EX-10.4 5 w17250exv10w4.htm EXHIBIT 10.4 exv10w4

Separation agreement

Employment agreement

 

Exhibit 10.1

SEPARATION AGREEMENT

     This Separation Agreement (the “Agreement”) dated as of December 14, 2006 (the “Effective Date”) is made by and between Patrick K. Donnelly (“Executive”) and Pharmaceutical Research Associates, Inc., a Virginia corporation (the “Company” or the “Employer”) (collectively referred to as the “Parties”).

     WHEREAS, Executive has been the President and Chief Executive Officer of the Company and a member of the Board of Directors of the Company (the “Board”);

     WHEREAS, the Company and Executive entered into an Employment Agreement, dated as of February 3, 2006 (the “Employment Agreement”);

     WHEREAS, the Company and Executive have agreed that Executive’s employment with the Company will terminate pursuant to Section 7(d) of the Employment Agreement and Executive desires to resign as a director of the Board and from his membership on any boards of affiliated companies; and

     WHEREAS, the Parties wish to clarify their duties and obligations upon Executive’s separation from the Company.

     NOW THEREFORE, in consideration of the promises made herein, the Parties hereby agree as follows. Capitalized Terms used herein and not otherwise defined shall have the meaning given to such terms in the Employment Agreement.

     1. Resignation of Employment and as a Director.

               (a) Executive’s service as President and Chief Executive Officer of the Company hereby terminates on the Effective Date. Executive hereby, as of the Effective Date, resigns his position as a member of the Board. Executive hereby, effective as of the Effective Date, resigns from every position Executive holds as an officer or director of any of the Company’s parents, subsidiaries or affiliated entities, both domestic and foreign. The Company will forthwith remove Executive as a signatory to all checking accounts and remove him from all foreign and domestic government and statutory filings.

               (b) From the Effective Date through December 31, 2006 Executive will continue as an “at-will” employee of the Company, but not as an officer of the Company. Executive’s service as an employee of the Company will terminate on December 31, 2006 (the “Termination Date”).

               (c) Executive’s termination of employment with the Company on the Termination Date shall be deemed to be a termination by the Employer without Cause pursuant to Section 7(d) of the Employment Agreement. Executive hereby agrees to waive the 30 day notice provision contained in Section 7(d) of the Employment Agreement. To the extent that the terms of this Agreement differ from those of Section 7(d) of the Employment Agreement, the terms of this Agreement shall supersede the terms of the Employment Agreement.

 


 

     2. Consideration. Subject to the effectiveness of this Agreement and Executive’s continued compliance with his obligations under this Agreement, the Company agrees to provide Executive with the following:

          (a) Accrued Compensation. The Company shall make a lump sum payment to Executive equal to: (a) all of Executive’s accrued but unpaid regular base salary, which is owed to Executive through the Termination Date; (b) all of Executive’s accrued but unpaid vacation time as of the Termination Date; and (c) all unpaid reasonable and necessary business expenses incurred by Executive in connection with the Company’s business through the Termination Date, in accordance with the Company’s reimbursement policies in effect as of the Termination Date (collectively, the “Accrued Compensation”). The Company shall pay the Accrued Compensation to Executive as soon as reasonably practical following the Termination Date but no later than January 8, 2007, with the exception of expense reimbursement claims, which will be paid in accordance with the Company’s reimbursement policies.

          (b) Severance. Subject to Executive signing the General Release of Claims attached hereto as Exhibit A (the “Release”) and Executive’s continued compliance with Section 11, Executive shall receive:

               (i) A total severance payment equal to $1,000,000, which amount shall be payable in equal installments during the twenty-nine (29) month period following the Termination Date in accordance with the Company’s regular payroll practice; and

               (ii) reimbursement or direct payment to the carrier for the premium costs under COBRA for Executive and to the extent applicable, his spouse and dependents, to continue coverage for eighteen months following the Termination Date under the Company’s group medical plan known as Cigna Gold Plan, as such plan may be amended from time to time for, or in such replacement plan as may be offered to, all participants in such plan.

Notwithstanding anything to the contrary in this Section 2, no payments in this Section 2 will be paid during the six-month period following Executive’s termination of employment unless the Company determines, in its good faith judgment, that paying such amounts at the time or times indicated in this Section would not cause Executive to incur an additional tax under Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) (in which case such amounts shall be paid at the time or times indicated in this Section). If the payment of any amounts are delayed as a result of the previous sentence, on the first day following the end of the six-month period, the Company will pay Executive a lump-sum amount equal to the cumulative amount that would have otherwise been paid to Executive under this Agreement during such six month period.

          (c) Consulting.

               (i) The Company shall retain Executive’s services, and Executive agrees to provide reasonable consulting services to the Company, for the period commencing on the Termination Date and ending on June 30, 2008 (the “Consulting Period”), as specified in this Section 2(c).

-2-


 

               (ii) During the Consulting Period, Executive will render to the Company such services of a consultative nature as the Company reasonably may request with respect to the Company’s business, so that the Company may continue to have the benefit of Executive’s experience and knowledge of the affairs of the Company. Executive shall be available to provide such services at reasonable times (consistent with Executive's other professional and personal obligations as may from time to time exist) by telephone, letter, e-mail, or in person. For each day or portion thereof in the first six months of the Consulting Period that the Company requests that Executive render consulting services to the Company and Executive actually renders such consulting services to the Company, the Company agrees to pay Executive a per diem of $2,000 (the “Per Diem Payment”) payable within fifteen (15) calendar days following the date that Executive submits documentation reasonably acceptable to the Company (directed to the Chairman of the Board) that evidences Executive’s rendering of consulting services. For the remainder of the Consulting Period following the initial six month period, the Company agrees to pay Executive an amount equal to the difference between (a) $200,000 and (b) the aggregate Per Diem Payments that Executive is paid for his consulting services to the Company under this Agreement for the initial six month period, payable ratably and on a monthly basis in arrears over the remaining Consulting Period.

               (iii) During the Consulting Period, the Company agrees to reimburse Executive for reasonable travel, lodging, telephone, and similar ordinary and necessary business expenses, in accordance with reimbursement policies established under the Executive’s Employment and Non Competition Agreement, incurred in connection with any consulting services provided under Section 10 of this Agreement and for which proper supporting documentation has been submitted to the Company by Executive.

          (d) Other. Executive shall not be required to return his cell phone-Blackberry to the Company and Executive may elect to transfer the phone number to a personal account. Executive shall not be required to return computer equipment maintained in his home office, including but not limited to laptop pc, printer, docking station and other connection devices, power cords, surge protectors, etc.; provided, that upon the request of the Company, the Executive shall permit the Company’s technology staff to examine such equipment and, to the extent necessary, remove any confidential or proprietary information of the Company (not including Executive’s Rolodex-type contact information) and any software for which the Company’s license is no longer applicable. The Company shall have no liability or obligations with respect to the cell phone after the Termination Date, except with respect to reasonable business expenses incurred by Executive prior to the Termination Date or incurred by Executive while providing consulting services to the Company.

        3. Options.

          (a) Executive’s outstanding options (the “Options”) to purchase shares of common stock (the “Shares”) of PRA International, a Delaware corporation (“Parent”) that are vested on the Termination Date will continue to be governed by the terms of the applicable option agreement (the “Option Agreement”) and the PRA International 2004 Incentive Award Plan through which the Options were granted, except as provided in Section 3(b). Executive’s Options that are unvested as of the Terminated Date will be forfeited on the Termination Date.

-3-


 

          (b) Executive’s vested Options that were granted on August 16, 2002 and June 28, 2001 shall remain exercisable for ten years from the applicable Option’s date of grant (as provided under Section 2(b) of the option agreements governing such Options), but subject to earlier termination pursuant to Section 12 of the PRA Holdings, Inc. Stock Option Plan (e.g., in connection with a change in control). For the avoidance of doubt, the intent of the parties is that the Options discussed in this Section 3(b) shall be exercisable for ten years following the applicable date of grant, subject to earlier termination in connection with an event such as a change in control.

