $26.7 million. The Company amortizes the rights in proportion to the revenues earned over the 14 year life of the license. The Company has a commitment to pay royalties to SkyePharma based on a percentage of net sales of Solaraze^TM. Pursuant to the license, the Company may pursue additional indications for the compound, which will be facilitated through the Company’s ownership rights in the Solaraze^TM NDA and Investigational New Drug.

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Notes to Consolidated Financial Statements — (Continued)

      In January 2002, the Company entered into an agreement with Kos Pharmaceuticals, Inc. (“KOSP”) to commercialize, in the United States, KOSP’s treatments for cholesterol disorders, Advicor® and Niaspan®. Advicor® was launched in January 2002 and Niaspan® is also on the market. Under the terms of the agreement, the Company will provide, at its own expense, a dedicated sales force of 150 cardiovascular-trained representatives who, in combination with KOSP’s sales force of 300 representatives, commercialized Advicor® and Niaspan® for the first two years after launch (January 2002 to December 2003). In return, the Company received a warrant to purchase 150,000 shares of KOSP’s common stock at $32.79 per share, exercisable in installments over two years. Further, the Company will receive commissions based on net sales of the product from 2002 through 2006. The commission payments are subject to minimum and maximum amounts, as amended June 30, 2003, of $50 million and $65 million, respectively, over the life of the agreement. Through December 31, 2003, the Company has received payments totaling approximately $9.2 million. The proceeds are reported in the accompanying statement of cash flows as an operating activity — change in operating assets and liabilities.

      In March 2002, the Company acquired certain assets of Bioglan Pharma, Inc. for a total consideration of approximately $27.9 million. The assets included distribution rights to market ADOXA^TM in the United States for nine years along with other products and product rights that Bioglan Pharma, Inc., had previously marketed, as well as approximately $1.6 million in cash. Under the purchase method of accounting, the results of operations of Bioglan Pharma, Inc. are included in the Company’s results of operations as of March 22, 2002 and the assets and liabilities of Bioglan Pharma, Inc. were recorded at their respective fair values. The acquisition did not have a material impact on the financial position or results of operations for the Company. The acquisition resulted in total intangible assets of $29.3 million. The Company amortizes the intangible assets in proportion to the estimated revenues over the lives of these products. Under certain of the contracts acquired, the Company has commitments to pay royalties based on a percentage of net sales of the acquired product rights.

      During the second quarter of 2002, the Company finalized the arrangements under its previously announced letter of intent with a large pharmaceutical customer to market pharmaceutical products in Belgium, Germany and Italy. Either party may cancel the contract at six-month intervals in the event that sales are not above certain levels specified. In the first quarter of 2003 and the third quarter of 2003, the agreements in Germany and Belgium, respectively, were terminated. For the remaining portion of the contract in Italy, the Company will provide, at its own expense, sales and marketing resources over the five-year life of the agreement. As of December 31, 2003, the Company estimates the cost of its minimum obligation over the remaining contract life for the remaining territory of Italy to be approximately $15 million, in return for which the customer will pay the Company royalties on product sales in excess of certain baselines. The total royalty is comprised of a minimal royalty on the baseline sales targets for these products plus a share of incremental net sales above these baselines.

      In July 2002, the Company entered into an agreement with Eli Lilly and Company (“LLY”) to support LLY in its commercialization efforts for Cymbalta^TM in the United States. LLY has submitted a NDA for Cymbalta^TM, which is currently under review by the FDA for the treatment of depression. Under the terms of the agreement, the Company will provide, at its expense, more than 500 sales representatives to supplement the extensive LLY sales force in the promotion of Cymbalta^TM for the five years following product launch. The sales force will promote Cymbalta^TM in its primary, or P1, position within sales calls. During the first three years LLY will pay for the remainder of the capacity of this sales force, referred to as the P2 and P3 positions, on a fee-for-service basis. The Company will make marketing and milestone payments to LLY totaling $110 million of which $70 million was paid in 2002 and the remaining $40 million is due throughout the four quarters following FDA approval. The $70 million in payments made by the Company is on an at-risk basis, and is not refundable in the event the FDA does not grant final approval for Cymbalta^TM. However, if any such non-approval occurs solely as a result of regulatory issues the FDA cites with respect to LLY’s manufacturing processes and facilities, the Company will be

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Notes to Consolidated Financial Statements — (Continued)

entitled to recoup its pre-approval outlays, plus interest at the prime rate plus five percent, from a percentage of any revenues or royalties LLY derives from the sales of Cymbalta^TM by LLY or sublicense of Cymbalta^TM to third parties, if any. The $110 million in payments will be capitalized and amortized in proportion to the estimated revenues as a reduction of revenue over the five-year service period. The sales force costs will be expensed as incurred. The payments are reported in the accompanying statement of cash flows as an investing activity — advances to customer. In return for the P1 position for Cymbalta^TM and the marketing and milestone payments, LLY will pay to the Company 8.25% of U.S. Cymbalta^TM sales for depression and other neuroscience indications over the five-year service period followed by a 3% royalty over the subsequent three years. In addition to the Company’s obligations, LLY is obligated to spend at specified levels. The Company or LLY has the ability to cancel this agreement if Cymbalta^TM is not approved by January 31, 2005, in which case the Company would write-off any payments made through that date, unless the FDA had failed to grant approval for Cymbalta^TM based on concerns over LLY’s manufacturing processes and facilities.

      In July 2002, the Company entered into an agreement with Columbia Laboratories, Inc. (“COB”) to commercialize, in the United States, the following women’s health products: Prochieve^TM 8%, Prochieve^TM 4%, Advantage-S® and RepHresh^TM. Under the terms of the agreement, the Company purchased 1,121,610 shares of COB common stock for $5.5 million. The Company also paid to COB four quarterly payments of $1.125 million each commencing in the third quarter of 2002. In return, the Company will receive royalties of 5% on the sales of the four COB’s women’s healthcare products in the United States for a five-year period beginning in the first quarter of 2003. The Company has paid $4.5 million as of December 31, 2003. The payments are reported in the accompanying statement of cash flows as an investing activity — acquisition of commercial rights and royalties. The royalties are subject to minimum and maximum amounts of $8.0 million and $12.0 million, respectively, over the life of the agreement. In addition, the Company will provide to COB, at COB’s expense on a fee-for-service basis, a sales force to commercialize the products. In January 2004, the Company and COB agreed to restructure the fee-for-service agreement to allow for an accelerated transfer of the sales force management responsibility to COB. The purchase of the COB common stock included participation rights to acquire additional shares of COB. During July 2003, the Company exercised its participation rights and purchased an additional 56,749 shares of COB for $664,000.

      In December 2002, the Company entered into an agreement with a large pharmaceutical customer to market two products in Belgium. Under the terms of an asset purchase agreement, the Company will have the rights to one product in Belgium in exchange for payments of 5.5 million euros (approximately $6.9 million). The customer will continue to manufacture the product through 2005. Under the terms of a distribution agreement, the Company will have the rights to market the other product in Belgium for a period of six years in exchange for payments of 6.9 million euros (approximately $8.7 million) of which 2.2 million euros (approximately $2.8 million) are in the form of services to be completed by December 31, 2008, based on the Company’s standard pricing. The Company has paid 6.5 million euros (approximately $8.2 million) as of December 31, 2003. The payments are reported in the accompanying statement of cash flows as an investing activity — acquisition of intangible assets. The Company has also provided 1.8 million euros in services to the customer under the 2.2 million euros service component. The Company’s service obligation is recorded as a cost of the distribution rights and is being amortized over the six-year distribution agreement. The customer will continue to manufacture the product for the six years of the distribution agreement.

      In March 2003, the Company entered into an agreement with COB to commercialize COB’s Striant^TM testosterone buccal bioadhesive product in the United States. Striant^TM was approved in June 2003 by the FDA for the treatment of hypogonadism. Under the terms of the agreement, the Company will pay to COB five quarterly payments of $3.0 million each which commenced in the second quarter of 2003. In return, the Company will receive a 9% royalty on the net sales of Striant^TM in the United States up to

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Notes to Consolidated Financial Statements — (Continued)

agreed levels of annual sales revenues, and a 4.5% royalty of net sales above those levels. The royalty term is seven years. Royalty payments will commence with the launch of Striant^TM and are subject to minimum and maximum amounts of $30.0 million and $55.0 million, respectively, over the life of the agreement. The Company has paid $12.0 million as of December 31, 2003. The payments are reported in the accompanying statement of cash flows as an investing activity — acquisition of commercial rights and royalties. In addition, the Company will provide to COB, at COB’s expense on a fee-for-service basis, a sales force to commercialize the products for a two-and-a-half year term. In January 2004, the Company and COB agreed to restructure the fee-for-service agreement to allow for an accelerated transfer of the sales force management responsibility to COB.

      The Company has firm commitments under the above arrangements described above to provide funding of approximately $250.3 million in exchange for various commercial rights. As of December 31, 2003, the Company has funded approximately $203.7 million. Further, the Company has additional future funding commitments that are contingent upon satisfaction of certain milestones being met by the third party such as receiving FDA approval, obtaining funding from additional third parties, agreeing to a marketing plan and other similar milestones. Due to the uncertainty of the amounts and timing, these contingent commitments are not included in the firm commitment amounts. If all of these contingencies were satisfied over approximately the same time period, the Company estimates these commitments to be a minimum of approximately $90-110 million per year for a period of five to six years, subject to certain limitations and varying time periods.

      Below is a summary of the remaining firm commitments with pre-determined payment schedules under such arrangements (in thousands):

	2004		2005		2006		2007		2008		Total
Milestone payments	$	3,000	$	—	$	—	$	—	$	—	$	3,000
Sales force commitments		16,548		15,069		3,806		3,916		403		39,742
Licensing and distribution rights		2,346		1,500		—		—		—		3,846
	$	21,894	$	16,569	$	3,806	$	3,916	$	403	$	46,588

6. Investments — Debt Securities

      The following is a summary as of December 31, 2003 (successor) of held-to-maturity securities and available-for-sale securities by contractual maturity where applicable (in thousands):

				Gross		Gross
		Amortized		Unrealized		Unrealized		Market
Held-to-Maturity Securities:		Cost		Gains		Losses		Value
State Securities —
	Maturing in one year or less	$	611	$	—	$	—	$	611
	Maturing in over five years		3,492		—		—		3,492
		$	4,103	$	—	$	—	$	4,103

			Gross		Gross
	Amortized		Unrealized		Unrealized		Market
Available-for-Sale Securities:	Cost		Gains		Losses		Value
Other	$	6,626	$	308	$	—	$	6,934
	$	6,626	$	308	$	—	$	6,934

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Notes to Consolidated Financial Statements — (Continued)

      The following is a summary as of December 31, 2002 (predecessor) of held-to-maturity securities and available-for-sale securities by contractual maturity where applicable (in thousands):

				Gross		Gross
		Amortized		Unrealized		Unrealized		Market
Held-to-Maturity Securities:		Cost		Gains		Losses		Value
State Securities —
	Maturing in one year or less	$	576	$	—	$	—	$	576
	Maturing in over five years		5,315		—		—		5,315
		$	5,891	$	—	$	—	$	5,891

			Gross		Gross
	Amortized		Unrealized		Unrealized			Market
Available-for-Sale Securities:	Cost		Gains		Losses			Value
Money Funds	$	27,186	$	—	$	(544	)	$	26,642
Other		5,476		—		(1,338	)		4,138
	$	32,662	$	—	$	(1,882	)	$	30,780

      The Company recognized $812,000 of losses from the sale of debt securities during the period from January 1, 2003 through September 25, 2003. The net after-tax adjustment to unrealized holding gains (losses) on available-for-sale debt securities included as a separate component of shareholders’ equity was $190,000 and $468,000 during the periods from September 26, 2003 through December 31, 2003 and January 1, 2003 through September 25, 2003, respectively, and ($1.0) million and $668,000 in 2002 and 2001, respectively.

7. Investments — Marketable Equity Securities

      The Company has entered into financial arrangements with various customers and other parties in which the Company provides funding in the form of an equity investment. The equity investments may be subject to certain trading restrictions including “lock-up” agreements. The Company’s portfolio in such transactions as of December 31, 2003 (successor) is as follows (in thousands except share data):

					Estimated
	Trading		Number of		Beneficial				Fair Market
Company	Symbol		Shares		Ownership %(1)		Cost Basis		Value
Common Stock:
The Medicines Company		MDCO		1,185,320		2.5%	$	30,759	$	34,920
Discovery Laboratories, Inc.		DSCO		1,359,567		4.6%		9,789		14,262
Columbia Laboratories, Inc.		COB		1,178,359		3.0%		14,235		7,424
Derivative instruments (see Note 9)								—		(1,526	)
Other								2,301		3,214
Total Marketable Equity Securities							$	57,084	$	58,294

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Notes to Consolidated Financial Statements — (Continued)

      The Company’s portfolio in such transactions as of December 31, 2002 (predecessor) is as follows (in thousands except share data):

					Estimated
	Trading		Number of		Beneficial				Fair Market
Company	Symbol		Shares		Ownership %(1)		Cost Basis		Value
Common Stock:
Triangle Pharmaceuticals Inc.		VIRS		3,775,000		4.9%	$	15,029	$	22,424
The Medicines Company		MDCO		2,062,520		5.2%		8,992		33,042
CV Therapeutics, Inc.		CVTX		126,705		0.5%		617		2,309
Columbia Laboratories, Inc.		COB		1,121,610		3.2%		5,500		3,769
Other								3,327		3,382
Total Marketable Equity Securities							$	33,465	$	64,926

(1)  The estimated beneficial ownership percentage calculation is based upon the issuer’s filings with the United States Securities and Exchange Commission. The beneficial ownership percentage is subject to change due to the Company’s transactions in these investments and changes in the issuer’s capitalization.

      The Company recognized gains from the sale of marketable equity securities of $209,000 and $24.0 million for the periods from September 26, 2003 through December 31, 2003 and January 1, 2003 through September 25, 2003, respectively, and $14.1 million and $22.9 million during and 2002 and 2001, respectively. The Company recognized $2,000 and $66,000 in losses from the sale of marketable equity securities during the period from September 26, 2003 through December 31, 2003 and the year ended December 31, 2002, respectively. Gross unrealized gains totaled $1.2 million as of December 31, 2003, $31.5 million as of December 31, 2002 and $46.4 million as of December 31, 2001 from investments in marketable equity securities. The net after-tax adjustment to unrealized holding gains (losses) on marketable equity securities included as a separate component of shareholders’ equity was $787,000 and $8.1 million for the periods from September 26, 2003 through December 31, 2003 and January 1, 2003 through September 25, 2003, respectively, and ($10.1) million and $81.3 million in 2002 and 2001, respectively. In accordance with its policy to continually review declines in fair value of the marketable equity securities for declines that may be other than temporary, the Company also recognized losses due to the impairment of marketable equity securities of $282,000 for the period from January 1, 2003 through September 25, 2003 and $335,000 and $338.8 million in 2002 and 2001, respectively. Included in the 2001 amount is $334.0 million relating to the Company’s investment in WebMD common stock.

      In 2000, the Company sold its electronic data interchange unit, ENVOY Corporation (“ENVOY”), to WebMD Corporation (“WebMD”). As part of the consideration received in the sale, the Company received 35 million shares of WebMD common stock. In 2001, WebMD paid the Company $185 million in cash for all of the 35 million shares of WebMD common stock and in settlement of the disputes.

8. Investments — Non-Marketable Equity Securities and Loans

      The Company has entered into financial arrangements with various customers and other parties in which the Company provides funding in the form of an equity investment in non-marketable securities or loans. These financial arrangements are comprised of direct and indirect investments. The indirect investments are made through eight venture capital funds in which the Company is an investor. The

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Notes to Consolidated Financial Statements — (Continued)

Company’s portfolio in such transactions as of December 31, 2003 (successor) is as follows (in thousands):

			Remaining
			Funding
Company	Cost Basis		Commitment
Venture capital funds	$	31,669	$	16,746
Equity investments (six companies)		13,581		—
Convertible loans (three companies)		727		66
Loans (two companies)		2,579		6,055
Total non-marketable equity securities and loans	$	48,556	$	22,867

      The Company’s portfolio in such transactions as of December 31, 2002 (predecessor) is as follows (in thousands):

Company	Cost Basis
Venture capital funds	$	27,405
Equity investments (eight companies)		11,961
Convertible loans (five companies)		5,576
Loans (two companies)		1,507
Total non-marketable equity securities and loans	$	46,449

      Included in the venture capital funds is $9.8 million and $7.7 million at December 31, 2003 and 2002, respectively, which are managed by A.M. Pappas & Associates, LLC whose chief executive officer was a member of the Company’s Board of Directors until September 25, 2003. The Company also has remaining commitments to these funds totaling $5.5 million as of December 31, 2003.

      Below is a table representing management’s best estimate as of December 31, 2003 of the amount and timing of the above remaining funding commitments (in thousands):

	2004		2005		Total
Venture capital funds	$	15,164	$	1,582	$	16,746
Convertible loans		66		—		66
Loans		6,055		—		6,055
	$	21,285	$	1,582	$	22,867

      The amount and timing of such funding events are subject to a number of different variables and may differ materially from management’s estimates.

      The Company also has future loan commitments that are contingent upon satisfaction of certain milestones by the third party such as receiving FDA approval, obtaining funding from additional third parties, agreement of a marketing plan and other similar milestones. Due to the uncertainty of the amounts and timing, these commitments are not included in the commitment amounts described above.

      The Company reviews the carrying value of each individual investment at each balance sheet date to determine whether or not an other-than-temporary decline in fair value has occurred. The Company employs alternative valuation techniques including: (1) the review of financial statements including assessments of liquidity, (2) the review of valuations available to the Company prepared by independent third parties used in raising capital, (3) the review of publicly available information including press releases and (4) direct communications with the investee’s management, as appropriate. If the review

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Notes to Consolidated Financial Statements — (Continued)

indicates that such a decline in fair value has occurred, the Company adjusts the carrying value to the estimated fair value of the investment and recognizes a loss for the amount of the adjustment. The Company recognized $1.2 million, $10.3 million, $4.0 million and $9.2 million of losses due to such impairments in the period from September 26, 2003 through December 31, 2003, the period from January 1, 2003 through September 25, 2003, and in 2002 and 2001, respectively, relating to non-marketable equity securities and loans mainly due to declining financial condition of investees that was deemed by management to be other-than-temporary.

9. Derivatives

      As of December 31, 2003, the Company had the following derivative positions in securities of other issuers: (1) conversion option positions that are embedded in financing arrangements, (2) freestanding warrants to purchase shares of common stock and (3) put and call instruments to hedge the cash flow from the sale of certain marketable securities.

      As of December 31, 2003 and 2002, the Company had funded five convertible loans with a carrying value of approximately $727,000 and $5.6 million, respectively. Loans that are convertible into an equity interest have an embedded option contract because the value of the equity interest is based on the market price of another entity’s common stock and thus is not clearly and closely related to the value of the interest-bearing note. The Company has not accounted for these embedded conversion features as mark-to-market derivatives because the terms of conversion do not allow for cash settlement and the Company believes that the equity interest delivered upon conversion would not be readily convertible to cash since these entities are privately held or have limited liquidity and trading of their equity interest.

      As of December 31, 2003 and 2002, the Company has several freestanding warrants to purchase common stock of various customers and other third parties. These freestanding warrants primarily were acquired as part of the financial arrangements with such customers and third parties. No quoted price is available for the Company’s freestanding warrants to purchase shares of common stock. The Company uses various valuation techniques including the present value of estimated expected future cash flows, option-pricing models and fundamental analysis. Factors affecting the valuation include the current price of the underlying asset, strike price, time to expiration of the option, estimated price volatility of the underlying asset over the life of the option and restrictions on the transferability or ability to exercise the option. As of January 1, 2001, the Company’s derivative instruments included two warrants to purchase an aggregate of 282,385 shares of common stock of The Medicines Company (NASDAQ: MDCO). The Company estimated the fair value of these derivative instruments to be insignificant at January 1, 2001 and December 31, 2001 because the Company concluded that the implicit restrictions on exercisability and transferability impaired the value of the warrants. The most significant of these restrictions were eliminated in January 2002. In March 2002, the Company exercised the MDCO warrants under its cashless exercise option and received 162,976 shares of MDCO common stock. At December 31, 2002, the Company held warrants from various contracts valued at $5.8 million which are included in the accompanying balance sheet as deposits and other assets. The Company recognized investment revenues of $2.6 million and $14.7 million during the periods from September 26, 2003 through December 31, 2003 and January 1, 2003 through September 25, 2003, respectively, and $535,000 in 2002 related to changes in the fair values of the warrants.

      The Company had exchange-traded option contracts with a fair value as of December 31, 2001 of approximately $1.3 million. These contracts expired in January 2002 and April 2002. There were no open exchange-traded option contracts at December 31, 2003 and 2002. During 2002 and 2001, the Company recorded a $3.4 million gain and a $1.9 million loss, respectively, in earnings related to changes in the fair value of put and call option contracts.

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Notes to Consolidated Financial Statements — (Continued)

      As of December 31, 2003, the Company had entered into three zero-cost-collar transactions to hedge certain future cash flows occurring in 2004. As these transactions were entered into to hedge the risk of the potential volatility in the cash flows resulting from the sales of the underlying security during the first three quarters of 2004, these transactions are accounted for as a cash flow hedge. As such, the effective portion of the gain or loss on the derivative instrument is recorded as unrealized holding gains (losses) on marketable equity securities included as a separate component of shareholders’ equity. This hedge is deemed to be perfectly effective under SFAS No. 133, as defined. As of December 31, 2003, the Company recorded a gross unrealized loss on these transactions of $1.5 million. Upon expiration of the hedging instruments, all amounts recorded as unrealized holding gains (losses) on marketable equity securities included as a separate component of shareholders’ equity will be reclassified into income. This unrealized loss is shown as a reduction of the marketable equity security balance on the accompanying balance sheet.

10. Investment Revenues

      The following table is a summary of investment revenues (in thousands):

		September 26,			January 1,
		2003 through			2003 through			Year ended			Year ended
		December 31,			September 25,			December 31,			December 31,
		2003			2003			2002			2001
		Successor			Predecessor			Predecessor			Predecessor
Marketable equity and derivative securities:
	Gross realized gains	$	4,381		$	38,724		$	18,093		$	14,394
	Gross realized losses		(396	)		—			(92	)		(1,954	)
	Impairment losses		—			(282	)		(335	)		(6,066	)
Non-marketable equity securities and loans:
	Gross realized gains		—			—			—			2,197
	Gross realized losses		—			—			—			(34	)
	Impairment losses		(1,225	)		(10,269	)		(3,962	)		(7,926	)
		$	2,760		$	28,173		$	13,704		$	611

11. Investments in Unconsolidated Affiliates and Other

      In October 2002, the Company acquired a controlling interest in Health Research Solutions Pty Ltd (“HRS”) and, accordingly, the results of operations for HRS and the assets and liabilities of HRS are included in the results of operations and assets and liabilities of the Company. In September 2003, the Company acquired the remaining interest in HRS for 71,724 shares of the Company’s Common Stock. The Company recorded the minority interest’s pro rata share (approximately 33.33%) of HRS’ earnings from October 2002 until the Company acquired the minority interest in September 2003 in the accompanying statement of operations as equity in losses of unconsolidated affiliates and other.

      In September 2003, the Company acquired a controlling interest in Pharmaplan Limited (“Pharmaplan”) and, accordingly, the results of operations for Pharmaplan and the assets and liabilities of Pharmaplan are included in the results of operations and assets and liabilities of the Company. The Company recorded the minority interest’s pro rata share (approximately 50% at December 31, 2003) of Pharmaplan’s earnings in the accompanying statement of operations as equity in losses of unconsolidated affiliates and other.

      In January 2002, the Company acquired an equity interest in a sales and marketing organization in France for approximately $328,000. The Company’s pro rata share of earnings is included in the

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Notes to Consolidated Financial Statements — (Continued)

accompanying statement of operations as losses of unconsolidated affiliates and other. The Company owns approximately 41.0% at December 31, 2003.

      In May 2002, the Company and McKesson Corporation (“McKesson”) completed the formation of a previously announced healthcare informatics joint venture named Verispan, L.L.C. (“Verispan”). The Company and McKesson are equal co-owners of a majority of the equity of Verispan. The Company contributed the net assets of its informatics group having a historical cost basis of approximately $112.1 million (including approximately $101.7 million of basis in excess of the book value of the identifiable net assets) and funded $10 million to Verispan. The net assets contributed to Verispan primarily consisted of accounts receivable, prepaid expense, property and equipment, trade accounts payable, accrued expenses, unearned income, including the basis in excess of the book value of the identifiable net assets. Verispan licenses data products to the Company and McKesson for use in their respective core businesses. Under the license arrangement, the Company continues to have access to Verispan’s commercially available products to enhance their service to and partnering with the Company’s customers.

      The Company accounts for its investment in Verispan under the equity method of accounting; therefore, the Company’s pro rata share of Verispan’s earnings, since the date of formation, is included in equity in losses of unconsolidated affiliates and other. As of December 31, 2003 and 2002, the Company owns approximately 43.5% and 45%, respectively, of Verispan. The Company’s ownership percentage may change from period to period to the extent new equity partners are admitted to the joint venture. The Company has recorded its investment in Verispan, approximately $120.7 million at December 31, 2003 and 2002, as an investment in unconsolidated affiliates.

12. Goodwill and Identifiable Intangible Assets

      The Company has allocated approximately $451.5 million to intangible assets, of which approximately $109.7 million is deemed to be indefinite-lived and, accordingly, is not being amortized, based upon an allocation of the purchase price of the assets acquired and the liabilities assumed in the Transaction.

      The following is a summary of identifiable intangible assets (in thousands):

		As of December 31, 2003						As of December 31, 2002
		Gross		Accumulated		Net		Gross		Accumulated		Net
		Amount		Amortization		Amount		Amount		Amortization		Amount
		Successor						Predecessor
Identifiable intangible assets:
	Commercial rights and royalties, licenses and customer relationships	$	207,829	$	14,079	$	193,750	$	81,889	$	5,913	$	75,976
	Trademarks, trade names and other		164,720		4,492		160,228		—		—		—
	Software and related assets		65,859		5,591		60,268		150,713		83,974		66,739
		$	438,408	$	24,162	$	414,246	$	232,602	$	89,887	$	142,715

      Amortization expense associated with identifiable intangible assets were as follows:

	September 26, 2003		January 1, 2003
	through		through		Year ended		Year ended
	December 31, 2003		September 25, 2003		December 31, 2002		December 31, 2001
	Successor		Predecessor		Predecessor		Predecessor
Amortization expense	$	25.0 million	$	27.8 million	$	29.3 million	$	14.1 million

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Notes to Consolidated Financial Statements — (Continued)

      Estimated amortization expense for existing identifiable intangible assets is targeted to be approximately $80.7 million, $65.6 million, $34.0 million, $24.6 million and $21.3 million for each of the years in the five-year period ending December 31, 2008, respectively. Estimated amortization expense can be affected by various factors including future acquisitions or divestitures of product and/or licensing and distribution rights.

      The following is a summary of goodwill by segment for the successor period from September 26, 2003 through December 31, 2003 (in thousands):

	Product		Commercial			PharmaBio
	Development		Services			Development		Consolidated
Balance as of September 26, 2003	$	—	$	—		$	—	$	—
Add: Transaction		111,500		61,712			2,646		175,858
Add: acquisitions		5,431		39			—		5,470
Impact of foreign currency fluctuations		—		(1	)		—		(1	)
Balance as of December 31, 2003	$	116,931	$	61,750		$	2,646	$	181,327

      The following is a summary of goodwill by segment for the predecessor period from January 1, 2003 through September 25, 2003 (in thousands):

	Product		Commercial		PharmaBio
	Development		Services		Development		Consolidated
Balance as of December 31, 2002	$	38,918	$	31,215	$	—	$	70,133
Add: acquisition		71		208		1,875		2,154
Impact of foreign currency fluctuations		3,729		965		—		4,694
Balance as of September 25, 2003	$	42,718	$	32,388	$	1,875	$	76,981

      The following is a summary of goodwill by segment for the predecessor period of the year ended December 31, 2002 (in thousands):

	Product		Commercial
	Development		Services		Informatics			Consolidated
Balance as of December 31, 2001	$	31,746	$	30,168	$	101,737		$	163,651
Add: acquisition		2,937		—		—			2,937
Less: reclass to investments in unconsolidated affiliates		—		—		(101,737	)		(101,737	)
Impact of foreign currency fluctuations		4,235		1,047		—			5,282
Balance as of December 31, 2002	$	38,918	$	31,215	$	—		$	70,133

      The decrease in goodwill during 2002 is primarily a result of the formation of the Verispan joint venture.

      Through December 2001, goodwill was amortized on a straight-line basis over periods from five to 40 years. Effective January 1, 2002, the Company adopted SFAS No. 142 and no longer amortizes

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Notes to Consolidated Financial Statements — (Continued)

goodwill. The following is a summary of reported loss from continuing operations and loss from continuing operations per share, adjusted to exclude goodwill amortization expense (in thousands, except per share amounts):

		Year ended
		December 31, 2001
Loss from continuing operations		$	(175,873	)
Add: goodwill amortization			7,765
Less: income tax benefit			(2,562	)
Adjusted loss from continuing operations		$	(170,670	)
Adjusted loss from continuing operations per share:
	Basic	$	(1.44	)
	Diluted		(1.44	)

13. Accrued Expenses

      Accrued expenses consist of the following (in thousands):

	December 31,		December 31,
	2003		2002
Compensation and payroll taxes	$	104,541	$	77,354
Restructuring		15,743		8,467
Transaction		32,900		—
Other		102,164		94,913
	$	255,348	$	180,734

14. Credit Arrangements

      The following is a summary of the credit facilities available to the Company at December 31, 2003:

Facility	Interest Rates
$75.0 million	Either at LIBOR (1.17% at December 31, 2003) plus 3.25% or ABR (4.0% at December 31, 2003) plus 2.25%
£1.5 million (approximately $2.7 million) general banking facility with a U.K. bank used for the issuance of guarantees	1% per annum fee for each guarantee issued

      The Company did not have any outstanding balances on these facilities at December 31, 2003 and 2002.

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Notes to Consolidated Financial Statements — (Continued)

      Long-term debt and obligations consist of the following (in thousands):

	December 31,			December 31,
	2003			2002
	Successor			Predecessor
10% Senior Subordinated Notes due 2013	$	450,000		$	—
Senior Term Loan (Either LIBOR (1.17% at December 31, 2003) plus 4.25% or ABR (4.0% at December 31, 2003) plus 3.25%)		309,225			—
Missouri tax incentive bonds due October 2009 (6.7% annual interest rate)		3,789			4,288
Other notes payable		5,926			7,269
		768,940			11,557
Less: current portion		(5,583	)		(3,347	)
	$	763,357		$	8,210

      Maturities of long-term debt and obligations at December 31, 2003 are as follows (in thousands):

2004	$	5,583
2005		5,370
2006		5,038
2007		4,185
2008		3,907
Thereafter		744,857
	$	768,940

      The estimated fair value of the long-term debt was $814.9 million and $11.6 million at December 31, 2003 and 2002, respectively.

      In connection with the long-term debt agreements, the Company has net debt issuance costs of approximately $25.7 million and $1.3 million as of December 31, 2003 and 2002, respectively, included as an other asset in the accompanying balance sheets. The debt issuance costs are being amortized into interest expense on an effective interest method over the term of the debt arrangements, which range from five years to 20 years.

      The Company’s various long-term debt agreements contain usual and customary negative covenants that, among other things, place limitations on its ability to (i) incur additional indebtedness, including capital leases and liens; (ii) pay dividends and repurchase its capital stock; (iii) enter into mergers, consolidations, acquisitions, asset dispositions and sale-leaseback transactions; (iv) make capital expenditures and (v) issue capital stock of its subsidiaries. The agreements also contain financial covenants requiring the Company to maintain minimum interest coverage ratios and maximum consolidated leverage and senior leverage ratios, as defined therein.

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Notes to Consolidated Financial Statements — (Continued)

15. Leases

      The Company leases certain office space and equipment under operating leases. The leases expire at various dates through 2074 with options to cancel certain leases at five-year increments. Rental expenses under these agreements were approximately:

	September 26, 2003		January 1, 2003
	through		through		Year ended		Year ended
	December 31, 2003		September 25, 2003		December 31, 2002		December 31, 2001
	Successor		Predecessor		Predecessor		Predecessor
Rental expenses under agreements	$	18.9 million	$	57.0 million	$	75.9 million	$	76.3 million

      The Company leases certain assets, primarily vehicles, under capital leases. Capital lease amortization is included with costs of revenues and accumulated depreciation in the accompanying financial statements.

      The following is a summary of future minimum payments under capitalized leases and under operating leases that have initial or remaining noncancelable lease terms in excess of one year at December 31, 2003 (in thousands):

	Capital			Operating
	Leases			Leases
2004	$	15,939		$	61,866
2005		7,759			42,688
2006		1,825			31,510
2007		679			25,258
2008		266			17,579
Thereafter		132			74,235
Total minimum lease payments		26,600		$	253,136
Amounts representing interest		1,226
Present value of net minimum payments		25,374
Current portion		(15,103	)
Long-term capital lease obligations	$	10,271

      During each of the last five years, the Company entered into sale-leaseback transactions of personal property with the city of Kansas City. Funding for these transactions was provided by the Company’s purchase of Kansas City industrial development bonds. As such, the Company has a corresponding asset and liability, which are netted in the accompanying balance sheets as right of setoff exists. These transactions approximated the carrying value of the assets; accordingly, no gains or losses were recognized as a result of these transactions.

      The Company uses the facilities of several buildings in South Africa owned and operated by two South African entities. Dr. Greeff, an executive officer of the Company, serves on the board of directors of each of these entities and his trust owns 40% of the outstanding shares of stock of each of these entities. The Company leases these buildings from these entities pursuant to separate lease agreements on market standard terms. The initial term of each of the three leases is six years and four months, expiring in March 2006, three years and one month, expiring in March 2005, and five years, expiring in March 2006, respectively, and each lease is renewable for one five-year term. Under the terms of the lease arrangements covering those facilities, the Company paid these entities approximately $790,000 in rent during 2003.

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Notes to Consolidated Financial Statements — (Continued)

16. Commitments and Contingencies

      On January 26, 2001, a purported class action lawsuit was filed in the State Court of Richmond County, Georgia, naming Novartis Pharmaceuticals Corp., Pharmed Inc., Debra Brown, Bruce I. Diamond and Quintiles Laboratories Limited, a subsidiary of the Company, on behalf of 185 Alzheimer’s patients who participated in drug studies involving an experimental drug manufactured by defendant Novartis, and their surviving spouses. The complaint alleges claims for breach of fiduciary duty, civil conspiracy, unjust enrichment, misrepresentation, Georgia RICO violations, infliction of emotional distress, battery, negligence and loss of consortium as to class member spouses. The complaint seeks unspecified damages, plus costs and expenses, including attorneys’ fees and experts’ fees. On September 27, 2003, the parties entered into a settlement memorandum following a mediated settlement conference. The parties are in the process of preparing final settlement documents, which would memorialize payments by several defendants to individual study participants or their representatives. The Company believes that its contribution will be covered by insurance or, in the alternative, will not represent a material amount to the Company.

      On January 22, 2002, Federal Insurance Company (“Federal”) and Chubb Custom Insurance Company (“Chubb”) filed suit against the Company, Quintiles Pacific, Inc. and Quintiles Laboratories Limited, two of the Company’s subsidiaries, in the United States District Court for the Northern District of Georgia. In the suit, Chubb, the Company’s primary commercial general liability carrier for coverage years 2000-2001 and 2001-2002, and Federal, the Company’s excess liability carrier for coverage years 2000-2001 and 2001-2002, seek to rescind the policies issued to the Company based on an alleged misrepresentation by the Company on the policy application. Alternatively, Chubb and Federal seek a declaratory judgment that there is no coverage under the policies for some or all of the claims asserted against the Company and its subsidiaries in the class action lawsuit filed on January 26, 2001 and described above and, if one or more of such claims is determined to be covered, Chubb and Federal request an allocation of the defense costs between the claims they contend are covered and non-covered claims. The Company has filed an answer with counterclaims against Federal and Chubb in response to their complaint. Additionally, the Company has amended its pleadings to add AON Risk Services (“AON”) as a counterclaim defendant, as an alternative to the Company’s position that Federal and Chubb are liable under the policies. In order to preserve its rights, on March 27, 2003, the Company also filed a separate action against AON in the United States District Court for the Middle District of North Carolina. The Company believes the allegations made by Federal and Chubb are without merit and is defending this case vigorously.

      In October 2002, seven purported class action lawsuits were filed in Superior Court, Durham County, North Carolina by certain of the Company’s shareholders seeking to enjoin the consummation of the initial transaction proposed by Pharma Services Company (a company controlled by Dennis B. Gillings, Ph.D.) to acquire all the Company’s outstanding shares for $11.25 per share in cash. All of the lawsuits were subsequently transferred to the North Carolina Business Court. The lawsuits named as defendants Dr. Gillings, other members of the Company’s Board of Directors, the Company and, in some cases Pharma Services Company. The complaints alleged, among other things, a breach of fiduciary duties by the directors with respect to the proposal. The complaints sought to enjoin the transaction proposed by Pharma Services Company, and the plaintiffs sought to recover damages. On November 11, 2002, a Special Committee of the Company’s Board of Directors announced its rejection of the proposal by Pharma Services Company and its intention to investigate strategic alternatives available to the Company for purposes of enhancing shareholder value, including the possibility of a sale of the Company and alternatives that would keep the Company independent and publicly owned. On January 6, 2003, the North Carolina Business Court entered a Case Management Order consolidating all seven lawsuits for all purposes and staying the lawsuits until March 29, 2003 or until the Company provided notice of a change-of-control transaction.

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QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

      On March 28, 2003, the Court entered an Order Maintaining the Status Quo, which continued its prior Case Management Order in all respects until the earlier of a date selected by the Court or until the Company provided the notice contemplated by the Case Management Order. On April 10, 2003, the Company’s Board of Directors approved the merger agreement with Pharma Services which provided for payment to the Company’s shareholders of $14.50 per share in cash. On June 25, 2003, counsel for the parties signed a Memorandum of Understanding, in which they agreed upon the terms of a settlement of the litigation, which would include the dismissal with prejudice of all claims against all defendants including the Company and the Company’s Board of Directors. On August 28, 2003, lead counsel for the plaintiffs and counsel for the defendants executed a formal Stipulation and Agreement of Compromise, Settlement and Release (the “Stipulation of Settlement”). On August 29, 2003, the Court entered an Order for Notice and Hearing on Settlement of Class Action (“Order for Notice”) and a Notice of Pendency of Class Action, Preliminary and Proposed Class Action Certification, Proposed Settlement of Class Action, Settlement Hearing and Right to Appear (the “Class Notice”). The Class Notice set a hearing date of October 10, 2003 (the “Settlement Hearing”) to determine whether the Court should approve the settlement as fair, adequate and in the best interest of the settlement class, end the action, and to consider other matters including a request by plaintiffs’ counsel for attorneys’ fees and reimbursement of costs, in an amount not to exceed a total of $450,000. In accordance with the terms of the Order of Notice, the Company mailed the Class Notice to the record holders of the Company’s Common Stock and options, as of the record date of August 19, 2003. A special meeting of the shareholders was held on September 25, 2003, at which time the shareholders approved the proposed transaction and the merger was consummated. On October 10, 2003, the Court certified a class for purposes of the settlement, approved the settlement as fair and reasonable and entered an Order and Final Judgment dismissing the lawsuit with prejudice. The Court also awarded plaintiff’s counsel $450,000 in attorneys’ fees and costs, which have been paid pursuant to the terms of the settlement. No other payments are required from the Company or any other party under the terms of the settlement and the Court’s Order.

      On June 13, 2003, ENVOY and Federal filed suit against the Company, in the United States District Court for the Middle District of Tennessee. One or both plaintiffs in this case have alleged claims for breach of contract, contractual subrogation, equitable subrogation, and equitable contribution. Plaintiffs reached settlement in principle, in the amount of $11 million, of the case pending in the same court captioned In Re Envoy Corporation Securities Litigation, Case No. 3-98-0760 (the “Envoy Securities Litigation”). Plaintiffs claim that the Company is responsible for payment of the settlement amount and associated fees and costs in the Envoy Securities Litigation based on merger and settlement agreements between WebMD, ENVOY and the Company. The Company has filed a motion to dismiss the suit, and the plaintiffs have filed motions for summary judgment. These motions are pending before the court. All parties have agreed to a stay of discovery. The Company believes that the allegations made by ENVOY and Federal are without merit and intends to defend the case vigorously.

      The Company also is party to other legal proceedings incidental to its business. While the Company’s management currently believes that the ultimate outcome of these proceedings, individually and in the aggregate, will not have a material adverse effect on the Company’s consolidated financial statements, litigation is subject to inherent uncertainties. Were an unfavorable ruling to occur, there exists the possibility of a material adverse impact on the results of operations for the period in which the ruling occurs.

      The Company entered into a seven-year service agreement in 2001 with a third party vendor to provide fully integrated information technology infrastructure services in the United States and Europe to the Company. The Company can terminate this agreement with six months notice and a penalty, which is based upon a sliding scale. The Company’s annual commitment under this service agreement is approximately $20.0 million.

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QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

17. Shareholders’ Equity

      The Company is authorized to issue 125 million shares of common stock, $.01 per share par value. At December 31, 2003, all 125 million common shares of $.01 par value were outstanding.

      In March 2001, the Board of Directors authorized the Company to repurchase up to $100 million of the Company’s Common Stock from time to time until March 2002. During 2001, the Company entered into agreements to repurchase 1,702,500 shares of its Common Stock for an aggregate price of approximately $27.5 million. On February 7, 2002, the Board of Directors extended this authorization until March 1, 2003. During 2002, the Company entered into agreements to repurchase 1,570,000 shares of its Common Stock for an aggregate price of approximately $22.2 million. The Company did not enter into any agreements to repurchase its common stock during the period of January 1, 2003 through September 25, 2003.

      In November 1999, the Board of Directors declared distribution of one preferred stock purchase right (a “Right) for each outstanding share of the Company’s Common Stock. Each Right, if activated, entitles the holder to purchase one one-thousandth of a share of the Company’s Series A Preferred Stock at a purchase price of $150, subject to adjustment in certain circumstances. Each one one-thousandth of a preferred share will have the same voting and dividend rights as a share of the Company’s Common Stock. The Rights become exercisable 10 business days after (1) any person or group announces it has acquired or obtained the right to acquire 15% or more of the outstanding shares of the Company’s Common Stock or (2) commencement of a tender offer or exchange offer for more than 15% of the Company’s Common Stock, subject to limited exceptions. In the event that any party should acquire more than 15% of the Company’s Common Stock without the Board’s approval, the Rights entitle all other shareholders to purchase shares of the Company’s Common Stock at a substantial discount. In addition, if the Company engages in certain types of mergers or business combinations after a group or person acquires 15% or more of the Company’s Common Stock, the Rights entitle all other shareholders to purchase common stock of the acquirer at a substantial discount. The Rights expire on November 15, 2009, unless redeemed earlier at the discretion of the Company at the redemption price of $0.0001 per Right. In connection with the Transaction, the Company’s Board of Directors approved an amendment to the Amended and Restated Rights Agreement, dated as of April 10, 2003, by and between the Company and the Rights Agent (the “Amendment”). The Amendment provides that (i) neither Pharma Services, Acquisition Corp., nor any of their affiliates, will be deemed to be an Acquiring Person (as such term is defined in the Amended and Restated Rights Agreement), (ii) certain defined “triggering events” will not occur, (iii) the Rights will not separate from the common stock, and (iv) the Rights will not become exercisable, in each case as a result of the execution, delivery or performance of the Transaction, the public announcement thereof, or the consummation of the Transaction. As described above, in connection with the Transaction, Pharma Services paid $14.50 in cash for each outstanding share of the Company’s Common Stock, including the Rights attached thereto, except for shares held by Pharma Services and Acquisition Corp.

18. Discontinued Operation

      On May 26, 2000, the Company completed the sale of its electronic data interchange unit, ENVOY, to Healtheon/ WebMD Corp., which subsequently changed its name to WebMD. Prior to the sale, ENVOY transferred its informatics subsidiary, Synergy Health Care, Inc., to the Company. The Company received $400 million in cash and 35 million shares of WebMD common stock in exchange for its entire interest in ENVOY and a warrant to acquire 10 million shares of the Company’s Common Stock at $40 per share, exercisable for four years. The Company recorded an extraordinary gain on the sale of $436.3 million, net of taxes of $184.7 million.

      Because the original acquisition of ENVOY qualified as a tax-free reorganization, the Company’s tax basis in the acquisition is allowed to be determined by substituting the tax basis of the previous

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QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

shareholders of ENVOY. However, when the Company sold ENVOY to WebMD during 2000, the tax basis of the previous shareholders was not available to the Company since ENVOY had been a publicly traded corporation at the time of the original acquisition. Therefore, the Company had to estimate its tax basis in ENVOY by reviewing financial statements, tax returns and other public documents which were available to the Company at that time. The Company used the estimated tax basis to calculate the extraordinary gain on the sale of ENVOY, net of income taxes. In September 2001, the Company received the results of a tax basis study completed by its external tax advisors, which was prepared so that the Company could prepare and file its 2000 U.S. Corporate income tax return. Based on this study, the Company adjusted its estimate of its tax basis in ENVOY, resulting in an approximate $142.0 million reduction in income taxes. This change in estimate resulted in an increase for the same amount in the extraordinary gain on the sale of ENVOY.

      In January 2004, the Company received a communication from the Internal Revenue Service proposing an increase in its income taxes owed for 2000 by approximately $153.1 million. The increase relates to the Internal Revenue Service challenging the Company’s method for determining the basis it applied to the sale of ENVOY. The Company is contesting the proposed increase.

      The Company retained exclusive rights to de-identified ENVOY transaction data and certain other de-identified data available from WebMD, subject to limited exceptions. The Company agreed to share with WebMD a royalty derived from sales of products using the licensed data. The Company formed a strategic alliance with WebMD to develop a web-based suite of integrated products and services for the pharmaceutical industry and may provide funding for development of the products. As a result of the settlement of litigation between the Company and WebMD, the Company continued to receive data from WebMD only through February 28, 2002. In addition, as part of the settlement, the contracts with WebMD were terminated, which among other things, absolved the Company from any obligation to fund WebMD to develop a web-based suite of integrated products and services. Also, the outstanding warrant to purchase up to 10 million shares of the Company’s Common Stock, at $40 per share, held by WebMD, was canceled. The Company recorded an $83.2 million gain from the settlement of litigation during 2001.

19. Change in Accounting for Deferred Income Taxes

      Effective January 1, 2002, the Company changed its method for calculating deferred income taxes related to its multi-jurisdictional tax transactions. Under the prior method, the Company followed an incremental approach to measuring the deferred income tax benefit of its multi-jurisdictional transactions, whereby it considered the income tax benefit from the step-up in tax basis, net of any potential incremental foreign income tax consequences determined by projecting taxable income, foreign source income, foreign tax credit provisions and the interplay of these items among and between their respective tax jurisdictions, based on different levels of intercompany foreign debt. As of December 31, 2001, the Company had deferred income tax assets of $72.7 million and a related valuation allowance of $45.7 million pursuant to the application of this prior accounting policy.

      The new methodology of accounting for deferred income taxes incorporates a strict jurisdictional view of SFAS No. 109, “Accounting for Income Taxes,” and assumes that the Company recorded deferred income taxes only for the future income tax impact of book and tax basis differences created as a result of multi-jurisdictional transactions. The Company believes that the new method has become more widely used in practice and is preferable because it eliminates the subjectivity and complexities involved in determining the timing and amount of the release or reversal of the valuation allowance under the prior method. This new approach ignores (i.e. in determining the amount of any recorded valuation allowance) the fact that future “incremental” income taxes may be paid in a separate tax jurisdiction as a result of the interplay among foreign and U.S. income tax statutes and accordingly may subject the Company to risk of increasing future income tax rates. After the accounting change, related deferred income tax assets

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QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

on January 1, 2002 were $72.7 million and no valuation allowance was required because it is more likely than not that there would be sufficient future taxable income on the U.S. federal income tax return to realize the benefit of future deductions of that amount which primarily represents deductible goodwill resulting from tax elections made at the time of the Company’s acquisition of Innovex Limited in November 1996. At December 31, 2002, the balance of the related deferred income tax assets was $65.4 million.

      In order to effect the change to this method of accounting as of January 1, 2002, the Company recorded a cumulative effect adjustment of $45.7 million representing the reversal of the valuation allowance related to deferred income taxes on these multi-jurisdictional income tax transactions. The change in accounting had no pro forma impact on the Company’s income in any prior quarterly or annual period.

20. Business Combinations

      In November 2003, the Company acquired Biomedical Systems Group (“BSG”), a clinical development services resource management company in Spain, for a purchase price of approximately $6.9 million including $3.4 million in cash. Under the purchase method of accounting, results of BSG are included in the Company’s results of operations as of the acquisition date and the assets and liabilities of BSG were recorded at their respective fair values. In connection with the BSG acquisition, the Company recorded approximately $5.4 million of goodwill. The former shareholders of BSG may receive additional cash consideration of up to 3.0 million euros (approximately $3.8 million) during 2004 and 2005 if certain revenue and backlog targets are met. The acquisition did not have a material impact on the financial position or results of operations for the Company.

      Prior to the Transaction, in September 2003, the Company acquired, for a purchase price of approximately $3.5 million including $1.2 million in cash, a controlling interest in Pharmaplan, a company headquartered in South Africa. Under the purchase method of accounting, the results of Pharmaplan are included in the Company’s results of operations as of the acquisition date and the assets and liabilities were recorded at their respective fair values. In connection with the Pharmaplan acquisition, the Company recorded approximately $1.9 million of goodwill. The acquisition did not have a material impact on the financial position or results of operations of the Company.

      In October 2002, the Company acquired, for approximately $1.8 million in cash, a controlling interest in HRS, a privately held Australian company specializing in multi-national late-phase clinical research. Under the purchase method of accounting, the results of HRS are included in the Company’s results of operations as of the acquisition date and the assets and liabilities of HRS were recorded at their respective fair values. In connection with the acquisition of HRS, the Company recorded $2.7 million of goodwill. In September 2003, the Company acquired the remaining interest in HRS for 71,724 shares of the Company’s Common Stock. The acquisition did not have a material impact on the financial position or results of operations for the Company.

      In March 2002, the Company acquired certain assets of Bioglan Pharma, Inc. for a total consideration of approximately $27.9 million. The assets included distribution rights to market ADOXA^TM in the United States for nine years along with other products and product rights that Bioglan Pharma, Inc. had previously marketed, as well as approximately $1.6 million in cash. Under the purchase method of accounting, the results of operations of Bioglan Pharma, Inc. are included in the Company’s results of operations as of March 22, 2002 and the assets and liabilities of Bioglan Pharma, Inc. were recorded at their respective fair values. The acquisition resulted in total intangible assets of $29.3 million. The acquisition did not have a material impact on the financial position or results of operations for the Company.

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QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

      During the first quarter of 2001, the Company acquired OEC, SA, a Switzerland-based company that provides drug safety services to the pharmaceutical industry, and Ungerer Laboratory, a laboratory based in Pretoria, South Africa specializing in microbiology, molecular biology and hematology. These transactions were accounted for as purchases with an aggregate purchase price of approximately $7.1 million. These acquisitions did not have a material impact on the financial position or results of operations for the Company.

21. Restructuring

      In connection with the Transaction, the Company adopted a restructuring plan (“2003 Plan”). As part of this plan, approximately 211 positions are to be eliminated mostly in Europe and the United States. As of December 31, 2003, 25 individuals had been terminated.

      As of December 31, 2003, the following amounts were recorded (in thousands):

Activity September 26, 2003 through December 31, 2003

	Balance at				2003 Plan			Balance at
	September 25,		2003 Plan		Write-Offs/			December 31,
	2003		Accrual		Payments			2003
Severance and related costs	$	—	$	8,669	$	(1,118	)	$	7,551
Asset write-offs		—		332		(332	)		—
Exit costs		—		219		(54	)		165
	$	—	$	9,220	$	(1,504	)	$	7,716

      During the period from July 1, 2003 through September 25, 2003 in connection with the Transaction, the Company reviewed its estimates of restructuring plans adopted during 2002, 2001 and 2000. This review resulted in a decrease of $1.0 million and $310,000 in severance payments for a plan adopted in 2002 and 2001, respectively. The decrease in severance payments was a result of the number of actual voluntary employee terminations exceeding the Company’s estimates. In addition, there was an increase of $6.4 million and $421,000 in exit costs for abandoned leased facilities for a plan adopted in 2001 and 2000, respectively. The increase was due to several factors including: (1) an increase in management’s previously estimated time required to sublet, (2) a decrease in the expected price per square foot to sublet or (3) an increase in the estimated cost to otherwise terminate the Company’s obligation under those leases brought about by prolonged stagnant conditions in local real estate markets.

      During the second quarter of 2002, the Company revised its estimates of the restructuring plan adopted during 2001 (“2001 Plan”) which resulted in a reduction of $9.1 million in accruals for the 2001 Plan. The reduction included approximately $5.7 million in severance payments and $3.4 million of exit costs. The reductions are primarily the result of a higher than expected number of voluntary terminations and the reversal of restructuring accruals due to the Company’s contribution of its informatics segment to the Verispan joint venture.

      Also during the second quarter of 2002, the Company recognized $9.1 million of restructuring charges as a result of the continued implementation of the strategic plan announced during 2001. This restructuring charge included revisions to 2001 and 2000 restructuring plans of approximately $2.5 million and $1.9 million, respectively, due to a revision in the estimates for the exit costs relating to the abandoned leased facilities. In addition, the adopted follow-on restructuring plan (“2002 Plan”) consisted of $4.3 million related to severance payments, $310,000 related to exit costs and $112,000 of asset write-offs. As part of this plan, approximately 99 positions are to be eliminated mostly in the Europe and Africa region. As of December 31, 2003, 78 individuals have been terminated.

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QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

      As of December 31, 2003, the following amounts were recorded (in thousands):

Activity September 26, 2003 through December 31, 2003

	Balance at		2002 Plan			Balance at
	September 25,		Write-Offs/			December 31,
	2003		Payments			2003
Exit costs	$	134	$	(3	)	$	131
	$	134	$	(3	)	$	131

Activity January 1, 2003 through September 25, 2003

	Balance at							2002 Plan			Balance at
	December 31,					Revised		Write-Offs/			September 25,
	2002		Revisions			Accrual		Payments			2003
Severance and related costs	$	2,066	$	(1,042	)	$	1,024	$	(1,024	)	$	—
Exit costs		154		—			154		(20	)		134
	$	2,220	$	(1,042	)	$	1,178	$	(1,044	)	$	134

      As of December 31, 2002, the following amounts were recorded (in thousands):

Activity Year Ended December 31, 2002

	Balance at				2002 Plan			Balance at
	December 31,		2002 Plan		Write-Offs/			December 31,
	2001		Accrual		Payments			2002
Severance and related costs	$	—	$	4,241	$	(2,175	)	$	2,066
Exit costs		—		310		(156	)		154
Asset write-offs		—		112		(112	)		—
	$	—	$	4,663	$	(2,443	)	$	2,220

      During the second quarter of 2001, the Company recognized a $2.1 million restructuring charge (“2001 A Plan”) relating primarily to severance costs from the reorganization of the Internet initiative and the commercial services group in the United States. All of the 40 positions to be eliminated as part of this restructuring were terminated as of June 30, 2001.

      During the third quarter of 2001, the Company recognized a $50.9 million restructuring charge (“2001 B Plan”). In addition, the Company recognized a restructuring charge of approximately $1.1 million as a revision of an estimate to a 2000 restructuring plan. The restructuring charge consisted of $31.1 million related to severance payments, $8.2 million related to asset impairment write-offs and $12.7 million of exit costs. As part of this restructuring, approximately 1,000 positions worldwide will be eliminated and as of December 31, 2003, 882 individuals have been terminated. In certain circumstances, international regulations and restrictions have caused the terminations to extend beyond one year. Positions have been eliminated in each of the segments.

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QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

      As of December 31, 2003, the following amounts were recorded (in thousands):

Activity September 26, 2003 through December 31, 2003

	2001 B Plan
	Balance at					Balance at
	September 25,		2001 B Plan			December 31,
	2003		Payment			2003
Exit costs	$	8,201	$	(569	)	$	7,632
	$	8,201	$	(569	)	$	7,632

Activity January 1, 2003 through September 25, 2003

	2001 B Plan
	Balance at										Balance at
	December 31,		Revisions to			Revised		2001 B Plan			September 25,
	2002		2001 B Plan			Accrual		Payment			2003
Severance and related costs	$	1,306	$	(310	)	$	996	$	(996	)	$	—
Exit costs		3,381		6,403			9,784		(1,583	)		8,201
	$	4,687	$	6,093		$	10,780	$	(2,579	)	$	8,201

      As of December 31, 2002, the following amounts were recorded (in thousands):

Activity Year Ended December 31, 2002

	2001 B Plan
	Balance at								Balance at
	December 31,		Revisions to			2001 B Plan			December 31,
	2001		2001 B Plan			Payment			2002
Severance and related costs	$	19,323	$	(5,725	)	$	(12,292	)	$	1,306
Exit costs		8,806		(875	)		(4,550	)		3,381
	$	28,129	$	(6,600	)	$	(16,842	)	$	4,687

      As of December 31, 2001, the following amounts were recorded (in thousands):

Activity Year Ended December 31, 2001

										2001 B
										Plan
										Write-			Balance at
	2001 A Plan		2001 B Plan		Total		2001 A Plan			offs/			December 31,
	Accrual		Accrual		Accrual		Payments			Payments			2001
Severance and related costs	$	1,970	$	31,134	$	33,104	$	(1,970	)	$	(11,811	)	$	19,323
Asset impairment write-offs		—		8,237		8,237		—			(8,237	)		—
Exit Costs		176		11,567		11,743		(176	)		(2,761	)		8,806
	$	2,146	$	50,938	$	53,084	$	(2,146	)	$	(22,809	)	$	28,129

      In January 2000, the Company announced the adoption of a restructuring plan (“January 2000 Plan”). In connection with this plan, the Company recognized a restructuring charge of $58.6 million. The restructuring charge consisted of $33.2 million related to severance payments, $11.3 million related to asset impairment write-offs and $14.0 million of exit costs. As part of this plan, approximately 770 positions worldwide were eliminated as of December 31, 2001. Although positions eliminated were across all functions, most of the eliminated positions were in the product development group.

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QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

      In the fourth quarter of 2000, the Company revised its estimates of the January 2000 Plan. This revision resulted in a reduction of the January 2000 Plan of $6.9 million. This reduction included $6.3 million in severance payments and $632,000 in exit costs. The severance reduction resulted primarily from a higher than expected number of voluntary terminations, reduced outplacement costs and related fringes.

      Also, during the fourth quarter of 2000, management conducted a detailed review of the resource levels within each business group. Based on this review, the Company adopted a follow-on restructuring plan (“2000 Follow-On Plan”) resulting in a restructuring charge of $7.1 million. The restructuring charge consisted of $5.8 million related to severance payments and $1.3 million related to exit costs. As part of this plan, approximately 220 positions were to be eliminated mostly in the commercial services group. As of December 31, 2003, 145 individuals have been terminated. In certain circumstances, international regulations and restrictions have caused the terminations to extend beyond one year.

      As of December 31, 2003, the following amounts were recorded (in thousands):

Activity September 26, 2003 through December 31, 2003

	Balance at								Balance at
	September 25,		January 2000			Follow-On Plan			December 31,
	2003		Plan Payments			Payments			2003
Severance and related costs	$	40	$	(24	)	$	—		$	16
Exit costs		421		—			(173	)		248
	$	461	$	(24	)	$	(173	)	$	264

Activity January 1, 2003 through September 25, 2003

	Balance at		Revisions to							Balance at
	December 31,		January		Revised		January 2000			September 25,
	2002		2000 Plan		Accrual		Plan Payments			2003
Severance and related costs	$	117	$	—	$	117	$	(77	)	$	40
Exit costs		1,443		421		1,864		(1,443	)		421
	$	1,560	$	421	$	1,981	$	(1,520	)	$	461

      As of December 31, 2002, the following amounts were recorded (in thousands):

Activity Year Ended December 31, 2002

	Balance at		Revisions to		Revisions to										Balance at
	December 31,		January		Follow-On		Revised		January 2000			Follow-On Plan			December 31,
	2001		2000 Plan		Plan		Accrual		Plan Payments			Payments			2002
Severance and related costs	$	894	$	—	$	—	$	894	$	(476	)	$	(301	)	$	117
Exit costs		1,714		644		1,293		3,651		(1,208	)		(1,000	)		1,443
	$	2,608	$	644	$	1,293	$	4,545	$	(1,684	)	$	(1,301	)	$	1,560

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QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

     As of December 31, 2001, the following amounts were recorded (in thousands):

Activity Year Ended December 31, 2001

	Balance at		Revisions to										Balance at
	December 31,		January		Revised		January 2000			2000 Follow-On			December 31,
	2000		2000 Plan		Accrual		Plan Payments			Plan Payments			2001
Severance and related costs	$	8,867	$	—	$	8,867	$	(3,530	)	$	(4,443	)	$	894
Exit costs		5,788		1,085		6,873		(4,351	)		(808	)		1,714
	$	14,655	$	1,085	$	15,740	$	(7,881	)	$	(5,251	)	$	2,608

22. Income Taxes

      As a result of the September 25, 2003 Transaction, the net book values of the Company’s assets and liabilities have been reestablished. Accordingly, deferred income taxes have been provided at December 31, 2003 based upon these reestablished values.

      The components of income tax expense (benefit) attributable to continuing operations are as follows (in thousands):

		September 26,			January 1,
		2003 through			2003 through			Year ended			Year ended
		December 31,			September 25,			December 31,			December 31,
		2003			2003			2002			2001
		Successor			Predecessor			Predecessor			Predecessor
Current:
	Federal	$	4,482		$	(429	)	$	15,732		$	13,130
	State		1,735			7,668			7,117			1,196
	Foreign		8,126			22,953			18,258			17,617
			14,343			30,192			41,107			31,943
Deferred expense (benefit):
	Federal and state		(398	)		3,639			11,014			(109,228	)
	Foreign		(3,233	)		(5,647	)		(10,694	)		(9,338	)
			(3,631	)		(2,008	)		320			(118,566	)
		$	10,712		$	28,184		$	41,427		$	(86,623	)

      The Company has allocated directly to additional paid-in capital approximately $3.2 million in the period from January 1, 2003 through September 25, 2003, $857,000 in 2002, and $15.9 million in 2001 related to the tax benefit from non-qualified stock options exercised.

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QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

      The differences between the Company’s consolidated income tax expense (benefit) attributable to continuing operations and the expense (benefit) computed at the 35% U.S. statutory income tax rate were as follows (in thousands):

	September 26,			January 1,
	2003 through			2003 through			Year ended			Year ended
	December 31,			September 25,			December 31,			December 31,
	2003			2003			2002			2001
	Successor			Predecessor			Predecessor			Predecessor
Federal income tax provision (benefit) at statutory rate	$	1,188		$	22,869		$	43,281		$	(91,874	)
State and local income taxes, net of federal benefit (detriment)		(137	)		1,482			1,764			(1,407	)
Non-deductible expenses and transaction costs		572			4,943			—			6,337
Deferred taxes recorded on foreign earnings		6,566			—			—			—
Foreign earnings taxed at different rates		(2,469	)		(749	)		(4,656	)		(3,208	)
Losses not utilized		—			—			—			911
Acquisition costs		4,694			—			—			—
Other		298			(361	)		1,038			2,618
	$	10,712		$	28,184		$	41,427		$	(86,623	)

      Income before income taxes from foreign operations was approximately $18.3 million, $42.9 million, $33.0 million, and $14.9 million for the period September 26, 2003 through December 31, 2003, the period January 1, 2003 through September 25, 2003, the year ended December 31, 2002, and the year ended December 31, 2001, respectively. Income from foreign operations was approximately $21.2 million, $67.6 million, $59.6 million, and $41.2 million for these same periods. The difference between income from operations and income before income taxes is due primarily to intercompany charges which eliminate in consolidation for financial statement purposes but, in some cases, do not eliminate for tax purposes. Undistributed earnings of the Company’s foreign subsidiaries amounted to approximately $246.6 million at December 31, 2003. As a result of the significant debt service requirements and other costs relating to the Transaction, those earnings are no longer considered to be indefinitely reinvested and, accordingly, the Company has recorded a deferred income tax liability of $94.8 million based upon the U.S. federal income tax rate. Upon distribution of those earnings in the form of dividends or otherwise, the Company would be subject to both U.S. income taxes (subject to an adjustment for foreign tax credits) and withholding taxes payable to the various countries.

96

QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

      The income tax effects of temporary differences from continuing operations that give rise to significant portions of deferred income tax assets (liabilities) are presented below (in thousands):

		December 31,			December 31,
		2003			2002
		Successor			Predecessor
Deferred income tax liabilities:
	Prepaid expenses	$	(7,589	)	$	(5,804	)
	Unrealized gain on equity investments		(13,315	)		(6,670	)
	Undistributed foreign earnings		(94,787	)		—
	Fixed assets		(13,511	)		—
	Identifiable intangibles		(55,277	)		—
	Deferred revenue and other		(10,753	)		(12,540	)
	Other		(2,939	)		(7,699	)
Total deferred income tax liabilities			(198,171	)		(32,713	)
Deferred income tax assets:
	Depreciation and amortization		15,904			16,323
	Net operating and capital loss carryforwards		126,367			120,721
	Accrued expenses and unearned income		35,251			26,043
	Goodwill, net of amortization		58,083			65,397
	Other		12,588			11,882
			248,193			240,366
Valuation allowance for deferred income tax assets			(122,091	)		(19,366	)
Total deferred income tax assets			126,102			221,000
Net deferred income tax (liabilities) assets		$	(72,069	)	$	188,287

      The Company’s valuation allowance of $122.1 million for deferred income tax assets increased by $102.7 million during 2003 due to the uncertainty related to realization of the deferred income tax asset for certain federal, state, and foreign net operating and capital losses. This uncertainty arose from the significant debt service requirements and other costs relating to the Transaction and its expected impact on the Company’s future operating results.

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QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

      The Company’s deferred income tax expense (benefit) attributable to continuing operations results from the following (in thousands):

		September 26,			January 1,
		2003 through			2003 through			Year ended			Year ended
		December 31,			September 25,			December 31,			December 31,
		2003			2003			2002			2001
		Successor			Predecessor			Predecessor			Predecessor
Excess (deficiency) of income tax over financial reporting:
	Depreciation and amortization	$	(3,753	)	$	6,276		$	(40,145	)	$	3,731
	Net operating and capital loss carryforwards		(615	)		(5,031	)		52,309			(113,129	)
	Valuation allowance increase (decrease)		—			—			—			911
	Accrued expenses and unearned income		262			(6,405	)		(4,377	)		(1,888	)
	Prepaid expenses		(1,136	)		2,921			(526	)		(628	)
	Deferred revenue		(911	)		(877	)		5,153			(4,037	)
	Undistributed foreign earnings		3,040			—			—			—
	Other items, net		(518	)		1,108			(12,094	)		(3,526	)
		$	(3,631	)	$	(2,008	)	$	320		$	(118,566	)

      The U.K. subsidiaries qualify for Scientific Research Allowances (SRAs) for 100% of capital expenditures on certain assets under the Inland Revenue Service guidelines. For the period September 26, 2003 through December 31, 2003, the period January 1, 2003 through September 25, 2003, the year ended December 31, 2002, and the year ended December 31, 2001, these allowances were $700,000, $7.3 million, $1.4 million and $7.8 million, respectively, which helped to generate net operating loss carryforwards to be used to offset taxable income in that country. Assuming the U.K. subsidiaries continue to invest in qualified capital expenditures at an adequate level, the portion of the deferred income tax liability relating to the U.K. subsidiaries may be deferred indefinitely. The Company recognizes a deferred income tax benefit for foreign generated operating losses at the time of the loss when the Company believes it is more likely than not that the benefit will be realized. The Company has net operating loss and capital loss carryforwards of approximately $149.0 million in various entities within the United Kingdom which have no expiration date and has over $62.9 million of net operating loss carryforwards from various foreign jurisdictions which have different expiration periods. In addition, the Company has approximately $262.7 million of U.S. state operating loss carryforwards which expire through 2023 and has approximately $36.5 million of U.S. federal operating loss carryforwards which expires in 2022. The Company also has a U.S. capital loss carryforward of approximately $90.9 million which expires in 2006. The Company evaluates its deferred income tax assets for realization based upon the more likely than not criteria prescribed in SFAS No. 109, “Accounting for Income Taxes.” Based upon current estimates, management believes it is more likely than not that the Company’s deferred income tax assets, after the effect of the recorded valuation allowance, will be realizable. The ultimate realization of deferred income tax assets is dependent upon the Company generating future taxable income and capital gains in sufficient amounts within the applicable carryforward period. Actual results could differ materially from management’s estimates.

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QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

23.     Weighted Average Shares Outstanding

      The following table sets forth the computation of the weighted-average shares used when calculating the basic and diluted net (loss) income per share (in thousands):

			September 26,		January 1,
			2003 through		2003 through		Year ended		Year ended
			December 31,		September 25,		December 31,		December 31,
			2003		2003		2002		2001
			Successor		Predecessor		Predecessor		Predecessor
Weighted average shares:
	Basic weighted average shares			125,000		118,358		118,135		118,223
	Effect of dilutive securities:
		Stock options		—		692		323		—
	Diluted weighted average shares			125,000		119,050		118,458		118,223

      The effect of options to purchase 20.6 million and 29.2 million shares of the Company’s Common Stock were outstanding during the period from January 1, 2003 through September 25, 2003, and the year ended December 31, 2002, respectively, but were not included in the computation of diluted net (loss) income per share because the options’ exercise price was greater than the average market price of the common shares and, therefore, the effect could be antidilutive. The Company did not have any outstanding stock options for the period of September 26, 2003 through December 31, 2003.

      The effect of options outstanding during 2001 were not included in the computation of diluted net (loss) income per share because the effect on loss from continuing operations would have been antidilutive.

      Warrants to purchase 10 million shares of common stock were outstanding from May 2000 until October 2001, but were not included in the computation of diluted net (loss) income per share because the effect on loss from continuing operations would have been antidilutive.

24.     Employee Benefit Plans

      The Company has numerous employee benefit plans, which cover substantially all eligible employees in the countries where the plans are offered. Contributions are primarily discretionary, except in some countries where contributions are contractually required. Plans include defined contribution plans in Austria, Belgium, Germany, Holland, Hungary, Israel, Netherlands, Poland, Sweden and Great Britain; profit sharing schemes in Canada and France; and defined benefit plans in Germany, Japan, Sweden and the U.K. The defined benefit plan in Germany is an unfunded plan, which is provided for in the balance sheet. The Approved Profit Sharing Schemes in the U.K. and Ireland are no longer funded. These plans were previously funded with Company stock, but the shares were exchanged for cash per the Agreement and Plan of Merger dated September 25, 2003. Final distributions are being made. In addition, the Company sponsors a supplemental non-qualified deferred compensation plan, covering certain management employees.

      In connection with the Transaction, the Company’s Employee Stock Ownership Plan for Non-U.S. Employees in Australia, Belgium, Canada and Singapore was terminated. These were contribution plans originally funded by Company stock.

      In connection with the Transaction, the ESOP/401(k) Plan was converted to a Profit-Sharing and 401(k) Plan. All shares under the ESOP were exchanged for cash and moved to the Profit-Sharing Plan for U.S. participants. For German participants, the German potion of the ESOP/401(k) Plan was spun off and terminated. Final distributions are being made for the German portion of the plan.

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QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

      The ESOP expense recognized is equal to the cost of the shares allocated to plan participants and the interest expense on the leveraged loans for the year. No shares were allocated to the Plan in either 2003, 2002 or 2001; therefore, there was no expense in those years. As of December 31, 2002 and 2001, 1,315,380 and 1,511,476 shares, respectively, were allocated to participants. There are no unallocated shares held in suspense as of September 25, 2003. All ESOP shares are considered outstanding for income per share calculations.

      Under the 401(k), the Company matches employee deferrals at varying percentages, set at the discretion of the Board of Directors. For the period September 26, 2003 through December 31, 2003, the period January 1, 2003 through September 25, 2003, the year ended December 31, 2002, and the year ended December 31, 2001, the Company expensed $1.7 million, $5.8 million, $7.2 million, and $9.5 million, respectively, as matching contributions.

      Participating employees in the Company’s employee stock purchase plan (the “Purchase Plan”) have the option to purchase shares at 85% of the lower of the closing price per share of common stock on the first or last day of the calendar quarter. The Purchase Plan is intended to qualify as an “employee stock purchase plan” under Section 423 of the Internal Revenue Code of 1986, as amended. During the period from January 1, 2003 through September 25, 2003, the year ended December 31, 2002 and the year ended December 31, 2001, 64,594, 351,695 and 382,968 shares, respectively, were purchased under the Purchase Plan. The Purchase plan was suspended during 2003 and later terminated due to the Transaction.

      Pharma Services has a stock option plan to provide incentives to eligible employees, officers and directors in the form of incentive stock options, non-qualified stock options and restricted stock. The Board of Directors determines the option price (not to be less than fair market value for incentive options) at the date of grant. Options, particularly those assumed or exchanged as a result of acquisitions, have various vesting schedules and terms. The majority of options granted under Pharma Services’ stock option plan typically vest 20% per year over five years and expire 10 years from the date of grant.

      As the Company has done in prior years, the Company reimburses its Chairman for business-related travel services he provides for himself and other Company employees with the use of his own airplane. For the period from January 1, 2003 through September 25, 2003 and the year ended December 31, 2002, these reimbursements totaled approximately $3.9 million and $2.8 million, respectively, which includes the granting of Company stock options with a Black-Scholes value of approximately $350,000 and $1.4 million, respectively. During the period from September 26, 2003 through December 31, 2003, the Company expensed approximately $1.7 million for such business-related travel expenses.

100

QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

      The Company’s stock option activity during the periods indicated is as follows:

					Weighted-
					Average
		Number of			Exercise
		Options			Price
Outstanding at December 31, 2000			27,158,181		$	21.80
	Granted		8,399,811			18.40
	Exercised		(2,514,514	)		12.88
	Canceled		(3,158,609	)		22.89
Outstanding at December 31, 2001			29,884,869			21.44
	Granted		7,311,605			12.78
	Exercised		(444,783	)		11.26
	Canceled		(3,094,059	)		21.47
Outstanding at December 31, 2002			33,657,632			19.69
	Granted		4,996,689			13.40
	Exercised		(698,028	)		8.76
	Canceled		(37,956,293	)		19.07
Outstanding at September 25, 2003			—		$	—

      Pharma Services’ stock option activity during the period from September 26, 2003 through December 31, 2003 indicated is as follows:

				Weighted-
				Average
		Number of		Exercise
		Options		Price
Outstanding at September 26, 2003			—	$	—
	Granted		3,350,000		14.50
	Exercised		—		—
	Canceled		—		—
Outstanding at December 31, 2003			3,350,000	$	14.50

      Selected information regarding Pharma Services’ stock options as of December 31, 2003 follows:

Options Outstanding								Options Exercisable
				Weighted-		Weighted-				Weighted-
				Average		Average				Average
Number of		Exercise Price		Exercise		Remaining		Number of		Exercise
Options		Range		Price		Life		Options		Price
	3,350,000	$	14.50 — $14.50	$	14.50		9.84		—	$	0.00
	3,350,000			$	14.50		9.84		—	$	0.00

      Pharma Services issued 7,356,000 shares of its common stock to certain of the Company’s employees at $0.2438 per share. Approximately $905,000 of loans to some of these employees from Pharma Services was outstanding as of December 31, 2003 in connection with the issuance.

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Notes to Consolidated Financial Statements — (Continued)

25.     Operations by Geographic Location

      The table below presents the Company’s operations by geographical location. The Company attributes revenues to geographical locations based upon (1) customer service activities, (2) operational management, (3) business development activities and (4) customer contract coordination. Investment revenues are included in the United States data. The Company’s operations within each geographical region are further broken down to show each country which accounts for 10% or more of the totals (in thousands):

					September 26,		January 1, 2003
					2003 through		through		Year ended		Year ended
					December 31, 2003		September 25, 2003		December 31, 2002		December 31, 2001
					Successor		Predecessor		Predecessor		Predecessor
Revenues:
	Americas:
			United States		$	155,509	$	490,338	$	694,809	$	815,204
			Other			10,30l		32,615		43,033		39,710
				Americas		165,810		522,953		737,842		854,914
	Europe and Africa:
			United Kingdom			94,876		254,872		344,392		330,087
			Other			119,256		285,791		317,367		271,730
				Europe and Africa		214,132		540,663		661,759		601,817
Asia-Pacific:
		Japan				56,333		128,489		133,745		117,407
		Other				14,635		38,035		59,413		46,345
				Asia-Pacific		70,968		166,523		193,158		163,752
						450,910		1,230,139		1,592,759		1,620,483
Reimbursed service costs						96,255		268,683		399,650		263,429
					$	547,165	$	1,498,822	$	1,992,409	$	1,883,912

				As of		As of		As of
				December 31, 2003		December 31, 2002		December 31, 2001
				Successor		Predecessor		Predecessor
Property, equipment and software, net:
	Americas:
		United States		$	167,574	$	165,628	$	203,685
		Other			2,151		1,729		1,856
			Americas		169,725		167,357		205,541
	Europe and Africa:
		United Kingdom			136,884		127,390		125,702
		Other			20,890		15,969		13,640
			Europe and Africa		157,774		143,359		139,342
	Asia-Pacific				19,096		17,186		17,423
				$	346,595	$	327,902	$	362,306

102

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Notes to Consolidated Financial Statements — (Continued)

26.     Segments

      The following table presents the Company’s operations by reportable segment. The Company is managed through three reportable segments, namely, the product development group, the commercial services group, and the PharmaBio Development group, which became a reportable segment in 2002. The informatics group was transferred to a joint venture in May 2002. Management has distinguished these segments based on the normal operations of the Company. The product development group is primarily responsible for all phases of clinical research and outcomes research consulting. The commercial services group is primarily responsible for sales force deployment and strategic marketing services. Before being transferred to the joint venture, the informatics group was primarily responsible for providing market research solutions and strategic analysis to support healthcare decisions. The PharmaBio Development group is primarily responsible for facilitating non-traditional customer alliances and consists primarily of product revenues, royalties and commissions and investment revenues relating to the financial arrangements with customers and other third parties. During 2002, the Late Phase, primarily Phase IV, operations previously included in the commercial services group were reclassified to the product development group in order to consolidate the operational and business development activities. These changes are reflected in all periods presented. The Company does not include general and administrative expenses, depreciation and amortization except amortization of commercial rights, interest (income) expense, other (income) expense and income tax expense (benefit) in segment profitability. Intersegment revenues have been eliminated (in thousands):

September 26, 2003 through December 31, 2003 — Successor

			Product		Commercial		PharmaBio
			development		services		Development		Eliminations			Consolidated
Service revenues:
	External		$	270,247	$	130,705	$	—	$	—		$	400,952
	Intersegment			—		10,458		—		(10,458	)		—
	Total net services			270,247		141,163		—		(10,458	)		400,952
	Reimbursed service costs			77,889		18,366		—		—			96,255
Gross service revenues				348,136		159,529		—		(10,458	)		497,207
Commercial rights and royalties				—		—		47,198		—			47,198
Investment				—		—		2,760		—			2,760
		Total revenues	$	348,136	$	159,529	$	49,958	$	(10,458	)	$	547,165
Contribution (revenues less costs of revenues, excluding depreciation and amortization expense except as noted below):
			$	141,046	$	55,353	$	9,736	$	—		$	206,135

103

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Notes to Consolidated Financial Statements — (Continued)

January 1, 2003 through September 25, 2003 — Predecessor

			Product		Commercial		PharmaBio
			development		services		Development		Eliminations			Consolidated
Service revenues:
	External		$	734,729	$	362,273	$	—	$	—		$	1,097,002
	Intersegment			—		29,777		—		(29,777	)		—
	Total net services			734,729		392,050		—		(29,777	)		1,097,002
	Reimbursed service costs			225,695		42,988		—		—			268,683
Gross service revenues				960,424		435,038		—		(29,777	)		1,365,685
Commercial rights and royalties				—		—		104,964		—			104,964
Investment				—		—		28,173		—			28,173
		Total revenues	$	960,424	$	435,038	$	133,137	$	(29,777	)	$	1,498,822
Contribution (revenues less costs of revenues, excluding depreciation and amortization expense except as noted below):
			$	375,125	$	142,144	$	43,001	$	—		$	560,270

Year ended December 31, 2002 — Predecessor

			Product		Commercial				PharmaBio
			development		services		Informatics		Development		Eliminations			Consolidated
Service revenues:
	External		$	944,861	$	503,466	$	20,347	$	—	$	—		$	1,468,674
	Intersegment			—		54,548		—		—		(54,548	)		—
	Total net services			944,861		558,014		20,347		—		(54,548	)		1,468,674
	Reimbursed service costs			312,669		86,959		22		—		—			399,650
Gross service revenues				1,257,530		644,973		20,369		—		(54,548	)		1,868,324
Commercial rights and royalties				—		—		—		110,381		—			110,381
Investment				—		—		—		13,704		—			13,704
		Total revenues	$	1,257,530	$	644,973	$	20,369	$	124,085	$	(54,548	)	$	1,992,409
Contribution (revenues less costs of revenues excluding depreciation and amortization expense except as noted below):
			$	477,492	$	207,711	$	8,024	$	17,620	$	—		$	710,847

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Notes to Consolidated Financial Statements — (Continued)

Year ended December 31, 2001 — Predecessor

			Product		Commercial				PharmaBio
			development		services		Informatics		Development			Eliminations			Consolidated
Service revenues:
	External		$	913,947	$	621,964	$	58,169	$	—		$	—		$	1,594,080
	Intersegment			—		12,900		—		—			(12,900	)		—
	Total net services			913,947		634,864		58,169		—			(12,900	)		1,594,080
	Reimbursed service costs			234,481		28,743		205		—			—			263,429
Gross service revenues				1,148,428		663,607		58,374		—			(12,900	)		1,857,509
Commercial rights and royalties				—		—		—		25,792			—			25,792
Investment				—		—		—		611			—			611
		Total revenues	$	1,148,428	$	663,607	$	58,374	$	26,403		$	(12,900	)	$	1,883,912
Contribution (revenues less costs of revenues excluding depreciation and amortization expense except as noted below):
			$	438,426	$	197,452	$	27,173	$	(2,311	)	$	—		$	660,740

		As of		As of		As of
		December 31,		December 31,		December 31,
		2003		2002		2001
		Successor		Predecessor		Predecessor
Total Assets:
	Product development	$	1,008,099	$	716,033	$	680,221
	Commercial services		266,021		384,814		229,190
	PharmaBio Development		356,121		315,633		164,111
	Informatics		—		—		124,057
	Corporate		362,470		637,715		656,215
		$	1,992,711	$	2,054,195	$	1,853,794

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Notes to Consolidated Financial Statements — (Continued)

		September 26,		January 1,
		2003 through		2003 through		Year ended		Year ended
		December 31,		September 25,		December 31,		December 31,
		2003		2003		2002		2001
		Successor		Predecessor		Predecessor		Predecessor
Expenditures to acquire long-lived assets:
	Product development	$	12,205	$	29,832	$	34,402	$	109,031
	Commercial services		1,858		8,759		4,656		12,520
	PharmaBio Development		118		540		247		—
	Informatics		—		—		666		9,962
	Corporate		713		551		186		2,470
		$	14,894	$	39,682	$	40,157	$	133,983
Depreciation and amortization expense:
	Product development	$	22,406	$	43,143	$	60,710	$	60,255
	Commercial services		9,177		15,521		21,926		23,823
	Informatics		—		—		2,559		10,031
	Corporate		2,987		604		953		986
Depreciation and amortization excluded from contribution			34,570		59,268		86,148		95,095
	PharmaBio Development		3,547		6,603		3,676		1,008
Total depreciation and amortization		$	38,117	$	65,871	$	89,824	$	96,103

27.     Guarantor Financial Information

      In connection with the issuance of the 10% Senior Subordinated Notes due 2013 in September 2003, the Company and all of its wholly owned domestic subsidiaries (“Guarantors”) have fully and unconditionally guaranteed, on a joint and several basis, the Company’s obligations under the related indentures (the “Guarantees”). Each Guarantee is subordinated in right of payment to the Guarantors’ existing and future senior debt, including obligations under the senior secured credit facility.

      The accompanying Guarantor condensed financial information is presented on the equity method of accounting for all periods presented. Under this method, investments in subsidiaries are recorded at cost and adjusted for the Company’s share in the subsidiaries’ cumulative results of operations, capital contributions and distributions and other changes in equity. Elimination entries relate primarily to the elimination of investments in subsidiaries and associated intercompany balances and transactions.

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Notes to Consolidated Financial Statements — (Continued)

      The following are condensed consolidating statements of operations of the Company for the periods from September 26, 2003 through December 31, 2003 and January 1, 2003 through September 25, 2003 and the year ended December 31, 2002 and the year ended December 31, 2001 (unaudited) (in thousands):

September 26, 2003 through December 31, 2003

		Quintiles			Subsidiary			Subsidiary
		Transnational Corp.			Guarantors			Non-Guarantors			Eliminations			Total
Gross revenues		$	963		$	208,792		$	344,260		$	(6,850	)	$	547,165
Costs, expenses and other:
	Costs of revenues		5,509			148,344			221,745			—			375,598
	General and administrative		12,625			54,475			94,438			(6,850	)		154,688
	Interest (income) expense, net		16,919			(6,687	)		5,658			—			15,890
	Other (income) expense, net		(14,272	)		14,586			(2,720	)		—			(2,406	)
	Transaction and restructuring		—			—			—			—			—
			20,781			210,718			319,121			(6,850	)		543,770
Income (loss) before income taxes			(19,818	)		(1,926	)		25,139			—			3,395
Income tax expense (benefit)			8,795			(1,176	)		3,093			—			10,712
Income (loss) before equity in earnings of unconsolidated affiliates and other			(28,613	)		(750	)		22,046			—			(7,317	)
Equity in earnings of unconsolidated affiliates and other			—			13			(123	)		—			(110	)
Subsidiary income			21,186			1,018			57			(22,261	)		—
Net income (loss)		$	(7,427	)	$	281		$	21,980		$	(22,261	)	$	(7,427	)

107

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Notes to Consolidated Financial Statements — (Continued)

January 1, 2003 through September 25, 2003

		Quintiles			Subsidiary			Subsidiary
		Transnational Corp.			Guarantors			Non-Guarantors			Eliminations			Total
Gross revenues		$	(3,233	)	$	649,428		$	870,967		$	(18,340	)	$	1,498,822
Costs, expenses and other:
	Costs of revenues		6,519			419,667			571,636			—			997,822
	General and administrative		32,747			147,648			235,263			(18,340	)		397,318
	Interest (income) expense, net		(3,111	)		(22,021	)		14,758			—			(10,374	)
	Other (income) expense, net		(33,379	)		16,628			11,318			—			(5,433	)
	Transaction and restructuring		48,537			(563	)		6,174			—			54,148
			51,313			561,359			839,149			(18,340	)		1,433,481
Income (loss) before income taxes			(54,546	)		88,069			31,818			—			65,341
Income tax expense (benefit)			(11,497	)		25,740			13,941			—			28,184
Income (loss) before equity in earnings of unconsolidated affiliates and other			(43,049	)		62,329			17,877			—			37,157
Equity in earnings of unconsolidated affiliates and other			—			(24	)		28			—			4
Subsidiary income			80,210			(16,554	)		(1,440	)		(62,216	)		—
Net income (loss)		$	37,161		$	45,751		$	16,465		$	(62,216	)	$	37,161

108

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Notes to Consolidated Financial Statements — (Continued)

Year ended December 31, 2002

		Quintiles			Subsidiary			Subsidiary
		Transnational Corp.			Guarantors			Non-Guarantors			Eliminations			Total
Gross revenues		$	(2,647	)	$	931,813		$	1,076,751		$	(13,508	)	$	1,992,409
Costs, expenses and other:
	Costs of revenues		6,351			636,482			724,878			—			1,367,711
	General and administrative		48,563			190,692			282,356			(13,508	)		508,103
	Interest (income) expense, net		(5,069	)		(28,310	)		19,191			—			(14,188	)
	Other (income) expense, net		(29,186	)		17,702			15,248			—			3,764
	Transaction and restructuring		3,359			—			—			—			3,359
			24,018			816,566			1,041,673			(13,508	)		1,868,749
Income (loss) before income taxes			(26,665	)		115,247			35,078			—			123,660
Income tax expense (benefit)			(1,870	)		32,339			10,958			—			41,427
Income (loss) before equity in earnings of unconsolidated affiliates and other			(24,795	)		82,908			24,120			—			82,233
Equity in earnings (losses) of unconsolidated affiliates and other			—			(543	)		(26	)		—			(569	)
Equity in subsidiary income			106,459			(23,872	)		(7,280	)		(75,307	)		—
Income (loss) from operations			81,664			58,493			16,814			(75,307	)		81,664
Cumulative effect on prior years (to December 31, 2001) of changing to a different method of recognizing deferred income taxes			45,659			—			—			—			45,659
Net income (loss)		$	127,323		$	58,493		$	16,814		$	(75,307	)	$	127,323

109

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Notes to Consolidated Financial Statements — (Continued)

Year ended December 31, 2001 (Unaudited)

		Quintiles			Subsidiary			Subsidiary
		Transnational Corp.			Guarantors			Non-Guarantors			Eliminations			Total
Gross revenues		$	(10,384	)	$	984,997		$	909,299		$	—		$	1,883,912
Costs, expenses and other:
	Costs of revenues		5,974			709,705			602,588			—			1,318,267
	General and administrative		48,466			225,736			246,478			—			520,680
	Interest (income) expense, net		(5,235	)		(31,690	)		20,253			—			(16,672	)
	Other (income) expense, net		(29,523	)		21,408			8,604			—			489
	Transaction and restructuring		1,141			24,153			28,875			—			54,169
	Impairment on investment in WebMD common stock		325,553			—			—			—			325,553
	Settlement of litigation		(83,200	)		—			—			—			(83,200	)
	Write-off of goodwill and other assets		1,207			22,146			3,769			—			27,122
			264,383			971,458			910,567			—			2,146,408
Income (loss) before income taxes			(274,767	)		13,539			(1,268	)		—			(262,496	)
Income tax expense (benefit)			(90,302	)		4,754			(1,075	)		—			(86,623	)
Income (loss) before equity in earnings of unconsolidated affiliates and other			(184,465	)		8,785			(193	)		—			(175,873	)
Equity in earnings of unconsolidated affiliates and other			—			—			—			—			—
Equity in subsidiary income			150,622			(33,944	)		(628	)		(116,050	)		—
Income (loss) from continuing operations			(33,843	)		(25,159	)		(821	)		(116,050	)		(175,873	)
Extraordinary gain from sale of discontinued operation, net of income taxes			—			142,030			—			—			142,030
Net income (loss)		$	(33,843	)	$	116,871		$	(821	)	$	(116,050	)	$	(33,843	)

110

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Notes to Consolidated Financial Statements — (Continued)

      The following are condensed consolidating balance sheets of the Company as of December 31, 2003 and December 2002 (in thousands):

As of December 31, 2003

		Quintiles			Subsidiary			Subsidiary
		Transnational Corp.			Guarantors			Non-Guarantors			Eliminations			Total
Assets
Current assets:
	Cash and cash equivalents	$	(7,138	)	$	188,475		$	193,826		$	—		$	375,163
	Trade accounts receivable and unbilled services, net		—			84,148			155,846			—			239,994
	Other current assets		5,885			23,669			48,495			—			78,049
Total current assets			(1,253	)		296,292			398,167			—			693,206
Property and equipment, net			1,863			125,838			158,666			—			286,367
Intangibles and other assets:
	Investments		20,147			339,797			1,143			—			361,087
	Goodwill and other identifiable intangibles, net		13,429			255,552			326,592			—			595,573
	Deposits and other assets		27,156			12,158			17,164			—			56,478
	Investments in subsidiaries		1,739,676			(201,283	)		77,107			(1,615,500	)		—
Total intangibles and other assets			1,800,408			406,224			422,006			(1,615,500	)		1,013,138
Total assets		$	1,801,018		$	828,354		$	978,839		$	(1,615,500	)	$	1,992,711
Liabilities and Shareholders’ Equity
Current liabilities:
	Accounts payable and accrued expenses	$	58,482		$	67,640		$	191,637			—		$	317,759
	Credit arrangements		3,100			752			16,834			—			20,686
	Unearned income		—			76,126			115,129			—			191,255
	Other current liabilities		58,871			4,006			(32,833	)		—			30,044
Total current liabilities			120,453			148,524			290,767			—			559,744
Long-term liabilities:
	Credit arrangements, less current portion		756,125			3,634			13,869			—			773,628
	Other liabilities		98,924			(8,375	)		33,692			—			124,241
	Net intercompany payables		290,418			(774,401	)		483,983			—			—
Total long-term liabilities			1,145,467			(779,142	)		531,544			—			897,869
Total liabilities			1,265,920			(630,618	)		822,311			—			1,457,613
Total shareholders’ equity			535,098			1,458,972			156,528			(1,615,500	)		535,098
Total liabilities and shareholders’ equity		$	1,801,018		$	828,354		$	978,839		$	(1,615,500	)	$	1,992,711

111

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Notes to Consolidated Financial Statements — (Continued)

As of December 31, 2002

		Quintiles			Subsidiary			Subsidiary
		Transnational Corp.			Guarantors			Non-Guarantors			Eliminations			Total
Assets
Current assets:
	Cash and cash equivalents	$	220		$	390,064		$	254,000		$	—		$	644,284
	Trade accounts receivable and unbilled services, net		—			107,467			148,180			—			255,647
	Other current assets		12,347			38,051			41,990			—			92,388
Total current assets			12,567			535,582			444,170			—			992,319
Property and equipment, net			865			120,789			140,504			—			262,158
Intangibles and other assets:
	Investments		37,572			334,992			901			—			373,465
	Goodwill and other identifiable intangibles, net		2,068			68,015			142,765			—			212,848
	Deposits and other assets		70,847			103,644			38,914			—			213,405
	Investments in subsidiaries		1,232,909			(145,491	)		73,598			(1,161,016	)		—
Total intangibles and other assets			1,343,396			361,160			256,178			(1,161,016	)		799,718
Total assets		$	1,356,828		$	1,017,531		$	840,852		$	(1,161,016	)	$	2,054,195
Liabilities and Shareholders’ Equity
Current liabilities:
	Accounts payable and accrued expenses	$	16,277		$	72,557		$	149,435		$	—		$	238,269
	Credit arrangements		—			961			20,758			—			21,719
	Unearned income		—			61,965			79,753			—			141,718
	Other current liabilities		46,059			(30,256	)		6,337			—			22,140
Total current liabilities			62,336			105,227			256,283			—			423,846
Long-term liabilities:
	Credit arrangements, less current portion		—			5,546			13,309			—			18,855
	Other liabilities		3,000			1,400			8,708			—			13,108
	Net intercompany payables		(306,894	)		(292,335	)		599,229			—			—
Total long-term liabilities			(303,894	)		(285,389	)		621,246			—			31,963
Total liabilities			(241,558	)		(180,162	)		877,529			—			455,809
Total shareholders’ equity			1,598,386			1,197,693			(36,677	)		(1,161,016	)		1,598,386
Total liabilities and shareholders’ equity		$	1,356,828		$	1,017,531		$	840,852		$	(1,161,016	)	$	2,054,195

112

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Notes to Consolidated Financial Statements — (Continued)

      The following are condensed consolidating statements of cash flows of the Company for the periods from September 26, 2003 through December 31, 2003 and January 1, 2003 through September 25, 2003 and the year ended December 31, 2002 and the year ended December 31, 2001 (unaudited) (in thousands):

September 26, 2003 through December 31, 2003

		Quintiles			Subsidiary			Subsidiary
		Transnational Corp.			Guarantors			Non-Guarantors			Eliminations			Total
Operating activities:
	Net (loss) income	$	(7,427	)	$	281		$	21,980		$	(22,261	)	$	(7,427	)
	Cumulative effect on prior years (to December 31, 2001) of changing to a different period of recognizing deferred income taxes		—			—			—			—			—
	(Loss) income from operations		(7,427	)		281			21,980			(22,261	)		(7,427	)
Adjustments to reconcile income from operations to net cash provided by operating activities:
	Depreciation and amortization		3,153			17,268			17,696			—			38,117
	Amortization of debt issuance costs		878			—			—			—			878
	Restructuring charge (payments) accrual, net		(27	)		(433	)		(1,482	)		—			(1,942	)
	(Gain) loss from sales and impairments of investments, net		(1,149	)		(1,803	)		—			—			(2,952	)
	Provision for (benefit from) deferred income tax expense		(387	)		(75	)		1,167			—			705
	Change in operating assets and liabilities		53,914			14,867			9,785			—			78,566
	Investment in subsidiaries and intercompany		(29,749	)		1,074			6,414			22,261			—
	Other		—			(157	)		(173	)		—			(330	)
Net cash provided by operating activities			19,206			31,022			55,387			—			105,615
Investing activities:
Acquisition of property and equipment			(586	)		(6,889	)		(7,419	)		—			(14,894	)
Repurchase of common stock in Transaction			(1,617,567	)		—			—			—			(1,617,567	)
Payment of transaction costs in Transaction			(64,734	)		—			—			—			(64,734	)
Acquisition of businesses, net of cash acquired			—			—			(3,363	)		—			(3,363	)
Acquisition of commercial rights and royalties			—			(3,000	)		—			—			(3,000	)
Proceeds from disposition of property and equipment			—			310			1,650			—			1,960
Proceeds from (purchases of) debt securities, net			(1,212	)		326			—			—			(886	)
Purchases of equity securities and other investments			24,013			(30,023	)		(10	)		—			(6,020	)
Proceeds from sale of equity securities and other investments			—			7,633			—			—			7,633
Net cash (used in) provided by investing activities			(1,660,086	)		(31,643	)		(9,142	)		—			(1,700,871	)
Financing activities:
Proceeds from borrowings, net of costs			734,529			(1,096	)		—			—			733,433
Principal payments on credit arrangements			(775	)		(338	)		(4,534	)		—			(5,647	)
Capital contribution (successor)			390,549			—			—			—			390,549
Net cash provided by (used in) financing activities			1,124,303			(1,434	)		(4,534	)		—			1,118,335
Effect of foreign currency exchange rate changes on cash			—			—			9,788			—			9,788
(Decrease) increase in cash and cash equivalents			(516,577	)		(2,055	)		51,499			—			(467,133	)
Cash and cash equivalents at beginning of period			509,439			190,526			142,331			—			842,296
Cash and cash equivalents at end of period		$	(7,138	)	$	188,471		$	193,830		$	—		$	375,163

113

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Notes to Consolidated Financial Statements — (Continued)

January 1, 2003 through September 25, 2003

		Quintiles			Subsidiary			Subsidiary
		Transnational Corp.			Guarantors			Non-Guarantors			Eliminations			Total
Operating activities:
	Net (loss) income	$	37,161		$	45,751		$	16,465		$	(62,216	)	$	37,161
	Cumulative effect on prior years (to December 31, 2001) of changing to a different period of recognizing deferred income taxes		—			—			—			—			—
	Income from operations		37,161			45,751			16,465			(62,216	)		37,161
Adjustments to reconcile income from operations to net cash provided by operating activities:
	Depreciation and amortization		1,034			27,712			37,125			—			65,871
	Restructuring charge (payments) accrual, net		(634	)		(2,050	)		2,967			—			283
	Transaction costs		44,057			—			—			—			44,057
	Loss (gain) from sales and impairments of investments, net		2,661			(30,024	)		—			—			(27,363	)
	Provision for (benefit from) deferred income tax expense		11,696			(1,414	)		2,310			—			12,592
	Change in operating assets and liabilities		(37,365	)		47,483			28,054			—			38,172
	Investment in subsidiaries and intercompany		453,500			(332,346	)		(183,370	)		62,216			—
	Other		(478	)		(1,114	)		688			—			(904	)
Net cash provided by operating activities			511,632			(246,002	)		(95,761	)		—			169,869
Investing activities:
Acquisition of property and equipment			(277	)		(18,915	)		(20,490	)		—			(39,682	)
Payment of transaction costs in Transaction			(2,896	)		—			—			—			(2,896	)
Acquisition of businesses, net of cash acquired			—			—			(1,379	)		—			(1,379	)
Acquisition of intangible assets			—			(500	)		(4,019	)		—			(4,519	)
Acquisition of commercial rights and royalties			—			(17,710	)		—			—			(17,710	)
Proceeds from disposition of property and equipment			—			1,330			4,889			—			6,219
Proceeds from (purchases of) debt securities, net			(1,353	)		26,620			—			—			25,267
Purchases of equity securities and other investments			(6,320	)		(4,471	)		(39	)		—			(10,830	)
Proceeds from sale of equity securities and other investments			1,391			60,533			2			—			61,926
Net cash (used in) provided by investing activities			(9,455	)		46,887			(21,036	)		—			16,396
Financing activities:
Principal payments on credit arrangements			—			(565	)		(12,654	)		—			(13,219	)
Issuance of common stock, net (predecessor)			7,042			—			—			—			7,042
Net cash provided by (used in) financing activities			7,042			(565	)		(12,654	)		—			(6,177	)
Effect of foreign currency exchange rate changes on cash			—			142			17,782			—			17,924
(Decrease) increase in cash and cash equivalents			509,219			(199,538	)		(111,669	)		—			198,012
Cash and cash equivalents at beginning of period			220			390,064			254,000			—			644,284
Cash and cash equivalents at end of period		$	509,439		$	190,526		$	142,331		$	—		$	842,296

114

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Notes to Consolidated Financial Statements — (Continued)

Year ended December 31, 2002

		Quintiles			Subsidiary			Subsidiary
		Transnational Corp.			Guarantors			Non-Guarantors			Eliminations			Total
Operating activities:
	Net income	$	127,323		$	58,493		$	16,814		$	(75,307	)	$	127,323
	Cumulative effect on prior years (to December 31, 2001) of changing to a different period of recognizing deferred income taxes		(45,659	)		—			—			—			(45,659	)
	Income from operations		81,664			58,493			16,814			(75,307	)		81,664
Adjustments to reconcile income from operations to net cash provided by operating activities:
	Depreciation and amortization		2,410			42,868			44,546			—			89,824
	Restructuring charge (payments) accrual, net		(2,609	)		(5,817	)		(12,732	)		—			(21,158	)
	Loss (gain) from sales and impairments of investments, net		1,870			(16,531	)		951			—			(13,710	)
	Provision for (benefit from) deferred income tax expense		4,408			(237	)		(1,707	)		—			2,464
	Change in operating assets and liabilities		38,648			9,226			57,135			—			105,009
	Investment in subsidiaries and intercompany		(64,383	)		(64,414	)		53,490			75,307			—
	Other		30			1,411			958			—			2,399
Net cash provided by operating activities			62,038			24,999			159,455			—			246,492
Investing activities:
Acquisition of property and equipment			(880	)		(18,380	)		(20,897	)		—			(40,157	)
Acquisition of businesses, net of cash acquired			—			(5,499	)		(22,469	)		—			(27,968	)
Acquisition of intangible assets			—			—			(2,541	)		—			(2,541	)
Advances to customer			—			(70,000	)		—			—			(70,000	)
Acquisition of commercial rights and royalties			—			(15,790	)		—			—			(15,790	)
Proceeds from disposition of property and equipment			—			(265	)		6,555			—			6,290
Proceeds from (purchases of) debt securities, net			(1,981	)		767			—			—			(1,214	)
Purchases of equity securities and other investments			(25,499	)		7,894			(494	)		—			(18,099	)
Proceeds from sale of equity securities and other investments			148			27,313			—			—			27,461
Advances to unconsolidated affiliates			(10,000	)		—			(328	)		—			(10,328	)
Net cash (used in) provided by investing activities			(38,212	)		(73,960	)		(40,174	)		—			(152,346	)
Financing activities:
Principal payments on credit arrangements			—			(617	)		(14,857	)		—			(15,474	)
Issuance of common stock, net (predecessor)			9,641			—			—			—			9,641
Repurchase of common stock			(27,024	)		—			—			—			(27,024	)
Net cash provided by (used in) financing activities			(17,383	)		(617	)		(14,857	)		—			(32,857	)
Effect of foreign currency exchange rate changes on cash			—			(384	)		18,316			—			17,932
(Decrease) increase in cash and cash equivalents			6,443			(49,962	)		122,740			—			79,221
Cash and cash equivalents at beginning of period			(6,223	)		440,026			131,260			—			565,063
Cash and cash equivalents at end of period		$	220		$	390,064		$	254,000		$	—		$	644,284

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QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

Year ended December 31, 2001 (Unaudited)

		Quintiles			Subsidiary			Subsidiary
		Transnational Corp.			Guarantors			Non-Guarantors			Eliminations			Total
Operating activities:
	Net (loss) income	$	(33,843	)	$	116,871		$	(821	)	$	(116,050	)	$	(33,843	)
	Extraordinary gain from sale of discontinued operation, net of income tax		—			(142,030	)		—			—			(142,030	)
	(Loss) income from operations		(33,843	)		(25,159	)		(821	)		(116,050	)		(175,873	)
Adjustments to reconcile income from operations to net cash provided by operating activities:
	Depreciation and amortization		849			53,045			42,209			—			96,103
	Restructuring charge (payments) accrual, net		1,048			22,849			19,078			—			42,975
	(Gain) loss from sales and impairments of investments, net		356,553			(32,533	)		(19,078	)		—			304,942
	Provision for (benefit from) deferred income tax expense		(179,235	)		120,790			(5,915	)		—			(64,360	)
	Change in operating assets and liabilities		163,521			(115,838	)		(4,848	)		—			42,835
	Investment in subsidiaries and intercompany		(410,882	)		213,499			81,333			116,050			—
	Other		—			177			557			—			734
Net cash provided by operating activities			(101,989	)		236,830			112,515			—			247,356
Investing activities:
Acquisition of property and equipment			(17,539	)		(88,262	)		(28,182	)		—			(133,983	)
Acquisition of businesses, net of cash acquired			—			—			(6,620	)		—			(6,620	)
Acquisition of intangible assets			—			—			(26,735	)		—			(26,735	)
Acquisition of commercial rights and royalties			—			(10,000	)		—			—			(10,000	)
Proceeds from disposition of property and equipment			—			1,004			6,544			—			7,548
Proceeds from (purchases of) debt securities, net			(3,787	)		75,683			—			—			71,896
Purchases of equity securities and other investments			(25,565	)		(27,379	)		—			—			(52,944	)
Proceeds from sale of equity securities and other investments			121,944			12,538			—			—			134,482
Net cash (used in) provided by investing activities			75,053			(36,416	)		(54,993	)		—			(16,356	)
Financing activities:
Principal payments on credit arrangements			—			(530	)		(13,395	)		—			(13,925	)
Issuance of common stock, net (predecessor)			48,439			—			—			—			48,439
Repurchase of common stock			(22,694	)		—			—			—			(22,694	)
Net cash provided by (used in) financing activities			25,745			(530	)		(13,395	)		—			11,820
Effect of foreign currency exchange rate changes on cash			—			(6	)		(7,965	)		—			(7,971	)
(Decrease) increase in cash and cash equivalents			(1,191	)		199,878			36,162			—			234,849
Cash and cash equivalents at beginning of period			(5,032	)		240,148			95,098			—			330,214
Cash and cash equivalents at end of period		$	(6,223	)	$	440,026		$	131,260		$	—		$	565,063

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QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

28.     Quarterly Financial Data (Unaudited)

      The following is a summary of unaudited quarterly results of operations (in thousands, except per share amounts):

	2003
								September 26
								through
					July 1, 2003 through			September 30,		Fourth
	First Quarter		Second Quarter		September 25, 2003			2003		Quarter
	Predecessor		Predecessor		Predecessor			Successor		Successor
Gross revenues	$	511,607	$	520,033	$	467,182		$	22,992	$	524,173
Income from continuing operations before income taxes		38,121		44,814		(17,594	)		1,245		2,150
Income (loss) from continuing operations		25,156		29,597		(17,592	)		819		(8,246	)
Net income	$	25,156	$	29,597	$	(17,592	)	$	819	$	(8,246	)
Basic net income per share	$	0.21	$	0.25	$	(0.15	)	$	0.01	$	(0.07	)
Diluted net income per share	$	0.21	$	0.25	$	(0.15	)	$	0.01	$	(0.07	)
Range of stock prices	$	11.990-13.210	$	12.190-14.250	$	13.660-14.490			N/A		N/A

		2002
		First Quarter		Second Quarter		Third Quarter		Fourth Quarter
		Predecessor		Predecessor		Predecessor		Predecessor
Gross revenues		$	493,296	$	498,233	$	490,965	$	509,915
Income from continuing operations before income taxes			25,762		30,074		33,798		34,026
Income (loss) from continuing operations			17,261		20,626		21,179		22,598
Cumulative effect on prior years (to December 31, 2001) of changing to a different method of recognizing deferred income taxes			45,659		—		—		—
Net income		$	62,920	$	20,626	$	21,179	$	22,598
Basic net income per share:
	Income from continuing operations	$	0.15	$	0.17	$	0.18	$	0.19
	Cumulative effect of change in accounting principle		0.38		—		—		—
	Basic net income per share	$	0.53	$	0.17	$	0.18	$	0.19
Diluted net income per share:
	Income from continuing operations	$	0.14	$	0.17	$	0.18	$	0.19
	Cumulative effect of change in accounting principle		0.38		—		—		—
	Diluted net income per share	$	0.52	$	0.17	$	0.18	$	0.19
Range of stock prices		$	14.680-19.300	$	11.300-17.700	$	8.350-12.457	$	7.650-12.360

      As discussed in Note 19, the Company changed its method for calculating deferred income taxes related to multi-jurisdictional tax transactions effective January 1, 2002.

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REPORT OF INDEPENDENT AUDITORS

To the Board of Directors and Shareholders of Quintiles Transnational Corp.:

      In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of operations, of cash flows, and of shareholders’ equity present fairly, in all material respects, the financial position of Quintiles Transnational Corp. and its subsidiaries at December 31, 2003 and the results of their operations and their cash flows for the period from September 26, 2003 through December 31, 2003 in conformity with accounting principles generally accepted in the United States of America. 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 audit. We conducted our audit of these statements in accordance with auditing standards generally accepted in the United States of America, 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 audit provides a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

Raleigh, North Carolina

February 25, 2004

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REPORT OF INDEPENDENT AUDITORS

To the Board of Directors and Shareholders of Quintiles Transnational Corp.:

      In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of operations, of cash flows, and of shareholders’ equity present fairly, in all material respects, the financial position of Quintiles Transnational Corp. and its subsidiaries at December 31, 2002 and the results of their operations and their cash flows for the period from January 1, 2003 through September 25, 2003 and for the year ended December 31, 2002, in conformity with accounting principles generally accepted in the United States of America. 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 auditing standards generally accepted in the United States of America, 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 our opinion. The financial statements of Quintiles Transnational Corp. as of December 31, 2001, and for the year then ended, before the revisions described in Note 2, 12 and 26, were audited by other independent auditors who have ceased operations. Those independent auditors expressed an unqualified opinion on those financial statements in their report dated January 23, 2002, except with respect to the matters discussed in Note 23, as to which the date is March 22, 2002*.

      As discussed in Note 19 to the financial statements, the Company changed its method for recording the benefit of international, multi-jurisdictional tax strategies on January 1, 2002.

      As discussed in Note 12 to the financial statements, the Company changed its method of accounting for goodwill upon the adoption of the accounting guidance of Statement of Financial Accounting Standards No. 142 on January 1, 2002.

      As discussed above, the financial statements of Quintiles Transnational Corp. and subsidiaries as of December 31, 2001, and for the year then ended, were audited by other independent auditors who have ceased operations. As described in Notes 2 and 26, these financial statements have been restated to reflect the adoption of Emerging Issues Task Force 01-14, “Income Statement Characterization of Reimbursements Received for ‘Out-of-Pocket’ Expenses Incurred,” and the change in the composition of the Company’s reportable segments, respectively. As described in Note 12, these financial statements have also been revised to include the transitional disclosures required by Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets,” which was adopted by the Company as of January 1, 2002. We audited the adjustments described in Notes 2 and 26 that were applied to revise the 2001 financial statements. We also audited the transitional disclosures described in Note 12. In our opinion, such adjustments are appropriate and have been properly applied and the transitional disclosures for 2001 in Note 12 are appropriate. However, we were not engaged to audit, review, or apply any procedures to the 2001 financial statements of the Company other than with respect to such adjustments and disclosures and, accordingly, we do not express an opinion or any other form of assurance on the 2001 financial statements taken as a whole.

/s/ PricewaterhouseCoopers LLP

Raleigh, North Carolina

February 25, 2004

* This reference refers to Note 23 on Form 10-K for the year ended December 31, 2001.

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      This is a copy of the audit report previously issued by Arthur Andersen LLP in connection with our filing on Form 10-K for the fiscal year ended December 31, 2001. This audit report has not been reissued by Arthur Andersen LLP in connection with this filing on Form 10-K. The financial statements to which this report relates have been revised as discussed in Note 2. These changes are not covered by the copy of the report of Arthur Andersen LLP and were audited by PricewaterhouseCoopers LLP as described in their report.

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Quintiles Transnational Corp.:

      We have audited the accompanying consolidated balance sheets of Quintiles Transnational Corp. (a North Carolina corporation) and subsidiaries as of December 31, 2001 and 2000, and the related consolidated statements of operations, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2001. 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 in accordance with auditing standards generally accepted in the United States. Those standards 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. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

      In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Quintiles Transnational Corp. and subsidiaries as of December 31, 2001 and 2000, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States.

ARTHUR ANDERSEN LLP

Raleigh, North Carolina,

January 23, 2002, except with respect to

the matters discussed in Note 23, as to

which the date is March 22, 2002*

* This reference refers to Note 23 on Form 10-K for the year ended December 31, 2001.

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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

      On May 22, 2002, we filed a Current Report on Form 8-K reporting that on May 17, 2002, our board of directors dismissed Arthur Andersen LLP and engaged PricewaterhouseCoopers LLP as our independent public accountants for our fiscal year ended December 31, 2002.

Item 9A. Controls and Procedures

      Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as of the end of the period covered by this Form 10-K. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this Form 10-K, our disclosure controls and procedures provide reasonable assurances that the information we are required to disclose in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time period required by the United States Securities and Exchange Commission’s rules and forms. There have been no changes in our internal controls over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the period covered by this Form 10-K that materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

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PART III

Item 10. Directors and Executive Officers of the Registrant

      Set forth below is certain information with respect to each of our executive officers and directors. There are no family relationships between any of our directors or executive officers. Each of our directors holds office until their respective successors are elected and qualified or until their earlier resignation or removal. Each of our directors also serves as a director of Pharma Services and Intermediate Holding.

				First Year
				Elected
Name	Position With Company	Age		Director
Dennis B. Gillings, Ph.D.	Executive Chairman, Chief Executive Officer and Director		59		1982
James L. Bierman	Executive Vice President, Chief Financial Officer and Director		51		2003
John S. Russell	Executive Vice President, General Counsel and Chief Administrative Officer		49		N/A
Ronald J. Wooten	Executive Vice President, Corporate Development		44		N/A
Oppel Greeff	President of Global Product Development		55		N/A
Richard M. Cashin, Jr.	Director		50		2003
Clateo Castellini(3)	Director		68		2004
Jonathan J. Coslet(1)(2)	Director		39		2004
Jack M. Greenberg(1)	Director		61		2004
Robert A. Ingram(2)(3)	Director		61		2004
S. Iswaran(2)	Director		41		2003
Jacques Nasser(2)	Director		57		2003
James S. Rubin(1)(3)	Director		36		2003

(1)	Member of Audit Committee
(2)	Member of Compensation and Nominations Committee
(3)	Member of Quality/ Regulatory Committee

      Dennis B. Gillings, Ph.D. has served as our Executive Chairman and Chief Executive Officer, as well as a Director since the Pharma Services transaction. Dr Gillings began providing statistical consulting and data management services to pharmaceutical customers in 1974 during his tenure as professor of biostatistics at the University of North Carolina at Chapel Hill. Quintiles arose from these consulting services and was founded by Dr. Gillings in 1982. Dr. Gillings also has served as the Chairman of Quintiles’ board of directors since our inception and served as our Chief Executive Officer from our inception until April 2001. Dr. Gillings currently oversees our corporate strategic planning, as chair of the strategy committee, and is active in our continued international expansion, particularly in Japan and the Asia-Pacific region. Dr. Gillings serves on several other boards and councils, including ICAgen, Inc.; the UNC School of Public Health Dean’s Advisory Council; the Graduate Education Advancement board of UNC; the North Carolina Institute of Medicine; and the UNC Health Care Systems. He formerly served as the founding Chairman of the Association of Clinical Research Organizations, a Washington-based trade group formed in 2002. Dr. Gillings received a diploma in Mathematical Statistics from Cambridge University in 1967 and a Ph.D. in Mathematics from the University of Exeter, England, in 1972. He served for more than 15 years as a professor at the University of North Carolina at Chapel Hill and received the Honorary Degree of Doctor of Science from the University in May 2001.

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      James L. Bierman has served as a Director and our Executive Vice President and Chief Financial Officer since the Pharma Services transaction. In January 2004, Mr. Bierman announced his intention to retire from this position. To help ensure a smooth transition of his responsibilities, Mr. Bierman has agreed, pursuant to an amended employment agreement, to remain in his position until June 30, 2004, if necessary. Prior to the Pharma Services transaction, Mr. Bierman had served as our Chief Financial Officer since February 2000. Mr. Bierman joined us in June 1998 as Senior Vice President of Corporate Development and had global responsibility for all mergers, acquisitions, strategic investments, and joint ventures. Prior to joining us, Mr. Bierman spent 22 years with Arthur Andersen, LLP, working with a diversified base of companies solving complex business problems, whether operational, financial, or accounting-related in nature. He is a member of both the North Carolina Association of Certified Public Accountants and the Pennsylvania Institute of Certified Public Accountants. Mr. Bierman received his Bachelor of Arts in Economics/ History from Dickinson College and received his MBA from Cornell University’s Johnson Graduate School of Management.

      John S. Russell has served as our Executive Vice President, General Counsel and Chief Administrative Officer since the Pharma Services transaction. Prior to the Pharma Services transaction, Mr. Russell had served as our General Counsel since 1998. Mr. Russell’s duties include acting as General Counsel, Board Secretary and manager of global Quality Assurance and Regulatory Matters as well as Government Relations. Previously, he also served as our Head of Global Human Resources. Prior to joining us in 1998, Mr. Russell practiced law for 12 years in the Research Triangle Park area of North Carolina, concentrating in the creation and acquisition of high technology and life sciences companies, and worked for four years at Houghton Mifflin Company in New York. He has served as a director of public and private companies and as Board Secretary of the Association of Clinical Research Organizations. Mr. Russell holds degrees from the University of North Carolina at Chapel Hill (B.A., 1977), Columbia University (M.A., 1978), and Harvard Law School (J.D., 1985).

      Ronald J. Wooten has served as our Executive Vice President, Corporate Development since June 2003. Mr. Wooten joined us in July 2000 as Senior Vice President, Finance to manage the formation of the PharmaBio Development Group and to contribute to the execution of our merger and acquisition and corporate finance strategies. Mr. Wooten’s previous experience includes nine years with First Union Securities, now Wachovia Securities, Inc., where Mr. Wooten most recently served as a Managing Director in Investment Banking. His capital markets and corporate finance experience includes mergers and acquisitions, public and private equity finance and fixed income advisory. Mr. Wooten earned his Bachelors degree in Chemistry from the University of North Carolina at Chapel Hill and a Masters degree in Finance from Boston University.

      Oppel Greeff, M.D. has served as our President of Global Product Development since 2002. Prior to his current position, Dr. Greeff worked in various capacities within our Africa-India region. Before joining us, Dr. Greeff founded or co-founded several corporations, including PharmaNet, Inc., a retail pharmacy franchise. Dr. Greeff received an M.D. in Psychiatry at the University of Natal. Dr. Greeff also received his MpharmMed and MBChB degrees from the University of Pretoria.

      Richard M. Cashin, Jr. has served as a Director since the Pharma Services transaction. Mr. Cashin is the Managing Partner of One Equity, the private equity arm of Bank One Corporation. One Equity manages $3.5 billion of investments and commitments. Prior to joining One Equity, Mr. Cashin was at Citicorp Venture Capital from 1980 to 2000 (President 1994 — 2000), where he led investments in approximately 100 companies. Mr. Cashin serves on the board of directors of Titan International, Inc., Delco Remy International Inc. and Fairchild Semiconductor International Inc. Mr. Cashin received his MBA from Harvard Business School.

      Clateo Castellini has served as a Director since January 2004. Mr. Castellini served as the Chairman, President & CEO of Becton, Dickinson and Company from 1994 until 1999 and also served as the Chairman of its board of directors from 1999 until 2003 and continues to serve as Director Emeritus. Prior to joining Becton Dickinson and Company, Mr. Castellini served in various management positions at Dow-Lepetit Pharmaceuticals, a subsidiary of the Dow Chemical Company. Mr. Castellini has also served as a

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director for Bestfoods, Inc., a leading manufacturer of food products in the United States and Canada, from 1997 until 1999 and currently serves on the board of directors of A-Bio Pharma Pte. Ltd, a biologics contract manufacturer located in Singapore and EDB and A-Bio, two other companies located in Singapore. Mr. Castellini received a degree from Bocconi University in Milano, Italy and an MBA from Harvard Business School.

      Jonathan J. Coslet has served as a Director since the Pharma Services transaction. Mr. Coslet is a Senior Partner of Texas Pacific Group. responsible for the firm’s generalist and healthcare investment activities. Mr. Coslet is also a member of the firm’s Investment Committee and Management Committee. Prior to joining Texas Pacific Group in 1993, Mr. Coslet was in the Investment Banking department of Donaldson, Lufkin & Jenrette, specializing in leveraged acquisitions and high yield finance from 1991 to 1993. From 1987 to 1989, Mr. Coslet worked at Drexel Burnham Lambert. Mr. Coslet serves on the boards of directors of Oxford Health Plans, Inc., Petco Animal Supplies, Inc., Endurance Specialty Holdings Ltd., and J.Crew Group, Inc. Mr. Coslet received his MBA from Harvard Graduate School of Business Administration in 1991, where he was a Baker Scholar and a Loeb Fellow. Mr. Coslet received his Bachelor of Science in Economics (Finance) from the University of Pennsylvania Wharton School, where he was Valedictorian, summa cum laude, a Gordon Fellow, and a Steur Fellow.

      Jack M. Greenberg has served as a Director since January 2004. At the end of 2002, Mr. Greenberg retired as Chairman and Chief Executive Officer of McDonald’s Corporation. Mr. Greenberg has served as McDonald’s Chairman since May 1999 and its Chief Executive Officer since August 1998. Mr. Greenberg served as McDonald’s President from August 1998 to May 1999, and as its Vice-Chairman from December 1991 to 1998. Mr. Greenberg also served as Chairman (from October 1996) and Chief Executive Officer (from July 1997) of McDonald’s USA, a division of McDonald’s Corporation until August 1998. Mr. Greenberg is a member of the American Institute of Certified Public Accountants, the Illinois CPA Society and the Chicago Bar Association. Mr. Greenberg is a director of The Allstate Corporation, Abbott Laboratories, First Data Corporation, Hasbro, Inc. and Manpower, Inc. Mr. Greenberg is also a member of the board of trustees of Ronald McDonald House Charities, DePaul University, where he previously served as Chairman, the Field Museum, the Chicago Symphony Orchestra and the Institute of International Education. Mr. Greenberg is a graduate of DePaul University’s School of Commerce and School of Law.

      Robert A. Ingram has served as a Director since February 2004. Mr. Ingram has been the Vice Chairman of Pharmaceuticals of GlaxoSmithKline plc since January of 2003. Mr. Ingram was the Chief Operating Officer and President, Pharmaceutical Operations of GlaxoSmithKline plc from January 2001 to January 2003. Mr. Ingram was Chief Executive of Glaxo Wellcome plc from October 1997 to December 2000 and Chairman of Glaxo Wellcome Inc., Glaxo Wellcome plc’s U.S. subsidiary, from January 1999 to December 2000. Mr. Ingram was Chairman, President and Chief Executive Officer of Glaxo Wellcome plc from October 1997 to January 1999. Mr. Ingram serves on the board of directors of Edwards Life Sciences, Lowe’s Companies, Inc., Misys plc, Molson Inc., Nortel Networks, OSI Pharmaceuticals, Valent Pharmaceuticals International and Wachovia Corporation. Mr. Ingram received his Bachelor of Science in Business Administration from Eastern Illinois University.

      S. Iswaran has served as a Director since November 2003. Mr. Iswaran is the Managing Director at Temasek Holdings (Pte) Ltd. Mr. Iswaran was previously Director (Strategic Development) at Singapore Technologies Pte Ltd. Prior to that, Mr. Iswaran was Director for Trade in the Ministry of Trade & Industry. Mr. Iswaran is a Member of Parliament of the West Coast GRC of Singapore. Mr. Iswaran serves on the board of directors of Sunningdale Precision Industries Ltd, SembCorp Industries Ltd, Hyflux Ltd and SciGen Ltd. Mr. Iswaran graduated with a Bachelor of Economics (First Class Honours) from the University of Adelaide, Australia, in 1986 and a Master of Public Administration from Harvard University in 1995.

      Jacques Nasser has served as a Director since September 2003. Mr. Nasser is a Senior Partner with One Equity and also serves as the Non-Executive Chairman of Polaroid Corporation, the instant-imaging company based in Waltham, Mass., which was acquired by an affiliate of One Equity in July 2002 following Polaroid’s voluntary bankruptcy filing in 2001. Mr. Nasser also serves on the International

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Advisory board of Allianz AG and on the board of directors of News Corporation’s British Sky Broadcasting Group. Prior to joining One Equity, Mr. Nasser served as the President Chief Executive Officer of Ford Motor Company, Inc. from January 1999 until October 2001 and served as a member of Ford’s board of directors from 1998 until 2001. Mr. Nasser’s 33-year career with Ford covered a variety of positions and assignments including senior leadership responsibilities in Europe, Australia, Asia and South America. Mr. Nasser also oversaw the growth and acquisition of Jaguar, Aston Martin, Volvo, Land Rover and Hertz. Mr. Nasser holds an honorary Doctorate and a Business degree from the Royal Melbourne Institute of Technology.

      James S. Rubin has served as Director since September 2003. Mr. Rubin is a Partner with One Equity. Prior to joining One Equity, Mr. Rubin was a Vice President with Allen & Company, Incorporated, a New York investment bank specializing in media and entertainment transactions and advisory work. From 1996 to 1998, he held a number of senior positions with the Federal Communications Commission under Chairman Reed Hundt, including Executive Director of the Education Technology Task Force and General Counsel to the Chief of the Wireless Bureau. Mr. Rubin received his Bachelor of Arts in History from Harvard University and received his Juris Doctor from Yale Law School.

Nomination of Directors

      Pharma Services entered into a stockholders agreement in connection with the Pharma Services transaction that requires each stockholder who is party to that agreement to vote his/her/its respective shares of common stock of Pharma Services in favor of ten nominees to the board of directors of Pharma Services. The stockholders agreement also provides that the constituents on our board of directors and the committees thereof are the same as Pharma Services. Each stockholder has agreed to vote all shares for the following directors: (i) one individual to be designated by Dr. Gillings, who is currently Dr. Gillings; (ii) three individuals to be designated by One Equity, whom are currently Messrs. Cashin, Nasser and Rubin; (iii) one member of management who shall be the chief financial officer until a chief executive officer (other than Dr. Gillings) or a new chief operating officer is hired, who is currently Mr. Bierman; (iv) two individuals who are not affiliates or associates of any stockholder or employee of Pharma Services or any of its subsidiaries that are initially mutually designated by One Equity, Dr. Gillings, Temasek and TPG and thereafter by the Compensation and Nominations Committee of the board of directors, whom are currently Messrs. Greenberg and Ingram; (v) two individuals to be designated by Temasek, whom are currently Messrs. S. Iswaran and Castellini; and (vi) one individual to be designated by TPG, who is currently Mr. Coslet. In addition, the Pharma Services Plan requires each holder of shares of Pharma Services common stock issued under the Pharma Services Plan to vote in the election of directors as directed by the Pharma Services board of directors, which shall be consistent with the provisions of the stockholders agreement. The rollover agreements entered by certain of our executive officers (among others) in connection with the Pharma Services transaction include similar provisions.

      Our board has determined that Mr. Greenberg is an independent director who qualifies as an audit committee financial expert, as that term is defined in Item 401(h) of Regulation S-K. The board also has determined that Messrs. Rubin and Coslet, who serve with Mr. Greenberg on the Audit Committee, also qualify as audit committee financial experts. As to Messrs. Rubin and Coslet, who serve as board representatives for One Equity and TPG, respectively, the board made no determination of their independence and without that determination, they should not be assumed to be independent.

Code of Ethics

      Our executive officers are subject to a code of ethics that complies with standards mandated by the Sarbanes-Oxley Act of 2002. The complete code of ethics is available on our website at www.quintiles.com. At any time it is not available on our website, we will provide a copy upon written request made to our Corporate Communication Department, at 4709 Creekstone Drive, Suite 200, Durham, North Carolina 27703-8411. Information on our website is not part of this report. If we amend or grant any waiver from a provision of our code of ethics that applies to our executive officers, we will publicly disclose such amendment or waiver as required by applicable law, including by posting such amendment or waiver on our website at www.quintiles.com or by filing a Current Report on Form 8-K.

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Section 16(a) — Beneficial Ownership Reporting Compliance

      Section 16(a) of the Exchange Act requires our executive officers, directors and greater-than 10% shareholders to file reports of ownership and changes in ownership with the SEC. Based solely upon review of Forms 3 and 4 and amendments thereto furnished to us during fiscal 2003, we believe that all Section 16(a) filing requirements applicable to our executive officers, directors and greater-than-10% shareholders were fulfilled during 2003 in a timely manner. No Forms 5 were required to be filed with respect to fiscal year 2003.

Item 11. Executive Compensation

      The following table shows the annual and long-term compensation paid to or accrued by us for the two individuals serving as Chief Executive Officer and the next four most highly compensated executive officers during the year ended December 31, 2003 (collectively, the “named executive officers”) for services rendered to us during the fiscal years indicated.

Summary Compensation Table

				Annual Compensation									Long Term Compensation
																Number of Shares of
																Common Stock
																Underlying Options
													Restricted
Name and										Other Annual			Stock						Pharma		All Other
Principal Position		Year		Salary			Bonus			Compensation			Awards			Quintiles(3)			Services		Compensation
Dennis B. Gillings(1)			2003	$	706,061		$	0		$	—	(2)		—			242,692	(4)		—	$	1,705,704	(5)
	Executive Chairman And		2002		600,000	(6)		80,067				(2)					339,733	(7)				847,422	(8)
	Chief Executive Officer		2001		600,000	(9)		31,875	(10)			(2)					372,323	(11)				724,318	(12)
James L. Bierman			2003	$	371,000		$	92,750		$	—	(2)		—			97,076			—	$	595,235	(13)
	Executive Vice President,		2002		365,750			65,956				(2)					144,387					5,782	(14)
	Chief Financial Officer		2001		368,749			12,031				(2)					106,470					9,332	(15)
John S. Russell			2003	$	316,227	(16)	$	709,000		$	—	(2)	$	0	(17)		97,076			225,000	$	590,587	(18)
	Executive Vice President,		2002		283,250	(19)		24,694				(2)					142,743					9,663	(20)
	General Counsel, and		2001		271,248	(21)		9,453	(22)			(2)					95,800	(23)				9,332	(24)
	Chief Administrative Officer
Ronald J. Wooten(25)			2003	$	295,833	(26)	$	825,000		$	—	(2)	$	0	(27)		54,363			225,000	$	252,288	(28)
	Executive Vice President, Corporate Development
Oppel Greeff(29)			2003	$	333,864	(30)	$	690,000		$	50,914	(31)	$	0	(32)		97,076			225,000	$	389,053	(33)
	President of Global Product Development
Pamela J. Kirby(34)			2003	$	471,224		$	144,375	(35)	$	—	(2)		—			169,884			—	$	4,908,285	(36)
	Former Chief Executive		2002		570,625			63,463	(37)			(2)					237,813					1,413	(38)
	Officer		2001		412,047			24,063	(39)			(2)					1,127,703	(40)				1,342	(41)

(1)	Dr. Gillings became our Executive Chairman and Chief Executive Officer effective September 25, 2003.
(2)	Perquisites and other personal benefits received did not exceed the lesser of $50,000 or 10% of salary and bonus compensation for the named executive officer.
(3)	In connection with the Pharma Services transaction, all options to purchase shares of our common stock, or the Quintiles options, became fully vested and exercisable. Messrs. Russell and Wooten and Dr. Greeff were each given the opportunity to roll over the “in-the-money value” of their Quintiles options for a combination of shares of common stock and Series A Preferred Stock of Pharma Services, referred to as the Pharma Services Units. The “in-the-money value” of such options means the excess of $14.50 over the exercise price of the option to purchase shares of our common stock, multiplied by the number of shares subject to each such option, less any applicable withholding taxes. Messrs. Russell and Wooten and Dr. Greeff elected to roll over $300,000, $232,028 and $361,569, respectively, of the “in-the-money value” of their Quintiles options to acquire Pharma Services Units. See “Management Agreements” below. Apart from the rollover arrangements

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described above, in connection with the Pharma Services transaction, Dr. Gillings rolled over $1,456,768 of the value of his Quintiles options (other than those options issued to Dr. Gillings for the use of his plane) to acquire Pharma Services Units. Quintiles options held by named executive officers prior to the Pharma Services transaction and not rolled over for Pharma Services Units, including those held by Dr. Kirby and Mr. Bierman, were canceled in exchange for a cash payment equal to the “in-the-money value” of such options. The value of the Quintiles options rolled over in the Pharma Services transaction is reflected in the “All Other Compensation” column. See “Aggregated Option Exercises in Last Fiscal Year and Fiscal Year End Option Values” under this Item 11 and “Certain Relationships and Related Transactions” under Item 13 for additional details regarding Quintiles options held by the named executive officers that were canceled in the Pharma Services transaction.

(4)	In 2003, Dr. Gillings used his own airplane to provide extensive business-related travel services for himself and other of our employees. To reimburse Dr. Gillings for the use of his plane prior to the Pharma Services transaction, we made cash payments of $2,328,724, which is in addition to the amounts shown in the table. In addition, on March 17, 2003, we granted Dr. Gillings Quintiles options with an aggregate Black-Scholes value of approximately $350,000. These options to purchase 49,869 shares at an exercise price of $12.27 per share are not included in the table because they were not treated as long-term compensation. To reimburse Dr. Gillings for the use of his plane after the Pharma Services transaction, we made a cash payment of $1,096,455, which is in addition the amounts shown in the table. See “Certain Relationships and Related Transactions” under Item 13 for additional information regarding these arrangements.
(5)	Includes $5,625 of matching contributions under the 401(k) Plan, $105 of estimated forfeitures allocated under the profit sharing portion of the 401(k) Plan, $240,884 for the present value of the benefit to Dr. Gillings of the premiums we paid in prior years under a split-dollar life insurance arrangement (we paid no premiums in 2003) (see “Certain Relationships and Related Transactions” under Item 13 for additional information), $2,322 of other life insurance premiums we paid, and $1,456,768 related to the cancellation of options (other than those options issued to Dr. Gillings for the use of his plane) in connection with the Pharma Services transaction, all of which Dr. Gillings used to acquire Pharma Services Units.
(6)	Includes $540,000 deferred during 2002 pursuant to our Elective Deferred Compensation Plan.
(7)	In 2002, Dr. Gillings used his own plane to provide extensive business-related travel services for himself and other of our employees. To reimburse Dr. Gillings for these services, the Human Resources and Compensation Committee of our former board of directors authorized cash payments up to approximately $1.4 million, which is in addition to the amounts shown in this table. We also granted Quintiles options to Dr. Gillings with an aggregate Black-Scholes value of approximately $1.4 million in quarterly installments with an exercise price on March 31, 2002 of $17.75 per share; on June 15, 2002 of $13.09 per share; on September 16, 2002 of $9.76 per share; and on December 16, 2002 of $12.11 per share. These options to purchase 190,250 shares are not included in the table because they were not treated as long-term compensation.
(8)	Includes $1,688 of matching contributions under the 401(k) portion of the ESOP and 401(k) Plan, $158 for the estimated value of forfeitures allocated under the ESOP portion of the ESOP and 401(k) Plan, $843,255 for the present value of the benefit to Dr. Gillings of the premiums we paid under a split-dollar life insurance arrangement, and $2,321 of other life insurance premiums we paid.
(9)	Includes $540,000 deferred during 2001 pursuant to our Elective Deferred Compensation Plan.

(10)

Includes $31,875 relating to bonus payable for 2001 deferred during 2002 pursuant to our Elective Deferred Compensation Plan.

(11)

Includes 8,281 shares subject to options granted pursuant to the 2001 bonus. In 2001, Dr. Gillings used his own plane to provide extensive business-related travel services for himself and other of our employees. To reimburse Dr. Gillings for these services, the Human Resources and Compensation Committee authorized cash payments up to $1.4 million, which is in addition to the amounts shown in this table. We also granted Quintiles options to Dr. Gillings with an aggregate Black-Scholes

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	value of $1.4 million in quarterly installments with an exercise price on March 31, 2001 of $18.875 per share; on June 30, 2001 of $25.25 per share; on September 30, 2001 of $14.60 per share; and on December 31, 2001 of $16.05 per share. These options are included in the table as long-term compensation.
(12)	Includes $2,700 of matching contributions under the 401(k) portion of the ESOP and 401(k) Plan, $869 for the estimated value of forfeitures allocated under, as well as $1,228 in interest under, the ESOP portion of the ESOP and 401(k) Plan, $717,199 for the present value of the benefit to Dr. Gillings of the premiums we paid under a split-dollar life insurance arrangement, and $2,322 in other life insurance premiums we paid.
(13)	Includes $8,533 of matching contributions under the 401(k) Plan, $105 for the estimated forfeitures allocated under the profit sharing portion of the 401(k) Plan, $1,242 in life insurance premiums, $580,632 related to the cancellation of Quintiles options in connection with the Pharma Services transaction, and $4,723 in disqualifying dispositions under the Employee Stock Purchase Plan as a result of the Pharma Services transaction.
(14)	Includes $3,938 in matching contributions under the 401(k) portion of the ESOP and 401(k) Plan, $602 for the estimated value of forfeitures allocated under the ESOP portion of the ESOP and 401(k) Plan, and $1,242 in life insurance premiums.
(15)	Includes $7,650 in matching contributions under the 401(k) portion of the ESOP and 401(k) Plan, $869 for the estimated value of forfeitures allocated under, as well as $3 in interest under, the ESOP portion of the ESOP and 401(k) Plan, and $810 in life insurance premiums.
(16)	Includes $15,215 deferred during 2003 pursuant to our Elective Deferred Compensation Plan.
(17)	Pharma Services granted Mr. Russell the right to purchase 450,000 shares of its restricted common stock, at a purchase price of $0.2438, or fair market value, per share. $0 represents the dollar value at the date of the grant, less the amounts paid by Mr. Russell for the award. The aggregate fair market value of the shares at the time of grant and at the end of fiscal year 2003 was $109,710, or the equivalent of the aggregate purchase price paid by Mr. Russell for the restricted shares.
(18)	Includes $9,000 in matching contributions under the 401(k) Plan, $105 for the estimated forfeitures allocated under the profit sharing portion of the 401(k) Plan, $1,225 in life insurance premiums, $579,110 related to the cancellation of Quintiles options in connection with the Pharma Services transaction, $300,000 of which Mr. Russell used to acquire Pharma Services Units, and $1,147 in disqualifying dispositions under the Employee Stock Purchase Plan as a result of the Pharma Services transaction.
(19)	Includes $28,325 deferred during 2002 pursuant to our Elective Deferred Compensation Plan.
(20)	Includes $8,250 in matching contributions under the 401(k) portion of the ESOP and 401(k) Plan, $603 for the estimated value of forfeitures allocated under the ESOP portion of the ESOP and 401(k) Plan, and $810 in life insurance premiums.
(21)	Includes $27,125 deferred during 2001 pursuant to our Elective Deferred Compensation Plan.
(22)	Includes $945 relating to bonus payable for 2001 deferred during 2002 pursuant to our Elective Deferred Compensation Plan.
(23)	Includes 2,456 shares subject to Quintiles options granted pursuant to the 2001 bonus.
(24)	Includes $7,650 in matching contributions under the 401(k) portion of the ESOP and 401(k) Plan, $869 for the estimated value of forfeitures under, as well as $3 in interest under, the ESOP portion of the ESOP and 401(k) plan, and $810 in life insurance premiums.
(25)	Mr. Wooten became the Company’s Executive Vice President, Corporate Development in June 2003. We have not provided information about any compensation paid to Mr. Wooten for any periods in which he did not serve as an executive officer.
(26)	Includes $28,490 deferred during 2003 pursuant to our Elective Deferred Compensation Plan.
(27)	Pharma Services granted Mr. Wooten the right to purchase 450,000 shares of its restricted common stock, at a purchase price of $0.2438, or fair market value, per share. $0 presents the dollar value at

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	the date of the grant, less the amounts paid by Mr. Wooten for the award. The aggregate fair market value of the shares at the time of grant and at the end of fiscal year 2003 was $109,710, or the equivalent of the aggregate purchase price paid by Mr. Wooten for the restricted shares.
(28)	Includes $9,000 in matching contributions under the 401(k) Plan, $105 for the estimated forfeitures allocated under the profit sharing portion of the 401(k) Plan, $850 in life insurance premiums, and $242,333 related to the cancellation of Quintiles options in connection with the Pharma Services transaction, $232,028 of which Mr. Wooten used to acquire Pharma Services Units.
(29)	Dr. Greeff became an executive officer in 2003. We have not provided information about any compensation paid to Dr. Greeff for any periods in which he did not serve as an executive officer.
(30)	Includes $44,291 deferred during 2003 pursuant to our Elective Deferred Compensation Plan.
(31)	Includes $40,000 for housing allowance, $10,164 for automobile allowance and $750 for tax preparation services.
(32)	Pharma Services granted Dr. Greeff the right to purchase 450,000 shares of its restricted common stock, at a purchase price of $0.2438, or fair market value, per share. $0 represents the dollar value at the date of the grant, less the amounts paid by Dr. Greeff for the award. The aggregate fair market value of the shares at the time of grant and at the end of fiscal year 2003 was $109,710, or the equivalent of the aggregate purchase price paid by Dr. Greeff for the restricted shares.
(33)	Includes $9,000 in matching contributions under the 401(k) Plan, $105 for estimated forfeitures allocated under the profit sharing portion of the 401(k) Plan, $2,322 in life insurance premiums, and $377,626 related to the cancellation of Quintiles options in connection with the Pharma Services transaction, $361,569 of which Dr. Greeff used to acquire Pharma Services Units.
(34)	Dr. Kirby resigned as Chief Executive Officer effective September 25, 2003.
(35)	Includes $142,282 relating to bonus deferred during 2003 pursuant to our Elective Deferred Compensation Plan.
(36)	Includes $983 in life insurance premiums, $756,822 related to the cancellation of Quintiles options in connection with the Pharma Services transaction, and $4,150,480 in severance pay.
(37)	Includes $62,543 relating to bonus payable for 2002 deferred during 2003 pursuant to our Elective Deferred Compensation Plan.
(38)	Includes $603 for the estimated value of forfeitures allocated under the ESOP portion of the ESOP and 401(k) Plan and $810 in life insurance premiums.
(39)	Includes $24,063 relating to bonus payable for 2001 deferred during 2002 pursuant to our Elective Deferred Compensation Plan.
(40)	Includes 3,126 shares subject to Quintiles options granted pursuant to the 2001 bonus.
(41)	Includes $869 for the estimated value of forfeitures allocated under the ESOP portion of the ESOP and 401(k) plan, and $473 in life insurance premiums.

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Option Grants In Last Fiscal Year

Quintiles Transnational Corp.

      The following table reflects the Quintiles options granted during the past fiscal year to the named executive officers pursuant to our 2002 Stock Option Plan, Equity Compensation Plan and Nonqualified Stock Option Plan. No stock appreciation rights were granted to the named executive officers during 2003. Immediately prior to the effective time of the Pharma Services transaction, we took all actions necessary so that each outstanding option granted under any of our option plans became fully vested and exercisable immediately prior to the effective time of the Pharma Services transaction. We also canceled any option to purchase shares of our common stock (other than options held by Pharma Services or its subsidiaries) that was not exercised prior to completion of the Pharma Services transaction in exchange for the right to receive cash in an amount equal to the “in-the-money value” of the options. Following the Pharma Services transaction, each of these plans was terminated.

	Individual Grants										Potential
											Realizable Value
				Percent of							at Assumed
				Total							Annual Rates of
	Number of			Options							Stock Price
	Securities			Granted to			Exercise				Appreciation for
	Underlying			Employees in			or Base				Option Term(1)
	Options			Fiscal			Price Per		Expiration
Name	Granted			Year(2)			Share($)		Date(3)		5%($)		10%($)
Dennis B. Gillings		89,052	(4)		1.8	%		12.27		03/17/2013		N/A		N/A
		49,869	(4)		1.0	%		12.27		03/17/2013		N/A		N/A
		79,011	(5)		1.6	%		14.23		06/16/2013		N/A		N/A
		74,629	(6)		1.5	%		14.42		09/15/2013		N/A		N/A
James L. Bierman		35,621	(4)		0.7	%		12.27		03/17/2013		N/A		N/A
		31,604	(5)		0.6	%		14.23		06/16/2013		N/A		N/A
		29,851	(6)		0.6	%		14.42		09/15/2013		N/A		N/A
John S. Russell		35,621	(4)		0.7	%		12.27		03/17/2013		N/A		N/A
		31,604	(5)		0.6	%		14.23		06/16/2013		N/A		N/A
		29,851	(6)		0.6	%		14.42		09/15/2013		N/A		N/A
Ronald J. Wooten		19,948	(4)		0.4	%		12.27		03/17/2013		N/A		N/A
		17,698	(5)		0.4	%		14.23		06/16/2013		N/A		N/A
		16,717	(6)		0.3	%		14.42		09/15/2013		N/A		N/A
Oppel Greeff		35,621	(4)		0.7	%		12.27		03/17/2013		N/A		N/A
		31,604	(5)		0.6	%		14.23		06/16/2013		N/A		N/A
		29,851	(6)		0.6	%		14.42		09/15/2013		N/A		N/A
Pamela J. Kirby		62,336	(4)		1.3	%		12.27		03/17/2013		N/A		N/A
		55,308	(5)		1.1	%		14.23		06/16/2013		N/A		N/A
		52,240	(6)		1.1	%		14.42		09/15/2013		N/A		N/A

(1)	All outstanding options were canceled September 25, 2003 in connection with the Pharma Services transaction so there is no potential realizable gain.
(2)	Options to purchase an aggregate of 4,898,293 shares were granted to employees during 2003 prior to the Pharma Services transaction.
(3)	All outstanding options were canceled on September 25, 2003, irrespective of their expiration date.
(4)	Nonqualified stock options granted March 17, 2003.
(5)	Nonqualified stock options granted June 16, 2003.
(6)	Nonqualified stock options granted September 15, 2003.

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Option Grants In Last Fiscal Year

Pharma Services Holding, Inc.

      The following table reflects the options to purchase shares of common stock of Pharma Services granted during the past fiscal year to the named executive officers pursuant to the Pharma Services Plan. No stock appreciation rights were granted to the named executive officers during 2003. Each option will terminate upon the tenth anniversary of the date of grant. However, except as provided in a grant certificate, upon the grantee’s termination of employment with Pharma Services and its subsidiaries for any reason, (1) options that are not then vested and exercisable shall immediately terminate, and (2) options that are vested and exercisable shall generally remain exercisable until, and terminate upon, the 91st day following such termination of employment (or the 366th day following such termination where such termination is by reason of death, or a disability, retirement or redundancy that is approved by the Compensation and Nominations Committee); provided, however, that if such termination is for cause, as defined in the Pharma Services Plan, or following such termination the grantee violates a restrictive covenant, as defined in the Pharma Services Plan, all options will terminate immediately.

Individual Grants

Potential Realizable

Percent of

Value at Assumed

Total

Annual Rates of

Number of

Options

Stock Price

Securities

Granted to

Exercise

Appreciation for

Underlying

Employees in

or Base

Option Term(1)

Options

Fiscal

Price Per

Expiration

Name

Granted

Year(2)

Share($)

Date

5%($)

10%($)

Dennis B. Gillings

0

N/A

N/A

N/A

N/A

N/A

James L. Bierman

0

N/A

N/A

N/A

N/A

N/A

John S. Russell

225,000

(3)

6.7

%

14.50

11/14/2013

0

0

Ronald J. Wooten

225,000

(4)

6.7

%

14.50

11/05/2013

0

0

Oppel Greeff

225,000

(5)

6.7

%

14.50

12/06/2013

0

0

Pamela J. Kirby

0

N/A

N/A

N/A

N/A

N/A

(1)	Potential realizable value of each grant is calculated assuming that market price of the underlying security appreciates at annualized rates of 5% and 10%, respectively, over the respective term of the grant. The assumed annual rates of appreciation of 5% and 10% would result in the price of the Pharma Services common stock, which was $0.2438 on December 31, 2003, increasing to $0.40 and $0.63 per share, respectively, for the options expiring November 5, 2013, November 14, 2013 and December 6, 2013. Because the exercise price per share of $14.50 is significantly greater than these appreciated prices, at stock price appreciation rates of both 5% and 10%, the options will have potential realizable values of zero.
(2)	Options to purchase an aggregate of 3,350,000 shares of Pharma Services common stock were granted to employees during 2003.
(3)	Nonqualified options granted November 14, 2003. Shares subject to the options granted vest over the next five years, with 20% of such shares vesting on September 25 of each year beginning September 25, 2004.
(4)	Nonqualified options granted November 5, 2003. Shares subject to the options granted vest over the next five years, with 20% of such shares vesting on September 25 of each year beginning September 25, 2004.
(5)	Nonqualified options granted December 6, 2003. Shares subject to the options granted vest over the next five years, with 20% of such shares vesting on September 25 of each year beginning September 25, 2004.

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Aggregated Option Exercises In Last Fiscal Year

and Fiscal Year End Option Values

Quintiles Transnational Corp.

      None of the named executive officers exercised Quintiles options in 2003. All Quintiles options were canceled on September 25, 2003 in connection with the Pharma Services transaction. Thus, there were no unexercised Quintiles options at fiscal year end. The following table provides information about the cancellation of the named executive officers’ Quintiles options, including the amounts they rolled over, if any, to acquire Pharma Services Units.

	Shares Underlying				Amount Used To
	Canceled Quintiles		Value		Purchase Pharma
Name	Options (#)		Realized($)		Services Units($)
Dennis B. Gillings		1,249,076		2,221,568		2,221,568
James L. Bierman		368,635		580,632		N/A
John S. Russell		366,022		579,110		300,000
Ronald J. Wooten		118,291		242,333		232,028
Oppel Greeff		211,966		377,626		361,569
Pamela J. Kirby		366,534		756,822		N/A

Aggregated Option Exercises In Last Fiscal Year

and Fiscal Year End Option Values

Pharma Services Holding, Inc.

      As indicated by the following table, no options to purchase shares of Pharma Services common stock were exercised by the named executive officers during 2003. Further, none of such options were in-the-money on December 31, 2003.

					Number of Securities
	Shares				Underlying Unexercised				Value of Unexercised In-the Money
	Acquired				Options at FY-End				Options at FY-End(1)
	On		Value
Name	Exercise(#)		Realized($)		Exercisable		Unexercisable		Exercisable($)		Unexercisable($)
Dennis B. Gillings		—		—		—		—		—		—
James L. Bierman		—		—		—		—		—		—
John S. Russell		—		—		—		225,000		0		0
Ronald J. Wooten		—		—		—		225,000		0		0
Oppel Greeff		—		—		—		225,000		0		0
Pamela J. Kirby		—		—		—		—		—		—

(1)  The value of the options is based upon the difference between the exercise price and the fair market value per share on December 31, 2003, $0.2438. As of December 31, 2003, shares of Pharma Services common stock were not publicly traded.

Director Compensation

      Prior to the Pharma Services transaction, each non-officer member of our board of directors received annually a grant of options to purchase shares of our common stock valued at $100,000 with the number of options determined in accordance with the Black-Scholes method. In addition, except as otherwise indicated below, each non-officer director received (1) an annual retainer of $24,000; (2) $1,000 for each board meeting attended in person or by teleconference; and (3) $500 for each committee meeting attended in person or by teleconference, each paid quarterly in cash. Committee chairs also received an extra $5,000 per year in compensation for their additional responsibilities. Each member of the Audit Committee received an additional $1,250 quarterly in light of increased responsibilities in the current public company environment. During 2003, each member of the Special Committee of outside directors

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that was formed in response to Pharma Services’ original October 2002 proposal to acquire us received $16,667 per month and the chair of the Special Committee received an additional $8,333 per month through September 25, 2003. We reimbursed each non-officer director for out-of-pocket expenses incurred in connection with the rendering of services as a director.

      Following the Pharma Services transaction, Messrs. Castellini, Greenberg and Ingram each will annually receive retainer fees of $40,000 (with an additional $1,000 for meetings attended in person and $500 for telephone meetings) for their service on the board of directors. Mr. Greenberg will receive an additional $10,000 retainer for his services as chair of the Audit Committee. Messrs. Ingram and Castellini will each receive $8,000 for their service as the chairs of the Compensation and Nominations Committee and Quality/ Regulatory Committee, respectively.

      In connection with their appointments to the Board of Directors, Pharma Services also provided Messrs. Castellini, Greenberg and Ingram an opportunity to purchase restricted shares of Pharma Services common stock, pursuant to the Pharma Services Plan, as well as an opportunity to purchase Pharma Services Units. Messrs. Castellini and Greenberg each purchased 50,000 restricted shares of Pharma Services common stock at an aggregate purchase price of $12,190 and 285 Pharma Services Units at an aggregate purchase price of $300,000. The restricted shares are subject to a right of repurchase exercisable by Pharma Services upon cessation of the director’s service on the board. Unvested restricted shares can be repurchased, under certain circumstances, at a price equal to the price per share paid by the director. Restricted shares that have vested and shares received upon the exercise of a vested option can also be repurchased, but at a price equal to the fair market value of such shares. The restricted shares vest over a period of five years of continued service on the board of directors by Messrs. Castellini and Greenberg. See “Equity Compensation Plans” under Item 12 of this Form 10-K for a detailed discussion of the terms and provisions of the Pharma Services Plan. The Pharma Services Units purchased by these directors are not subject to any vesting provisions or any reacquisition rights, however, such securities are subject to certain transfer restrictions, drag-along rights with respect to the sale of Pharma Services in certain circumstances, and voting requirements with respect to the election of members of the Pharma Services board of directors.

Employment Agreements

      We have entered into employment agreements with Dr. Gillings, Messrs. Bierman, Russell and Wooten and Drs. Greeff and Kirby. Except to the extent described below, the named executive officers are eligible to participate in any bonus, stock option, pension, insurance, medical, dental, 401(k), disability and other plans generally made available to our executives.

      Employment Agreement with Dr. Gillings. On September 25, 2003, in connection with the Pharma Services transaction, Dr. Gillings entered into a new employment agreement with us and Pharma Services to replace his then-existing employment agreement with us. The term of the new employment agreement commenced on September 25, 2003 and will continue until it is terminated pursuant to its terms. Under his new employment agreement, Dr. Gillings serves as our Executive Chairman and Chief Executive Officer for an annual base salary of $1.0 million, the opportunity to earn an annual cash bonus and certain other benefits, which include, without limitation:

•  participation in all of our general benefit programs and group health coverage for the respective lifetimes of Dr. Gillings and his wife;

•  reimbursement for expenses, at the rate of $10,794 per hour, related to the use of the airplane owned and operated by GF Management Company, Inc., or GFM, a company controlled by Dr. Gillings, for business- related travel (estimated to be approximately 700 hours per year); and

•  our agreement to modify, revise, and/or terminate, to the extent permitted by applicable law, certain insurance arrangements providing death benefits to Dr. Gillings and certain irrevocable life insurance trusts created by Dr. Gillings, as reasonably necessary or appropriate, in a manner that will ultimately result in death benefits no less favorable to the trusts and Dr. Gillings than those

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that would have been provided had such arrangements prior to September 25, 2003 remained in place without change.

Dr. Gillings serves as Executive Chairman and Chief Executive Officer of Pharma Services for no additional compensation.

      The employment agreement provides for severance payments to Dr. Gillings equal to 2.9 times his then current annual base salary and most recent annual bonus and for the continuation of benefits in the event Dr. Gillings’ employment is terminated by Dr. Gillings due to:

•  his permanent disability;

•  a material breach of the new employment agreement by us or by Pharma Services;

•  his improper termination by us for cause if cause is found not to exist;

•  a change in his position of Executive Chairman;

•  the consummation of an underwritten public offering of common stock of Pharma Services registered under the Securities Act that, together with the consummation of any other prior underwritten public offering of Pharma Services common stock, results in gross proceeds to Pharma Services of at least $100 million in the aggregate, or a Qualified Offering; or

•  a sale of securities representing at least 75% of the voting power of the common stock of Pharma Services or of all, or substantially all, of the assets of Pharma Services, each referred to as a Sale of Pharma Services, except when Dr. Gillings is one of the stockholders of Pharma Services holding a majority of the outstanding shares of Pharma Services common stock or votes in favor of such transaction;

or by us for any reason other than:

•  cause;

•  a Qualified Offering; or

•  a Sale of Pharma Services, except when Dr. Gillings is not one of the stockholders of Pharma Services holding a majority of the outstanding shares of Pharma Services common stock or if he does not vote in favor of such transaction.

Any severance payments we owe Dr. Gillings are to be paid in equal monthly installments during the three year period following the termination of his employment. The continuation of benefits applies for the three year period following the termination of his employment. If Dr. Gillings breaches any of the restrictive covenants (described immediately below) following his termination, then we are not obligated to provide him any severance benefits.

      The employment agreement includes certain restrictive covenants pursuant to which Dr. Gillings has agreed not to:

•  compete with us, Pharma Services or any of our subsidiaries in any geographic area in which we or they do business;

•  solicit or interfere with our, Pharma Services’ or any of our subsidiaries’ relationship with any person or entity doing business with us or them;

•  offer employment to any person employed by us, Pharma Services or any of our subsidiaries; or

•  disclose any of our confidential information

until the latest of (1) five years from the date of the Pharma Services transaction, (2) three years following the date he ceases to own any equity interest in us, Pharma Services, or any of our subsidiaries, and (3) three years from the date of his termination of employment. For so long as we require Dr. Gillings to comply with these restrictive covenants, we are required to pay him during the non-

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competition period monthly amounts equal to his then-current annual base salary plus his most recent annual bonus divided by 12, provided however, that we are not required to make such payments during the three year period following termination if we are paying Dr. Gillings any severance payments described above.

      Letter Agreement with Mr. Bierman. Mr. Bierman was party to an employment agreement with us dated June 16, 1998 and amended on March 31, 2003. The terms of this employment agreement, except for certain restrictive covenants and indemnification provisions discussed below, were expressly superseded by the terms of a letter agreement entered into by us and Mr. Bierman on January 21, 2004.

      Pursuant to the letter agreement, Mr. Bierman will remain employed by us through June 30, 2004, however, we may relieve Mr. Bierman of his duties as Chief Financial Officer at any time without impacting his employment status. Prior to June 30, 2004, Mr. Bierman can only be terminated by us for his breach of the letter agreement, his failure to perform or gross negligence in the performance of his duties, or his conviction of certain crimes. Mr. Bierman will perform duties consistent with his position as Chief Financial Officer or the transition of his duties to his successor.

      Mr. Bierman received a lump sum signing bonus of $500,000 for his acceptance of the letter agreement. Until the termination of his employment, he will be paid a base salary at the annual rate of $550,000 and he will be able to continue in our benefit plans. If he remains employed until June 30, 2004, he may elect to continue to participate in our group health plan following his termination for the earlier of 18 months or until he becomes entitled to comparable group coverage. If Mr. Bierman remains employed with us through June 30, 2004, or if he dies or become disabled prior to that date, he will receive retention bonus payments in the aggregate amount of $4,215,502.

      By the terms of the letter agreement, the indemnification provisions and restrictive covenants in Mr. Bierman’s employment agreement, dated June 16, 1998 as amended on March 31, 2003, remain in full force and effect, except that the non-competition period is extended from 12 to 13 months following the termination of his employment. Thus, during his employment and for 13 months following his termination from employment, Mr. Bierman is prohibited from competing with us or our affiliates in any geographic area in which we do business, from soliciting or interfering with our relationship with any person or entity who is our customer or a customer of our affiliates, and from soliciting for or offering employment to any person who had been employed by us or our affiliates during the last year of his employment with us. Additionally, Mr. Bierman must refrain from disclosing our confidential information and trade secrets.

Employment Agreements With Messrs. Russell and Wooten and Dr. Greeff

      Our employment agreements with Messrs. Russell and Wooten and Dr. Greeff have substantially the same provisions.

      Mr. Russell’s employment agreement is dated December 3, 1998 and was amended on October 26, 1999 and November 14, 2003. His employment arrangement with us also is affected by three letters from Pharma Services to him, one dated September 12, 2003 relating to the acquisition of stock of Pharma Services by rolling over certain options to purchase shares of our common stock in connection with the Pharma Services transaction, and two letters dated November 3, 2003 relating to the acquisition of restricted stock and certain option grants under the Pharma Services Plan.