     4. No Other Payments. Once the Company has paid to Executive all of the payments and benefits described in this Agreement, Executive acknowledges and agrees that he shall have received all salary, wages, bonuses, accrued vacation, commissions and any and all other benefits to which he is entitled pursuant to this Agreement or otherwise. Except for the payments provided for in this Agreement, Executive acknowledges and agrees that he no longer has any right to receive any other payments or benefits from the Company pursuant to the Employment Agreement or otherwise. Except as described in this Agreement, the Company shall have no other obligations to Executive under the Employment Agreement or otherwise, including but not limited to any payments provided for in Section 7 of the Employment Agreement. The Parties acknowledge that because funds in Executive’s 401(k) account are owned by Executive, the provisions of this paragraph do not apply to said 401(k) account.

     5. Taxes. The Company shall be entitled to withhold from any amounts payable under this Agreement any federal, state, local or foreign withholding or other taxes or charges which the Company is required to withhold, and the Company shall pay the required taxes to the applicable taxing authorities. The Company shall be entitled to rely on an opinion of counsel if any questions as to the amount or requirement of withholding shall arise. To the extent any taxes may be due on the payments to Executive provided in this Agreement beyond any withheld by the Company, Executive agrees to pay the taxes himself. Executive further agrees to provide any and all information pertaining to Executive upon request as reasonably necessary for the Company and other entities released herein to comply with applicable tax laws.

     6. Press Release. The press release issued in connection with Executive’s departure and replacement will be in substantially the form attached hereto as Exhibit B.

     7. Death or Disability. The obligations of the Company to the Executive set forth in this Agreement shall continue in the event of Executive’s death or disability; in the event of Executive’s death, the estate of the Executive shall become the obligee.

     8. Indemnification. The Company will fulfill and honor in all respects the obligations of the Company to the Executive pursuant to Article XI of the Company’s Bylaws as in effect on the date of this Agreement, and such provisions will not be amended, repealed or otherwise modified for a period of six years from the date of this Agreement in any manner that would adversely affect the rights thereunder of the Executive, unless such modification is required by law. The Company shall not take any action to reduce the coverage available to the Executive under the Company’s directors’ and officers’ liability insurance policy in effect as of the date of this Agreement.

-4-


 

     9. Non-Disparagement. The officers and directors of the Company with whom Executive worked in any twenty-four (24) months prior to the Termination Date, and who are still employed or engaged by the Company, agree not to disparage the character of Executive. Notwithstanding the foregoing, nothing in this Agreement shall preclude the officers and directors of the Company from making truthful statements that are required by applicable law, regulation or legal process.

     10. Release of Claims. Executive agrees to execute the Release. Executive hereby agrees and acknowledges that his rights to the benefits provided under this Agreement, including pursuant to Section 2, are subject to the Executive’s timely execution of such Release.

     11. Executive Covenants. Executive agrees that the provisions of Sections 9, 10, 11 and 12 of the Employment Agreement (the “Executive Covenants”) shall survive beyond the Termination Date as Post Termination Obligations referenced in Section 13 herein.

     12. Severability. In the event that any provision hereof becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement shall continue in full force and effect without said provision so long as the remaining provisions remain intelligible and continue to reflect the original intent of the Parties, except that, if a court holds or declares (in connection with an action or proceeding directly or indirectly involving the Executive or parties related to or affiliated with the Executive) that the Release is not fully enforceable and that Executive has the right to assert any claims that are released in that Release, then the Company’s obligation to make payments or provide benefits under this Agreement shall terminate, and to the extent permitted by law, as a condition of asserting any such claim against the Company, Executive will reimburse the Company for the entire cost of all payments and benefits Executive has received pursuant to Section 2 of this Agreement.

     13. Entire Agreement. This Agreement, the General Release of Claims and the Option Agreements represent the entire agreement and understanding between the Company and Executive concerning the subject matter of this Agreement, and supersede and replace any and all prior agreements and understandings between the Parties concerning the subject matter of this Agreement, including the Employment Agreement, with the exception of certain of Executive’s post-termination obligations under the Employment Agreement and the Option Agreement which are (a) specifically referenced herein, and (b) deemed to be part of this Agreement (the “Post Termination Obligations”).

     14. No Waiver. The failure of any party to insist upon the performance of any of the terms and conditions in this Agreement, or the failure to prosecute any breach of any of the terms and conditions of this Agreement, shall not be construed thereafter as a waiver of any such terms or conditions. This entire Agreement shall remain in full force and effect as if no such forbearance or failure of performance had occurred.

     15. No Oral Modification. Any modification or amendment of this Agreement, or additional obligation assumed by either party in connection with this Agreement, shall be effective only if placed in writing and signed by both Parties or by authorized representatives of each party.

-5-


 

     16. Governing Law. This Agreement shall be construed, interpreted, governed, and enforced in accordance with the laws of Delaware, without regard to conflict of law principles. The Parties hereby consent to personal and exclusive jurisdiction and venue in the state and federal courts of Delaware.

     17. Counterparts. This Agreement may be executed in counterparts, and each counterpart shall have the same force and effect as an original and shall constitute an effective, binding agreement on the part of each of the undersigned.

     18. Prevailing Parties. In the event that either the Company or Executive is successful in whole or in part in any legal or equitable action against the other party under this Agreement (either as determined by a court of competent jurisdiction pursuant to a final, non-appealable order or as agreed to by the parties pursuant to a duly executed settlement agreement), the prevailing party in any such dispute shall be entitled to receive a reimbursement of his or its reasonable attorneys’ fees and related costs associated with resolving such dispute.

     19. Voluntary Execution of Agreement. This Agreement is executed voluntarily and without any duress or undue influence on the part or behalf of the Parties hereto, with the full intent of releasing all claims and this Agreement is executed by Executive without reliance upon any statement or representation, written or oral, by the Company, its employees or any party released herein, except as set forth herein. The Parties acknowledge that:

          (a) they have read this Agreement;

          (b) they have been represented in the preparation, negotiation, and execution of this Agreement by legal counsel of their own choice or that they have voluntarily declined to seek such counsel;

          (c) they understand the terms and consequences of this Agreement and of the releases it contains;

          (d) no promise or inducement for this Agreement has been made except as set forth in this Agreement; and

          (e) they are fully aware of the legal and binding effect of this Agreement

     20. Section 409A. To the extent that the Company reasonably determines that any compensation or benefits payable under this Agreement are subject to Section 409A of the Code, this Agreement shall incorporate the terms and conditions required by Section 409A of the Code and Department of Treasury regulations as reasonably determined by the Company and Executive. To the extent applicable, this Agreement shall be interpreted in accordance with Section 409A of the Code and Department of Treasury regulations and other interpretative guidance issued thereunder, including without limitation any such regulations or other such guidance that may be issued after the Effective Date. Notwithstanding any provision of this Agreement to the contrary, in the event that following the Termination Date the Company reasonably determines that any compensation or benefits payable under this Agreement may be subject to Section 409A of the Code and related Department of Treasury guidance (including

-6-


 

such Department of Treasury guidance as may be issued after the Termination Date), the Company and Executive shall work together to adopt such amendments to this Agreement or adopt other policies or procedures (including amendments, policies and procedures with retroactive effect), or take any other commercially reasonable actions necessary or appropriate to (a) exempt the compensation and benefits payable under this Agreement from Section 409A of the Code and/or preserve the intended tax treatment of the compensation and benefits provided with respect to this Agreement, or (b) comply with the requirements of Section 409A of the Code and related Department of Treasury guidance.

[Signature Page Follows]

-7-


 

     IN WITNESS WHEREOF, the Parties have executed this Agreement on the respective dates set forth below.