      Mr. Wooten’s employment agreement is dated July 25, 2000, was amended on November 5, 2003, and further amended on November 14, 2003. His employment arrangement with us also is affected by three letters from Pharma Services to him, one dated September 12, 2003 relating to the acquisition of stock of Pharma Services by rolling over certain options to purchase shares of our common stock in connection with the Pharma Services transaction, and two letters dated October 30, 2003 relating to the acquisition of restricted stock and certain option grants under the Pharma Services Plan.

      Dr. Greeff’s employment agreement is dated February 8, 2002, and was amended on November 17, 2003, and further amended on December 6, 2003. His employment arrangement with us also is affected by

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three letters from Pharma Services to him, one dated September 12, 2003 relating to the acquisition of restricted stock of Pharma Services by rolling over certain options to purchase shares of our common stock in connection with the Pharma Services transaction, and two letters dated October 30, 2003 relating to the acquisition of restricted stock and certain option grants under the Pharma Services Plan.

      Messrs. Russell and Wooten and Dr. Greeff, pursuant to their employment agreements with us, are each entitled to receive a monthly base salary of $33,333.33, to participate in our annual cash bonus plan, and to certain other benefits, including participation in all of our general benefit plans.

      Each of their employment agreements extends for successive one year terms. Each agreement may be terminated by us:

•  by 90 days’ written notice of our intent not to renew the agreement;

•  without cause upon 90 days’ written notice; or

•  immediately for cause, defined to include the executive’s death, disability, material breach of the agreement, acts or omissions that are materially harmful to our interests, or any other reason recognized as “cause” under applicable law.

The executive may terminate the agreement:

•  by 90 days’ written notice of intent not to renew;

•  without cause upon 90 days’ written notice; or

•  because of our material breach which is not cured within 30 days of receiving notice of the breach from him.

      If the executive’s employment is terminated by us by notice of non-renewal or without cause or by him because of our failure to cure our material breach, then, subject to his compliance with the non-competition, confidential information, intellectual property, and release provisions of the agreement, the executive will be entitled to severance payments for 36 months with each monthly payment being equal to 1.55 times his monthly rate of pay at the time of termination. In addition, he may continue to participate for 36 months in all of our benefit plans in which he participated on the termination date, unless he becomes eligible for comparable coverage. The December 6, 2003 amendment to Dr. Greeff’s agreement provides that the severance payments and benefits also will be payable, subject to his compliance with his obligations under the employment agreement, if his employment terminates prior to September 25, 2006 because of his death or disability. The payments will be reduced by any disability payments he receives from us.

      Each employment agreement provides for a bonus payable as soon as practicable following the occurrence of the Pharma Services transaction. Mr. Russell and Dr. Greeff each were entitled to a $500,000 bonus and Mr. Wooten was entitled to a $200,000 bonus. We paid these bonuses on December 31, 2003.

      The employment agreements contain certain restrictive covenants which prohibit the executive during his employment and for one year following the termination of his employment, from competing with us or our affiliates in any geographic area in which we do business, soliciting from or interfering with our relationship with any person or entity who is our customer or a customer of our affiliates, and from soliciting for or offering employment to any person who had been employed by us or our affiliates during his last year of employment. In addition, each executive must refrain from disclosing our confidential information and trade secrets.

      Employment Agreement with Dr. Kirby. Dr. Kirby was party to an employment agreement with us, dated March 13, 2001. Prior to the Pharma Services transaction, Dr. Kirby served as our Chief Executive Officer for a monthly base salary of $45,833.33, participation in our executive compensation plan, and certain other benefits, including participation in all of our general benefit plans. Dr. Kirby’s employment with us commenced as of April 2, 2001.

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      Pursuant to the terms of her employment agreement, Dr. Kirby could choose to terminate her employment within 18 months following the Pharma Services transaction, with or without “good reason,” and receive certain severance payments and benefits. Dr. Kirby exercised her right to terminate her employment and resigned from her position as Chief Executive Officer of the Company on October 24, 2003. Dr. Kirby’s employment agreement provided for the following severance benefits:

•  severance payments equal to 2.99 times the amount of her most recent annual compensation, including the amount of her most recent annual bonus;

•  continuation of benefit plans in which she participated for 18 months following her resignation;

•  a lump sum payment of all amounts contributed to a company pension or retirement plan to which she was entitled under the terms of such plan; and

•  immediate vesting of any unvested stock options held by her and an extension of the exercise period for such options to the later of the expiration of the applicable exercise period or three years following the date of termination of employment.

We paid Dr. Kirby $4,150,480 in severance benefits in connection with her resignation. In connection with the Pharma Services transaction, all of Dr. Kirby’s options became fully vested and any unexercised options were canceled and exchanged for a right to a cash payment equal to the excess of $14.50 per share minus the applicable exercise price of the option, multiplied by the number of shares for which the option was exercisable immediately prior to cancellation, and minus any amounts required to be withheld for tax purposes.

      Dr. Kirby has certain continuing obligations to us, which include compliance with the non-compete and confidential information provisions of the employment agreement. Those continuing obligations prohibit her from competing with us or our affiliates in any geographic area in which we do business, from soliciting business from or interfering with our relationship with any person or entity who is a customer of us or our affiliates, and from soliciting for or offering employment to any person who had been employed by us or our affiliates during the last year of her employment. Additionally, she must refrain from disclosing any of our confidential information or trade secrets.

Special Bonus Arrangements

      In connection with the Pharma Services transaction, the Special Committee of our board of directors established a Special Bonus Plan to provide appropriate incentives to certain of our senior executives and to reward such senior executives for the additional burdens, above and beyond their normal duties, placed on them by the auction process. The Special Bonus Plan, as administered by the Special Committee, paid cash bonus payments to certain of our senior executives designated by the Special Committee, including Dr. Kirby and Messrs. Bierman, Russell and Wooten and Dr. Greeff. These individuals received cash bonus payments of $144,375, $92,750, $143,000, $125,000 and $124,000, respectively.

Acceleration of Stock Options in the Pharma Services Transaction.

      Immediately prior to the effective time of the Pharma Services transaction, we took all actions necessary so that each outstanding option granted under any of our option plans became fully vested and exercisable immediately prior to the effective time of the Pharma Services transaction. We also canceled any option to purchase shares of our common stock (other than options held by Pharma Services or its subsidiaries) that was not exercised prior to completion of the Pharma Services transaction in exchange for the right to receive cash in an amount equal to the “in-the-money value” of the options. The cash payment was to be made as soon as practicable after the holder surrendered all of the stock options held by the holder or delivered a written agreement or acknowledgment that all of the stock options held by the

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holder were canceled as a result of the Pharma Services transaction in exchange for the cash payment. Prior to the Pharma Services transaction, our management, other employees and directors held options to purchase shares of our common stock, many of which had exercise prices below $14.50 per share and could be accelerated by the Pharma Services transaction. As a result of the Pharma Services transaction, our then-current directors and executive officers (excluding Dr. Gillings, Messrs. Russell and Wooten, Dr. Greeff and Chester W. Douglass, one of our former directors) cashed out all of their Quintiles options for an aggregate payment of approximately $1,768,138. Dr. Gillings exchanged all of his Quintiles options including those granted to him for the use of this plane, with an aggregate value of $2,221,568, for equity securities of Pharma Services. Messrs. Russell and Wooten and Drs. Greeff and Douglass, cashed out a portion of their Quintiles options for an aggregate payment of approximately $318,845 and exchanged their remaining options with an aggregate value of approximately $1,038,597 for equity securities of Pharma Services.

Management Arrangements Relating to the Pharma Services Transaction

      Rollover by Executive Officers other than Dr. Gillings. In connection with the Pharma Services transaction, Messrs. Russell and Wooten and Dr. Greeff exchanged all or some portion of their respective shares of our common stock and Quintiles options for equity securities of Pharma Services. These officers did not receive any consideration from us for any such shares or options so exchanged in connection with the Pharma Services transaction. Messrs. Russell and Wooten and Dr. Greeff purchased 61,525, 47,585 and 390,009 shares of common stock of Pharma Services, respectively, and 285, 220 and 1,806 shares of preferred stock of Pharma Services, respectively, by exchanging all or a portion of their respective shares of our common stock and/or the “in-the-money value” of their Quintiles options outstanding immediately prior to the Pharma Services transaction. The Pharma Services securities purchased pursuant to these rollover arrangements are not subject to any vesting provisions or any reacquisition rights, provided however, that if during the 18 month period following the Pharma Services transaction, an executive resigns his position under circumstances which would entitle him to severance payments as a result of a change in control, Pharma Services will reacquire the Pharma Services securities in exchange for a cash payment equal to the purchase price. Such securities are subject to certain transfer restrictions, drag-along rights with respect to the sale of Pharma Services in certain circumstances, and voting requirements with respect to the election of members of the Pharma Services board of directors.

      Pharma Services Stock Incentive Plan Arrangements. Pharma Services has established a Stock Incentive Plan, referred to in this report as the Pharma Services Plan, under which each of Messrs. Russell and Wooten and Dr. Greeff purchased 450,000 restricted shares of Pharma Services’ common stock and was granted an option to purchase 225,000 shares of Pharma Services common stock. The restricted shares and shares received upon the exercise of vested options are subject to a right of repurchase exercisable by Pharma Services upon termination of the executive’s employment with us. Unvested restricted shares can be repurchased, under certain circumstances, at a price equal to the price per share paid by the employee. Restricted shares that have vested and shares received upon the exercise of a vested option can also be repurchased, but at a price equal to the fair market value of such shares. The restricted shares and options vest over a period of five years of continued employment from the date of grant. See “Equity Compensation Plans” under Item 12 of this Form 10-K for a detailed discussion of the terms and provisions of the Pharma Services Plan.

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Item 12. Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters

Principal Stockholders

      On September 25, 2003, Pharma Services acquired all of our issued and outstanding common stock. Intermediate Holding currently owns 99.2% of our outstanding common stock with Pharma Services owning the remainder. Pharma Services was formed for purposes of the Pharma Services transaction by Dr. Gillings, our Executive Chairman, Chief Executive Officer and founder, and One Equity, the private equity arm of Bank One Corporation.

      Since we are an indirect wholly-owned subsidiary of Pharma Services, set forth below is certain information regarding the beneficial ownership of the outstanding preferred stock and common stock of Pharma Services. As of March 1, 2004, there were 523,282 shares of preferred stock and 126,776,446 shares of common stock of Pharma Services outstanding. Currently, there is only one series of preferred stock, Series A Redeemable Preferred Stock, authorized under Pharma Services’ certificate of incorporation. Shares of preferred stock have no voting rights except as required by law. Holders of shares of common stock are entitled to one vote per share in the election of directors and all other matters submitted to a vote of stockholders. The preferred stock will be senior in right of payment to the common stock. Shares of the preferred stock are subject to mandatory redemption on the earliest to occur of a sale of Pharma Services, an initial public offering with gross proceeds greater than $100 million and the 20th anniversary of the issue date, subject to the terms of our senior secured credit facility. Dividends on the preferred stock are cumulative and will initially accrue at the rate of 12% per annum.

      Notwithstanding the beneficial ownership of common and preferred stock presented below, a stockholders agreement governs the stockholders’ exercise of their voting rights with respect to election of directors and certain other material events. The parties to the stockholders agreement have agreed to vote their shares to elect the board of directors as set forth therein. See “Certain Relationships and Related Party Transactions” under Item 13 for a detailed description of the stockholders agreement.

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      The following table sets forth certain beneficial ownership of Pharma Services of (1) each person or entity who is known to us to beneficially own more than 5% of Pharma Services common or preferred stock, (2) each of our named executive officers, (3) each of our directors, and (4) all of our directors and executive officers, in each case as of March 1, 2004. Our executive officers and directors are identical to those of Pharma Services and of Intermediate Holding. Beneficial ownership has been determined in accordance with the applicable rules and regulations of the SEC, which generally require inclusion of shares over which a person has voting or investment power. Share ownership in each case includes shares that may be acquired within sixty days through the exercise of any options. Except as otherwise indicated, the address for each of the named individuals is 4709 Creekstone Drive, Riverbirch Building, Suite 200, Durham, North Carolina 27703.

	Common Stock					Preferred Stock
	(voting)					(non-voting)
	Number of					Number of
	Shares		Percent(1)			Shares		Percent(2)
One Equity Partners LLC(3)		45,416,357		35.82			210,377		40.20	%
Temasek Holdings (Private) Limited(4)		18,457,752		14.56			85,500		16.34
TPG Advisors III, Inc.(5)		18,457,752		14.56			85,500		16.34
Dennis B. Gillings, Ph.D.(6)		24,943,777		19.68			89,045		17.02
James L. Bierman		—		—			—		—
John S. Russell(7)		511,525		*			285		*
Oppel Greeff(8)		840,009		*			1,806		*
Ronald Wooten(9)		497,585		*			220		*
Richard M. Cashin, Jr.(10)		45,293,306		35.73			209,807		40.09
Clateo Castellini(11)		111,525		*			285		*
Jonathan J. Coslet(12)		—		—			—		—
Jack M. Greenberg(13)		111,525		*			285		*
Robert A. Ingram(14)		—		—			—		—
S. Iswaran(15)		18,457,752		14.56			85,500		16.34
Jacques Nasser(16)		44,370,418		35.00			205,532		39.28
James S. Rubin(17)		44,288,384		34.93			205,152		39.20
Pamela J. Kirby		—		—			—		—
All directors and current executive officers as a group (13 persons)(18)		90,890,060		71.69	%		387,089		74.11	%

*  Less than 1%

(1)	The foregoing percentage amount is based upon 126,776,446 shares of common stock held as of March 1, 2004. This amount includes 7,888,500 shares of restricted common stock held by certain members of management and our Board of Directors under the Pharma Services Plan, which are subject to certain repurchase rights exercisable by Pharma Services.
(2)	The foregoing percentage amount is based upon 523,282 shares preferred stock outstanding as of March 1, 2004.
(3)	Includes 454,615 shares of common stock and 2,105 shares of preferred stock held by OEP Co-Investors, LLC, an entity affiliated with One Equity Partners, LLC. Includes 1,025,430 shares of common stock and 4,750 shares of preferred stock held by Mr. Cashin, the Chairman of One Equity, 102,543 shares of common stock and 475 shares of preferred stock held by Mr. Nasser, a senior partner at One Equity, and 20,508 shares of common stock and 95 shares of preferred stock held by Mr. Rubin, a partner of One Equity. One Equity disclaims beneficial ownership of the shares held by Messrs. Cashin, Nasser and Rubin. The principal business address of One Equity is 320 Park Avenue, 18th Floor, New York, New York 10022.

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(4)	The shares of common stock and shares of preferred stock indicated as beneficially owned by Temasek Holdings (Private) Limited are directly held by Temasek Life Sciences Investments Private Limited. The foregoing entity is affiliated with Temasek Holdings (Private) Limited. The principal business address of Temasek Holdings (Private) Limited is 60 B. Orchard Road #06-18, Tower 2 The Atrium Orchard Singapore 238891.
(5)	The shares of common stock and shares of preferred stock indicated as beneficially owned by TPG Advisors III, Inc. are directly held by TPG Quintiles Holdco LLC. The foregoing entities are affiliated with TPG. The principal business address of TPG Advisors III, Inc. is 301 Commerce Street, Suite 3300, Fort Worth, Texas 76102.
(6)	Includes 5,720,665 shares of common stock subject to a repurchase right exercisable by Pharma Services under certain circumstances (such restricted amount to be reduced to zero over a period of five years). Also, includes (i) 39,678 shares of common stock and 183 shares of preferred stock owned by Dr. Gillings’ daughter; (ii) 713,699 shares of common stock and 3,306 shares of preferred stock owned by the Gillings Family Limited Partnership, of which Dr. Gillings and his wife are the general partners; (iii) 42,227 shares of common stock and 195 shares of preferred stock owned by the GFEF Limited Partnership, of which Dr. Gillings is the general partner; (iv) 767,459 shares of common stock and 3,555 shares of preferred stock owned by Dr. Gillings’ wife; (v) 163,556 shares of common stock and 757 shares of preferred stock owned by the Gillings Family Foundation, of which Dr. Gillings is the general partner; and (vi) 1,000,000 shares of common stock owned by the Dennis B. Gillings Grantor Retained Annuity Trust, of which Dr. Gillings is trustee. Dr. Gillings shares voting and investment power over certain of these shares. Dr. Gillings disclaims beneficial ownership of all shares owned by his wife and daughter, all shares in the Gillings Family Limited Partnership, all shares in the Gillings Family Foundation, all shares owned by the GFEF Limited Partnership, and all shares in the Dennis B. Gillings Grantor Retained Annuity Trust, except to the extent of his interest therein.
(7)	Includes 61,525 shares of common stock and 285 shares of preferred stock, subject to repurchase rights exercisable by Pharma Services under certain circumstances during the 18 month period following the closing of the Pharma Services transaction. Also includes 450,000 shares of issued but restricted common stock subject to a repurchase right exercisable by Pharma Services under certain circumstances.
(8)	Includes 390,009 shares of common stock and 1,806 shares of preferred stock held by The Oppel Greeff Family Trust subject to repurchase rights exercisable by Pharma Services under certain circumstances during the 18 month period following the closing of the Pharma Services transaction. Also includes 450,000 shares of issued but restricted common stock subject to a repurchase right exercisable by Pharma Services under certain circumstances.
(9)	Includes 47,585 shares of common stock and 220 shares of preferred stock, subject to repurchase rights exercisable by Pharma Services under certain circumstances during the 18 month period following the closing of the Pharma Services transaction. Also includes 450,000 shares of issued restricted common stock subject to a repurchase right exercisable by Pharma Services under certain circumstances.

(10)

Includes 43,813,259 shares of common stock and 202,951 shares of preferred stock held by One Equity Partners LLC, of which Mr. Cashin is Chairman. Includes 454,615 shares of common stock and 2,105 shares of preferred stock held by OEP Co-Investors, LLC, an entity affiliated with One Equity. Mr. Cashin disclaims beneficial ownership of such shares, except to the extent of his pecuniary interest therein. The principal business address of Mr. Cashin is 320 Park Avenue, 18th Floor, New York, New York 10022.

(11)

Includes 61,525 shares of common stock and 285 shares of preferred stock, subject to repurchase rights exercisable by Pharma Services under certain circumstances during the 18 month period following the closing of the Pharma Services transaction. Also includes 50,000 shares of issued restricted stock subject to a repurchase right exercisable by Pharma Services under certain

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circumstances. The principal business address of Mr. Castellini is Via P. Verri, 1, 20121 Milano, Italy.

(12)	Mr. Coslet disclaims beneficial ownership of the shares held by TPG. The principal business address of Mr. Coslet is 301 Commerce Street, Suite 3300, Fort Worth, Texas 76102.
(13)	Includes 61,525 shares of common stock and 285 shares of preferred stock, subject to repurchase rights exercisable by Pharma Services under certain circumstances during the 18 month period following the closing of the Pharma Services transaction. Also includes 50,000 shares of issued restricted stock subject to a repurchase right exercisable by Pharma Services under certain circumstances. The principal business address of Mr. Greenberg is 333 W. Wacker Drive, Suite 1015, Chicago, Illinois 60606.
(14)	The principal business address of Mr. Ingram is Five Moore Drive, Research Triangle Park, North Carolina 27709.
(15)	Includes 18,457,752 shares of common stock and 85,500 shares of preferred stock held by Temasek Holdings (Private) Limited, of which Mr. Iswaran is a Managing Director. Mr. Iswaran disclaims beneficial ownership of such shares, except to the extent of his pecuniary interest therein. The principal business address of Mr. Iswaran is c/o Temasek Holdings (Private) Limited is 60 B. Orchard Road #06-18, Tower 2 The Atrium Orchard Singapore 238891.
(16)	Includes 43,813,259 shares of common stock and 202,951 shares of preferred stock held by One Equity Partners LLC, of which Mr. Nasser is a senior partner. Includes 454,615 shares of common stock and 2,105 shares of preferred stock held by OEP Co-Investors, LLC, an entity affiliated with One Equity. Mr. Nasser disclaims beneficial ownership of any shares held by either One Equity or OEP Co-Investors, except to the extent of his pecuniary interest therein. The principal business address of Mr. Nasser is 100 Bloomfield Hills Parkway, Suite 175, Bloomfield Hills, Michigan 48304.
(17)	Includes 43,813,659 shares of common stock and 202,951 shares of preferred stock held by One Equity Partners LLC, of which Mr. Rubin is a partner. Includes 454,615 shares of common stock and 2,105 shares of preferred stock held by OEP Co-Investors, LLC, an entity affiliated with One Equity. Mr. Rubin disclaims beneficial ownership of any shares held by either One Equity or OEP Co-Investors, except to the extent of his pecuniary interest therein. The principal business address of Mr. Rubin is 320 Park Avenue, 18th Floor, New York, New York 10022.
(18)	Includes shares of restricted common stock and beneficially owned shares as described in the preceding footnotes.

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Equity Compensation Plans

      As of December 31, 2003, we do not have any compensation plans (including individual compensation arrangements) under which our equity securities are authorized for issuance. The following table summarizes information regarding compensation plans (including individual compensation arrangements) under which the equity securities of our parent company, Pharma Services, are authorized for issuance as of December 31, 2003.

						Number of
						securities
	Number of			Weighted		remaining available
	securities to be			average exercise		for future issuance
	issued upon			price of		under equity
	exercise of			outstanding		compensation
	outstanding			options,		plans (excluding
	options, warrants			warrants and		securities reflected
Plan Category	and rights(1)			rights		in column (a))(1)
	(a)			(b)		(c)
Equity compensation plans approved by security holders		N/A			N/A		N/A
Equity compensation plans not approved by security holders		10,706,000	(2)	$	14.50		3,746,208	(3)
Total		10,706,000		$	14.50		3,746,208

(1)	Refers to shares of common stock of Pharma Services and options to purchase shares of common stock of Pharma Services. All amounts are as of December 31, 2003.
(2)	Includes 7,356,000 shares of restricted common stock of Pharma Services granted under the Pharma Services Plan and 3,350,000 shares issuable upon exercise of outstanding options granted under the Pharma Services Plan.
(3)	Includes 2,278,805 restricted shares and 1,467,403 options to purchase shares of common stock remaining for future issuance under the Pharma Services Plan.

Summary Description of the Pharma Services Plan

      On September 25, 2003, in connection with the closing of the Pharma Services transaction, Pharma Services adopted the Pharma Services Plan. Under the Pharma Services Plan, 14,452,208 shares of Pharma Services common stock are authorized for issuance in the form of shares or options. Shares may be vested or unvested. Options may be incentive stock options, or ISOs, or nonqualified options.

      The Pharma Services Plan is administered by the Compensation and Nominations Committee, or the Committee, which is composed entirely of directors who are not our employees. The Committee has broad discretion to determine, among other things, (1) the individuals to whom options and shares may be granted, (2) the terms and conditions of any option, including the exercise price, conditions relating to exercise and termination of the right to exercise, (3) whether shares shall be vested or unvested and the conditions pursuant to which any unvested shares shall become vested, (4) whether any option shall be an ISO or a nonqualified option. The Committee may grant options under the Pharma Services Plan to employees, directors and other service providers of ours and of our subsidiaries.

      Except as provided in a grant certificate, upon the grantee’s termination of employment with Pharma Services and its subsidiaries for any reason, (1) options that are not then vested and exercisable shall immediately terminate, and (2) options that are vested and exercisable shall generally remain exercisable until, and terminate upon, the 91st day following such termination of employment (or the 366th day following such termination where such termination is by reason of death, or a disability, retirement or redundancy that is approved by the Committee for purposes hereof); provided, however, that if such termination is for cause, as defined in the Pharma Services Plan, or following such termination the grantee violates a restrictive covenant, as defined in the Pharma Services Plan, all options will terminate

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immediately; provided, further, that in any event, each option will terminate upon the tenth anniversary of the date of grant.

      The Pharma Services Plan provides that the number and kind of securities subject to unvested shares or outstanding options, as well as the exercise price per share subject to options, shall be appropriately adjusted in the event of any recapitalization, forward or reverse split, reorganization, or other specified events involving a change in the capitalization of Pharma Services. In addition, the Committee is authorized to make adjustments in the terms and conditions of, and the criteria included in, unvested shares or options, including, without limitation, acceleration of the expiration date of options, cancellation of options in exchange for the “in-the-money value”, if any, of vested options or substitution of unvested shares or options of a successor or other entity in recognition of unusual or nonrecurring events, including a sale of Pharma Services. Unless otherwise determined by the Committee, the terms of the plan provide that all options and unvested shares shall become fully vested immediately prior to a sale of Pharma Services. The terms of the plan permit the Committee to amend or terminate the plan, provided that no such action shall adversely affect the rights of grantees with respect to options or shares previously granted.

      Shares of Pharma Services common stock acquired through the Pharma Services Plan are subject to transfer restrictions and other limitations set forth in the plan. These limitations include repurchase rights upon termination of employment and drag-along rights that require holders of shares issued under the plan to sell a pro rata portion of such shares to third parties along with certain sales by stockholders holding a majority of the Pharma Services common stock on the same terms, and subject to the same conditions, as such sales. In addition, the Pharma Services Plan requires each holder of Pharma Services common stock issued under the Pharma Services Plan to vote in the election of directors as directed by the Pharma Services board of directors which shall be consistent with the provisions of the stockholder agreement.

Item 13. Certain Relationships and Related Transactions

Effect of the Pharma Services Transaction on Share Ownership of Executive Officers

      Dr. Gillings and his affiliates exchanged 6,311,057 shares of our common stock and all options to purchase shares of our common stock held by Dr. Gillings and his affiliates for equity securities of Pharma Services in the Pharma Services transaction. Dr. Gillings and his affiliates received the $14.50 per share Pharma Services transaction consideration for a total of approximately $2,634,343 with respect to shares of our common stock Dr. Gillings and his affiliates cashed out in the Pharma Services transaction. At the effective time of the Pharma Services transaction, Dr. Gillings also purchased an additional 6,021,753 shares of Pharma Services common stock, then equal to 4.7% of the outstanding common stock of Pharma Services. Dr. Gillings and his affiliates are parties to the stockholders agreement. The restrictions on transfers of shares described in the stockholders agreement (below) also apply to the additional shares acquired by Dr. Gillings. These shares of Pharma Services common stock also are subject to a repurchase right in certain limited instances upon termination of Dr. Gillings’ employment with Pharma Services. The number of shares subject to this repurchase right declines to zero over the five years following the Pharma Services transaction. The repurchase price for any such shares shall be the price paid by Dr. Gillings for the shares.

      In addition, Messrs. Russell and Wooten and Dr. Greeff exchanged all or some portion of their respective shares and options to purchase shares of our common stock for equity securities of Pharma Services. They did not receive any consideration from us for any such shares or options so exchanged in connection with the Pharma Services transaction. With respect to shares cashed out in the Pharma Services transaction, each of Messrs. Bierman, Russell and Wooten received the $14.50 per share merger consideration for a total of $60,287, $30,577 and $10,365, respectively. Dr. Greeff exchanged all of his shares of our common stock for equity securities of Pharma Services. With respect to Quintiles options canceled in the Pharma Services transaction, each of Messrs. Bierman, Russell and Wooten and Dr. Greeff received a total of approximately $580,632, $279,110, $10,305, and $16,057, respectively, for options held at the time of the Pharma Services transaction that were not exchanged for Pharma Services securities. For a description of the equity and other arrangements of our executive officers (other than

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Dr. Gillings) following the consummation of the Pharma Services transaction, please see “Management Arrangements” under Item 12 of this Form 10-K.

Stockholders Agreement

      In connection with the Pharma Services transaction, Pharma Services entered into a stockholders agreement with One Equity, Dr. Gillings and his affiliates, Temasek and TPG, and certain other investors who acquired equity securities of Pharma Services, dated as of the closing. Messrs. Cashin, Nasser and Rubin are parties to the stockholders agreement in their individual capacities.

Transfer Restrictions

      The stockholders agreement prohibits transfers of securities of Pharma Services except (1) to certain “Permitted Transferees,” (2) in a registered public offering, (3) pursuant to certain drag-along rights that require stockholders to sell all or part of their equity interest in Pharma Services to third parties along with certain sales by stockholders holding a majority of the outstanding shares of common stock or a majority of the outstanding shares of preferred stock and on the same terms, and subject to the same conditions, as such sales, (4) pursuant to certain duty of first offer requirements and tag-along rights that require a stockholder wishing to sell all or part of its equity interest in Pharma Services to first offer its shares on the same terms to Pharma Services and the other stockholders of Pharma Services who are party to the stockholders agreement, and if not purchased by Pharma Services or such stockholders, to include shares of such stockholders, at their option, in the event of a sale to a third party, and (5) on the terms, and subject to the conditions, set forth in the restricted stock purchase agreement entered into with Dr. Gillings in connection with his purchase of an additional 4.7% of Pharma Services’ outstanding common stock at the effective time of the Pharma Services transaction.

      The stockholders agreement also restricts transfers of securities to our competitors, except pursuant to a sale of Pharma Services.

      Under the stockholders agreement, Dr. Gillings and his affiliates are permitted to enter into a bona fide pledge of preferred stock of Pharma Services to financial institutions that agree to be bound by certain provisions of the stockholders agreement.

      The stockholders agreement provides for a right to purchase additional securities allowing stockholders of Pharma Services to maintain their respective ownership percentage in Pharma Services upon certain sales of stock by Pharma Services.

Corporate Governance

      The stockholders agreement also provides that the constituents on our board of directors and committees thereof are the same as those of Pharma Services. In addition, as described in more detail under “Directors and Offices of the Registrant — Nomination of Directors” under Item 10 of this Form 10-K, the stockholders agreement requires each stockholder to vote their respective shares of Pharma Services in favor of the ten specified nominees to the board of directors.

      All decision making by the board of directors generally requires the affirmative vote of a majority of the members of the entire board of directors, except that any transactions entered into between Pharma Services or any of its subsidiaries and any stockholder or affiliate or associate of any stockholder will require the affirmative vote of a majority of the board of directors of Pharma Services with the nominee(s) of the interested stockholder abstaining from such vote.

Registration Rights Agreement

      Pharma Services and its stockholders that are parties to the stockholders agreement are also parties to a registration rights agreement dated as of September 25, 2003. Pursuant to the registration rights agreement, at any time after the first anniversary of the registration rights agreement, the holders of a majority of the registrable securities of Pharma Services will have the right to require that Pharma

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Services effect an initial public offering. After the earlier of six months following the completion of an initial public offering or the date on which Pharma Services merges with a publicly held company whereby the common stock of Pharma Services is exchanged for publicly held stock or the common stock of Pharma Services otherwise becomes registered under the Exchange Act, each stockholder of Pharma Services that is a party to the registration rights agreement will be entitled to demand registration of their registrable securities under certain circumstances, and Pharma Services will be required to establish and maintain, as soon as eligible to do so, a “shelf” registration statement for sale of registrable securities by the stockholders until all registrable securities held by them have been sold or are freely transferable. In addition, in most circumstances when Pharma Services proposes (other than pursuant to a demand registration) to register any of its equity securities under the Securities Act, the stockholders that are parties to the registration rights agreement will have the opportunity to register their registrable securities on such registration statement.

Exchange Agreement

      The holders of the Pharma Services preferred stock entered into an exchange agreement pursuant to which transferees of the Series A preferred stock who are unaffiliated with the initial holders of such stock may, under certain circumstances, exchange their shares of Series A preferred stock at any time and from time to time for notes of Intermediate Holding.

Fee Agreements

      Pharma Services entered into agreements with GFM and certain of the other equity investors of Pharma Services, including One Equity, pursuant to which Pharma Services paid GFM, a company controlled by Dr. Gillings, and One Equity a one-time transaction fee of $5.0 million and $15.0 million, respectively, at the effective time of the Pharma Services transaction, and, agreed to pay GFM and such investors an annual management service fee of approximately $3.75 million, of which GFM, TPG and Cassia Fund Management Pte Ltd., an affiliate of Temasek, each receive approximately $750,000 and One Equity receives approximately $1.5 million until 2008.

      Pharma Services was also responsible for the fees and expenses of Dr. Gillings, One Equity, Temasek and TPG, and each of their respective affiliates and advisors, related to the Pharma Services transaction. Pharma Services paid $17.1 million to Dr. Gillings pursuant to this arrangement.

Other Transactions

      Dr. Gillings provides extensive use of his own plane for business-related travel services for himself and other of our employees. For the year ended December 31, 2003, we reimbursed Dr. Gillings for the use of his plane with cash payments totaling approximately $3.6 million and by granting options to Dr. Gillings with a Black-Scholes value of approximately $350,000 on March 17, 2003. Under the terms of Dr. Gillings’ new employment agreement with us, GFM will be reimbursed for business use of Dr. Gillings’ plane on behalf of Pharma Services and its subsidiaries at an hourly rate of $10,794.

      As of May 16, 1996, we entered into split-dollar life insurance agreements with certain trusts created by Dr. Gillings whereby we and the trusts shared in the premium costs of certain variable and whole life insurance policies that will pay an aggregate death benefit to the trusts upon the death of Dr. Gillings or his wife, Joan Gillings, whichever occurs later. The trusts paid premiums on the policies as if each policy were a one year term life policy, and we paid the remaining premiums. On December 19, 2003, we terminated three of the six policies that were then in place and, commensurate with that, received repayment from the trusts of $7,652,126.00 of the cumulative premiums previously paid by us with respect to those policies. On December 23, 2003, the trusts also repaid $6,000,000, or approximately 70% of the cumulative premiums previously paid by us with respect to the remaining policies. We did not make any premium payments with respect to the remaining policies in 2003, nor will we in the future. To the extent those arrangements remain in place, any ongoing funding obligations will be the responsibility of Dr. Gillings. Upon any surrender of a remaining policy, the liability of the related trust to us is limited to

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the cash value of the policy. See footnotes (5), (8) and (12) to the “Summary Compensation Table” above for additional information on premium payments we made under the policies.

      We use the facilities of several buildings in South Africa owned and operated by two South African entities. Dr. Greeff serves on the board of directors of each of these entities and his trust owns 40% of the outstanding shares of stock of each of these entities. We lease these buildings from these entities pursuant to separate lease agreements on market standard terms. The initial term of each of the three leases is six years and four months, expiring in March 2006, three years and one month, expiring in March 2005, and five years, expiring in March 2006, respectively, and each lease is renewable for one 5-year term. Under the terms of the lease arrangements covering those facilities, we paid these entities approximately $790,000 in rent during 2003.

Item 14. Principal Accountant Fees and Services

      We engaged PricewaterhouseCoopers LLP as our independent auditors on May 21, 2002. The following table presents fees for professional audit services rendered by PricewaterhouseCoopers LLP for the audit of our annual financial statements for the periods from January 1, 2003 through September 25, 2003 and from September 26, 2003 through December 31, 2003 and for the year ended December 31, 2002 and fees billed for other services rendered by PricewaterhouseCoopers LLP during those periods.

Fiscal Year	2003		2002
	$ in thousands
Audit Fees	$	1,700	$	1,650
Audit Related Fees(1)	$	611	$	280
Tax Fees(2)	$	2,627	$	1,594
All Other Fees(3)	$	4	$	—
Total	$	4,942	$	3,524

(1)	Audit Related Fees consist of services related to mergers and acquisitions, primarily the Pharma Services transaction and related regulatory filings, and consultation concerning financial accounting and reporting standards.
(2)	Tax Fees consist of tax compliance, tax planning and advice.
(3)	All Other Fees consist of miscellaneous accounting research tools.

      Arthur Andersen LLP served as our independent public accountants until May 17, 2002. We paid $205,000 to Arthur Andersen LLP for audit fees relating to the review of financial statements included in our Form 10-Q for the quarterly period ended March 31, 2002 and certain statutory filings for the 2002 fiscal year.

      Our Audit Committee is responsible for appointing, setting compensation, and overseeing the work of the independent public accountants. As part of this responsibility, the Audit Committee is required to pre-approve the audit and non-audit services performed by the independent public accountants in order to assure the public accountant’s independence. Our Audit Committee has adopted and our board of directors has ratified, an Audit and Non-Audit Pre-Approval Policy, which established a policy requiring our Audit Committee to review and approve all audit services, review and attest engagements and permitted non-audit services to be performed by our independent accountants. Pre-approval fee levels for all services to be provided by our independent public accountants are established annually by our Audit Committee. Audit services are subject to specific pre-approval while audit-related services, tax services and all other services may be granted pre-approvals within specified categories. Any proposed services exceeding these levels require specific pre-approval by our Audit Committee. Additionally, our Audit Committee may delegate either type of pre-approval authority to one or more if its members. The member to whom such authority is delegated must report, for informational purposes only, any pre-approval decisions to our Audit Committee at its next scheduled meeting.

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PART IV

Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K

      (a)(1) Financial Statements. The following financial statements and supplementary data are included in Item 8 of this Annual Report on Form 10-K.

Financial Statements	Form 10-K Page
Consolidated Statements of Operations for the periods from September 26, 2003 through December 31, 2003 (successor), January 1, 2003 through September 25, 2003 (predecessor), and the years ended December 31, 2002 and 2001 (predecessor)		54
Consolidated Balance Sheets as of December 31, 2003 (successor) and 2002 (predecessor)		55
Consolidated Statements of Cash Flows for the periods from September 26, 2003 through December 31, 2003 (successor), January 1, 2003 through September 25, 2003 (predecessor), and the years ended December 31, 2002 and 2001 (predecessor)		57
Consolidated Statements of Shareholders’ Equity for the periods from September 26, 2003 through December 31, 2003 (successor), January 1, 2003 through September 25, 2003 (predecessor), and the years ended December 31, 2002 and 2001 (predecessor)		59
Notes to Consolidated Financial Statements		60
Report of Independent Public Auditors, PricewaterhouseCoopers LLP, dated February 25, 2004		118
Report of Independent Public Auditors, PricewaterhouseCoopers LLP, dated February 25, 2004		119
Report of Independent Public Accountants, Arthur Andersen LLP, dated January 23, 2002 (previously issued and not reissued)		120

      (a)(2) Financial Statement Schedules. All applicable financial statement schedules required under Regulation S-X have been included in the Notes to the Consolidated Financial Statements.

      (a)(3) Exhibits. The exhibits required by Item 601 of Regulation S-K are listed below.

Exhibit		Description
	2.01(1)	Agreement and Plan of Merger, dated April 10, 2003, by and among Pharma Services Holding, Inc., Pharma Services Acquisition Corp, and Quintiles Transnational Corp.
	2.02	Amendment No. 1 to Agreement and Plan of Merger, dated as of August 18, 2003, by and among Pharma Services Holding, Inc., Pharma Services Acquisition Corp, and Quintiles Transnational Corp.
	3.01(2)	Restated Articles of Incorporation of Quintiles Transnational Corp.
	3.02(2)	Amended and Restated Bylaws of Pharma Services Acquisition Corp., as Adopted by Quintiles Transnational Corp.
	4.01(2)	Specimen Stock Certificate
	4.02(2)	Indenture, dated as of September 25, 2003, among the Company, the Subsidiary Guarantors named therein and Wells Fargo Bank Minnesota, N.A., as Trustee
	4.03(2)	Registration Rights Agreement, dated as of September 25, 2003, among the Company and Citigroup Global Markets, Inc., as Representative of the Initial Purchasers named therein
	4.04(2)	Form of Global Note (included as Exhibit A to Exhibit 4.02 hereto)
	10.01(2)	Credit Agreement, dated September 25, 2003, among the Company, Pharma Services Holding, Inc. and Pharma Services Intermediate Holding Corp., as Parent Guarantors, the Lender referred to therein, Citigroup Global Markets, Inc., as Sole Lead Arranger and Sole Bookrunner, Citicorp North America, as Administrative Agent, ABN AMRO Bank N.V. and Banc One Mezzanine Corporation, as Co-Syndication Agents and Residential Funding Corporation (DBA GMAC — RFC Health Capital), as Documentation Agent

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Exhibit		Description
	10.02(2)(3)	Executive Employment Agreement, dated September 25, 2003, by and among Dr. Dennis B. Gillings, Pharma Services Holding, Inc. and Quintiles Transnational Corp.
	10.03(3)(4)	Employment Agreement, dated March 13, 2001, by and between Dr. Pamela J. Kirby and Quintiles Transnational Corp.
	10.04(3)(5)	Executive Employment Agreement, dated June 16, 1998, by and between James L. Bierman and Quintiles Transnational Corp.
	10.05(3)(6)	Amendment to Executive Employment Agreement, dated March 31, 2003, by and between James L. Bierman and Quintiles Transnational Corp.
	10.06(3)	Letter Agreement, dated January 21, 2004, to James L. Bierman from Quintiles Transnational Corp.
	10.07(3)	Executive Employment Agreement, dated February 8, 2002, by and between Oppel Greeff and Quintiles Transnational Corp.
	10.08(3)	Amendment to Executive Employment Agreement, dated November 17, 2003, by and between Oppel Greeff and Quintiles Transnational Corp.
	10.09(3)	Letter dated December 6, 2003 to Oppel Greeff from Quintiles Transnational Corp. re. Amendment to Executive Employment Agreement
	10.10(3)	Letter dated October 30, 2003 to Oppel Greeff from Pharma Services Holding, Inc. re. Opportunity to Purchase Shares
	10.11(3)	Letter dated October 30, 2003 to Oppel Greeff from Pharma Services Holding, Inc. re. Stock Option
	10.12(3)(5)	Executive Employment Agreement, dated December 3, 1998, by and between John S. Russell and Quintiles Transnational Corp.
	10.13(3)(5)	Amendment to Executive Employment Agreement, dated October 26, 1999, by and between John S. Russell and Quintiles Transnational Corp.
	10.14(3)	Amendment to Executive Employment Agreement, dated November 14, 2003, by and between John S. Russell and Quintiles Transnational Corp.
	10.15(3)	Letter dated November 3, 2003 to John S. Russell from Pharma Services Holding, Inc. re. Opportunity to Purchase Shares
	10.16(3)	Letter dated November 3, 2003 to John S. Russell from Pharma Services Holding, Inc. re. Stock Option
	10.17(3)	Executive Employment Agreement, dated July 25, 2000, by and between Ron Wooten and Quintiles Transnational Corp.
	10.18(3)	Amendment to Executive Employment Agreement, dated November 5, 2003, by and between Ron Wooten and Quintiles Transnational Corp.
	10.19(3)	Letter dated November 13, 2003 to Ron Wooten from Quintiles Transnational Corp. re. Amendment to Executive Employment Agreement
	10.20(3)	Letter dated October 30, 2003 to Ron Wooten from Pharma Services Holding, Inc. re. Opportunity to Purchase Shares
	10.21(3)	Letter dated October 30, 2003 to Ron Wooten from Pharma Services Holding, Inc. re. Stock Option
	10.22(3)(7)	Quintiles Transnational Corp. Special Bonus Plan
	10.23(3)	Pharma Services Stock Option Incentive Plan
	10.24(8)	Underlease, dated November 28, 1997, by and between PDFM Limited and Quintiles (UK) Limited and guaranteed by the Company
	10.25(9)	Agreement for the Provision of Research Services and Purchase of Business Assets, dated as of January 1, 1999, between Hoechst Marion Roussel, Inc. and Quintiles, Inc.
	10.26(10)	Agreement and Plan of Merger, dated as of January 22, 2000, among Quintiles Transnational Corp., Healtheon/ WebMD Corporation, Pine Merger Corp., Envoy Corp. and QFinance, Inc.

149

Exhibit		Description
	10.27(11)	Settlement Agreement, dated October 12, 2001, between Quintiles Transnational Corp. and WebMD Corporation.
	10.28	Agreement of Lease, dated April 26, 2003, entered into between Shibbolet (Proprietary) Limited and Quintiles Clindepharm (Proprietary) Limited
	10.29	Agreement of Lease, dated December 13, 1999, entered into between Shibbolet (Proprietary) Limited and Quintiles Clindepharm (Proprietary) Limited
	10.30	Memorandum of Agreement of Lease, dated March 13, 2000, between Rosenpark Eindomme CC and Quintiles Clindepharm (Proprietary) Limited
	16.01(12)	Letter regarding change in the Company’s certifying accountant dated May 17, 2002
	21	Subsidiaries
	24.01	Power of Attorney (included on the signature page hereto)
	31.01	Certification Pursuant to Rule 13a-14/15d-14, As Adopted Pursuant to Section 302 of The Sarbanes-Oxley Act of 2002
	31.02	Certification Pursuant to Rule 13a-14/15d-14, As Adopted Pursuant to Section 302 of The Sarbanes-Oxley Act of 2002
	32.01	Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of The Sarbanes-Oxley Act of 2002
	32.02	Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of The Sarbanes-Oxley Act of 2002

(1)	Exhibit to our Current Report on Form 8-K dated April 10, 2003, as filed with the Securities and Exchange Commission on April 11, 2003 and incorporated herein by reference.
(2)	Exhibit to our Quarterly Report on Form 10-Q for the period ended September 30, 2003, as filed with the Securities and Exchange Commission on November 14, 2003, and incorporated herein by reference.
(3)	Executive compensation plans and arrangements.
(4)	Exhibit to our Quarterly Report on Form 10-Q for the period ended March 31, 2001, as filed with the Securities and Exchange Commission on May 15, 2001, and incorporated herein by reference.
(5)	Exhibit to our Annual Report on Form 10-K for the fiscal year ended December 31, 1999, as filed with the Securities and Exchange Commission on March 30, 2000, and incorporated herein by reference.
(6)	Exhibit to our Annual Report on Form 10-K/ A for the fiscal year ended December 31, 2002, as filed with the Securities and Exchange Commission on April 29, 2003, and incorporated herein by reference.
(7)	Exhibit to our Annual Report on Form 10-K for the fiscal year ended December 31, 2002, as filed with the Securities and Exchange Commission on February 24, 2003, and incorporated herein by reference.
(8)	Exhibit to our Annual Report on Form 10-K for the fiscal year ended December 31, 1997, as filed with the Securities and Exchange Commission on March 30, 1998, and incorporated herein by reference.
(9)	Exhibit to our Current Report on Form 8-K dated March 3, 1999, as filed with the Securities and Exchange Commission on March 3, 1999, and incorporated herein by reference.

(10)	Exhibit to our Current Report on Form 8-K, dated January 25, 2000, as filed with the Securities and Exchange Commission on January 25, 2000, and incorporated herein by reference.
(11)	Exhibit to our Quarterly Report on Form 10-Q for the period ended September 30, 2001, as filed with the Securities and Exchange Commission on November 1, 2001, and incorporated herein by reference.

150

(12)  Exhibit to our Current Report on Form 8-K dated May 17, 2002, as filed with the Securities and Exchange Commission on May 22, 2002, and incorporated herein by reference.

      (b) Reports on Form 8-K.

      We did not file nor furnish any Current Reports on Form 8-K during the period between October 1, 2003 and December 31, 2003.

      (c) Exhibits Required by this Form 10-K.

      See (a)(3) above.

      (d) Financial Statements and Schedules.

      See (a)(2) above.

151

SIGNATURES

      Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in Durham, North Carolina, on the 1st day of March, 2004.

QUINTILES TRANSNATIONAL CORP.

By:  /s/ DENNIS B. GILLINGS, PH.D.

Dennis B. Gillings, Ph.D.

Executive Chairman and

Chief Executive Officer

152

SIGNATURES AND POWER OF ATTORNEY

      KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Dennis B. Gillings and James L. Bierman and each of them, each with full power to act without the other, his true and lawful attorneys-in-fact and agents, with full powers of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any or all amendments to this report, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully for all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or their substitutes, may lawfully do or cause to be done by virtue hereof.

      Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities and on the dates indicated.

Signature	Title	Date
/s/ DENNIS B. GILLINGS, PH.D. Dennis B. Gillings, Ph.D.	Executive Chairman, Chief Executive Officer and Director (principal executive officer)	March 1, 2004
/s/ JAMES L. BIERMAN James L. Bierman	Executive Vice President, Chief Financial Officer and Director (principal financial officer)	March 1, 2004
/s/ RICHARD M. CASHIN, JR. Richard M. Cashin, Jr.	Director	March 1, 2004
/s/ CLATEO CASTELLINI Clateo Castellini	Director	March 1, 2004
/s/ JONATHAN COSLET Jonathan Coslet	Director	March 1, 2004
/s/ JACK M. GREENBERG Jack M. Greenberg	Director	March 1, 2004
/s/ ROBERT A. INGRAM Robert A. Ingram	Director	March 1, 2004
S. Iswaran	Director
/s/ JACQUES NASSER Jacques Nasser	Director	March 1, 2004
/s/ JAMES S. RUBIN James S. Rubin	Director	March 1, 2004

153

EXHIBIT INDEX

Exhibit		Description
	2.01(1)	Agreement and Plan of Merger, dated April 10, 2003, by and among Pharma Services Holding, Inc., Pharma Services Acquisition Corp, and Quintiles Transnational Corp.
	2.02	Amendment No. 1 to Agreement and Plan of Merger, dated as of August 18, 2003, by and among Pharma Services Holding, Inc., Pharma Services Acquisition Corp, and Quintiles Transnational Corp.
	3.01(2)	Restated Articles of Incorporation of Quintiles Transnational Corp.
	3.02(2)	Amended and Restated Bylaws of Pharma Services Acquisition Corp., as Adopted by Quintiles Transnational Corp.
	4.01(2)	Specimen Stock Certificate
	4.02(2)	Indenture, dated as of September 25, 2003, among the Company, the Subsidiary Guarantors named therein and Wells Fargo Bank Minnesota, N.A., as Trustee
	4.03(2)	Registration Rights Agreement, dated as of September 25, 2003, among the Company and Citigroup Global Markets, Inc., as Representative of the Initial Purchasers named therein
	4.04(2)	Form of Global Note (included as Exhibit A to Exhibit 4.02 hereto)
	10.01(2)	Credit Agreement, dated September 25, 2003, among the Company, Pharma Services Holding, Inc. and Pharma Services Intermediate Holding Corp., as Parent Guarantors, the Lender referred to therein, Citigroup Global Markets, Inc., as Sole Lead Arranger and Sole Bookrunner, Citicorp North America, as Administrative Agent, ABN AMRO Bank N.V. and Banc One Mezzanine Corporation, as Co-Syndication Agents and Residential Funding Corporation (DBA GMAC — RFC Health Capital), as Documentation Agent
	10.02(2)(3)	Executive Employment Agreement, dated September 25, 2003, by and among Dr. Dennis B. Gillings, Pharma Services Holding, Inc. and Quintiles Transnational Corp.
	10.03(3)(4)	Employment Agreement, dated March 13, 2001, by and between Dr. Pamela J. Kirby and Quintiles Transnational Corp.
	10.04(3)(5)	Executive Employment Agreement, dated June 16, 1998, by and between James L. Bierman and Quintiles Transnational Corp.
	10.05(3)(6)	Amendment to Executive Employment Agreement, dated March 31, 2003, by and between James L. Bierman and Quintiles Transnational Corp.
	10.06(3)	Letter Agreement, dated January 21, 2004, to James L. Bierman from Quintiles Transnational Corp.
	10.07(3)	Executive Employment Agreement, dated February 8, 2002, by and between Oppel Greeff and Quintiles Transnational Corp.
	10.08(3)	Amendment to Executive Employment Agreement, dated November 17, 2003, by and between Oppel Greeff and Quintiles Transnational Corp.
	10.09(3)	Letter dated December 6, 2003 to Oppel Greeff from Quintiles Transnational Corp. re. Amendment to Executive Employment Agreement
	10.10(3)	Letter dated October 30, 2003 to Oppel Greeff from Pharma Services Holding, Inc. re. Opportunity to Purchase Shares
	10.11(3)	Letter dated October 30, 2003 to Oppel Greeff from Pharma Services Holding, Inc. re. Stock Option
	10.12(3)(5)	Executive Employment Agreement, dated December 3, 1998, by and between John S. Russell and Quintiles Transnational Corp.
	10.13(3)(5)	Amendment to Executive Employment Agreement, dated October 26, 1999, by and between John S. Russell and Quintiles Transnational Corp.
	10.14(3)	Amendment to Executive Employment Agreement, dated November 14, 2003, by and between John S. Russell and Quintiles Transnational Corp.
	10.15(3)	Letter dated November 3, 2003 to John S. Russell from Pharma Services Holding, Inc. re. Opportunity to Purchase Shares

Exhibit		Description
	10.16(3)	Letter dated November 3, 2003 to John S. Russell from Pharma Services Holding, Inc. re. Stock Option
	10.17(3)	Executive Employment Agreement, dated July 25, 2000, by and between Ron Wooten and Quintiles Transnational Corp.
	10.18(3)	Amendment to Executive Employment Agreement, dated November 5, 2003, by and between Ron Wooten and Quintiles Transnational Corp.
	10.19(3)	Letter dated November 13, 2003 to Ron Wooten from Quintiles Transnational Corp. re. Amendment to Executive Employment Agreement
	10.20(3)	Letter dated October 30, 2003 to Ron Wooten from Pharma Services Holding, Inc. re. Opportunity to Purchase Shares
	10.21(3)	Letter dated October 30, 2003 to Ron Wooten from Pharma Services Holding, Inc. re. Stock Option
	10.22(3)(7)	Quintiles Transnational Corp. Special Bonus Plan
	10.23(3)	Pharma Services Stock Option Incentive Plan
	10.24(8)	Underlease, dated November 28, 1997, by and between PDFM Limited and Quintiles (UK) Limited and guaranteed by the Company
	10.25(9)	Agreement for the Provision of Research Services and Purchase of Business Assets, dated as of January 1, 1999, between Hoechst Marion Roussel, Inc. and Quintiles, Inc.
	10.26(10)	Agreement and Plan of Merger, dated as of January 22, 2000, among Quintiles Transnational Corp., Healtheon/ WebMD Corporation, Pine Merger Corp., Envoy Corp. and QFinance, Inc.
	10.27(11)	Settlement Agreement, dated October 12, 2001, between Quintiles Transnational Corp. and WebMD Corporation
	10.28	Agreement of Lease, dated April 26, 2003, entered into between Shibbolet (Proprietary) Limited and Quintiles Clindepharm (Proprietary) Limited
	10.29	Agreement of Lease, dated December 13, 1999, entered into between Shibbolet (Proprietary) Limited and Quintiles Clindepharm (Proprietary) Limited
	10.30	Memorandum of Agreement of Lease, dated March 13, 2000, between Rosenpark Eiendomme CC and Quintiles Clindepharm (Proprietary) Limited
	16.01(12)	Letter regarding change in the Company’s certifying accountant dated May 17, 2002
	21	Subsidiaries
	24.01	Power of Attorney (included on the signature page hereto)
	31.01	Certification Pursuant to Rule 13a-14/15d-14, As Adopted Pursuant to Section 302 of The Sarbanes-Oxley Act of 2002
	31.02	Certification Pursuant to Rule 13a-14/15d-14, As Adopted Pursuant to Section 302 of The Sarbanes-Oxley Act of 2002
	32.01	Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of The Sarbanes-Oxley Act of 2002
	32.02	Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of The Sarbanes-Oxley Act of 2002

(1)	Exhibit to our Current Report on Form 8-K dated April 10, 2003, as filed with the Securities and Exchange Commission on April 11, 2003 and incorporated herein by reference.
(2)	Exhibit to our Quarterly Report on Form 10-Q for the period ended September 30, 2003, as filed with the Securities and Exchange Commission on November 14, 2003, and incorporated herein by reference.
(3)	Executive compensation plans and arrangements.
(4)	Exhibit to our Quarterly Report on Form 10-Q for the period ended March 31, 2001, as filed with the Securities and Exchange Commission on May 15, 2001, and incorporated herein by reference.

(5)	Exhibit to our Annual Report on Form 10-K for the fiscal year ended December 31, 1999, as filed with the Securities and Exchange Commission on March 30, 2000, and incorporated herein by reference.
(6)	Exhibit to our Annual Report on Form 10-K/ A for the fiscal year ended December 31, 2002, as filed with the Securities and Exchange Commission on April 29, 2003, and incorporated herein by reference.
(7)	Exhibit to our Annual Report on Form 10-K for the fiscal year ended December 31, 2002, as filed with the Securities and Exchange Commission on February 24, 2003, and incorporated herein by reference.
(8)	Exhibit to our Annual Report on Form 10-K for the fiscal year ended December 31, 1997, as filed with the Securities and Exchange Commission on March 30, 1998, and incorporated herein by reference.
(9)	Exhibit to our Current Report on Form 8-K dated March 3, 1999, as filed with the Securities and Exchange Commission on March 3, 1999, and incorporated herein by reference.

(10)	Exhibit to our Current Report on Form 8-K, dated January 25, 2000, as filed with the Securities and Exchange Commission on January 25, 2000, and incorporated herein by reference.
(11)	Exhibit to our Quarterly Report on Form 10-Q for the period ended September 30, 2001, as filed with the Securities and Exchange Commission on November 1, 2001, and incorporated herein by reference.
(12)	Exhibit to our Current Report on Form 8-K dated May 17, 2002, as filed with the Securities and Exchange Commission on May 22, 2002, and incorporated herein by reference.

EX-2.02 3 g87218exv2w02.htm EX-2.02

EXHIBIT 2.02

AMENDMENT NO. 1

TO AGREEMENT AND PLAN OF MERGER

     AMENDMENT NO. 1 TO AGREEMENT AND PLAN OF MERGER, dated as of August 18, 2003 (this “Amendment”) by and among Quintiles Transnational Corp., a North Carolina corporation (the “Company”), Pharma Services Holding, Inc., a Delaware corporation (“Parent”) and Pharma Services Acquisition Corp., a North Carolina corporation and wholly owned subsidiary of Parent (“Merger Sub”). Capitalized terms used herein but not defined shall have the meaning ascribed to such terms in the Merger Agreement (as defined below).

WITNESSETH:

     WHEREAS, the Company, Parent and Merger Sub have entered into that certain Agreement and Plan of Merger, dated as of April 10, 2003 (the “Merger Agreement”);

     WHEREAS, Section 9.11 of the Merger Agreement provides that the Merger Agreement may be amended by the parties thereto by action taken by each of Parent, Merger Sub and the Company (with the consent of the Special Committee) at any time before the Effective Time by an instrument in writing signed by the parties to the Merger Agreement;

     WHEREAS, the Effective Time has not occurred and the Company, Parent and Merger Sub wish to amend the Merger Agreement as set forth below;

     WHEREAS, the Special Committee has approved and adopted this Amendment and the transactions contemplated thereby and has consented to the Company entering in to this Amendment;

     WHEREAS, the boards of directors of the Company, Parent and Merger Sub have approved and adopted this Amendment and the transactions contemplated thereby;

     NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements herein contained, and intending to be legally bound hereby, the Company, Parent and Merger Sub hereby agree as follows:

ARTICLE I.

AMENDMENTS

          SECTION 1.1. Amendments. Section 2.7 of the Merger Agreement is amended by deleting the provisions thereof in their entirety and by substituting the following in lieu thereof:

    “SECTION 2.7. Conversion of Securities. At the Effective Time, by virtue of the Merger and without any action on the part of the Company, Parent, Merger Sub or the holder of any of the following securities:

          (a) Except as provided in clauses (b) and (c) below, each share of Company Common Stock issued and outstanding immediately before the Effective Time and any Rights associated therewith (such shares of Company Common Stock and associated Rights are hereinafter referred to, together, as the “Shares”) (other than Shares held by Dissenting Shareholders (as defined in Section 2.10), if any) shall be converted into the right to receive $14.50 (the “Per Share Amount”) in cash payable to the holder thereof, without interest, upon surrender of the certificate representing such Share or an affidavit with respect thereto, in each case in accordance with Section 2.8. As of the Effective Time, all Shares so converted shall no longer be outstanding and shall automatically be canceled and retired and shall cease to exist, and each holder of a certificate or certificates representing any such Shares shall cease to have any rights with respect thereto, except to receive the aggregate Per Share Amount applicable thereto, in accordance with Section 2.8.

          (b) Each share of Company Common Stock that is owned by any Subsidiary of the Company immediately before the Effective Time shall automatically be canceled and extinguished and shall cease to exist, and no cash, Company Common Stock or other consideration shall be delivered or deliverable in exchange therefor.

          (c) All shares of Company Common Stock owned or held by Parent or Merger Sub immediately before the Effective Time (including, without limitation, any Shares acquired pursuant to the Rollover Agreements) shall be converted into an aggregate of 1,000,000 fully paid and nonassessable shares of common stock, $0.01 par value per share, of the Surviving Corporation.

          (d) Each share of common stock, $0.01 par value per share, of Merger Sub issued and outstanding immediately before the Effective Time shall automatically be canceled and extinguished and shall be converted into and become 1,240,000 fully paid and nonassessable shares of common stock, $0.01 par value per share, of the Surviving Corporation.”

ARTICLE II.

GENERAL PROVISIONS

          SECTION 2.1. Headings. The headings contained in this Amendment are for reference purposes only and shall not affect in any way the meaning or interpretation of this Amendment.

          SECTION 2.2. Counterparts. This Amendment may be executed in one or more counterparts, each of which when executed shall be deemed to be an original but all of which shall constitute one and the same agreement.

          SECTION 2.3. Governing Law. This Amendment shall be governed by, and construed in accordance with, the Laws of the State of North Carolina applicable to contracts executed in and to be performed entirely within that State without regard to principles of conflicts of Laws therein.

-2-

     IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed as of the date first written above by their respective officers thereunto duly authorized.

QUINTILES TRANSNATIONAL CORP.
By:	/s/ John S. Russell
	Name: John S. Russell
	Title:   Executive Vice President
PHARMA SERVICES HOLDING, INC.
By:	/s/ Dennis B. Gillings
	Name: Dennis B. Gillings, Ph.D.
	Title:   Chairman
PHARMA SERVICES ACQUISITION CORP.
By:	/s/ Dennis B. Gillings
	Name: Dennis B. Gillings, Ph.D.
	Title:   President

-3- EX-10.06 4 g87218exv10w06.htm EX-10.06

EXHIBIT 10.06

(Quintiles Transnational Corp. Logo)

Quintiles Transnational Corp. Post Office Box 13979 Research Triangle Park, NC 27709-3979 919 998 2000/fax 919 998 9113 http://www.quintiles.com
January 21,2004
CONFIDENTIAL
James L. Bierman P.O. Box 6834
Shallotte, North Carolina 28470
Re: Remaining Employment with Quintiles Transnational Corporation and Its Affiliates
Dear Jim:
This letter (“Letter Agreement”) outlines the arrangements regarding the remainder of your employment with Quintiles Transnational Corporation (the “Company”), as follows:
1.	Term of Employment. The Company agrees to employ you, and you agree to remain employed by the Company, through June 30, 2004 (the “Scheduled Termination Date”), at which time you will resign from employment and all positions with the Company and its affiliates. You agree that thereafter, you will not represent yourself to be associated in any capacity with the Company. Your employment may be terminated by the Company prior to the Scheduled Termination Date only for Cause, which, for purposes of this Letter Agreement, means your (i) willful and material breach of this Letter Agreement, including, without limitation, paragraph 5 below, that has continued uncorrected for thirty days following your receipt of written notice thereof from the Company, (ii) material failure or refusal to timely perform the duties of your employment (other than by reason of a physical or mental illness or impairment) that, to the extent correctable, has continued uncorrected for thirty days following your receipt of written notice thereof from the Company, or your gross negligence in the performance of your duties, provided that for purposes of this clause (ii), your failure to meet performance expectations after your good faith efforts to do so, shall not constitute a material failure to perform your duties, or (iii) conviction of, or plea of guilty or nolo contendere to, a crime involving

(Quintiles Transnational Corp. Logo)

moral turpitude, dishonesty, fraud or unethical business conduct, or any felony of any nature whatsoever. The date of your actual termination of employment is hereinafter referred to as the “Termination Date”.

2. Duties.

a.

During your remaining employment, you shall perform such duties as may be assigned to you by the Company consistent with your position as Chief Financial Officer or with the transition of your duties to a successor Chief Financial Officer. To the extent requested, you will assist in the process of identifying and recruiting a replacement for your position, and transitioning your duties to any person so hired,

b.

At any time prior to the Scheduled Termination Date, the Company may relieve you of any or all of your duties, and reduce or eliminate the time during which you are required to be physically present at the office. Any such action by the Company shall not be construed as a termination of your employment for purposes of this Letter Agreement or be deemed to make the Termination Date for purposes of this letter to be any date other than the Scheduled Termination Date, or relieve you or the Company of your and its respective other obligations under this Letter Agreement except for the performance of your duties under paragraph 2(a) above.

3. Payments and Benefits. In respect of your remaining employment with the Company, you will be entitled to receive only the following payments and benefits (in each case subject to applicable tax withholding);

a.	Signing Bonus. As soon as practicable following your acceptance of this Letter Agreement, you will be paid $500,000 in a lump sum.
b.	Base Salary. From January 1, 2004 until the termination of your employment, you will be paid a base salary at the rate of $550,000.
c.	Benefits.

(i) You will be entitled to continue to participate in the Company’s Employee Stock Ownership and 401(k) Plan, Elective Deferred Compensation Plan, and group insurance programs until your Termination Date. You will also be entitled to 10 business days of paid vacation leave and all company holidays. In addition, you will be reimbursed in accordance with and subject to the Company’s reimbursement policy for reasonable and necessary expenses you incur in connection with your employment by the Company through your Termination Date.

(Quintiles Transnational Corp. Logo)

(ii) If you remain employed until the Scheduled Termination Date, you may elect to continue to participate in the Company’s group health plan for a period of 18 months thereafter on the same basis that you participated immediately prior to your Termination Date, provided that such continued coverage will end on the date that you become entitled to comparable group coverage. If your continued participation in such plan is barred by the terms of such plan, the Company will reimburse you for the amount by which the cost of comparable coverage you obtain on commercially reasonable terms exceeds the cost you bore for such plan prior to the Termination Date. For purposes of clarification, the continued group health coverage called for under this paragraph beyond your Termination Date shall constitute continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA). Upon your Termination Date, any vested benefits that you have accrued under the Company’s Employee Stock Ownership and 401 (k) Plan, or Elective Deferred Compensation Plan will be payable to you in accordance with the terms of those plans.

d. Retention Bonus. If you remain employed through your Scheduled Termination Date, or, if prior thereto, your employment terminates by reason of your death or disability entitling you to benefits under the Company’s long term disability plan, you (or your estate) will receive a payment of $4,215,582, which will be payable as follows:

- $2,400,000 payable on the date of the Company’s receipt of the confirmation referred to in clause (iii) of paragraph 6 below;

- $1,200,000 payable on July 31, 2004; and

- $615,582 payable on December 31,2004.

4. Cessation of all other Compensation and Benefits. You will not receive compensation, payments or benefits of any kind from the Company or its affiliates other than those set forth in paragraph 3 above, and you expressly acknowledge and agree that, except with respect to the payments and benefits specifically set forth in this Letter Agreement, you are not entitled to any compensation, payment or benefit from the Company or its affiliates whatsoever, including, without limitation, any right to payments or benefits under the Executive Employment Agreement between you and the Company, dated June 16, 1998, and amended March 31, 2003 (the “Employment Agreement”), the Company’s Executive Compensation Plan, its stock option plans, and its Special Bonus Plan. Except as specifically provided in paragraphs 5 and 7 below, this Letter Agreement shall supersede the Employment Agreement, which shall be of no further force and effect.

(Quintiles Transnational Corp. Logo)

5.	Restrictive Covenants. The covenants and agreements made by you in Sections 6, 7, 8 and 9 of your Employment Agreement shall remain in full force and effect in accordance with their terms, and for purposes thereof, any action taken by the Company pursuant to paragraph 2(b) above shall not be treated as a termination of your employment, provided that you agree that the one year period referred to in Section 6.3 of your Employment Agreement (Competitive Business Activities) will be extended to a 13 month period. You acknowledge that your right to receive and retain the payments and benefits referred to in clauses (a), (c)(ii) and (d) of paragraph 3 above is conditional upon your material compliance with Section 6.1 and your compliance with Section 6.3 of the Employment Agreement (as modified pursuant to the proviso in the preceding sentence).
6.	Release. In order to be entitled to the payments and benefits set forth in clauses (c)(ii) and (d) of paragraph 3 above, and in consideration therefor, you (or your estate) must (i) deliver a signed and dated copy of the attached Release no earlier than June 30, 2004 and no later than July 22, 2004, (ii) not subsequently revoke your execution of such Release, and (iii) deliver no earlier than 8 days after your execution of the Release a written confirmation that you (or your estate) have not revoked the Release.
7.	Indemnification. The provisions of Section 11 of your Employment Agreement shall remain in full force and effect in accordance with their terms. In addition, the Company has determined that no excise tax will be payable by you pursuant to section 4999 of the Internal Revenue Code (the “Excise Tax”) by reason of the payments to be made to you under this Letter Agreement, and you agree to take a position consistent with that of the Company at all times in respect of the applicability of the Excise Tax. If it is subsequently determined by the Internal Revenue Service (“IRS”) on audit that you are in fact subject an Excise Tax, then the Company will pay to you an amount that, after taking into account all income, social security, Medicare and excise taxes, is equal to such Excise Tax. The Company, at its cost, may, on your behalf, challenge any assessment or imposition of any Excise Tax by the IRS, and you agree to assist and cooperate with the Company with respect to any such challenge. Should you receive a refund of any Excise Tax previously paid, you agree to repay to the Company the portion of any payment made pursuant to this paragraph 7 in respect of the Excise Tax so refunded.
8.	Miscellaneous: Choice of Law. This Letter Agreement may be executed in several counterparts, each or which shall be deemed to be an original but all of which together will constitute one and the same instrument. This Letter Agreement constitutes the entire agreement, and supersedes all prior agreements, of the parties hereto relating to the subject matter hereof, and there are no written or oral terms or representations made by either party other than those contained herein and therein. This Letter Agreement cannot be modified, altered or amended except by a writing signed by all the parties. No waiver by either party of any provision or condition of this Letter Agreement at any time shall be deemed a waiver of such provision or condition at any prior or subsequent time or of any provision or condition at the same or any prior or subsequent time. This Letter

(Quintiles Transnational Corp. Logo)

Agreement and attached Release shall be governed by and construed in accordance with the domestic laws of the State of North Carolina, except to the extent preempted by federal law, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of North Carolina or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of North Carolina. You consent to jurisdiction in North Carolina for the purpose of any litigation relating to this Letter Agreement and attached Release and agree that any such litigation shall be conducted in the courts of Wake County, North Carolina or the federal courts of the United States for the Eastern District of North Carolina.

9. Notices. Signed and dated copies of this Letter Agreement, the Release, or any revocation or confirmation of non-revocation of the Release should be sent by mail, courier, or facsimile to:

Michael Mortimer

Executive Vice President,

  Global Human Resources

Quintiles Transnational Corp.

4709 Creekstone Drive

Riverbirch Building

Durham, NC 27703

(919) 998-2068 (tel)

(919) 998-2750 (fax)

Mike.Mortimer@Quintiles.com

With a copy to:	Gary Rothstein, Esq.
	Morgan Lewis & Bockius, LLP
	101 Park Avenue
	New York, NY 10178
	(212) 309-6360 (tel)
	(877) 432-9652 (fax)
	grothstein@morganlewis.com

10.

Confidentiality. You agree not to disclose or discuss in any way the terms of this Letter Agreement and attached Release, and represent that you have not previously discussed or disclosed any drafts or negotiations related thereto, with anyone other than members of your immediate family, or your personal counsel or financial advisors (and you will advise such persons of the confidential nature of these documents), provided that your obligations under this paragraph 10 will cease if and when the Company files this Letter Agreement with the Securities and Exchange Commission.

11.

No Set Off. The obligations of the Company to make and provide the payments and benefits described in paragraph 3(d) of this Letter Agreement shall be subject solely to

(Quintiles Transnational Corp. Logo)

	you satisfying the conditions contained in paragraphs 3(d) and 6, and your continued material compliance with Section 6.1 and continued compliance with Section 6.3 of the Employment Agreement (as modified pursuant to the proviso in the first sentence of paragraph 5 above), but shall otherwise be absolute and unconditional and shall not be affected by any circumstances, including, without limitation, any set-off, counterclaim, recoupment, defense or other right which the Company or any of its affiliates may have against you. You are not be required to mitigate the amount of the payments described in paragraph 3 by seeking other employment or otherwise, nor shall the amount of such payments be reduced by any compensation earned by you as the result of employment by another company, by your retirement benefits or otherwise.
12.	Acknowledgement. By signing this Letter Agreement and attached Release, you certify that you have read the terms of this Letter Agreement and Release, and that your execution of this Letter Agreement and Release shall indicate that this Letter Agreement and Release conforms to your understanding and is acceptable to you as a final agreement. You further acknowledge and agree that you have been advised of the opportunity to consult with counsel of your choice and that you have been given a reasonable and sufficient period of time in which to consider and return this Letter Agreement and attached Release.
	Sincerely,
	Michael Mortimer
	Executive Vice President, Global Human Resources
	ACCEPTED AND AGREED
	Date: 1.21.04

EX-10.07 5 g87218exv10w07.htm EX-10.07

EXHIBIT 10.07

(Quintiles Transnational Corp. Logo)

EXECUTIVE EMPLOYMENT AGREEMENT

     This Executive Employment Agreement (“Agreement”), dated as of February 8, 2002, is made and entered into by QUINTILES TRANSNATIONAL CORP., a North Carolina corporation (hereinafter the “Company”) and Oppel Greeff (hereinafter the “Executive”). The Company desires employ Executive as its Head of EDLS and CPO Head of South America, India and Latin America and provide adequate assurances to Executive and Executive desires to accept such employment on the terms set forth below, which terms Executive agreed to in Executive’s offer letter.

     In consideration of the mutual promises set forth below and other good and valuable new consideration, the receipt and sufficiency of which the parties acknowledge, the Company and Executive agree as follows:

     1. EMPLOYMENT. The Company employs Executive and Executive accepts employment on the terms and conditions set forth in this Agreement

     2. NATURE OF EMPLOYMENT. Executive shall serve as Head of EDLS and CPO Head of South America, India and Latin America and have such responsibilities and authority as the Company may assign from time to time. Additionally, Executive agrees to perform such other duties consonant with those of an executive at his level as the Company may set from time to time.

          2.1 Executive shall perform all duties and exercise all authority in accordance with, and shall otherwise comply with, all Company policies, procedures, practices and directions.

          2.2 Executive shall devote all working time, best efforts, knowledge and experience to perform successfully his duties and advance the Company’s and/or its Affiliates’ interests. During his employment, Executive shall not engage in any other business activities of any nature whatsoever (including board memberships) for which he receives compensation without the Company’s prior written consent; provided, however, this provision does not prohibit him from personally owning and trading in stocks, bonds, securities, real estate, commodities or other investment properties for his own benefit, which do not create actual or potential conflicts of interest with the Company and/or its Affiliates. As used in this Agreement, “Affiliates” shall mean: (i) any

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Company’s parent, subsidiary or related entity; and/or (ii) any entity directly or indirectly controlled or beneficially owned in whole or part by the Company or Company’s parent, subsidiary or related entity.

          2.3 Executive’s base of operation shall be Durham, North Carolina, subject to business travel as may be necessary in the performance of Executive’s duties.

     3. COMPENSATION.

          3.1 Base Salary. Executive’s monthly salary for all services rendered shall be $21,666.66 (less applicable withholdings), payable in accordance with the Company’s policies, procedures and practices as they may exist from time to time. Executive’s salary shall be reviewed in accordance with the Company’s policies, procedures and practices as they may exist from time to time.

          3.2 Executive Compensation Plan. Executive may participate as a Level 2.5 employee in the Executive Compensation Plan (or successor plans) (“ECP”) which may be made available from time to time to Company executives at Executive’s level; provided, however, that Executive’s participation is subject to the applicable terms, conditions and eligibility requirements of the plan documents, some of which are within the plan administrator’s discretion, as they may exist from time to time.

          3.3 Tax Returns. Executive shall be entitled to tax return preparation and reasonable financial planning, consultation and advice by the Company’s accounting firm and/or legal counsel and/or financial consultants as the Company may provide from time to time to Company executives at Executive’s level.

          3.4 Other Benefits. Executive may participate in all medical, dental and disability insurance, 401(k), pension, personal leave, car allowance and other employee benefit plans and programs, except Executive may not receive severance payments other than specified in this Agreement; provided, however, that Executive’s participation in benefit plans and programs is subject to the applicable terms, conditions and eligibility requirements of these plans and programs, some of which are within the plan administrator’s discretion, as they may exist from time to time.

          3.5 Business Expenses. Executive shall be reimbursed for reasonable and necessary expenses actually incurred by him in performing services under this

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Agreement in accordance with and subject to the terms and conditions of the applicable Company reimbursement policies, procedures and practices as they may exist from time to time. Expenses covered by this provision include but are not limited to travel, entertainment, professional dues, subscriptions and dues, fees and expenses associated with membership in various professional, and business and civic associations of which Executive’s participation is in the Company’s best interest.

          3.6 Nothing in this Agreement shall require the Company to create, continue or refrain from amending, modifying, revising or revoking any of the plans, programs or benefits set forth in Sections 3.2 through 3.5. Any amendments, modifications, revisions and revocations of these plans, programs and benefits shall apply to Executive.

          3.7 If, at any time during which Executive is receiving salary or post-termination payments from the Company, he receives payments on account of mental or physical disability from any Company-provided plan, then the Company, at its discretion, may reduce his salary or post-termination payments by the amount of such disability payments.

     4. TERM OF EMPLOYMENT. The original term of employment shall be for a one (1) year period commencing on February 1, 2002 and terminating on January 31, 2003, subject to the following provisions:

          4.1 Upon the expiration of the original or any renewal term of employment, Executive’s employment shall be automatically renewed for an additional one (1) year period unless, at least ninety (90) days prior to the renewal date, either party gives the other party written notice of its intent not to continue the employment relationship. During any renewal term of employment, the terms, conditions and provisions set forth in this Agreement shall remain in effect unless modified in accordance with Section 15.

          4.2 Either party may terminate the employment relationship without cause at any time upon giving the other party ninety (90) days written notice.

          4.3 The Company may terminate the Executive’s employment relationship immediately without notice at any time for the following reasons which shall constitute “Cause”: (i) Executive’s death; (ii) Executive’s physical or mental inability to

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perform the essential functions of his duties satisfactorily for a period of 180 consecutive days or 180 days in total within a 365-day period as determined by the Company in its reasonable discretion and in accordance with applicable law; (iii) any act or omission of Executive constituting willful misconduct (including willful violation of the Company’s policies), gross negligence, fraud, misappropriation, embezzlement, criminal behavior, conflict of interest or competitive business activities which, as determined by the Company in its reasonable discretion, shall cause material harm, or any other actions that are materially detrimental to the Company or any Affiliates’ interest; (iv) any other reason recognized as “cause” under applicable law; or (v) Executive’s material breach of this Agreement.

          4.4 Executive may terminate Executive’s employment with the Company as a result of the Company’s failure to cure its material breach of this Agreement after Executive has given the Company notice of the material breach and at least thirty (30) days to cure the breach (or such longer period as may be reasonably required to cure the breach as long as the Company is making good faith efforts to do so).

          4.5 This Agreement shall terminate upon the termination of the employment relationship with the following exceptions: Section 6 (Trade Secrets, Confidential Information, Company Property and Competitive Business Activities), 7 (Intellectual Property Ownership), 8 (License), 9 (Release), and 12 (Change in Control) shall survive the termination of Executive’s employment and/or the expiration or termination of this Agreement, regardless of the reasons for such expiration or termination.

     5. COMPENSATION AND BENEFITS UPON TERMINATION.

          5.1 The Company’s obligation to compensate Executive ceases on the effective termination date except as to: (i) amounts due at that time; (ii) any amount subsequently due pursuant to the plan described in Section 3.2; and (iii) any compensation and/or benefits to which he may be entitled to receive pursuant to Sections 5.2, 5.3,5.4 or 5.5.

          5.2 If the Company terminates Executive’s employment pursuant to Sections 4.1 (notice of non-renewal) or 4.2 (without cause), then the Company’s sole obligation shall be to pay Executive: (i) amounts due on the effective termination date;

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(ii) any amounts subsequently due pursuant to the plan described in Section 3.2; and (iii) subject to Executive’s compliance with Sections 6,7,8 and 9 and subject to Sections 3.7 and 5.6, an amount equal to his then current monthly salary (less applicable withholdings) for the twelve (12) month non-competition period set forth in Section 6.3, payable in equal monthly installments.

          5.3 During the period during which Executive receives post-termination payments pursuant to Section 5.2, he may continue to participate, to the extent permitted by the applicable plans and subject to their terms, conditions and eligibility requirements, in all employee welfare benefits plans (as defined by the Employee Retirement Income Security Act of 1974, as amended) in which Executive participated on his effective termination date. The Company will pay or, at the Company’s discretion, reimburse Executive for the premiums actually paid, to continue coverage under such plans during the period. Notwithstanding the Company’s payment of or reimbursement for the premiums, any coverage under such plans shall be subject to the terms, conditions and eligibility requirements of such plans, and nothing in this Section shall constitute any guaranty of coverage.

          5.4 If the Company terminates Executive’s employment as provided in Sections 4.3 (i) (death), (ii) (physical or mental inability to perform), (iii) (materially harmful acts or omissions), (iv) (other reasons recognized as “cause”) or (v) (Executive’s material breach) or if the Executive terminates his employment pursuant to Section 4.1 (notice of non-renewal) or Section 4.2 (without cause), then the Company’s sole obligation shall be to pay Executive: (i) amounts due on the effective termination date and (ii) any amounts subsequently due pursuant to the plan described in Section 3.2. Executive, except when employment terminates pursuant to Section 4.3(i) (death), shall comply with Sections 6,7,8 and 9 of this Agreement upon expiration or termination of this Agreement.

          5.5 If Executive terminates the employment relationship as a result of the Company’s failure to cure its material breach of this Agreement after he has given the Company notice of the material breach and 30 days in which to cure the breach (or such longer period as may be reasonably required to cure the breach as long as the Company is making good faith efforts to do so), pursuant to Section 4.4 of this Agreement, then the Company’s sole obligation to Executive in lieu of any other damages or other relief to which he otherwise may be entitled shall be (i) an amount equal to amounts due at the time of his termination; and (ii) subject to Executive’s

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compliance with Sections 6, 7, 8 and 9 and subject to Sections 3.7 and 5.6, liquidated damages in an amount equal to his then current monthly salary (less applicable withholdings) for the twelve (12) month non-competition period set forth in Section 6.3, payable in equal monthly installments.

          5.6 The Company’s obligation to provide the payments under Sections 5.2 and 5.5 is conditioned upon Executive’s execution of an enforceable release of all claims and his compliance with Sections 6, 7, 8 and 9 of this Agreement. If Executive chooses not to execute such a release or fails to comply with these sections, then the Company’s obligation to compensate him ceases on the effective termination date except as to amounts due at that time and any amount subsequently due pursuant to the plan described in Section 3.2.

          5.7 Executive is not entitled to receive any compensation or benefits upon his termination except as: (i) set forth in this Agreement; (ii) otherwise required by law; or (iii) otherwise required by any employee benefit plan in which he participates. Nothing in this Agreement, however, is intended to waive or supplant any death, disability, retirement, 401(k) or pension benefits to which he may be entitled under employee benefit plans in which he participates.

     6. TRADE SECRETS, CONFIDENTIAL INFORMATION, COMPANY PROPERTY AND COMPETITIVE BUSINESS ACTIVITIES. Executive acknowledges that: (i) the Company and its Affiliates have worldwide business operations, a worldwide customer base, and are engaged in the business of contract research, sales and marketing, healthcare policy consulting and health information management services to the worldwide pharmaceutical, biotechnology, medical device and healthcare industries; (ii) by virtue of his employment by and upper-level position with the Company, he has or will have access to Trade Secrets and Confidential Information (as defined in Sections 6.1(5) and 6.1(6)) of the Company and its Affiliates, including valuable information about their worldwide business operations and entities with whom they do business in various locations throughout the world, and has developed or will develop relationships with their customers and others with whom they do business in various locations throughout the world; and (iii) the Trade Secret, Confidential Information and Competitive Business Activities’ provisions set forth in this Agreement are reasonably necessary to protect the Company’s and its Affiliates’ legitimate business interests, are reasonable as to the time, territory and scope of activities which are restricted, do not interfere with public policy or public interest and

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are described with sufficient accuracy and definiteness to enable him to understand the scope of the restrictions imposed on him.

          6.1 Trade Secrets and Confidential Information. Executive acknowledges that: (i) the Company and/or its Affiliates will disclose to him certain Trade Secrets and Confidential Information; (ii) Trade Secrets and Confidential Information are the sole and exclusive property of the Company and/or its Affiliates (or a third party providing such information to the Company and/or its Affiliates) and the Company and/or its Affiliates or such third party owns all worldwide rights therein under patent, copyright, trademarks, trade secret, confidential information or other property right; and (iii) the disclosure of Trade Secrets and Confidential Information to Executive does not confer upon him any license, interest or rights of any kind in or to the Trade Secrets or Confidential Information.

               6.1(1) Executive may use the Trade Secrets and Confidential Information only while he is employed or otherwise retained by the Company and only then in accordance, with applicable Company policies and procedures and solely for the Company’s benefit. Except as authorized in the performance of services for the Company, Executive will hold in confidence and will not, either directly or indirectly, in any form, by any means, or for any purpose, disclose, reproduce, distribute, transmit, reverse engineer, decompile, disassemble, or transfer Trade Secrets or Confidential Information or any portion thereof. Upon the Company’s request, Executive shall return Trade Secrets and Confidential Information and all related materials.

               6.1(2) If Executive is required to disclose Trade Secrets or Confidential Information pursuant to a court order, subpoena or other government process or such disclosure is necessary to comply with applicable law or defend against claims, he shall: (i) notify the Company promptly before any such disclosure is made; (ii) at the Company’s request and expense take all reasonably necessary steps to defend against such disclosure, including defending against the enforcement of the court order, other government process or claims; and (iii) permit the Company to participate with counsel of its choice in any proceeding relating to any such court order, subpoena, other government process or claims.

               6.1(3) Executive’s obligations with regard to Trade Secrets shall remain in effect for as long as such information shall remain a trade secret under applicable law.

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               6.1(4) Executive’s obligations with regard to Confidential Information shall remain in effect while he is employed or otherwise retained by the Company and/or its Affiliates and for fifteen (15) years thereafter.

               6.1(5) As used in this Agreement, “Trade Secrets” means information of the Company, its Affiliates and its and/or their licensors, suppliers, customers, or prospective licensors or customers, including, but not limited to, data, formulas, patterns, compilations, programs, devices, methods, techniques, processes, financial data, financial plans, product plans, or lists of actual or potential customers or suppliers, which: (i) derives independent actual or potential commercial value, from not being generally known to or readily ascertainable through independent development or reverse engineering by persons or entities who can obtain economic value from its disclosure or use; and (ii) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

               6.1(6) As used in this Agreement, “Confidential Information” means information other than Trade Secrets, that is of value to its owner and is treated as confidential, including, but not limited to, future business plans, licensing strategies, advertising campaigns, information regarding executives and employees, and the terms and conditions of this Agreement; provided, however, Confidential Information shall not include information which is in the public domain or becomes public knowledge through no fault of Executive.

          6.2 Company Property. Upon termination of his employment, Executive shall (i) deliver to the Company all records, memoranda, data, documents and other property of any description which refer or relate in any way to Trade Secrets or Confidential Information, including all copies thereof, which are in his possession, custody or control; (ii) deliver to the Company all Company and/or Affiliates property (including, but not limited to, keys, credit cards, client files, contracts, proposals, work in process, manuals, forms, computer stored work in process and other computer data, research materials, other items of business information concerning any Company and/or Affiliates client, or Company and/or Affiliates business or business methods, including all copies thereof) which is in his possession, custody or control; (iii) bring all such records, files and other materials up to date before returning them; and (iv) fully cooperate with the Company in winding up his work and transferring that work to other individuals designated by the Company.

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          6.3 Competitive Business Activities. During his employment and the one (1) year following his effective termination date (regardless of the reason for the termination), Executive will not engage in the following activities:

               (A) on Executive’s own or another’s behalf, whether as an officer, director, stockholder, partner, associate, owner, employee, consultant or otherwise, directly or indirectly:

                    (i) compete with the Company or its Affiliates within the geographical areas set forth in Section 6.3(1); except that Executive, without violating this provision, may become employed by any company which is engaged in the integrated development, discovery, manufacture, marketing and sale of pharmaceutical drugs that does not engage in contract sales and/or research;

                    (ii) within the geographical areas set forth in Section 6.3(1), solicit or do business which is the same, similar to or otherwise in competition with the business engaged in by the Company or its Affiliates, from or with persons or entities: (A) who are customers of the Company or its Affiliates; (B) who Executive or someone for whom he was responsible solicited, negotiated, contracted or serviced on the Company’s or its Affiliates’ behalf; or (C) who were customers of the Company or its Affiliates at any time during the last year of Executive’s employment with the Company;

                    (iii) offer employment to or otherwise solicit for employment any employee or other person who had been employed by the Company or its Affiliates during the last year of Executive’s employment with the Company; or

               (B) directly or indirectly take any action which is materially detrimental or otherwise intended to be adverse to the Company’s and/or Affiliates’ goodwill, name, business relations, prospects and operations.

               6.3(1) The restrictions set forth in Section 6.3 apply to the following geographical areas; (i) within a 60-mile radius of the Company and/or its Affiliates where the Executive had an office during the Executive’s employment with the Company and/or its Affiliates; (ii) any city, metropolitan area, county (or similar political subdivision in foreign countries) in which Executive’s substantial services were provided, or for which Executive had substantial responsibility, or in which Executive

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performed substantial work on Company and/or Affiliates’ projects, while employed by the Company; and (iii) any city, metropolitan area, county (or similar political subdivisions in foreign countries) in which the Company or its Affiliates is located or does or, during Executive’s employment with Company, did business.

               6.3(2) Notwithstanding the foregoing, Executive’s ownership, directly or indirectly, of not more than one percent of the issued and outstanding stock of a corporation the shares of which are regularly traded on a national securities exchange or in the over-the-counter market shall not violate Section 6.3.

          6.4 Remedies. Executive acknowledges that his failure to abide by the Trade Secrets, Confidential Information, Company Property or Competitive Business Activities provisions of this Agreement would cause irreparable harm to the Company and/or its Affiliates for which legal remedies would be inadequate. Therefore, in addition to any legal or other relief to which the Company and/or its Affiliates may be entitled by virtue of Executive’s failure to abide by these provisions: (i) the Company will be released of its obligations under this Agreement to make any post-termination payments, including but not limited to those otherwise available pursuant to Sections 5.2, 5.3, 5.4, 5.5; (ii) the Company may seek legal and equitable relief, including but not limited to preliminary and permanent injunctive relief, for Executive’s actual or threatened failure to abide by these provisions; (iii) Executive will return all post-termination payments received pursuant to this Agreement, including but not limited to those received pursuant to Sections 5.2, 5.3, 5.4, 5.5; (iv) Executive will indemnify the Company and/or its Affiliates for all expenses including attorneys’ fees in seeking to enforce these provisions; and (v) if, as a result of Executive’s failure to abide by the Trade Secrets, Confidential Information, Company Property or Competitive Business Activities provisions, any commission or fee becomes payable to Executive or to any person, corporation or other entity with which Executive has become employed or otherwise associated, Executive shall pay the Company or cause the person, corporation or other entity with whom he has become employed or otherwise associated to pay the Company an amount equal to such commission or fee. In the event that the Company exercises its right to discontinue payments under this provision and/or Executive returns all post-termination payments received pursuant to this Agreement, Executive shall remain obligated to abide by the Trade Secrets, Confidential Information, Company Property and Competitive Business Activities provisions set forth in this Agreement.

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          6.5 Tolling. The period during which Executive must refrain from the activities set forth in Sections 6.1 and 6.3 shall be tolled during any period in which he fails to abide by these provisions.

          6.6 Other Agreements. Nothing in this Agreement shall terminate, revoke or diminish Executive’s obligations or the Company’s and/or its Affiliates’ rights and remedies under law or any agreements relating to trade secrets, confidential information, non-competition or intellectual property which Executive has executed in the past or may execute in the future or contemporaneously with this Agreement.

     7. INTELLECTUAL PROPERTY OWNERSHIP.

          7.1 As used in this Agreement, “Work Product” shall mean the data, materials, documentation, computer programs, inventions (whether or not patentable), improvements, modifications, discoveries, methods, developments, picture, audio, video, artistic works and all works of authorship, including all worldwide rights therein under patent, copyright, trademark, trade secret, confidential information or other property right, created or developed in whole or in part by Executive, while employed by the Company (whether developed during work hours or not), whether prior or subsequent to the date of this Agreement.

          7.2 All Work Product shall be considered work made for hire by Executive and owned by the Company. If any of the Work Product may not, by operation of law be considered work made for hire by Executive for the Company, or if ownership of all right, title, and interest of the intellectual property rights therein shall not otherwise vest exclusively in the Company, Executive hereby assigns to the Company, and upon the future creation thereof automatically assigns to the Company, without further consideration, the ownership of all Work Product. The Company shall have the right to obtain and hold in its own name copyrights, registrations and any other protection available in the Work Product. Executive agrees to perform, during or after his employment, such further acts which the Company requests as may be necessary or desirable to transfer, perfect and defend its ownership of the Work Product.

          7.3 Notwithstanding the foregoing, this Agreement shall not require assignment of any invention that: (i) Executive developed entirely on his own time without using the Company’s equipment, supplies, facilities, Trade Secrets or Confidential Information; and (ii) does not relate to the Company’s business or actual or

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anticipated research or development or result from any work performed by Executive for the Company.

          7.4 Executive shall promptly disclose to the Company in writing all Work Product conceived, developed or made by him, individually or jointly.

     8. LICENSE. To the extent that any preexisting materials are contained in Work Product which Executive delivers to the Company or its customers, Executive grants to the Company an irrevocable, nonexclusive, worldwide, royalty-free license to: (i) use and distribute (internally or externally) copies of, and prepare derivative works based upon, such preexisting materials and derivative works thereof; and (ii) authorize others to do any of the foregoing.

     9. RELEASE. Executive acknowledges that: (i) as a part of his services, he may provide his image, likeness, voice or other characteristics; and (ii) the Company may use his image., likeness, voice or other characteristics and expressly releases the Company, its Affiliates and its and/or their agents, employees, licensees and assigns from and against any and all claims which he has or may have for invasion of privacy, right of privacy, defamation, copyright infringement or any other causes of action arising out of the use, adaptation, reproduction, distribution, broadcast or exhibition of such characteristics.

     10. EMPLOYEE REPRESENTATION. Executive represents and warrants that his employment and obligations under this Agreement will not (i) breach any duty or obligation he owes to another or (ii) violate any law, recognized ethics standard or recognized business custom.

     11. OFFICERS AND DIRECTORS INDEMNIFICATION PROVISIONS. To the.extent Executive serves as a Company and/or Affiliate officer or director, Executive.shall be entitled to insurance under Company’s directors and officers’ indemnification policies comparable to any such insurance covering executives of the applicable entity serving in similar capacities. Further, the Company’s bylaws shall contain provisions granting to Executive the maximum indemnity protection allowed under applicable law and the Company hereby agrees to indemnify and hold harmless Executive in accordance with such maximum indemnity protection allowed under applicable law.

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     12. CHANGE IN CONTROL.

          12.1 For purposes of this Agreement, a “Change in Control” shall mean the occurrence of any one of the following:

               (A) An acquisition (other than directly from the Company) of any voting securities of the Company by any “Person” (as such term is used in Sections 3(A)(9), 13(D)(3) and 14(D)(2) of the Securities Exchange Act of 1934, as amended (the “Act”)), after which such Person, together with its “affiliates” and “associates” (as such terms are defined in Rule 12b-2 under the Act), becomes the “beneficial owner” (as such term is defined in Rule 13d-3 under the Act), directly or indirectly, of more than one- third (33.33%) of the total voting power of the Company’s then outstanding voting securities, but excluding any such acquisition by the Company, any Person of which a majority of its voting power or its voting equity securities or equity interests is owned, directly or indirectly, by the Company (for purposes hereof, a “Subsidiary”), any employee benefit plan of the Company or any of its Subsidiaries (including any Person acting as trustee or other fiduciary for any such plan), or Dennis B. Gillings;

               (B) The shareholders of the Company approve a merger, share exchange, consolidation or reorganization involving the Company and any other corporation or other entity that is not controlled by the Company, as a result of which less than two-thirds (66.66%) of the total voting power of the outstanding voting securities of the Company or of the successor corporation or entity after such transaction is held in the aggregate by the holders of the Company’s voting securities immediately prior to such transaction;

               (C) The shareholders of the Company approve a liquidation or dissolution of the Company, or approve the sale or other disposition by the Company of all or substantially all of the Company’s assets to any Person (other than a transfer to a Subsidiary of the Company);

               (D) During any period of 24 consecutive months, the individuals who constitute the Board of Directors of the Company at the beginning of such period (the “Incumbent Directors”) cease for any reason to constitute at least two-thirds of the Board of Directors; provided, however, that a director who is not a director at the beginning of such period shall be deemed to be an Incumbent Director if such

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director is elected or recommended for election by at least two-thirds (66.66%) of the directors who are then Incumbent Directors.

          12.2 Termination Following Change in Control. After the occurrence of a Change in Control, Executive shall be entitled to receive payments and benefits pursuant to this Agreement if, at the time of the Change in Control, (i) Executive is in ECP Levels 1 to 2 and his employment is terminated pursuant to Sections 12.2(A), (B), or (C) below, or (ii) Executive is in ECP Levels 2.5 to 4 and his employment is terminated pursuant to Sections 12.2(B) or (C) below.

               (A) Within eighteen (18) months following a Change in Control, Executive terminates his employment with Company by giving written notice of such termination to Company.

               (B) Within eighteen (18) months following a Change in Control, Company terminates Executive’s employment for reasons other than “Cause” as such term is defined in Section 4.3 hereof.

               (C) Within eighteen (18) months following a Change in Control, Executive terminates his employment with the Company for “Good Reason.” For purposes of this Agreement, “Good Reason” shall mean the occurrence after a Change in Control of any of the following events or conditions:

                    (i) a change in Executive’s status, title, position or responsibilities (including reporting responsibilities) which, in Executive’s reasonable judgment, represents an adverse change from his status, title, position or responsibilities in effect immediately prior thereto; the assignment to Executive of any duties or responsibilities which in Executive’s reasonable judgment, are inconsistent with his status, title, position or responsibilities; or any removal of Executive from or failure to reappoint or reelect him to any such positions, status, or title except in connection with the termination of his employment for Cause or by Executive other than for Good Reason,

                    (ii) a reduction in Executive’s base salary;

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                    (iii) the Company’s requiring Executive to be based at any place outside a thirty (30) mile radius from Executive’s principal place of residence, except for reasonably required travel on Company’s business which is not greater than such travel requirements prior to the Change in Control;

                    (iv) the failure by the Company to continue in effect any compensation, welfare or benefit plan in which Executive is participating at the time of a Change in Control, including benefits pursuant to the Executive Compensation Plan or similar plans, without substituting plans providing Executive with substantially similar or greater benefits, or the taking of any action by the Company which would adversely affect Executive’s participation in or materially reduce Executive’s benefits under any such plans or deprive Executive of any material fringe benefit enjoyed by Executive at the time of the Change in Control;

                    (v) any purported termination of Executive’s employment for Cause without grounds therefor;

                    (vi) the insolvency or the filing (by any party including the Company) of a petition for bankruptcy of the Company;

                    (vii) any material breach by the Company of any provision of this Agreement after Executive has given the Company notice of the material breach and at least thirty (30) days to cure the breach (or such longer period as may be reasonably required to cure the breach as long as the Company is making good faith efforts to do so); or

                    (viii) the failure of the Company to obtain an agreement, satisfactory to Executive, from any successor or assign of the Company to assume and agree to perform this Agreement.

         12.3 Severance Pay and Benefits. If Executive’s employment with the Company terminates under circumstances as described in Section 12.2. above, Executive shall be entitled to receive all of the following:

               (A) all accrued compensation through the termination date, plus any Bonus for which the Executive otherwise would be eligible in the year of termination, prorated through the termination date, payable in cash. For purposes of

15

Sections 12.3(A) and 12.3(B), “Bonus” shall be defined as any benefits for which Executive would be eligible under the Executive Compensation Plan described in Section 3.2 of this Agreement. The amount of such Bonus shall be paid in cash and, for purposes of Sections 12.3(A) and 12.3(B), shall be calculated as if Executive had achieved 100% of Executive’s performance goals for that year.

               (B) a severance payment equal to two and ninety-nine hundredths (2.99) times the amount of Executive’s most recent annual compensation, including the amount of his most recent annual Bonus. The severance amount shall be paid (i) in cash in thirty-four (34) equal monthly installments commencing one month after the termination date, or (ii) in a lump sum, within one month after the termination date, at the sole option of the Executive.

               (C) the Company shall maintain in full force and effect, for eighteen (18) months after the termination date, all life insurance, health, accidental death and dismemberment, disability plans and other benefit programs in which Executive is entitled to participate immediately prior to the termination date, provided that Executive’s continued participation is possible under the general terms and provisions of such plans and programs. Executive’s continued participation in such plans and programs shall be at no greater cost to Executive than the cost he bore for such participation immediately prior to the termination date. If Executive’s participation in any such plan or program is barred, Company shall arrange upon comparable terms, and at no greater cost to Executive than the cost he bore for such plans and programs prior to the termination date, to provide Executive with benefits substantially similar to, or greater than, those which he is entitled to receive under any such plan or program; and

               (D) a lump sum payment (or otherwise as specified by Executive to the extent permitted by the applicable plan) of any and all amounts contributed to a Company pension or retirement plan which Executive is entitled to under the terms of any such plan through the date of termination.

          12.4 Stock Options.

               (A) Upon a Change in Control, all options (“Options”) to purchase Common Stock of the Company held by Executive as of the date of the Change in Control shall become fully vested and exercisable.

16

               (B) If Executive’s employment with the Company terminates pursuant to Section 12.2, then the Options shall remain exercisable until the later of:

                    (i) the expiration of the applicable period for exercise following termination of employment set forth in the Option agreements (or in any other agreement between Executive and the Company that supersedes the Option agreements); or

                    (ii) three (3) years after the date of termination (to the extent of the terms of the Options); provided, however, that any “incentive stock options” within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”), that are exercised more than ninety (90) days after the date of termination pursuant Section 12.2 shall be treated for tax purposes as nonqualified stock options.

          12.5 Excise Tax Payments.

               (A) If any payment or benefit (within the meaning of Section 280G(b)(2) of the Code), to Executive or for his benefit pursuant to this Agreement (a “Payment”) is subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then the amount of the Payment net of all taxes other than the Excise Tax (the “Net Amount”) shall be calculated. Executive shall then receive, in addition to the Payment, an additional payment (the “Gross-Up Payment”), which shall be an amount such that, after payment of all taxes (including the Excise Tax) on the Payment and the Gross-Up Payment, Executive shall retain an amount equal to the Net Amount.

               (B) An initial determination as to whether a Gross-Up Payment is required pursuant to this Agreement and the amount of such Gross-Up Payment shall be made at Company’s expense by an accounting firm selected by Company and reasonably acceptable to Executive which is designated as one of the five largest accounting firms in the United States (the “Accounting Firm”). The Accounting Firm shall provide its determination (the “Determination”), together with detailed supporting calculations and documentation to Company and Executive within ten days of the date Executive’s employment terminates if applicable, or such other time as requested by Company or by Executive (provided Executive reasonably believes that any of the Payments may be subject to the Excise Tax) and if the Accounting Firm determines that no Excise Tax is payable by Executive with respect to a Payment, it shall furnish Executive with an opinion reasonably acceptable to Executive that no Excise Tax will be

17

imposed with respect to any such Payment. Within ten days of the delivery of the Determination to Executive, Executive shall have the right to dispute the Determination (the “Dispute”). The Gross-Up Payment, if any, as determined pursuant to this Section 12.5 shall be paid by Company to Executive within five days of the receipt of the Accounting Firm’s determination. The existence of the Dispute shall not in any way affect Executive’s right to receive the Gross-Up Payment in accordance with the Determination. Upon the final resolution of a Dispute, Company shall promptly pay to Executive any additional amount required by such resolution. If there is no Dispute, the Determination shall be binding, final and conclusive upon Company and Executive subject to the application of Section (C) below.

               (C) Notwithstanding anything in this Agreement to the contrary, in the event that, according to the Determination, an Excise Tax will be imposed on any Payment, Company shall pay to the applicable government taxing authorities as Excise Tax withholding, the amount of the Excise Tax that the Company has actually withheld from the Payment and the Gross-Up Payment, as applicable.

               (D) If Executive is subject to taxation under a non-United States taxing authority and an excise tax similar to the Excise Tax is imposed on any Payment by such non-United States taxing authority, then Executive shall be entitled to receive a Gross-Up Payment as calculated pursuant to Section 12.5(a) above, based upon the lesser of such non-United States excise tax imposed and the Excise Tax that would have been imposed had the Payment been subject to United States taxation.

     13. NOTICES. All notices, requests, demands and other communications required or permitted to be given in writing pursuant to this Agreement shall be deemed given and received: (A) upon delivery if delivered personally; (B) on the fifth (5th) day after being deposited with the U.S. Postal Service if mailed by first class mail, postage prepaid, registered or certified with return receipt requested, at the addresses set forth below; (C) on the next day after being deposited with a reliable overnight delivery service; or (D) upon receipt of an answer back confirmation, if transmitted by telefax, addressed to the below indicated telefax number. Notice given in another manner shall be effective only if and when received by the addressee. For purposes of notice, the addresses and telefax number (if any) of the parties shall be as follows:

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If to the Executive, to :	Oppel Greeff
	111 Beaver Dam Run
	Durham, NC 27703
If to the Company, to:	Quintiles Transnational Corp.
	4709 Creekstone Drive
	Riverbirch Building, Suite 300
	Durham, North Carolina 27703-8411
	Attn: General Counsel

provided that: (A) each party shall have the right to change its address for notice, and the person who is to receive notice, by the giving of fifteen (15) days’ prior written notice to the other party in the manner set forth above; and (B) notices shall be effective if given to the other party in the manner set forth above regardless of whether a copy was received by the additional addressee specified above.

     14. WAIVER OF BREACH. The Company’s or Executive’s waiver of any breach of a provision of this Agreement shall not waive any subsequent breach by the other party.

     15. ENTIRE AGREEMENT. Except as expressly provided in this Agreement, this Agreement: (i) supersedes all other understandings and agreements, oral or written, between the parties with respect to the subject matter of this Agreement; and (ii) constitutes the sole agreement between the parties with respect to this subject matter. Each party acknowledges that: (i) no representations, inducements, promises or agreements, oral or written, have been made by any party or by anyone acting on behalf of any party, which are not embodied in this Agreement; and (ii) no agreement, statement or promise not contained in this Agreement shall be valid. No change or modification of this Agreement shall be valid or binding upon the parties unless such change or modification is in writing and is signed by the parties.

     16. SEVERABILITY. If a court of competent jurisdiction holds that any provision or sub-part thereof contained in this Agreement is invalid, illegal or unenforceable, that invalidity, illegality or unenforceability shall not affect any other provision in this Agreement. Additionally, if any of the provisions, clauses or phrases in the Trade Secrets, Confidential Information or Competitive Business Activities

19

provisions set forth in this Agreement are held unenforceable by a court of competent jurisdiction, then the parties desire that they be “blue-penciled’ or rewritten by the court to the extent necessary to render them enforceable.

     17. PARTIES BOUND. The terms, provisions, covenants and agreements contained in this Agreement shall apply to, be binding upon and inure to the benefit of the Company’s successors and assigns. The Company, at its discretion, may assign this Agreement to Affiliates, Because this Agreement is personal to Executive, Executive may not assign this Agreement.

     18. GOVERNING LAW. This Agreement and the employment relationship created by it shall be governed by North Carolina law without giving effect to North Carolina choice of law provisions. The parties hereby consent to jurisdiction in North Carolina for the purpose of any litigation relating to this Agreement and agree that any litigation by or involving them relating to this Agreement shall be conducted in the courts of Wake County, North Carolina or the federal courts of the United States for the Eastern District of North Carolina.

     IN WITNESS WHEREOF, the parties have entered into this Agreement on the day and year first written above.

	NAME
	QUINTILES TRANSNATIONAL CORP.
By:
	Title: VP, Global HR OPS

20 EX-10.08 6 g87218exv10w08.htm EX-10.08

EXHIBIT 10.08

AMENDMENT TO EXECUTIVE EMPLOYMENT AGREEMENT

     THIS AMENDMENT (this “Amendment”) dated as of November 17, 2003 by and between QUINTILES TRANSNATIONAL CORP., a North Carolina corporation (the “Company”) and Oppel Greeff (“Executive”).

     WHEREAS, the Company and Executive have entered into that certain Executive Employment Agreement, dated as of February 8, 2002 (the “Agreement”); and

     WHEREAS, the Company and Executive desire to amend the Agreement to reflect the acquisition of the Company by Pharma Services Holding, Inc., a Delaware Corporation (“Pharma”) pursuant to that certain Agreement and Plan of Merger, dated as of April 10, 2003 by and among the Company, Pharma and Pharma Services Acquisition Corp., a North Carolina corporation and wholly-owned subsidiary of Pharma.

     NOW, THEREFORE, in consideration of the mutual covenants and agreements and the representations and warranties herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree that the Agreement shall be amended as follows, effective upon, and only upon, the Executive’s execution hereof prior to November 17, 2003:

1.     Section 2 of the Agreement shall be amended by adding the following sentence to the end of the first paragraph thereof:

        Executive shall also serve, without additional compensation, in such other officer and director positions of Affiliates to which he may be appointed.

2.     Section 3.1 of the Agreement shall be amended to replace “$21,666.66” with “$33,333.33”, effective as of the Change in Control (as defined in Section 12.1, as amended by this Agreement).

3.     Section 3.2 of the Agreement shall be amended to read as follows:

     3.2 Annual Cash Bonus Plan. Executive may participate on a basis commensurate with his position as a senior executive officer, as determined by the Company, in the Company’s annual cash bonus plan which may be made available from time to time to Company executives; provided, however, that Executive’s participation is subject to the applicable terms, conditions and eligibility requirements of the plan documents, some of which are within the plan administrator’s discretion, as they may exist from time to time.

4.     Section 5.2 shall be amended to read as follows:

     5.2 If the Company terminates Executive’s employment pursuant to Section 4.1 (notice of non-renewal) or 4.2 (without cause), or if Executive terminates Executive’s employment pursuant to Section 4.4 (breach of Agreement), then the Company’s sole obligation to Executive, in lieu of any other damages or other relief to which he otherwise may be entitled, shall be to pay: (i) amounts due on the effective date of the termination; (ii) any amounts subsequently due pursuant to the plan described in Section 3.2; and (iii) subject to Executive’s compliance with Sections 6, 7, 8 and 9 and subject to Sections 3.7 and 5.6 (release), 36 monthly payments, where each payment equals Executive’s monthly rate of base salary in effect at the time of such termination multiplied by 1.55.

5.     The first sentence of Section 5.3 of the Agreement shall be amended by adding “(but in no event after the date the Executive becomes eligible for comparable coverage)” immediately after the reference to Section 5.2.

6.     Section 5.5 of the Agreement shall be deleted in its entirety and labeled “[Reserved]”.

7.     Section 12.1 of the Agreement shall be amended to read as follows:

     12.1 For purposes of this Agreement, a “Change in Control” shall mean the consummation of the transactions pursuant to that certain Agreement and Plan of Merger, dated as of April 10, 2003, as amended, by and among the Company, Pharma Services Holding, Inc., a Delaware corporation (“Pharma”), and Pharma Services Acquisition Corp., a North Carolina corporation and wholly-owned subsidiary of Pharma (as such agreement may be amended from time to time, the “Merger Agreement”).

8.     Section 12.2 of the Agreement shall be deleted in its entirety and labeled “[Reserved]”.

9.     Section 12.3 of the Agreement shall be amended to read as follows:

     12.3 Bonus. As soon as practicable following the occurrence of the Change in Control, Executive shall be entitled to a cash bonus equal to $500,000, less applicable withholdings. Such bonus shall not be taken into account for purposes of determining any entitlement pursuant to Section 5.2.

10.     Section 12.4 of the Agreement shall be amended by deleting subsection (B) thereof, and by adding the following to the end of subsection (A):

Executive acknowledges that all unexercised Options will be cancelled upon the Change in Control, including without limit those with an exercise price per share greater than or equal to $14.50, and will be treated in the manner described in Section 2.9 of the Merger Agreement.

2

11.     Subsection (B) of Section 12.5 of the Agreement shall be amended to read as follows:

     (B) The Company will determine whether a Gross-Up Payment is required pursuant to this Agreement and the amount thereof (the “Determination”). If it is subsequently determined by the Internal Revenue Service (“IRS”) on audit that Executive is in fact subject an Excise Tax larger than that on which the Company based its Determination, then the Company shall recalculate the Gross-Up Payment and pay to Executive the additional amount required (including any interest or penalties incurred by Executive due to the increase in the Excise Tax). The Company, at its cost, may, on Executive’s behalf, challenge any assessment or imposition of any Excise Tax by the IRS, and Executive will assist and cooperate with the Company with respect to any such challenge. Should Executive receive a refund of any Excise Tax previously paid, Executive shall repay to the Company the portion of any Gross-Up Payment made in respect of the Excise Tax so refunded. Executive will, with respect to the applicability of the Excise Tax, take a position consistent with that of the Company at all times.

12.     Section 15 of the Agreement shall be amended to read as follows:

     15.     ENTIRE AGREEMENT. This Agreement, along with three letters from Pharma to Executive, one dated September 12, 2003 relating to the acquisition of stock of Pharma by rollover, and two dated October 30, 2003 relating to the acquisition of stock under the Pharma Stock Incentive Plan (collectively, the “Pharma letters”), (i) supersede all other understandings, offers and agreements, oral or written, between or among Executive, Pharma, the Company or any of their affiliates; and (ii) constitute the sole agreement between or among Executive, Pharma and the Company with respect to employment, compensation (including equity compensation) and benefits. Executive acknowledges that: (i) no representations, inducements, promises or agreements, oral or written, have been made by any party or by anyone acting on behalf of any party, which are not embodied in this Agreement or the Pharma letters; and (ii) no agreement, statement or promise not contained in this Agreement or the Pharma letters shall be valid. No change or modification of this Agreement shall be valid or binding upon the parties unless such change or modification is in writing and is signed by the parties.

13.     A new Section 19 shall be added to the Agreement to read as follows:

     19.     TAX WITHHOLDING. The Company shall have the right to deduct and withhold such amounts from any payment made hereunder as may be necessary to enable the Company to satisfy any applicable withholding obligation imposed by law.

3

     IN WITNESS WHEREOF, this Amendment has been duly executed and delivered by Executive and by a duly authorized officer of the Company as of the date and year first above written.

QUINTILES TRANSNATIONAL CORP.

By: /s/ John S. Russell

Name: John S. Russell

Title:

/s/ Oppel Greeff

Oppel Greeff

4 EX-10.09 7 g87218exv10w09.htm EX-10.09

EXHIBIT 10.09

(Quintiles Transnational Corp. Logo)

Quintiles Transnational Corp.
Post Office Box 13979
Research Triangle Park, NC 27709-3979
919 998 2000 / Fax 919 998 9113
http://www.quintiles.com

December 5, 2003

PERSONAL AND CONFIDENTIAL

Oppel Greeff

111 Beaver Dam Run

Durham, NC 27703

Re: Amendment to Executive Employment Agreement

Dear Oppel:

Reference is made to the amendment to your Executive Employment Agreement (the “Employment Agreement”) dated as of November 17, 2003 (the “Amendment”). This will confirm our agreement that Section 5.2 of the Employment Agreement, as amended by paragraph 4 of the Amendment, will be further amended to provide that, subject to the satisfaction of the conditions contained therein, the post-employment benefits payable thereunder will also be payable upon a termination of your employment prior to September 25, 2006 pursuant to Section 4.3(i) (death) or Section 4.3(ii) (disability) of the Employment Agreement. However, as to such benefits payable upon disability, (i) the 36 month period referred to in Section 5.2 shall be reduced by any preceding period during which you were receiving short-term disability benefits from the Company or otherwise were compensated by the Company while you were physically or mentally unable to perform the essential functions of your duties, and (ii) the monthly payments shall be reduced by the monthly payments you receive pursuant to the Company’s long-term disability program. Prior to September 25, 2006, references to Sections 4.3(i) and (ii) contained in Section 5.4 of the Employment Agreement shall be ignored.

You represent to the Company that you are not aware of any illness or condition that could reasonably be expected to result in your death or disability prior to September 25, 2006, and the Company is agreeing to provide you the benefits set forth in the preceding paragraph based on such representation. You further agree to submit, upon the Company’s request, to a medical examination for purposes of the Company’s obtaining insurance to fund its obligations under the preceding paragraph, provided that the Company’s failure to obtain such insurance shall have no effect on such obligations.

(Quintiles Transnational Corp. Logo)

Greeff – Amendment Employment Agreement Ltr.

December 5, 2003

Page 2

Please confirm that this conforms to your understanding of our agreement by signing below.

Sincerely yours,

Michael Mortimer

Executive Vice President, Global Human Resources

Agreed to and Accepted by:

	12/06/03
Oppel Greeff	Date

EX-10.10 8 g87218exv10w10.htm EX-10.10

EXHIBIT 10.10

Pharma Services Holding, Inc.
c/o One Equity Partners
230 Park Avenue, 18th Floor
New York, New York 10022

October 30, 2003

Oppel Greeff
111 Beaver Dam Run
Durham, NC 27703

Re: Opportunity to Purchase Shares

Dear Oppel:

As you know, on September 25, 2003, Quintiles Transnational Corp. (“Quintiles”), became an indirect wholly-owned subsidiary of Pharma Services Holding, Inc. (the “Company”). We are pleased to offer you the opportunity to purchase shares of common stock (“Shares”) of the “Company” pursuant to the Company’s Stock Incentive Plan (the “Plan”) and on the terms and conditions set forth below.

1.	Number of Shares. You will have the opportunity to purchase up to 450,000 Shares.
2.	Purchase Price. The purchase price per Share is $0.2438, for a total of $109,710 if you purchase all of the Shares, payable by check to the Company.
3.	Vesting. Your Shares when issued will be “Unvested Shares” (as defined in the Plan) and will become “Vested Shares” (as defined in the Plan) as to 20% of the total number awarded on the 25th day of each September, beginning September 25, 2004 and ending September 25, 2008, provided (i) all Shares will become Vested Shares upon a “Sale of the Company”, as defined in the Plan, and the Committee will not exercise its discretion to provide otherwise, (ii) all Shares will become Vested Shares upon your termination of employment by reason of your death or pursuant to Section 4.3(ii) of your Executive Employment Agreement (physical or mental inability to perform), and (iii) upon your termination of employment under circumstances entitling you to severance benefits pursuant to Section 5.2 of your Executive Employment Agreement, such number of Unvested Shares shall become Vested Shares as is equal to the total number of Shares set forth in paragraph 1 above multiplied by the “vesting percentage”, as defined below. In no event will any Unvested Shares become Vested Shares following your termination of employment with the Company and its subsidiaries for any reason (after taking into account any vesting that occurs upon termination of employment pursuant to clauses (ii) and (iii) of the preceding sentence). For purposes of the foregoing, “vesting percentage” means the 20% multiplied by a fraction, the numerator of which is the

	number of days that have elapsed from the 25th day of September that immediately precedes the date of your termination of employment through the date of such termination, and the denominator of which is 365, provided that if the date of your termination of employment falls on the 25th day of any September, the vesting percentage shall be zero.
4.	Repurchase Right; Restrictions on Shares. Upon your termination of employment with the Company and its subsidiaries for any reason, the Company and certain other persons may, but are not obligated to, repurchase your Shares. As further described in Section 8 of the Plan, the repurchase price to be paid by the Company depends upon whether the Shares are Unvested Shares or Vested Shares, and the circumstances of your termination. Generally, Unvested Shares may be repurchased for the price you paid for them, and Vested Shares may be repurchased for their “Fair Market Value”, as defined in the Plan, but under certain circumstances described in the Plan, even your Vested Shares may be repurchased for the price you paid for them. Also, as further described in Section 8 of the Plan, the Shares are generally nontransferable prior to a Sale of the Company or “Qualified Public Offering” (as defined in the Plan), the Company has the right to require that you participate in a Sale of the Company (a “Drag-Along Right”), and your right to vote with respect to the election of directors of the Company may be restricted. For purposes of Section 8(c)(ii) of the Plan (Repurchase Right), in making a good faith determination of “Fair Market Value”, the Committee will take into account the most recent outside event pursuant to which a value of a Share can be implied (including, without limitation, an equity issuance, stock option grant or valuation by an appraisal firm, investment bank or similar organization), provided that if no such event has occurred within the preceding 12 months, the Committee shall obtain a new valuation by an appraisal firm, investment bank or similar organization, and shall take such valuation into account in determining Fair Market Value. For purposes of the proviso contained in Section 8(c)(ii) of the Plan, clause (x) thereof shall not apply, and clause (z) shall apply only if the breach referred to therein is material.
5.	Taxes. A separate information statement describing the tax considerations relating to your purchase of Shares will be provided to you.
6.	Representations.

     (a) Authority. You have the requisite power, authority and capacity to execute this Agreement and to perform your obligations under this Agreement and to consummate the transactions contemplated hereby. The Acceptance has been duly and validly executed and delivered by you and constitutes your legal, valid and binding obligation, enforceable against you in accordance with its terms, except to the extent that such validly binding effect and enforceability may be limited by applicable bankruptcy, reorganization, insolvency, moratorium and other laws relating to or affecting creditors’ rights generally.

     (b) Brokers. No Person is entitled to any broker’s, finder’s, financial adviser’s or other similar fee or commission in connection with the transactions contemplated hereby based upon any action taken by you.

2

     (c) Shares Unregistered; Accredited Investor. You acknowledge that (i) the offer and sale of the Shares has not been registered under applicable securities laws; (ii) the Shares being purchased by you must be held indefinitely; (iii) there is no established market for the Shares and it is not anticipated that there will be any such market for the Shares in the foreseeable future; (iv) you are an “accredited investor” under Rule 501(a) of the Securities Act of 1933; (v) your knowledge and experience in financial and business matters are such that you are capable of evaluating the merits and risks of your investment in the Shares, or you have been advised by a representative (not affiliated with the Company) possessing such knowledge and experience; (vi) you and your representatives, including your professional, financial, tax and other advisors, if any, have carefully considered your proposed investment in the Shares, and you understand and have taken cognizance of (or have been advised by your representatives as to) the risk factors related to the acquisition of such Shares, and no representations or warranties have been made to you or your representatives concerning the Shares, the Company or the Company’s business, operations, financial condition or prospects or other matters; (vii) in making your decision to purchase the Shares, you have relied upon independent investigations made by you and, to the extent believed by you to be appropriate, your representatives, including your professional, financial, tax and other advisors, if any; (viii) you and your representatives have been given the opportunity to request to examine all documents of, and to ask questions of, and to receive answers from, the Company and its representatives concerning the terms and conditions of the acquisition of the Shares and to obtain any additional information which you or your representatives deem necessary; (ix) you are acquiring the Shares for the purpose of investment and not with a view to, or for resale in connection with, the distribution thereof, and not with any present intention of distributing such Shares and you have no present plan or intention to sell any of the Shares; and (x) the Company is allowing you to acquire the Shares in reliance upon these representations and warranties.

7.	Subject to Plan. The opportunity to purchase the Shares is being made to you pursuant to the Plan, a copy of which is attached, and such purchase, holding and transfer of the Shares is subject to the terms of the Plan in all respects.
8.	Conditions. Our offer and your acceptance of our to purchase Shares is conditional upon your execution of an amendment to your Executive Employment Agreement in the form attached as Exhibit A no later than November 17, 2003.
9.	Acknowledgement. You acknowledge: (i) that the Plan is discretionary in nature and may be suspended or terminated by the Company at any time; (ii) that this grant of the opportunity to purchase Shares is a one-time benefit, which does not create any contractual or other right to receive future awards under the Plan, or benefits in lieu of awards; (iii) that all determinations with respect to any such future grants, including, but not limited to, the times when awards shall be granted, the number of shares subject to each award, the exercise or purchase price, and the time or times when each award shall vest, will be at the sole discretion of the Committee; (iv) that your participation in the Plan shall not create a right to further employment with the Company or its affiliates and shall not interfere with the Company’s, its affiliates’ or your ability to terminate your employment relationship at any time with or

3

without cause; (v) that your participation in the Plan is voluntary; (vi) that the value of this award is an extraordinary item of compensation which is outside the scope of your employment contract, if any; and (vii) that award is not part of normal or expected compensation for purposes of calculating any severance, resignation, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments.

10.

Employee Data Privacy. As a condition of the grant of this opportunity to purchase Shares, you consent to the collection, use and transfer of personal data as described in this paragraph 10. You understand that the Company and its Affiliates hold certain personal information about you including, but not limited to, your name, home address and telephone number, date of birth, social security number, salary, nationality, job title, shares of common stock or directorships held in the Company, details of all Options or other entitlement to shares of common stock awarded, cancelled, exercised, vested, unvested or outstanding in your favor, for the purpose of managing and administering the Plan (“Data”). You further understand that the Company and/or its Affiliates will transfer Data amongst themselves as necessary for the purposes of implementation, administration and management of your participation in the Plan, and that the Company and/or any of its Affiliates may each further transfer Data to any third parties assisting the Company in the implementation, administration and management of the Plan. You understand that these recipients may be located in your country of residence or elsewhere, such as the United States. You authorize them to receive, possess, use, retain and transfer Data in electronic or other form, for the purposes of implementing, administering and managing your participation in the Plan, including any requisite transfer of such Data as may be required for the administration of the Plan and/or the subsequent holding shares of common stock on your behalf to a broker or other third party with whom the shares acquired on exercise may be deposited. You understand that he or she may, at any time, view the Data, require any necessary amendments to it or withdraw the consent herein in writing by contacting the local human resources representative.

Please indicate the number of Shares you wish to purchase on the Acceptance below. Please return a signed copy of the Acceptance, along with a check for the purchase price ($0.2438 per Share) made payable to Pharma Services Holding, Inc., to Gary Rothstein, Esq., Morgan Lewis & Bockius, LLP, 101 Park Avenue, New York, NY 10178. Your Acceptance and payment must be received no later than November 17, 2003.

Sincerely yours,

PHARMA SERVICES HOLDING, INC.

4

ACCEPTANCE OF OFFER
TO PURCHASE COMMON SHARES OF PHARMA SERVICES HOLDING, INC.

I, Oppel Greeff hereby accept the offer made to me by Pharma Services Holding, Inc. (“Pharma”) to purchase 450,000 shares of common stock of Pharma at a price per share of $0.2438 pursuant to and in accordance with the terms of a letter to me from Pharma dated October 30, 2003, and enclose a check for $109,710.

/s/ Oppel Greeff	12/06/03
Oppel Greeff	Date

5 EX-10.11 9 g87218exv10w11.htm EX-10.11

EXHIBIT 10.11

Pharma Services Holding, Inc.
c/o One Equity Partners
230 Park Avenue, 18th Floor
New York, New York 10022

October 30, 2003

Oppel Greeff
111 Beaver Dam Run
Durham, NC 27703

Re: Stock Option

Dear Oppel,

As you know, on September 25, 2003, Quintiles Transnational Corp. (“Quintiles”), became an indirect wholly-owned subsidiary of Pharma Services Holding, Inc. (the “Company”). We are pleased to inform you that you will be granted an option (“Option”) to purchase shares of common stock (“Shares”) of the Company pursuant to the Company’s Stock Incentive Plan (the “Plan”) and on the terms and conditions set forth below.

1.	Number of Shares subject to Option. 225,000 Shares.
2.	Exercise Price per Share. $14.50
3.	Vesting. The Option will vest and become exercisable as to as to 20% of the total number of Shares subject to the Option on the 25th day of each September, beginning September 25, 2004 and ending September 25, 2008, provided that (i) the Option will become fully vested and exercisable upon a “Sale of the Company”, as defined in the Plan, and the Committee will not exercise its discretion to provide otherwise, (ii) the Option will become fully vested and exercisable upon your termination of employment by reason of your death or pursuant to Section 4.3(ii) of your Executive Employment Agreement (physical or mental inability to perform), and (iii) the unvested portion of the Option will become vested and exercisable upon your termination of employment under circumstances entitling you to severance benefits pursuant to Section 5.2 of your Executive Employment Agreement as to the total number of Shares subject to the Option multiplied by the “vesting percentage”, as defined below. In no event will any portion of the Option that is not vested and exercisable at the time of your termination of employment with the Company and its subsidiaries for any reason (after taking into account any vesting that occurs upon termination of employment pursuant to clauses (ii) and (iii) of the preceding sentence) become vested and exercisable following such termination. For purposes of the foregoing, “vesting percentage” means 20% multiplied by a fraction, the numerator of which is the number of days that have elapsed from the 25th day of September that immediately precedes the date of your termination of employment through the date of such termination, and the denominator of which is 365,

	provided that if the date of your termination of employment falls on the 25th day of any September, the vesting percentage shall be zero.
4.	Termination of Option. The Option will terminate as provided in Section 5(b) of the Plan.
5.	Restrictions on Shares. Any Shares that you acquire upon exercise of the Option will generally be nontransferable, and subject to such other restrictions as contained in Section 8 of the Plan. For purposes of Section 8(c)(ii) of the Plan (Repurchase Right), in making a good faith determination of “Fair Market Value”, the Committee will take into account the most recent outside event pursuant to which a value of a Share can be implied (including, without limitation, an equity issuance, stock option grant or valuation by an appraisal firm, investment bank or similar organization), provided that if no such event has occurred within the preceding 12 months, the Committee shall obtain a new valuation by an appraisal firm, investment bank or similar organization, and shall take such valuation into account in determining Fair Market Value. For purposes of the proviso contained in Section 8(c)(ii) of the Plan, clause (x) thereof shall not apply, and clause (z) shall apply only if the breach referred to therein is material.
6.	Taxes. A separate information statement describing the tax considerations relating to the Option grant will be provided to you.
7.	Subject to Plan. The Option is being granted pursuant to the Plan, a copy of which is attached, and is subject to the terms of the Plan in all respects.
8.	Condition. The grant of the Option is conditional upon your execution of an amendment to your Executive Employment Agreement in the form attached as Exhibit A no later than November 17, 2003.
9.	Acknowledgement. You acknowledge: (i) that the Plan is discretionary in nature and may be suspended or terminated by the Company at any time; (ii) that each grant of an Option is a one-time benefit, which does not create any contractual or other right to receive future grants of Options, or benefits in lieu of Options; (iii) that all determinations with respect to any such future grants, including, but not limited to, the times when Options shall be granted, the number of shares subject to each Option, the Option price, and the time or times when each Option shall be exercisable, will be at the sole discretion of the Committee; (iv) that your participation in the Plan shall not create a right to further employment with the Company or its affiliates and shall not interfere with the Company’s, its affiliates’ or your ability to terminate your employment relationship at any time with or without cause; (v) that your participation in the Plan is voluntary; (vi) that the value of the Option is an extraordinary item of compensation which is outside the scope of your employment contract, if any; and (vii) that the Option is not part of normal or expected compensation for purposes of calculating any severance, resignation, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments.
10.	Employee Data Privacy. As a condition of the grant of Option, you consent to the collection, use and transfer of personal data as described in this Section 10. You understand that the

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Company and its Affiliates hold certain personal information about you including, but not limited to, your name, home address and telephone number, date of birth, social security number, salary, nationality, job title, shares of common stock or directorships held in the Company, details of all Options or other entitlement to shares of common stock awarded, cancelled, exercised, vested, unvested or outstanding in your favor, for the purpose of managing and administering the Plan (“Data”). You further understand that the Company and/or its Affiliates will transfer Data amongst themselves as necessary for the purposes of implementation, administration and management of your participation in the Plan, and that the Company and/or any of its Affiliates may each further transfer Data to any third parties assisting the Company in the implementation, administration and management of the Plan. You understand that these recipients may be located in your country of residence or elsewhere, such as the United States. You authorize them to receive, possess, use, retain and transfer Data in electronic or other form, for the purposes of implementing, administering and managing your participation in the Plan, including any requisite transfer of such Data as may be required for the administration of the Plan and/or the subsequent holding shares of common stock on your behalf to a broker or other third party with whom the shares acquired on exercise may be deposited. You understand that he or she may, at any time, view the Data, require any necessary amendments to it or withdraw the consent herein in writing by contacting the local human resources representative.

* * * *

Sincerely yours,

PHARMA SERVICES HOLDING, INC.

3 EX-10.14 10 g87218exv10w14.htm EX-10.14

EXHIBIT 10.14

AMENDMENT TO EXECUTIVE EMPLOYMENT AGREEMENT

          THIS AMENDMENT (this “Amendment”) dated as of November 14, 2003 by and between QUINTILES TRANSNATIONAL CORP., a North Carolina corporation (the “Company”) and John S. Russell (“Executive”).

          WHEREAS, the Company and Executive have entered into that certain Executive Employment Agreement, dated as of December 3, 1998, as amended on October 26, 1999 (the “Agreement”); and

          WHEREAS, the Company and Executive desire to amend the Agreement to reflect the acquisition of the Company by Pharma Services Holding, Inc., a Delaware Corporation (“Pharma”) pursuant to that certain Agreement and Plan of Merger, dated as of April 10, 2003 by and among the Company, Pharma and Pharma Services Acquisition Corp., a North Carolina corporation and wholly-owned subsidiary of Pharma.

          NOW, THEREFORE, in consideration of the mutual covenants and agreements and the representations and warranties herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree that the Agreement shall be amended as follows, effective upon, and only upon, the Executive’s execution hereof prior to November 17, 2003:

1.     The second sentence of the opening paragraph of the Agreement and the first sentence of Section 2 of the Agreement shall each be amended by replacing “Senior Vice President” with “Executive Vice President”.

2.     Section 2 of the Agreement shall be further amended by adding the following sentence to the end of the first paragraph thereof:

        Executive shall also serve, without additional compensation, in such other officer and director positions of Affiliates to which he may be appointed.

3.    Section 3.1 of the Agreement shall be amended to replace $16,666.00 with $33,333.33, effective as of the Change in Control (as defined in Section 19.1, as amended by this Amendment).

4.    Section 3.2 of the Agreement shall be amended to read as follows:

     3.2 Annual Cash Bonus Plan. Executive may participate on a basis commensurate with his position as a senior executive officer, as determined by the Company, in the Company’s annual cash bonus plan which may be made available from time to time to Company executives; provided, however, that Executive’s participation is subject to the applicable terms, conditions and

eligibility requirements of the plan documents, some of which are within the plan administrator’s discretion, as they may exist from time to time.

5.     Section 5.2 shall be amended to read as follows:

          5.2 If the Company terminates Executive’s employment pursuant to Section 4.1 (notice of non-renewal) or 4.2 (without cause), or if Executive terminates Executive’s employment pursuant to Section 4.4 (breach of Agreement), then the Company’s sole obligation to Executive, in lieu of any other damages or other relief to which he otherwise may be entitled, shall be to pay: (i) amounts due on the effective date of the termination; (ii) any amounts subsequently due pursuant to the plan described in Section 3.2; and (iii) subject to Executive’s compliance with Sections 6, 7, 8 and 9 and subject to Sections 3.7 and 5.6 (release), 36 monthly payments, where each payment equals Executive’s monthly rate of base salary in effect at the time of such termination multiplied by 1.55.

6.     The first sentence of Section 5.3 of the Agreement shall be amended by adding “(but in no event after the date the Executive becomes eligible for comparable coverage)” immediately after the reference to Section 5.2.

7.     Section 5.5 of the Agreement shall be deleted in its entirety and labeled “[Reserved]”.

8.     Section 18 of the Agreement shall be amended to read as follows:

          18. ENTIRE AGREEMENT. This Agreement, along with three letters from Pharma to Executive, one dated September 12, 2003 relating to the acquisition of stock of Pharma by rollover, and two dated November 3, 2003 relating to the acquisition of stock under the Pharma Stock Incentive Plan (collectively, the “Pharma letters”), (i) supersede all other understandings, offers and agreements, oral or written, between or among Executive, Pharma, the Company or any of their affiliates; and (ii) constitute the sole agreement between or among Executive, Pharma and the Company with respect to employment, compensation and benefits. Executive acknowledges that: (i) no representations, inducements, promises or agreements, oral or written, have been made by any party or by anyone acting on behalf of any party, which are not embodied in this Agreement or the Pharma letters; and (ii) no agreement, statement or promise not contained in this Agreement or the Pharma letters shall be valid. No change or modification of this Agreement shall be valid or binding upon the parties unless such change or modification is in writing and is signed by the parties.

9.     Section 19.1 of the Agreement shall be amended to read as follows:

     19.1 For purposes of this Agreement, a “Change in Control” shall mean the consummation of the transactions pursuant to that certain Agreement and Plan of Merger, dated as of April 10, 2003, as amended, by and among the Company, Pharma Services Holding, Inc., a Delaware corporation (“Pharma”), and Pharma

2

Services Acquisition Corp., a North Carolina corporation and wholly-owned subsidiary of Pharma (as such agreement may be amended from time to time, the “Merger Agreement”).

10.     Section 19.2 of the Agreement shall be deleted in its entirety and labeled “[Reserved]”.

11.     Section 19.3 of the Agreement shall be amended to read as follows:

     19.3 Bonus. As soon as practicable following the occurrence of the Change in Control, Executive shall be entitled to a cash bonus equal to $500,000, less applicable withholdings. Such bonus shall not be taken into account for purposes of determining any entitlement pursuant to Section 5.2.

12.     Section 19.4 of the Agreement shall be amended by deleting subsection (B) thereof, and by adding the following to the end of subsection (A):

Executive acknowledges that all unexercised Options will be cancelled upon the Change in Control, including without limit those with an exercise price per share greater than or equal to $14.50, and will be treated in the manner described in Section 2.9 of the Merger Agreement.

13.     Subsection (B) of Section 19.5 of the Agreement shall be amended to read as follows:

     (B) The Company will determine whether a Gross-Up Payment is required pursuant to this Agreement and the amount thereof (the “Determination”). If it is subsequently determined by the Internal Revenue Service (“IRS”) on audit that Executive is in fact subject an Excise Tax larger than that on which the Company based its Determination, then the Company shall recalculate the Gross-Up Payment and pay to Executive the additional amount required (including any interest or penalties incurred by Executive due to the increase in the Excise Tax). The Company, at its cost, may, on Executive’s behalf, challenge any assessment or imposition of any Excise Tax by the IRS, and Executive will assist and cooperate with the Company with respect to any such challenge. Should Executive receive a refund of any Excise Tax previously paid, Executive shall repay to the Company the portion of any Gross-Up Payment made in respect of the Excise Tax so refunded. Executive will, with respect to the applicability of the Excise Tax, take a position consistent with that of the Company at all times.

14.     A new Section 20 shall be added to the Agreement to read as follows:

3

          20. TAX WITHHOLDING. The Company shall have the right to deduct and withhold such amounts from any payment made hereunder as may be necessary to enable the Company to satisfy any applicable withholding obligation imposed by law.

          IN WITNESS WHEREOF, this Amendment has been duly executed and delivered by Executive and by a duly authorized officer of the Company as of the date and year first above written.

QUINTILES TRANSNATIONAL CORP.
By:	/s/ Beverly Rubin Moyer
	Name: Beverly Rubin Moyer
	Title:

/s/ John S. Russell

John S. Russell

4 EX-10.15 11 g87218exv10w15.htm EX-10.15

EXHIBIT 10.15

Pharma Services Holding, Inc.
c/o One Equity Partners
230 Park Avenue, 18th Floor
New York, New York 10022

November 3, 2003

John S. Russell
507 East Rosemary Street
Chapel Hill, NC 27514

Re: Opportunity to Purchase Shares

Dear John:

As you know, on September 25, 2003, Quintiles Transnational Corp. (“Quintiles”), became an indirect wholly-owned subsidiary of Pharma Services Holding, Inc. (the “Company”). We are pleased to offer you the opportunity to purchase shares of common stock (“Shares”) of the “Company” pursuant to the Company’s Stock Incentive Plan (the “Plan”) and on the terms and conditions set forth below.

1.	Number of Shares. You will have the opportunity to purchase up to 450,000 Shares.
2.	Purchase Price. The purchase price per Share is $0.2438, for a total of $109,710 if you purchase all of the Shares, payable by check to the Company.
3.	Vesting. Your Shares when issued will be “Unvested Shares” (as defined in the Plan) and will become “Vested Shares” (as defined in the Plan) as to 20% of the total number awarded on the 25th day of each September, beginning September 25, 2004 and ending September 25, 2008, provided (i) all Shares will become Vested Shares upon a “Sale of the Company”, as defined in the Plan, and the Committee will not exercise its discretion to provide otherwise, (ii) all Shares will become Vested Shares upon your termination of employment by reason of your death or pursuant to Section 4.3(ii) of your Executive Employment Agreement (physical or mental inability to perform), and (iii) upon your termination of employment under circumstances entitling you to severance benefits pursuant to Section 5.2 of your Executive Employment Agreement, such number of Unvested Shares shall become Vested Shares as is equal to the total number of Shares set forth in paragraph 1 above multiplied by the “vesting percentage”, as defined below. In no event will any Unvested Shares become Vested Shares following your termination of employment with the Company and its subsidiaries for any reason (after taking into account any vesting that occurs upon termination of employment pursuant to clauses (ii) and (iii) of the preceding sentence). For purposes of the foregoing, “vesting percentage” means the 20% multiplied by a fraction, the numerator of which is the

	number of days that have elapsed from the 25th day of September that immediately precedes the date of your termination of employment through the date of such termination, and the denominator of which is 365, provided that if the date of your termination of employment falls on the 25th day of any September, the vesting percentage shall be zero.
4.	Repurchase Right; Restrictions on Shares. Upon your termination of employment with the Company and its subsidiaries for any reason, the Company and certain other persons may, but are not obligated to, repurchase your Shares. As further described in Section 8 of the Plan, the repurchase price to be paid by the Company depends upon whether the Shares are Unvested Shares or Vested Shares, and the circumstances of your termination. Generally, Unvested Shares may be repurchased for the price you paid for them, and Vested Shares may be repurchased for their “Fair Market Value”, as defined in the Plan, but under certain circumstances described in the Plan, even your Vested Shares may be repurchased for the price you paid for them. Also, as further described in Section 8 of the Plan, the Shares are generally nontransferable prior to a Sale of the Company or “Qualified Public Offering” (as defined in the Plan), the Company has the right to require that you participate in a Sale of the Company (a “Drag-Along Right”), and your right to vote with respect to the election of directors of the Company may be restricted. For purposes of Section 8(c)(ii) of the Plan (Repurchase Right), in making a good faith determination of “Fair Market Value”, the Committee will take into account the most recent outside event pursuant to which a value of a Share can be implied (including, without limitation, an equity issuance, stock option grant or valuation by an appraisal firm, investment bank or similar organization), provided that if no such event has occurred within the preceding 12 months, the Committee shall obtain a new valuation by an appraisal firm, investment bank or similar organization, and shall take such valuation into account in determining Fair Market Value. For purposes of the proviso contained in Section 8(c)(ii) of the Plan, clause (x) thereof shall not apply, and clause (z) shall apply only if the breach referred to therein is material.
5.	Taxes. A separate information statement describing the tax considerations relating to your purchase of Shares will be provided to you.
6.	Representations.
	(a) Authority. You have the requisite power, authority and capacity to execute this Agreement and to perform your obligations under this Agreement and to consummate the transactions contemplated hereby. The Acceptance has been duly and validly executed and delivered by you and constitutes your legal, valid and binding obligation, enforceable against you in accordance with its terms, except to the extent that such validly binding effect and enforceability may be limited by applicable bankruptcy, reorganization, insolvency, moratorium and other laws relating to or affecting creditors’ rights generally.
	(b) Brokers. No Person is entitled to any broker’s, finder’s, financial adviser’s or other similar fee or commission in connection with the transactions contemplated hereby based upon any action taken by you.

2

	(c) Shares Unregistered; Accredited Investor. You acknowledge that (i) the offer and sale of the Shares has not been registered under applicable securities laws; (ii) the Shares being purchased by you must be held indefinitely; (iii) there is no established market for the Shares and it is not anticipated that there will be any such market for the Shares in the foreseeable future; (iv) you are an “accredited investor” under Rule 501(a) of the Securities Act of 1933; (v) your knowledge and experience in financial and business matters are such that you are capable of evaluating the merits and risks of your investment in the Shares, or you have been advised by a representative (not affiliated with the Company) possessing such knowledge and experience; (vi) you and your representatives, including your professional, financial, tax and other advisors, if any, have carefully considered your proposed investment in the Shares, and you understand and have taken cognizance of (or have been advised by your representatives as to) the risk factors related to the acquisition of such Shares, and no representations or warranties have been made to you or your representatives concerning the Shares, the Company or the Company’s business, operations, financial condition or prospects or other matters; (vii) in making your decision to purchase the Shares, you have relied upon independent investigations made by you and, to the extent believed by you to be appropriate, your representatives, including your professional, financial, tax and other advisors, if any; (viii) you and your representatives have been given the opportunity to request to examine all documents of, and to ask questions of, and to receive answers from, the Company and its representatives concerning the terms and conditions of the acquisition of the Shares and to obtain any additional information which you or your representatives deem necessary; (ix) you are acquiring the Shares for the purpose of investment and not with a view to, or for resale in connection with, the distribution thereof, and not with any present intention of distributing such Shares and you have no present plan or intention to sell any of the Shares; and (x) the Company is allowing you to acquire the Shares in reliance upon these representations and warranties.
7.	Subject to Plan. The opportunity to purchase the Shares is being made to you pursuant to the Plan, a copy of which is attached, and such purchase, holding and transfer of the Shares is subject to the terms of the Plan in all respects.
8.	Conditions. Our offer and your acceptance of our to purchase Shares is conditional upon your execution of an amendment to your Executive Employment Agreement in the form attached as Exhibit A no later than November 17, 2003.
9.	Acknowledgement. You acknowledge: (i) that the Plan is discretionary in nature and may be suspended or terminated by the Company at any time; (ii) that this grant of the opportunity to purchase Shares is a one-time benefit, which does not create any contractual or other right to receive future awards under the Plan, or benefits in lieu of awards; (iii) that all determinations with respect to any such future grants, including, but not limited to, the times when awards shall be granted, the number of shares subject to each award, the exercise or purchase price, and the time or times when each award shall vest, will be at the sole discretion of the Committee; (iv) that your participation in the Plan shall not create a right to further employment with the Company or its affiliates and shall not interfere with the Company’s, its affiliates’, or your ability to terminate your employment relationship at any time with or

3

without cause; (v) that your participation in the Plan is voluntary; (vi) that the value of this award is an extraordinary item of compensation which is outside the scope of your employment contract, if any; and (vii) that award is not part of normal or expected compensation for purposes of calculating any severance, resignation, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments.

10.

Employee Data Privacy. As a condition of the grant of this opportunity to purchase Shares, you consent to the collection, use and transfer of personal data as described in this paragraph 10. You understand that the Company and its Affiliates hold certain personal information about you including, but not limited to, your name, home address and telephone number, date of birth, social security number, salary, nationality, job title, shares of common stock or directorships held in the Company, details of all Options or other entitlement to shares of common stock awarded, cancelled, exercised, vested, unvested or outstanding in your favor, for the purpose of managing and administering the Plan (“Data”). You further understand that the Company and/or its Affiliates will transfer Data amongst themselves as necessary for the purposes of implementation, administration and management of your participation in the Plan, and that the Company and/or any of its Affiliates may each further transfer Data to any third parties assisting the Company in the implementation, administration and management of the Plan. You understand that these recipients may be located in your country of residence or elsewhere, such as the United States. You authorize them to receive, possess, use, retain and transfer Data in electronic or other form, for the purposes of implementing, administering and managing your participation in the Plan, including any requisite transfer of such Data as may be required for the administration of the Plan and/or the subsequent holding shares of common stock on your behalf to a broker or other third party with whom the shares acquired on exercise may be deposited. You understand that he or she may, at any time, view the Data, require any necessary amendments to it or withdraw the consent herein in writing by contacting the local human resources representative.

Please indicate the number of Shares you wish to purchase on the Acceptance below. Please return a signed copy of the Acceptance, along with a check for the purchase price ($0.2438 per Share) made payable to Pharma Services Holding, Inc., to Gary Rothstein, Esq., Morgan Lewis & Bockius, LLP, 101 Park Avenue, New York, NY 10178. Your Acceptance and payment must be received no later than November 17, 2003.

Sincerely yours,

PHARMA SERVICES HOLDING, INC.

4

ACCEPTANCE OF OFFER
TO PURCHASE COMMON SHARES OF PHARMA SERVICES HOLDING, INC.

I, John S. Russell, hereby accept the offer made to me by Pharma Services Holding, Inc. (“Pharma”) to purchase 450,000 shares of common stock of Pharma at a price per share of $0.2438 pursuant to and in accordance with the terms of a letter to me from Pharma dated November 3, 2003, and enclose a check for $109,710.00.

/s/ John S. Russell	November 14, 2003
John S. Russell	Date

5 EX-10.16 12 g87218exv10w16.htm EX-10.16

EXHIBIT 10.16

Pharma Services Holding, Inc.
c/o One Equity Partners
230 Park Avenue, 18th Floor
New York, New York 10022

November 3, 2003

John S. Russell
507 East Rosemary Street
Chapel Hill, NC 27514

Re: Stock Option

Dear John,

As you know, on September 25, 2003, Quintiles Transnational Corp. (“Quintiles”), became an indirect wholly-owned subsidiary of Pharma Services Holding, Inc. (the “Company”). We are pleased to inform you that you will be granted an option (“Option”) to purchase shares of common stock (“Shares”) of the Company pursuant to the Company’s Stock Incentive Plan (the “Plan”) and on the terms and conditions set forth below.

1.	Number of Shares subject to Option. 225,000 Shares.
2.	Exercise Price per Share. $14.50
3.	Vesting. The Option will vest and become exercisable as to as to 20% of the total number of Shares subject to the Option on the 25th day of each September, beginning September 25, 2004 and ending September 25, 2008, provided that (i) the Option will become fully vested and exercisable upon a “Sale of the Company”, as defined in the Plan, and the Committee will not exercise its discretion to provide otherwise, (ii) the Option will become fully vested and exercisable upon your termination of employment by reason of your death or pursuant to Section 4.3(ii) of your Executive Employment Agreement (physical or mental inability to perform), and (iii) the unvested portion of the Option will become vested and exercisable upon your termination of employment under circumstances entitling you to severance benefits pursuant to Section 5.2 of your Executive Employment Agreement as to the total number of Shares subject to the Option multiplied by the “vesting percentage”, as defined below. In no event will any portion of the Option that is not vested and exercisable at the time of your termination of employment with the Company and its subsidiaries for any reason (after taking into account any vesting that occurs upon termination of employment pursuant to clauses (ii) and (iii) of the preceding sentence) become vested and exercisable following such termination. For purposes of the foregoing, “vesting percentage” means 20% multiplied by a fraction, the numerator of which is the number of days that have elapsed from the 25th day of September that immediately precedes the date of your termination of employment through the date of such termination, and the denominator of which is 365,

	provided that if the date of your termination of employment falls on the 25th day of any September, the vesting percentage shall be zero.
4.	Termination of Option. The Option will terminate as provided in Section 5(b) of the Plan.
5.	Restrictions on Shares. Any Shares that you acquire upon exercise of the Option will generally be nontransferable, and subject to such other restrictions as contained in Section 8 of the Plan. For purposes of Section 8(c)(ii) of the Plan (Repurchase Right), in making a good faith determination of “Fair Market Value”, the Committee will take into account the most recent outside event pursuant to which a value of a Share can be implied (including, without limitation, an equity issuance, stock option grant or valuation by an appraisal firm, investment bank or similar organization), provided that if no such event has occurred within the preceding 12 months, the Committee shall obtain a new valuation by an appraisal firm, investment bank or similar organization, and shall take such valuation into account in determining Fair Market Value. For purposes of the proviso contained in Section 8(c)(ii) of the Plan, clause (x) thereof shall not apply, and clause (z) shall apply only if the breach referred to therein is material.
6.	Taxes. A separate information statement describing the tax considerations relating to the Option grant will be provided to you.
7.	Subject to Plan. The Option is being granted pursuant to the Plan, a copy of which is attached, and is subject to the terms of the Plan in all respects.
8.	Condition. The grant of the Option is conditional upon your execution of an amendment to your Executive Employment Agreement in the form attached as Exhibit A no later than November 17, 2003.
9.	Acknowledgement. You acknowledge: (i) that the Plan is discretionary in nature and may be suspended or terminated by the Company at any time; (ii) that each grant of an Option is a one-time benefit, which does not create any contractual or other right to receive future grants of Options, or benefits in lieu of Options; (iii) that all determinations with respect to any such future grants, including, but not limited to, the times when Options shall be granted, the number of shares subject to each Option, the Option price, and the time or times when each Option shall be exercisable, will be at the sole discretion of the Committee; (iv) that your participation in the Plan shall not create a right to further employment with the Company or its affiliates and shall not interfere with the Company’s, its affiliates’ or your ability to terminate your employment relationship at any time with or without cause; (v) that your participation in the Plan is voluntary; (vi) that the value of the Option is an extraordinary item of compensation which is outside the scope of your employment contract, if any; and (vii) that the Option is not part of normal or expected compensation for purposes of calculating any severance, resignation, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments.
10.	Employee Data Privacy. As a condition of the grant of Option, you consent to the collection, use and transfer of personal data as described in this Section 10. You understand that the

2

Company and its Affiliates hold certain personal information about you including, but not limited to, your name, home address and telephone number, date of birth, social security number, salary, nationality, job title, shares of common stock or directorships held in the Company, details of all Options or other entitlement to shares of common stock awarded, cancelled, exercised, vested, unvested or outstanding in your favor, for the purpose of managing and administering the Plan (“Data”). You further understand that the Company and/or its Affiliates will transfer Data amongst themselves as necessary for the purposes of implementation, administration and management of your participation in the Plan, and that the Company and/or any of its Affiliates may each further transfer Data to any third parties assisting the Company in the implementation, administration and management of the Plan. You understand that these recipients may be located in your country of residence or elsewhere, such as the United States. You authorize them to receive, possess, use, retain and transfer Data in electronic or other form, for the purposes of implementing, administering and managing your participation in the Plan, including any requisite transfer of such Data as may be required for the administration of the Plan and/or the subsequent holding shares of common stock on your behalf to a broker or other third party with whom the shares acquired on exercise may be deposited. You understand that he or she may, at any time, view the Data, require any necessary amendments to it or withdraw the consent herein in writing by contacting the local human resources representative.

* * * *

Sincerely yours,

PHARMA SERVICES HOLDING, INC.

3 EX-10.17 13 g87218exv10w17.htm EX-10.17

EXHIBIT 10.17

Quintiles Transnational Corp.
Post Office Box 13979
Research Triangle Park, NC 27709-3979
919 941 2000/Fax 919 941 9113
http://www.quintiles.com

EXECUTIVE EMPLOYMENT AGREEMENT

     This Executive Employment Agreement (“Agreement”), dated as of July 25, 2000, is made and entered into by QUINTILES TRANSNATIONAL CORP., a North Carolina corporation (hereinafter the “Company”) and RON WOOTEN (hereinafter the “Executive”). The Company desires employ Executive as its Senior Vice President, Finance, and provide adequate assurances to Executive and Executive desires to accept such employment on the terms set forth below, which terms Executive agreed to in Executive’s offer letter, which is incorporated herein by reference.

     In consideration of the mutual promises set forth below and other good and valuable new consideration, the receipt and sufficiency of which the parties acknowledge, the Company and Executive agree as follows:

     1. EMPLOYMENT. The Company employs Executive and Executive accepts employment on the terms and conditions set forth in this Agreement

     2. NATURE OF EMPLOYMENT. Executive shall serve as Senior Vice President, Finance, and have such responsibilities and authority as the Company may assign from time to time. Additionally, Executive agrees to perform such other duties consonant with those of an executive at his level as the Company may set from time to time.

          2.1 Executive shall perform all duties and exercise all authority in accordance with, and shall otherwise comply with, all Company policies, procedures, practices and directions.

          2.2 Executive shall devote all working time, best efforts, knowledge and experience to perform successfully his duties and advance the Company’s and/or its Affiliates’ interests. During his employment, Executive shall not engage in any other business activities of any nature whatsoever (including board memberships) for which he receives compensation without the Company’s prior written consent; provided, however, this provision does not prohibit him from personally owning and trading in stocks, bonds, securities, real estate, commodities or other investment properties for his own benefit, which do not create actual or potential conflicts of interest with the Company and/or its

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Affiliates. As used in this Agreement, “Affiliates” shall mean: (i) any Company’s parent, subsidiary or related entity; and/or (ii) any entity directly or indirectly controlled or beneficially owned in whole or part by the Company or Company’s parent, subsidiary or related entity.

          2.3 Executive’s base of operation shall be Durham, North Carolina, subject to business travel as may be necessary in the performance of Executive’s duties.

     3. COMPENSATION.

           3.1 Base Salary. Executive’s monthly salary for all services rendered shall be $16,666.67 (less applicable withholdings), payable in accordance with the Company’s policies, procedures and practices as they may exist from time to time. Executive’s salary shall be reviewed in accordance with the Company’s policies, procedures and practices as they may exist from time to time.

           3.2 Executive Compensation Plan. Executive may participate as a Level 3.5 employee in the Executive Compensation Plan (or successor plans) (“ECP”) which may be made available from time to time to Company executives at Executive’s level; provided, however, that Executive’s participation is subject to the applicable terms, conditions and eligibility requirements of the plan documents, some of which are within the plan administrator’s discretion, as they may exist from time to time.

           3.3 Tax Returns. Executive shall be entitled to tax return preparation and reasonable financial planning, consultation and advice by the Company’s accounting firm and/or legal counsel and/or financial consultants as the Company may provide from time to time to Company executives at Executive’s level.

          3.4 Other Benefits. Executive may participate in all medical, dental and disability insurance, 401(k), pension, personal leave, car allowance and other employee benefit plans and programs, except Executive may not receive severance payments other than specified in this Agreement; provided, however, that Executive’s participation in benefit plans and programs is subject to the applicable terms, conditions and eligibility requirements of these plans and programs, some of which are within the plan administrator’s discretion, as they may exist from time to time.

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          3.5 Business Expenses. Executive shall be reimbursed for reasonable and necessary expenses actually incurred by him in performing services under this Agreement in accordance with and subject to the terms and conditions of the applicable Company reimbursement policies, procedures and practices as they may exist from time to time. Expenses covered by this provision include but are not limited to travel, entertainment, professional dues, subscriptions and dues, fees and expenses associated with membership in various professional, and business and civic associations of which Executive’s participation is in the Company’s best interest.

           3.6 Nothing in this Agreement shall require the Company to create, continue or refrain from amending, modifying, revising or revoking any of the plans, programs or benefits set forth in Sections 3.2 through 3.5. Any amendments, modifications, revisions and revocations of these plans, programs and benefits shall apply to Executive.

           3.7 If, at any time during which Executive is receiving salary or post-termination payments from the Company, he receives payments on account of mental or physical disability from any Company-provided plan, then the Company, at its discretion, may reduce his salary or post-termination payments by the amount of such disability payments.

      4. TERM OF EMPLOYMENT. The original term of employment shall be for a one (1) year period commencing on July 24, 2000, 2000, and terminating on July 23, 2001, subject to the following provisions:

           4.1 Upon the expiration of the original or any renewal term of employment, Executive’s employment shall be automatically renewed for an additional one (1) year period unless, at least ninety (90) days prior to the renewal date, either party gives the other party written notice of its intent not to continue the employment relationship. During any renewal term of employment, the terms, conditions and provisions set forth in this Agreement shall remain in effect unless modified in accordance with Section 15.

           4.2 Either party may terminate the employment relationship without cause at any time upon giving the other party ninety (90) days written notice.

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          4.3 The Company may terminate the Executive’s employment relationship immediately without notice at any time for the following reasons which shall constitute “Cause”: (i) Executive’s death; (ii) Executive’s physical or mental inability to perform the essential functions of his duties satisfactorily for a period of 180 consecutive days or 180 days in total within a 365-day period as determined by the Company in its reasonable discretion and in accordance with applicable law; (iii) any act or omission of Executive constituting willful misconduct (including willful violation of the Company’s policies), gross negligence, fraud, misappropriation, embezzlement, criminal behavior, conflict of interest or competitive business activities which, as determined by the Company in its reasonable discretion, shall cause material harm, or any other actions that are materially detrimental to the Company or any Affiliates’ interest; (iv) any other reason recognized as “cause” under applicable law; or (v) Executive’s material breach of this Agreement.

           4.4 Executive may terminate Executive’s employment with the Company as a result of the Company’s failure to cure its material breach of this Agreement after Executive has given the Company notice of the material breach and at least thirty (30) days to cure the breach (or such longer period as may be reasonably required to cure the breach as long as the Company is making good faith efforts to do so).

           4.5 This Agreement shall terminate upon the termination of the employment relationship with the following exceptions: Section 6 (Trade Secrets, Confidential Information, Company Property and Competitive Business Activities), 7 (Intellectual Property Ownership), 8 (License), 9 (Release), and 12 (Change in Control) shall survive the termination of Executive’s employment and/or the expiration or termination of this Agreement, regardless of the reasons for such expiration or termination.

      5. COMPENSATION AND BENEFITS UPON TERMINATION.

          5.1 The Company’s obligation to compensate Executive ceases on the effective termination date except as to: (i) amounts due at that time; (ii) any amount subsequently due pursuant to the plan described in Section 3.2; and (iii) any compensation and/or benefits to which he may be entitled to receive pursuant to Sections 5.2, 5.3, 5.4 or 5.5.

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           5.2 If the Company terminates Executive’s employment pursuant to Sections 4.1 (notice of non-renewal) or 4.2 (without cause), then the Company’s sole obligation shall be to pay Executive: (i) amounts due on the effective termination date; (ii) any amounts subsequently due pursuant to the plan described in Section 3.2; and (iii) subject to Executive’s compliance with Sections 6,7,8 and 9 and subject to Sections 3.7 and 5.6, an amount equal to his then current monthly salary (less applicable withholdings) for the twelve (12) month non-competition period set forth in Section 6.3, payable in equal monthly installments.