 

 

 

 

 

 

 

 

 

PHARMACEUTICAL RESEARCH

 

 

 

 

ASSOCIATES, INC. a Virginia corporation

 

 

 

 

 

 

 

 

 

Dated: December 14, 2006

 

By:

 

/s/ David W. Dockhorn

 

 

 

 

Name:

 

 

David W. Dockhorn

 

 

 

 

Title:

 

Executive Vice President

 

 

 

 

 

 

 

 

 

 

 

Patrick K. Donnelly, an individual

 

 

 

 

 

 

 

 

 

Dated: December 14, 2006

 

/s/ Patrick K. Donnelly

 

 

 

 

 

 

 

-8-


 

EXHIBIT A

GENERAL RELEASE OF CLAIMS

     A general release is required as a condition for receiving the benefits described in the Separation Agreement (the “Agreement”) to which this Exhibit is attached. Thus, by executing this “General Release of Claims” (the “General Release”), you have advised us that you intend to assert no claims against Pharmaceutical Research Associates (the “Company”), its predecessors, successors or assigns, parent, affiliated companies, or shareholders and their respective officers, directors, agents and employees, and by execution of this General Release you agree to waive and release any such claims, except relating to any compensation and benefits described in the Agreement.

     You understand and agree that this General Release will extend to all claims, demands, liabilities and causes of action of every kind, nature and description whatsoever, whether known, unknown or suspected to exist, which you ever had or may now have against the Company, any parent and/or any related entities, their successors or assigns, and their respective officers, directors, agents and employees, including, without limitation, any claims, demands, liabilities and causes of action arising from your employment with the Company and the termination of that employment, including any claims for severance or vacation pay, business expenses, and/or pursuant to any federal, state, county, or local employment laws, regulations, executive orders, or other requirements, including, but not limited to, Title VII of the 1964 Civil Rights Act, the 1866 Civil Rights Act, the Americans with Disabilities Act, the Civil Rights Act of 1991, the Workers Adjustment and Retraining Notification Act, the Delaware Discrimination in Employment Act, the Virginia Constitution, the Virginia Human Rights Act, the Virginians with Disabilities Act and any other local, state or federal fair employment laws, and any contract or tort claims.

     It is further understood and agreed that you are waiving any right to initiate an action in state or federal court by you or on your behalf alleging discrimination on the basis of race, sex, religion, national origin, age, disability, marital status, or any other protected status or involving any contract or tort claims based on your termination from the Company. It is also acknowledged that your termination is not in any way related to any work-related injury.

     It is further understood and agreed that you covenant not to sue to challenge the enforceability of this General Release. It also is understood and agreed that the remedy at law for breach of the Agreement and/or General Release shall be inadequate, and the Company shall be entitled to injunctive relief.

     This General Release will be effective on the date you sign it. As this General Release affects your legal rights, we also advise you to consult with legal counsel prior to signing a copy of this General Release.

     Finally, this is to expressly acknowledge:

 

 

You understand that you are not waiving any claims or rights that may arise after the date you execute this General Release or that arise from breaches of the Agreement.

-9-


 

 

 

 

You understand and agree that the compensation and benefits described in the Agreement offer you consideration greater than that to which you would otherwise be entitled.

     I hereby state that I have carefully read this General Release and that I am signing this General Release knowingly and voluntarily with the full intent of releasing Pharmaceutical Research Associates and the related individuals and entities referenced herein from any and all claims, except as set forth herein.

 

 

 

 

 

December 14, 2006

 

/s/ Patrick K. Donnelly

 

 

 

Date

 

 

Patrick K. Donnelly

 

 

-10-


 

EXHIBIT B

FORM OF PRESS RELEASE

 


 

COMPANY CONTACTS:

 

 

 

Investors/Analysts:

 

 

Matt Bond

 

Kathy Waller

Executive Vice President & CFO

 

Financial Relations Board

(703) 464-6300

 

(312) 640-6696

THURSDAY, DECEMBER 14, 2006

PRA INTERNATIONAL ANNOUNCES MANAGEMENT AND BOARD CHANGES

ALSO UPDATES 2006 EARNINGS GUIDANCE

§

 

Donnelly steps down as Director, President and CEO of PRA

 

 

 

§

 

Melvin Booth replaces Jean-Pierre Conte as Board Chairman

 

 

 

§

 

Terrance Bieker named Director and Interim CEO

RESTON, Va., December 14, 2006 — PRA International (NASDAQ: PRAI), a leading clinical research organization, today announced the resignation of Patrick K. Donnelly as Director, President and Chief Executive Officer, effective December 14, 2006. He will be leaving the organization December 31, 2006 and will remain an outside consultant to PRA’s Board for 18 months.

The Company also announced the appointment of Melvin D. Booth as Chairman of the Board of Directors. Mr. Booth will assume the role of Chairman from Jean-Pierre Conte, who will continue to serve as a Director.

Terrance J. Bieker has been appointed to the Board of Directors and named Interim CEO until a permanent replacement can be found.

“After 13 rewarding years with PRA I have made the decision to leave the Company to embrace new challenges and opportunities,” said Mr. Donnelly. “I am grateful for the time I’ve spent at PRA and believe I am leaving the Company in great hands with a tremendous management team in place. It is now time for PRA to be led by a CEO with a more scientific and therapeutic focus.”

“On behalf of the entire Board, I’d like to express our sincere gratitude to Pat for his dedicated service to PRA International,” said incoming Chairman, Mel Booth. “Pat has guided the company through a period of unparalleled growth. His numerous accomplishments include navigating three leveraged financings; spearheading a successful corporate reorganization and IPO; skillfully acquiring and integrating 10 strategic acquisitions; and developing global service offerings that have added substantially to stockholder value. We wish him well in his future endeavors. In the meantime, we expect a seamless transition and look forward to achieving our

 


 

strategic goals. The Company has already engaged a global executive recruitment firm to assist in identifying a permanent CEO.”

Mr. Booth added, “Terry Bieker brings a wealth of global strategic and operating experience to the Board and is well positioned to serve as Interim CEO. His experience includes executive positions in the fields of drug discovery, clinical diagnostics and medical devices. We believe Terry is an excellent choice to oversee this transition in executive leadership.”

Most recently, Mr. Bieker served as Director, President and Chief Executive Officer of BioSource International, Inc. from November 2003 to November 2005. From 1999 to 2003, he served as Director and Chief Executive Officer of several medical device corporations, including Axia Medical and Transfusion Technologies Corporation and as Chief Operating Officer for SafeSkin, Inc. Prior to that, Mr. Bieker was Chairman, President and Chief Executive Officer of Sanofi Diagnostics Pasteur, Inc. from 1989 to 1997 and held various executive positions with Genetic Systems Corporation and American Hospital Supply Corporation from 1978 to 1983. Mr. Bieker graduated from the University of Minnesota in 1963.

Mr. Bieker noted, “PRA has assimilated a strong management team and has in place a solid foundation upon which to implement its five key growth strategies. I believe the Company is well positioned to continue to be one of the best Clinical Research Organizations in the world and to continue to provide truly outstanding service to all of our clients.”

Mr. Conte, who will continue to serve as a Director, is stepping aside as Chairman to allow Mr. Booth to assume that role. “With more than 29 years of senior management experience in healthcare and the life sciences, Mel has distinguished himself as a global leader in the healthcare industry. He has been instrumental in the growth and success of a number of top life sciences companies,” said Mr. Conte. “We believe Mel’s expertise in strategic planning, business development and international operations will be a tremendous asset to PRA.”