           5.3 During the period during which Executive receives post- termination payments pursuant to Section 5.2, he may continue to participate, to the extent permitted by the applicable plans and subject to their terms, conditions and eligibility requirements, in all employee welfare benefits plans (as defined by the Employee Retirement Income Security Act of 1974, as amended) in which Executive participated on his effective termination date. The Company will pay or, at the Company’s discretion, reimburse Executive for the premiums actually paid, to continue coverage under such plans during the period. Notwithstanding the Company’s payment of or reimbursement for the premiums, any coverage under such plans shall be subject to the terms, conditions and eligibility requirements of such plans, and nothing in this Section shall constitute any guaranty of coverage.

           5.4 If the Company terminates Executive’s employment as provided in Sections 4.3 (i) (death), (ii) (physical or mental inability to perform), (iii) (materially harmful acts or omissions), (iv) (other reasons recognized as “cause”) or (v) (Executive’s material breach) or if the Executive terminates his employment pursuant to Section 4.1 (notice of non-renewal) or Section 4.2 (without cause), then the Company’s sole obligation shall be to pay Executive: (i) amounts due on the effective termination date and (ii) any amounts subsequently due pursuant to the plan described in Section 3.2. Executive, except when employment terminates pursuant to Section 4.3(i) (death), shall comply with Sections 6,7,8 and 9 of this Agreement upon expiration or termination of this Agreement.

           5.5 If Executive terminates the employment relationship as a result of the Company’s failure to cure its material breach of this Agreement after he has given the Company notice of the material breach and 30 days in which to cure the breach (or such longer period as may be reasonably required to cure the breach as long as the Company is

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making good faith efforts to do so), pursuant to Section 4.4 of this Agreement, then the Company’s sole obligation to Executive in lieu of any other damages or other relief to which he otherwise may be entitled shall be (i) an amount equal to amounts due at the time of his termination; and (ii) subject to Executive’s compliance with Sections 6, 7, 8 and 9 and subject to Sections 3.7 and 5.6, liquidated damages in an amount equal to his then current monthly salary (less applicable withholdings) for the twelve (12) month non-competition period set forth in Section 6.3, payable in equal monthly installments.

          5.6 The Company’s obligation to provide the payments under Sections 5.2 and 5.5 is conditioned upon Executive’s execution of an enforceable release of all claims and his compliance with Sections 6, 7, 8 and 9 of this Agreement. If Executive chooses not to execute such a release or fails to comply with these sections, then the Company’s obligation to compensate him ceases on the effective termination date except as to amounts due at that time and any amount subsequently due pursuant to the plan described in Section 3.2.

          5.7 Executive is not entitled to receive any compensation or benefits upon his termination except as: (i) set forth in this Agreement; (ii) otherwise required by law; or (iii) otherwise required by any employee benefit plan in which he participates. Nothing in this Agreement, however, is intended to waive or supplant any death, disability, retirement, 401(k) or pension benefits to which he may be entitled under employee benefit plans in which he participates.

     6. TRADE SECRETS, CONFIDENTIAL INFORMATION, COMPANY PROPERTY AND COMPETITIVE BUSINESS ACTIVITIES. Executive acknowledges that: (i) the Company and its Affiliates have worldwide business operations, a worldwide customer base, and are engaged in the business of contract research, sales and marketing, healthcare policy consulting and health information management services to the worldwide pharmaceutical, biotechnology, medical device and healthcare industries; (ii) by virtue of his employment by and upper-level position with the Company, he has or will have access to Trade Secrets and Confidential Information (as defined in Sections 6.1(5) and 6.1(6)) of the Company and its Affiliates, including valuable information about their worldwide business operations and entities with whom they do business in various locations throughout the world, and has developed or will develop relationships with their customers and others with whom they do business in various locations throughout the world; and (iii) the Trade Secret,

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Confidential Information and Competitive Business Activities’ provisions set forth in this Agreement are reasonably necessary to protect the Company’s and its Affiliates’ legitimate business interests, are reasonable as to the time, territory and scope of activities which are restricted, do not interfere with public policy or public interest and are described with sufficient accuracy and definiteness to enable him to understand the scope of the restrictions imposed on him/her.

          6.1 Trade Secrets and Confidential Information. Executive acknowledges that: (i) the Company and/or its Affiliates will disclose to him certain Trade Secrets and Confidential Information; (ii) Trade Secrets and Confidential Information are the sole and exclusive property of the Company and/or its Affiliates (or a third party providing such information to the Company and/or its Affiliates) and the Company and/or its Affiliates or such third party owns all worldwide rights therein under patent, copyright, trademarks, trade secret, confidential information or other property right; and (iii) the disclosure of Trade Secrets and Confidential Information to Executive does not confer upon him any license, interest or rights of any kind in or to the Trade Secrets or Confidential Information.

               6.1(1) Executive may use the Trade Secrets and Confidential Information only while he is employed or otherwise retained by the Company and only then in accordance with applicable Company policies and procedures and solely for the Company’s benefit. Except as authorized in the performance of services for the Company, Executive will hold in confidence and will not, either or indirectly, in any form, by any means, or for any purpose, disclose, reproduce, distribute, transmit, reverse engineer, decompile, disassemble, or transfer Trade Secrets or Confidential Information or any portion thereof. Upon the Company’s request, Executive shall return Trade Secrets and Confidential Information and all related materials.

               6.1(2) If Executive is required to disclose Trade Secrets or Confidential Information pursuant to a court order, subpoena or other government process or such disclosure is necessary to comply with applicable law or defend against claims, he shall: (i) notify the Company promptly before any such disclosure is made; (ii) at the Company’s request and expense take all reasonably necessary steps to defend against such disclosure, including defending against the enforcement of the court order, other government process or claims; and (iii) permit the Company to participate with

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counsel of its choice in any proceeding relating to any such court order, subpoena, other government process or claims.

               6.1(3) Executive’s obligations with regard to Trade Secrets shall remain in effect for as long as such information shall remain a trade secret under applicable law.

               6.1(4) Executive’s obligations with regard to Confidential Information shall remain in effect while he is employed or otherwise retained by the Company and/or its Affiliates and for fifteen (15) years thereafter.

               6.1(5) As used in this Agreement, “Trade Secrets” means information of the Company, its Affiliates and its and/or their licensors, suppliers, customers, or prospective licensors or customers, including, but not limited to, data, formulas, patterns, compilations, programs, devices, methods, techniques, processes, financial data, financial plans, product plans, or lists of actual or potential customers or suppliers, which: (i) derives independent actual or potential commercial value, from not being generally known to or readily ascertainable through independent development or reverse engineering by persons or entities who can obtain economic value from its disclosure or use; and (ii) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

               6.1(6) As used in this Agreement, “Confidential Information” means information other than Trade Secrets, that is of value to its owner and is treated as confidential, including, but not limited to, future business plans, licensing strategies, advertising campaigns, information regarding executives and employees, and the terms and conditions of this Agreement; provided, however, Confidential Information shall not include information which is in the public domain or becomes public knowledge through no fault of Executive.

          6.2 Company Property. Upon termination of his employment, Executive shall; (i) deliver to the Company all records, memoranda, data, documents and other property of any description which refer or relate in any way to Trade Secrets or Confidential Information, including all copies thereof, which are in his possession, custody or control; (ii) deliver to the Company all Company and/or Affiliates property (including, but not limited to, keys, credit cards, client files, contracts, proposals, work in

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process, manuals, forms, computer stored work in process and other computer data, research materials, other items of business information concerning any Company and/or Affiliates client, or Company and/or Affiliates business or business methods, including all copies thereof) which is in his possession, custody or control; (iii) bring all such records, files and other materials up to date before returning them; and (iv) fully cooperate with the Company in winding up his work and transferring that work to other individuals designated by the Company.

          6.3 Competitive Business Activities. During his employment and the one (1) year following his effective termination date (regardless of the reason for the termination), Executive will not engage in the following activities:

               (A) on Executive’s own or another’s behalf, whether as an officer, director, stockholder, partner, associate, owner, employee, consultant or otherwise, directly or indirectly:

                    (i) compete with the Company or its Affiliates within the geographical areas set forth in Section 6.3(1); except that Executive, without violating this provision, may become employed by any company which is engaged in the integrated development, discovery, manufacture, marketing and sale of pharmaceutical drugs that does not engage in contract sales and/or research;

                    (ii) within the geographical areas set forth in Section 6.3(1), solicit or do business which is the same, similar to or otherwise in competition with the business engaged in by the Company or its Affiliates, from or with persons or entities: (A) who are customers of the Company or its Affiliates; (B) who Executive or someone for whom he was responsible solicited, negotiated, contracted or serviced on the Company’s or its Affiliates’ behalf; or (C) who were customers of the Company or its Affiliates at any time during the last year of Executive’s employment with the Company;

                    (iii) offer employment to or otherwise solicit for employment any employee or other person who had been employed by the Company or its Affiliates during the last year of Executive’s employment with the Company; or

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               (B) directly or indirectly take any action which is materially detrimental or otherwise intended to be adverse to the Company’s and/or Affiliates’ goodwill, name, business relations, prospects and operations.

               6.3(1) The restrictions set forth in Section 6.3 apply to the following geographical areas; (i) within a 60-mile radius of the Company and/or its Affiliates where the Executive had an office during the Executive’s employment with the Company and/or its Affiliates; (ii) any city, metropolitan area, county (or similar political subdivision in foreign countries) in which Executive’s substantial services were provided, or for which Executive had substantial responsibility, or in which Executive performed substantial work on Company and/or Affiliates’ projects, while employed by the Company; and (iii) any city, metropolitan area, county (or similar political subdivisions in foreign countries) in which the Company or its Affiliates is located or does or, during Executive’s employment with Company, did business.

               6.3(2) Notwithstanding the foregoing, Executive’s ownership, directly or indirectly, of not more than one percent of the issued and outstanding stock of a corporation the shares of which are regularly traded on a national securities exchange or in the over-the-counter market shall not violate Section 6.3.

          6.4 Remedies. Executive acknowledges that his failure to abide by the Trade Secrets, Confidential Information, Company Property or Competitive Business Activities provisions of this Agreement would cause irreparable harm to the Company and/or its Affiliates for which legal remedies would be inadequate. Therefore, in addition to any legal or other relief to which the Company and/or its Affiliates may be entitled by virtue of Executive’s failure to abide by these provisions: (i) the Company will be released of its obligations under this Agreement to make any post-termination payments, including but not limited to those otherwise available pursuant to Sections 5.2, 5.3, 5.4, 5.5; (ii) the Company may seek legal and equitable relief, including but not limited to preliminary and permanent injunctive relief, for Executive’s actual or threatened failure to abide by these provisions; (iii) Executive will return all post-termination payments received pursuant to this Agreement, including but not limited to those received pursuant to Sections 5.2, 5.3, 5.4, 5.5; (iv) Executive will indemnify the Company and/or its Affiliates for all expenses including attorneys’ fees in seeking to enforce these provisions; and (v) if, as a result of Executive’s failure to abide by the Trade Secrets, Confidential Information, Company Property or Competitive Business

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Activities provisions, any commission or fee becomes payable to Executive or to any person, corporation or other entity with which Executive has become employed or otherwise associated, Executive shall pay the Company or cause the person, corporation or other entity with whom he has become employed or otherwise associated to pay the Company an amount equal to such commission or fee. In the event that the Company exercises its right to discontinue payments under this provision and/or Executive returns all post-termination payments received pursuant to this Agreement, Executive shall remain obligated to abide by the Trade Secrets, Confidential Information, Company Property and Competitive Business Activities provisions set forth in this Agreement.

          6.5 Tolling. The period during which Executive must refrain from the activities set forth in Sections 6.1 and 6.3 shall be tolled during any period in which he fails to abide by these provisions.

          6.6 Other Agreements. Nothing in this Agreement shall terminate, revoke or diminish Executive’s obligations or the Company’s and/or its Affiliates’ rights and remedies under law or any agreements relating to trade secrets, confidential information, non-competition or intellectual property which Executive has executed in the past or may execute in the future or contemporaneously with this Agreement.

     7. INTELLECTUAL PROPERTY OWNERSHIP.

          7.1 As used in this Agreement, “Work Product” shall mean the data, materials, documentation, computer programs, inventions (whether or not patentable), improvements, modifications, discoveries, methods, developments, picture, audio, video, artistic works and all works of authorship, including all worldwide rights therein under patent, copyright, trademark, trade secret, confidential information or other property right, created or developed in whole or in part by Executive, while employed by the Company (whether developed during work hours or not), whether prior or subsequent to the date of this Agreement.

          7.2 All Work Product shall be considered work made for hire by Executive and owned by the Company. If any of the Work Product may not, by operation of law be considered work made for hire by Executive for the Company, or if ownership of all right, title, and interest of the intellectual property rights therein shall not otherwise vest exclusively in the Company, Executive hereby assigns to the

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Company, and upon the future creation thereof automatically assigns to the Company, without further consideration, the ownership of all Work Product. The Company shall have the right to obtain and hold in its own name copyrights, registrations and any other protection available in the Work Product. Executive agrees to perform, during or after his employment, such further acts which the Company requests as may be necessary or desirable to transfer, perfect and defend its ownership of the Work Product.

          7.3 Notwithstanding the foregoing, this Agreement shall not require assignment of any invention that: (i) Executive developed entirely on his own time without using the Company’s equipment, supplies, facilities, Trade Secrets or Confidential Information; and (ii) does not relate to the Company’s business or actual or anticipated research or development or result from any work performed by Executive for the Company.

          7.4 Executive shall promptly disclose to the Company in writing all Work Product conceived, developed or made by him/her, individually or jointly.

     8. LICENSE. To the extent that any preexisting materials are contained in Work Product which Executive delivers to the Company or its customers, Executive grants to the Company an irrevocable, nonexclusive, worldwide, royalty-free license to: (i) use and distribute (internally or externally) copies of, and prepare derivative works based upon, such preexisting materials and derivative works thereof; and (ii) authorize others to do any of the foregoing.

     9. RELEASE. Executive acknowledges that: (i) as a part of his services, he may provide his image, likeness, voice or other characteristics; and (ii) the Company may use his image, likeness, voice or other characteristics and expressly releases the Company, its Affiliates and its and/or their agents, employees, licensees and assigns from and against any and all claims which he has or may have for invasion of privacy, right of privacy, defamation, copyright infringement or any other causes of action arising out of the use, adaptation, reproduction, distribution, broadcast or exhibition of such characteristics.

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     10. EMPLOYEE REPRESENTATION. Executive represents and warrants that his employment and obligations under this Agreement will not (i) breach any duty or obligation he owes to another or (ii) violate any law, recognized ethics standard or recognized business custom.

     11. OFFICERS AND DIRECTORS INDEMNIFICATION PROVISIONS. To the extent Executive serves as a Company and/or Affiliate officer or director, Executive shall be entitled to insurance under Company’s directors and officers’ indemnification policies comparable to any such insurance covering executives of the applicable entity serving in similar capacities. Further, the Company’s bylaws shall contain provisions granting to Executive the maximum indemnity protection allowed under applicable law and the Company hereby agrees to indemnify and hold harmless Executive in accordance with such maximum indemnity protection allowed under applicable law.

     12. CHANGE IN CONTROL.

          12.1 For purposes of this Agreement, a “Change in Control” shall mean the occurrence of any one of the following:

               (A) An acquisition (other than directly from the Company) of any voting securities of the Company by any “Person” (as such term is used in Sections 3(A)(9), 13(D)(3) and 14(D)(2) of the Securities Exchange Act of 1934, as amended (the “Act”)), after which such Person, together with its “affiliates” and “associates” (as such terms are defined in Rule 12b-2 under the Act), becomes the “beneficial owner” (as such term is defined in Rule 13d-3 under the Act), directly or indirectly, of more than one-third (33.33%) of the total voting power of the Company’s then outstanding voting securities, but excluding any such acquisition by the Company, any Person of which a majority of its voting power or its voting equity securities or equity interests is owned, directly or indirectly, by the Company (for purposes hereof, a “Subsidiary”), any employee benefit plan of the Company or any of its Subsidiaries (including any Person acting as trustee or other fiduciary for any such plan), or Dennis B. Gillings;

               (B) The shareholders of the Company approve a merger, share exchange, consolidation or reorganization involving the Company and any other corporation or other entity that is not controlled by the Company, as a result of which less

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than two-thirds (66.66%) of the total voting power of the outstanding voting securities of the Company or of the successor corporation or entity after such transaction is held in the aggregate by the holders of the Company’s voting securities immediately prior to such transaction;

               (C) The shareholders of the Company approve a liquidation or dissolution of the Company, or approve the sale or other disposition by the Company of all or substantially all of the Company’s assets to any Person (other than a transfer to a Subsidiary of the Company);

               (D) During any period of 24 consecutive months, the individuals who constitute the Board of Directors of the Company at the beginning of such period (the “Incumbent Directors”) cease for any reason to constitute at least two-thirds of the Board of Directors; provided, however, that a director who is not a director at the beginning of such period shall be deemed to be an Incumbent Director if such director is elected or recommended for election by at least two-thirds (66.66%) of the directors who are then Incumbent Directors.

          12.2 Termination Following Change in Control. After the occurrence of a Change in Control, Executive shall be entitled to receive payments and benefits pursuant to this Agreement if, at the time of the Change in Control, (i) Executive is in ECP Levels 1 to 2 and his/her employment is terminated pursuant to Sections 12.2(A), (B), or (C) below, or (ii) Executive is in ECP Levels 2.5 to 4 and his/her employment is terminated pursuant to Sections 12.2(B) or (C) below.

               (A) Within eighteen (18) months following a Change in Control, Executive terminates his employment with Company by giving written notice of such termination to Company.

               (B) Within eighteen (18) months following a Change in Control, Company terminates Executive’s employment for reasons other than “Cause” as such term is defined in Section 4.3 hereof.

               (C) Within eighteen (18) months following a Change in Control, Executive terminates his employment with the Company for “Good Reason.”

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For purposes of this Agreement, “Good Reason” shall mean the occurrence after a Change in Control of any of the following events or conditions:

                    (i) a change in Executive’s status, title, position or responsibilities (including reporting responsibilities) which, in Executive’s reasonable judgment, represents an adverse change from his/her status, title, position or responsibilities in effect immediately prior thereto; the assignment to Executive of any duties or responsibilities which in Executive’s reasonable judgment, are inconsistent with his/her status, title, position or responsibilities; or any removal of Executive from or failure to reappoint or reelect him/her to any such positions, status, or title except in connection with the termination of his/her employment for Cause or by Executive other than for Good Reason,

                    (ii) a reduction in Executive’s base salary;

                    (iii) the Company’s requiring Executive to be based at any place outside a thirty (30) mile radius from Executive’s principal place of residence, except for reasonably required travel on Company’s business which is not greater than such travel requirements prior to the Change in Control;

                    (iv) the failure by the Company to continue in effect any compensation, welfare or benefit plan in which Executive is participating at the time of a Change in Control, including benefits pursuant to the Executive Compensation Plan or similar plans, without substituting plans providing Executive with substantially similar or greater benefits, or the taking of any action by the Company which would adversely affect Executive’s participation in or materially reduce Executive’s benefits under any such plans or deprive Executive of any material fringe benefit enjoyed by Executive at the time of the Change in Control;

                    (v) any purported termination of Executive’s employment for Cause without grounds therefor;

                    (vi) the insolvency or the filing (by any party including the Company) of a petition for bankruptcy of the Company;

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                         (vii) any material breach by the Company of any provision of this Agreement after Executive has given the Company notice of the material breach and at least thirty (30) days to cure the breach (or such longer period as may be reasonably required to cure the breach as long as the Company is making good faith efforts to do so.); or

                         (viii) the failure of the Company to obtain an agreement, satisfactory to Executive, from any successor or assign of the Company to assume and agree to perform this Agreement.

          12.3 Severance Pay and Benefits. If Executive’s employment with the Company terminates under circumstances as described in Section 12.2. above, Executive shall be entitled to receive all of the following:

               (A) all accrued compensation through the termination date, plus any Bonus for which the Executive otherwise would be eligible in the year of termination, prorated through the termination date, payable in cash. For purposes of Sections 12.3(A) and 12.3(B), “Bonus” shall be defined as any benefits for which Executive would be eligible under the Executive Compensation Plan described in Section 3.2 of this Agreement. The amount of such Bonus shall be paid in cash and, for purposes of Sections 12.3(A) and 12.3(B), shall be calculated as if Executive had achieved 100% of Executive’s performance goals for that year.

               (B) a severance payment equal to two and ninety-nine hundredths (2.99) times the amount of Executive’s most recent annual compensation, including the amount of his/her most recent annual Bonus. The severance amount shall be paid (i) in cash in thirty-four (34) equal monthly installments commencing one month after the termination date, or (ii) in a lump sum, within one month after the termination date, at the sole option of the Executive.

               (C) the Company shall maintain in full force and effect, for eighteen (18) months after the termination date, all life insurance, health, accidental death and dismemberment, disability plans and other benefit programs in which Executive is entitled to participate immediately prior to the termination date, provided that Executive’s continued participation is possible under the general terms and provisions of such plans and programs. Executive’s continued participation in such plans and programs shall be at

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no greater cost to Executive than the cost he/she bore for such participation immediately prior to the termination date. If Executive’s participation in any such plan or program is barred, Company shall arrange upon comparable terms, and at no greater cost to Executive than the cost he/she bore for such plans and programs prior to the termination date, to provide Executive with benefits substantially similar to, or greater than, those which he/she is entitled to receive under any such plan or program; and

               (D) a lump sum payment (or otherwise as specified by Executive to the extent permitted by the applicable plan) of any and all amounts contributed to a Company pension or retirement plan which Executive is entitled to under the terms of any such plan through the date of termination.

     12.4 Stock Options.

               (A) Upon a Change in Control, all options (“Options”) to purchase Common Stock of the Company held by Executive as of the date of the Change in Control shall become fully vested and exercisable.

               (B) If Executive’s employment with the Company terminates pursuant to Section 12.2, then the Options shall remain exercisable until the later of:

                    (i) the expiration of the applicable period for exercise following termination of employment set forth in the Option agreements (or in any other agreement between Executive and the Company that supersedes the Option agreements); or

                    (ii) three (3) years after the date of termination (to the extent of the terms of the Options); provided, however, that any “incentive stock options” within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”), that are exercised more than ninety (90) days after the date of termination pursuant Section 12.2 shall be treated for tax purposes as nonqualified stock options.

          12.5 Excise Tax Payments.

               (A) If any payment or benefit (within the meaning of Section 280G(b)(2) of the Code), to Executive or for his/her benefit pursuant to this Agreement

17

(a “Payment”) is subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then the amount of the Payment net of all taxes other than the Excise Tax (the “Net Amount”) shall be calculated. Executive shall then receive, in addition to the Payment, an additional payment (the “Gross-Up Payment”), which shall be an amount such that, after payment of all taxes (including the Excise Tax) on the Payment and the Gross-Up Payment, Executive shall retain an amount equal to the Net Amount.

               (B) An initial determination as to whether a Gross-Up Payment is required pursuant to this Agreement and the amount of such Gross-Up Payment shall be made at Company’s expense by an accounting firm selected by Company and reasonably acceptable to Executive which is designated as one of the five largest accounting firms in the United States (the “Accounting Firm”). The Accounting Firm shall provide its determination (the “Determination”), together with detailed supporting calculations and documentation to Company and Executive within ten days of the date Executive’s employment terminates if applicable, or such other time as requested by Company or by Executive (provided Executive reasonably believes that any of the Payments may be subject to the Excise Tax) and if the Accounting Firm determines that no Excise Tax is payable by Executive with respect to a Payment, it shall furnish Executive with an opinion reasonably acceptable to Executive that no Excise Tax will be imposed with respect to any such Payment. Within ten days of the delivery of the Determination to Executive, Executive shall have the right to dispute the Determination (the “Dispute”). The Gross-Up Payment, if any, as determined pursuant to this Section 12.5 shall be paid by Company to Executive within five days of the receipt of the Accounting Firm’s determination. The existence of the Dispute shall not in any way affect Executive’s right to receive the Gross-Up Payment in accordance with the Determination. Upon the final resolution of a Dispute, Company shall promptly pay to Executive any additional amount required by such resolution. If there is no Dispute, the Determination shall be binding, final and conclusive upon Company and Executive subject to the application of Section (C) below.

               (C) Notwithstanding anything in this Agreement to the contrary, in the event that, according to the Determination, an Excise Tax will be imposed on any Payment, Company shall pay to the applicable government taxing authorities as Excise Tax withholding, the amount of the Excise Tax that the Company has actually withheld from the Payment and the Gross-Up Payment, as applicable.

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               (D) If Executive is subject to taxation under a non-United States taxing authority and an excise tax similar to the Excise Tax is imposed on any Payment by such non-United States taxing authority, then Executive shall be entitled to receive a Gross-Up Payment as calculated pursuant to Section 12.5(a) above, based upon the lesser of such non-United States excise tax imposed and the Excise Tax that would have been imposed had the Payment been subject to United States taxation.

     13. NOTICES. All notices, requests, demands and other communications required or permitted to be given in writing pursuant to this Agreement shall be deemed given and received: (A) upon delivery if delivered personally; (B) on the fifth (5th) day after being deposited with the U.S. Postal Service if mailed by first class mail, postage prepaid, registered or certified with return receipt requested, at the addresses set forth below; (C) on the next day after being deposited with a reliable overnight delivery service; or (D) upon receipt of an answer back confirmation, if transmitted by telefax, addressed to the below indicated telefax number. Notice given in another manner shall be effective only if and when received by the addressee. For purposes of notice, the addresses and telefax number (if any) of the parties shall be as follows:

If to the Executive, to :	Ron Wooten
	4023 Foxcroft Road
	Charlotte, NC 28211
If to the Company, to:	Quintiles Transnational Corp.
	4709 Creekstone Drive
	Riverbirch Building, Suite 300
	Durham, North Carolina 27703-8411
	Attn: General Counsel

provided that: (A) each party shall have the right to change its address for notice, and the person who is to receive notice, by the giving of fifteen (15) days’ prior written notice to the other party in the manner set forth above; and (B) notices shall be effective if given to the other party in the manner set forth above regardless of whether a copy was received by the additional addressee specified above.

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     14. WAIVER OF BREACH. The Company’s or Executive’s waiver of any breach of a provision of this Agreement shall not waive any subsequent breach by the other party.

     15. ENTIRE AGREEMENT. Except as expressly provided in this Agreement, this Agreement: (i) supersedes all other understandings and agreements, oral or written, between the parties with respect to the subject matter of this Agreement; and (ii) constitutes the sole agreement between the parties with respect to this subject matter. Each party acknowledges that: (i) no representations, inducements, promises or agreements, oral or written, have been made by any party or by anyone acting on behalf of any party, which are not embodied in this Agreement; and (ii) no agreement, statement or promise not contained in this Agreement shall be valid. No change or modification of this Agreement shall be valid or binding upon the parties unless such change or modification is in writing and is signed by the parties.

     16. SEVERABILITY. If a court of competent jurisdiction holds that any provision or sub-part thereof contained in this Agreement is invalid, illegal or unenforceable, that invalidity, illegality or unenforceability shall not affect any other provision in this Agreement. Additionally, if any of the provisions, clauses or phrases in the Trade Secrets, Confidential Information or Competitive Business Activities provisions set forth in this Agreement are held unenforceable by a court of competent jurisdiction, then the parties desire that they be “blue-penciled’ or rewritten by the court to the extent necessary to render them enforceable.

     17. PARTIES BOUND. The terms, provisions, covenants and agreements contained in this Agreement shall apply to, be binding upon and inure to the benefit of the Company’s successors and assigns. The Company, at its discretion, may assign this Agreement to Affiliates. Because this Agreement is personal to Executive, Executive may not assign this Agreement.

     18. GOVERNING LAW. This Agreement and the employment relationship created by it shall be governed by North Carolina law without giving effect to North Carolina choice of law provisions. The parties hereby consent to jurisdiction in North Carolina for the purpose of any litigation relating to this Agreement and agree that any litigation by or involving them relating to this Agreement shall be conducted in the courts

20

of Wake County, North Carolina or the federal courts of the United States for the Eastern District of North Carolina.

               IN WITNESS WHEREOF, the parties have entered into this Agreement on the day and year first written above.

RON WOOTEN
QUINTILES TRANSNATIONAL CORP.
By:
	Beverly L. Rubin
Title:	Vice President and Associate General Counsel

21 EX-10.18 14 g87218exv10w18.htm EX-10.18

EXHIBIT 10.18

AMENDMENT TO EXECUTIVE EMPLOYMENT AGREEMENT

          THIS AMENDMENT (this “Amendment”) dated as of November 5, 2003 by and between QUINTILES TRANSNATIONAL CORP., a North Carolina corporation (the “Company”) and Ron Wooten (“Executive”).

          WHEREAS, the Company and Executive have entered into that certain Executive Employment Agreement, dated as of July 25, 2000 (the “Agreement”); and

          WHEREAS, the Company and Executive desire to amend the Agreement to reflect the acquisition of the Company by Pharma Services Holding, Inc., a Delaware Corporation (“Pharma”) pursuant to that certain Agreement and Plan of Merger, dated as of April 10, 2003 by and among the Company, Pharma and Pharma Services Acquisition Corp., a North Carolina corporation and wholly-owned subsidiary of Pharma.

          NOW, THEREFORE, in consideration of the mutual covenants and agreements and the representations and warranties herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree that the Agreement shall be amended as follows, effective upon, and only upon, the Executive’s execution hereof prior to November 17, 2003:

1.     Section 2 of the Agreement shall be amended by addition the following to the end of the first paragraph thereof:

        Executive shall also serve, without additional compensation, in such other officer and director positions of Affiliates to which he may be appointed.

2.     Section 3.1 of the Agreement shall be amended to replace “$16,666.67” with “$33,333.33”, effective as of the Change in Control (as defined in Section 12.1).

3.     Section 3.2 of the Agreement shall be amended to read as follows:

     3.2 Annual Cash Bonus Plan. Executive may participate on a basis commensurate with his position as a senior executive officer, as determined by the Company, in the Company’s annual cash bonus plan which may be made available from time to time to Company executives; provided, however, that Executive’s participation is subject to the applicable terms, conditions and eligibility requirements of the plan documents, some of which are within the plan administrator’s discretion, as they may exist from time to time.

4.     Section 5.2 shall be amended to read as follows:

          5.2 If the Company terminates Executive’s employment pursuant to Section 4.1 (notice of non-renewal) or 4.2 (without cause), or if Executive terminates Executive’s employment pursuant to Section 4.4 (breach of Agreement), then the Company’s sole obligation to Executive, in lieu of any other damages or other relief to which he otherwise may be entitled, shall be to pay: (i) amounts due on the effective date of the termination; (ii) any amounts subsequently due pursuant to the plan described in Section 3.2; and (iii) subject to Executive’s compliance with Sections 6, 7, 8 and 9 and subject to Sections 3.7 and 5.6 (release), 36 monthly payments, where each payment equals the sum of (A) Executive’s monthly rate of base salary in effect at the time of such termination, plus (B) the annual cash bonus that would have been paid to Executive pursuant to the plan described in Sections 3.2 for the fiscal year in which termination occurs, assuming achievement of performance objectives at target level, divided by 12 (less applicable withholdings).

5.     The first sentence of Section 5.3 of the Agreement shall be amended by adding “(but in no event after the date the Executive becomes eligible for comparable coverage)” immediately after the reference to Section 5.2.

6.     Section 5.5 of the Agreement shall be deleted in its entirety and labeled “[Reserved]”.

7.     Section 12.1 of the Agreement shall be amended to read as follows:

     12.1 For purposes of this Agreement, a “Change in Control” shall mean the consummation of the transactions pursuant to that certain Agreement and Plan of Merger, dated as of April 10, 2003, as amended, by and among the Company, Pharma Services Holding, Inc., a Delaware corporation (“Pharma”), and Pharma Services Acquisition Corp., a North Carolina corporation and wholly-owned subsidiary of Pharma (as such agreement may be amended from time to time, the “Merger Agreement”).

8.     Section 12.2 of the Agreement shall be deleted in its entirety and labeled “[Reserved]”.

9.     Section 12.3 of the Agreement shall be replaced with the following:

     12.3 Bonus. As soon as practicable following the occurrence of the Change in Control, Executive shall be entitled to a cash bonus equal to $200,000, less applicable withholdings. Such bonus shall not be taken into account for purposes of determining any entitlement pursuant to Section 5.2.

10.     Section 12.4 of the Agreement shall be amended by deleting subsection (B) thereof, and by adding the following to the end of subsection (A):

Executive acknowledges that all unexercised Options will be cancelled upon the Change in Control, including without limit those with an exercise price per share

2

greater than or equal to $14.50, and will be treated in the manner described in Section 2.9 of the Merger Agreement.

11.     Subsection (B) of Section 12.5 of the Agreement shall be amended to read as follows:

     (B) The Company will determine whether a Gross-Up Payment is required pursuant to this Agreement and the amount thereof (the “Determination”). If it is subsequently determined by the Internal Revenue Service (“IRS”) on audit that Executive is in fact subject an Excise Tax larger than that on which the Company based its Determination, then the Company shall recalculate the Gross-Up Payment and pay to Executive the additional amount required. The Company, at its cost, may, on Executive’s behalf, challenge any assessment or imposition of any Excise Tax by the IRS, and Executive will assist and cooperate with the Company with respect to any such challenge. Should Executive receive a refund of any Excise Tax previously paid, Executive shall repay to the Company the portion of any Gross-Up Payment made in respect of the Excise Tax so refunded. Executive will, with respect to the applicability of the Excise Tax, take a position consistent with that of the Company at all times.

12.     Section 15 of the Agreement shall be amended to read as follows:

              15. ENTIRE AGREEMENT. This Agreement, along with three letters from Pharma to Executive, one dated September 12, 2003 relating to the acquisition of stock of Pharma by rollover, and two dated October 30, 2003 relating to the acquisition of stock under the Pharma Stock Incentive Plan (collectively, the “Pharma letters”), (i) supersede all other understandings, offers and agreements, oral or written, between or among Executive, Pharma, the Company or any of their affiliates; and (ii) constitute the sole agreement between or among Executive, Pharma and the Company with respect to employment, compensation (including equity compensation) and benefits. Executive acknowledges that: (i) no representations, inducements, promises or agreements, oral or written, have been made by any party or by anyone acting on behalf of any party, which are not embodied in this Agreement or the Pharma letters; and (ii) no agreement, statement or promise not contained in this Agreement or the Pharma letters shall be valid. No change or modification of this Agreement shall be valid or binding upon the parties unless such change or modification is in writing and is signed by the parties.

13.     A new Section 19 shall be added to the Agreement to read as follows:

              19. TAX WITHHOLDING. The Company shall have the right to deduct and withhold such amounts form any payment made hereunder as may be necessary to enable the Company to satisfy any applicable withholding obligation imposed by law.

3

          IN WITNESS WHEREOF, this Amendment has been duly executed and delivered by Executive and by a duly authorized officer of the Company as of the date and year first above written.

By:	QUINTILES TRANSNATIONAL CORP.
	/s/ John S. Russell
	Name: John S. Russell
	Title:
	/s/ Ron Wooten
	Ron Wooten

4 EX-10.19 15 g87218exv10w19.htm EX-10.19

(Quintiles Transnational Corp. Logo)	Quintiles Transnational Corp, Post Office Box 13979 Research Triangle Park, NC 27709-3979 919 998 2000 / Fax 919 998 9113	EXHIBIT 10.19
	http://www.quintiles.com

November 13, 2003

Ron Wooten
c/o Quintiles Transnational Corp.
4709 Creekstone Drive
Riverbirch Building, Suite 300
Durham, NC 27703

Re: Amendment to Executive Employment Agreement

Dear Ron:

Reference is made to the amendment to your Executive Employment Agreement dated as of November 12, 2003 (the “Amendment”). This will confirm our agreement that in lieu of the calculation of the 36 monthly severance payments in the manner specified in paragraph 4 of the Amendment, each such monthly payment will instead equal your monthly rate of base salary in effect at the time of your termination of employment, multiplied by 1.55.

All other terms of the Executive Employment Agreement, as amended by the Amendment, are unaffected by this letter, including the conditions that must be met to receive or retain severance benefits.

Please confirm that this conforms to your understanding of our agreement by signing below.

Sincerely yours,

Michael Mortimer
Executive Vice President, Global Human Resources

Agreed to and Accepted by:

	11/14/03
Ron Wooten	Date

EX-10.20 16 g87218exv10w20.htm EX-10.20

EXHIBIT 10.20

Pharma Services Holding, Inc.
c/o One Equity Partners
230 Park Avenue, 18th Floor
New York, New York 10022

October 30, 2003

Ron Wooten
c/o Quintiles Transnational Corp.
4709 Creekstone Drive
Riverbirch Building, Suite 300
Durham, NC 27703

Re: Opportunity to Purchase Shares

Dear Ron:

As you know, on September 25, 2003, Quintiles Transnational Corp. (“Quintiles”), became an indirect wholly-owned subsidiary of Pharma Services Holding, Inc. (the “Company”). We are pleased to offer you the opportunity to purchase shares of common stock (“Shares”) of the “Company” pursuant to the Company’s Stock Incentive Plan (the “Plan”) and on the terms and conditions set forth below.

1.	Number of Shares. You will have the opportunity to purchase up to 450,000 Shares.
2.	Purchase Price. The purchase price per Share is $0.2438, for a total of $109,710 if you purchase all of the Shares, payable by check to the Company.
3.	Vesting. Your Shares when issued will be “Unvested Shares” (as defined in the Plan) and will become “Vested Shares” (as defined in the Plan) as to 20% of the total number awarded on the 25th day of each September, beginning September 25, 2004 and ending September 25, 2008, provided (i) all Shares will become Vested Shares upon a “Sale of the Company”, as defined in the Plan, and the Committee will not exercise its discretion to provide otherwise, and (ii) all Shares will become Vested Shares upon your termination of employment by reason of your death or pursuant to Section 4.3(ii) of your Executive Employment Agreement (physical or mental inability to perform). In no event will any Unvested Shares become Vested Shares following your termination of employment with the Company and its subsidiaries for any reason (after taking into account any vesting that occurs upon termination of employment pursuant to clause (ii) of the preceding sentence).
4.	Repurchase Right; Restrictions on Shares. Upon your termination of employment with the Company and its subsidiaries for any reason, the Company and certain other persons may, but

	are not obligated to, repurchase your Shares. As further described in Section 8 of the Plan, the repurchase price to be paid by the Company depends upon whether the Shares are Unvested Shares or Vested Shares, and the circumstances of your termination. Generally, Unvested Shares may be repurchased for the price you paid for them, and Vested Shares may be repurchased for their “Fair Market Value”, as defined in the Plan, but under certain circumstances described in the Plan, even your Vested Shares may be repurchased for the price you paid for them. Also, as further described in Section 8 of the Plan, the Shares are generally nontransferable prior to a Sale of the Company or “Qualified Public Offering” (as defined in the Plan), the Company has the right to require that you participate in a Sale of the Company (a “Drag-Along Right”), and your right to vote with respect to the election of directors of the Company may be restricted. For purposes of Section 8(c)(ii) of the Plan (Repurchase Right), in making a good faith determination of “Fair Market Value”, the Committee will take into account the most recent outside event pursuant to which a value of a Share can be implied (including, without limitation, an equity issuance, stock option grant or valuation by an appraisal firm, investment bank or similar organization), provided that if no such event has occurred within the preceding 12 months, the Committee shall obtain a new valuation by an appraisal firm, investment bank or similar organization, and shall take such valuation into account in determining Fair Market Value. For purposes of the proviso contained in Section 8(c)(ii) of the Plan, clause (x) thereof shall not apply, and clause (z) shall apply only if the breach referred to therein is material.
5.	Taxes. A separate information statement describing the tax considerations relating to your purchase of Shares will be provided to you.
6.	Representations.
	(a) Authority. You have the requisite power, authority and capacity to execute this Agreement and to perform your obligations under this Agreement and to consummate the transactions contemplated hereby. The Acceptance has been duly and validly executed and delivered by you and constitutes your legal, valid and binding obligation, enforceable against you in accordance with its terms, except to the extent that such validly binding effect and enforceability may be limited by applicable bankruptcy, reorganization, insolvency, moratorium and other laws relating to or affecting creditors’ rights generally.
	(b) Brokers. No Person is entitled to any broker’s, finder’s, financial adviser’s or other similar fee or commission in connection with the transactions contemplated hereby based upon any action taken by you.
	(c) Shares Unregistered; Accredited Investor. You acknowledge that (i) the offer and sale of the Shares has not been registered under applicable securities laws; (ii) the Shares being purchased by you must be held indefinitely; (iii) there is no established market for the Shares and it is not anticipated that there will be any such market for the Shares in the foreseeable future; (iv) you are an “accredited investor” under Rule 501(a) of the Securities Act of 1933; (v) your knowledge and experience in financial and business matters are such

2

	that you are capable of evaluating the merits and risks of your investment in the Shares, or you have been advised by a representative (not affiliated with the Company) possessing such knowledge and experience; (vi) you and your representatives, including your professional, financial, tax and other advisors, if any, have carefully considered your proposed investment in the Shares, and you understand and have taken cognizance of (or have been advised by your representatives as to) the risk factors related to the acquisition of such Shares, and no representations or warranties have been made to you or your representatives concerning the Shares, the Company or the Company’s business, operations, financial condition or prospects or other matters; (vii) in making your decision to purchase the Shares, you have relied upon independent investigations made by you and, to the extent believed by you to be appropriate, your representatives, including your professional, financial, tax and other advisors, if any; (viii) you and your representatives have been given the opportunity to request to examine all documents of, and to ask questions of, and to receive answers from, the Company and its representatives concerning the terms and conditions of the acquisition of the Shares and to obtain any additional information which you or your representatives deem necessary; (ix) you are acquiring the Shares for the purpose of investment and not with a view to, or for resale in connection with, the distribution thereof, and not with any present intention of distributing such Shares and you have no present plan or intention to sell any of the Shares; and (x) the Company is allowing you to acquire the Shares in reliance upon these representations and warranties.
7.	Subject to Plan. The opportunity to purchase the Shares is being made to you pursuant to the Plan, a copy of which is attached, and such purchase, holding and transfer of the Shares is subject to the terms of the Plan in all respects.
8.	Conditions. Our offer and your acceptance of our to purchase Shares is conditional upon your execution of an amendment to your Executive Employment Agreement in the form attached as Exhibit A no later than November 17, 2003.
9.	Acknowledgement. You acknowledge: (i) that the Plan is discretionary in nature and may be suspended or terminated by the Company at any time; (ii) that this grant of the opportunity to purchase Shares is a one-time benefit, which does not create any contractual or other right to receive future awards under the Plan, or benefits in lieu of awards; (iii) that all determinations with respect to any such future grants, including, but not limited to, the times when awards shall be granted, the number of shares subject to each award, the exercise or purchase price, and the time or times when each award shall vest, will be at the sole discretion of the Committee; (iv) that your participation in the Plan shall not create a right to further employment with the Company and shall not interfere with the Company’s or your ability to terminate the your employment relationship at any time with or without cause; (v) that your participation in the Plan is voluntary; (vi) that the value of this award is an extraordinary item of compensation which is outside the scope of your employment contract, if any; and (vii) that award is not part of normal or expected compensation for purposes of calculating any severance, resignation, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments.

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10. Employee Data Privacy. As a condition of the grant of this opportunity to purchase Shares, you consent to the collection, use and transfer of personal data as described in this paragraph 10. You understand that the Company and its Affiliates hold certain personal information about you including, but not limited to, your name, home address and telephone number, date of birth, social security number, salary, nationality, job title, shares of common stock or directorships held in the Company, details of all Options or other entitlement to shares of common stock awarded, cancelled, exercised, vested, unvested or outstanding in your favor, for the purpose of managing and administering the Plan (“Data”). You further understand that the Company and/or its Affiliates will transfer Data amongst themselves as necessary for the purposes of implementation, administration and management of your participation in the Plan, and that the Company and/or any of its Affiliates may each further transfer Data to any third parties assisting the Company in the implementation, administration and management of the Plans. You understand that these recipients may be located in your country of residence or elsewhere, such as the United States. You authorize them to receive, possess, use, retain and transfer Data in electronic or other form, for the purposes of implementing, administering and managing your participation in the Plan, including any requisite transfer of such Data as may be required for the administration of the Plan and/or the subsequent holding shares of common stock on your behalf to a broker or other third party with whom the shares acquired on exercise may be deposited. You understand that he or she may, at any time, view the Data, require any necessary amendments to it or withdraw the consent herein in writing by contacting the local human resources representative.

*  *  *  *

Please indicate the number of Shares you wish to purchase on the Acceptance below. Please return a signed copy of the Acceptance, along with a check for the purchase price ($0.2438 per Share) made payable to Pharma Services Holding, Inc., to Gary Rothstein, Esq., Morgan Lewis & Bockius, LLP, 101 Park Avenue, New York, NY 10178. Your Acceptance and payment must be received no later than November 17, 2003.

Sincerely yours,

PHARMA SERVICES HOLDING, INC.

4

ACCEPTANCE OF OFFER
TO PURCHASE COMMON SHARES OF PHARMA SERVICES HOLDING, INC.

I, Ronald J. Wooten [print name] hereby accept the offer made to me by Pharma Services Holding, Inc. (“Pharma”) to purchase 450,000 shares of common stock of Pharma at a price per share of $0.2438 pursuant to and in accordance with the terms of a letter to me from Pharma dated October 30, 2003, and enclose a check for $109,710.

/s/ Ronald J. Wooten	November 5, 2003
Ron Wooten	Date

5 EX-10.21 17 g87218exv10w21.htm EX-10.21

EXHIBIT 10.21

Pharma Services Holding, Inc.
c/o One Equity Partners
230 Park Avenue, 18th Floor
New York, New York 10022

October 30, 2003

Ron Wooten
c/o Quintiles Transnational Corp.
4709 Creekstone Drive
Riverbirch Building, Suite 300
Durham, NC 27703

Re: Stock Option

Dear Ron,

As you know, on September 25, 2003, Quintiles Transnational Corp. (“Quintiles”), became an indirect wholly-owned subsidiary of Pharma Services Holding, Inc. (the “Company”). We are pleased to inform you that you will be granted an option (“Option”) to purchase shares of common stock (“Shares”) of the Company pursuant to the Company’s Stock Incentive Plan (the “Plan”) and on the terms and conditions set forth below.

1.	Number of Shares subject to Option. 225,000 Shares.
2.	Exercise Price per Share. $14.50
3.	Vesting. The Option will vest and become exercisable as to as to 20% of the total number of Shares subject to the Option on the 25th day of each September, beginning September 25, 2004 and ending September 25, 2008, provided that (i) the Option will become fully vested and exercisable upon a “Sale of the Company”, as defined in the Plan, and the Committee will not exercise its discretion to provide otherwise, and (ii) the Option will become fully vested and exercisable upon your termination of employment by reason of your death or pursuant to Section 4.3(ii) of your Executive Employment Agreement (physical or mental inability to perform). In no event will any portion of the Option that is not vested and exercisable at the time of your termination of employment with the Company and its subsidiaries for any reason (after taking into account any vesting that occurs upon termination of employment pursuant to clause (ii) of the preceding sentence) become vested and exercisable following such termination.
4.	Termination of Option. The Option will terminate as provided in Section 5(b) of the Plan.

5.	Restrictions on Shares. Any Shares that you acquire upon exercise of the Option will generally be nontransferable, and subject to such other restrictions as contained in Section 8 of the Plan. For purposes of Section 8(c)(ii) of the Plan (Repurchase Right), in making a good faith determination of “Fair Market Value”, the Committee will take into account the most recent outside event pursuant to which a value of a Share can be implied (including, without limitation, an equity issuance, stock option grant or valuation by an appraisal firm, investment bank or similar organization), provided that if no such event has occurred within the preceding 12 months, the Committee shall obtain a new valuation by an appraisal firm, investment bank or similar organization, and shall take such valuation into account in determining Fair Market Value. For purposes of the proviso contained in Section 8(c)(ii) of the Plan, clause (x) thereof shall not apply, and clause (z) shall apply only if the breach referred to therein is material.
6.	Taxes. A separate information statement describing the tax considerations relating to your option grant will be provided to you.
7.	Subject to Plan. The Option is being granted pursuant to the Plan, a copy of which is attached, and is subject to the terms of the Plan in all respects.
8.	Condition. The grant of the Option is conditional upon your execution of an amendment to your Executive Employment Agreement with Quintiles in the form attached as Exhibit A no later than November 17, 2003.
9.	Acknowledgement. You acknowledge: (i) that the Plan is discretionary in nature and may be suspended or terminated by the Company at any time; (ii) that each grant of an Option is a one-time benefit, which does not create any contractual or other right to receive future grants of Options, or benefits in lieu of Options; (iii) that all determinations with respect to any such future grants, including, but not limited to, the times when Options shall be granted, the number of shares subject to each Option, the Option price, and the time or times when each Option shall be exercisable, will be at the sole discretion of the Committee; (iv) that your participation in the Plan shall not create a right to further employment with the Company and shall not interfere with the Company’s or your ability to terminate the your employment relationship at any time with or without cause; (v) that your participation in the Plan is voluntary; (vi) that the value of the Option is an extraordinary item of compensation which is outside the scope of your employment contract, if any; and (vii) that the Option is not part of normal or expected compensation for purposes of calculating any severance, resignation, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments.
10.	Employee Data Privacy. As a condition of the grant of Option, you consent to the collection, use and transfer of personal data as described in this Section 10. You understand that the Company and its Affiliates hold certain personal information about you including, but not limited to, your name, home address and telephone number, date of birth, social security number, salary, nationality, job title, shares of common stock or directorships held in the

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Company, details of all Options or other entitlement to shares of common stock awarded, cancelled, exercised, vested, unvested or outstanding in your favor, for the purpose of managing and administering the Plan (“Data”). You further understand that the Company and/or its Affiliates will transfer Data amongst themselves as necessary for the purposes of implementation, administration and management of your participation in the Plan, and that the Company and/or any of its Affiliates may each further transfer Data to any third parties assisting the Company in the implementation, administration and management of the Plans. You understand that these recipients may be located in your country of residence or elsewhere, such as the United States. You authorize them to receive, possess, use, retain and transfer Data in electronic or other form, for the purposes of implementing, administering and managing your participation in the Plan, including any requisite transfer of such Data as may be required for the administration of the Plan and/or the subsequent holding shares of common stock on your behalf to a broker or other third party with whom the shares acquired on exercise may be deposited. You understand that he or she may, at any time, view the Data, require any necessary amendments to it or withdraw the consent herein in writing by contacting the local human resources representative.

*  *  *  *

Sincerely yours,

PHARMA SERVICES HOLDING, INC.

3 EX-10.23 18 g87218exv10w23.htm EX-10.23

EXHIBIT 10.23

PHARMA SERVICES HOLDING, INC.
STOCK INCENTIVE PLAN

Section 1. Purpose

     The Plan authorizes the Committee to provide Employees, who are in a position to contribute to the long-term success of the Company or its subsidiaries, with Shares or Options to acquire Shares in the Company. The Company believes that this incentive program will cause those persons to increase their interest in the welfare of the Company and its subsidiaries, and aid in attracting, retaining and motivating Employees of outstanding ability.

Section 2. Definitions

     Capitalized terms not otherwise defined herein shall have the meanings set forth in this Section.

     (a)  “Affiliate” means, with respect to any Person, any other Person that controls, is controlled by or is under common control with such Person. For the purposes of this definition, “control” (including, with its correlative meanings, the terms “controlled by” and “under common control with”), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of securities, by contract or otherwise.

     (b)  “Board” shall mean the Board of Directors of the Company.

     (c)  “Cause” shall have the meaning ascribed thereto in any employment agreement between the Company or any of its subsidiaries and the Grantee, or, if there is no employment agreement or if any such employment agreement does not contain a definition of “cause”, then Cause shall mean a finding by the Committee that the Grantee has (i) been charged with a felony or a crime involving moral turpitude, (ii) committed an act of fraud or embezzlement against the Company or its subsidiaries, (iii) materially violated any policy of the Company or its subsidiaries, (iv) failed, refused or neglected to substantially perform his duties (other than by reason of a physical or mental impairment) or to implement the directives of the Company, or (v) willfully engaged in conduct that is materially injurious to the Company, monetarily or otherwise.

     (d)  “Company” shall mean Pharma Services Holding, Inc., a corporation organized under the laws of the state of Delaware.

     (e)  “Committee” shall mean the committee of the Board designated by the Board to administer the Plan, or in the absence of any such designation, the Board.

     (f)  “Effective Date” shall have the meaning set forth in Section 11.

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     (g)  “Employee” shall mean any person or entity that is providing, or has agreed to provide, services to the Company or a subsidiary of the Company, whether as an employee, director or independent contractor.

     (h)  “Fair Market Value” of a Share on any given date shall be determined in good faith by the Committee, taking into account such factors as the Committee determines are appropriate.

     (i)  “Grant Certificate” shall mean a certificate accepted by the Grantee, or other written agreement between the Company and the Grantee, evidencing the grant of an Option or Shares hereunder and containing such terms and conditions, not inconsistent with the Plan, as the Committee shall approve.

     (j)  “Grantee” shall mean an Employee granted an Option or Shares under the Plan.

     (k)  “ISO” shall mean any Option or portion thereof that is designated in a Grant Certificate as an ISO and meets the requirements of an incentive stock option under Section 422 of the Internal Revenue Code of 1986.

     (l)  “Majority Common Stockholders” shall mean the stockholders of the Company holding a majority of the outstanding Shares who are parties to the Stockholders Agreement.

     (m)  “Nonqualified Option” shall mean any Option or portion thereof that either is designated by the Committee as such or is otherwise not an ISO.

     (n)  “Options” shall refer to options issued under and subject to the Plan.

     (o)  “Permitted Transferee” means (A) the Grantee’s spouse, (B) any lineal ancestor or descendant (including by adoption and stepchildren) of the Grantee, (C) any trust of which the Grantee is the controlling trustee and which is established solely for the benefit of any of the foregoing individuals, (D) the estate of the Grantee established by reason of the Grantee’s death, or (E) any corporation, limited liability company or partnership, all of the interests of which are (or is) owned by one or more of the persons identified in this clause (A), (B), (C) or (D).

     (p)  “Person” means an individual, partnership, corporation, limited liability company or partnership, trust, unincorporated organization, joint venture, government (or agency or political subdivision thereof) or any other entity of any kind.

     (q)  “Plan” shall mean the Pharma Services Holding, Inc. Stock Incentive Plan as set forth herein and as amended from time to time.

     (r)  “Qualifying Offering” means the consummation of an underwritten public offering of Shares registered under the Securities Act of 1933 that together with the

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consummation of any other prior underwritten public offerings of Shares registered under the Securities Act of 1933 results in gross proceeds to the Company of at least $100 million in the aggregate.

     (s)  “Restrictive Covenant” shall mean any agreement made by the Grantee with the Company or its subsidiaries relating to nondisclosure of confidential information or trade secrets, noncompetition, or nonsoliciation of clients or employees.

     (t)  “Sale of the Company” shall mean the sale of the Company (whether by merger, consolidation, recapitalization, reorganization, sale of securities, sale of assets or otherwise) in one transaction or series of related transactions to a Person or Persons pursuant to which such Person or Persons (together with its Affiliates) acquires (i) securities representing at least a 75% of the voting power of all securities of the Company, assuming the conversion, exchange or exercise of all securities convertible, exchangeable or exercisable for or into voting securities, or (ii) all or substantially all of the Company’s assets on a consolidated basis; provided that for purposes of Section 9, such a sale to a Person that is a stockholder of the Company or a Permitted Transferee of any stockholder shall not be a Sale of the Company.

     (u)  “Share” shall mean a share of the Company’s common stock, par value $.01.

     (v)  “Stockholders Agreement” means any stockholders agreement that may be in effect from time to time among the Company and the majority of its stockholders.

     (w)  “Unvested Shares” shall have the meaning set forth in Section 6.

     (x)  “Vested Shares” shall have the meaning set forth in Section 6.

Section 3. Shares Available under the Plan

     The total number of Shares that may be issued under the Plan shall not exceed 14,452,208, provided that Shares reacquired by the Company pursuant to Section 8(c) at a price less than the Fair Market Value thereof shall again be available for issuance.

Section 4. Administration of the Plan

     (a)  Authority of the Committee. The Plan shall be administered by the Committee. The Committee shall have full and final authority to take the following actions, in each case subject to and consistent with the provisions of the Plan:

     (i) to select the Employees to whom Options and Shares may be granted, and the number of Shares relating thereto;

     (ii) to determine the terms and conditions of any Option granted under the Plan, including the exercise price, conditions relating to exercise, and termination of the right to exercise;

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     (iii) to determine whether Shares issued under the Plan shall be Unvested Shares or Vested Shares, and the conditions pursuant to which Unvested Shares shall become Vested Shares;

     (iv) to determine whether any Option shall be an ISO or a Nonqualified Option;

     (v) to determine the restrictions or conditions related to the delivery, holding and disposition of Shares issued under the Plan;

     (vi) to prescribe the form of each Grant Certificate;

     (vii) to adopt, amend, suspend, waive and rescind such rules and regulations and appoint such agents as the Committee may deem necessary or advisable to administer the Plan;

     (viii) to correct any defect or supply any omission or reconcile any inconsistency in the Plan and to construe and interpret the Plan and any Grant Certificate or other instrument hereunder; and

     (ix) to make all other decisions and determinations as may be required under the terms of the Plan or as the Committee may deem necessary or advisable for the administration of the Plan.

     (b)  Manner of Exercise of Committee Authority. Any action of the Committee with respect to the Plan shall be final, conclusive and binding on all persons, including the Company, subsidiaries of the Company, Grantees, or any person claiming any rights under the Plan from or through any Grantee. If not specified in the Plan, the time at which the Committee must or may make any determination shall be determined by the Committee, and any such determination may thereafter be modified by the Committee (subject to Section 11). The express grant of any specific power to the Committee, and the taking of any action by the Committee, shall not be construed as limiting any power or authority of the Committee. The Committee may delegate to officers or managers of the Company or any subsidiary of the Company the authority, subject to such terms as the Committee shall determine, to perform such functions as the Committee may determine, to the extent permitted under applicable law.

     (c)  Limitation of Liability. The Committee shall be entitled to, in good faith, rely or act upon any report or other information furnished to it by any officer or other employee of the Company or any of its subsidiaries, the Company’s independent certified public accountants or any executive compensation consultant, legal counsel or other professional retained by the Company to assist in the administration of the Plan. To the fullest extent permitted by applicable law, neither any member of the Committee, nor any officer or employee of the Company acting on its behalf, shall be personally liable for any action, determination or interpretation taken or made in good faith with respect to the Plan, and each member of the Committee and any officer or employee of the Company acting on its behalf shall, to the extent

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permitted by law, be fully indemnified and protected by the Company with respect to any such action, determination or interpretation.

Section 5. Terms Relating to Options.

     (a)  Generally. Options granted under the Plan shall be subject to the terms of the Plan and such other terms as the Committee shall set forth in a Grant Certificate.

     (b)  Termination of Options. Except as provided in a Grant Certificate, upon the Grantee’s termination of employment with the Company and its subsidiaries for any reason, (i) Options that are not then vested and exercisable shall immediately terminate, and (ii) Options that are vested and exercisable shall generally remain exercisable until, and terminate upon, the 91st day following such termination of employment (or the 366th day following such termination where such termination is by reason of death, or a disability, retirement or redundancy that is approved by the Committee for purposes of hereof); provided, however, that if such termination is for Cause or following such termination the Grantee violates a Restrictive Covenant, all Options will terminate immediately; provided, further, that in any event, each Option will terminate upon the tenth anniversary of the date of grant, or such earlier time as may be provided by action of the Committee pursuant to Section 7.

     (c)  Exercise of Options. Only the vested portion of any Option may be exercised. A Grantee shall exercise an Option by delivery of written notice to the Company setting forth the number of Shares with respect to which the Option is to be exercised, together with a certified check or bank draft payable to the order of the Company for an amount equal to the sum of the exercise price for such Shares and any employment tax required to be withheld. The Committee may, in its sole discretion, permit other forms of payment, including notes or other contractual obligations of a Grantee to make payment on a deferred basis. Before the Company issues any Shares to a Grantee pursuant to the exercise of an Option, the Company shall have the right to require that the Grantee make such provision, or furnish the Company such authorization, necessary or desirable so that the Company may satisfy its obligation under applicable income tax laws to withhold for income or other taxes due upon or incident to such exercise. The Committee, may, in its discretion, permit such withholding obligation to be satisfied through the withholding of Shares that would otherwise be delivered upon exercise of the Option. Unless otherwise provided in a Grant Certificate, Shares acquired upon exercise of an Option shall be Vested Shares.

     (d)  Transferability. No Option may be sold, transferred, assigned, pledged or otherwise encumbered, and an Option shall be exercisable only by the Grantee, provided that the Committee may permit transfers to a Permitted Transferee. Any such Permitted Transferee shall be subject to all the terms and conditions of the Plan and Grant Certificate, including the provisions relating to the termination of the right to exercise the Option.

     (e)  Shares. Shares issued upon exercise of Options shall be treated as Shares issued under the Plan for all purposes of the Plan, including the provisions of Section 3 and Section 8, and, unless otherwise provided in a Grant Certificate, Shares issued upon exercise of an Option shall be treated as Vested Shares for purposes Section 8.

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Section 6. Terms Relating to Awards of Shares.

     The Committee may award Shares to a Grantee that may or may not be conditional upon the passage of time, the Grantee’s future performance of services and/or achievement of specified performance targets. Shares granted under the Plan that are so conditional are referred to as “Unvested Shares”, and Shares that are not so conditional are referred to as “Vested Shares”. Except to the extent restricted under the terms of the Plan and any Grant Certificate, a Grantee awarded Unvested Shares shall have all of the rights of a stockholder including, without limitation, the right to vote Unvested Shares or the right to receive dividends thereon. The Committee may require the Grantee to pay (in cash or such other form as determined by the Committee, including notes or other contractual obligations of a Grantee to make payment on a deferred basis) for Shares at a price per Share up to the Fair Market Value thereof. The grant of Shares or the lapse of restrictions on Unvested Shares shall be conditional on the Grantee’s satisfaction of any withholding tax obligation that arises in connection therewith.

Section 7. Adjustment Upon Changes in Capitalization

     In the event any recapitalization, forward or reverse split, reorganization, merger, consolidation, incorporation, spin-off, combination, repurchase, exchange of Shares or other securities, dividend or distribution of Shares or other special and nonrecurring dividend or distribution (whether in the form of cash, securities or other property), liquidation, dissolution, sale or purchase of assets or other similar transactions or events, affects the Shares such that an adjustment is, in the sole discretion of the Committee, appropriate in order to prevent dilution or enlargement of the rights of Grantees under the Plan, then the Committee shall equitably adjust any or all of (i) the number and kind of securities deemed to be available thereafter for grants of awards under Section 3, (ii) the number and kind of securities subject to Unvested Shares or outstanding Options, and (iii) the exercise price per Share subject to Options. In addition, the Committee is authorized to make adjustments in the terms and conditions of, and the criteria included in, Unvested Shares or Options (including, without limitation, acceleration of the expiration date of Options, cancellation of Options in exchange for the intrinsic (i.e., in-the-money) value, if any, of the vested portion thereof, or substitution of Unvested Shares or Options using securities or other obligations of a successor or other entity) in recognition of unusual or nonrecurring events (including, without limitation, a Sale of the Company or an event described in the preceding sentence) affecting the Company or any subsidiary of the Company or the financial statements of the Company or any subsidiary of the Company, or in response to changes in applicable laws, regulations, or accounting principles.

Section 8. Restrictions on Shares.

     (a)  Restrictions on Issuing Shares. No Shares shall be issued or transferred to an Employee under the Plan unless and until all applicable legal requirements have been complied with to the satisfaction of the Committee. The Committee shall have the right to condition the award or delivery of Shares or exercise of any Option on the Grantee’s undertaking in writing to comply with such restrictions on any subsequent disposition of the Shares issued or

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transferred thereunder as the Committee shall deem necessary or advisable as a result of any applicable law, regulation, official interpretation thereof, or any underwriting agreement.

     (b)  Transfer Restrictions. Except for transfers made in connection with a Sale of the Company or pursuant to Sections 8(c) or (d) below, Shares issued to a Grantee pursuant to the Plan may not be sold, pledged, encumbered or otherwise transferred other than to a Permitted Transferee. Any such Permitted Transferee shall be subject to all the terms and conditions of the Plan and Grant Certificate, including the provisions of this Section 8.

     (c)  Repurchase Right.

          (i) Unless otherwise provided in a Grant Certificate, the Company shall have the right (but not the obligation) to repurchase any or all of the Shares issued pursuant to the Plan upon a Grantee’s termination of employment with the Company and its subsidiaries for any reason. Such right shall be exercisable by the Company during the one year period following the later of the date of termination or the date the Grantee acquires the Shares, or such longer period as may be necessary so that the exercise of such right does not give rise to a compensation expense pursuant to Accounting Principles Board Opinion 25 (or any successor thereto).

          (ii) Unless otherwise provided in a Grant Certificate, the price per Share to be paid by the Company should it choose to exercise its repurchase right shall equal, in the case of Unvested Shares, the price per Share paid by the Grantee (if any), and shall equal, in the case of Vested Shares, the Fair Market Value per Share; provided, however, that the price per Share to be paid by the Company for any Vested Shares shall not exceed the price per Share paid by the Grantee (if any) if the Shares are to be repurchased following (x) the Grantee’s termination of employment within 18 months of the Effective Date that causes the Grantee to be eligible for enhanced change in control severance benefits pursuant to Grantee’s employment agreement with the Company or any of its subsidiaries, (y) the Grantee’s termination for Cause, or (z) a breach by the Grantee of any Restrictive Covenant.

          (iii) The price per Share to be paid by the Company should it choose to exercise its repurchase right shall be paid by in cash or plain check against delivery of certificates representing the repurchased Shares. Notwithstanding the foregoing, if at the time of the exercise of the repurchase right or payment for the Shares pursuant thereto, such exercise or repurchase would result in a default or breach on the part of the Company or any subsidiary under any loan or other agreement, or if the repurchase would not be permitted under the Delaware General Corporation Law, then the Company shall take possession of the Shares to be repurchased and payment shall be deferred until the first business day that it may occur without any such event existing or resulting. The Company may offset against the payment of the repurchase price any amounts owed by the Grantee to the Company or any Affiliate of the Company.

          (iv) Should the Company choose not to exercise its repurchase right, One Equity Partners LLC (“OEP”) or any Affiliate of OEP designated by OEP may exercise such right as if it were the Company, and if OEP or any such Affiliate chooses to exercise such right, Temasek Life Sciences Investments Private Limited, a Singapore Corporation (“Temasek”) or

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any Affiliate of Temasek designated by Temasek and TPG Quintiles Holdco LLC, a Delaware limited liability company (“TPG”) or any Affiliate of TPG designated by TPG may each participate in the exercise of such right on a pro rata basis, and OEP, Temasek and TPG shall be third party beneficiaries of the Plan and any Grant certificate with respect to the exercise of such right.

     (d)  Drag-Along Right. If the Majority Common Stockholders notify a holder of Shares issued under the Plan that the Majority Common Stockholders desire to effect a Sale of the Company and specify the terms and conditions of such proposed sale then, such holder shall take all necessary and desirable actions reasonably requested by such Majority Common Stockholders in connection with the consummation of such Sale of the Company, and within ten (10) business days of the receipt of such notice (or such longer period of time as such Majority Common Stockholders shall designate in such notice) such holder shall cause a pro rata number of his Shares to be sold to the designated purchaser on the same terms and conditions for the same per share consideration and at the same time as the Shares being sold by such Majority Common Stockholders, provided, that before the payment of any consideration in connection with such Sale of the Company to the holders of Shares, the holders of shares of the Company’s Series A Preferred Stock shall be entitled to receive the Series A Liquidation Preference (as defined in the Certificate of Incorporation of the Company) in connection with any Sale of the Company. In furtherance, and not in limitation, of the foregoing, in connection with a Sale of the Company, such holder will, (a) consent to and raise no objections against the Sale of the Company or the process pursuant to which it was arranged, (b) waive any dissenter’s rights and other similar rights and (c) execute all documents containing such terms and conditions as those executed by such Majority Common Stockholders as directed by such Majority Common Stockholders.

     (e)  Voting. As to the election of members of the Board, each holder of Shares issued under the Plan shall vote, consent or take other action as directed by the Board which shall be consistent with the provisions of the Stockholders Agreement, whether or not such holder is a party thereto.

     (f)  Transfer of ISO Shares. The Grantee shall notify the Company of any transfer of Shares that were acquired upon exercise of an ISO that occurs within one year of such exercise or two years of the date the ISO was granted.

     (g)  Qualifying Offering. The restrictions contained in subsections (b), (c), (d) and (e) above shall lapse upon a Qualifying Offering; provided, however, that (i) the repurchase rights set forth in Section 8(c) in respect of any termination of employment occurring prior to the Qualifying Offering may continue to be exercised, and the repurchase right arising under the circumstances described in clause (x), (y) or (z) of Section 8(c)(ii) may continue to be exercised, regardless of when termination of employment occurs, and (ii) unless otherwise determined by the Committee, no Shares shall be sold or distributed during the 180-day period beginning on the effective date of the Qualifying Offering (except as part of such underwritten registration) and each Grantee shall enter into such standstill agreements and related agreements as the managing underwriters of such Qualifying Offering may request.

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     (h)  Certificates for Shares. Shares issued under the Plan may be evidenced in such manner as the Committee shall determine. If certificates representing Shares are registered in the name of a Grantee, such certificates may bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Shares, and the Company may retain physical possession of the certificates, in which case the Grantee shall be required to have delivered a power of transfer to the Company, endorsed in blank, relating to the Shares.

Section 9. Acceleration of Vesting.

     Unless otherwise determined by the Committee, all Options and Unvested Shares held by a Grantee shall become fully vested immediately prior to a Sale of the Company.

Section 10. General Provisions

     (a)  Each Option and Share grant shall be evidenced by a Grant Certificate. The terms and provisions of such certificates may vary among Grantees and among different Options and Shares granted to the same Grantee.

     (b)  The grant of an Option or Shares in any year shall not give the Grantee any right to similar grants in future years, any right to continue such Grantee’s employment relationship with the Company or its subsidiaries (for the applicable vesting period or otherwise), or, until Shares are issued pursuant to the exercise of an Option, any rights as a stockholder of the Company. All Grantees shall remain subject to discharge to the same extent as if the Plan were not in effect. For purposes of the Plan, a sale of any subsidiary of the Company that employs a Grantee shall be treated as the termination of such Grantee’s employment unless such Grantee remains employed by the Company or another subsidiary of the Company.

     (c)  No Grantee, and no beneficiary or other persons claiming under or through the Grantee, shall have any right, title or interest by reason of any award under the Plan to any particular assets of the Company or subsidiaries of the Company, or any Shares allocated or reserved for the purposes of the Plan or subject to any award except as set forth herein. The Company shall not be required to establish any fund or make any other segregation of assets to assure satisfaction of the Company’s obligations under the Plan.

     (d)  The Plan shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of New York, except to the extent that the Delaware General Corporation Law applies as a result of the Company being incorporated in the State of Delaware, in which case the Delaware General Corporation Law shall apply. Each Grantee, and each beneficiary or other person claiming under or through the Grantee consents to the exclusive jurisdiction of any state or federal court located within the State of New York and irrevocably agrees that all actions or proceedings relating to the Plan shall be litigated in such courts. Each Grantee, and each beneficiary or other person claiming under or through the Grantee accepts generally and unconditionally, the exclusive jurisdiction of the aforesaid courts and waives any defense of forum non conveniens, and irrevocably agrees to

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be bound by any final and nonappealable judgment rendered thereby in connection with the Plan. Each Grantee, and each beneficiary or other person claiming under or through the Grantee further irrevocably consents to the service of process out of any of the aforementioned courts in any such action or proceeding by the mailing of copies thereof via overnight courier, such service to become effective fourteen calendar days after such mailing.

Section 11. Effective Date; Amendment or Termination

     The Plan shall become effective upon the closing of the transactions contemplated by the Agreement and Plan of Merger, dated as of April 10, 2003, by and among the Company, Pharma Services Acquisition Corp, a North Carolina corporation and wholly-owned subsidiary of the Company and Quintiles Transnational Corp., a North Carolina corporation (the “Effective Date”). The Committee may, at any time, alter, amend, suspend, discontinue or terminate the Plan; provided, however, that no such action shall adversely affect the rights of Grantees with respect to Options or Shares previously granted hereunder. The Committee shall also have the authority to establish separate sub-plans under the Plan with respect to Grantees resident in a particular jurisdiction (the terms of which shall not be inconsistent with those of the Plan) if necessary or desirable to comply with the applicable laws of such jurisdiction.