Mr. Booth has been a Director of PRA International since November 2004 and was a Director of MedImmune, Inc. from November 1998 until March 2005, serving as its President and Chief Operating Officer from October 1998 through December 2003. Prior to joining MedImmune, Mr. Booth was President, Chief Operating Officer, and a member of the Board of Directors of Human Genome Sciences, Inc. from July 1995 to October 1998. Mr. Booth held many executive positions from 1975 to July 1995 at Syntex, including President of SyntexU.S. pharmaceutical business. He is currently also a board member of Millipore Corporation, Prestwick Pharmaceuticals, Inc. and Ventria Bioscience. Mr. Booth graduated with honors and holds an honorary Doctor of Science degree from Northwest Missouri State University. Mr. Booth also currently serves as Chairman of the Audit Committee of the Board of Directors of PRA International.

2006 Earnings Guidance

Today, PRA also narrowed its 2006 service revenue guidance to $300-305 million, the lower end of its current range. The Company is also revising its fully diluted earnings per share to $1.08-$1.11, which includes one-time charges of approximately $0.05 per share associated with

 


 

Mr. Donnelly’s resignation and $0.02 per share for a write-off of amounts owed to PRA relating to the financial failure of certain biotech customers.

     PRA will hold a conference call Friday, December 15, 2006 at 1:00 p.m. ET to discuss the management changes and 2006 earnings guidance. The call will be available via live webcast at www.prainternational.com. Please go to the website at least 15 minutes early to register, download and install any necessary audio software. The call may also be accessed by dialing                     . A replay of the call will remain available at the site for 30 days.

Cautionary Note Regarding Forward-Looking Statements

This news release contains forward-looking statements that are subject to risks and uncertainties relating to PRA International’s future financial and business performance, as well as any other predictive statements that depend on future events or conditions, or that include words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “may,” “will,” “estimate” or similar expressions of futurity. You should not place undue reliance on any forward-looking statements, which represent the company’s statements only as of the date of this news release and are not intended to give any assurance as to actual future events. Factors that might cause future events to differ include: operational and personnel challenges that could result from management changes; the results of the executive search process; the ability to execute our strategy during management transitions; the ongoing need for early and late phase drug development services; project cancellations and timing issues; our ability to attract and retain qualified personnel; our ability to continue providing our services effectively, including the quality or accuracy of the data or reports provided and our ability to meet agreed-upon schedules; the ability and willingness of our clients to continue to spend on research and development at rates comparable to or greater than historical levels; trends or events affecting the CRO industry and the demand for CRO services; government regulation, including regulatory standards applicable to CRO services; evolving industry standards and technological changes; and general business and economic conditions. Events relating to PRA International could differ materially from those anticipated in these forward-looking statements. Although these statements are based upon assumptions company management believes to be reasonable based upon available information, they are subject to the foregoing risks and uncertainties as well as those described more fully in the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of our annual report on Form 10-K. This document can be accessed in the SEC’s EDGAR database found at http://www.sec.gov. Please note that PRA International assumes no obligation to update any of the forward-looking statements in this release, except as required by applicable securities laws.

About PRA International

PRA International is one of the world’s leading global clinical development organizations, with over 2,700 employees working from offices in North America, Europe, South America, Africa, Australia, and Asia. PRA, an ISO 9001:2000 registered company, delivers services to its clients through a unique approach called Project Assurance®, which represents the company’s

 


 

commitment to reliable service delivery, program-level therapeutic expertise, easy, global access to knowledge, and involved senior management.

To learn more about PRA International, please visit www.prainternational.com or call our World Headquarters at +1 (703) 464-6300.

 

 

EMPLOYMENT AND NON-COMPETITION AGREEMENT
BETWEEN

Patrick K. Donnelly

AND

PHARMACEUTICAL RESEARCH ASSOCIATES, INC.

     THIS EMPLOYMENT AGREEMENT (this “Agreement”) is made as of the 3rd day of February, 2006 (the “Effective Date”), by and between Pharmaceutical Research Associates, Inc., a Virginia corporation (“Employer”), having its principal office in the Commonwealth of Virginia, which is a wholly-owned subsidiary of PRA International, a Delaware corporation (“PRA International”), and Patrick K. Donnelly (“Employee”).

     WHEREAS, Employer and Employee desire to enter into an agreement for the employment by Employer of Employee commencing on the Effective Date.

     WHEREAS, by entering into this Agreement, the terms of the Employee’s employment with the Employer will be governed by the terms and conditions of this Agreement and any other prior agreement between the Employee and the Employer relating to the Employee’s employment with the Employer or any of its affiliated entities is superseded by the terms of the Agreement.

     NOW, THEREFORE, in consideration of the mutual promises, covenants and conditions set forth below, which consideration is acknowledged by both parties to be good and sufficient, the parties hereto agree as follows:

     1. Position. Employer hereby agrees to employ Employee as of the Effective Date (as defined herein) and Employee hereby accepts employment as of the Effective Date in the position of President and Chief Executive Officer with appropriate title, rank, status and responsibilities as determined from time to time by the Board of Directors of PRA International (“Board”) upon the terms and conditions hereinafter set forth. Employee also currently serves as a member of the Board.

     2. Employment Period.

          (a) The period of employment under this Agreement shall begin on the Effective Date and shall end on February 28, 2009, unless terminated sooner pursuant to Section 7 of this Agreement. This Agreement shall not automatically renew upon the expiration of its term, and continued employment thereafter by the Employee with Employer shall be terminable by either party with or without cause and with or without notice unless the parties enter into a separate written agreement for employment;

 


 

provided, however, that Employee’s obligations under Sections 9, 10, 11 and 12 of this Agreement shall survive the expiration of this Agreement in any and all events (but Employer’s obligations under Section 7 shall not survive the expiration of this Agreement).

          (b) The period during which Employee is employed under the terms of this Agreement is the “Employment Period.”

     3. Duties. The Board shall have the power to determine the specific duties that shall be performed by Employee and the means and manner by which those duties shall be performed, but such duties shall be consistent with the executive position of Employee.

          (a) During the Employment Period, Employee agrees to use his best efforts in the business of Employer and to devote his full time, skill, attention and energies to the business of Employer. Employee shall not be engaged in any other business activity which shall be competitive with the business of Employer or which may (i) interfere with Employee’s ability to discharge his responsibilities to Employer; or (ii) detract from the business of Employer. Employee shall not:

          (i) work either on a part-time or independent contracting basis for any other company, business or enterprise without the prior written consent of the Board; or

          (ii) serve on the board of directors or comparable governing body of any other material business, civic or community corporation or similar entity without the prior written consent of the Board (excluding those positions Employee holds and boards of directors on which Employee serves as of the date of this Agreement, which positions and boards, if any, are listed on Exhibit A hereto), such consent which shall not be unreasonably withheld.

          (b) Employee agrees to use his reasonable efforts to impart his skill and knowledge relating to the business of Employer to such individuals as are designated by Employer, and to train such individuals in the aspects of the business with which Employee is familiar. In addition, at the request of Employer and without additional compensation, Employee shall use his best efforts to record and document his knowledge relating to the business of Employer.

     4. Compensation. For all services rendered by Employee under this Agreement, for, and in consideration of, Employee’s agreements and undertaking contained in this Agreement (including, without limitation, those contained in Sections 9 and 10 below), and, subject to Sections 7 and 8 below, during the Employment Period, Employer shall provide Employee with the following:

2


 

          (a) Base Salary. Employer shall pay to Employee, in equal bi-monthly installments, a base salary of USD$425,000 per year, less relevant deductions. Employee shall be eligible for salary increases, which may be based on performance and/or competitive market factors, as determined under the provisions of any salary policy of Employer that is generally applicable to Employer’s employees, provided that any such increases shall be reviewed and approved in advance by the Compensation Committee of the Board. Employee shall be eligible for such other increases in compensation as are otherwise imposed by the Compensation Committee of the Board, in its discretion, from time to time.

          (b) Bonus. Employee shall participate in the PRA International Bonus Plan (“Bonus Plan”) approved by the Compensation Committee of the Board with an annual bonus target of USD$250,000 less relevant deductions. Employee’s eligibility for bonus payments under the Bonus Plan shall be governed by the terms of said Bonus Plan (hereby incorporated by reference). Any bonus payments must be approved by the Compensation Committee of the Board in advance of payment.