10 EX-10.28 19 g87218exv10w28.txt EX-10.28 EXHIBIT 10.28 AGREEMENT OF LEASE ENTERED INTO BETWEEN SHIBBOLET (PROPRIETARY) LIMITED AND QUINTILES CLINDEPHARM (PROPRIETARY) LIMITED Jointly referred to as the Parties. INDEX AGREEMENT OF LEASE

NO CLAUSE HEADINGS PAGE - -- --------------- ---- 1 Parties 2 Interpretation 3 Recordance 4 Letting and Hiring 5 Duration 6 Rental 7 Operating Costs 8 Increase in the Rates 9 Additional Charges 10 Electricity 11 Deposit 12 Insurance 13 Assignment and Subletting 14 Sundry Obligations of the Lessee 15 Maintenance and Repairs 16 Alterations, Additions and Improvements 17 Exclusion of Lessor's Liability and Indemnity 18 Lessor's Rights 19 Area of the Premises 20 Rules 21 Parking and Loading 22 Damage to or Destruction of Premises 23 Special Remedy for Breach 24 Option of Renewal 25 New Tenants and Purchasers 26 Costs 27 Domicilia and Notices 28 Whole Agreement 29 Non-Waiver 30 Warranty of Authority 31 Merchants' Association 32 Security for Payment by Lessee 33 Sale of Premises

2 AGREEMENT OF LEASE 1. PARTIES: The parties to this lease are: 1.1 Shibbolet (Proprietary) Limited ("the Lessor"); and 1.2 Quintiles Clindepharm (Proprietary) Limited ("the Lessee"). 2. INTERPRETATION: 2.1 In this Agreement, except in a context indicating that some other meaning is intended: 2.1.1 "THIS AGREEMENT" means this Agreement together with all appedicis and annexures; 2.1.2 "ASSOCIATE" in relation to the Lessee means a company, which is for the time being: 2.1.2.1 a subsidiary or holding company of the Lessee within the meaning ascribed to such terms in the Companies Act 61 of 1973; or 2.1.2.2 a subsidiary or holding company of a company referred to in 2.1.2.1 above; 2.1.3 "THE BUILDING" means the buildings known as Centurion Science Park, Phases IV, situated on the Property, and includes, where the context so allows, all permanent improvements on the Property; 2.1.4 "COMMON AREAS" means portions of the Building which are not suitable for letting and are not actually let by the Lessor; 2.1.5 "DAY" means any day of the week, excluding Saturdays, Sundays and public holidays; 3 2.1.6 "THE LEASE PERIOD" means the period for which this lease subsists, including any period for which it is renewed; 2.1.7 "THE LESSOR" means Shibbolet (Proprietary) Limited, a company duly incorporated in terms of the Company Laws of the Republic of South Africa; 2.1.8 "THE LESSEE" means Quintiles Clindepharm (Proprietary) Limited, a company duly incorporated in terms of the Company Laws of the Republic of South Africa; 2.1.9 "MONTH" means a calendar month, and more specifically 2.1.9.1 in reference to a number of months from a specific date, a calendar month commencing on that date or the same date of any subsequent month; and 2.1.9.2 in any other context, a month of the calendar, that is, one of the 12 months of the calendar, 2.1.9.3 and "monthly" has the corresponding meaning; 2.1.10 "OPTION PERIOD" means the period referred to in clause 24; 2.1.11 "THE PARTIES" means the parties to this Agreement; 2.1.12 "THE PREMISES" means Phase IV of Centurion Science Park, further identified by the annexed plans signed by the parties and having a Rentable Area of 3316 (Three Thousand Three Hundred and Sixteen) square metres of offices and 134 (One Hundred and Thirty Four) square metres of storerooms; and also including the parking areas as set out in 21 and in respect of which the Premises shall comprise air conditioned offices as they existed at the commencement date. 2.1.13 "THE PROPERTY" means Erf 2457, Lyttelton Manor X 3, Centurion, including the Premises; 2.1.14 "THE PRIME RATE" means the public quoted basic rate of 4 interest per annum (as certified by any manager of ABSA Bank) at which that bank lends on unsecured overdraft to its most favoured customers in the private bank sector, compounded monthly in arrears and calculated on a 365 (three hundred and sixty five) day year factor irrespective of whether the year is a leap year of not; 21.15 "THE RATES" means the assessment rates and all taxes of what so ever nature payable on the Property and includes any other charges payable by the Lessor to the local authority (such as, but not limited to, refuse removal charges or sanitary fees), but not charges for water, electricity or gas; 2.1.16 "RENTABLE AREA" in relation to the Premises means the area of the Premises determined in accordance with clause 19; 2.1.16 "YEAR" means a period of 12 consecutive months, and "yearly" refers to a year commencing on the date on which the lease comes into operation or any anniversary of that date; 2.2 references to notices, statements and other communications by or from the Lessor include notices by or from the Lessor's agent; 2.3 expressions in the singular also denote the plural, and vice versa; 2.4 words and phrases denoting natural persons refer also to juristic persons, and vice versa; and 2.5 Pronouns of any gender include the corresponding pronouns of the other gender; 2.6 If any provision in a definition is a substantive provision conferring rights or imposing obligations on any party, notwithstanding that it appears in the definition clause only, effect shall be given to it as if it were a substantive provision in the body of the agreement. 2.7 Words and expressions defined in any sub-clause shall, for the purpose of the clause of which that sub-clause forms part, bear the meaning assigned to such words and expressions in that sub-clause. 2.8 If a particular number of days are referred to in this agreement, such number of days shall be reckoned exclusively of the first day and 5 inclusively of the last day of the number of days, which is specified. 2.9 Any provision of this lease imposing a restraint, prohibition or restriction on the Lessee shall be so construed that the Lessee is not only bound to comply therewith but is also obliged to procure that the same restraint, prohibition or restriction is observed by everybody occupying or entering the Premises or any other part of the Property or the Building through, under, by arrangement with, or at the invitation of, the Lessee, including (without limiting the generality of this provision) its Associates and the directors, members, officers, employees, agents, customers and invitees of the Lessee or its Associates. 2.10 Clause headings appear in this lease for purposes of reference only and shall not influence the proper interpretation of the subject matter. 2.11 This lease shall be interpreted and applied in accordance with South African law. 3. RECORDANCE: It is recorded that: 3.1 The Lessor is the owner of the Property; 3.2 The Lessee wishes to hire and the Lessor wishes to lease, the Property; 3.3 This Agreement sets out the terms and conditions agreed upon between the parties in relation to such lease. 4 LETTING AND HIRING: The Lessor lets and the Lessee hires the Premises on the terms of this Agreement. 5 DURATION: This Agreement shall: 5.1 come into operation on 1 March 2003 (the commencement date) and shall subsist for 3 (Three) years and 1 (One) months notwithstanding the date of signature hereof; 6 5.2 terminate, unless renewed in terms of 5.3, on 31 March 2006; 5.3 be renewable at the option of the Lessee for a further period of 5 (Five) years. 5.4 The option contained in 5.3 shall be exercisable on notice, as provided for in this Agreement and in terms of the provisions as set out in 24, by the Lessee to the Lessor given not less than 6 (six) months prior to the date on which this Agreement would expire if it were not for the exercise of such option. 6. RENTAL: 6.1 The monthly rental payable by the Lessee to the Lessor: 6.1.1 in respect of the Premises during the period commencing on the commencement date and ending on the day prior to the first anniversary of the commencement date or, if the commencement date does not fall on the first day of a month, on the last day of the month in which the first anniversary of the commencement date falls, shall be R 53.24 (Fifty Three Rand and Twenty Four Cents) per square meter for offices and R 36.30 (Thirty Six Rand and Thirty Cents) per square meter for storerooms (amounting to a total rental of R 181 408.04 (One Hundred and Eighty One Thousand Four Hundred and Eight Rand and Four Cents) per month; 6.1.2 in respect of the Premises on 1 August 2003 a rental of 10% (Ten per centum) higher than the rental payable in respect of the property for the final month of the preceding year and thereafter in respect of each subsequent year during the initial period, commencing on 1 April 2000, a rental of 10% (Ten per centum) higher than the rental payable in respect of the property for the final month of the preceding year. 6.2 Should the Lessee exercise the option contained in 5.3, the rental during the option period shall be such rental as may be agreed upon in writing between the Lessor and the Lessee or, failing such agreement between the Lessor and the Lessee within 3 (three) months after the date of the exercise of such option, a fair market rental determined in accordance with the applicable provisions of this clause 6. 6.3 For the purpose of 6.2, the fair market rental of the property during the option period shall be deemed to be the rental which a willing 7 Lessee would be prepared to pay a willing Lessor in respect of the property for the option period, if agreed upon on the date of receipt by the Lessor of the notice referred to in 5.4, and as determined by an expert agreed upon in writing between the Lessor and the Lessee for that purpose or, failing agreement between them within 14 (fourteen) days, as determined by an expert nominated for that purpose at the request of the Lessor or the Lessee by the president of The South African Institute of Estate Agents. 6.4 Notwithstanding the provision of 6.3, should either the Lessor or the Lessee be dissatisfied with the fair market rental determined by the expert agreed upon or nominated in terms of 6.3, and the party who is so dissatisfied ("THE DISSATISFIED PARTY") notify the other party within 14 (fourteen) days after the determination of such expert of his dissatisfaction, then the matter shall be referred to another expert nominated by the president of the South African Institute of Estate Agents for the determination of such fair market rental. 6.5 Should the fair market rental of the property as determined by the expert nominated in terms of 6.4 ("THE SECOND EXPERT"): 6.5.1 not be 10% (Ten per centum) more or less than the fair market rental of the property as determined by the expert agreed upon or nominated in terms of 6.3 ("THE FIRST EXPERT"), then: 6.5.1.1 the fair market rental of the property shall be deemed to be the fair market rental of the property as determined by the first expert; 6.5.1.2 the dissatisfied party shall pay all costs incurred in connection with the services rendered by the second expert; 6.5.2 be 10% (ten per centum) more or less than the fair market rental as determined by the first expert, then: 6.5.2.1 the fair market rental of the property shall be deemed to be the average of the fair market rentals of the property as determined by the first and second experts; 6.5.2.2 in the event of the fair market rental of the property as determined by the second expert being higher than the fair market rental of the property as determined by the first expert, the Lessee shall pay all costs incurred in connection with the services rendered by the second expert; 8 6.5.2.3 in the event of the fair market rental of the property as determined by the second expert being lower than the fair market rental of the property as determined by the first expert, the Lessor shall pay all costs incurred in connection with the services rendered by the second expert. 6.6 For the purposes of the preceding provisions of this 7, should: 6.6.1 the Lessor notify the Lessee that it is prepared to agree to the fair market rental of the property being deemed to be less; or 6.6.2 the Lessee notify the Lessor that it is prepared to agree to the fair market rental of the property being deemed to be more than the fair market rental of the property as determined by the first expert, within 7 (seven) days after the determination of the first expert, then the fair market rental of the property as determined by the first expert shall be deemed to be the higher or lower rental notified by the Lessor or Lessee to the Lessee or Lessor (as the case may be). 6.7 The costs incurred in respect of the services rendered by the first expert shall be borne and paid by the parties in equal shares. 6.8 Any additional amount payable by the Lessee in respect of Operating Costs, Rates and Additional Charges, in terms of 7, 8 and 9 shall be added to the rental payable by the Lessee, and: 6.8.1 the Lessee shall be liable to pay such increased rental; 6.8.2 the terms and conditions of this agreement in respect of rental generally shall apply mutatis mutandis to such increased rental. 6.9 The rentals referred to above are exclusive of value-added tax, and the Lessee shall, in addition to the rental, be liable for the payment of value-added tax thereon. 6.10 The aforesaid rental shall be paid monthly in advance on the first day of each and every month, without deduction or set-off and free of exchange to the Lessor at ABSA Bank Lyttelton Account Number 600 164 570, or at such other place in Gauteng as the Lessor may direct in writing. 6.11 All amounts payable by the Lessee to the Lessor in terms of this agreement, and which are not paid on the due date thereof shall, without prejudice to any rights which the Lessor may otherwise have, bear interest with effect from the due date of such payment at the prime rate, for the period that elapses from such due date up to and 9 until 5 (five) days after date of the letter of demand and thereafter such an amount shall bear interest at a rate per annum of 400 (Four hundred) basis points higher than the prime rate until date of final payment. 6.12 The Lessee shall not withhold, defer, or make any deduction from any payment due to the Lessor, whether or not the Lessor is indebted to the Lessee or in breach of any obligation to the Lessee. 7. OPERATING COSTS: 7.1 For the purposes of this clause 7: 7.1.1 "THE OPERATING COSTS" means the reasonable costs (for which the Lessee is not otherwise liable in terms of this lease) incurred by the Lessor in connection with the ownership, management, maintenance, repair and operation of the Property and the Building, including, but not limited to, the Rates and the costs of: 7.1.1.1 cleaning the Building and the Property; 7.1.1.2 providing security in respect of the Building; 7.1.1.3 maintaining lifts and escalators, if any; 7.1.1.4 providing electricity, water, gas, oil or any necessary service to Common Areas 7.1.1.5 maintaining internal roofs, walls and finishes 7.1.1.6 gardens and gardening services and maintenance. 7.2 All the above Operating Costs are not included in the rental amount as set out in 6 above and until such time as these costs are incurred by the Lessor, in terms of a further written agreement, the Lessee shall be responsible for such services at its own cost. 8. INCREASES IN THE RATES: 8.1 Whenever the Rates are increased during the Lease Period, the Lessor may, by written notice to the Lessee, increase the monthly rent for the Premises by an amount which bears the same ratio to the increase in Rates, calculated on a monthly basis, as the rent payable 10 by the Lessee for the Premises bears for the time being to the total rentals receivable by the Lessor from all tenants of the Building. Every such increase in the rent shall take effect on the first day of the month following that in which the Lessor's notice of the increase is received by the Lessee or, whichever is the later, the date on which the corresponding increase in the Rates takes effect. 8.2 For the purposes of 8.1, any premises in the Building which are not part of the Common Areas but are unlet for the time being shall be deemed to be let for the rental that was last receivable by the Lessor for the same premises or, if they were never let, a fair market rental determined in good faith by a reputable estate agent appointed by the Lessor). 9. ADDITIONAL CHARGES: 9.1 In addition to paying the rent and other amounts, the Lessee shall reimburse the Lessor, monthly in arrear, within 7 (Seven) days after receiving an account from the Lessor reflecting the amount(s) so payable, with the cost of water consumed on the Premises, determined at prevailing municipal rates in accordance with readings of separate submeters or, if there are no such submeters, on the basis of the Lessee being liable to bear 100 % ( One Hundred percent) of the total cost of all water consumed on the Property. 9.2 If any additional levy, not dealt with under 7,8 and 9, payable by the Lessor in respect of the Property, Building or Premises, be increased from time to time during the duration of this lease so as to exceed the amount of such levy as at the commencement date; or a new levy or impost cost or expense of whatsoever nature, not in force as at commencement date, be imposed at any time thereafter on the Lessor, by virtue of its being the owner of the property, then the Lessor shall be entitled to increase the monthly rental for the property by an amount equal to one-twelfth of the yearly amount of that increase or new levy or impost multiplied by the Lessee's Contribution Percentage being an increase in respect of an item, charge or cost as contemplated by 6.8 with effect from the date upon which that increase or new levy or impost takes effect. 10. ELECTICITY: The Lessee shall be responsible for the payment of all electricity charges related to the Premises and in this regard such electricity consumption shall be determined by separate meter allocated to the 11 Premises. 11. DEPOSIT: 11.1 On entering into this Agreement the Lessee shall pay the Lessor a deposit of R 0.00 ( Nil Rand), which amount the Lessor may apply, in whole or part, in meeting any payment due by the Lessee to the Lessor at any time during the Lease Period or after the termination of this Agreement. 11.2 Whenever during the Lease Period the deposit is so applied in whole or part, the Lessee shall on demand reinstate the deposit to its original amount. 11.3 As soon as all the obligations of the Lessee to the Lessor have been discharged following the termination of this Agreement, the Lessor shall refund to the Lessee, free of interest, so much of the deposit as has not been applied in terms of the above provisions. 12. INSURANCE: 12.1 The Lessee shall not keep or do in or about the Property, Building or Premises anything which is liable to enhance any of the risks against which the Property or Building is insured for the time being to the extent that such insurance is rendered void or voidable or the premiums of such insurance are, or become liable to be, increased. 12.2 Without prejudice to any other right of action or remedy which the Lessor may have arising out of a breach of the aforegoing provision, the Lessor may recover from the Lessee on demand the full amount of any increase in insurance premiums in respect of the Property or Building attributable to such breach. 13. ASSIGNMENT AND SUBLETTING: 13.1 The Lessee shall not be entitled, except with the prior written consent of the Lessor to: 13.1.1 cede or assign all or any of the rights or obligations of the Lessee under this Agreement; or 13.1.2 sublet or give up possession of the Premises, in whole or part, to any third party which is not an Associate of the 12 Lessee. 13.2 The Lessor shall be entitled, in its sole and absolute discretion, to withhold its consent to the subletting of the whole or part of the Premises by the Lessee to any other entity. 14. SUNDRY OBLIGATIONS OF THE LESSEE: The Lessee shall: 14.1 keep the Premises clean and tidy; 14.2 not use the Premises or allow it to be used, in whole or part, for any purpose other than that of offices and laboratory facilities; 14.3 not place or leave any article or other thing in or about any passage, lift, stairway, pathway, parking garage, or other common part of the Property or Building so as to cause a nuisance or obstruction; 14.4 not bring into or unto the Property, Building or Premises any article which, by reason of its weight or other characteristics, is liable to cause damage to the Property, Building or Premises; 14.5 not contravene any of the conditions of title of the Property or any of the laws, rules or regulations affecting owners, tenants or occupiers of the Property or the Building and specifically any measure having the force of law with which the Lessor is obliged to comply as owner of the Property including without limiting the generality hereof all laws relating to environmental protection which may apply to the Lessee in general or specifically due to the nature of the Lessee's business; 14.6 not cause or commit any nuisance on the Property or in the Building or Premises or cause any annoyance or discomfort to other tenants or occupiers of the Property or Building; 14.7 not leave refuse or allow it to accumulate in or about the Property, Building or Premises except in the refuse bins provided; 14.8 refrain from interfering with the electrical, plumbing or gas installations or systems serving the Property, Building or Premises, except as may be necessary to enable the Lessee to carry out its obligations of maintenance and repair in terms of this Lease and then the Lessee shall only utilise persons properly qualified; 13 14.9 take all reasonable measures to prevent blockages and obstructions from occurring in the drains, sewerage pipes and water pipes serving the Property, Building or Premises; 14.10 provide at the Lessee's own expense all electric, fluorescent and incandescent light bulbs required in the Premises; 14.11 be responsible for all glass, both internal and external, on the Premises, including all mirrors, office fronts, and window panels; 14.12 keep the office fronts of the Premises illuminated during such reasonable hours as the Lessor may from time to time in writing direct; 14.13 procure that the decor of the Premises is maintained at a level which is in keeping with the standards of the Property and Building; 14.14 not paint, affix or attach to the Premises or any part of the Building any sign, notice, awning or canopy without the Lessor's prior written consent, which shall not be unreasonably withheld; 14.15 keep any such sign, notice, awning or canopy which has been so approved by the Lessor in good order, condition and repair at all times; 14.16 not erect any radio or television aerial on the roof or exterior walls of the Premises or the Building without the Lessor's prior written consent, which shall not be unreasonably withheld; 14.17 on the termination of this Agreement reinstate and return the property to the Lessor in the same good order and condition (fair wear and tear excepted) as it was in as at the commencement date; 14.18 have no claim of any nature whatsoever for any loss or damages which the Lessee may suffer ,including cancellation of this lease, as a result of: 14.18.1 any defect in the property or any part thereof or any improvement thereon; 14.18.2 vis major, casus fortuitus or any other causes which is either wholly or substantially outside the control of the Lessor; 14.18.3 not do anything , which will damage the property or any of the improvements thereon; 14.19 be responsible during the duration of this Agreement for obtaining 14 and renewing all licenses, permits or other consents in respect of the Lessee's business, and the failure to obtain such licenses or permits shall not be a ground for the cancellation of this Agreement by the Lessee; and 14.20 take out and maintain public liability insurance for an amount which, having regard to the nature of the Lessee's business, a prudent businessman would take out and maintain. 15. MAINTENANCE AND REPAIRS: 15.1 The Lessee shall at its own expense and without recourse to the Lessor: 15.1.1 throughout the Lease Period maintain in good order and condition the interior of the Premises and all parts thereof, including (without limitation of the generality of this obligation) all shop fronts, windows, doors, appurtenances, fixtures and fittings contained in the Premises; 15.1.2 be responsible for all repairs of and maintenance to the parking bays and shade netting associated with such parking bays as set out in 21.5; 15.1.3 promptly repair or make good all damage occurring in the Premises from time to time during the Lease Period, whatever the cause of such damage, and including damage to any part of the interior of the Premises or to any shop front, window, door, appurtenance, fixture or fitting, and replace all such items (as well as any keys) which have been broken, lost or destroyed (again regardless of cause); and 15.1.4 on the termination of this lease, howsoever and whenever it terminates, return the Premises and all such parts thereof (including all keys) to the Lessor in good order, condition and repair, fair wear and tear excepted. 15.2 If the Lessee notifies the Lessor in writing within 5(Five) days after having taken possession of the Premises of the need for any repairs to or in the Premises or of the fact that any part of the Premises, including any lock, key, door, shop front, window, appurtenance, fixture or fitting, is damaged, missing, or out of order, the Lessor shall promptly cause the necessary repair or replacement to be 15 effected at the Lessor's own expense. If or in so far as the Lessee does not give such notice, the Lessee shall be deemed to have acknowledged that the Premises and all parts thereof were intact, in place, and in good order, condition and repair when the Lessee took possession of the Premises under this lease. 15.3 The Lessor shall be responsible for the maintenance of, and for all repairs and replacements becoming necessary from time to time in or to, the Building and all parts thereof other than those which are the responsibility for the time being of tenants or of the local authority, and the Lessor's obligations in this respect shall include the maintenance and repair of the structure of the Building, all systems, works and installations contained therein, the roofs, the exterior walls, the lifts, the grounds and gardens, and all other parts of the Common Areas, provided that maintenance of the grounds and gardens and all other parts of the Common Areas will only commence once the Lessor has taken over responsibility for such, based on a further written agreement between the parties, and until such time as the responsibility is so taken over by the Lessor the Lessee shall be responsible for such maintenance at its own cost. 15.4 The Lessor shall not, however, be in breach of clause 15.3 in so far as any of its obligations thereunder are not or cannot be fulfilled by reason of any vis maior or the acts or omissions of others over whom the Lessor has no direct authority or control, and where the Lessor is indeed in breach of clause 15.3, the Lessee's only remedy against the Lessor shall be a right of action for specific performance. 15.5 Should the Lessee fail to carry out any of its obligations under this Agreement with regard to any maintenance, repair or replacement, the Lessor shall be entitled, without prejudice to any of its other rights or remedies, to effect the required item of maintenance, repair or replacement and to recover the cost thereof from the Lessee on demand. 16. ALTERATIONS, ADDITIONS AND IMPROVEMENTS: 16.1 The Lessee shall not make any alterations or additions to the Premises without the Lessor's prior written consent, but the Lessor shall not withhold its consent unreasonably to an alteration or addition which is not structural, 16.2 If the Lessee does alter, add to, or improve the Premises in any way, whether in breach of 16.1 or not, the Lessee shall, if so required in writing by the Lessor, restore the Premises on the termination of this 16 Agreement to its condition as it was prior to such alteration, addition or improvement having been made. The Lessor's requirement in this regard may be communicated to the Lessee at any time, and this 16.2 shall not be construed as excluding any other or further remedy which the Lessor may have in consequence of a breach by the Lessee of 16.1. 16.3 Save for any improvement which is removed from the Premises as required by the Lessor in terms of clause 16.2, all improvements made to the Premises shall belong to the Lessor and may not be removed from the Premises at any time. The Lessee shall not, whatever the circumstances, have any claim against the Lessor for compensation for any improvement to the Premises, nor shall the Lessee have a right of retention in respect of any improvements. 17. EXCLUSION OF LESSOR FROM CERTAIN LIABILITY AND INDEMNITY: 17.1 The Lessee shall have no claim for damages against the Lessor and may not withhold or delay any payment due to the Lessor by reason directly or indirectly of: 17.1.1 a breach by the Lessor of any of its obligations under this Agreement; 17.1.2 any act or omission of the Lessor or any agent or servant of, or contractor to, the Lessor, whether or not negligent, or otherwise actionable at law, and including (without limiting the generality of the aforegoing) any act or omission of any cleaner, maintenance person, handyman, artisan, labourer, workman, watchman, guard, or caretaker; 17.1.3 the condition or state of repair at any time of the Property, the Building, or any part of the Property or the Building; 17.1.4 any failure or suspension of, or any interruption in, the supply of water, electricity, gas, air-conditioning, heating, or any other amenity or service to the Premises, the Building, or the Property (including, without generality being limited, any cleaning service), whatever the cause; 17.1.5 any breakdown of, or interruption in the operation of, 17 any machinery, plant, equipment, installation or system situated in or on, or serving the Property, the Building, or the Premises, and including (but without limiting the generality of the aforegoing) any lift, escalator, geyser, boiler, burglar alarm, or security installation or system, again regardless of cause; 17.1.6 any interruption of, or interference with, the enjoyment or beneficial occupation of the Premises or any of the Common Areas of the Property or the Building caused by any building operations or other works to or in the Building or elsewhere on or about the Property, whether by the Lessor or by anybody else; or 17.1.7 any other event or circumstance whatever occurring, or failing to occur, upon, in, or about the Property, the Building, or the Premises, whether or not the Lessor could otherwise have been held liable for such occurrence or failure, 17.1.8 and the Lessee indemnifies the Lessor against all liability to any of the associates, directors, members, agents, customers, servants, guests and other invitees of the Lessee or of any of its Associates, and all other persons who may enter upon the Premises or any parts thereof through or under the Lessee, in consequence of any such matter as is referred to in clauses 17.1.1 to 17.1.7 above and further indemnifies the Lessor against any claim made against the Lessor by anyone for any loss or damage suffered in or on the property or in consequence of any act or omission of the Lessee's servants or agents. 17.2 The Lessor shall not, however, be excused from specific performance of any of its obligations under this Agreement, whether express or implied, and particularly (but not only) its obligations to afford the Lessee occupation and enjoyment of the Premises as contemplated by this Agreement and to carry out such maintenance and repairs as are incumbent upon the Lessor in terms hereof. 17.3 The Lessor does not warrant that the Premises are suitable for the purposes of the Lessee or any of its Associates or that the Lessee or any of its Associates will be granted any licence or consent which may be necessary for the carrying on of any business or activity in the Premises. 18 18. LESSOR'S RIGHTS: 18.1 The Lessor's representatives, agents, servants and contractors may at all reasonable times, without thereby giving rise to any claim or right of action on the part of the Lessee or any other occupier of the Premises: 18.1.1 enter the leased Premises in order to inspect them, to carry out any necessary repairs, replacements or other works, or to perform any other lawful function in the bona fide interests of the Lessor or any of the occupiers of the Property; or 18.1.2 carry out elsewhere in the Building or on the Property any necessary repairs, replacements or other works; but the Lessor shall ensure that this right is exercised with due regard for, and a minimum of interference with, the beneficial enjoyment of the Premises by those in occupation thereof. 18.2 The Lessor shall have the right: 18.2.1 to display at the property: 18.2.2.1 a "TO LET" notice during the period of 6 (six) months immediately preceding the termination of the lease; 18.2.2.2 a "FOR SALE" notice at any time during the currency of this lease; 18.2.2 to show any prospective tenants or buyers of the property the property on reasonable notice during reasonable hours on business days; 18.2.3 to display on the property any notice which may be required by the Lessor or any of the tenants or prospective tenants of the Lessor in connection with any applications for a license for any business to be carried on, on the property; 19. AREA OF THE PREMISES: 19.1 If it is necessary in terms of this lease to determine the area, in 19 square metres, of the Premises or any other part of the Building, such determination shall be made according to the SAPOA standard method for measuring floor areas. Any dispute between the Lessor and the Lessee as to any such area shall be determined by an independent architect, acting as expert and not arbitrator, whose certificate as to such area shall be final and binding on the parties. If the parties fail to agree on the identity of such architect, he shall be appointed by the Executive Director for the time being of the South African Institute of Architects. 19.2 The party who declares a dispute in relation to the square meters, as set out in 2.1.12, shall be responsible for the cost incurred relating to the determination by the independent Architect as contemplated above, in the event that such determination confirms the correctness of the square meters contain in 2.1.12. In the event that the independent architect determines a meterage other than that contained in 2.1.12, the cost of such determination shall be borne by the parties equally. 20. RULES: 20.1 The Lessee shall at all material times comply with such reasonable rules and regulations as are laid down in writing by or on behalf of the Lessor for observance by tenants and other occupiers of the Property, their customers and their invitees, including (without generality being limited) rules and regulations in connection with: 20.1.1 the security of the Property and the protection of persons and property thereon, including in particular (again without generality being restricted) any rules for the control and identification of persons and vehicles entering the Property or any parts thereof; 20.1.2 the driving and parking of vehicles on or about the Property; 20.1.3 the utilisation of common amenities and facilities on the Property; 20.1.4 the air-conditioning plant, if any, servicing the Building; 20.1.5 the prohibition or restriction of specific activities and practices which are actually or potentially detrimental to the general interests of traders in the Building; and 20 20.1.6 the loading and off-loading of merchandise and other articles on and about the Property. 20.2 20.1 shall not be construed as implying that the Lessor assumes any liability, which it would not otherwise have had in connection with the subject matter of any such rule or regulation. 21. PARKING AND LOADING: 21.1 The Lessee shall throughout the Lease Period have the exclusive use for its directors, officers, members, partners, employees, clients, customers and invitees of 27 (Twenty Seven) Shaded parking bays and 109 (One Hundred and Nine) Basement parking bays as identified on the plan being A5, at an initial monthly rental of R 163.35 (One Hundred and Sixty Three Rand and Thirty Five Cents) per Shaded parking bay and R 297.00 (Two Hundred and Ninety Seven Rand) per Basement parking bay, payable in addition to, and increasing from time to time simultaneously with and proportionately to, the rent and or other increases as contemplated in 7,8 and 9 for the Premises (whatever the cause or basis of such increase). 21.2 All the terms of this Agreement relating to the Premises themselves shall apply mutatis mutandis to the loading bay(s) and parking bay(s)/garage(s) referred to in 21.1 except those which are obviously inapplicable. 21.3 Without derogation from any rules or regulations in force for the time being as envisaged in 20.1, the Lessee shall procure that the loading and off-loading of merchandise and other articles in connection with the business carried on in the Premises are carried out: 21.3.1 only in the bay(s) let to the Lessee in terms of 21.1 and such other loading bay(s)/area(s) as are provided for the purpose; and 21.3.2 with due regard and consideration for the interests of other traders in the Building and the general public. 21.4 The provisions of this 21, in respect of the lease of parking bays or additional parking bays, shall endure for the duration of this Agreement and shall terminate simultaneously with this Agreement. 21.5 The Lessor shall be responsible for the maintenance and upkeep of the covered parking bays but the Lessee shall specifically be responsible for all damage which may occur in respect of such 21 parking bays, resulting from the wilful or negligent acts of its employees, clients or visitors, or any other person and the Lessee shall pay to the Lessor, on demand, all such costs incurred by the Lessor in the repair of damaged parking bays. 22. DAMAGE TO OR DESTRUCTION OF PREMISES: 22.1 If the Building or Premises is destroyed or so damaged that the Lessee can no longer beneficially occupy the Premises, this lease shall terminate when that happens unless the parties agree otherwise in writing. 22.2 If the Premises is significantly damaged but can still be beneficially occupied, this Agreement shall remain in force and the Lessor shall repair the damage without undue delay, but the rent shall be abated so as to compensate the Lessee fairly for the effects of the damage and repair work on the enjoyment of the Premises. Failing agreement on such abatement or on the applicability of this clause to any particular circumstances, the matter shall be referred to an expert appointed by the parties jointly or, if they do not agree on such appointment, nominated by the President for the time being of The Institute of Estate Agents of South Africa, and the decision of such expert shall be final and binding. The expert's fees and disbursements, including any inspection costs, shall be borne and paid by the parties in equal shares. Pending determination of the abatement the Lessee shall continue to pay the full rent for the Premises as if they had not been damaged, and as soon as the matter has been resolved the Lessor shall make the appropriate repayment, if any, to the Lessee. 22.3 Subject to 17, if any damage to the Premises or the destruction thereof is caused by an act or omission for which either party is responsible in terms of this Agreement or in law, the other party shall not be precluded by reason of any of the aforegoing provisions of this 22 from exercising or pursuing any alternative or additional right of action or remedy available to the latter party under the circumstances (whether in terms of this Agreement or in law). 23. SPECIAL REMEDY FOR BREACH: 23.1 Should the Lessee default in any payment due under this Agreement and fail to remedy such default within 5 (five) days after receiving a written demand that it be remedied; or 23.2 fail to pay any amount owing in terms of this Agreement on due 22 date, but within 5 (five) days after receipt of a notice from the Lessor requiring such payment to be made, on more than 3 (three) occasions falling within any period of 12 (twelve) calendar months; or 23.3 commit any other breach of any term or condition of this Agreement and fail to remedy that breach within a period of 30 (thirty) days after receipt of a notice from the Lessor calling on the Lessee to do so, then, in any such event, the Lessor shall be entitled to cancel this Agreement, by notice to the Lessee, without prejudice to any rights, which the Lessor may have against the Lessee as a result thereof, then the Lessor shall be entitled, without prejudice to any alternative or additional right of action or remedy available to the Lessor under the circumstances without further notice, to cancel this Agreement with immediate effect, be possession of the Premises, and recover from the Lessee damages for the default or breach and the cancellation of this Agreement. 23.4 Clause 23.1 shall not be construed as excluding the ordinary lawful consequences of a breach of this Agreement by either party (save any such consequences as are expressly excluded by any of the other provisions of this Agreement) and in particular any right of cancellation of this Agreement on the ground of a material breach going to the root of this Agreement. 23.5 In the event of the Lessor having cancelled this Agreement justifiably but the Lessee remaining in occupation of the Premises, with or without disputing the cancellation, and continuing to tender payments of rent and any other amounts which would have been payable to the Lessor but for the cancellation, the Lessor may accept such payments without prejudice to and without affecting the cancellation, in all respects as if they had been payments on account of the damages suffered by the Lessor by reason of the unlawful holding-over on the part of the Lessee. 24. OPTION OF RENEWAL: 24.1 The Lessee shall have the right to renew this Agreement upon the terms and subject to the conditions set out below. 24.2 The period for which this lease may be so renewed is five years, commencing on the date immediately following the date of expiry of the initial term of this lease. 24.3 All the terms of this Agreement shall continue to apply during the 23 renewal period, save that: 24.3.1 the rent shall be determined as set out in clause 6; and 24.3.2 there shall be no further right of renewal. 24.4 The right of renewal shall be exercised by notice in writing from the Lessee to the Lessor given and received not later than 6 (six) months prior to the date on which the renewal period is to commence, and shall lapse if not so exercised. 24.5 If the right of renewal is duly exercised, this Agreement shall be renewed automatically and without the need for any further act of the parties. 24.6 The Lessee may not, however, exercise the right of renewal while in breach or default of any of the terms of this Agreement. 24.7 If this Agreement does not endure at least for the full term for which it is initially contracted, the right of renewal shall lapse and any notice of exercise thereof given prior to such lapsing shall be null and void. 27. NEW TENANTS AND PURCHASERS: The Lessee shall at all reasonable times: 25.1 during the Lease Period, allow prospective purchasers of the Property or of any shares or other interests in the Lessor; and 25.2 during the last 6 (six) months of the Lease Period, allow prospective tenants or purchasers of the Premises, to enter and view the interior of the Premises. 27. COSTS: Each party shall bear its own legal costs incurred in the preparation and negotiation of this lease provided that the stamp duty payable thereon shall be borne and paid by the Lessee. 27. DOMICILIA AND NOTICES: 27.1 The parties choose as their domicilia citandi et executandi the 24 addresses mentioned in clause 27.2, provided that such domicilium of either party may be changed by written notice from such party to the other party with effect from the date of receipt or deemed receipt by the latter of such notice. 27.2 The parties domicilia addresses: 27.2.1 The Lessor: The Centurion Wine Centre 123 Amkor Road Lyttelton Manor X3 Centurion 0157 27.2.2 The Lessee: At the Premises 27.3 Any notice, acceptance, demand or other communication properly addressed by either party to the other party at the latter's domicilium in terms hereof for the time being and sent by prepaid registered post shall be deemed to be received by the latter on the 7th (seventh) business day following the date of posting thereof. This provision shall not be construed as precluding the utilisation of other means and methods (including telefacsimile) for the transmission or delivery of notices, acceptances, demands and other communications, but no presumption of delivery shall arise if any such other means or method is used. 28. WHOLE AGREEMENT: 28.1 This is the entire agreement between the parties. 28.2 Neither party relies in entering into this agreement on any warranties, representations, disclosures or expressions of opinion which have not been incorporated into this agreement as warranties or undertakings, 28.3 No variation or consensual cancellation of this agreement shall be of any force or effect unless reduced to writing and signed by both parties. 29. NON-WAIVER: 29.1 Neither party shall be regarded as having waived, or be precluded in 25 any way from exercising, any right under or arising from this lease by reason of such party having at any time granted any extension of time for, or having shown any indulgence to, the other party with reference to any payment or performance hereunder, or having failed to enforce, or delayed in the enforcement of, any right of action against the other party. 29.2 The failure of either party to comply with any non-material provision of this lease shall not excuse the other party from performing the latter's obligations hereunder fully and timeously. 30. WARRANTY OF AUTHORITY: The person signing this lease on behalf of the Lessee expressly warrants his authority to do so. 31. SECURITY FOR PAYMENT BY LESSEE: 31 As security for the due performance by the Lessee of the Lessee's obligations in terms of this Agreement the Lessee shall provide the Lessor on the date of signature of this Agreement by the party last signing, with, at the choice of the Lessor, either or both: 31.1.1 A signed suretyship binding the Lessee to the Lessor in writing as surety and co-principal debtor for all the obligations of the Lessee to the Lessor under this Agreement as well as those arising in consequence of any termination thereof; and/or 31.1.2 an unconditional and irrevocable bank guarantee, in a form and from an institution acceptable to the Lessor, of the due payment by the Lessee of the rental or any other amounts payable in terms of this agreement, provided that the liability of the guarantor shall be limited to an amount equal to four months rental, such rental to be the rental applicable to the year in respect of which the amount become owing, having taken all escalations into account. 31.2 The provision of the security as set out in this clause shall act as a suspensive condition to this Agreement becoming operational except as set forth in this clause and unless provision of such security is waived by the Lessor in writing in terms of 31.3, this lease shall not come into operation but shall be null and void save that the Lessee shall then solely bear and pay, or reimburse the Lessor on demand with, the costs of this lease and the Lessor's expenses in reletting 26 the Premises, including any agent's commission and advertising costs. 31.3 The Lessor, by his signature to this agreement, waives the provision of security as contemplated in 31.2. The parties however agree that the Lessor shall at any time during the Lease Period be entitled to call for such security in writing and the Lessee shall within 7 (Seven) days after receiving such notice provide the security called for failing which the Lessee shall be in breach of this agreement. 32. SALE OF PREMISES The validity of this lease shall not in any way be affected by the transfer of the Property, Building or Premises from the Lessor pursuant to a sale thereof. It shall accordingly, upon registration of transfer of the Property, Building or Premises into the; name of the purchaser, remain of full force and effect save that the purchaser shall be substituted as lessor and acquire all rights and be liable to fulfil all the obligations which the Lessor, as lessor, enjoyed against or was liable to fulfil in favour of the Lessee in terms of this Agreement. DATED at Centurion on 24 April 2003. AS WITNESSES: 1. /s/ [illegible] /s/ [illegible] ------------------------------------- --------------------------------- For and on behalf of Shibbolet (Proprietary) Limited 2. /s/ [illegible] ------------------------------------- DATED at Pretoria on 16 April 2003. AS WITNESSES: 1. /s/ [illegible] /s/ [illegible] ------------------------------------- --------------------------------- For and on behalf of Quintiles Clindepharm (Proprietary) Limited 2. /s/ [illegible] ------------------------------------- 27 EX-10.29 20 g87218exv10w29.txt EX-10.29 EXHIBIT 10.29 AGREEMENT OF LEASE ENTERED INTO BETWEEN SHIBBOLET (PROPRIETARY) LIMITED AND QUINTILES CLINDEPHARM (PROPRIETARY) LIMITED Jointly referred to as the Parties. INDEX AGREEMENT OF LEASE

- ------------------------------------------------------------------------------ NO CLAUSE HEADINGS PAGE - ------------------------------------------------------------------------------ 1 Parties 2 Interpretation 3 Recordance 4 Letting and Hiring 5 Duration 6 Rental 7 Operating Costs 8 Increase in the Rates 9 Additional Charges 10 Electricity 11 Deposit 12 Insurance 13 Assignment and Subletting 14 Sundry Obligations of the Lessee 15 Maintenance and Repairs 16 Alterations, Additions and Improvements 17 Exclusion of Lessor's Liability and Indemnity 18 Lessor's Rights 19 Area of the Premises 20 Rules 21 Parking and Loading 22 Damage to or Destruction of Premises 23 Special Remedy for Breach 24 Option of Renewal 25 New Tenants and Purchasers 26 Costs 27 Domicilia and Notices 28 Whole Agreement 29 Non-Waiver 30 Warranty of Authority 31 Merchants' Association 32 Security for Payment by Lessee 33 Sale of Premises

LEASE(QUINTILES) 2 7 DECEMBER 1999 AGREEMENT OF LEASE 1. PARTIES: The parties to this lease are: 1.1 Shibbolet (Proprietary) Limited ("the Lessor"); and 1.2 Quintiles Clindepharm (Proprietary) Limited ("the Lessee"). 2. INTERPRETATION: 2.1 In this Agreement, except in a context indicating that some other meaning is intended: 2.1.1 "THIS AGREEMENT" means this Agreement together with all appedicis and annexures; 2.1.2 "ASSOCIATE" in relation to the Lessee means a company, which is for the time being: 2.1.2.1 a subsidiary or holding company of the Lessee within the meaning ascribed to such terms in the Companies Act 61 of 1973; or 2.1.2.2 a subsidiary or holding company of a company referred to in 2.1.2.1 above; 2.1.3 "THE BUILDING" means the buildings known as Centurion Science Park, Phases I to IV, situated on the Property, and includes, where the context so allows, all permanent improvements on the Property; 2.1.4 "COMMON AREAS" means portions of the Building which are not suitable for letting and are not actually let by the Lessor; 2.1.5 "DAY" means any day of the week, excluding Saturdays, Sundays and public holidays; LEASE(QUINTILES) 3 7 DECEMBER 1999 2.1.6 "THE LEASE PERIOD" means the period for which this lease subsists, including any period for which it is renewed; 2.1.7 "THE LESSOR" means Shibbolet (Proprietary) Limited, a company duly incorporated in terms of the Company Laws of the Republic of South Africa; 2.1.8 "THE LESSEE" means Quintiles Clindepharm (Proprietary) Limited, a company duly incorporated in terms of the Company Laws of the Republic of South Africa; 2.1.9 "MONTH" means a calendar month, and more specifically 2.1.9.1 in reference to a number of months from a specific date, a calendar month commencing on that date or the same date of any subsequent month; and 2.1.9.2 in any other context, a month of the calendar, that is, one of the 12 months of the calendar, 2.1.9.3 and "monthly" has the corresponding meaning; 2.1.10 "OPTION PERIOD" means the period referred to in clause 24; 2.1.11 "THE PARTIES" means the parties to this Agreement; 2.1.12 "THE PREMISES" means Phases I, II, III and IV of Centurion Science Park, further identified by the annexed plans signed by the parties and having a Rentable Area of 2328 (Two Thousand Three Hundred and Twenty Eight square metres;) and also including the parking areas as set out in 21 and in respect of which the Premises shall comprise air conditioned offices as they existed at the commencement date. 2.1.13 "THE PROPERTY" means Erf 1831, Lyttelton Manor X 3, Centurion, including the Premises; 2.1.14 "THE PRIME RATE" means the public quoted basic rate of interest per annum (as certified by any manager of LEASE(QUINTILES) 4 7 DECEMBER 1999 ABSA Bank) at which that bank lends on unsecured overdraft to its most favoured customers in the private bank sector, compounded monthly in arrears and calculated on a 365 (three hundred and sixty five) day year factor irrespective of whether the year is a leap year of not; 21.15 "THE RATES" means the assessment rates and all taxes of what so ever nature payable on the Property and includes any other charges payable by the Lessor to the local authority (such as, but not limited to, refuse removal charges or sanitary fees), but not charges for water, electricity or gas; 2.1.16 "RENTABLE AREA" in relation to the Premises means the area of the Premises determined in accordance with clause 19; 2.1.16 "YEAR" means a period of 12 consecutive months, and "yearly" refers to a year commencing on the date on which the lease comes into operation or any anniversary of that date; 2.2 references to notices, statements and other communications by or from the Lessor include notices by or from the Lessor's agent; 2.3 expressions in the singular also denote the plural, and vice versa; 2.4 words and phrases denoting natural persons refer also to juristic persons, and vice versa; and 2.5 Pronouns of any gender include the corresponding pronouns of the other gender; 2.6 If any provision in a definition is a substantive provision conferring rights or imposing obligations on any party, notwithstanding that it appears in the definition clause only, effect shall be given to it as if it were a substantive provision in the body of the agreement. 2.7 Words and expressions defined in any sub-clause shall, for the purpose of the clause of which that sub-clause forms part, bear the meaning assigned to such words and expressions in that sub-clause. 2.8 If a particular number of days are referred to in this agreement, such number of days shall be reckoned exclusively of the first day and inclusively of the last day of the number of days, which is specified. LEASE(QUINTILES) 5 7 DECEMBER 1999 2.9 Any provision of this lease imposing a restraint, prohibition or restriction on the Lessee shall be so construed that the Lessee is not only bound to comply therewith but is also obliged to procure that the same restraint, prohibition or restriction is observed by everybody occupying or entering the Premises or any other part of the Property or the Building through, under, by arrangement with, or at the invitation of, the Lessee, including (without limiting the generality of this provision) its Associates and the directors, members, officers, employees, agents, customers and invitees of the Lessee or its Associates. 2.10 Clause headings appear in this lease for purposes of reference only and shall not influence the proper interpretation of the subject matter. 2.11 This lease shall be interpreted and applied in accordance with South African law. 3. RECORDANCE: It is recorded that: 3.1 The Lessor is the owner of the Property; 3.2 The Lessee wishes to hire and the Lessor wishes to lease, the Property; 3.3 This Agreement sets out the terms and conditions agreed upon between the parties in relation to such lease. 4 LETTING AND HIRING: The Lessor lets and the Lessee hires the Premises on the terms of this Agreement. 5 DURATION: This Agreement shall: 5.1 come into operation on 1 December 1999 (the commencement date) and shall subsist for 6 (Six) years and 4 (Four) months notwithstanding the date of signature hereof; LEASE(QUINTILES) 6 7 DECEMBER 1999 5.2 terminate, unless renewed in terms of 5.3, on 31 March 2006; 5.3 be renewable at the option of the Lessee for a further period of 5 (Five) years. 5.4 The option contained in 5.3 shall be exercisable on notice, as provided for in this Agreement and in terms of the provisions as set out in 24, by the Lessee to the Lessor given not less than 6 (six) months prior to the date on which this Agreement would expire if it were not for the exercise of such option. 6. RENTAL: 6.1 The monthly rental payable by the Lessee to the Lessor: 6.1.1 in respect of the Premises during the period commencing on the commencement date and ending on the day prior to the first anniversary of the commencement date or, if the commencement date does not fall on the first day of a month, on the last day of the month in which the first anniversary of the commencement date falls, shall be R 39.00 (Thirty Nine Rand) per square meter amounting to a total rental of R 90 792.00 (Ninety Thousand Seven Hundred and Ninety Two Rand) per month; 6.1.2 in respect of the Premises on 1 April 2000 a rental of 10% (Ten per centum) higher than the rental payable in respect of the property for the final month of the preceding year and thereafter in respect of each subsequent year during the initial period, commencing on 1 April 2000, a rental of 10% (Ten per centum) higher than the rental payable in respect of the property for the final month of the preceding year. 6.2 Should the Lessee exercise the option contained in 5.3, the rental during the option period shall be such rental as may be agreed upon in writing between the Lessor and the Lessee or, failing such agreement between the Lessor and the Lessee within 3 (three) months after the date of the exercise of such option, a fair market rental determined in accordance with the applicable provisions of this clause 6. 6.3 For the purpose of 6.2, the fair market rental of the property during the option period shall be deemed to be the rental which a willing Lessee would be prepared to pay a willing Lessor in respect of the property for the option period, if agreed upon on the date of receipt by the Lessor of the notice referred to in 5.4, and as determined by LEASE(QUINTILES) 7 7 DECEMBER 1999 an expert agreed upon in writing between the Lessor and the Lessee for that purpose or, failing agreement between them within 14 (fourteen) days, as determined by an expert nominated for that purpose at the request of the Lessor or the Lessee by the president of The South African Institute of Estate Agents. 6.4 Notwithstanding the provision of 6.3, should either the Lessor or the Lessee be dissatisfied with the fair market rental determined by the expert agreed upon or nominated in terms of 6.3, and the party who is so dissatisfied ("THE DISSATISFIED PARTY") notify the other party within 14 (fourteen) days after the determination of such expert of his dissatisfaction, then the matter shall be referred to another expert nominated by the president of the South African Institute of Estate Agents for the determination of such fair market rental. 6.5 Should the fair market rental of the property as determined by the expert nominated in terms of 6.4 ("THE SECOND EXPERT"): 6.5.1 not be 10% (Ten per centum) more or less than the fair market rental of the property as determined by the expert agreed upon or nominated in terms of 6.3 ("THE FIRST EXPERT"), then: 6.5.1.1 the fair market rental of the property shall be deemed to be the fair market rental of the property as determined by the first expert; 6.5.1.2 the dissatisfied party shall pay all costs incurred in connection with the services rendered by the second expert; 6.5.2 be 10% (ten per centum) more or less than the fair market rental as determined by the first expert, then: 6.5.2.1 the fair market rental of the property shall be deemed to be the average of the fair market rentals of the property as determined by the first and second experts; 6.5.2.2 in the event of the fair market rental of the property as determined by the second expert being higher than the fair market rental of the property as determined by the first expert, the Lessee shall pay all costs incurred in connection with the services rendered by the second expert; 6.5.2.3 in the event of the fair market rental of the property as determined by the second expert being lower than the fair market rental of the property as determined by the first expert, the Lessor shall pay all LEASE(QUINTILES) 8 7 DECEMBER 1999 costs incurred in connection with the services rendered by the second expert. 6.6 For the purposes of the preceding provisions of this 7, should: 6.6.1 the Lessor notify the Lessee that it is prepared to agree to the fair market rental of the property being deemed to be less; or 6.6.2 the Lessee notify the Lessor that it is prepared to agree to the fair market rental of the property being deemed to be more than the fair market rental of the property as determined by the first expert, within 7 (seven) days after the determination of the first expert, then the fair market rental of the property as determined by the first expert shall be deemed to be the higher or lower rental notified by the Lessor or Lessee to the Lessee or Lessor (as the case may be). 6.7 The costs incurred in respect of the services rendered by the first expert shall be borne and paid by the parties in equal shares. 6.8 Any additional amount payable by the Lessee in respect of Operating Costs, Rates and Additional Charges, in terms of 7,8 and 9 shall be added to the rental payable by the Lessee, and: 6.8.1 the Lessee shall be liable to pay such increased rental; 6.8.2 the terms and conditions of this agreement in respect of rental generally shall apply mutatis mutandis to such increased rental. 6.9 The rentals referred to above are exclusive of value-added tax, and the Lessee shall, in addition to the rental, be liable for the payment of value-added tax thereon. 6.10 The aforesaid rental shall be paid monthly in advance on the first day of each and every month, without deduction or set-off and free of exchange to the Lessor at ABSA Bank Lyttelton Account Number 600 164 570, or at such other place in Gauteng as the Lessor may direct in writing. 6.11 All amounts payable by the Lessee to the Lessor in terms of this agreement, and which are not paid on the due date thereof shall, without prejudice to any rights which the Lessor may otherwise have, bear interest with effect from the due date of such payment at the prime rate, for the period that elapses from such due date up to and until 5 (five) days after date of the letter of demand and thereafter such an amount shall bear interest at a rate per annum of 400 (Four hundred) basis points higher than the prime rate until date of final LEASE(QUINTILES) 9 7 DECEMBER 1999 payment. 6.12 The Lessee shall not withhold, defer, or make any deduction from any payment due to the Lessor, whether or not the Lessor is indebted to the Lessee or in breach of any obligation to the Lessee. 7. OPERATING COSTS: 7.1 For the purposes of this clause 7: 7.1.1 "THE OPERATING COSTS" means the reasonable costs (for which the Lessee is not otherwise liable in terms of this lease) incurred by the Lessor in connection with the ownership, management, maintenance, repair and operation of the Property and the Building, including, but not limited to, the Rates and the costs of: 7.1.1.1 cleaning the Building and the Property; 7.1.1.2 providing security in respect of the Building; 7.1.1.3 maintaining lifts and escalators, if any; 7.1.1.4 providing electricity, water, gas, oil or any necessary service to Common Areas 7.1.1.5 maintaining internal roofs, walls and finishes 7.1.1.6 gardens and gardening services and maintenance. 7.2 All the above Operating Costs are not included in the rental amount as set out in 6 above and until such time as these costs are incurred by the Lessor, in terms of a further written agreement, the Lessee shall be responsible for such services at its own cost. 8. INCREASES IN THE RATES: 8.1 Whenever the Rates are increased during the Lease Period, the Lessor may, by written notice to the Lessee, increase the monthly rent for the Premises by an amount which bears the same ratio to the increase in Rates, calculated on a monthly basis, as the rent payable by the Lessee for the Premises bears for the time being to the total rentals receivable by the Lessor from all tenants of the Building. Every such increase in the rent shall take effect on the first day of the LEASE(QUINTILES) 10 7 DECEMBER 1999 month following that in which the Lessor's notice of the increase is received by the Lessee or, whichever is the later, the date on which the corresponding increase in the Rates takes effect. 8.2 For the purposes of 8.1, any premises in the Building which are not part of the Common Areas but are unlet for the time being shall be deemed to be let for the rental that was last receivable by the Lessor for the same premises or, if they were never let, a fair market rental determined in good faith by a reputable estate agent appointed by the Lessor). 9. ADDITIONAL CHARGES: 9.1 In addition to paying the rent and other amounts, the Lessee shall reimburse the Lessor, monthly in arrear, within 7 (Seven) days after receiving an account from the Lessor reflecting the amount(s) so payable, with the cost of water consumed on the Premises, determined at prevailing municipal rates in accordance with readings of separate submeters or, if there are no such submeters, on the basis of the Lessee being liable to bear 100 % ( One Hundred percent) of the total cost of all water consumed on the Property. 9.2 If any additional levy, not dealt with under 7,8 and 9, payable by the Lessor in respect of the Property, Building or Premises, be increased from time to time during the duration of this lease so as to exceed the amount of such levy as at the commencement date; or a new levy or impost cost or expense of whatsoever nature, not in force as at commencement date, be imposed at any time thereafter on the Lessor, by virtue of its being the owner of the property, then the Lessor shall be entitled to increase the monthly rental for the property by an amount equal to one-twelfth of the yearly amount of that increase or new levy or impost multiplied by the Lessee's Contribution Percentage being an increase in respect of an item, charge or cost as contemplated by 6.8 with effect from the date upon which that increase or new levy or impost takes effect. 10. ELECTICITY: The Lessee shall be responsible for the payment of all electricity charges related to the Premises and in this regard such electricity consumption shall be determined by separate meter allocated to the Premises. LEASE(QUINTILES) 11 7 DECEMBER 1999 11. DEPOSIT: 11.1 On entering into this Agreement the Lessee shall pay the Lessor a deposit of R 0.00 ( Nil Rand), which amount the Lessor may apply, in whole or part, in meeting any payment due by the Lessee to the Lessor at any time during the Lease Period or after the termination of this Agreement. 11.2 Whenever during the Lease Period the deposit is so applied in whole or part, the Lessee shall on demand reinstate the deposit to its original amount. 11.3 As soon as all the obligations of the Lessee to the Lessor have been discharged following the termination of this Agreement, the Lessor shall refund to the Lessee, free of interest, so much of the deposit as has not been applied in terms of the above provisions. 12. INSURANCE: 12.1 The Lessee shall not keep or do in or about the Property, Building or Premises anything which is liable to enhance any of the risks against which the Property or Building is insured for the time being to the extent that such insurance is rendered void or voidable or the premiums of such insurance are, or become liable to be, increased. 12.2 Without prejudice to any other right of action or remedy which the Lessor may have arising out of a breach of the aforegoing provision, the Lessor may recover from the Lessee on demand the full amount of any increase in insurance premiums in respect of the Property or Building attributable to such breach. 13. ASSIGNMENT AND SUBLETTING: 13.1 The Lessee shall not be entitled, except with the prior written consent of the Lessor to: 13.1.1 cede or assign all or any of the rights or obligations of the Lessee under this Agreement; or 13.1.2 sublet or give up possession of the Premises, in whole or part, to any third party which is not an Associate of the Lessee. 13.2 The Lessor shall be entitled, in its sole and absolute discretion, to LEASE(QUINTILES) 12 7 DECEMBER 1999 withhold its consent to the subletting of the whole or part of the Premises by the Lessee to any other entity. 14. SUNDRY OBLIGATIONS OF THE LESSEE: The Lessee shall: 14.1 keep the Premises clean and tidy; 14.2 not use the Premises or allow it to be used, in whole or part, for any purpose other than that of offices and laboratory facilities; 14.3 not place or leave any article or other thing in or about any passage, lift, stairway, pathway, parking garage, or other common part of the Property or Building so as to cause a nuisance or obstruction; 14.4 not bring into or unto the Property, Building or Premises any article which, by reason of its weight or other characteristics, is liable to cause damage to the Property, Building or Premises; 14.5 not contravene any of the conditions of title of the Property or any of the laws, rules or regulations affecting owners, tenants or occupiers of the Property or the Building and specifically any measure having the force of law with which the Lessor is obliged to comply as owner of the Property including without limiting the generality hereof all laws relating to environmental protection which may apply to the Lessee in general or specifically due to the nature of the Lessee's business; 14.6 not cause or commit any nuisance on the Property or in the Building or Premises or cause any annoyance or discomfort to other tenants or occupiers of the Property or Building; 14.7 not leave refuse or allow it to accumulate in or about the Property, Building or Premises except in the refuse bins provided; 14.8 refrain from interfering with the electrical, plumbing or gas installations or systems serving the Property, Building or Premises, except as may be necessary to enable the Lessee to carry out its obligations of maintenance and repair in terms of this Lease and then the Lessee shall only utilise persons properly qualified; 14.9 take all reasonable measures to prevent blockages and obstructions from occurring in the drains, sewerage pipes and water pipes serving the Property, Building or Premises; LEASE(QUINTILES) 13 7 DECEMBER 1999 14.10 provide at the Lessee's own expense all electric, fluorescent and incandescent light bulbs required in the Premises; 14.11 be responsible for all glass, both internal and external, on the Premises, including all mirrors, office fronts, and window panels; 14.12 keep the office fronts of the Premises illuminated during such reasonable hours as the Lessor may from time to time in writing direct; 14.13 procure that the decor of the Premises is maintained at a level which is in keeping with the standards of the Property and Building; 14.14 not paint, affix or attach to the Premises or any part of the Building any sign, notice, awning or canopy without the Lessor's prior written consent, which shall not be unreasonably withheld; 14.15 keep any such sign, notice, awning or canopy which has been so approved by the Lessor in good order, condition and repair at all times; 14.16 not erect any radio or television aerial on the roof or exterior walls of the Premises or the Building without the Lessor's prior written consent, which shall not be unreasonably withheld; 14.17 on the termination of this Agreement reinstate and return the property to the Lessor in the same good order and condition (fair wear and tear excepted) as it was in as at the commencement date; 14.18 have no claim of any nature whatsoever for any loss or damages which the Lessee may suffer, including cancellation of this lease, as a result of: 14.18.1 any defect in the property or any part thereof or any improvement thereon; 14.18.2 vis major, casus fortuitus or any other causes which is either wholly or substantially outside the control of the Lessor; 14.18.3 not do anything , which will damage the property or any of the improvements thereon; 14.19 be responsible during the duration of this Agreement for obtaining and renewing all licenses, permits or other consents in respect of the Lessee's business, and the failure to obtain such licenses or permits shall not be a ground for the cancellation of this Agreement by the LEASE(QUINTILES) 14 7 DECEMBER 1999 Lessee; and 14.20 take out and maintain public liability insurance for an amount which, having regard to the nature of the Lessee's business, a prudent businessman would take out and maintain. 15. MAINTENANCE AND REPAIRS: 15.1 The Lessee shall at its own expense and without recourse to the Lessor: 15.1.1 throughout the Lease Period maintain in good order and condition the interior of the Premises and all parts thereof, including (without limitation of the generality of this obligation) all shop fronts, windows, doors, appurtenances, fixtures and fittings contained in the Premises; 15.1.2 be responsible for all repairs of and maintenance to the parking bays and shade netting associated with such parking bays as set out in 21.5; 15.1.3 promptly repair or make good all damage occurring in the Premises from time to time during the Lease Period, whatever the cause of such damage, and including damage to any part of the interior of the Premises or to any shop front, window, door, appurtenance, fixture or fitting, and replace all such items (as well as any keys) which have been broken, lost or destroyed (again regardless of cause); and 15.1.4 on the termination of this lease, howsoever and whenever it terminates, return the Premises and all such parts thereof (including all keys) to the Lessor in good order, condition and repair, fair wear and tear excepted. 15.2 If the Lessee notifies the Lessor in writing within 5(Five) days after having taken possession of the Premises of the need for any repairs to or in the Premises or of the fact that any part of the Premises, including any lock, key, door, shop front, window, appurtenance, fixture or fitting, is damaged, missing, or out of order, the Lessor shall promptly cause the necessary repair or replacement to be effected at the Lessor's own expense. If or in so far as the Lessee does not give such notice, the Lessee shall be deemed to have acknowledged that the Premises and all parts thereof were intact, in LEASE(QUINTILES) 15 7 DECEMBER 1999 place, and in good order, condition and repair when the Lessee took possession of the Premises under this lease. 15.3 The Lessor shall be responsible for the maintenance of, and for all repairs and replacements becoming necessary from time to time in or to, the Building and all parts thereof other than those which are the responsibility for the time being of tenants or of the local authority, and the Lessor's obligations in this respect shall include the maintenance and repair of the structure of the Building, all systems, works and installations contained therein, the roofs, the exterior walls, the lifts, the grounds and gardens, and all other parts of the Common Areas, provided that maintenance of the grounds and gardens and all other parts of the Common Areas will only commence once the Lessor has taken over responsibility for such, based on a further written agreement between the parties, and until such time as the responsibility is so taken over by the Lessor the Lessee shall be responsible for such maintenance at its own cost. 15.4 The Lessor shall not, however, be in breach of clause 15.3 in so far as any of its obligations thereunder are not or cannot be fulfilled by reason of any vis maior or the acts or omissions of others over whom the Lessor has no direct authority or control, and where the Lessor is indeed in breach of clause 15.3, the Lessee's only remedy against the Lessor shall be a right of action for specific performance. 15.5 Should the Lessee fail to carry out any of its obligations under this Agreement with regard to any maintenance, repair or replacement, the Lessor shall be entitled, without prejudice to any of its other rights or remedies, to effect the required item of maintenance, repair or replacement and to recover the cost thereof from the Lessee on demand. 16. ALTERATIONS, ADDITIONS AND IMPROVEMENTS: 16.1 The Lessee shall not make any alterations or additions to the Premises without the Lessor's prior written consent, but the Lessor shall not withhold its consent unreasonably to an alteration or addition which is not structural. 16.2 If the Lessee does alter, add to, or improve the Premises in any way, whether in breach of 16.1 or not, the Lessee shall, if so required in writing by the Lessor, restore the Premises on the termination of this Agreement to its condition as it was prior to such alteration, addition or improvement having been made. The Lessor's requirement in this regard may be communicated to the Lessee at any time, and this LEASE(QUINTILES) 16 7 DECEMBER 1999 16.2 shall not be construed as excluding any other or further remedy which the Lessor may have in consequence of a breach by the Lessee of 16.1. 16.3 Save for any improvement which is removed from the Premises as required by the Lessor in terms of clause 16.2, all improvements made to the Premises shall belong to the Lessor and may not be removed from the Premises at any time. The Lessee shall not, whatever the circumstances, have any claim against the Lessor for compensation for any improvement to the Premises, nor shall the Lessee have a right of retention in respect of any improvements. 17. EXCLUSION OF LESSOR FROM CERTAIN LIABILITY AND INDEMNITY: 17.1 The Lessee shall have no claim for damages against the Lessor and may not withhold or delay any payment due to the Lessor by reason directly or indirectly of: 17.1.1 a breach by the Lessor of any of its obligations under this Agreement; 17.1.2 any act or omission of the Lessor or any agent or servant of, or contractor to, the Lessor, whether or not negligent, or otherwise actionable at law, and including (without limiting the generality of the aforegoing) any act or omission of any cleaner, maintenance person, handyman, artisan, labourer, workman, watchman, guard, or caretaker; 17.1.3 the condition or state of repair at any time of the Property, the Building, or any part of the Property or the Building; 17.1.4 any failure or suspension of, or any interruption in, the supply of water, electricity, gas, air-conditioning, heating, or any other amenity or service to the Premises, the Building, or the Property (including, without generality being limited, any cleaning service), whatever the cause; 17.1.5 any breakdown of, or interruption in the operation of, any machinery, plant, equipment, installation or system situated in or on, or serving the Property, the Building, or the Premises, and including (but without limiting the LEASE(QUINTILES) 17 7 DECEMBER 1999 generality of the aforegoing) any lift, escalator, geyser, boiler, burglar alarm, or security installation or system, again regardless of cause; 17.1.6 any interruption of, or interference with, the enjoyment or beneficial occupation of the Premises or any of the Common Areas of the Property or the Building caused by any building operations or other works to or in the Building or elsewhere on or about the Property, whether by the Lessor or by anybody else; or 17.1.7 any other event or circumstance whatever occurring, or failing to occur, upon, in, or about the Property, the Building, or the Premises, whether or not the Lessor could otherwise have been held liable for such occurrence or failure, 17.1.8 and the Lessee indemnifies the Lessor against all liability to any of the associates, directors, members, agents, customers, servants, guests and other invitees of the Lessee or of any of its Associates, and all other persons who may enter upon the Premises or any parts thereof through or under the Lessee, in consequence of any such matter as is referred to in clauses 17.1.1 to 17.1.7 above and further indemnifies the Lessor against any claim made against the Lessor by anyone for any loss or damage suffered in or on the property or in consequence of any act or omission of the Lessee's servants or agents. 17.2 The Lessor shall not, however, be excused from specific performance of any of its obligations under this Agreement, whether express or implied, and particularly (but not only) its obligations to afford the Lessee occupation and enjoyment of the Premises as contemplated by this Agreement and to carry out such maintenance and repairs as are incumbent upon the Lessor in terms hereof. 17.3 The Lessor does not warrant that the Premises are suitable for the purposes of the Lessee or any of its Associates or that the Lessee or any of its Associates will be granted any licence or consent which may be necessary for the carrying on of any business or activity in the Premises. LEASE(QUINTILES) 18 7 DECEMBER 1999 18. LESSOR'S RIGHTS: 18.1 The Lessor's representatives, agents, servants and contractors may at all reasonable times, without thereby giving rise to any claim or right of action on the part of the Lessee or any other occupier of the Premises: 18.1.1 enter the leased Premises in order to inspect them, to carry out any necessary repairs, replacements or other works, or to perform any other lawful function in the bona fide interests of the Lessor or any of the occupiers of the Property; or 18.1.2 carry out elsewhere in the Building or on the Property any necessary repairs, replacements or other works; but the Lessor shall ensure that this right is exercised with due regard for, and a minimum of interference with, the beneficial enjoyment of the Premises by those in occupation thereof. 18.2 The Lessor shall have the right: 18.2.1 to display at the property: 18.2.2.1 a "TO LET" notice during the period of 6 (six) months immediately preceding the termination of the lease; 18.2.2.2 a "FOR SALE" notice at any time during the currency of this lease; 18.2.2 to show any prospective tenants or buyers of the property the property on reasonable notice during reasonable hours on business days; 18.2.3 to display on the property any notice which may be required by the Lessor or any of the tenants or prospective tenants of the Lessor in connection with any applications for a license for any business to be carried on, on the property; 19. AREA OF THE PREMISES: 19.1 If it is necessary in terms of this lease to determine the area, in square metres, of the Premises or any other part of the Building, such determination shall be made according to the SAPOA standard method for measuring floor areas. Any dispute between the Lessor LEASE(QUINTILES) 19 7 DECEMBER 1999 and the Lessee as to any such area shall be determined by an independent architect, acting as expert and not arbitrator, whose certificate as to such area shall be final and binding on the parties. If the parties fail to agree on the identity of such architect, he shall be appointed by the Executive Director for the time being of the South African Institute of Architects. 19.2 The party who declares a dispute in relation to the square meters, as set out in 2.1.12, shall be responsible for the cost incurred relating to the determination by the independent Architect as contemplated above, in the event that such determination confirms the correctness of the square meters contain in 2.1.12. In the event that the independent architect determines a meterage other than that contained in 2.1.12, the cost of such determination shall be borne by the parties equally. 20. RULES: 20.1 The Lessee shall at all material times comply with such reasonable rules and regulations as are laid down in writing by or on behalf of the Lessor for observance by tenants and other occupiers of the Property, their customers and their invitees, including (without generality being limited) rules and regulations in connection with: 20.1.1 the security of the Property and the protection of persons and property thereon, including in particular (again without generality being restricted) any rules for the control and identification of persons and vehicles entering the Property or any parts thereof; 20.1.2 the driving and parking of vehicles on or about the Property; 20.1.3 the utilisation of common amenities and facilities on the Property; 20.1.4 the air-conditioning plant, if any, servicing the Building; 20.1.5 the prohibition or restriction of specific activities and practices which are actually or potentially detrimental to the general interests of traders in the Building; and 20.1.6 the loading and off-loading of merchandise and other articles on and about the Property. LEASE(QUINTILES) 20 7 DECEMBER 1999 20.2 20.1 shall not be construed as implying that the Lessor assumes any liability, which it would not otherwise have had in connection with the subject matter of any such rule or regulation. 21. PARKING AND LOADING: 21.1 The Lessee shall throughout the Lease Period have the exclusive use for its directors, officers, members, partners, employees, clients, customers and invitees of 28 (Thirty One) covered parking bays/garages as identified on the plan being A5, at an initial monthly rental of R 120.00 (One Hundred and Twenty Rand) per bay, payable in addition to, and increasing from time to time simultaneously with and proportionately to, the rent and or other increases as contemplated in 7,8 and 9 for the Premises (whatever the cause or basis of such increase). 21.2 All the terms of this Agreement relating to the Premises themselves shall apply mutatis mutandis to the loading bay(s) and parking bay(s)/garage(s) referred to in 21.1 except those which are obviously inapplicable. 21.3 Without derogation from any rules or regulations in force for the time being as envisaged in 20.1, the Lessee shall procure that the loading and off-loading of merchandise and other articles in connection with the business carried on in the Premises are carried out: 21.3.1 only in the bay(s) let to the Lessee in terms of 21.1 and such other loading bay(s)/area(s) as are provided for the purpose; and 21.3.2 with due regard and consideration for the interests of other traders in the Building and the general public. 21.4 The provisions of this 21, in respect of the lease of parking bays or additional parking bays, shall endure for the duration of this Agreement and shall terminate simultaneously with this Agreement. 21.5 The Lessor shall be responsible for the maintenance and upkeep of the covered parking bays but the Lessee shall specifically be responsible for all damage which may occur in respect of such parking bays, resulting from the wilful or negligent acts of its employees, clients or visitors, or any other person and the Lessee shall pay to the Lessor, on demand, all such costs incurred by the Lessor in the repair of damaged parking bays. LEASE(QUINTILES) 21 7 DECEMBER 1999 22. DAMAGE TO OR DESTRUCTION OF PREMISES: 22.1 If the Building or Premises is destroyed or so damaged that the Lessee can no longer beneficially occupy the Premises, this lease shall terminate when that happens unless the parties agree otherwise in writing. 22.2 If the Premises is significantly damaged but can still be beneficially occupied, this Agreement shall remain in force and the Lessor shall repair the damage without undue delay, but the rent shall be abated so as to compensate the Lessee fairly for the effects of the damage and repair work on the enjoyment of the Premises. Failing agreement on such abatement or on the applicability of this clause to any particular circumstances, the matter shall be referred to an expert appointed by the parties jointly or, if they do not agree on such appointment, nominated by the President for the time being of The Institute of Estate Agents of South Africa, and the decision of such expert shall be final and binding. The expert's fees and disbursements, including any inspection costs, shall be borne and paid by the parties in equal shares. Pending determination of the abatement the Lessee shall continue to pay the full rent for the Premises as if they had not been damaged, and as soon as the matter has been resolved the Lessor shall make the appropriate repayment, if any, to the Lessee. 22.3 Subject to 17, if any damage to the Premises or the destruction thereof is caused by an act or omission for which either party is responsible in terms of this Agreement or in law, the other party shall not be precluded by reason of any of the aforegoing provisions of this 22 from exercising or pursuing any alternative or additional right of action or remedy available to the latter party under the circumstances (whether in terms of this Agreement or in law). 23. SPECIAL REMEDY FOR BREACH: 23.1 Should the Lessee default in any payment due under this Agreement and fail to remedy such default within 5 (five) days after receiving a written demand that it be remedied; or 23.2 fail to pay any amount owing in terms of this Agreement on due date, but within 5 (five) days after receipt of a notice from the Lessor requiring such payment to be made, on more than 3 (three) occasions falling within any period of 12 (twelve) calendar months; or LEASE(QUINTILES) 22 7 DECEMBER 1999 23.3 commit any other breach of any term or condition of this Agreement and fail to remedy that breach within a period of 30 (thirty) days after receipt of a notice from the Lessor calling on the Lessee to do so, then, in any such event, the Lessor shall be entitled to cancel this Agreement, by notice to the Lessee, without prejudice to any rights, which the Lessor may have against the Lessee as a result thereof, then the Lessor shall be entitled, without prejudice to any alternative or additional right of action or remedy available to the Lessor under the circumstances without further notice, to cancel this Agreement with immediate effect, be possession of the Premises, and recover from the Lessee damages for the default or breach and the cancellation of this Agreement. 23.4 Clause 23.1 shall not be construed as excluding the ordinary lawful consequences of a breach of this Agreement by either party (save any such consequences as are expressly excluded by any of the other provisions of this Agreement) and in particular any right of cancellation of this Agreement on the ground of a material breach going to the root of this Agreement. 23.5 In the event of the Lessor having cancelled this Agreement justifiably but the Lessee remaining in occupation of the Premises, with or without disputing the cancellation, and continuing to tender payments of rent and any other amounts which would have been payable to the Lessor but for the cancellation, the Lessor may accept such payments without prejudice to and without affecting the cancellation, in all respects as if they had been payments on account of the damages suffered by the Lessor by reason of the unlawful holding-over on the part of the Lessee. 24. OPTION OF RENEWAL: 24.1 The Lessee shall have the right to renew this Agreement upon the terms and subject to the conditions set out below. 24.2 The period for which this lease may be so renewed is five years, commencing on the date immediately following the date of expiry of the initial term of this lease. 24.3 All the terms of this Agreement shall continue to apply during the renewal period, save that: 24.3.1 the rent shall be determined as set out in clause 6; and 24.3.2 there shall be no further right of renewal. LEASE(QUINTILES) 23 7 DECEMBER 1999 24.4 The right of renewal shall be exercised by notice in writing from the Lessee to the Lessor given and received not later than 6 (six) months prior to the date on which the renewal period is to commence, and shall lapse if not so exercised. 24.5 If the right of renewal is duly exercised, this Agreement shall be renewed automatically and without the need for any further act of the parties. 24.6 The Lessee may not, however, exercise the right of renewal while in breach or default of any of the terms of this Agreement. 24.7 If this Agreement does not endure at least for the full term for which it is initially contracted, the right of renewal shall lapse and any notice of exercise thereof given prior to such lapsing shall be null and void. 27. NEW TENANTS AND PURCHASERS: The Lessee shall at all reasonable times: 25.1 during the Lease Period, allow prospective purchasers of the Property or of any shares or other interests in the Lessor; and 25.2 during the last 6 (six) months of the Lease Period, allow prospective tenants or purchasers of the Premises, to enter and view the interior of the Premises. 27. COSTS: Each party shall bear its own legal costs incurred in the preparation and negotiation of this lease provided that the stamp duty payable thereon shall be borne and paid by the Lessee. 27. DOMICILIA AND NOTICES: 27.1 The parties choose as their domicilia citandi et executandi the addresses mentioned in clause 27.2, provided that such domicilium of either party may be changed by written notice from such party to the other party with effect from the date of receipt or deemed receipt by the latter of such notice. LEASE(QUINTILES) 24 7 DECEMBER 1999 27.2 The parties domicilia addresses: 27.2.1 The Lessor: The Centurion Wine Centre 123 Amkor Road Lyttelton Manor X3 Centurion 0157 27.2.2 The Lessee: At the Premises 27.3 Any notice, acceptance, demand or other communication properly addressed by either party to the other party at the latter's domicilium in terms hereof for the time being and sent by prepaid registered post shall be deemed to be received by the latter on the 7th (seventh) business day following the date of posting thereof. This provision shall not be construed as precluding the utilisation of other means and methods (including telefacsimile) for the transmission or delivery of notices, acceptances, demands and other communications, but no presumption of delivery shall arise if any such other means or method is used. 28. WHOLE AGREEMENT: 28.1 This is the entire agreement between the parties. 28.2 Neither party relies in entering into this agreement on any warranties, representations, disclosures or expressions of opinion which have not been incorporated into this agreement as warranties or undertakings. 28.3 No variation or consensual cancellation of this agreement shall be of any force or effect unless reduced to writing and signed by both parties. 29. NON-WAIVER: 29.1 Neither party shall be regarded as having waived, or be precluded in any way from exercising, any right under or arising from this lease by reason of such party having at any time granted any extension of time for, or having shown any indulgence to, the other party with reference to any payment or performance hereunder, or having failed to enforce, or delayed in the enforcement of, any right of action LEASE(QUINTILES) 25 7 DECEMBER 1999 against the other party. 29.2 The failure of either party to comply with any non-material provision of this lease shall not excuse the other party from performing the latter's obligations hereunder fully and timeously. 30. WARRANTY OF AUTHORITY: The person signing this lease on behalf of the Lessee expressly warrants his authority to do so. 31. SECURITY FOR PAYMENT BY LESSEE: 31 As security for the due performance by the Lessee of the Lessee's obligations in terms of this Agreement the Lessee shall provide the Lessor on the date of signature of this Agreement by the party last signing, with, at the choice of the Lessor, either or both: 31.1.1 A signed suretyship binding the Lessee to the Lessor in writing as surety and co-principal debtor for all the obligations of the Lessee to the Lessor under this Agreement as well as those arising in consequence of any termination thereof; and/or 31.1.2 an unconditional and irrevocable bank guarantee, in a form and from an institution acceptable to the Lessor, of the due payment by the Lessee of the rental or any other amounts payable in terms of this agreement, provided that the liability of the guarantor shall be limited to an amount equal to four months rental, such rental to be the rental applicable to the year in respect of which the amount become owing, having taken all escalations into account. 31.2 The provision of the security as set out in this clause shall act as a suspensive condition to this Agreement becoming operational except as set forth in this clause and unless provision of such security is waived by the Lessor in writing in terms of 31.3, this lease shall not come into operation but shall be null and void save that the Lessee shall then solely bear and pay, or reimburse the Lessor on demand with, the costs of this lease and the Lessor's expenses in reletting the Premises, including any agent's commission and advertising costs. 31.3 The Lessor, by his signature to this agreement, waives the provision of security as contemplated in 31.2. The parties however agree that LEASE(QUINTILES) 26 7 DECEMBER 1999 the Lessor shall at any time during the Lease Period be entitled to call for such security in writing and the Lessee shall within 7 (Seven) days after receiving such notice provide the security called for failing which the Lessee shall be in breach of this agreement. 32. SALE OF PREMISES The validity of this lease shall not in any way be affected by the transfer of the Property, Building or Premises from the Lessor pursuant to a sale thereof. It shall accordingly, upon registration of transfer of the Property, Building or Premises into the name of the purchaser, remain of full force and effect save that the purchaser shall be substituted as lessor and acquire all rights and be liable to fulfil all the obligations which the Lessor, as lessor, enjoyed against or was liable to fulfil in favour of the Lessee in terms of this Agreement. DATED at CENTURION on 13 DECEMBER 1999. AS WITNESSES: 1. /s/ [illegible] ------------------------------------- /s/ [illegible] ---------------------------------- For and on behalf of Shibbolet (Proprietary) Limited 2. /s/ [illegible] ------------------------------------- DATED at CENTURION on 13 DECEMBER 1999. AS WITNESSES: 1. /s/ [illegible] ------------------------------------- /s/ [illegible] ---------------------------------- For and on behalf of Quintiles Clindepharm (Proprietary) Limited 2. /s/ [illegible] ------------------------------------- LEASE(QUINTILES) 27 7 DECEMBER 1999 EX-10.30 21 g87218exv10w30.htm EX-10.30

Exhibit 10.30

MEMORANDUM OF AGREEMENT
OF LEASE

between

ROSENPARK EIENDOMME CC
(“LESSOR”)

and

QUINTILES CLINDEPHARM
(PTY) LIMITED
(“LESSEE”)

MEMORANDUM OF AGREEMENT OF LEASE
(hereafter called “the AGREEMENT”)
(Offices)

The AGREEMENT made and entered into by and between

ROSENPARK ElENDOMME CC, CK94/01945/23
herein represented by LAMBERTUS JACOBUS VAN ZYL
he being duly authorised thereto
(hereafter called “the LESSOR”)

and

QUINTILES CLINDEPHARM (PTY) LIMITED
Reg. No. 95/00823/07
herein represented by WILLEM STEFANUS CONRADIE
he being duly authorised thereto
(hereafter called “the LESSEE”)

The LESSOR hereby lets to the LESSEE and the LESSEE hereby hires the PREMISES (as hereafter defined under the heading “PREMISES”) situate in the BUILDING (as hereafter defined under the heading “BUILDING”) on the terms and conditions as recorded in this AGREEMENT and the annexures referred to below.

1.	PREMISES
	Identification	:	ERF NO. 31282 BELLVILLE
	Floor	:	PORTION FIRST FLOOR
	See annexure “G” (Premises as demarcated) (hereafter called “the PREMISES”)
	Name of Building	:	“MONTROSE PLACE”
	Address of Building	:	2 BELLA ROSA STREET,
	(hereafter called “the BUILDING”) ROSENPARK, BELLVILLE

2

2. PERIOD

2.1	This AGREEMENT shall endure for a period of FIVE (5) YEARS (hereafter called “the LEASE PERIOD” and “the INITIAL PERIOD”)
	and shall commence on the 1ST day of APRIL 2000
	and shall terminate on the last day of MARCH 2005
2.2	OPTION TO RENEW (Refer to Annexure B)
	commencing on 1ST APRIL 2005 and terminating on 31ST MARCH 2010 (hereinafter referred to as “the RENEWAL PERIOD”)

3. BASIC RENTAL

3.1	The LESSEE shall during the currency of the LEASE PERIOD pay the following basic rental per month (exclusive of VAT) to the LESSOR.
	The gross lettable area being approximately 403m2 @ R53-00/m2;

01/04/2000 – 31/03/2001	R21 359-00 (Twenty One Thousand Three Hundred and Fifty Nine Rand) per month;
01/04/2001 – 31/03/2002	R23 708-49 (Twenty Three Thousand Seven Hundred and Eight Rand Forty Nine Cents) per month;
01/04/2002 – 31/03/2003	R26 316-42 (Twenty Six Thousand Three Hundred and Sixteen Rand Forty Two Cents) per month;
01/04/2003 – 31/03/2004	R29 211-23 (Twenty Nine Thousand Two Hundred and Eleven Rand Twenty Three Cents) per month;
01/04/2004 – 31/03/2005	R32 424-47 (Thirty Two Thousand Four Hundred and Twenty Four Rand Forty Seven Cents) per month;

3.2 ADDITIONAL COSTS (per month)

3.2.1	Contribution for electricity consumed on the PREMISES (see Annexure A clause 4)                                                   Sub-metered
3.2.2	Contribution to water consumed (see Annexure A clause 9)                                                                                                              22.41 %

3.3	STAMP DUTY (See Annexure A clause 31)
3.4	DEPOSIT (See Annexure A clause 42)

3

4. GENERAL

4.1	The Lessor shall at its own expense and prior to the lease commencement date modify the premises to align with the attached plan marked Annexure “G” which includes all alterations to existing partitioning, repainting of plastered walls, air-conditioning utilising console units and the existing ceiling cassette unit, re-locating of existing lightfittings and power points and additional power requirements.
4.2	Parking – 9 undercover parking bays at R300-00 per bay per month (VAT excluded) has been allocated to the Lessee, which monthly rental shall escalate by 11% compound per annum.
4.3	The Lessor will give the Lessee a first right of refusal to any space that becomes available for leasing on the same floor. The rental for such additional space shall be estimated according to the then fair market related rentals.

5. PURPOSE FOR WHICH PREMISES SHALL BE USED
(see also Annexure A clause 10)

Type of business	:	ADMINISTRATIVE OFFICES FOR PHARMACEUTICAL COMPANY
Specific exclusions	:	ANY OTHER ACTIVITIES NOT RELATED TO THE ABOVE

6.	SHAREHOLDERS / MEMBERS / PROPRIETORS / PARTNERS (see also Annexure A clause 29)
	AS PER ATTACHED LETTER.
7.	LESSOR’S DOMICILIUM AND PLACE OF PAYMENT

7.1	The LESSOR’s domicilium citandi et executandi for all purposes under, arising from, and applicable to this AGREEMENT is 3rd Floor, 5 High Street, Rosenpark, Bellville, 7530 or such other address as the LESSOR may from time to time appoint in writing.
7.2	Rental and all other monies payable by the LESSEE to the LESSOR in terms of this AGREEMENT, shall be paid to the LESSOR, free of any deductions, at 3rd Floor, 5 High Street, Rosenpark, Bellville, 7530 or such other address as the LESSOR may from time to time appoint in writing.

4

8. ANNEXURE/S AND DEFINITIONS

8.1 The following annexure/s form part of this AGREEMENT:

Annexure/s : “A”, “B”, “C”, “D”, “E”, “G”

	Any reference in this AGREEMENT or the aforesaid Annexure/s to this AGREEMENT shall also include a reference to the Annexure/s aforementioned.
8.2	The words and expressions defined above shall not be limited to the relevant definition but shall, where applicable, be supplemented as set out in Annexure A clause 1.

THUS DONE AND SIGNED BY / ON BEHALF OF THE LESSEE AT CENTURION ON THIS 18^th DAY OF FEBRUARY 2000.

AS WITNESSES:

1.   /s/ [illegible]	/s/ Quintiles Clindepharm (Pty) Limited
	LESSEE
2.   /s/ [illegible]	GENERAL MANAGER
	CAPACITY

THUS DONE AND SIGNED BY / ON BEHALF OF THE LESSOR AT BELLVILLE ON THIS 13^th DAY OF MARCH 2000.

AS WITNESSES:

1.   /s/ [illegible]	/s/ Lambertus Jacobus Van Zyl
	LAMBERTUS JACOBUS
	VAN ZYL IN HIS
	CAPACITY AS DIRECTOR
2.   /s/ [illegible]

ANNEXURE A

GENERAL CONDITIONS OF THE AGREEMENT

1.	DEFINITIONS
	In this AGREEMENT, unless the context indicates otherwise:

1.1	“the PREMISES” means the PREMISES let in terms of this AGREEMENT and all the LESSOR’s fixtures, fittings, appliances, equipment and electrical and sanitary installations therein and appertaining thereto;
1.2	“the BUILDING” means the BUILDING of which the PREMISES form part;
1.3	“the PROPERTY” means the BUILDING together with the land on which it is situated;
1.4	Words in the singular shall include the plural and vice versa;
1.5	Words referring to the male gender shall include the female gender and vice versa;
1.6	The impersonal pronoun shall include the masculine or female pronouns;
1.7	Words referring to individual persons shall include firms, associations, companies, partnerships and corporate bodies, and vice versa;
1.8	Any reference to the period, currency, unexpired period, termination or date of termination of this AGREEMENT, shall include any renewal or extension thereof;
1.9	Any reference to the LESSOR shall include the LESSOR and its successors in title and their respective agents, employees, architects, project co-ordinators, contractors and workmen;
1.10	Any reference to the LESSEE shall include the LESSEE’s agents, employees, servants, customers, clients, licensees, contractors, invitees, visitors and guests;
1.11	For purposes of paragraph 2.1 the lettable area of the PREMISES will be calculated in terms of the guidelines laid down by SAPOA (the South African Property Owners Association).

2. GENERAL

2.1 The headings to the clauses in this AGREEMENT are for reference purposes only and shall not affect the interpretation of the provisions to which they relate.