          (c) Long Term Incentives. Employee shall participate under the terms of the PRA International 2004 Incentive Award Plan (“Incentive Award Plan”), according to the terms set forth in Exhibit B.

          (d) Review. It is understood and agreed that the Compensation Committee of the Board will review compensation matters of Employer on a regular basis, and will (on at least an annual basis) set all annual bonus targets, salaries and benefits in which Employee shall be eligible to participate.

     5. Benefits. Employee shall be eligible to participate in Employer’s standard benefits programs, which presently include health, life and disability insurance, and those additional benefits (the “Additional Benefits”) currently offered to Employer’s executive staff, including monthly car allowance, as described in Exhibit C. It is agreed that the nature and amount of the Additional Benefits, if any, shall be determined from time to time by the Compensation Committee of the Board, in its discretion, provided that no Additional Benefits (as defined above) will be materially reduced. Employee shall be entitled to paid vacation in accordance with the Employer’s vacation policies in effect for executive staff during the Employment Period (currently 20 days of paid time off (“PTO”)). Employee shall be covered by the holiday policy of the Employer and, by any other pension or retirement plan, disability benefit plan or any other benefit plan or arrangement of Employer determined by the Board to be applicable to Employee.

     6. Expense Reimbursement. Subject to such conditions as Employer may from time to time determine and pursuant to Employer’s expense reimbursement policy then in place, Employer shall reimburse Employee for reasonable expenses incurred by Employee in connection with the business of Employer and the performance of Employee’s duties hereunder. Employee shall be entitled to travel business class on all business related transoceanic airplane flights where the specific segment of the flight is over 5 hours in length.

3


 

     7. Termination. This Agreement may be terminated under the following circumstances, having the consequences described in Sections 7 and 8:

          (a) Death of Employee. This Agreement shall terminate immediately upon the death of Employee. Should this Agreement be terminated pursuant to this Section 7(a), Employee shall be entitled to Termination Payments as provided for in Section 7(g).

          (b) Termination by Employer for Disability of Employee. If during the Employment Period, Employee shall be prevented from performing his duties for a continuous period of one hundred and eighty (180) days by reason of disability that renders Employee physically or mentally incapable of performing substantially all of his duties under this Agreement (excluding infrequent and temporary absences due to illness), Employer may terminate Employee’s employment hereunder. If after a period of disability commences (but prior to termination of Employee’s employment), Employee returns to work for a period of at least twenty (20) consecutive work days, the period of disability shall terminate and not be counted towards any period of subsequent disability. For purposes of this Agreement, Employer, upon the advice of a qualified and impartial physician, at Employer’s expense, shall determine whether Employee has become physically or mentally incapable of performing substantially all of his duties under this Agreement. Employer shall give Employee (or his guardian, as applicable) thirty (30) days’ written notice of termination of the Employment Period under this Section 7(b). Should the Employee be terminated pursuant to this Section 7(b), Employee shall be entitled to Termination Payments as provided for in Section 7(g).

          (c) Termination by Employer for Cause. Employer may terminate Employee’s employment at any time for Cause. For purposes of this Agreement, “Cause” includes, but is not limited to: (i) a material breach of this Agreement by Employee (where Employee fails to cure such breach within five (5) business days after being notified in writing by Employer of such breach); (ii) Employee’s failure to competently perform his material assigned duties as reasonably determined by the Board; (iii) Employee engaging in or causing an act that has a material adverse impact on the reputation, business, business relationships or financial condition of Employer; (iv) the conviction of or plea of guilty or nolo contendre by Employee to a felony or any crime involving moral turpitude; (v) Employee’s gross misconduct, dishonesty, or fraud; or (vi) Employee’s willful refusal to perform specific directives of the Board which are consistent with the scope, ethics and nature of Employee’s duties and responsibilities hereunder. Notwithstanding the foregoing, “Cause” shall not include a situation whereby Employer asks Employee to be based at any office or location or to relocate to any location other than within 35 miles of Employee’s then current location and Employee declines to do so. Termination by Employer for Cause hereunder shall not abrogate the rights and remedies of Employer in respect of the breach or wrongful act giving rise to such termination. In the event of termination by Employer for Cause,

4


 

Employee shall receive any and all accrued but unpaid base salary compensation (and accrued PTO, as applicable) due to Employee as of the Termination Date.

          (d) Termination by Employer without Cause. This Agreement may be terminated by Employer for reasons other than death, disability or Cause upon thirty (30) days’ written notice given to Employee. Should the Employee be terminated pursuant to this Section 7(d), Employee shall be entitled to Termination Payments as provided for in Section 7(g).

          (e) Termination by the Employee without Good Reason. This Agreement may be terminated by Employee upon sixty (60) days’ written notice given to Employer. In the event of termination by Employee without Good Reason, Employer may immediately relieve Employee of all duties and immediately terminate this Agreement, provided that Employer shall pay Employee any and all accrued but unpaid base salary compensation (and accrued PTO, as applicable) due to Employee as of the Termination Date.

          (f) Termination by Employee for Good Reason. This Agreement may be terminated by Employee at any time for Good Reason. For purposes of this Agreement, “Good Reason” shall mean (i) any material breach of this Agreement by Employer (where Employer fails to cure such breach within ten (10) business days after being notified in writing by Employee of such breach); (ii) the diminution, without Employee’s written consent, of Employee’s position, title, authority, duties or responsibilities as indicated in this Agreement; (iii) the Company requiring the Employee, without Employee’s written consent, to be based at any office or location or to relocate to any location other than within 35 miles of Employee’s then current location; and (iv) Employee not being elected as a member of the Board by PRA International’s shareholders or being removed from the Board without cause in accordance with PRA International’s bylaws. Termination by Employee hereunder in this Section 7(f) shall not abrogate the rights and remedies of Employee in respect of the breach giving rise to such termination.

          (g) Termination Payments.

               A. If Employee’s employment is terminated pursuant to Section 7(a) (Employee’s Death), 7(b) (by Employer for Employee’s Disability), 7(d) (by Employer without Cause) or 7(f) (by Employee for Good Reason) (each of the circumstances in this Section 7(g)(A) being known as a “Termination Event”), Employer shall provide Employee (or, in the case of his death, his estate, heirs or legal representatives) the following (collectively, the “Termination Payments”):

(i) any and all accrued but unpaid base salary compensation (and accrued PTO, as applicable) due to Employee as of the date on which the Employment Period ends (the “Termination Date”), which shall be paid on the Termination Date; and

5


 

(ii) Employee’s full base salary (payable bi-monthly at the same time Employee would otherwise receive such base salary if Employee were still employed by Employer) for fifteen (15) months after the Termination Date; and

(iii) health benefits after the Termination Date pursuant to COBRA coverage (reimbursed by Employer for the first fifteen (15) months) under Employer’s health benefit plan under which Employee was receiving coverage during the Employment Period.

               B. If a Termination Event (other than the death of Employee as specified in Section 7(a)) occurs within twelve months after a Change in Control, then Employee is entitled to the Termination Payments as stated in Section 7(g)(A)(i) (ii) and (iii) above, except that the period for which salary and benefits are provided in Sections 7(g)(A)(ii) and (iii) shall be thirty (30) months, and all payments to be made pursuant to those sections shall be paid to Employee in a lump sum upon the Termination Event. For purposes of this Section and this Agreement, “Change in Control” shall mean: (i) the sale of all or substantially all of the assets of PRA International; or (ii) the consummation of a merger or consolidation of PRA International with any other corporation other than (A) a merger or consolidation which would result in the voting securities of PRA International outstanding immediately prior thereto continuing to represent more than fifty percent (50%) of the combined voting power of the voting securities of PRA International, or such surviving entity, outstanding immediately after such merger or consolidation, or (B) a merger or consolidation effected to implement a recapitalization of PRA International (or similar transaction) in which no “person” (as defined below) acquires more than thirty percent (30%) of the combined voting power of PRA International’s then-outstanding securities; or (iii) any “person,” as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (other than (1) PRA International or (2) any corporation owned, directly or indirectly, by PRA International or the shareholders of PRA International in substantially the same proportions as their ownership of stock in PRA International), becomes after the Effective Date the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of PRA International representing thirty percent (30%) or more of the combined voting power of PRA International’s then outstanding securities.

               C. Employer’s obligation to make any Termination Payments provided in Section 7(g)(A) and (B) above is conditioned upon Employee’s execution and non-recision of a general release in the reasonable form provided by Employer.

               D. If a Termination Event occurs under Section 7(g)(B), Employee agrees that in consideration of Employer’s obligation to make the

6


 

payments provided in Section 7(g)(B), Section 10(a) (Non-Competition and Non-Solicitation) will not apply and, instead, the following provision shall apply:

Employee agrees that for a period of thirty (30) months after Employee’s employment with Employer ceases (the “Change in Control Noncompetition Period”), Employee will not whether as owner, manager, officer, director, employee, consultant or otherwise, be engaged or employed by a Change in Control Competing CRO to provide Customer Services that are the same or substantially related to the Customer Services that Employee performed for Employer at any time during the twenty-four (24) months prior to the Termination Date.

Employer acknowledges and agrees that ownership by Employee of not more than one percent (1.0%) of the shares of any corporation having a class of equity securities actively traded on a national securities exchange or on the Nasdaq Stock Market shall not be deemed, in and of itself, to violate the prohibitions set forth in this section.

For the purposes of this Section 7(g)(D), the terms “Customer Services” and “Customer” shall have the same meanings as stated in Section 10(a). For purposes of this Section 7(g)(D), “Change in Control Competing CRO” means any entity (and its respective affiliates and successors) that competes with Employer in the provision of Customer Services to Customers as a contract research organization and assumes, as an independent contractor with a drug sponsor, one or more of the obligations of a drug sponsor, e.g., design of a protocol, selection or monitoring of investigations, evaluating reports, and preparation of material to be submitted to the Food and Drug Administration.

          (h) Tax Provisions. In the event that any payments under this Agreement or any other compensation, benefit or other amount from Employer for the benefit of Employee are subject to the tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”) (including any applicable interest and penalties, the “Excise Tax”), no such payment (“Parachute Payment”) shall be reduced (except for required tax withholdings) and Employer shall pay to Employee by the earlier of the date such Excise Tax is withheld from payments made to Employee or the date such Excise Tax becomes due and payable by Employee, an additional amount (the “Gross-Up Payment”) such that the net amount retained by Employee (after deduction of any Excise Tax on the Parachute Payments, taxes based upon the Tax Rate (as defined below) upon the payment provided for by this Section 7(h) and Excise Tax upon the payment provided for by this Section 7(h)), shall be equal to the amount Employee would have received if no Excise Tax had been imposed. A tax counsel chosen by the Employer’s independent auditors, provided such person is reasonably acceptable to the Employee (“Tax Counsel”), shall determine in good faith whether any of the Parachute Payments are subject to the Excise Tax and the amount of any Excise Tax, and Tax Counsel shall promptly notify Employee of its determination. Employer and Employee shall file all tax returns and reports regarding such Parachute Payments in a manner consistent with Employer’s reasonable good faith determination. For purposes of determining the amount of the Gross-Up Payment, Employee shall be deemed to pay

7


 

taxes at the Tax Rate applicable at the time of the Gross-Up Payment. In the event that the Excise Tax is subsequently determined to be less than the amount taken into account hereunder at the time a Parachute Payment is made, Employee shall repay to Employer promptly following the date that the amount of such reduction in Excise Tax is finally determined the portion of the Gross-Up Payment attributable to such reduction (without interest). In the event that the Excise Tax is determined to exceed the amount taken into account hereunder at the time a Parachute Payment is made (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-Up Payment), Employer shall pay the Employee an additional amount with respect to the Gross-Up Payment in respect of such excess (plus any interest or penalties payable in respect of such excess) at the time that the amount of such excess is finally determined. Employer shall reimburse Employee for all reasonable fees, expenses, and costs related to determining the reasonableness of Employer’s position in connection with this paragraph and preparation of any tax return or other filing that is affected by any matter addressed in this paragraph, and any audit, litigation or other proceeding that is affected by any matter addressed in this Section 7(h) and an amount equal to the tax on such amounts at Employee’s Tax Rate. For the purposes of the foregoing, “Tax Rate” means the Employee’s effective tax rate based upon the combined federal and state and local income, earnings, Medicare and any other tax rates applicable to Employee, all at the highest marginal rate of taxation in the country and state of Employee’s residence on the date of determination, net of the reduction in federal income taxes which could be obtained by deduction of such state and local taxes.

     8. Survival of Sections of this Agreement. Without regard to the reason for termination of this Agreement or the employment of Employee, and notwithstanding anything contained in this Agreement to the contrary, it is expressly understood and agreed that Employee’s obligations under Sections 9, 10, 11 and 12 of this Agreement shall survive termination of this Agreement in any and all events.

     9. Confidential Information and Certain Property Matters.

          (a) Employee recognizes that information, knowledge, contacts and experience relating to the businesses, operations, properties, assets, liabilities and financial condition of Employer and the markets and industries in which it operates, including, without limitation, information relating to business plans and ideas, trade secrets, intellectual property, know-how, formulas, processes, research and development, methods, policies, materials, results of operations, financial and statistical data, personnel data and customers in and related to the markets and industries in which Employer operates (“Confidential Information”), is considered by Employer to be valuable, secret, confidential and proprietary. Employee hereby acknowledges and agrees that the Confidential Information is valuable, secret, confidential and proprietary to Employer, and further agrees that he shall not, at any time (whether during or after the Employment Period), make public, disclose, divulge, furnish, release, transfer, sell or otherwise make available to any person any of the Confidential Information, or otherwise use or disclose any of the same or allow any of the same to be used or disclosed for any purpose, other than as may be permitted to Employee under this Agreement. Notwithstanding the

8


 

foregoing, Employee may, without violating this Section 9(a), disclose Confidential Information if (i) such disclosure is required to comply with a valid court order or any administrative law order or decree; (ii) Employee gives Employer advance written notice of the required disclosure so that Employer may, if it wishes, seek an appropriate protective order; and (iii) Employee, in any event, requests that any disclosed information be afforded confidential treatment, to the greatest extent possible.

          (b) Employee shall fully disclose to Employer all Inventions made or conceived by him during the Employment Period that would be deemed applicable, useful or otherwise beneficial to or in respect of the current business of Employer, in whole or in part. “Inventions” include, but are not limited to, customer list compilations, machinery, apparatus, products, processes, results of research and development (including without limitation results that constitute trade secrets, ideas and writings), computer hardware, information systems, software (including without limitation source code, object code, documentation, diagrams and flow charts) and any other discoveries, concepts and ideas, whether patentable or not (including without limitation processes, methods, formulas, and techniques, as well as improvements thereof or know-how related thereto, concerning any present or prospective business activities of Employer). Any and all Inventions shall be the absolute property of Employer or its designees, and Employee acknowledges that he shall have no interest whatsoever in such Inventions. At the request of Employer and without additional compensation, Employee (i) shall make application in due form for United States letters patent and foreign letters patent on such Inventions, and shall assign to Employer all his right, title and interest in such Inventions; (ii) shall execute any and all instruments and do any and all acts necessary or desirable in connection with any such application for letters patent or in order to establish and perfect in Employer the entire right, title and interest in such Inventions, patent applications or patents; and (iii) shall execute any instruments necessary or desirable in connection with any continuations, renewals or reissues thereof or in the conduct of any related proceedings or litigation. Except as authorized by Employer in writing, Employee shall not disclose, directly or indirectly, to any person other than Employer, any information relating to any Invention or any patent application relating thereto.