3. PAYMENTS OF AMOUNTS DUE

3.1

The LESSEE shall pay without demand the basic rental as well as any increases in the basic rental (see clause 5 hereafter) and any other amounts which may become due and payable in terms of this AGREEMENT, monthly in advance on or before the first day of each calendar month during the then ruling office hours of the LESSOR, free of bank exchange and other charges, at the address of the LESSOR stated in the AGREEMENT or such other address of which the LESSOR may from time to time notify the LESSEE in writing.

3.2

Subject to the provisions of clause 4 of the AGREEMENT, the LESSOR shall be liable for the cost of alterations to the PREMISES, deviations from the BUILDING plans and additional installations which may be installed.

4. COSTS OF ELECTRICITY CONSUMPTION

4.1 The LESSEE shall pay the costs, including any cost increase as the result of an increase in the tariff, levies or other costs of electricity supply, in connection with the consumption of electricity on the PREMISES on the basis as set out in sub-clauses 4.1.1 or 4.1.2, as the case may be;

4.1.1

If the PREMISES is serviced by a separate meter its reading shall be prima facie proof of the electricity consumption on the PREMISES and the LESSEE shall pay the costs thereof to the supplier of electricity at the time and in the manner determined by the supplier.

4.1.2

If the PREMISES is serviced by its own sub-meter its reading shall be prima facie proof of the electricity consumption on the PREMISES and the LESSEE shall pay the costs thereof to the LESSOR. If the PREMISES is serviced jointly with other PREMISES by a sub-meter the said costs shall be calculated pro rata to the area which the sub-meter serves, on the same tariff, levies and costs which would have applied to the LESSEE had the supplier supplied electricity to the PREMISES direct.

2 ANNEXURE A

4.1.3	If the PREMISES is not serviced by a sub-meter, then the LESSEE shall monthly pay an amount equal to RX where
		Rx  =  (A-B) x C /  D

and	A=	the total electricity account payable by the LESSOR in respect of the PROPERTY;
	B =	the total amount payable by LESSEE’s whose PREMISES are serviced by sub-meters;
	C =	the lettable area of the PREMISES;
	D=	the total lettable area of the BUILDING less the lettable areas of the PREMISES serviced by sub-meters.

4.1.4 If no PREMISES in the BUILDING is serviced by a separate sub-meter the LESSEE shall pay the amount indicated against “Contribution for electricity consumed on the PREMISES” in the AGREEMENT or an amount represented by the percentage indicated there-against of the total monthly electricity account including any cost increases as the result of an increase in the tariff, levies and other costs of electricity supply.

4.2	The LESSOR shall be entitled to charge a service fee in connection with the reading of sub-meters which service fee shall be payable by the LESSEE where the levy of such fee has been approved by the relevant electricity supplier.
4.3	Unless specifically otherwise stated the costs of electricity consumption shall be payable monthly to the LESSOR forthwith on receipt by the LESSEE of an account.

5. INCREASE IN RENTAL AND CONTRIBUTION TO COSTS

5.1	In the event of the assessment rates and taxes or any other rates payable by the LESSOR in respect of the PROPERTY being increased during the LEASE PERIOD as a result of an increase in the tariff, a re-evaluation of the PROPERTY or any other increase, the monthly rental shall increase from the date on which such increase becomes effective. The LESSOR shall calculate the additional monthly rental which the LESSEE shall pay as a result of the increase by multiplying the annual increase by the percentage indicated against “LESSEE’s contribution to increase (per month)” in the AGREEMENT and dividing it by twelve (12). (The pro rata share currently amounts to approximately 20c/m2)
	The LESSEE shall pay a pro rata portion of any costs which the LESSOR may incur in an attempt to obtain a reduction in respect of PROPERTY rates from the local authority. The LESSOR shall calculate the pro rata portion by multiplying the total costs by the percentage indicated against “LESSEE’s contribution to increases (per month)” in the AGREEMENT.
5.2	The LESSOR shall advise the LESSEE in writing of any increase in rental payable by the LESSEE to the LESSOR pursuant to the provisions of sub-clause 5.1 above, whether with retro-active effect or not. In the event of any Stamp Duty being payable to the Receiver of Revenue in respect of such written notice, the LESSEE shall be liable for payment thereof to the LESSOR on demand.
5.3	The provisions of sub-clauses. 5.1 and 5.2 above shall mutatis mutandis apply to any increase in respect of assessment rates and taxes, and other rates referred to in sub-clause 5.1 of which the LESSOR receives notice from the relevant authority at any time after the rental stated in the AGREEMENT has been agreed to but prior to the commencement date of the LEASE PERIOD, subject to whether this AGREEMENT had been signed by or on behalf of the LESSOR and/or LESSEE as at the date of such notice to the LESSOR.
5.4	Security - It is recorded that in the event of the LESSOR deciding to upgrade the security of the complex inter alia by the installation of C.C.T.V. cameras the Lessee’s prior approval will be obtained and if in agreement, the LESSEE will be obliged to contribute pro rata to the cost thereof. Such costs will be limited to a maximum of 3% of the lease amount per month.

6. DEFAULT IN PAYMENT OF AMOUNTS DUE

6.1 If the LESSEE fails to pay the rental or any other amount for which he is liable in terms of this AGREEMENT on the due date for such payment, the LESSOR may charge interest on the total amount outstanding from time to time at a rate equal to the prime lending rate of the First National Bank South Africa applicable from

3 ANNEXURE A

	time to time plus three percent (3%). Interest will be calculated on each amount from and including the due date for payment thereof until such amount has been paid in full. If interest is raised by the LESSOR then any payment made by the LESSEE shall firstly be utilised in payment of interest and any balance remaining in reduction in full or in part of the amount in arrears. Any excess payment shall thereafter be credited to the current liability of the LESSEE.
6.2	If the LESSEE fails timeously to pay any amount for which he is liable to a local authority or any other party direct, the LESSOR may on behalf of the LESSEE pay such account and recover that amount together with interest thereon calculated as set out above.
6.3	Failure by the LESSOR to charge interest on any amount in arrears shall in no way prejudice or affect the right of the LESSOR to charge such interest, whether with retro-active effect or not, at any time thereafter.
6.4	Where a reduction in rental has been granted by the LESSOR to the LESSEE, the full amount of such reduction shall become due upon default by the LESSEE. Reduction shall include any rebate or credit arrangements or similar grants.

7. CANCELLATION OF AGREEMENT OF LEASE

7.1	Should the LESSEE fail and/or refuse to effect payment of rental and/or any other amount payable by the LESSEE in terms of this AGREEMENT on the due date for payment thereof and/or breach or allow any breach of any other provision hereof or commit an act of insolvency, the LESSOR shall be entitled, after having given the LESSEE written notice of the LESSEE’s failure and/or breach aforesaid and demanding payment of the amount in arrears and/or a remedy of breach and the LESSEE fails and/or refuses to pay the amount in arrears and/or remedy the breach within 30 (thirty) days after receipt of such notice, to forthwith cancel this AGREEMENT and to take occupation of the PREMISES without prejudice to any of the LESSOR’s rights in terms of this AGREEMENT, common law or legislation.
7.2	Should the LESSOR cancel this AGREEMENT pursuant to the provisions of sub-clause 7.1 above and the LESSEE contest the LESSOR’s right so to cancel, the LESSEE shall continue to perform strictly in accordance with the provisions of this AGREEMENT pending the outcome of the dispute, whether by way of negotiation or by way of litigation, provided that the LESSEE’s continued occupation of the PREMISES and performance in terms hereof and, in particular, acceptance by the LESSOR of any payments made by the LESSEE, shall in no way prejudice or affect the LESSOR’s claim for cancellation which is in dispute.
7.3	Notwithstanding the foregoing paragraph 7.1, should the LESSEE persist with late payments in respect of the monthly rental and other charges aforesaid on more than two (2) occasions during the currency of this Lease or any extension thereof, then the LESSOR shall have the right without further notice to cancel this AGREEMENT with reservation of all the LESSOR’s other rights in terms of this AGREEMENT and the common law.
7.4	Should the LESSOR cancel this AGREEMENT pursuant to a breach by the LESSEE, irrespective of the nature and extent of such breach, the LESSEE shall, and the LESSEE hereby accepts liability, pay to the LESSOR, over and above any rental and other monies which may be in arrears in terms of this AGREEMENT as at date of cancellation, an amount equal to

7.4.1	rental which the LESSOR would otherwise have received from the LESSEE in terms of this AGREEMENT for the period reckoned from the date of cancellation to the date upon which the PREMISES is re-let or the date upon which the LEASE PERIOD would have expired in the normal course of events, whichever is the earlier;
7.4.2	the difference between the rental and other monies which the LESSOR would have received from the LESSEE in terms hereof and the rental and other monies which the LESSOR will receive from the new lessee calculated from date of commencement of the new lease to the date upon which the LEASE PERIOD would have expired in the normal course of events provided that the rental and other monies receivable in terms of the new lease are less than the rental and other monies which the LESSEE would have had to pay;
7.4.3	a pro rata portion of agent’s commission which the LESSOR may have to pay to any estate agent based on rental receivable as a result of the conclusion of the new lease in respect of the PREMISES, calculated from the commencement date thereof to the date upon which the LEASE PERIOD would have expired in the normal course of events on the one side and the LEASE PERIOD of the new lease on the other side.
7.4.4	the cost of repair of any damages to the PREMISES;
7.4.5	costs incurred by the LESSOR being the LESSOR’s allowances to install the LESSEE, plus costs, to be borne by LESSOR, whether partially or in full, to install the new lessee in the PREMISES;

4 ANNEXURE A

7.4.6 any other damages which the LESSOR may suffer as the result of the premature termination of this AGREEMENT.

9. WATER AND OTHER CHARGES

9.1	The LESSOR shall be liable for the costs in respect of water consumed on the PROPERTY save where water consumed on the PREMISES is measured by a sub-meter. The LESSEE shall monthly pay the cost of his water consumption according to the sub-meter to the LESSOR. Should the water consumption on the PREMISES, in the opinion of the LESSOR, be more than normal, the LESSOR may install a sub-meter on the PREMISES at the expense of the LESSEE to measure the consumption of water on the PREMISES. Should a sub-meter be installed in respect of the PREMISES in terms of this sub-clause, the LESSEE shall monthly pay the cost of the water consumed on the PREMISES to the LESSOR. The cost shall be calculated on the same tariff and levies, which the LESSEE would pay if the supplier supplies the water to him direct.
9.2	Notwithstanding 9.1 above and if applicable the LESSEE shall contribute to the LESSOR’s costs in respect of the monthly consumption of water on the PROPERTY in an amount equivalent to the percentage stated in the AGREEMENT under ADDITIONAL COSTS which amount shall be payable monthly by the LESSEE to the LESSOR.
9.3	The LESSEE shall be liable for any other charges and levies, which may be imposed from time to time by municipal and other authorities in respect of the PREMISES and the business conducted thereon.

10. PURPOSE FOR WHICH THE PREMISES SHALL BE USED

10.1	The PREMISES shall be used for the purpose described in the AGREEMENT and for no other purpose without the LESSOR’s prior written consent being had and obtained, which consent shall not be unreasonably withheld. The LESSEE shall keep the PREMISES open for business during the normal business hours which apply in the relevant municipal area for the type of business conducted by the LESSEE.
10.2	The LESSEE may not -

10.2.1	use the PREMISES or allow the PREMISES to be used for residential purposes;
	and
10.2.2	without the prior consent of the LESSOR being had and obtained, permit any sale by public auction on the PREMISES.

11.

LESSOR’S HYPOTHEC

For the duration of this AGREEMENT all furniture, fittings and fixtures, equipment, stock, etc., brought onto the PREMISES shall be subject to the LESSOR’s hypothec and shall serve as collateral security for the proper fulfillment by the LESSEE of all his obligations in terms of this AGREEMENT. The LESSEE may not without the prior written approval of the LESSOR, which approval shall not be unreasonably withheld, pledge or otherwise encumber or dispose of the aforementioned assets or remove them from the PREMISES except in the ordinary course of business.

5 ANNEXURE A

12.	DEFECTS
	Should the LESSEE on taking occupation of the PREMISES find any of the keys, locks, doors, windows, wash-basins, taps, sanitary conveniences, drains or down-pipes, electrical or other equipment of the PREMISES in disrepair, the LESSEE shall notify the LESSOR in writing of all defects within Forty Five (45) days of taking occupation and the LESSOR shall take all reasonable steps to repair such defects as soon as possible. Should the LESSEE fail to give such notice to the LESSOR the LESSEE shall be deemed to have acknowledged that on taking occupation of the PREMISES the aforesaid items were received in good order and condition.
13.	MAINTENANCE

13.1	The LESSEE shall keep the interior of the PREMISES in good order and condition and hereby acknowledges, subject to the provisions of clause 12 above, that, on taking occupation, he received the PREMISES in a good and clean condition and free of insects and rodents. The LESSEE undertakes to leave the PREMISES in the same good order and condition, fair wear and tear excepted, on expiration, or prior termination of this AGREEMENT or the eventual vacation thereof. The LESSOR will be responsible for all maintenance to the exterior of the premises.
13.2	If the LESSEE fails to leave the PREMISES in the condition contemplated in sub-clause 13.1 at the expiration or prior termination of this AGREEMENT or the eventual vacation thereof, the LESSOR may have the necessary repairs effected or other work done to restore the PREMISES to the condition contemplated in sub- clause 13.1, only if the Lessee elects not to do so. The LESSEE shall forthwith on demand pay to the LESSOR all costs incurred or which may have to be incurred in terms of this sub-clause. A certificate signed by an authorised representative of the LESSOR stating the amount of the costs aforementioned (or the anticipated costs to be incurred), shall be prima facie proof of the amount due and payable by the LESSEE to the LESSOR. This provision shall not in any way prejudice the LESSOR’s rights pursuant to sub-clause 13.3 below.
13.3	If the LESSOR is prevented from letting the PREMISES due to the fact that repairs are being done to the PREMISES in terms of sub-clause 13.2, the LESSEE shall, not withstanding termination of this AGREEMENT, pay to the LESSOR an amount equal to the monthly rental and other monies (e.g. increase in rates and taxes, sanitation fees, etc.) which the LESSEE would have had to pay to the LESSOR had this AGREEMENT not been cancelled, multiplied with the period expressed in months during which the LESSOR is prevented from letting the PREMISES as a result of the work and repairs being done to the PREMISES.
13.4	The LESSEE shall not without the LESSOR’s prior written consent being had and obtained, which consent shall not be unreasonably withheld, bring any safe or other unusually heavy object onto the PREMISES and the LESSEE shall be responsible for the repair, to the satisfaction of the LESSOR, of any damage to the PREMISES or to the BUILDING, caused by such heavy objects.
13.5	The LESSEE shall at all times during the LEASE PERIOD keep and maintain in proper order and condition all lamps and fittings for electric light and power. Air-conditioning and ventilation fitted in the leased PREMISES will also be maintained by the LESSEE.
13.6	For the duration of the Lease the LESSOR shall not be liable for, whether wholly or in part, the replacement of, or repairs to, the floor covering in the PREMISES. The LESSEE shall be liable for the cost of replacement of, or repairs to the floor covering, power and telephone outlets, defective fluorescent tubes, electric bulbs, starters and choking coils, broken or cracked partitions, plate glass, window frames and door panels, ventilation louvres and any other item supplied by the LESSOR in or on the PREMISES.
13.7	The LESSEE shall not without the LESSOR’s prior consent being obtained, which consent shall not be unreasonably withheld, effect any repairs or permit repairs to be effected to the PREMISES and/or replace any equipment for which he is liable in terms of this clause. The LESSOR shall decide whether the LESSOR or the LESSEE or another party shall effect the repairs or replacement and shall determine the conditions which shall apply to the repair work and/or replacement. The repair work and/or replacement shall be executed to the satisfaction of the LESSOR at the reasonable expense of the LESSEE.
13.8	The LESSEE shall not change the colour scheme of the PREMISES without the prior written consent of the LESSOR being had and obtained.

14. ALTERATIONS

14.1 The LESSEE may not effect any alterations and/or additions to the PREMISES without the prior written consent of the LESSOR being had and obtained, which consent shall not be unreasonably withheld. In the event of alterations and/or additions the LESSEE shall at the expiration or prior termination of this

6 ANNEXURE A

AGREEMENT, repair and/or remove such alterations and/or additions and restore the PREMISES to the condition in which it was prior to such alterations and/or additions, fair wear and tear excepted. Should alterations and/or additions agreed to by the LESSOR not be defined in an annexure to this AGREEMENT which has been signed or initialed by all the parties to this AGREEMENT, such written consent shall serve as prima facie proof of the alterations and/or additions agreed to by the LESSOR.

14.2

In effecting alterations, the LESSEE shall ensure that

14.2.1	the walls, floors and ceilings of the PREMISES are not damaged in anyway;
14.2.2	the electrical wiring installed to light the PREMISES is not used for any other purpose;
14.2.3	the electric outlets or electric wiring is used solely for the purpose to supply power to normal equipment with a maximum loading of one kilowatt per electric outlet. For any deviation from this stipulation the LESSEE shall first obtain the written consent of the LESSOR, which consent shall not be unreasonably withheld, prior to any deviation from the aforegoing.

14.3	Should consent be given pursuant to sub-clause 14.2.3 the alterations or use shall nevertheless be effected strictly in accordance with the reasonable requirements and conditions imposed or which may be imposed by the LESSOR and in accordance with all the rules and regulations made from time to time by the suppliers of electricity, by insurance companies and by the municipality or any other competent authority.
14.4	The LESSEE shall be liable for any damage to electrical installations or the BUILDING caused by the LESSEE’s use, with or without the prior consent of the LESSOR, of the electric outlets or wiring.
14.5	If the LESSEE on expiration or prior termination of the AGREEMENT or when he eventually vacates the PREMISES, fails to remove and/or repair, to the reasonable satisfaction of the LESSOR, the alterations and/or additions to the PREMISES in terms of sub-clause 14.1, the LESSOR may repair and/or remove the alterations and/or additions at the LESSEE’s expense. Any additions thus removed shall become the PROPERTY of the LESSOR without any obligation to compensate the LESSEE therefor. The Lessee shall have the right to remove any corporate image items and the LESSEE’S corporate signage will remain its property.
14.6	The LESSEE shall forthwith on demand pay to the LESSOR the amount for expenditure to be incurred by the LESSOR for the removal and/or repairs referred to in sub-clause 14.5. A certificate signed by the LESSOR and in which the amount of expenses or expected expenses is stated, shall be prima facie proof of the amount due and payable by the LESSEE. This provision shall not prejudice the LESSOR’s right to claim damages for loss of rental from the LESSEE if the PREMISES on vacation cannot be let because the alterations and/or repairs have not yet been effected to the satisfaction of the LESSOR.
14.7	The LESSEE may under no circumstances without the prior written consent of the LESSOR being had and obtained, which consent shall not be unreasonably withheld, install or arrange to be installed any heaters or air- conditioning units.

15.	SIGNS, NAME PLATES, ETC
	The LESSEE shall not place any name-plate, advertisement or anything of a like nature on any part of the BUILDING, including display windows, either internal or external, or on the PROPERTY save with the prior written consent of the LESSOR being had and obtained, which consent shall not be unreasonably withheld. The LESSOR shall in such way as the LESSOR may decide is suitable and at the expense of tenants (allocated on a pro rata share to each tenant’s sign), provide name-boards at or near the entrances on the ground floor and on each floor and on which the names of the tenants and their professions are stated.
	The LESSEE shall be entitled to have a name-plate or other form of identification fixed to the main entrance to the PREMISES provided that the LESSOR has approved such name-plate or other form of identification. The LESSOR shall affix such name-plate or other form of identification at the expense of the LESSEE. Any name-plate affixed at the expense of the LESSEE, shall become and remain the property and the responsibility of the LESSEE.
	The LESSEE shall not be entitled to hang any curtains or place or erect any blinds of whatever nature in the PREMISES and/or any other part of the BUILDING without the prior approval of the LESSOR being had and obtained, which approval shall not be unreasonably withheld.
	Should the LESSEE place or affix any of the abovementioned in or on the PREMISES or the BUILDING without the prior written consent of the LESSOR being had and obtained, the LESSOR has the right, without prejudice to any other rights of the LESSOR in terms of this AGREEMENT, to remove same at the expense of the LESSEE.

7 ANNEXURE A

16.	INTERRUPTION OF SERVICES
	The LESSOR shall take all reasonable steps to ensure the supply of water, electricity and, if applicable, air-conditioning to the PREMISES, but the LESSOR shall not be liable for any delay, inconvenience or damage, whether direct or consequential, suffered by the LESSEE as a result of an interruption in the supply of these services. The LESSEE shall forthwith notify the LESSOR of any defect in the water system, electrical or air-conditioning installations and the LESSOR shall take all reasonable steps within acceptable limits to ensure that the defect is rectified as soon as possible.
	The LESSEE may not reduce the rental, withhold or defer payment of rental, or terminate this AGREEMENT by reason of such interruption.
17.	PROVISION OF SERVICES
	The LESSOR may at any time during the LEASE PERIOD lay electric wiring, air-conditioning equipment, water pipes, telephone cables or any other equipment or wiring through the PREMISES should it be necessary for the supply of electricity, air-conditioning, water or any other service to any other part of the BUILDING and/or the PROPERTY. However, the LESSOR shall endeavor to ensure that as little inconvenience as possible is caused to the LESSEE. The LESSEE may not reduce the rental, withhold or defer payment of rental, or terminate this AGREEMENT as a result of any such inconvenience or disruption of his business activities.
18.	COMMUNAL CONVENIENCES AND SERVICES

18.1	The LESSEE may together with the other lessees in the BUILDING and/or on the PROPERTY use the toilets, escalators, lifts, loading zones, kitchens, malls and passages, service corridors, staircases and other conveniences allocated by the LESSOR for communal use.
18.2	The LESSEE shall comply with any rules laid down from time to time by the LESSOR for the use of the conveniences and shall take all reasonable steps to prevent a contravention of such rules. Should there be an interruption in any of the communal services or facilities or should any such services and conveniences or equipment become unusable, the LESSEE may not reduce the rental, withhold or defer payment of rental, or terminate this AGREEMENT, provided that the Lessor shall make every reasonable effort to remedy the cause of the interruption as soon as possible.
18.3	Common areas such as, inter alia, the backyard, loading zones and passages, shall not be used by the LESSEE for storage, display or sale of goods, supplying of services, the parking of vehicles or for any other purpose not permitted by the LESSOR and the LESSEE shall take all reasonable steps to ensure that the common areas are not misused in any way.
18.4	No goods, crates, furniture, safes or any other such items may be taken onto the escalators or into the passenger lifts on the PROPERTY without the prior consent of the LESSOR being had and obtained, which consent shall not be unreasonably withheld. No vehicles of whatever nature may be brought through any of the entrances to the PROPERTY except through entrances for vehicles.
18.5	The LESSEE shall use its reasonable endeavors to ensure that the common areas and communal facilities are not used as eating-and/or general resting places and shall ensure that no one misuses the areas and facilities in any other way.
18.6	Communal conveniences and facilities are used at the LESSEE’s own risk and the LESSOR shall not be liable for any injury, damage or loss, however caused, which the LESSEE may suffer as the result of his use aforesaid. The LESSOR should not be entitled to contract out of its own negligence.

19. PARKING FACILITIES, DRIVEWAYS AND LOADING ZONES

19.1

The basement parking, parking areas and/or parcade of the PROPERTY, if provided, are under direct control of the LESSOR. The LESSEE may park a vehicle only at the place and on the conditions, which the LESSOR may stipulate from time to time. The LESSOR may appoint a person to ensure that the provisions of this clause are adhered to. The LESSOR shall from time to time determine the times when the basement parking, parking areas and/or parcade will be available for parking, the rental or parking tariff, and the arrangements for entry to the basement parking, parking areas and/or parcade. Any stipulations imposed by an authorised representative of the LESSOR shall be as agreed with the LESSOR and the LESSEE shall be bound by the stipulations.

19.2

The LESSEE shall not place, or permit to be placed, any sign, object or any obstruction whatsoever in or on the driveways, loading zones, basement parking, parking area and/or parcade which may in any way impede

8 ANNEXURE A

	free access or exit to the driveways, loading zones, basement parking, parking areas and/or parcade. The loading zones shall be used solely for the loading or unloading of goods. Vehicles may not be parked on a loading zone unless goods are being loaded or unloaded.
19.3	The LESSEE shall take all reasonable steps to prevent his employees from obstructing the entrances and/or exits to the basement parking, parking areas, parcade, escalators, lifts, loading zones, driveways, passages and/or arcades in any way whatsoever.
19.4	The LESSOR shall, wherever possible, incorporate similar clauses in other leases concluded by the LESSOR in respect of the PROPERTY but the LESSOR shall under no circumstances be liable to the LESSEE if the provisions of such clauses are not complied with by any other lessee.
19.5	Should the basement parking, parking areas, parcade, driveways, loading zones and/or the parking bay of the LESSEE and/or entrances and/or exits hereto or therefrom (hereinafter called “parking space”) for any reason be completely destroyed or become unsuitable for their intended use temporarily or for the duration of the LEASE PERIOD, no claim for compensation or damages shall be brought against the LESSOR and the LESSEE shall not be entitled to claim a reduction in rent or the termination of this AGREEMENT or to withhold or defer payment of rental. The LESSOR shall, as soon as possible, repair or make suitable the parking space and the LESSEE if he is a lessee of a parking space, shall be entitled to a reduction in the rental payable for his parking space during the period that the parking space is being repaired unless the LESSOR can provide the LESSEE with alternative parking space of the same or similar standard. The LESSOR and the LESSEE shall mutually agree to the reduction or the alternative parking space.
19.6	The LESSEE shall park every vehicle on/in the parking space at his own risk and the LESSOR shall not be liable for any loss or damage whatsoever (whether due to the LESSOR’s negligence or not) to a vehicle, its accessories or contents, while it is parked on the PROPERTY. The LESSOR shall furthermore not be liable for any personal accident or third party claims which may arise from the use by the LESSEE of the basement parking, parking areas and/or parcades in/on the PROPERTY. The Lessor should not be entitled to contract out of its own negligence.
19.7	Notwithstanding any rights which the LESSEE may have in respect of a parking space, the LESSOR may let the basement parking, parking areas and/or parcade to a third party during the LEASE PERIOD in which event the LESSOR shall for the purposes of the LESSEE’s rights be substituted by such third party as LESSOR and the LESSEE shall pay all amounts which he is liable to pay in respect of such rights to the third party.

20. INSPECTION, BUILDING OPERATIONS AND REPAIRS

20.1	The LESSOR may on notice to the Lessee enter, inspect and have repairs effected to the PREMISES at all reasonable times.
20.2	In the event of the BUILDING not being fully completed on the date on which the LESSEE is to take occupation of the PREMISES or in the event of repairs and/or alterations thereto or to the PREMISES being undertaken at a later stage and the LESSEE being inconvenienced by building operations and resulting noise, the LESSEE shall be entitled to claim a remission of, or a reduction in rental and/or any damages. The LESSEE shall not be entitled to cancel this AGREEMENT as a result of the BUILDING operations.
	Any dispute between the parties as to the remission or reduction of rental shall be dealt with in accordance with the provisions of clause 25.3.
20.3	In exercising its rights in terms hereof, the LESSOR shall take steps to ensure that as little inconvenience as is possible is caused to the LESSEE.

21.	KEYS AND LOCKS
	No duplicate keys of any lock on the PREMISES, or any other premises on the PROPERTY shall be made nor shall any additional lock be fixed to any door of the PREMISES or the BUILDING without the prior written consent of the LESSOR being had and obtained. On vacating the PREMISES the LESSEE shall deliver all keys and duplicate keys in good order to the LESSOR. The LESSEE shall be liable for any loss of, or damage to, the keys and locks of the PREMISES and shall, at the request of the LESSOR, either replace the keys and locks or have the lock mechanisms and lock combinations changed and provide new keys.
22.	CLEANING SERVICES AND REFUSE REMOVAL

22.1 The LESSOR shall provide a cleaning service in the communal areas of the PROPERTY. The LESSOR shall decide on the nature and quality and the times and frequency of the cleaning service and the LESSEE shall

9 ANNEXURE A

	not interfere with the service or hinder the LESSOR’s workmen in the performance of their duties, provided that the LESSOR shall exercise its rights in terms hereof with the least possible inconvenience to the LESSEE.
22.2	Should the PREMISES be office premises, the LESSOR shall in its own discretion decide on the provision, nature, quality, extent and frequency of cleaning services.
	Should the parties agree that the LESSEE shall be responsible for the cleaning service, which shall include the regular cleaning of all floor surfaces, plate-glass window frames and sun blinds on the PREMISES, the LESSEE shall not appoint any firm rendering such service to clean the interior of the PREMISES without the prior written consent of the LESSOR being had and obtained to such appointment and the times during which such cleaning service shall be rendered. Should the LESSOR, in its own discretion, decide that the firm appointed by the LESSEE or the staff of such firm or the times of such services interfere with the LESSOR’s security measures in respect of the PROPERTY the LESSEE shall upon receipt of written notice from the LESSOR, forthwith terminate his agreement with such firm.
	The LESSOR shall clean the outside windows of the PREMISES and the LESSEE hereby agrees, where necessary, to permit the window cleaners entry to the PREMISES. The LESSEE shall not make his own arrangements with the cleaners as to the times of this cleaning service but shall make arrangements with the LESSOR in this regard. The LESSOR’s decision in this regard shall be final.
22.3	Should the PREMISES be described as a shop in the AGREEMENT, the LESSEE shall at his own expense clean the inside of the PREMISES, as well as the name-boards on the outside of the PREMISES. The LESSEE shall, in accordance with the LESSOR’s directives, regularly clean all plate glass, louvers (whether of glass or otherwise) and window frames on the inside and the outside of the PREMISES.
22.4	The LESSEE shall contribute to the cleaning service provided as per paragraph 22.1 on the PROPERTY on a pro rata floor area basis and shall follow all reasonable directives of the LESSOR with regard to the cleaning thereof.
22.5	The LESSEE shall be responsible for the removal of refuse from the PROPERTY in accordance with arrangements with the relevant municipality. The LESSEE shall keep his refuse on the PREMISES and shall not leave any refuse outside the PREMISES except if agreed otherwise in writing by the LESSOR and the LESSEE. The LESSOR shall decide on the times and frequency of refuse removal from the PREMISES, or from such central point on the PROPERTY as may be designated by the LESSOR for the placing of refuse. Should in the LESSOR’s opinion the LESSEE’s quantity and type of refuse be abnormal, the LESSEE shall make special arrangements with the LESSOR for its removal. The LESSEE shall pay all costs of refuse removal.

23.	NUISANCE
	The LESSEE shall not do or permit or cause anything to be done which in the reasonable opinion of the LESSOR constitutes a nuisance or may cause inconvenience to or in any way disturb the peace and quiet of the LESSOR and/or other lessees on the PROPERTY or in the BUILDING or which in general detracts from the neat appearance of the PROPERTY or the PREMISES.
	The LESSEE shall also be obliged at his own expense to comply with the requirements of all regulations, laws, provincial ordinances and municipal rules and regulations concerning the conduct of the LESSEE’s business. Without detracting from the generality of the foregoing, the LESSEE may not exhibit, store, or leave goods or articles on the pavements or the stairs or landings or in passages, foyers or arcades of the PROPERTY. The LESSEE shall have no right of entry to the roof, machine rooms of the BUILDING, and/or workrooms of the LESSOR.
24.	BURGLARY OR ATTEMPTED BURGLARY
	The LESSEE shall be responsible for the repair of any damage to the interior of the PREMISES as the result of a burglary or an attempted burglary of the PREMISES.
25.	DISASTER DAMAGE

25.1

Unrentable

If, as the result of fire, storms or any other cause whatsoever, the PREMISES are destroyed completely or are rendered unfit for the purpose for which it is let, this AGREEMENT shall terminate forthwith and the LESSEE shall have no claim for compensation or damages against the LESSOR, except for losses suffered as a result of negligence of the Lessor. The AGREEMENT shall however, not terminate if the PREMISES are destroyed or rendered unfit due to a willful act or omission of the LESSEE or any other person under his control.

10 ANNEXURE A

25.2	Rentable
	Should the PREMISES be partially damaged by fire, storms or any other cause whatsoever to such an extent that the LESSEE is still reasonably able to use it for the purpose described in the AGREEMENT, the LESSOR shall ensure that the PREMISES are repaired as soon as possible and the LESSEE shall be entitled to a reduction in rental whilst the PREMISES are being repaired. The amount of the reduction shall be mutually agreed upon. The LESSEE shall however, not be entitled to any reduction in rental if the PREMISES are partially damaged due to a fault of the LESSEE or any other person under his control.
25.3	In the event of a dispute between the parties:

25.3.1	as to whether the PREMISES are at any time wholly untenantable or not;
25.3.2	the amount of the reduction in rental contemplated by clause 25.2

it is agreed that an Arbitrator shall be appointed to decide the dispute. Such Arbitrator shall appoint an expert, if necessary, to determine any dispute between the parties in regard to the amount of the reduced rental.

If the parties cannot agree on an Arbitrator then the then Chairman of the Western Cape Branch of the South African Institute of Architects shall be asked to appoint an expert to act as Arbitrator. His decision shall be accepted as final and binding on both parties. The costs of such Arbitration shall be shared between the parties.

26.	NON-LIABILITY
	The Lessor shall not be liable for any damage or loss which the LESSEE may suffer on the PREMISES or in or on the PROPERTY, except if it is as a result of negligence of the Lessor.
27.	INSURANCE

27.1 The LESSEE shall ensure that

27.1.1	the insurance policy/ies in respect of the PROPERTY and/or the BUILDING and/or any part or the contents thereof is/are not invalidated or prejudiced by inflammable, combustible or other dangerous materials, the presence of which is contrary to regulations of the local and other authorities and the insurers, being brought onto the PROPERTY;
27.1.2	no work is done or any trade conducted in the PREMISES which may in any way prejudice the insurance policy/ies referred to in 27.1.1

27.2	If the insurance premiums are increased as the result of a trade conducted by the LESSEE on the PREMISES or as the result of inflammable or other dangerous goods or materials being brought onto the PREMISES, with or without the LESSOR’s consent, the LESSOR may recover the increase in premiums from the LESSEE.
27.3	The LESSOR shall comprehensively insure the BUILDING (of which the PREMISES form part) for the joint benefit of the LESSOR and LESSEE i.e. the LESSEE’s interest shall be noted on the policy. Without limiting the generality of the aforegoing:

27.3.1 The LESSEE shall be responsible for repair of any damage to the interior of the PREMISES as the result of a burglary or an attempted burglary of the PREMISES.

27.4 The LESSEE shall insure the contents of the PREMISES.

28. SUBLETTING AND ALIENATION

28.1	The LESSEE shall not cede, transfer, pledge or in any way dispose of any of his rights in terms of this AGREEMENT and may not sublet the PREMISES or any part thereof nor allow anyone else to occupy the PREMISES or any part thereof, whether for a specific or limited period of time, without the prior written consent of the LESSOR, which consent shall not be unreasonably withheld.
28.2	The LESSOR shall release the LESSEE from his future obligations in terms of this AGREEMENT provided the LESSEE applies thereto in writing and introduces another lessee to the LESSOR who is acceptable to the

11 ANNEXURE A

LESSOR and who enters into a new lease with the LESSOR for at least the unexpired period of this AGREEMENT at the rental and on the terms and conditions which the LESSOR may then require.

29. TRANSFER OF SHARES, MEMBER’S INTEREST AND CHANGE OF PARTNERSHIP

29.2	If the LESSEE is a partnership, its composition shall not be altered for the duration of the LEASE PERIOD save with the LESSOR’s prior written consent being had and obtained. If such an alteration takes place without the prior written consent of the LESSOR, the present partners shall remain jointly and severally liable in terms of this AGREEMENT as if the partnership had not been dissolved.
29.3	If some but not all the partners of the partnership, sign this AGREEMENT it shall be deemed that the partners who have signed have by their signatures warranted to the LESSOR that they are authorised to bind the other partners to all the conditions of this AGREEMENT, including the provisions of this sub-clause.

30.	LIABILITY
	If two or more persons are the LESSEE they shall be liable jointly and severally for the due fulfillment of all the LESSEE’s obligations in terms of the AGREEMENT.
31.	COSTS
	The LESSEE shall against signature of this AGREEMENT pay all costs in connection with the drafting of the AGREEMENT to the LESSOR.
	The stamp duty payable on the AGREEMENT and any addenda shall be payable by the LESSEE to the LESSOR on demand.
32.	“TO LET” NOTICES
	The LESSOR shall be entitled in the 3 (three) months prior to expiration or termination of this AGREEMENT to place “To Let” notices in a prominent position on the PREMISES and to show the interior of the PREMISES to potential lessees at any reasonable time. During this period the LESSOR or any new lessee of the PREMISES may exhibit on the windows and/or doors of the PREMISES any notices required for any application relating to the PREMISES or any trade license for the PREMISES. The LESSEE shall also permit the interior of the PREMISES to be shown at any reasonable time to prospective purchasers of the PROPERTY.
33.	FIRE FIGHTING AND EVACUATION EXERCISES
	The LESSEE shall take part and co-operate with the LESSOR in all security activities, fire fighting, fire prevention and evacuation exercises which the LESSOR may order from time to time.
34.	ENTRY TO THE PROPERTY
	For security purposes the LESSOR shall supply access control to all the entrances to the PROPERTY and shall supply control for those entrances which in the LESSOR’s opinion are necessary to admit or to let out the LESSEE.
35.	RULES
	The LESSOR may from time to time prescribe rules to facilitate the administration of the BUILDING. These rules may include, inter alia, the delivery of goods, refuse removal, advertisements, the use of communal conveniences and parking space, delivery of mail, fire prevention exercises and security measures. The LESSEE shall be bound by the rules. The LESSOR shall notify the LESSEE of the rules and any amendments thereto thereafter.

12 ANNEXURE A

36.	NON-WAIVER AND WHOLE AGREEMENT
	Non-waiver

36.1

Neither party shall be regarded as having waived, or be precluded in any way from exercising any right under or arising from this AGREEMENT by reason of such party having at any time granted any extension of time for, or having shown any indulgence to the other party with reference to, any payment or performance hereunder, or having failed to enforce, or delayed in the enforcement of, any right of action against the other party.

36.2

The failure of either party to comply with non-material provision of this AGREEMENT shall not excuse the other party from performing the latter’s obligations hereunder fully and timeously.

Whole agreement

36.3	This is the entire agreement between the parties.
36.4	Neither party relies in entering into this AGREEMENT upon any warranties, representations, disclosures or expressions of opinion which have not been incorporated into this AGREEMENT as warranties or undertakings.
36.5	No variation or consensual cancellation of this AGREEMENT shall be of any force or effect unless reduced to writing and signed by both parties.

37.	LEGAL COSTS
	Should the LESSOR institute legal action against the LESSEE for payment of moneys payable in terms of this AGREEMENT, with or without cancellation of the AGREEMENT, the LESSEE shall also be liable to the LESSOR for all legal costs as between attorney and client, including collection commission, as between attorney and client, and any costs incurred to trace the LESSEE.
38.	DOMICILE AND JURISDICTION OF COURT

38.1	The LESSEE hereby chooses 103 Algoa Road, Uitenhage, 6230 as his domicilium citandi et executandi for all matters arising from this AGREEMENT, including but not limited to the receipt of all notices and legal documents.
38.2	The LESSOR’s chosen domicilium citandi et executandi shall be as stipulated in the AGREEMENT.
38.3	All notices which the LESSOR may give to the LESSEE in terms of this AGREEMENT shall be sent by prepaid registered mail or delivered by hand or placed in the LESSEE’s post-box. In the case of notices sent by prepaid registered mail, it shall be deemed to have been received by the LESSEE on the 4th (fourth) business day after the date of posting, unless the contrary is proven. Notices delivered by hand and for which no dated acknowledgement of receipt is obtained or notices placed in the LESSEE’s post-box shall be deemed to have been received on date of delivery unless the LESSEE can prove the contrary.
38.4	Should the LESSEE fail and/or refuse to take occupation of the PREMISES or vacate the PREMISES, with or without the LESSOR’s consent, the LESSOR may, notwithstanding anything to the contrary contained in this AGREEMENT, send or deliver by hand any notice to be given to the LESSEE in terms of this AGREEMENT to the LESSEE at his last known business or residential address, or in the case of partnerships, at any known address of any of the partners, or in the case of a company, at any known address of any of the directors or shareholders. Any notice sent by registered mail or delivered by hand shall be deemed a proper dispatch or delivery of such notice pursuant to the provisions of clauses 38.1 to 38.4.

Jurisdiction of Court

38.5 Notwithstanding the provisions of the Magistrate’s Courts Act (Act 32 of 1944) (as amended from time to time or substituted) with regard to jurisdiction in connection with cause of action and/or the amount claimed, a competent Magistrate’s Court shall have jurisdiction in respect of any legal action which the LESSOR may institute against the LESSEE arising from this AGREEMENT. Either party shall have the right, notwithstanding the aforegoing, at its own discretion, to institute any legal action which exceeds the jurisdiction of the Magistrate’s Court, against the other in the competent division of the High Court.

Arbitration

38.6 In the event of a notice of intention to defend being delivered in any legal action, or a notice of intention to oppose being delivered in any application instituted by any one of the parties out of the High Court or the

13 ANNEXURE A

	Magistrate’s Court in a dispute of any nature whatsoever arising between the parties on any matter provided for in, or arising out of this AGREEMENT, then that dispute shall be referred to arbitration provided that:
38.6.1	Where the party instituting such action would normally be entitled, upon receipt of such a notice of intention to defend to file an application for summary judgement, the dispute shall only be referred to arbitration upon:

38.6.1.1	Refusal of the application for summary judgement by the relevant Court; or
38.6.1.2	Withdrawal of the application for summary judgement; or
38.6.1.3	Where no application for summary judgement was filed, upon the expiry of the time allowed on the relevant Court Rules for the filing of an application of summary judgement.

38.6.2	Where a dispute is referred to arbitration in terms of the provisions of Clause 38.6, the parties further agree that any rent interdict issued by the Magistrate’s Court (in terms of Section 31 of Act 32 of 1994) or the High Court shall remain in effect until all outstanding rent awarded to the LESSOR is paid, or the LESSOR’s claim is dismissed.
38.6.3	The party who instituted the action or application may elect to continue the process in the Court wherein it was instituted. Such action shall be exercised in a written notice delivered to the other party or parties prior to the commencement of the arbitration process.
38.6.4	“Dispute” in paragraph 38.6 shall include, but shall not be limited to the following:

38.6.4.1	Any dispute regarding the interpretation or rectification of the AGREEMENT and Annexures thereto, as well as this clause;
38.6.4.2	Any dispute regarding the termination of the AGREEMENT and Annexures thereto and the consequences of any such termination or purported termination;
38.6.4.3	Any dispute regarding the voidness or voidability of the AGREEMENT and Annexures thereto. It is specifically recorded that this arbitration clause is severable from the AGREEMENT;
38.6.4.4	A counterclaim on any matter provided for in or arising out of the AGREEMENT and Annexures thereto.

38.6.5	Any arbitration arising shall be referred to the Arbitration Forum Limited, and shall be conducted in accordance with the standard terms and conditions, and the summary procedure rules, then applicable in that Forum.
38.6.6	Any variation, amendment or cancellation of this arbitration agreement shall be of no force and effect unless agreed to in writing by all the parties to this AGREEMENT.

39.	ALLOCATION OF MONIES RECEIVED
	It is hereby agreed between the LESSOR and the LESSEE that, notwithstanding any allocation by the LESSEE, the LESSOR shall be entitled to allocate any payment made by the LESSEE in terms hereof firstly in settlement or partial reduction of any rental or other amount in arrears on date of receipt of such payment and the surplus, if any, thereafter in settlement or in partial reduction of any rental or other amount due and payable on date of receipt of such payment to the LESSOR for the calendar month during which such payment is made.
40.	REBUILDING
	Should the LESSOR decide to demolish the BUILDING (or any part thereof) or the PREMISES, the LESSOR may, notwithstanding anything to the contrary contained in this AGREEMENT, terminate this AGREEMENT by giving the LESSEE 6 (six) months prior written notice to vacate the PREMISES.
41.	SIGNATURE AND RETURN OF AGREEMENT OF LEASE
	This document records the AGREEMENT between the LESSOR and the LESSEE but should this AGREEMENT not be returned to the LESSOR, duly signed and completed, within 30 (thirty) days after dispatch to the LESSEE, the LESSOR may, without prejudice to any other rights which the LESSOR may have, adjust and amend the rental and terms and conditions contained herein.

14 ANNEXURE A

42. DEPOSIT

42.1	As security for the due and proper fulfillment by the LESSEE of all his obligations in terms of and arising from this AGREEMENT, the LESSEE shall, against signature hereof by the LESSEE, pay the amount indicated under DEPOSIT in the AGREEMENT to the LESSOR which amount the LESSOR shall hold during the LEASE PERIOD, on behalf of the LESSEE, including any extension/renewal thereof, provided that the LESSOR shall, subject to the provisions of sub-clause 42.2 below, refund the DEPOSIT, with interest, to the LESSEE within 3 (three) months from date of expiration of the LEASE PERIOD (including any renewal/or extension thereof). Interest payable by the LESSOR will be 60% of prime rate at FNB. Capitalised annually.
42.2	The LESSOR shall be entitled notwithstanding anything to the contrary herein contained, to recover any amount which the LESSEE may be indebted to the LESSOR at expiration of the LEASE PERIOD (including any renewal/extension thereof), including but not limited to damage to the PREMISES, loss of rental, electricity costs and other levies in arrears and rental in arrears, in full from the DEPOSIT provided that, should there be a shortfall, the LESSEE shall remain liable for payment of such shortfall to the LESSOR.
42.3	The LESSEE shall not be entitled at any time during the LEASE PERIOD (including any renewal/extension thereof) to set the DEPOSIT off against any amount due and payable by the LESSEE to the LESSOR but should the LESSEE do so then, notwithstanding anything to the contrary contained in this AGREEMENT and in particular Clause 7 hereof, the LESSOR shall be entitled forthwith to terminate this AGREEMENT without prejudice to any and/or all the rights of the LESSOR in terms of or arising from this AGREEMENT and/or the Common Law.

ANNEXURE B

OPTION TO RENEW

The LESSEE shall have the option to renew the Lease for the PREMISES for a further period as referred to in clause 2.2 of the AGREEMENT.

1.	LESSEE’s OPTION
	The LESSEE shall be entitled to renew this lease for the RENEWAL PERIOD on the same terms and conditions as contained herein save that the rental shall be the rental determined pursuant to the provisions of clause 2 hereafter; and provided that:

1.1	the LESSOR shall not have lawfully cancelled this lease;
1.2	the LESSEE shall have given the LESSOR written notice at least 8 (eight) months prior to the expiry of the INITIAL PERIOD of its intention to renew this lease.

2. DETERMINATION OF RENTAL FOR THE RENEWAL PERIOD

2.1	The monthly rental payable by the LESSEE to the LESSOR shall during the RENEWAL PERIOD be in respect of the first year of the RENEWAL PERIOD, the estimated fair market rental for the PREMISES (having due regard to the terms of this lease, as at the commencement of that particular year, with the fair market increase and/or escalations in rental for each of the ensuing years of the RENEWAL PERIOD, determined as at the commencement of the RENEWAL PERIOD.
2.2	In determining the fair market rental and the fair market increase and/or escalations as contemplated in 2.1, regard shall be had to the market value of the PREMISES, the net rate of return prevailing and the prevailing increases and/or escalations thereon and all other relevant factors.
2.3	Within 30 (thirty) days of the commencement of the sixth month preceding the expiry of the INITIAL PERIOD, the parties shall endeavour to agree to the rental payable during the RENEWAL PERIOD together with the fair market increases and/or agreement as aforesaid within the prescribed period, then the rental and the rental increases and/or escalations shall be determined as soon as possible by an independent Valuer or Associated Valuer with not less than 10 years experience who practices in the Northern Suburbs of Cape Town and who has been registered for at least 10 years with the South African Council of Valuers and shall also be a sworn appraiser nominated by the chairman or president for the time being of the South African Council of Valuers failing agreement by the parties on a specific valuer.
2.4	Notwithstanding anything to the contrary herein contained or implied, the Valuer shall not be entitled to determine:-

2.4.1	the monthly rental for the first year of the RENEWAL PERIOD at less than the monthly rental which was payable during the last month of the INITIAL PERIOD increased by 12%.
2.4.2	the annual escalations for the RENEWAL PERIOD at less than the escalation provided for in the INITIAL PERIOD.

2.5	The determination of the Valuer shall be final and binding on the parties and such determination shall not be subject to appeal and/or review.
2.6	The costs of the Valuer shall be borne in such manner as may be determined by the Valuer.
2.7	If at commencement of the RENEWAL PERIOD the rental so payable has not been determined, then pending such determination the LESSEE shall pay on account of such rental, an amount equal to the minimum monthly rental payable under 2.4.1.
2.8	Upon the determination of the actual rental so payable for the first year of the RENEWAL PERIOD, any amount unpaid shall forthwith be paid by the LESSEE to the LESSOR, together with interest thereon calculated at the Prime Rate on each such underpayment, from the date when the relevant underpayment was made to the date of payment.

ANNEXURE C

COMMENCEMENT DATE OF LEASE PERIOD

FINAL EXTENT

Should the final extent of the PREMISES, in the case of a building to be erected, calculated from the final plans of the architects, differ from any extent which may be stated in the AGREEMENT:

1.	the extent stated in the AGREEMENT as well as the percentage of “lessee’s contribution to increase” shall be amended accordingly;
2.	the basic rental will be increased/reduced proportionally;
3.	the additional costs (per month) stated in the AGREEMENT shall, if applicable, be increased/reduced proportionally.

ANNEXURE D

AIR-CONDITIONING

1.	The LESSOR will supply the LESSEE with an acceptable standard of air-conditioning for the shops and offices supplied. Maintenance of the air-conditioning are as stipulated in paragraph 13.5 of Annexure A.
2.	The LESSEE acknowledges that after occupation of the PREMISES, the LESSOR shall be accorded a reasonable period for the testing and setting of the air-conditioning and that the air-conditioning may not be of an optimum standard during this period. The LESSOR shall, however, do everything in his power to ensure that the period aforesaid is limited to a minimum.
3.	The LESSEE shall at all times co-operate with the LESSOR to ensure the most effective use of the air-conditioning. The LESSEE shall give such co-operation by, inter alia, bringing down or closing louvers or curtains, whether provided by the LESSOR or the LESSEE, when the sun’s rays fall directly on the windows of the PREMISES.
4.	The LESSEE may under no circumstances install or have installed air-conditioning units in/on the PREMISES without the prior written consent of the LESSOR being had and obtained.

TENANTS’ ASSOCIATION

The LESSEE hereby undertakes to become a member of the tenant’s Association of this development as and when the Association is formed and formally constituted, which Association will be established for the advancement of all business activities on the Property.

The LESSEE also undertakes:

1.	to give his full co-operation to the ASSOCIATION to further its objectives; and
2.	to participate in advertising as required by the ASSOCIATION.

The LESSEE further undertakes to remain a member of the ASSOCIATION during the LEASE PERIOD or any extension thereof, whether due to the exercise of a right to rent or otherwise. The LESSEE undertakes to pay his membership fee monthly in advance to the ASSOCIATION or its nominee in accordance with the provisions of the articles of the ASSOCIATION.

FLOOR PLAN OF PREMISES

ADDENDUM TO
MEMORANDUM OF AGREEMENT
OF LEASE

between

iLEASE ASSET MANAGEMENT
(PTY) LIMITED
(“LESSOR”)

and

QUINTILES CLINDEPHARM
(PTY) LIMITED
(“LESSEE”)

- 2 -

5. SPECIAL CONDITIONS

5.1	Additional parking facilities – 4 Under cover parking bays at R300.00 per bay per month(VAT excluded) as well as 3 open reserved parking bays at R150.00 per bay per month (VAT excluded);
5.2	The Lessor shall for his own account contribute the following amounts, for the specific items, towards the Lessee’s installation costs.

• Pay the actual cost of carpeting only, to the floors of the leased premises, up to a maximum amount of R55-00/m² (VAT inclusive) based on the leased area.

• Pay the actual cost of partitioning, utilizing Donn LC partitioning only, up to a maximum amount of R150.00m² (VAT inclusive) based on the leased area.

• Pay the actual cost of venetian blinds for all outside windows.

5.3 The Lessor shall for his own account and prior to the lease commencement date modify the premises to align with the attached plan marked Annexure “G” which includes air-conditioning utilizing console units, re-locating of existing light fittings and power points and additional power requirements.

6. The Lessee shall have the right to renew the annexed Agreement of Lease in conjunction with this Addendum for a further period of five (5) years, on the same terms and conditions, save as to rental, provided that written notice of intention to exercise this right of renewal is given to the Lessor at least six (6) months prior to the expiry of the lease period. The rental for the renewal period shall be as mutually agreed between the Lessor and the Lessee.

This Addendum does not waive, extend or change any of the conditions or limitations in the said Agreement of Lease, except as stated herein.

THUS/....................

- 3 -

THUS DONE and SIGNED at BELLVILLE on the 21ST day of DECEMBER 2000.

AS WITNESSES

1.	/s/ [illegible]
		/s/ LAMBERTUS JACOBUS VAN ZYL
2.		LESSOR
		iLEASE ASSET MANAGEMENT
		(PTY) LIMITED

THUS DONE and SIGNED at CENTURION on the 19TH day of DECEMBER 2000.

AS WITNESSES

1.	/s/ [illegible]
		/s/ DR. W.S. CONRADIE
2.	/s/ [illegible]	LESSEE
		QUINTILES CLINDEPHARM
		(PTY) LIMITED

EX-21 22 g87218exv21.htm EX-21

Exhibit 21

Subsidiary	Jurisdiction
Action International Marketing Services Limited	England
AR-MED Limited	England
Benefit Canada Medico-Economic Studies, Inc.	Canada
Benefit Holding, Inc.	North Carolina
Benefit Research Italia S.r.l	Italy
Benefit Transnational Holding Corp.	North Carolina
Bioglan Pharmaceuticals Company	North Carolina
BRI International Holdings N.V	Belgium
BRI International Limited	England
BRI International SARL	France
Clin Data International (PTY) Limited	South Africa
G.D.R.U. Limited	England
Health Science Academy (Pty) Ltd	South Africa
Histological Services Limited	England
Innovex (Australia) Holdings Pty Ltd.	Australia
Innovex (India) Private Limited	India
Innovex (UK) Limited	England
Innovex, Inc.	Delaware
Innovex Belgium NV	Belgium
Innovex Brasil Limitada	Brazil
Innovex GmbH	Germany
Innovex Holdings Limited	England
Innovex Limited	England
Innovex Merger Corp.	North Carolina
Innovex Nevada Limited Partnership	Nevada
Innovex Overseas Holdings, Ltd./Limited	England
Innovex SA	France
Innovex S.r.l	Italy
Innovex South Africa Pty Limited [f/k/a PPMS]	South Africa
Innovex Staff Services. S.r.l	Italy
Innovex Support Services Limited Partnership	North Carolina
Innovex Turkey S.A.	Turkey
Laboratorie Novex Pharma Sarl	France
McPharma (Pty) Limited	South Africa
MedCom, Inc.	New Jersey
Medical Action Communications Limited	England
Medical Informatics KK	Japan
Medical Technology Consultants Limited	England
Medicines Control Consultants	South Africa
MedLab (Pty) Limited	South Africa
Minerva Ireland Limited	Ireland
Minerva Medical Limited	United Kingdom
Nexan PLC	England
Novex Pharma Ltd.	England
Penderwood Limited	England
PharmaBio Development, Inc.	North Carolina
Pharma Informatics, Inc.	Delaware
Pharma Services Holdings, Inc.	Delaware
Pharma Services Intermediate Holdings, Inc.	Delaware
Phytotherapy Pty. Ltd.	South Africa
PMSI Limited	England
QED Communications, Inc.	New York
QFinance, Inc.	Delaware

1

Subsidiary	Jurisdiction
Quintiles (Israel) Ltd.	Israel
Quintiles (UK) Limited	England
Quintiles AB	Sweden
Quintiles AG	Switzerland
Quintiles BV	Holland
Quintiles Argentina S.A.	Argentina
Quintiles Asia, Inc.	North Carolina
Quintiles Australia Pty. Limited	Australia
Quintiles Austrian Holdings, LLC	North Carolina
Quintiles Benefit France SNC	France
Quintiles Bermuda Ltd.	Bermuda
Quintiles Brasil Ltda.	Brazil
Quintiles Canada, Inc.	Canada
Quintiles Cardiac Alert Limited	England
Quintiles Clindepharm (Pty.) Limited	South Africa
Quintiles Clinical Supplies Americas, Inc.	New Jersey
Quintiles Data Processing Centre (India)      Private Limited	India
Quintiles East Asia Pte. Limited	Singapore
Quintiles Estonia OU	Estonia
Quintiles European Holdings Limited	England
Quintiles Federated Services, Inc.	North Carolina
Quintiles Finance Limited BV	The Netherlands
Quintiles Finance Uruguay SRL	Uruguay
Quintiles GesmbH Ltd.	Austria
Quintiles GmbH	Germany
Quintiles Holdings Limited	England
Quintiles Holdings SNC	France
Quintiles Hong Kong Limited	Hong Kong
Quintiles Hungary Kft	Hungary
Quintiles, Inc.	North Carolina
Quintiles Ireland (Finance) Limited	Ireland
Quintiles Ireland Limited	Ireland
Quintiles Laboratories Limited	North Carolina
Quintiles Latin America, Inc.	North Carolina
Quintiles Limited	England
Quintiles Malaysia Sdn. Bnd	Malaysia
Quintiles Mauritius Holdings, Inc.	Mauritius
Quintiles Medical Development (Shanghai)      Company Limited	China
Quintiles Mexico, S. de R.L. de C.V.	Mexico
Quintiles NV/SA	Belgium
Quintiles Oy	Finland
Quintiles Pacific, Inc.	North Carolina
Quintiles Phase One Services, Inc.	Kansas
Quintiles Philippines, Inc.	Philippines
Quintiles Poland Sp. Zoo	Poland
Quintiles s.l	Spain
Quintiles, S.r.l	Italy
Quintiles Services AB	Sweden
Quintiles South Africa (Pty.) Limited	South Africa
Quintiles Spectral (India) Limited	India
Quintiles Taiwan Limited	Taiwan
Quintiles Technologies, Inc.	North Carolina
Quintiles Thailand Ltd.	Thailand
Quintiles Transnational Corp.	North Carolina

2

Subsidiary	Jurisdiction
Quintiles Transnational Japan KK	Japan
Quintiles Transnational Korea Co. Ltd.	Korea
Quintiles Transfer, L.L.C	North Carolina
Quintiles Trustees Ltd.	England
Quintiles Uruguay S.A.	Uruguay
Servicios Clinicos, S.A. de C.V.	Mexico
Spectral Laboratories Limited	India
Strategic Medical Communications Limited	England
The Clinical Research Foundation (UK) Ltd.	England
The Lewin Group, Inc.	North Carolina
The Royce Consultancy Limited	Scotland
Transforce, S.A. de C.V.	Mexico
Verispan, LLC	Delaware

3 EX-31.01 23 g87218exv31w01.htm EX-31.01

Exhibit 31.01

Quintiles Transnational Corp. and Subsidiaries

Certification Pursuant To

Section 302 of the Sarbanes-Oxley Act of 2002

I, Dennis B. Gillings, Ph.D., certify that:

      1. I have reviewed this annual report on Form 10-K of Quintiles Transnational Corp.:

      2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

      3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

      4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

      (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

      (b) [Paragraph omitted pursuant to SEC Release Nos. 33-8238 and 34-47986.]

      (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

      (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

      5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

      (a) All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

      (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 1, 2004

/s/ DENNIS B. GILLINGS, PH.D.

Dennis B. Gillings, Ph.D.

Executive Chairman and

Chief Executive Officer

EX-31.02 24 g87218exv31w02.htm EX-31.02

Exhibit 31.02

Quintiles Transnational Corp. and Subsidiaries

Certification Pursuant To

Section 302 of the Sarbanes-Oxley Act of 2002

I, James L. Bierman, certify that:

      1. I have reviewed this annual report on Form 10-K of Quintiles Transnational Corp.:

      2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

      3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

      4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

      (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

      (b) [Paragraph omitted pursuant to SEC Release Nos. 33-8238 and 34-47986.]

      (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

      (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

      5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

      (a) All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

      (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 1, 2004

/s/ JAMES L. BIERMAN

James L. Bierman

Chief Financial Officer

EX-32.01 25 g87218exv32w01.htm EX-32.01

Exhibit 32.01

Quintiles Transnational Corp. and Subsidiaries

Certification Pursuant To

18 U.S.C. Section 1350,

As Adopted Pursuant To

Section 906 of the Sarbanes-Oxley Act of 2002

      In connection with the Annual Report of Quintiles Transnational Corp. (the “Company”) on Form 10-K for the year ended December 31, 2003, filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Dennis B. Gillings, Executive Chairman and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to my knowledge, that:

      (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

      (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ DENNIS B. GILLINGS

Dennis B. Gillings

Executive Chairman and

Chief Executive Officer

Date March 1, 2004

      This certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed “filed” by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and shall not be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Report, irrespective of any general incorporation language contained in such filing.

      A signed original of this written statement required by Section 906, or other documents authenticating, acknowledging, or otherwise adopting the signature that appear in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. EX-32.02 26 g87218exv32w02.htm EX-32.02

Exhibit 32.02

Quintiles Transnational Corp. and Subsidiaries

Certification Pursuant To

18 U.S.C. Section 1350,

As Adopted Pursuant To

Section 906 of the Sarbanes-Oxley Act of 2002

      In connection with the Annual Report of Quintiles Transnational Corp. (the “Company”) on Form 10-K for the year ended December 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, James L. Bierman, Executive Vice President and Chief Financial Officer of the Company certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to my knowledge that:

      (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

      (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ JAMES L. BIERMAN

James L. Bierman

Executive Vice President and

Chief Financial Officer

Date March 1, 2004

      This certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed “filed” by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and shall not be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Report, irrespective of any general incorporation language contained in such filing.

      A signed original of this written statement required by Section 906, or other documents authenticating, acknowledging, or otherwise adopting the signature that appear in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. 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M>M;"3*TV`8%T4Q``(2?R+B1&/A(Q$N<'+S,T,/""`?*2;"`$(8*H&E0W'*=! M&6!#'GCQ('PA*`%:FF@X+E8U1E?41M$R)8B'$!"Q+^8&`!JZH0(``)LF`)`2 M?1<#2?,2'^LB?3+&H&?T%PR4$>0550.2F1]@&<@R;D?!`6EW'A7`>79I'?:" M`1J@`=Q%>@*0*85GCM8C`0707\(E:8.#%@:`&*^Q6;,37E-C0Y6)>/S61:0' ME'.!'^(C',6D$_?T_@%!(59W9A$2!(C58EG68UE.XDXTUB``HB"=8B?(!VW+ MHV3NLFF4!YI*;",0$WQEP+(10;0#:89`$+T#Z6 M(9-%03;(*'S;.!4)$3SY(A`J$`-BD0#"!>_]$!,<:0M2.` M./%97189#I*C&?!';N)F*"8X\@(`%?"2@#A[0VDHGL0J)2.S-8$05T%)^IA] M7E$54&*44*$C1HD51,1@BP$7*Q4>FX0[*Z>U=&,15^BL>1%8^HH01A=\(5$! M"72QI2DW40@;%4CF849`(\/T4Q>K:J_M7Y===J'=!Y$G*AK+5#$,)G M509&J,66,5&Q-2DF%V)S1S^)57H:-!)C8'Q1>C`A)M>!&!4+N?DG&H31JL)5 M,V;J&PN@'`3`7@/!/AJ2H>JW&L%I$=F3+&=8.]W#N1<8`0O0<+ZB`$0DF)S% MO?C$HE[9=1GP90-06<+;$^4*LP<``+V:$-]R`"12+P1`,`N@9,EFAP)A`+`C M&$M5,X]R`$:A3*IH(^!1%A3@'S^)76;J;-L;9*#GDT!)$`YB)I37%B%D>7.E MBL2S%RZ4,787%^MB-MMB)4QZ2>04O5<2)#\R'")G$1S;$20(.A`"P(1IK&]3 M9P/AC;KC'0VP>^?%_@!]:",``#+-5G(*\#TED@!BO`$"6"^C\@'9DT\U(0`; M)D%3@1E2%7]6W#)VA6[#YQ#ODADUQP1X0'4LE"Q$6CF>GER4:T<03Z2L4';,C3JH9]]/)CS MY1WYZZJK<:$AJ1,256[U0A$+<+B:!@`.,![\H5G/27\#L1WFQQ`)4!ZXJ0!/ M@TE)`412=`SJ;(0A;#&X)5LC$!-H4Z:"%\N2,R216N M"!*&@00_63(E+"+,;.H7F!D=&U-O4<*#Y_ILI)6D`S4$J./H62V-P?N++S_0=/NU%V>&W M,RP4;>@SLI'.[`'045*2J/133*>AG>@33WC.F(G5;!2NY5,05>7/%(!$#[`D M&'&U$6M],9P8Y_*"HV&RO!))-F(3.+%4EW//.7+3?L$E*45O#0$M`F6!L%6, MU0*DT1<2&J!#"&LEA7%^3HJPHCW6U3=?P.$U_CR6`.-HLV,Q@&X+L%1Q`!?$ MI$L".$W7`.`RAP?PG!ST5,W!OUHA@8(%`0-0T3%Y$#G+ M&KO*(SW])L)&SQK^6.R5.P-C>4S"8P@`.P^\C3'!J?3$$`1``/#RP$FEDX.R M)OSX'O!%;W#AN"\,_F)^.6A`1!!6(C#2\4I#03:],3MIM"5;,BFUBBGH%W5P M;GOZW'6C&AV>P1K=QP!@AFR>]^.Q327?$P'(>F,#B$'>$@!Q`C)M`@$&@-2W M\DP70JR&MR:<%&8(P#DT40!9X3K2Y-3/IA$[`8A=#NA\(9P6^IJHG1.M]G=SM5`=`"YV7*8H;2-LVJR*Q!0(HI+-$J08 M@$FN`W^[,"R4[C658ML;R!!+Z&$/0`"UHI(E_D)& M`[$L6F%7>'O-.&&S;M%=*19&QD[OTV%#RA$E+\$`HX07S:$2"[8PV&[M,H@IE>&F*+8P MK&T]*5SM*'8JMV=9/E-[UF,]M`>(Z*6+07I?66&\A.DDK"7E%\%,^@I?N=1. M2JJ:%N]%+`4C M&+``$OW:V%KVK1)JY8J\#U2Z"@!W\]HF`C&.(,'USSLX)S))B"L_0U-*P5[: MTVGX*JHC7,=0#K<18)(`X4,?2FK,H,\J9X\N_FG?+TO7]AZQ`7`/&GK"(5WJ M`'K"\12A]X_9]PE/=9^C`(-ORJU_**'&)HK?`0#`-ROR^%1AI@K>$93_K0QQ M1]-5<+Z$`:7$9:*)$?:7_!1)E"E5KF39TN5+F#%19K!@0:-#@QH`5""`H"<'"1D.=CBX M\*!0E0Q.=MB`](,'HC9/+O3@``//`@,P4+B@$,QZ83-FI4I4)V'[04,&@`0,%.F>?2&+SQHP"`"!0P6,F3P,'MD?04/KE)X``%"9`TTP^Z!#9ASZH,-)O`O M*.GOI4P8H<."#,C$$ MKU)@A=3@@B*9>C&`'GDEE@`"#C@@@0P^?0JP##JP8,89#<(``<*((BK`HC1# M:H,&)*A@``(&0*!&-3.J3R,,?@QV7GK-XB#9L2"(4JP'#LBV7H`KOZH"##38@=F`*KHS@@")/4J#=_I4ZJ``#!1R@0#Z4P`KX9-LN M\)"D&1M8:S8)@G+2V01:(V^YI483JH-J/1#`J`QFF^Y`HMC:P`$.(!!@``%V MK>`!"6TT*-MX4;;Z:I0FZ)4L#@A^B8,$$O@7:[+/JZ`WYUSV0($)`L`+@P(< M/4L!E:Z$"2\&W/,TI0TX+OOOE0:.3,`L$5I+`@(4V-@N`0ECBRD..*BO@=H8 MIP\EN-Y<@"<"!#!`@@Y`='?L\:;^%7#4@?6`6+,RR!@F#@A0*'7:$9/`:X/` M!JL"!Q808((1$ZLHI0I,Z#YH+^_@J!`A^F"YYO"6Z_ MX4^`+K',2?3S`>0U($_.`@JVT/(`TF5D5"R)%YCR9!&5L&Z`M9.>!;CDKNF4 MAGL4B,SER.,@I$C.`Y'94DYR%YUL40563(-`!Y!'%N-M4(>(B9>@7*(BF'@@ M`@78WPZ-F)$?=8``!]E5`OI#N>R)IR@RP4`.#=B2#$3@:`Y02`0S\K$C`FXQ M'L3)^>Z#(.DQ"P$DVXCYN@:_B%F@`A2H4[PBX)\%T8D"3XN`5>;$J`C<<8X0 MF``#FD4NAZ!M*>#3@/W"^$@J.I(LQI()D^@'R2.6"(,&64#&I,2!-2J@_@$V MF0`0RU(2E7QI)18@H9_THP$O'D0"4L0DP.)C$YPYS$P;Z1KB7M.A"LBQ`AFH MP)8V8+X-:$"%;UHAQ&;D@6IAL&M,@:5#9/.0!!"$6`MYIOJF]4TS:;*6X\24 MO%[2`66*90)T(R0ZEE"`G^VDE/22A12J.&<^%B#.`"#`@%?A92,%F,L&=D*>!Q0$:A/H@`&6 MPY8[\>H#$'`,!_IHF@4$(`!+(P`#'!!!Y;"D`[MB:$^E]$^Q>%`L%%C`0GMZ M/^-UB#P&Z$WYOD0!>ZX+7^!\H4L\(,F1%'`D_L0L20(6(+)-6JF(1V73&-]E M&D$Q10+$:5(!G*3,A8B(/`,@**\DR0%Y5F`N%1#`C-9C%+`V(%T&&(`!^DA5 M=YV0;U@EZR/)-=:6E">H"HAE8Z%G/`9`)0&T?,I_$.!5#O2JLB\99DHZ"YCD MGEXI)`.*:LJSF/,#^/I.!R(`J[QUI4`N.9UYV]1!JT(E`A[2@&R2.9T"%;@I MR=0`7BP0@%1M"`$<_I$3CVHRLCD&TP(3HX`'MK+:JY%[+.X#$$%-:G2Y&`0BPZ022R;"5,);%%2K-5+VB@0?$S`$6 MB)ET[RA=D<4G`AJX"I67?``!!&`!C;R`Y$CJV\4TYWM/R=CC.-L2[@X9>E<- M($Q(2!8,G%G-?Q,)`0(@4)2DB0&&YOK&,:A055"Y#/0NM:/,!+VOJ@L]\8F+DN9&`RX#T++7GD(=VS*-K"7$4D#> M%L*!6&Y@F!:`$`8X<@&"\BD#L"P<8@T"DOS,LCZ>'HD53^WH)9TR)14`!,M+J7ZNHH3.:'::1X$&QS2Q:><,04F24+U2Y@S`1K M7X_.FV4Y.Y+$&:.H`\8Q0I7U+]LLQ6;H*BH#_8-+VR\,D MD*7;9>X*W.`-XSIF/7Z3T0,'[02QY[\(=_+))-S]DJ\-DK<<`I+7^16<`K?K$XP`$3 MN!/EE%>N.SX`.<$O9M6K_G7X"T`!9"AO2XR!@0IK`3+8,0M\&T`'?$`(W#D; M.@\)::$V`;4(S$`-W$`6ZQK+^CX.#$$1'$$2+$$3/$$43$$57$$6;$$7?$$8 MC$$9G$$:K$$;O$$<*,Q!'=Q!'NQ!'_Q!(`Q"(1Q"(BQ"(SQ")$Q")5Q")FQ" *)WQ"*&2)@```.S\_ ` end

EX-2.02

Ex-2.02

EX-10.06

Ex-10.06

EX-10.07

Ex-10.07

EX-10.08

Ex-10.08

EX-10.09

Ex-10.09

EX-10.10

Ex-10.10

EX-10.11

Ex-10.11

EX-10.14

Ex-10.14

EX-10.15

Ex-10.15

EX-10.16

Ex-10.16

EX-10.17

Ex-10.17

EX-10.18

Ex-10.18

EX-10.19

Ex-10.19

EX-10.20

Ex-10.20

EX-10.21

Ex-10.21

EX-10.23

Ex-10.23

EX-10.28

                                                                   EXHIBIT 10.28

                               AGREEMENT OF LEASE

                              ENTERED INTO BETWEEN

                         SHIBBOLET (PROPRIETARY) LIMITED

                                       AND

                   QUINTILES CLINDEPHARM (PROPRIETARY) LIMITED

Jointly referred to as the Parties.



                                      INDEX

                               AGREEMENT OF LEASE



NO                   CLAUSE HEADINGS                        PAGE
- --                   ---------------                        ----
                                                      
1       Parties
2       Interpretation
3       Recordance
4       Letting and Hiring
5       Duration
6       Rental
7       Operating Costs
8       Increase in the Rates
9       Additional Charges
10      Electricity
11      Deposit
12      Insurance
13      Assignment and Subletting
14      Sundry Obligations of the Lessee
15      Maintenance and Repairs
16      Alterations, Additions and Improvements
17      Exclusion of Lessor's Liability and Indemnity
18      Lessor's Rights
19      Area of the Premises
20      Rules
21      Parking and Loading
22      Damage to or Destruction of Premises
23      Special Remedy for Breach
24      Option of Renewal
25      New Tenants and Purchasers
26      Costs
27      Domicilia and Notices
28      Whole Agreement
29      Non-Waiver
30      Warranty of Authority
31      Merchants' Association
32      Security for Payment by Lessee
33      Sale of Premises


                                        2


                               AGREEMENT OF LEASE

1.       PARTIES:

         The parties to this lease are:

1.1      Shibbolet (Proprietary) Limited

         ("the Lessor"); and

1.2      Quintiles Clindepharm (Proprietary) Limited

         ("the Lessee").

2.       INTERPRETATION:

2.1      In this Agreement, except in a context indicating that some other
         meaning is intended:

         2.1.1    "THIS AGREEMENT" means this Agreement together with all
                  appedicis and annexures;

         2.1.2    "ASSOCIATE" in relation to the Lessee means a company, which
                  is for the time being:

                  2.1.2.1  a subsidiary or holding company of the Lessee within
                           the meaning ascribed to such terms in the Companies
                           Act 61 of 1973; or

                  2.1.2.2  a subsidiary or holding company of a company referred
                           to in 2.1.2.1 above;

         2.1.3    "THE BUILDING" means the buildings known as Centurion Science
                  Park, Phases IV, situated on the Property, and includes, where
                  the context so allows, all permanent improvements on the
                  Property;

         2.1.4    "COMMON AREAS" means portions of the Building which are not
                  suitable for letting and are not actually let by the Lessor;

         2.1.5    "DAY" means any day of the week, excluding Saturdays, Sundays
                  and public holidays;

                                       3


         2.1.6    "THE LEASE PERIOD" means the period for which this lease
                  subsists, including any period for which it is renewed;

         2.1.7    "THE LESSOR" means Shibbolet (Proprietary) Limited, a company
                  duly incorporated in terms of the Company Laws of the Republic
                  of South Africa;

         2.1.8    "THE LESSEE" means Quintiles Clindepharm (Proprietary)
                  Limited, a company duly incorporated in terms of the Company
                  Laws of the Republic of South Africa;

         2.1.9    "MONTH" means a calendar month, and more specifically

                  2.1.9.1  in reference to a number of months from a specific
                           date, a calendar month commencing on that date or the
                           same date of any subsequent month; and

                  2.1.9.2  in any other context, a month of the calendar, that
                           is, one of the 12 months of the calendar,

                  2.1.9.3  and "monthly" has the corresponding meaning;

         2.1.10   "OPTION PERIOD" means the period referred to in clause 24;

         2.1.11   "THE PARTIES" means the parties to this Agreement;

         2.1.12   "THE PREMISES" means Phase IV of Centurion Science Park,
                  further identified by the annexed plans signed by the parties
                  and having a Rentable Area of 3316 (Three Thousand Three
                  Hundred and Sixteen) square metres of offices and 134 (One
                  Hundred and Thirty Four) square metres of storerooms; and also
                  including the parking areas as set out in 21 and in respect of
                  which the Premises shall comprise air conditioned offices as
                  they existed at the commencement date.

         2.1.13   "THE PROPERTY" means Erf 2457, Lyttelton Manor X 3, Centurion,
                  including the Premises;

         2.1.14   "THE PRIME RATE" means the public quoted basic rate of

                                       4


                  interest per annum (as certified by any manager of ABSA Bank)
                  at which that bank lends on unsecured overdraft to its most
                  favoured customers in the private bank sector, compounded
                  monthly in arrears and calculated on a 365 (three hundred and
                  sixty five) day year factor irrespective of whether the year
                  is a leap year of not;

         21.15    "THE RATES" means the assessment rates and all taxes of what
                  so ever nature payable on the Property and includes any other
                  charges payable by the Lessor to the local authority (such as,
                  but not limited to, refuse removal charges or sanitary fees),
                  but not charges for water, electricity or gas;

         2.1.16   "RENTABLE AREA" in relation to the Premises means the area of
                  the Premises determined in accordance with clause 19;

         2.1.16   "YEAR" means a period of 12 consecutive months, and "yearly"
                  refers to a year commencing on the date on which the lease
                  comes into operation or any anniversary of that date;

2.2      references to notices, statements and other communications by or
         from the Lessor include notices by or from the Lessor's agent;

2.3      expressions in the singular also denote the plural, and vice versa;

2.4      words and phrases denoting natural persons refer also to juristic
         persons, and vice versa; and

2.5      Pronouns of any gender include the corresponding pronouns of the
         other gender;

2.6      If any provision in a definition is a substantive provision conferring
         rights or imposing obligations on any party, notwithstanding that it
         appears in the definition clause only, effect shall be given to it as
         if it were a substantive provision in the body of the agreement.

2.7      Words and expressions defined in any sub-clause shall, for the purpose
         of the clause of which that sub-clause forms part, bear the meaning
         assigned to such words and expressions in that sub-clause.

2.8      If a particular number of days are referred to in this agreement, such
         number of days shall be reckoned exclusively of the first day and

                                       5


         inclusively of the last day of the number of days, which is specified.

2.9      Any provision of this lease imposing a restraint, prohibition or
         restriction on the Lessee shall be so construed that the Lessee is not
         only bound to comply therewith but is also obliged to procure that the
         same restraint, prohibition or restriction is observed by everybody
         occupying or entering the Premises or any other part of the Property or
         the Building through, under, by arrangement with, or at the invitation
         of, the Lessee, including (without limiting the generality of this
         provision) its Associates and the directors, members, officers,
         employees, agents, customers and invitees of the Lessee or its
         Associates.

2.10     Clause headings appear in this lease for purposes of reference only and
         shall not influence the proper interpretation of the subject matter.

2.11     This lease shall be interpreted and applied in accordance with South
         African law.

3.       RECORDANCE:

         It is recorded that:

3.1      The Lessor is the owner of the Property;

3.2      The Lessee wishes to hire and the Lessor wishes to lease, the Property;

3.3      This Agreement sets out the terms and conditions agreed upon between
         the parties in relation to such lease.

4        LETTING AND HIRING:

         The Lessor lets and the Lessee hires the Premises on the terms of this
         Agreement.

5        DURATION:

         This Agreement shall:

5.1      come into operation on 1 March 2003 (the commencement date) and shall
         subsist for 3 (Three) years and 1 (One) months notwithstanding the date
         of signature hereof;

                                       6


5.2      terminate, unless renewed in terms of 5.3, on 31 March 2006;

5.3      be renewable at the option of the Lessee for a further period of 5
         (Five) years.

5.4      The option contained in 5.3 shall be exercisable on notice, as provided
         for in this Agreement and in terms of the provisions as set out in 24,
         by the Lessee to the Lessor given not less than 6 (six) months prior to
         the date on which this Agreement would expire if it were not for the
         exercise of such option.

6.        RENTAL:

6.1     The monthly rental payable by the Lessee to the Lessor:

         6.1.1    in respect of the Premises during the period commencing on the
                  commencement date and ending on the day prior to the first
                  anniversary of the commencement date or, if the commencement
                  date does not fall on the first day of a month, on the last
                  day of the month in which the first anniversary of the
                  commencement date falls, shall be R 53.24 (Fifty Three Rand
                  and Twenty Four Cents) per square meter for offices and R
                  36.30 (Thirty Six Rand and Thirty Cents) per square meter for
                  storerooms (amounting to a total rental of R 181 408.04 (One
                  Hundred and Eighty One Thousand Four Hundred and Eight Rand
                  and Four Cents) per month;

         6.1.2    in respect of the Premises on 1 August 2003 a rental of 10%
                  (Ten per centum) higher than the rental payable in respect of
                  the property for the final month of the preceding year and
                  thereafter in respect of each subsequent year during the
                  initial period, commencing on 1 April 2000, a rental of 10%
                  (Ten per centum) higher than the rental payable in respect of
                  the property for the final month of the preceding year.

6.2      Should the Lessee exercise the option contained in 5.3, the rental
         during the option period shall be such rental as may be agreed upon in
         writing between the Lessor and the Lessee or, failing such agreement
         between the Lessor and the Lessee within 3 (three) months after the
         date of the exercise of such option, a fair market rental determined in
         accordance with the applicable provisions of this clause 6.

6.3      For the purpose of 6.2, the fair market rental of the property during
         the option period shall be deemed to be the rental which a willing

                                       7


         Lessee would be prepared to pay a willing Lessor in respect of the
         property for the option period, if agreed upon on the date of receipt
         by the Lessor of the notice referred to in 5.4, and as determined by an
         expert agreed upon in writing between the Lessor and the Lessee for
         that purpose or, failing agreement between them within 14 (fourteen)
         days, as determined by an expert nominated for that purpose at the
         request of the Lessor or the Lessee by the president of The South
         African Institute of Estate Agents.

6.4      Notwithstanding the provision of 6.3, should either the Lessor or the
         Lessee be dissatisfied with the fair market rental determined by the
         expert agreed upon or nominated in terms of 6.3, and the party who is
         so dissatisfied ("THE DISSATISFIED PARTY") notify the other party
         within 14 (fourteen) days after the determination of such expert of his
         dissatisfaction, then the matter shall be referred to another expert
         nominated by the president of the South African Institute of Estate
         Agents for the determination of such fair market rental.

6.5      Should the fair market rental of the property as determined by the
         expert nominated in terms of 6.4 ("THE SECOND EXPERT"):

         6.5.1    not be 10% (Ten per centum) more or less than the fair market
                  rental of the property as determined by the expert agreed upon
                  or nominated in terms of 6.3 ("THE FIRST EXPERT"), then:

                  6.5.1.1  the fair market rental of the property shall be
                           deemed to be the fair market rental of the property
                           as determined by the first expert;

                  6.5.1.2  the dissatisfied party shall pay all costs incurred
                           in connection with the services rendered by the
                           second expert;

         6.5.2    be 10% (ten per centum) more or less than the fair market
                  rental as determined by the first expert, then:

                  6.5.2.1  the fair market rental of the property shall be
                           deemed to be the average of the fair market rentals
                           of the property as determined by the first and second
                           experts;

                  6.5.2.2  in the event of the fair market rental of the
                           property as determined by the second expert being
                           higher than the fair market rental of the property as
                           determined by the first expert, the Lessee shall pay
                           all costs incurred in connection with the services
                           rendered by the second expert;

                                       8


                  6.5.2.3  in the event of the fair market rental of the
                           property as determined by the second expert being
                           lower than the fair market rental of the property as
                           determined by the first expert, the Lessor shall pay
                           all costs incurred in connection with the services
                           rendered by the second expert.

6.6      For the purposes of the preceding provisions of this 7, should:

         6.6.1    the Lessor notify the Lessee that it is prepared to agree to
                  the fair market rental of the property being deemed to be
                  less; or

         6.6.2    the Lessee notify the Lessor that it is prepared to agree to
                  the fair market rental of the property being deemed to be more
                  than the fair market rental of the property as determined by
                  the first expert, within 7 (seven) days after the
                  determination of the first expert, then the fair market rental
                  of the property as determined by the first expert shall be
                  deemed to be the higher or lower rental notified by the Lessor
                  or Lessee to the Lessee or Lessor (as the case may be).

6.7      The costs incurred in respect of the services rendered by the first
         expert shall be borne and paid by the parties in equal shares.

6.8      Any additional amount payable by the Lessee in respect of Operating
         Costs, Rates and Additional Charges, in terms of 7, 8 and 9 shall be
         added to the rental payable by the Lessee, and:

         6.8.1    the Lessee shall be liable to pay such increased rental;

         6.8.2    the terms and conditions of this agreement in respect of
                  rental generally shall apply mutatis mutandis to such
                  increased rental.

6.9      The rentals referred to above are exclusive of value-added tax, and the
         Lessee shall, in addition to the rental, be liable for the payment of
         value-added tax thereon.

6.10     The aforesaid rental shall be paid monthly in advance on the first day
         of each and every month, without deduction or set-off and free of
         exchange to the Lessor at ABSA Bank Lyttelton Account Number 600 164
         570, or at such other place in Gauteng as the Lessor may direct in
         writing.

6.11     All amounts payable by the Lessee to the Lessor in terms of this
         agreement, and which are not paid on the due date thereof shall,
         without prejudice to any rights which the Lessor may otherwise have,
         bear interest with effect from the due date of such payment at the
         prime rate, for the period that elapses from such due date up to and

                                       9


         until 5 (five) days after date of the letter of demand and thereafter
         such an amount shall bear interest at a rate per annum of 400 (Four
         hundred) basis points higher than the prime rate until date of final
         payment.

6.12     The Lessee shall not withhold, defer, or make any deduction from any
         payment due to the Lessor, whether or not the Lessor is indebted to the
         Lessee or in breach of any obligation to the Lessee.

7.       OPERATING COSTS:

7.1      For the purposes of this clause 7:

         7.1.1    "THE OPERATING COSTS" means the reasonable costs (for which
                  the Lessee is not otherwise liable in terms of this lease)
                  incurred by the Lessor in connection with the ownership,
                  management, maintenance, repair and operation of the Property
                  and the Building, including, but not limited to, the Rates and
                  the costs of:

                  7.1.1.1  cleaning the Building and the Property;

                  7.1.1.2  providing security in respect of the Building;

                  7.1.1.3  maintaining lifts and escalators, if any;

                  7.1.1.4  providing electricity, water, gas, oil or any
                           necessary service to Common Areas

                  7.1.1.5  maintaining internal roofs, walls and finishes

                  7.1.1.6  gardens and gardening services and maintenance.

7.2      All the above Operating Costs are not included in the rental amount as
         set out in 6 above and until such time as these costs are incurred by
         the Lessor, in terms of a further written agreement, the Lessee shall
         be responsible for such services at its own cost.

8.       INCREASES IN THE RATES:

8.1      Whenever the Rates are increased during the Lease Period, the Lessor
         may, by written notice to the Lessee, increase the monthly rent for the
         Premises by an amount which bears the same ratio to the increase in
         Rates, calculated on a monthly basis, as the rent payable

                                       10


         by the Lessee for the Premises bears for the time being to the total
         rentals receivable by the Lessor from all tenants of the Building.
         Every such increase in the rent shall take effect on the first day of
         the month following that in which the Lessor's notice of the increase
         is received by the Lessee or, whichever is the later, the date on which
         the corresponding increase in the Rates takes effect.

8.2      For the purposes of 8.1, any premises in the Building which are not
         part of the Common Areas but are unlet for the time being shall be
         deemed to be let for the rental that was last receivable by the Lessor
         for the same premises or, if they were never let, a fair market rental
         determined in good faith by a reputable estate agent appointed by the
         Lessor).

9.       ADDITIONAL CHARGES:

9.1      In addition to paying the rent and other amounts, the Lessee shall
         reimburse the Lessor, monthly in arrear, within 7 (Seven) days after
         receiving an account from the Lessor reflecting the amount(s) so
         payable, with the cost of water consumed on the Premises, determined at
         prevailing municipal rates in accordance with readings of separate
         submeters or, if there are no such submeters, on the basis of the
         Lessee being liable to bear 100 % ( One Hundred percent) of the total
         cost of all water consumed on the Property.

9.2      If any additional levy, not dealt with under 7,8 and 9, payable by the
         Lessor in respect of the Property, Building or Premises, be increased
         from time to time during the duration of this lease so as to exceed the
         amount of such levy as at the commencement date; or a new levy or
         impost cost or expense of whatsoever nature, not in force as at
         commencement date, be imposed at any time thereafter on the Lessor, by
         virtue of its being the owner of the property, then the Lessor shall be
         entitled to increase the monthly rental for the property by an amount
         equal to one-twelfth of the yearly amount of that increase or new levy
         or impost multiplied by the Lessee's Contribution Percentage being an
         increase in respect of an item, charge or cost as contemplated by 6.8
         with effect from the date upon which that increase or new levy or
         impost takes effect.

10.      ELECTICITY:

         The Lessee shall be responsible for the payment of all electricity
         charges related to the Premises and in this regard such electricity
         consumption shall be determined by separate meter allocated to the

                                       11


         Premises.

11.      DEPOSIT:

11.1     On entering into this Agreement the Lessee shall pay the Lessor a
         deposit of R 0.00 ( Nil Rand), which amount the Lessor may apply, in
         whole or part, in meeting any payment due by the Lessee to the Lessor
         at any time during the Lease Period or after the termination of this
         Agreement.

11.2     Whenever during the Lease Period the deposit is so applied in whole or
         part, the Lessee shall on demand reinstate the deposit to its original
         amount.

11.3     As soon as all the obligations of the Lessee to the Lessor have been
         discharged following the termination of this Agreement, the Lessor
         shall refund to the Lessee, free of interest, so much of the deposit as
         has not been applied in terms of the above provisions.

12.      INSURANCE:

12.1     The Lessee shall not keep or do in or about the Property, Building or
         Premises anything which is liable to enhance any of the risks against
         which the Property or Building is insured for the time being to the
         extent that such insurance is rendered void or voidable or the premiums
         of such insurance are, or become liable to be, increased.

12.2     Without prejudice to any other right of action or remedy which the
         Lessor may have arising out of a breach of the aforegoing provision,
         the Lessor may recover from the Lessee on demand the full amount of any
         increase in insurance premiums in respect of the Property or Building
         attributable to such breach.

13.      ASSIGNMENT AND SUBLETTING:

13.1     The Lessee shall not be entitled, except with the prior written consent
         of the Lessor to:

         13.1.1   cede or assign all or any of the rights or obligations of the
                  Lessee under this Agreement; or

         13.1.2   sublet or give up possession of the Premises, in whole or
                  part, to any third party which is not an Associate of the

                                       12


                  Lessee.

13.2     The Lessor shall be entitled, in its sole and absolute discretion, to
         withhold its consent to the subletting of the whole or part of the
         Premises by the Lessee to any other entity.

14.      SUNDRY OBLIGATIONS OF THE LESSEE:

         The Lessee shall:

14.1     keep the Premises clean and tidy;

14.2     not use the Premises or allow it to be used, in whole or part, for any
         purpose other than that of offices and laboratory facilities;

14.3     not place or leave any article or other thing in or about any passage,
         lift, stairway, pathway, parking garage, or other common part of the
         Property or Building so as to cause a nuisance or obstruction;

14.4     not bring into or unto the Property, Building or Premises any article
         which, by reason of its weight or other characteristics, is liable to
         cause damage to the Property, Building or Premises;

14.5     not contravene any of the conditions of title of the Property or any of
         the laws, rules or regulations affecting owners, tenants or occupiers
         of the Property or the Building and specifically any measure having the
         force of law with which the Lessor is obliged to comply as owner of the
         Property including without limiting the generality hereof all laws
         relating to environmental protection which may apply to the Lessee in
         general or specifically due to the nature of the Lessee's business;

14.6     not cause or commit any nuisance on the Property or in the Building or
         Premises or cause any annoyance or discomfort to other tenants or
         occupiers of the Property or Building;

14.7     not leave refuse or allow it to accumulate in or about the Property,
         Building or Premises except in the refuse bins provided;

14.8     refrain from interfering with the electrical, plumbing or gas
         installations or systems serving the Property, Building or Premises,
         except as may be necessary to enable the Lessee to carry out its
         obligations of maintenance and repair in terms of this Lease and then
         the Lessee shall only utilise persons properly qualified;

                                       13


14.9     take all reasonable measures to prevent blockages and obstructions from
         occurring in the drains, sewerage pipes and water pipes serving the
         Property, Building or Premises;

14.10    provide at the Lessee's own expense all electric, fluorescent and
         incandescent light bulbs required in the Premises;

14.11    be responsible for all glass, both internal and external, on the
         Premises, including all mirrors, office fronts, and window panels;

14.12    keep the office fronts of the Premises illuminated during such
         reasonable hours as the Lessor may from time to time in writing direct;

14.13    procure that the decor of the Premises is maintained at a level which
         is in keeping with the standards of the Property and Building;

14.14    not paint, affix or attach to the Premises or any part of the Building
         any sign, notice, awning or canopy without the Lessor's prior written
         consent, which shall not be unreasonably withheld;

14.15    keep any such sign, notice, awning or canopy which has been so approved
         by the Lessor in good order, condition and repair at all times;

14.16    not erect any radio or television aerial on the roof or exterior walls
         of the Premises or the Building without the Lessor's prior written
         consent, which shall not be unreasonably withheld;

14.17    on the termination of this Agreement reinstate and return the property
         to the Lessor in the same good order and condition (fair wear and tear
         excepted) as it was in as at the commencement date;

14.18    have no claim of any nature whatsoever for any loss or damages which
         the Lessee may suffer ,including cancellation of this lease, as a
         result of:

         14.18.1  any defect in the property or any part thereof or any
                  improvement thereon;

         14.18.2  vis major, casus fortuitus or any other causes which is either
                  wholly or substantially outside the control of the Lessor;

         14.18.3  not do anything , which will damage the property or any of the
                  improvements thereon;

14.19    be responsible during the duration of this Agreement for obtaining

                                       14


         and renewing all licenses, permits or other consents in respect of the
         Lessee's business, and the failure to obtain such licenses or permits
         shall not be a ground for the cancellation of this Agreement by the
         Lessee; and

14.20    take out and maintain public liability insurance for an amount which,
         having regard to the nature of the Lessee's business, a prudent
         businessman would take out and maintain.

15.      MAINTENANCE AND REPAIRS:

15.1     The Lessee shall at its own expense and without recourse to the Lessor:

         15.1.1   throughout the Lease Period maintain in good order and
                  condition the interior of the Premises and all parts thereof,
                  including (without limitation of the generality of this
                  obligation) all shop fronts, windows, doors, appurtenances,
                  fixtures and fittings contained in the Premises;

         15.1.2   be responsible for all repairs of and maintenance to the
                  parking bays and shade netting associated with such parking
                  bays as set out in 21.5;

         15.1.3   promptly repair or make good all damage occurring in the
                  Premises from time to time during the Lease Period, whatever
                  the cause of such damage, and including damage to any part of
                  the interior of the Premises or to any shop front, window,
                  door, appurtenance, fixture or fitting, and replace all such
                  items (as well as any keys) which have been broken, lost or
                  destroyed (again regardless of cause); and

         15.1.4   on the termination of this lease, howsoever and whenever it
                  terminates, return the Premises and all such parts thereof
                  (including all keys) to the Lessor in good order, condition
                  and repair, fair wear and tear excepted.

15.2     If the Lessee notifies the Lessor in writing within 5(Five) days after
         having taken possession of the Premises of the need for any repairs to
         or in the Premises or of the fact that any part of the Premises,
         including any lock, key, door, shop front, window, appurtenance,
         fixture or fitting, is damaged, missing, or out of order, the Lessor
         shall promptly cause the necessary repair or replacement to be

                                       15


         effected at the Lessor's own expense. If or in so far as the Lessee
         does not give such notice, the Lessee shall be deemed to have
         acknowledged that the Premises and all parts thereof were intact, in
         place, and in good order, condition and repair when the Lessee took
         possession of the Premises under this lease.

15.3     The Lessor shall be responsible for the maintenance of, and for all
         repairs and replacements becoming necessary from time to time in or to,
         the Building and all parts thereof other than those which are the
         responsibility for the time being of tenants or of the local authority,
         and the Lessor's obligations in this respect shall include the
         maintenance and repair of the structure of the Building, all systems,
         works and installations contained therein, the roofs, the exterior
         walls, the lifts, the grounds and gardens, and all other parts of the
         Common Areas, provided that maintenance of the grounds and gardens and
         all other parts of the Common Areas will only commence once the Lessor
         has taken over responsibility for such, based on a further written
         agreement between the parties, and until such time as the
         responsibility is so taken over by the Lessor the Lessee shall be
         responsible for such maintenance at its own cost.

15.4     The Lessor shall not, however, be in breach of clause 15.3 in so far as
         any of its obligations thereunder are not or cannot be fulfilled by
         reason of any vis maior or the acts or omissions of others over whom
         the Lessor has no direct authority or control, and where the Lessor is
         indeed in breach of clause 15.3, the Lessee's only remedy against the
         Lessor shall be a right of action for specific performance.

15.5     Should the Lessee fail to carry out any of its obligations under this
         Agreement with regard to any maintenance, repair or replacement, the
         Lessor shall be entitled, without prejudice to any of its other rights
         or remedies, to effect the required item of maintenance, repair or
         replacement and to recover the cost thereof from the Lessee on demand.

16.      ALTERATIONS, ADDITIONS AND IMPROVEMENTS:

16.1     The Lessee shall not make any alterations or additions to the Premises
         without the Lessor's prior written consent, but the Lessor shall not
         withhold its consent unreasonably to an alteration or addition which is
         not structural,

16.2     If the Lessee does alter, add to, or improve the Premises in any way,
         whether in breach of 16.1 or not, the Lessee shall, if so required in
         writing by the Lessor, restore the Premises on the termination of this

                                       16


         Agreement to its condition as it was prior to such alteration, addition
         or improvement having been made. The Lessor's requirement in this
         regard may be communicated to the Lessee at any time, and this 16.2
         shall not be construed as excluding any other or further remedy which
         the Lessor may have in consequence of a breach by the Lessee of 16.1.

16.3     Save for any improvement which is removed from the Premises as required
         by the Lessor in terms of clause 16.2, all improvements made to the
         Premises shall belong to the Lessor and may not be removed from the
         Premises at any time. The Lessee shall not, whatever the circumstances,
         have any claim against the Lessor for compensation for any improvement
         to the Premises, nor shall the Lessee have a right of retention in
         respect of any improvements.

17.      EXCLUSION OF LESSOR FROM CERTAIN LIABILITY AND INDEMNITY:

17.1     The Lessee shall have no claim for damages against the Lessor and may
         not withhold or delay any payment due to the Lessor by reason directly
         or indirectly of:

         17.1.1   a breach by the Lessor of any of its obligations under this
                  Agreement;

         17.1.2   any act or omission of the Lessor or any agent or servant of,
                  or contractor to, the Lessor, whether or not negligent, or
                  otherwise actionable at law, and including (without limiting
                  the generality of the aforegoing) any act or omission of any
                  cleaner, maintenance person, handyman, artisan, labourer,
                  workman, watchman, guard, or caretaker;

         17.1.3   the condition or state of repair at any time of the Property,
                  the Building, or any part of the Property or the Building;

         17.1.4   any failure or suspension of, or any interruption in, the
                  supply of water, electricity, gas, air-conditioning, heating,
                  or any other amenity or service to the Premises, the Building,
                  or the Property (including, without generality being limited,
                  any cleaning service), whatever the cause;

         17.1.5   any breakdown of, or interruption in the operation of,

                                       17


                  any machinery, plant, equipment, installation or system
                  situated in or on, or serving the Property, the Building, or
                  the Premises, and including (but without limiting the
                  generality of the aforegoing) any lift, escalator, geyser,
                  boiler, burglar alarm, or security installation or system,
                  again regardless of cause;

         17.1.6   any interruption of, or interference with, the enjoyment or
                  beneficial occupation of the Premises or any of the Common
                  Areas of the Property or the Building caused by any building
                  operations or other works to or in the Building or elsewhere
                  on or about the Property, whether by the Lessor or by anybody
                  else; or

         17.1.7   any other event or circumstance whatever occurring, or failing
                  to occur, upon, in, or about the Property, the Building, or
                  the Premises, whether or not the Lessor could otherwise have
                  been held liable for such occurrence or failure,

         17.1.8   and the Lessee indemnifies the Lessor against all liability to
                  any of the associates, directors, members, agents, customers,
                  servants, guests and other invitees of the Lessee or of any of
                  its Associates, and all other persons who may enter upon the
                  Premises or any parts thereof through or under the Lessee, in
                  consequence of any such matter as is referred to in clauses
                  17.1.1 to 17.1.7 above and further indemnifies the Lessor
                  against any claim made against the Lessor by anyone for any
                  loss or damage suffered in or on the property or in
                  consequence of any act or omission of the Lessee's servants or
                  agents.

17.2     The Lessor shall not, however, be excused from specific performance of
         any of its obligations under this Agreement, whether express or
         implied, and particularly (but not only) its obligations to afford the
         Lessee occupation and enjoyment of the Premises as contemplated by this
         Agreement and to carry out such maintenance and repairs as are
         incumbent upon the Lessor in terms hereof.

17.3     The Lessor does not warrant that the Premises are suitable for the
         purposes of the Lessee or any of its Associates or that the Lessee or
         any of its Associates will be granted any licence or consent which may
         be necessary for the carrying on of any business or activity in the
         Premises.

                                       18


18.      LESSOR'S RIGHTS:

18.1     The Lessor's representatives, agents, servants and contractors may at
         all reasonable times, without thereby giving rise to any claim or right
         of action on the part of the Lessee or any other occupier of the
         Premises:

         18.1.1   enter the leased Premises in order to inspect them, to carry
                  out any necessary repairs, replacements or other works, or to
                  perform any other lawful function in the bona fide interests
                  of the Lessor or any of the occupiers of the Property; or

         18.1.2   carry out elsewhere in the Building or on the Property any
                  necessary repairs, replacements or other works;

         but the Lessor shall ensure that this right is exercised with due
         regard for, and a minimum of interference with, the beneficial
         enjoyment of the Premises by those in occupation thereof.

18.2     The Lessor shall have the right:

         18.2.1   to display at the property:

                  18.2.2.1    a "TO LET" notice during the period of 6 (six)
                              months immediately preceding the termination of
                              the lease;

                  18.2.2.2    a "FOR SALE" notice at any time during the
                              currency of this lease;

         18.2.2   to show any prospective tenants or buyers of the property the
                  property on reasonable notice during reasonable hours on
                  business days;

         18.2.3   to display on the property any notice which may be required by
                  the Lessor or any of the tenants or prospective tenants of the
                  Lessor in connection with any applications for a license for
                  any business to be carried on, on the property;

19.      AREA OF THE PREMISES:

19.1     If it is necessary in terms of this lease to determine the area,  in

                                       19


         square metres, of the Premises or any other part of the Building, such
         determination shall be made according to the SAPOA standard method for
         measuring floor areas. Any dispute between the Lessor and the Lessee as
         to any such area shall be determined by an independent architect,
         acting as expert and not arbitrator, whose certificate as to such area
         shall be final and binding on the parties. If the parties fail to agree
         on the identity of such architect, he shall be appointed by the
         Executive Director for the time being of the South African Institute of
         Architects.

19.2     The party who declares a dispute in relation to the square meters, as
         set out in 2.1.12, shall be responsible for the cost incurred relating
         to the determination by the independent Architect as contemplated
         above, in the event that such determination confirms the correctness of
         the square meters contain in 2.1.12. In the event that the independent
         architect determines a meterage other than that contained in 2.1.12,
         the cost of such determination shall be borne by the parties equally.

20.     RULES:

20.1     The Lessee shall at all material times comply with such reasonable
         rules and regulations as are laid down in writing by or on behalf of
         the Lessor for observance by tenants and other occupiers of the
         Property, their customers and their invitees, including (without
         generality being limited) rules and regulations in connection with:

         20.1.1   the security of the Property and the protection of persons and
                  property thereon, including in particular (again without
                  generality being restricted) any rules for the control and
                  identification of persons and vehicles entering the Property
                  or any parts thereof;

         20.1.2   the driving and parking of vehicles on or about the Property;

         20.1.3   the utilisation of common amenities and facilities on the
                  Property;

         20.1.4   the air-conditioning plant, if any, servicing the Building;

         20.1.5   the prohibition or restriction of specific activities and
                  practices which are actually or potentially detrimental to the
                  general interests of traders in the Building; and

                                       20


         20.1.6   the loading and off-loading of merchandise and other articles
                  on and about the Property.

20.2     20.1 shall not be construed as implying that the Lessor assumes any
         liability, which it would not otherwise have had in connection with the
         subject matter of any such rule or regulation.

21.      PARKING AND LOADING:

21.1     The Lessee shall throughout the Lease Period have the exclusive use for
         its directors, officers, members, partners, employees, clients,
         customers and invitees of 27 (Twenty Seven) Shaded parking bays and 109
         (One Hundred and Nine) Basement parking bays as identified on the plan
         being A5, at an initial monthly rental of R 163.35 (One Hundred and
         Sixty Three Rand and Thirty Five Cents) per Shaded parking bay and R
         297.00 (Two Hundred and Ninety Seven Rand) per Basement parking bay,
         payable in addition to, and increasing from time to time simultaneously
         with and proportionately to, the rent and or other increases as
         contemplated in 7,8 and 9 for the Premises (whatever the cause or basis
         of such increase).

21.2     All the terms of this Agreement relating to the Premises themselves
         shall apply mutatis mutandis to the loading bay(s) and parking
         bay(s)/garage(s) referred to in 21.1 except those which are obviously
         inapplicable.

21.3     Without derogation from any rules or regulations in force for the time
         being as envisaged in 20.1, the Lessee shall procure that the loading
         and off-loading of merchandise and other articles in connection with
         the business carried on in the Premises are carried out:

         21.3.1   only in the bay(s) let to the Lessee in terms of 21.1 and such
                  other loading bay(s)/area(s) as are provided for the purpose;
                  and

         21.3.2   with due regard and consideration for the interests of other
                  traders in the Building and the general public.

21.4     The provisions of this 21, in respect of the lease of parking bays or
         additional parking bays, shall endure for the duration of this
         Agreement and shall terminate simultaneously with this Agreement.

21.5     The Lessor shall be responsible for the maintenance and upkeep of the
         covered parking bays but the Lessee shall specifically be responsible
         for all damage which may occur in respect of such

                                       21


         parking bays, resulting from the wilful or negligent acts of its
         employees, clients or visitors, or any other person and the Lessee
         shall pay to the Lessor, on demand, all such costs incurred by the
         Lessor in the repair of damaged parking bays.

22.      DAMAGE TO OR DESTRUCTION OF PREMISES:

22.1     If the Building or Premises is destroyed or so damaged that the Lessee
         can no longer beneficially occupy the Premises, this lease shall
         terminate when that happens unless the parties agree otherwise in
         writing.

22.2     If the Premises is significantly damaged but can still be beneficially
         occupied, this Agreement shall remain in force and the Lessor shall
         repair the damage without undue delay, but the rent shall be abated so
         as to compensate the Lessee fairly for the effects of the damage and
         repair work on the enjoyment of the Premises. Failing agreement on such
         abatement or on the applicability of this clause to any particular
         circumstances, the matter shall be referred to an expert appointed by
         the parties jointly or, if they do not agree on such appointment,
         nominated by the President for the time being of The Institute of
         Estate Agents of South Africa, and the decision of such expert shall be
         final and binding. The expert's fees and disbursements, including any
         inspection costs, shall be borne and paid by the parties in equal
         shares. Pending determination of the abatement the Lessee shall
         continue to pay the full rent for the Premises as if they had not been
         damaged, and as soon as the matter has been resolved the Lessor shall
         make the appropriate repayment, if any, to the Lessee.

22.3     Subject to 17, if any damage to the Premises or the destruction thereof
         is caused by an act or omission for which either party is responsible
         in terms of this Agreement or in law, the other party shall not be
         precluded by reason of any of the aforegoing provisions of this 22 from
         exercising or pursuing any alternative or additional right of action or
         remedy available to the latter party under the circumstances (whether
         in terms of this Agreement or in law).

23.      SPECIAL REMEDY FOR BREACH:

23.1     Should the Lessee default in any payment due under this Agreement and
         fail to remedy such default within 5 (five) days after receiving a
         written demand that it be remedied; or

23.2     fail to pay any amount owing in terms of this Agreement on due

                                       22


         date, but within 5 (five) days after receipt of a notice from the
         Lessor requiring such payment to be made, on more than 3 (three)
         occasions falling within any period of 12 (twelve) calendar months; or

23.3     commit any other breach of any term or condition of this Agreement and
         fail to remedy that breach within a period of 30 (thirty) days after
         receipt of a notice from the Lessor calling on the Lessee to do so,
         then, in any such event, the Lessor shall be entitled to cancel this
         Agreement, by notice to the Lessee, without prejudice to any rights,
         which the Lessor may have against the Lessee as a result thereof, then
         the Lessor shall be entitled, without prejudice to any alternative or
         additional right of action or remedy available to the Lessor under the
         circumstances without further notice, to cancel this Agreement with
         immediate effect, be possession of the Premises, and recover from the
         Lessee damages for the default or breach and the cancellation of this
         Agreement.

23.4     Clause 23.1 shall not be construed as excluding the ordinary lawful
         consequences of a breach of this Agreement by either party (save any
         such consequences as are expressly excluded by any of the other
         provisions of this Agreement) and in particular any right of
         cancellation of this Agreement on the ground of a material breach going
         to the root of this Agreement.

23.5     In the event of the Lessor having cancelled this Agreement justifiably
         but the Lessee remaining in occupation of the Premises, with or without
         disputing the cancellation, and continuing to tender payments of rent
         and any other amounts which would have been payable to the Lessor but
         for the cancellation, the Lessor may accept such payments without
         prejudice to and without affecting the cancellation, in all respects as
         if they had been payments on account of the damages suffered by the
         Lessor by reason of the unlawful holding-over on the part of the
         Lessee.

24.      OPTION OF RENEWAL:

24.1     The Lessee shall have the right to renew this Agreement upon the terms
         and subject to the conditions set out below.

24.2     The period for which this lease may be so renewed is five years,
         commencing on the date immediately following the date of expiry of the
         initial term of this lease.

24.3     All the terms of this Agreement shall continue to apply during the

                                       23


         renewal period, save that:

         24.3.1   the rent shall be determined as set out in clause 6; and

         24.3.2   there shall be no further right of renewal.

24.4     The right of renewal shall be exercised by notice in writing from the
         Lessee to the Lessor given and received not later than 6 (six) months
         prior to the date on which the renewal period is to commence, and shall
         lapse if not so exercised.

24.5     If the right of renewal is duly exercised, this Agreement shall be
         renewed automatically and without the need for any further act of the
         parties.

24.6     The Lessee may not, however, exercise the right of renewal while in
         breach or default of any of the terms of this Agreement.

24.7     If this Agreement does not endure at least for the full term for which
         it is initially contracted, the right of renewal shall lapse and any
         notice of exercise thereof given prior to such lapsing shall be null
         and void.

27.      NEW TENANTS AND PURCHASERS:

         The Lessee shall at all reasonable times:

25.1     during the Lease Period, allow prospective purchasers of the Property
         or of any shares or other interests in the Lessor; and

25.2     during the last 6 (six) months of the Lease Period, allow prospective
         tenants or purchasers of the Premises, to enter and view the interior
         of the Premises.

27.      COSTS:

         Each party shall bear its own legal costs incurred in the preparation
         and negotiation of this lease provided that the stamp duty payable
         thereon shall be borne and paid by the Lessee.

27.      DOMICILIA AND NOTICES:

27.1     The parties choose as their domicilia citandi et executandi the

                                       24


         addresses mentioned in clause 27.2, provided that such domicilium of
         either party may be changed by written notice from such party to the
         other party with effect from the date of receipt or deemed receipt by
         the latter of such notice.

27.2     The parties domicilia addresses:

         27.2.1             The Lessor:
                            The Centurion Wine Centre
                            123 Amkor Road
                            Lyttelton Manor X3
                            Centurion
                            0157

         27.2.2            The Lessee:

                           At the Premises

27.3     Any notice, acceptance, demand or other communication properly
         addressed by either party to the other party at the latter's domicilium
         in terms hereof for the time being and sent by prepaid registered post
         shall be deemed to be received by the latter on the 7th (seventh)
         business day following the date of posting thereof. This provision
         shall not be construed as precluding the utilisation of other means and
         methods (including telefacsimile) for the transmission or delivery of
         notices, acceptances, demands and other communications, but no
         presumption of delivery shall arise if any such other means or method
         is used.

28.      WHOLE AGREEMENT:

28.1     This is the entire agreement between the parties.

28.2     Neither party relies in entering into this agreement on any warranties,
         representations, disclosures or expressions of opinion which have not
         been incorporated into this agreement as warranties or undertakings,

28.3     No variation or consensual cancellation of this agreement shall be of
         any force or effect unless reduced to writing and signed by both
         parties.

29.      NON-WAIVER:

29.1     Neither party shall be regarded as having waived, or be precluded in

                                       25


         any way from exercising, any right under or arising from this lease by
         reason of such party having at any time granted any extension of time
         for, or having shown any indulgence to, the other party with reference
         to any payment or performance hereunder, or having failed to enforce,
         or delayed in the enforcement of, any right of action against the other
         party.

29.2     The failure of either party to comply with any non-material provision
         of this lease shall not excuse the other party from performing the
         latter's obligations hereunder fully and timeously.

30.      WARRANTY OF AUTHORITY:

         The person signing this lease on behalf of the Lessee expressly
         warrants his authority to do so.

31.      SECURITY FOR PAYMENT BY LESSEE:

31       As security for the due performance by the Lessee of the Lessee's
         obligations in terms of this Agreement the Lessee shall provide the
         Lessor on the date of signature of this Agreement by the party last
         signing, with, at the choice of the Lessor, either or both:

         31.1.1   A signed suretyship binding the Lessee to the Lessor in
                  writing as surety and co-principal debtor for all the
                  obligations of the Lessee to the Lessor under this Agreement
                  as well as those arising in consequence of any termination
                  thereof; and/or

         31.1.2   an unconditional and irrevocable bank guarantee, in a form and
                  from an institution acceptable to the Lessor, of the due
                  payment by the Lessee of the rental or any other amounts
                  payable in terms of this agreement, provided that the
                  liability of the guarantor shall be limited to an amount equal
                  to four months rental, such rental to be the rental applicable
                  to the year in respect of which the amount become owing,
                  having taken all escalations into account.

31.2     The provision of the security as set out in this clause shall act as a
         suspensive condition to this Agreement becoming operational except as
         set forth in this clause and unless provision of such security is
         waived by the Lessor in writing in terms of 31.3, this lease shall not
         come into operation but shall be null and void save that the Lessee
         shall then solely bear and pay, or reimburse the Lessor on demand with,
         the costs of this lease and the Lessor's expenses in reletting

                                       26


         the Premises, including any agent's commission and advertising costs.

31.3     The Lessor, by his signature to this agreement, waives the provision of
         security as contemplated in 31.2. The parties however agree that the
         Lessor shall at any time during the Lease Period be entitled to call
         for such security in writing and the Lessee shall within 7 (Seven) days
         after receiving such notice provide the security called for failing
         which the Lessee shall be in breach of this agreement.

32.      SALE OF PREMISES

The validity of this lease shall not in any way be affected by the transfer of
the Property, Building or Premises from the Lessor pursuant to a sale thereof.
It shall accordingly, upon registration of transfer of the Property, Building or
Premises into the; name of the purchaser, remain of full force and effect save
that the purchaser shall be substituted as lessor and acquire all rights and be
liable to fulfil all the obligations which the Lessor, as lessor, enjoyed
against or was liable to fulfil in favour of the Lessee in terms of this
Agreement.

DATED at  Centurion  on 24 April 2003.

AS WITNESSES:

1.   /s/ [illegible]                           /s/ [illegible]
     -------------------------------------     ---------------------------------
                                               For and on behalf of Shibbolet
                                               (Proprietary) Limited

2.   /s/ [illegible]
     -------------------------------------

DATED at Pretoria on 16 April 2003.

AS WITNESSES:

1.   /s/ [illegible]                           /s/ [illegible]
     -------------------------------------     ---------------------------------
                                               For and on behalf of Quintiles
                                               Clindepharm (Proprietary) Limited

2.   /s/ [illegible]
     -------------------------------------


                                       27

EX-10.29

                                                                   EXHIBIT 10.29

                               AGREEMENT OF LEASE

                              ENTERED INTO BETWEEN

                         SHIBBOLET (PROPRIETARY) LIMITED

                                       AND

                   QUINTILES CLINDEPHARM (PROPRIETARY) LIMITED

Jointly referred to as the Parties.



                                      INDEX

                               AGREEMENT OF LEASE



- ------------------------------------------------------------------------------
NO                               CLAUSE HEADINGS                          PAGE
- ------------------------------------------------------------------------------
                                                                    
1           Parties
2           Interpretation
3           Recordance
4           Letting and Hiring
5           Duration
6           Rental
7           Operating Costs
8           Increase in the Rates
9           Additional Charges
10          Electricity
11          Deposit
12          Insurance
13          Assignment and Subletting
14          Sundry Obligations of the Lessee
15          Maintenance and Repairs
16          Alterations, Additions and Improvements
17          Exclusion of Lessor's Liability and Indemnity
18          Lessor's Rights
19          Area of the Premises
20          Rules
21          Parking and Loading
22          Damage to or Destruction of Premises
23          Special Remedy for Breach
24          Option of Renewal
25          New Tenants and Purchasers
26          Costs
27          Domicilia and Notices
28          Whole Agreement
29          Non-Waiver
30          Warranty of Authority
31          Merchants' Association
32          Security for Payment by Lessee
33          Sale of Premises


LEASE(QUINTILES)                        2                        7 DECEMBER 1999



                               AGREEMENT OF LEASE

1.       PARTIES:

         The parties to this lease are:

1.1      Shibbolet (Proprietary) Limited

         ("the Lessor"); and

1.2      Quintiles Clindepharm (Proprietary) Limited

         ("the Lessee").

2.       INTERPRETATION:

2.1      In this Agreement, except in a context indicating that some other
         meaning is intended:

         2.1.1    "THIS AGREEMENT" means this Agreement together with all
                  appedicis and annexures;

         2.1.2    "ASSOCIATE" in relation to the Lessee means a company, which
                  is for the time being:

                  2.1.2.1  a subsidiary or holding company of the Lessee within
                           the meaning ascribed to such terms in the Companies
                           Act 61 of 1973; or

                  2.1.2.2  a subsidiary or holding company of a company referred
                           to in 2.1.2.1 above;

         2.1.3    "THE BUILDING" means the buildings known as Centurion Science
                  Park, Phases I to IV, situated on the Property, and includes,
                  where the context so allows, all permanent improvements on the
                  Property;

         2.1.4    "COMMON AREAS" means portions of the Building which are not
                  suitable for letting and are not actually let by the Lessor;

         2.1.5    "DAY" means any day of the week, excluding Saturdays, Sundays
                  and public holidays;

LEASE(QUINTILES)                        3                        7 DECEMBER 1999



         2.1.6    "THE LEASE PERIOD" means the period for which this lease
                  subsists, including any period for which it is renewed;

         2.1.7    "THE LESSOR" means Shibbolet (Proprietary) Limited, a company
                  duly incorporated in terms of the Company Laws of the Republic
                  of South Africa;

         2.1.8    "THE LESSEE" means Quintiles Clindepharm (Proprietary)
                  Limited, a company duly incorporated in terms of the Company
                  Laws of the Republic of South Africa;

         2.1.9    "MONTH" means a calendar month, and more specifically

                  2.1.9.1  in reference to a number of months from a specific
                           date, a calendar month commencing on that date or the
                           same date of any subsequent month; and

                  2.1.9.2  in any other context, a month of the calendar, that
                           is, one of the 12 months of the calendar,

                  2.1.9.3  and "monthly" has the corresponding meaning;

         2.1.10   "OPTION PERIOD" means the period referred to in clause 24;

         2.1.11   "THE PARTIES" means the parties to this Agreement;

         2.1.12   "THE PREMISES" means Phases I, II, III and IV of Centurion
                  Science Park, further identified by the annexed plans signed
                  by the parties and having a Rentable Area of 2328 (Two
                  Thousand Three Hundred and Twenty Eight square metres;) and
                  also including the parking areas as set out in 21 and in
                  respect of which the Premises shall comprise air conditioned
                  offices as they existed at the commencement date.

         2.1.13   "THE PROPERTY" means Erf 1831, Lyttelton Manor X 3, Centurion,
                  including the Premises;

         2.1.14   "THE PRIME RATE" means the public quoted basic rate of
                  interest per annum (as certified by any manager of

LEASE(QUINTILES)                        4                        7 DECEMBER 1999



                  ABSA Bank) at which that bank lends on unsecured overdraft to
                  its most favoured customers in the private bank sector,
                  compounded monthly in arrears and calculated on a 365 (three
                  hundred and sixty five) day year factor irrespective of
                  whether the year is a leap year of not;

         21.15    "THE RATES" means the assessment rates and all taxes of what
                  so ever nature payable on the Property and includes any other
                  charges payable by the Lessor to the local authority (such as,
                  but not limited to, refuse removal charges or sanitary fees),
                  but not charges for water, electricity or gas;

         2.1.16   "RENTABLE AREA" in relation to the Premises means the area of
                  the Premises determined in accordance with clause 19;

         2.1.16   "YEAR" means a period of 12 consecutive months, and "yearly"
                  refers to a year commencing on the date on which the lease
                  comes into operation or any anniversary of that date;

2.2      references to notices, statements and other communications by or from
         the Lessor include notices by or from the Lessor's agent;

2.3      expressions in the singular also denote the plural, and vice versa;

2.4      words and phrases denoting natural persons refer also to juristic
         persons, and vice versa; and

2.5      Pronouns of any gender include the corresponding pronouns of the other
         gender;

2.6      If any provision in a definition is a substantive provision conferring
         rights or imposing obligations on any party, notwithstanding that it
         appears in the definition clause only, effect shall be given to it as
         if it were a substantive provision in the body of the agreement.

2.7      Words and expressions defined in any sub-clause shall, for the purpose
         of the clause of which that sub-clause forms part, bear the meaning
         assigned to such words and expressions in that sub-clause.

2.8      If a particular number of days are referred to in this agreement, such
         number of days shall be reckoned exclusively of the first day and
         inclusively of the last day of the number of days, which is specified.

LEASE(QUINTILES)                        5                        7 DECEMBER 1999



2.9      Any provision of this lease imposing a restraint, prohibition or
         restriction on the Lessee shall be so construed that the Lessee is not
         only bound to comply therewith but is also obliged to procure that the
         same restraint, prohibition or restriction is observed by everybody
         occupying or entering the Premises or any other part of the Property or
         the Building through, under, by arrangement with, or at the invitation
         of, the Lessee, including (without limiting the generality of this
         provision) its Associates and the directors, members, officers,
         employees, agents, customers and invitees of the Lessee or its
         Associates.

2.10     Clause headings appear in this lease for purposes of reference only and
         shall not influence the proper interpretation of the subject matter.

2.11     This lease shall be interpreted and applied in accordance with South
         African law.

3.       RECORDANCE:

         It is recorded that:

3.1      The Lessor is the owner of the Property;

3.2      The Lessee wishes to hire and the Lessor wishes to lease, the Property;

3.3      This Agreement sets out the terms and conditions agreed upon between
         the parties in relation to such lease.

4        LETTING AND HIRING:

         The Lessor lets and the Lessee hires the Premises on the terms of this
         Agreement.

5        DURATION:

         This Agreement shall:

5.1      come into operation on 1 December 1999 (the commencement date) and
         shall subsist for 6 (Six) years and 4 (Four) months notwithstanding the
         date of signature hereof;

LEASE(QUINTILES)                        6                        7 DECEMBER 1999




5.2      terminate, unless renewed in terms of 5.3, on 31 March 2006;

5.3      be renewable at the option of the Lessee for a further period of 5
         (Five) years.

5.4      The option contained in 5.3 shall be exercisable on notice, as provided
         for in this Agreement and in terms of the provisions as set out in 24,
         by the Lessee to the Lessor given not less than 6 (six) months prior to
         the date on which this Agreement would expire if it were not for the
         exercise of such option.

6.       RENTAL:

6.1      The monthly rental payable by the Lessee to the Lessor:

         6.1.1    in respect of the Premises during the period commencing on the
                  commencement date and ending on the day prior to the first
                  anniversary of the commencement date or, if the commencement
                  date does not fall on the first day of a month, on the last
                  day of the month in which the first anniversary of the
                  commencement date falls, shall be R 39.00 (Thirty Nine Rand)
                  per square meter amounting to a total rental of R 90 792.00
                  (Ninety Thousand Seven Hundred and Ninety Two Rand) per month;

         6.1.2    in respect of the Premises on 1 April 2000 a rental of 10%
                  (Ten per centum) higher than the rental payable in respect of
                  the property for the final month of the preceding year and
                  thereafter in respect of each subsequent year during the
                  initial period, commencing on 1 April 2000, a rental of 10%
                  (Ten per centum) higher than the rental payable in respect of
                  the property for the final month of the preceding year.

6.2      Should the Lessee exercise the option contained in 5.3, the rental
         during the option period shall be such rental as may be agreed upon in
         writing between the Lessor and the Lessee or, failing such agreement
         between the Lessor and the Lessee within 3 (three) months after the
         date of the exercise of such option, a fair market rental determined in
         accordance with the applicable provisions of this clause 6.

6.3      For the purpose of 6.2, the fair market rental of the property during
         the option period shall be deemed to be the rental which a willing
         Lessee would be prepared to pay a willing Lessor in respect of the
         property for the option period, if agreed upon on the date of receipt
         by the Lessor of the notice referred to in 5.4, and as determined by

LEASE(QUINTILES)                        7                        7 DECEMBER 1999



         an expert agreed upon in writing between the Lessor and the Lessee for
         that purpose or, failing agreement between them within 14 (fourteen)
         days, as determined by an expert nominated for that purpose at the
         request of the Lessor or the Lessee by the president of The South
         African Institute of Estate Agents.

6.4      Notwithstanding the provision of 6.3, should either the Lessor or the
         Lessee be dissatisfied with the fair market rental determined by the
         expert agreed upon or nominated in terms of 6.3, and the party who is
         so dissatisfied ("THE DISSATISFIED PARTY") notify the other party
         within 14 (fourteen) days after the determination of such expert of his
         dissatisfaction, then the matter shall be referred to another expert
         nominated by the president of the South African Institute of Estate
         Agents for the determination of such fair market rental.

6.5      Should the fair market rental of the property as determined by the
         expert nominated in terms of 6.4 ("THE SECOND EXPERT"):

         6.5.1    not be 10% (Ten per centum) more or less than the fair market
                  rental of the property as determined by the expert agreed upon
                  or nominated in terms of 6.3 ("THE FIRST EXPERT"), then:

                  6.5.1.1       the fair market rental of the property shall be
                                deemed to be the fair market rental of the
                                property as determined by the first expert;

                  6.5.1.2       the dissatisfied party shall pay all costs
                                incurred in connection with the services
                                rendered by the second expert;

         6.5.2    be 10% (ten per centum) more or less than the fair market
                  rental as determined by the first expert, then:

                  6.5.2.1       the fair market rental of the property shall be
                                deemed to be the average of the fair market
                                rentals of the property as determined by the
                                first and second experts;

                  6.5.2.2       in the event of the fair market rental of the
                                property as determined by the second expert
                                being higher than the fair market rental of the
                                property as determined by the first expert, the
                                Lessee shall pay all costs incurred in
                                connection with the services rendered by the
                                second expert;

                  6.5.2.3       in the event of the fair market rental of the
                                property as determined by the second expert
                                being lower than the fair market rental of the
                                property as determined by the first expert, the
                                Lessor shall pay all

LEASE(QUINTILES)                        8                        7 DECEMBER 1999



                         costs incurred in connection with the services rendered
                         by the second expert.

6.6      For the purposes of the preceding provisions of this 7, should:

         6.6.1    the Lessor notify the Lessee that it is prepared to agree to
                  the fair market rental of the property being deemed to be
                  less; or

         6.6.2    the Lessee notify the Lessor that it is prepared to agree to
                  the fair market rental of the property being deemed to be more
                  than the fair market rental of the property as determined by
                  the first expert, within 7 (seven) days after the
                  determination of the first expert, then the fair market rental
                  of the property as determined by the first expert shall be
                  deemed to be the higher or lower rental notified by the Lessor
                  or Lessee to the Lessee or Lessor (as the case may be).

6.7      The costs incurred in respect of the services rendered by the first
         expert shall be borne and paid by the parties in equal shares.

6.8      Any additional amount payable by the Lessee in respect of Operating
         Costs, Rates and Additional Charges, in terms of 7,8 and 9 shall be
         added to the rental payable by the Lessee, and:

         6.8.1    the Lessee shall be liable to pay such increased rental;

         6.8.2    the terms and conditions of this agreement in respect of
                  rental generally shall apply mutatis mutandis to such
                  increased rental.

6.9      The rentals referred to above are exclusive of value-added tax, and the
         Lessee shall, in addition to the rental, be liable for the payment of
         value-added tax thereon.

6.10     The aforesaid rental shall be paid monthly in advance on the first day
         of each and every month, without deduction or set-off and free of
         exchange to the Lessor at ABSA Bank Lyttelton Account Number 600 164
         570, or at such other place in Gauteng as the Lessor may direct in
         writing.

6.11     All amounts payable by the Lessee to the Lessor in terms of this
         agreement, and which are not paid on the due date thereof shall,
         without prejudice to any rights which the Lessor may otherwise have,
         bear interest with effect from the due date of such payment at the
         prime rate, for the period that elapses from such due date up to and
         until 5 (five) days after date of the letter of demand and thereafter
         such an amount shall bear interest at a rate per annum of 400 (Four
         hundred) basis points higher than the prime rate until date of final

LEASE(QUINTILES)                        9                        7 DECEMBER 1999



         payment.

6.12     The Lessee shall not withhold, defer, or make any deduction from any
         payment due to the Lessor, whether or not the Lessor is indebted to the
         Lessee or in breach of any obligation to the Lessee.

7.       OPERATING COSTS:

7.1      For the purposes of this clause 7:

         7.1.1    "THE OPERATING COSTS" means the reasonable costs (for which
                  the Lessee is not otherwise liable in terms of this lease)
                  incurred by the Lessor in connection with the ownership,
                  management, maintenance, repair and operation of the Property
                  and the Building, including, but not limited to, the Rates and
                  the costs of:

         7.1.1.1  cleaning the Building and the Property;

         7.1.1.2  providing security in respect of the Building;

         7.1.1.3  maintaining lifts and escalators, if any;

         7.1.1.4  providing electricity, water, gas, oil or any necessary
                  service to Common Areas

         7.1.1.5  maintaining internal roofs, walls and finishes

         7.1.1.6  gardens and gardening services and maintenance.

7.2      All the above Operating Costs are not included in the rental amount as
         set out in 6 above and until such time as these costs are incurred by
         the Lessor, in terms of a further written agreement, the Lessee shall
         be responsible for such services at its own cost.

8.       INCREASES IN THE RATES:

8.1      Whenever the Rates are increased during the Lease Period, the Lessor
         may, by written notice to the Lessee, increase the monthly rent for the
         Premises by an amount which bears the same ratio to the increase in
         Rates, calculated on a monthly basis, as the rent payable by the Lessee
         for the Premises bears for the time being to the total rentals
         receivable by the Lessor from all tenants of the Building. Every such
         increase in the rent shall take effect on the first day of the

LEASE(QUINTILES)                       10                        7 DECEMBER 1999



         month following that in which the Lessor's notice of the increase is
         received by the Lessee or, whichever is the later, the date on which
         the corresponding increase in the Rates takes effect.

8.2      For the purposes of 8.1, any premises in the Building which are not
         part of the Common Areas but are unlet for the time being shall be
         deemed to be let for the rental that was last receivable by the Lessor
         for the same premises or, if they were never let, a fair market rental
         determined in good faith by a reputable estate agent appointed by the
         Lessor).

9.       ADDITIONAL CHARGES:

9.1      In addition to paying the rent and other amounts, the Lessee shall
         reimburse the Lessor, monthly in arrear, within 7 (Seven) days after
         receiving an account from the Lessor reflecting the amount(s) so
         payable, with the cost of water consumed on the Premises, determined at
         prevailing municipal rates in accordance with readings of separate
         submeters or, if there are no such submeters, on the basis of the
         Lessee being liable to bear 100 % ( One Hundred percent) of the total
         cost of all water consumed on the Property.

9.2      If any additional levy, not dealt with under 7,8 and 9, payable by the
         Lessor in respect of the Property, Building or Premises, be increased
         from time to time during the duration of this lease so as to exceed the
         amount of such levy as at the commencement date; or a new levy or
         impost cost or expense of whatsoever nature, not in force as at
         commencement date, be imposed at any time thereafter on the Lessor, by
         virtue of its being the owner of the property, then the Lessor shall be
         entitled to increase the monthly rental for the property by an amount
         equal to one-twelfth of the yearly amount of that increase or new levy
         or impost multiplied by the Lessee's Contribution Percentage being an
         increase in respect of an item, charge or cost as contemplated by 6.8
         with effect from the date upon which that increase or new levy or
         impost takes effect.

10.      ELECTICITY:

         The Lessee shall be responsible for the payment of all electricity
         charges related to the Premises and in this regard such electricity
         consumption shall be determined by separate meter allocated to the
         Premises.

LEASE(QUINTILES)                       11                        7 DECEMBER 1999



11.      DEPOSIT:

11.1     On entering into this Agreement the Lessee shall pay the Lessor a
         deposit of R 0.00 ( Nil Rand), which amount the Lessor may apply, in
         whole or part, in meeting any payment due by the Lessee to the Lessor
         at any time during the Lease Period or after the termination of this
         Agreement.

11.2     Whenever during the Lease Period the deposit is so applied in whole or
         part, the Lessee shall on demand reinstate the deposit to its original
         amount.

11.3     As soon as all the obligations of the Lessee to the Lessor have been
         discharged following the termination of this Agreement, the Lessor
         shall refund to the Lessee, free of interest, so much of the deposit as
         has not been applied in terms of the above provisions.

12.      INSURANCE:

12.1     The Lessee shall not keep or do in or about the Property, Building or
         Premises anything which is liable to enhance any of the risks against
         which the Property or Building is insured for the time being to the
         extent that such insurance is rendered void or voidable or the premiums
         of such insurance are, or become liable to be, increased.

12.2     Without prejudice to any other right of action or remedy which the
         Lessor may have arising out of a breach of the aforegoing provision,
         the Lessor may recover from the Lessee on demand the full amount of any
         increase in insurance premiums in respect of the Property or Building
         attributable to such breach.

13.      ASSIGNMENT AND SUBLETTING:

13.1     The Lessee shall not be entitled, except with the prior written consent
         of the Lessor to:

         13.1.1   cede or assign all or any of the rights or obligations of the
                  Lessee under this Agreement; or

         13.1.2   sublet or give up possession of the Premises, in whole or
                  part, to any third party which is not an Associate of the
                  Lessee.

13.2     The Lessor shall be entitled, in its sole and absolute discretion, to

LEASE(QUINTILES)                       12                        7 DECEMBER 1999



         withhold its consent to the subletting of the whole or part of the
         Premises by the Lessee to any other entity.

14.      SUNDRY OBLIGATIONS OF THE LESSEE:

         The Lessee shall:

14.1     keep the Premises clean and tidy;

14.2     not use the Premises or allow it to be used, in whole or part, for any
         purpose other than that of offices and laboratory facilities;

14.3     not place or leave any article or other thing in or about any passage,
         lift, stairway, pathway, parking garage, or other common part of the
         Property or Building so as to cause a nuisance or obstruction;

14.4     not bring into or unto the Property, Building or Premises any article
         which, by reason of its weight or other characteristics, is liable to
         cause damage to the Property, Building or Premises;

14.5     not contravene any of the conditions of title of the Property or any of
         the laws, rules or regulations affecting owners, tenants or occupiers
         of the Property or the Building and specifically any measure having the
         force of law with which the Lessor is obliged to comply as owner of the
         Property including without limiting the generality hereof all laws
         relating to environmental protection which may apply to the Lessee in
         general or specifically due to the nature of the Lessee's business;

14.6     not cause or commit any nuisance on the Property or in the Building or
         Premises or cause any annoyance or discomfort to other tenants or
         occupiers of the Property or Building;

14.7     not leave refuse or allow it to accumulate in or about the Property,
         Building or Premises except in the refuse bins provided;

14.8     refrain from interfering with the electrical, plumbing or gas
         installations or systems serving the Property, Building or Premises,
         except as may be necessary to enable the Lessee to carry out its
         obligations of maintenance and repair in terms of this Lease and then
         the Lessee shall only utilise persons properly qualified;

14.9     take all reasonable measures to prevent blockages and obstructions from
         occurring in the drains, sewerage pipes and water pipes serving the
         Property, Building or Premises;

LEASE(QUINTILES)                       13                        7 DECEMBER 1999



14.10    provide at the Lessee's own expense all electric, fluorescent and
         incandescent light bulbs required in the Premises;

14.11    be responsible for all glass, both internal and external, on the
         Premises, including all mirrors, office fronts, and window panels;

14.12    keep the office fronts of the Premises illuminated during such
         reasonable hours as the Lessor may from time to time in writing direct;

14.13    procure that the decor of the Premises is maintained at a level which
         is in keeping with the standards of the Property and Building;

14.14    not paint, affix or attach to the Premises or any part of the Building
         any sign, notice, awning or canopy without the Lessor's prior written
         consent, which shall not be unreasonably withheld;

14.15    keep any such sign, notice, awning or canopy which has been so approved
         by the Lessor in good order, condition and repair at all times;

14.16    not erect any radio or television aerial on the roof or exterior walls
         of the Premises or the Building without the Lessor's prior written
         consent, which shall not be unreasonably withheld;

14.17    on the termination of this Agreement reinstate and return the property
         to the Lessor in the same good order and condition (fair wear and tear
         excepted) as it was in as at the commencement date;

14.18    have no claim of any nature whatsoever for any loss or damages which
         the Lessee may suffer, including cancellation of this lease, as a
         result of:

         14.18.1       any defect in the property or any part thereof or any
                       improvement thereon;

         14.18.2       vis major, casus fortuitus or any other causes which is
                       either wholly or substantially outside the control of the
                       Lessor;

         14.18.3       not do anything , which will damage the property or any
                       of the improvements thereon;

14.19    be responsible during the duration of this Agreement for obtaining and
         renewing all licenses, permits or other consents in respect of the
         Lessee's business, and the failure to obtain such licenses or permits
         shall not be a ground for the cancellation of this Agreement by the

LEASE(QUINTILES)                       14                        7 DECEMBER 1999



         Lessee; and

14.20    take out and maintain public liability insurance for an amount which,
         having regard to the nature of the Lessee's business, a prudent
         businessman would take out and maintain.

15.      MAINTENANCE AND REPAIRS:

15.1     The Lessee shall at its own expense and without recourse to the Lessor:

         15.1.1   throughout the Lease Period maintain in good order and
                  condition the interior of the Premises and all parts thereof,
                  including (without limitation of the generality of this
                  obligation) all shop fronts, windows, doors, appurtenances,
                  fixtures and fittings contained in the Premises;

         15.1.2   be responsible for all repairs of and maintenance to the
                  parking bays and shade netting associated with such parking
                  bays as set out in 21.5;

         15.1.3   promptly repair or make good all damage occurring in the
                  Premises from time to time during the Lease Period, whatever
                  the cause of such damage, and including damage to any part of
                  the interior of the Premises or to any shop front, window,
                  door, appurtenance, fixture or fitting, and replace all such
                  items (as well as any keys) which have been broken, lost or
                  destroyed (again regardless of cause); and

         15.1.4   on the termination of this lease, howsoever and whenever it
                  terminates, return the Premises and all such parts thereof
                  (including all keys) to the Lessor in good order, condition
                  and repair, fair wear and tear excepted.

 15.2    If the Lessee notifies the Lessor in writing within 5(Five) days after
         having taken possession of the Premises of the need for any repairs to
         or in the Premises or of the fact that any part of the Premises,
         including any lock, key, door, shop front, window, appurtenance,
         fixture or fitting, is damaged, missing, or out of order, the Lessor
         shall promptly cause the necessary repair or replacement to be effected
         at the Lessor's own expense. If or in so far as the Lessee does not
         give such notice, the Lessee shall be deemed to have acknowledged that
         the Premises and all parts thereof were intact, in

LEASE(QUINTILES)                       15                        7 DECEMBER 1999



         place, and in good order, condition and repair when the Lessee took
         possession of the Premises under this lease.

15.3     The Lessor shall be responsible for the maintenance of, and for all
         repairs and replacements becoming necessary from time to time in or to,
         the Building and all parts thereof other than those which are the
         responsibility for the time being of tenants or of the local authority,
         and the Lessor's obligations in this respect shall include the
         maintenance and repair of the structure of the Building, all systems,
         works and installations contained therein, the roofs, the exterior
         walls, the lifts, the grounds and gardens, and all other parts of the
         Common Areas, provided that maintenance of the grounds and gardens and
         all other parts of the Common Areas will only commence once the Lessor
         has taken over responsibility for such, based on a further written
         agreement between the parties, and until such time as the
         responsibility is so taken over by the Lessor the Lessee shall be
         responsible for such maintenance at its own cost.

15.4     The Lessor shall not, however, be in breach of clause 15.3 in so far as
         any of its obligations thereunder are not or cannot be fulfilled by
         reason of any vis maior or the acts or omissions of others over whom
         the Lessor has no direct authority or control, and where the Lessor is
         indeed in breach of clause 15.3, the Lessee's only remedy against the
         Lessor shall be a right of action for specific performance.

15.5     Should the Lessee fail to carry out any of its obligations under this
         Agreement with regard to any maintenance, repair or replacement, the
         Lessor shall be entitled, without prejudice to any of its other rights
         or remedies, to effect the required item of maintenance, repair or
         replacement and to recover the cost thereof from the Lessee on demand.

16.      ALTERATIONS, ADDITIONS AND IMPROVEMENTS:

16.1     The Lessee shall not make any alterations or additions to the Premises
         without the Lessor's prior written consent, but the Lessor shall not
         withhold its consent unreasonably to an alteration or addition which is
         not structural.

16.2     If the Lessee does alter, add to, or improve the Premises in any way,
         whether in breach of 16.1 or not, the Lessee shall, if so required in
         writing by the Lessor, restore the Premises on the termination of this
         Agreement to its condition as it was prior to such alteration, addition
         or improvement having been made. The Lessor's requirement in this
         regard may be communicated to the Lessee at any time, and this

LEASE(QUINTILES)                       16                        7 DECEMBER 1999



         16.2 shall not be construed as excluding any other or further remedy
         which the Lessor may have in consequence of a breach by the Lessee of
         16.1.

16.3     Save for any improvement which is removed from the Premises as required
         by the Lessor in terms of clause 16.2, all improvements made to the
         Premises shall belong to the Lessor and may not be removed from the
         Premises at any time. The Lessee shall not, whatever the circumstances,
         have any claim against the Lessor for compensation for any improvement
         to the Premises, nor shall the Lessee have a right of retention in
         respect of any improvements.

17.      EXCLUSION OF LESSOR FROM CERTAIN LIABILITY AND INDEMNITY:

17.1     The Lessee shall have no claim for damages against the Lessor and may
         not withhold or delay any payment due to the Lessor by reason directly
         or indirectly of:

         17.1.1   a breach by the Lessor of any of its obligations under this
                  Agreement;

         17.1.2   any act or omission of the Lessor or any agent or servant of,
                  or contractor to, the Lessor, whether or not negligent, or
                  otherwise actionable at law, and including (without limiting
                  the generality of the aforegoing) any act or omission of any
                  cleaner, maintenance person, handyman, artisan, labourer,
                  workman, watchman, guard, or caretaker;

         17.1.3   the condition or state of repair at any time of the Property,
                  the Building, or any part of the Property or the Building;

         17.1.4   any failure or suspension of, or any interruption in, the
                  supply of water, electricity, gas, air-conditioning, heating,
                  or any other amenity or service to the Premises, the Building,
                  or the Property (including, without generality being limited,
                  any cleaning service), whatever the cause;

         17.1.5   any breakdown of, or interruption in the operation of, any
                  machinery, plant, equipment, installation or system situated
                  in or on, or serving the Property, the Building, or the
                  Premises, and including (but without limiting the

LEASE(QUINTILES)                       17                        7 DECEMBER 1999



                  generality of the aforegoing) any lift, escalator, geyser,
                  boiler, burglar alarm, or security installation or system,
                  again regardless of cause;

         17.1.6   any interruption of, or interference with, the enjoyment or
                  beneficial occupation of the Premises or any of the Common
                  Areas of the Property or the Building caused by any building
                  operations or other works to or in the Building or elsewhere
                  on or about the Property, whether by the Lessor or by anybody
                  else; or

         17.1.7   any other event or circumstance whatever occurring, or failing
                  to occur, upon, in, or about the Property, the Building, or
                  the Premises, whether or not the Lessor could otherwise have
                  been held liable for such occurrence or failure,

         17.1.8   and the Lessee indemnifies the Lessor against all liability to
                  any of the associates, directors, members, agents, customers,
                  servants, guests and other invitees of the Lessee or of any of
                  its Associates, and all other persons who may enter upon the
                  Premises or any parts thereof through or under the Lessee, in
                  consequence of any such matter as is referred to in clauses
                  17.1.1 to 17.1.7 above and further indemnifies the Lessor
                  against any claim made against the Lessor by anyone for any
                  loss or damage suffered in or on the property or in
                  consequence of any act or omission of the Lessee's servants or
                  agents.

17.2     The Lessor shall not, however, be excused from specific performance of
         any of its obligations under this Agreement, whether express or
         implied, and particularly (but not only) its obligations to afford the
         Lessee occupation and enjoyment of the Premises as contemplated by this
         Agreement and to carry out such maintenance and repairs as are
         incumbent upon the Lessor in terms hereof.

17.3     The Lessor does not warrant that the Premises are suitable for the
         purposes of the Lessee or any of its Associates or that the Lessee or
         any of its Associates will be granted any licence or consent which may
         be necessary for the carrying on of any business or activity in the
         Premises.

LEASE(QUINTILES)                       18                        7 DECEMBER 1999



18.      LESSOR'S RIGHTS:

18.1     The Lessor's representatives, agents, servants and contractors may at
         all reasonable times, without thereby giving rise to any claim or right
         of action on the part of the Lessee or any other occupier of the
         Premises:

         18.1.1   enter the leased Premises in order to inspect them, to carry
                  out any necessary repairs, replacements or other works, or to
                  perform any other lawful function in the bona fide interests
                  of the Lessor or any of the occupiers of the Property; or

         18.1.2   carry out elsewhere in the Building or on the Property any
                  necessary repairs, replacements or other works;

         but the Lessor shall ensure that this right is exercised with due
         regard for, and a minimum of interference with, the beneficial
         enjoyment of the Premises by those in occupation thereof.

18.2     The Lessor shall have the right:

         18.2.1   to display at the property:

                  18.2.2.1      a "TO LET" notice during the period of 6
                                (six) months immediately preceding the
                                termination of the lease;

                  18.2.2.2      a "FOR SALE" notice at any time during the
                                currency of this lease;

         18.2.2   to show any prospective tenants or buyers of the property
                  the property on reasonable notice during reasonable hours
                  on business days;

         18.2.3   to display on the property any notice which may be required
                  by the Lessor or any of the tenants or prospective tenants of
                  the Lessor in connection with any applications for a license
                  for any business to be carried on, on the property;

19.      AREA OF THE PREMISES:

19.1     If it is necessary in terms of this lease to determine the area, in
         square metres, of the Premises or any other part of the Building, such
         determination shall be made according to the SAPOA standard method for
         measuring floor areas. Any dispute between the Lessor

LEASE(QUINTILES)                       19                        7 DECEMBER 1999



         and the Lessee as to any such area shall be determined by an
         independent architect, acting as expert and not arbitrator, whose
         certificate as to such area shall be final and binding on the parties.
         If the parties fail to agree on the identity of such architect, he
         shall be appointed by the Executive Director for the time being of the
         South African Institute of Architects.

19.2     The party who declares a dispute in relation to the square meters, as
         set out in 2.1.12, shall be responsible for the cost incurred relating
         to the determination by the independent Architect as contemplated
         above, in the event that such determination confirms the correctness of
         the square meters contain in 2.1.12. In the event that the independent
         architect determines a meterage other than that contained in 2.1.12,
         the cost of such determination shall be borne by the parties equally.

20.      RULES:

20.1     The Lessee shall at all material times comply with such reasonable
         rules and regulations as are laid down in writing by or on behalf of
         the Lessor for observance by tenants and other occupiers of the
         Property, their customers and their invitees, including (without
         generality being limited) rules and regulations in connection with:

         20.1.1   the security of the Property and the protection of persons and
                  property thereon, including in particular (again without
                  generality being restricted) any rules for the control and
                  identification of persons and vehicles entering the Property
                  or any parts thereof;

         20.1.2   the driving and parking of vehicles on or about the Property;

         20.1.3   the utilisation of common amenities and facilities on the
                  Property;

         20.1.4   the air-conditioning plant, if any, servicing the Building;

         20.1.5   the prohibition or restriction of specific activities and
                  practices which are actually or potentially detrimental to the
                  general interests of traders in the Building; and

         20.1.6   the loading and off-loading of merchandise and other articles
                  on and about the Property.

LEASE(QUINTILES)                       20                        7 DECEMBER 1999



20.2     20.1 shall not be construed as implying that the Lessor assumes any
         liability, which it would not otherwise have had in connection with the
         subject matter of any such rule or regulation.

21.      PARKING AND LOADING:

21.1     The Lessee shall throughout the Lease Period have the exclusive use for
         its directors, officers, members, partners, employees, clients,
         customers and invitees of 28 (Thirty One) covered parking bays/garages
         as identified on the plan being A5, at an initial monthly rental of R
         120.00 (One Hundred and Twenty Rand) per bay, payable in addition to,
         and increasing from time to time simultaneously with and
         proportionately to, the rent and or other increases as contemplated in
         7,8 and 9 for the Premises (whatever the cause or basis of such
         increase).

21.2     All the terms of this Agreement relating to the Premises themselves
         shall apply mutatis mutandis to the loading bay(s) and parking
         bay(s)/garage(s) referred to in 21.1 except those which are obviously
         inapplicable.

21.3     Without derogation from any rules or regulations in force for the time
         being as envisaged in 20.1, the Lessee shall procure that the loading
         and off-loading of merchandise and other articles in connection with
         the business carried on in the Premises are carried out:

         21.3.1   only in the bay(s) let to the Lessee in terms of 21.1 and such
                  other loading bay(s)/area(s) as are provided for the purpose;
                  and

         21.3.2   with due regard and consideration for the interests of other
                  traders in the Building and the general public.

21.4     The provisions of this 21, in respect of the lease of parking bays or
         additional parking bays, shall endure for the duration of this
         Agreement and shall terminate simultaneously with this Agreement.

21.5     The Lessor shall be responsible for the maintenance and upkeep of the
         covered parking bays but the Lessee shall specifically be responsible
         for all damage which may occur in respect of such parking bays,
         resulting from the wilful or negligent acts of its employees, clients
         or visitors, or any other person and the Lessee shall pay to the
         Lessor, on demand, all such costs incurred by the Lessor in the repair
         of damaged parking bays.

LEASE(QUINTILES)                       21                        7 DECEMBER 1999



22.      DAMAGE TO OR DESTRUCTION OF PREMISES:

22.1     If the Building or Premises is destroyed or so damaged that the Lessee
         can no longer beneficially occupy the Premises, this lease shall
         terminate when that happens unless the parties agree otherwise in
         writing.

22.2     If the Premises is significantly damaged but can still be beneficially
         occupied, this Agreement shall remain in force and the Lessor shall
         repair the damage without undue delay, but the rent shall be abated so
         as to compensate the Lessee fairly for the effects of the damage and
         repair work on the enjoyment of the Premises. Failing agreement on such
         abatement or on the applicability of this clause to any particular
         circumstances, the matter shall be referred to an expert appointed by
         the parties jointly or, if they do not agree on such appointment,
         nominated by the President for the time being of The Institute of
         Estate Agents of South Africa, and the decision of such expert shall be
         final and binding. The expert's fees and disbursements, including any
         inspection costs, shall be borne and paid by the parties in equal
         shares. Pending determination of the abatement the Lessee shall
         continue to pay the full rent for the Premises as if they had not been
         damaged, and as soon as the matter has been resolved the Lessor shall
         make the appropriate repayment, if any, to the Lessee.

22.3     Subject to 17, if any damage to the Premises or the destruction thereof
         is caused by an act or omission for which either party is responsible
         in terms of this Agreement or in law, the other party shall not be
         precluded by reason of any of the aforegoing provisions of this 22 from
         exercising or pursuing any alternative or additional right of action or
         remedy available to the latter party under the circumstances (whether
         in terms of this Agreement or in law).

23.      SPECIAL REMEDY FOR BREACH:

23.1     Should the Lessee default in any payment due under this Agreement and
         fail to remedy such default within 5 (five) days after receiving a
         written demand that it be remedied; or

23.2     fail to pay any amount owing in terms of this Agreement on due date,
         but within 5 (five) days after receipt of a notice from the Lessor
         requiring such payment to be made, on more than 3 (three) occasions
         falling within any period of 12 (twelve) calendar months; or

LEASE(QUINTILES)                       22                        7 DECEMBER 1999



23.3     commit any other breach of any term or condition of this Agreement and
         fail to remedy that breach within a period of 30 (thirty) days after
         receipt of a notice from the Lessor calling on the Lessee to do so,
         then, in any such event, the Lessor shall be entitled to cancel this
         Agreement, by notice to the Lessee, without prejudice to any rights,
         which the Lessor may have against the Lessee as a result thereof, then
         the Lessor shall be entitled, without prejudice to any alternative or
         additional right of action or remedy available to the Lessor under the
         circumstances without further notice, to cancel this Agreement with
         immediate effect, be possession of the Premises, and recover from the
         Lessee damages for the default or breach and the cancellation of this
         Agreement.

23.4     Clause 23.1 shall not be construed as excluding the ordinary lawful
         consequences of a breach of this Agreement by either party (save any
         such consequences as are expressly excluded by any of the other
         provisions of this Agreement) and in particular any right of
         cancellation of this Agreement on the ground of a material breach going
         to the root of this Agreement.

23.5     In the event of the Lessor having cancelled this Agreement justifiably
         but the Lessee remaining in occupation of the Premises, with or without
         disputing the cancellation, and continuing to tender payments of rent
         and any other amounts which would have been payable to the Lessor but
         for the cancellation, the Lessor may accept such payments without
         prejudice to and without affecting the cancellation, in all respects as
         if they had been payments on account of the damages suffered by the
         Lessor by reason of the unlawful holding-over on the part of the
         Lessee.

24.      OPTION OF RENEWAL:

24.1     The Lessee shall have the right to renew this Agreement upon the terms
         and subject to the conditions set out below.

24.2     The period for which this lease may be so renewed is five years,
         commencing on the date immediately following the date of expiry of the
         initial term of this lease.

24.3     All the terms of this Agreement shall continue to apply during the
         renewal period, save that:

         24.3.1   the rent shall be determined as set out in clause 6; and

         24.3.2   there shall be no further right of renewal.

LEASE(QUINTILES)                       23                        7 DECEMBER 1999



24.4     The right of renewal shall be exercised by notice in writing from the
         Lessee to the Lessor given and received not later than 6 (six) months
         prior to the date on which the renewal period is to commence, and shall
         lapse if not so exercised.

24.5     If the right of renewal is duly exercised, this Agreement shall be
         renewed automatically and without the need for any further act of the
         parties.

24.6     The Lessee may not, however, exercise the right of renewal while in
         breach or default of any of the terms of this Agreement.

24.7     If this Agreement does not endure at least for the full term for which
         it is initially contracted, the right of renewal shall lapse and any
         notice of exercise thereof given prior to such lapsing shall be null
         and void.

27.      NEW TENANTS AND PURCHASERS:

         The Lessee shall at all reasonable times:

25.1     during the Lease Period, allow prospective purchasers of the Property
         or of any shares or other interests in the Lessor; and

25.2     during the last 6 (six) months of the Lease Period, allow prospective
         tenants or purchasers of the Premises, to enter and view the interior
         of the Premises.

27.      COSTS:

         Each party shall bear its own legal costs incurred in the preparation
         and negotiation of this lease provided that the stamp duty payable
         thereon shall be borne and paid by the Lessee.

27.      DOMICILIA AND NOTICES:

27.1     The parties choose as their domicilia citandi et executandi the
         addresses mentioned in clause 27.2, provided that such domicilium of
         either party may be changed by written notice from such party to the
         other party with effect from the date of receipt or deemed receipt by
         the latter of such notice.

LEASE(QUINTILES)                       24                        7 DECEMBER 1999



27.2     The parties domicilia addresses:

         27.2.1   The Lessor:
                  The Centurion Wine Centre
                  123 Amkor Road
                  Lyttelton Manor X3
                  Centurion
                  0157

         27.2.2   The Lessee:

                  At the Premises

27.3     Any notice, acceptance, demand or other communication properly
         addressed by either party to the other party at the latter's domicilium
         in terms hereof for the time being and sent by prepaid registered post
         shall be deemed to be received by the latter on the 7th (seventh)
         business day following the date of posting thereof. This provision
         shall not be construed as precluding the utilisation of other means and
         methods (including telefacsimile) for the transmission or delivery of
         notices, acceptances, demands and other communications, but no
         presumption of delivery shall arise if any such other means or method
         is used.

28.      WHOLE AGREEMENT:

28.1     This is the entire agreement between the parties.

28.2     Neither party relies in entering into this agreement on any warranties,
         representations, disclosures or expressions of opinion which have not
         been incorporated into this agreement as warranties or undertakings.

28.3     No variation or consensual cancellation of this agreement shall be of
         any force or effect unless reduced to writing and signed by both
         parties.

29.      NON-WAIVER:

29.1     Neither party shall be regarded as having waived, or be precluded in
         any way from exercising, any right under or arising from this lease by
         reason of such party having at any time granted any extension of time
         for, or having shown any indulgence to, the other party with reference
         to any payment or performance hereunder, or having failed to enforce,
         or delayed in the enforcement of, any right of action

LEASE(QUINTILES)                       25                        7 DECEMBER 1999



         against the other party.

29.2     The failure of either party to comply with any non-material provision
         of this lease shall not excuse the other party from performing the
         latter's obligations hereunder fully and timeously.

30.      WARRANTY OF AUTHORITY:

         The person signing this lease on behalf of the Lessee expressly
         warrants his authority to do so.

31.      SECURITY FOR PAYMENT BY LESSEE:

31       As security for the due performance by the Lessee of the Lessee's
         obligations in terms of this Agreement the Lessee shall provide the
         Lessor on the date of signature of this Agreement by the party last
         signing, with, at the choice of the Lessor, either or both:

         31.1.1        A signed suretyship binding the Lessee to the Lessor in
                       writing as surety and co-principal debtor for all the
                       obligations of the Lessee to the Lessor under this
                       Agreement as well as those arising in consequence of any
                       termination thereof; and/or

         31.1.2        an unconditional and irrevocable bank guarantee, in a
                       form and from an institution acceptable to the Lessor, of
                       the due payment by the Lessee of the rental or any other
                       amounts payable in terms of this agreement, provided that
                       the liability of the guarantor shall be limited to an
                       amount equal to four months rental, such rental to be the
                       rental applicable to the year in respect of which the
                       amount become owing, having taken all escalations into
                       account.

31.2     The provision of the security as set out in this clause shall act as a
         suspensive condition to this Agreement becoming operational except as
         set forth in this clause and unless provision of such security is
         waived by the Lessor in writing in terms of 31.3, this lease shall not
         come into operation but shall be null and void save that the Lessee
         shall then solely bear and pay, or reimburse the Lessor on demand with,
         the costs of this lease and the Lessor's expenses in reletting the
         Premises, including any agent's commission and advertising costs.

31.3     The Lessor, by his signature to this agreement, waives the provision of
         security as contemplated in 31.2. The parties however agree that

LEASE(QUINTILES)                       26                        7 DECEMBER 1999



         the Lessor shall at any time during the Lease Period be entitled to
         call for such security in writing and the Lessee shall within 7 (Seven)
         days after receiving such notice provide the security called for
         failing which the Lessee shall be in breach of this agreement.

32.      SALE OF PREMISES

The validity of this lease shall not in any way be affected by the transfer of
the Property, Building or Premises from the Lessor pursuant to a sale thereof.
It shall accordingly, upon registration of transfer of the Property, Building or
Premises into the name of the purchaser, remain of full force and effect save
that the purchaser shall be substituted as lessor and acquire all rights and be
liable to fulfil all the obligations which the Lessor, as lessor, enjoyed
against or was liable to fulfil in favour of the Lessee in terms of this
Agreement.

DATED at CENTURION on 13 DECEMBER 1999.

AS WITNESSES:

1.   /s/ [illegible]
     -------------------------------------

                                             /s/ [illegible]
                                             ----------------------------------
                                             For and on behalf of Shibbolet
                                             (Proprietary) Limited

2.   /s/ [illegible]
     -------------------------------------

DATED at CENTURION on 13 DECEMBER 1999.

AS WITNESSES:

1.   /s/ [illegible]
     -------------------------------------

                                             /s/ [illegible]
                                             ----------------------------------
                                             For and on behalf of Quintiles
                                             Clindepharm (Proprietary) Limited

2.   /s/ [illegible]
     -------------------------------------

LEASE(QUINTILES)                       27                        7 DECEMBER 1999

EX-10.30

Ex-10.30

EX-21

Ex-21

EX-31.01

Ex-31.01

EX-31.02

Ex-31.02

EX-32.01

Ex-32.01

EX-32.02

Ex-32.02