          (c) Employee hereby acknowledges and agrees that the work performed by Employee pursuant to his employment by Employer will be specifically ordered or commissioned by Employer, and that such work shall be considered a “work for hire” as defined in the Copyright Revision Act of 1976 (the “Act”), granting Employer full ownership to the work and all rights comprised therein. In addition, Employee hereby waives in favor of Employer any and all moral rights in the work contemplated by this Section 9(c) that Employer now has or in the future may have. Should any work not fall within the definition of a “work for hire” as set forth in such Act, Employee hereby transfers and assigns to Employer full ownership of the copyright to the work and all rights comprised therein. Employee shall sign all applications for registration of such copyright as are requested by Employer, and shall sign all other

9


 

writings and instruments and perform all other acts necessary or desirable to carry out the terms of this Agreement.

     10. Non-Competition and Non-Solicitation

          (a) With the exception of when a Termination Event occurs under Section 7(g)(B) (in which case, Section 7(g)(D) shall apply), Employee agrees that during the Employment Period and for a period of fifteen (15) months after Employee’s employment with Employer ceases, for whatever reason (the “Noncompetition Period”), Employee will not, within the country where Employee’s office with Employer was located at the Termination Date, whether as owner, manager, officer, director, employee, consultant or otherwise, be engaged or employed by a Competing CRO to provide Customer Services that are the same or substantially related to the Customer Services that Employee performed for Employer at any time during the twenty-four (24) months prior to the Termination Date.

Employer acknowledges and agrees that ownership by Employee of not more than one percent (1.0%) of the shares of any corporation having a class of equity securities actively traded on a national securities exchange or on the Nasdaq Stock Market shall not be deemed, in and of itself, to violate the prohibitions set forth in this section.

For the purposes of this Agreement, the term “Customer Services” means any product or service provided by Employer to a third party for remuneration, including, but not limited to, on a contract or outsourced basis, assisting pharmaceutical or biotechnology companies in developing and taking drug compounds, biologics, and drug delivery devices through appropriate regulatory approval processes, (i) during the Employment Period or (ii) about which Employee has material knowledge and that Employee knows Employer will provide or has contracted to provide to third parties during the twelve (12) months following the Employment Period. “Customer” means any person or legal entity (and its subsidiaries, agents, employees and representatives) about whom Employee has acquired material information based on employment with Employer and as to whom Employee has been informed that Employer provides or will provide Customer Services. “Competing CRO” means any of the following entities and their affiliates and successors to the extent that and for so long as those said entities, affiliates, and successors directly compete with Employer in the provision of Customer Services to Customers: Charles River Laboratories International, Inc., Covance Inc., ICON plc, INC Research, Inc., Kendle International Inc., MDS Pharma Services, PAREXEL International Corporation, Pharmaceutical Product Development, Inc., PharmaNet, Quintiles Transnational Corp., United BioSource Corporation, and United HealthCare Corporation.

          (b) Employee agrees that he shall not, during the Employment Period and for a period of twelve (12) months after Employee’s employment with Employer ceases (twenty-four (24) months in the event that a Termination Event occurs under Section 7(g)(B)), directly or indirectly, whether as owner, manager, officer, director, employee, consultant or otherwise, solicit the business of, or accept business

10


 

from any Customer of Employer at the Termination Date, unless the business being solicited or accepted is not in competition with or substantially similar to Employer’s Customer Services or otherwise on behalf of Employer.

          (c) Employee agrees that he shall not, during the Employment Period and for a period of twelve (12) months after Employee’s employment with Employer ceases (twenty-four (24) months in the event a Termination Event occurs under Section 7(g)(B)), directly or indirectly, solicit or induce (or attempt to solicit or induce) to leave the employ of Employer or any of its affiliates for any reason whatsoever any person employed by Employer or any of its affiliates at the time of the act of solicitation or inducement.

          (d) During and after the Employment Period, Employee agrees not to disparage Employer or any of its affiliates. During and after the Employment Period, the officers with whom Employer worked in any twenty-four (24) months prior to the Termination Date agree not to disparage the character of Employee.

          (e) Employee hereby specifically acknowledges and agrees that the provisions of this Section 10 (as well as Section 7(g)(D)) are reasonable and necessary to protect the legitimate interests of Employer, and that Employee desires to agree to the provisions of this Section 10 (as well as Section 7(g)(D)). In the event that any of the provisions of this Section 10 (or Section 7(g)(D)) should ever be held to exceed the time, scope or geographic limitations permitted by applicable law, it is hereby declared to be the intention of the parties hereto that such provision be reformed to reflect the maximum time, scope and geographic limitations that are permitted by such law.

          (f) Employee hereby acknowledges and agrees that, owing to the special, unique and extraordinary nature of the matters covered by this Section 10 (as well as Section 7(g)(D)), in the event of any breach or threatened breach by Employee of any of the provisions hereof, Employer would suffer substantial and irreparable injury, which could not be fully compensated by monetary award alone, and Employer would not have adequate remedy at law. Therefore, Employee agrees that, in such event, Employer shall be entitled to temporary and/or permanent injunctive relief against Employee, without the necessity of proving actual damages or of posting bond to enforce any of the provisions of this Section 10 (or Section 7(g)(D)), and Employee hereby waives the defenses, claims, or arguments that the matters are not special, unique, and extraordinary, that Employer must prove actual damages, and that Employer has an adequate remedy at law. In addition, Employee shall pay to Employer and Employer shall be awarded the reasonable attorneys’ fees and costs incurred by Employer as a result of Employee’s breach of Employee’s obligations contained in this Section 10 (or Section 7(g)(D)).

          (g) Employee further agrees that the rights and remedies described in this Section 10 (and Section 7(g)(D)) are cumulative and shall be in addition

11


 

to and not in lieu of any other rights and remedies otherwise available under this Agreement, or at law or in equity, including but not limited to monetary damages.

          (h) Notwithstanding any other provision of this Agreement, Employee further agrees that in the event of any breach by Employee of any of the provisions of this Section 10 (or Section 7(g)(D)), all obligations and liabilities of Employer under this Agreement (including, but not limited to, Sections 6 and 7 hereof) shall immediately terminate and be extinguished.

          (i) Employee agrees that Employer shall have the right to disclose this Agreement or its contents to any future employer of Employee for the purpose of providing notice of the post-employment restrictions contained herein. Employer shall provide Employee with written notice if and when Employer discloses the existence of this Agreement to any future employer of Employee.

     11. Records. Upon termination of this Agreement for any reason, Employee shall promptly deliver to Employer all property of Employer then in Employee’s possession or under his control, including but not limited to: (i) any and all correspondence, mailing lists, drawings, blueprints, manuals, letters, records, notes, notebooks, reports, flow-charts, programs, proposals, computer tapes, discs and diskettes; (ii) any and all documents concerning or relating to Employer’s business, clients, customers, investors or lenders, or concerning products, processes or technologies used by Employer; (iii) any and all documents or materials containing or constituting Confidential Information; and (iv) any laptops or computer equipment issued by Employer.

     12. Arbitration. Except with respect to any attempt to obtain preliminary injunctive relief to enforce the post-employment restrictive provisions of this Agreement (in which case any such matter may be brought initially in a court of competent jurisdiction for purposes of resolving any request for preliminary injunctive relief), all disputes between Employer and Employee hereunder, or otherwise arising out of the employment or termination of employment of Employee, including but not limited to disputes arising under any state or federal employment discrimination law, shall be settled by arbitration pursuant to the then in effect rules for the resolution of employment disputes of the American Arbitration Association, in Washington, D.C. Arbitration hereunder shall be by a single arbitrator appointed by mutual agreement of the parties. The single arbitrator shall have the authority to summarily dismiss any claim or claims brought in arbitration prior to a hearing on the merits. The award rendered by the arbitrator shall be conclusive and binding upon the parties hereto. Each party shall pay its own expenses of arbitration and the expenses of the arbitrator shall be equally shared.

     13. Full Settlement; Mitigation, Costs after a Change in Control. In no event shall Employee be obligated to seek other employment or take any other action by way of mitigation of the amounts (including amounts for damages for breach) payable to Employee under any of the provisions of this Agreement, and such amounts shall not be

12


 

reduced whether Employee obtains other employment. In addition, following a Change in Control only, Employer’s obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which Employer may have against Employee or others. Notwithstanding any other provisions in this Agreement to the contrary, in the event that, following a Change in Control, any successor in interest to Employer unsuccessfully contests and/or challenges any of Employer’s rights under this Agreement, then the successor in interest to Employer shall pay Employee’s reasonable attorney’s fees and costs incurred in such contest or challenge.

     14. Entire Agreement. This Agreement (together with Exhibits A, B, and C hereto) supersedes and terminates any and all prior agreements or contracts, written or oral, entered into between Employer and Employee with regard to the subject matter hereof. Employee acknowledges and agrees that Employee is not entitled to any salary, bonus, benefits, severance, deferred compensation or similar payments from Employer or any of its affiliates except as expressly set forth herein. This instrument contains the entire agreement between Employer and Employee regarding the employment of Employee by Employer, and any representation, promise or condition in connection therewith not in writing shall not be binding upon either party. No amendment, alteration or modification of this Agreement shall be valid unless in each instance such amendment, alteration or modification is expressed in a written instrument duly executed in the name of the party or parties making such amendment, alteration or modification.

     15. Severability. The provisions of this Agreement shall be deemed severable, and if any part of any provision is held to be illegal, void, voidable, invalid, nonbinding or unenforceable in its entirety or partially or as to any party, for any reason, such provision may be changed, consistent with the intent of the parties hereto, to the extent reasonably necessary to make the provision, as so changed, legal, valid, binding and enforceable. If any provision of this Agreement is held to be illegal, void, voidable, invalid, nonbinding or unenforceable in its entirety or partially or as to any party, for any reason, and if such provision cannot be changed consistent with the intent of the parties hereto to make it fully legal, valid, binding and enforceable, then such provision shall be stricken from this Agreement, and the remaining provisions of this Agreement shall not in any way be affected or impaired, but shall remain in full force and effect.

     16. Governing Law. This Agreement is to be governed by and interpreted under the laws of the state of Delaware, without regard to the conflicts of laws provisions or rules of such State’s law.

     17. Headings; Form of Words. The headings contained in this Agreement have been inserted for the convenience of reference only, and neither such headings nor the placement of any term hereof under any particular heading shall in any way restrict or modify any of the terms or provisions hereof. Terms used in the singular

13


 

shall be read in the plural, and vice versa, and terms used in the masculine gender shall be read in the feminine or neuter gender when the context so requires. The term “person” as used herein refers to a natural person, a corporation, a limited liability company, a partnership, a joint venture, or other entity or association, as the context requires.

     18. Notices. All notices, requests, consents, payments, demands and other communications required or contemplated under this Agreement (“Notices”) shall be in writing and (a) personally delivered; (b) deposited in the United States mail, registered or certified mail, return receipt requested, with postage prepaid; or (c) sent by Federal Express or other internationally recognized overnight delivery service (for next business day delivery), shipping prepaid, as follows:

     If to Employer, to:

     Pharmaceutical Research Associates, Inc.

     12120 Sunset Hills Road, Suite 600

     Reston, VA 20190

     Attn: Chief Financial Officer

     with a copy (which shall not constitute notice) to the Chairman of the Board at that person’s then current business address

     If to Employee, to :

     At Employee’s then current home address on file with Employer

or such other persons or address as any party may request by notice given as aforesaid. Notices shall be deemed given and received at the time of personal delivery or, if sent by U.S. mail, five (5) business days after the date mailed in the manner set forth in this Section 18, or, if sent by Federal Express or other nationally recognized overnight delivery service, one business day after such sending.

     19. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

     20. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of Employee and Employee’s heirs and legal representatives and Employer and its successors and assigns. Employee’s rights and obligations under this Agreement are personal to Employee and shall not be assignable or transferable by Employee (except that Employee’s rights may be transferred upon his death by will, trust, or the laws of intestacy). Employer shall require any successor (whether direct or indirect, by purchase, merger, consolidation, share exchange or otherwise) to all or substantially all of the business and/or assets of Employer to expressly assume in writing and agree to perform this Agreement in the same manner and to the same extent that

14


 

Employer would be required to perform it if no such succession had taken place, except that no such assumption and agreement will be required if the successor is bound by operation of law to perform this Agreement. In this Agreement, the term “Employer” shall include any successor to Employer’s business and assets that assumes and agrees to perform this Agreement (either by agreement or by operation of law).

     21. Cooperation. Each party to this Agreement agrees to cooperate with the other party hereto to carry out the purpose and intent of this Agreement, including without limitation the execution and delivery to the appropriate party of all such further documents as may reasonably be required in order to carry out the terms of this Agreement.

     22. Waiver. Any waiver of any provision hereof (or in any related document or instrument) shall not be effective unless made expressly and in a writing executed in the name of the party sought to be charged. The failure of any party to insist, in any one or more instances, on performance of any of the terms or conditions of this Agreement shall not be construed as a waiver or relinquishment of any rights granted hereunder or of the future performance of any such term, covenant or condition, but the obligations of the parties with respect thereto shall continue in full force and effect.

     23. Indemnification. Employee shall be entitled to be indemnified by Employer to the fullest extent permitted by the applicable state law and consistent with Employer’s Articles of Incorporation. Employer further agrees to indemnify Employee to the extent permitted under applicable law for all actions taken in good faith within the scope, and in the course, of Employee’s employment under this Agreement during the Employment Period for the life of any claim.

[Signature Page to Follow]

15


 

     IN WITNESS WHEREOF, the parties have executed this Agreement the day and year first above written.

 

 

 

 

 

 

 

 

 

Employer:

 

PHARMACEUTICAL RESEARCH

 

 

 

 

ASSOCIATES, INC.

 

 

 

 

 

 

 

 

 

 

 

 

 

By:

 

/s/ Robert E. Conway

 

 

 

 

 

 

 

 

 

 

 

Print Name:

 

Robert E. Conway

 

 

 

 

Print Title:

 

Chairman, Compensation Committee

 

 

 

 

 

 

 

 

 

 

 

Employee:

 

/s/ Patrick K. Donnelly

 

 

 

 

 

 

 

Print Name

 

Patrick K. Donnelly

 

 

16


 

EXHIBIT A

Positions and Boards of Directors on which Employee Serves as of the Date of this

Agreement

Pharma eMarket LLC — Director

17


 

EXHIBIT B

Incentive Award Plan

     Employee is eligible to participate, at Employee’s election, in the Incentive Award Plan as follows:

     Employee will be granted 45,000 PRA International stock options at a strike price of USD$26.10. All matters involving the PRA International stock options, including but not limited to their vesting, their exercise, and their termination will be governed by the terms of the Incentive Award Plan and an option agreement to be entered into by Employee in a form provided by PRA International.

     Under the PRA International Management Stock Purchase Plan (“MSPP”), Employee will be provided the opportunity to purchase PRA International stock in the form of Restricted Stock Units (“RSUs”) with Employer matching in additional stock 100% of the purchase amount. As part of the MSPP, Employee has the opportunity to voluntarily purchase RSUs on a pre-tax basis by allocating and deferring a portion of Employee’s annual final cash bonus into the plan in advance of the plan year. The deferral amount would be capped at a maximum of 50%. All matters involving the MSPP will be governed by the terms of the MSPP plan documents.

18


 

EXHIBIT C

Additional Benefits

 

 

 

Annual Car Allowance:

 

USD$10,800

19