PRAI Pra Intl Common Stk (MM)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

 

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES

EXCHANGE ACT OF 1934

(Amendment No. 2)

 

Filed by the Registrant  þ

 

Filed by a Party other than the Registrant  o

 

Check the appropriate box:

 

þ   Preliminary Proxy Statement

o   Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

o   Definitive Proxy Statement

o   Definitive Additional Materials

o   Soliciting Material Pursuant to §240.14a-12

 

PRA INTERNATIONAL

(Name of Registrant as Specified In Its Charter)

N/A

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

 

Payment of Filing Fee (Check the appropriate box):

 

 

 

Common stock, par value $0.01 per share, of PRA International (“PRA common stock”)

 

 

 

24,780,237 shares of PRA common stock 3,572,378 options to purchase shares of PRA common stock

 

 

 

Calculated solely for the purpose of determining the filing fee . The filing fee was calculated based on the sum of (1) an aggregate cash payment of $755,797,228.50 for the proposed per share cash payment of $30.50 for 24,780,237 outstanding shares of PRA common stock and (2) an aggregate cash payment of $40,600,469 expected to be paid upon the cancellation of outstanding options having an exercise price of less than $30.50 (the sum of (1) and (2), the “Total Consideration”). In accordance with Section 14(g) of the Securities Exchange Act of 1934, as amended, and the rules promulgated thereunder, the filing fee was determined by multiplying 0.0000307 by the Total Consideration.

 

 

 

$796,397,697.50

 

 

 

$24,449.41

 

 

 

 

 

 

 

 

 

 

SUBJECT TO COMPLETION, OCTOBER 30, 2007

 

PRA INTERNATIONAL

12120 Sunset Hills Road

Suite 600

Reston, Virginia 20190

 

[ • ], 2007

 

Dear Stockholder:

 

You are cordially invited to attend a special meeting of stockholders of PRA International, or PRA, to be held at [ • ]  a.m., Eastern Time, on [ • ], at [ • ]. The attached notice of the special meeting and proxy statement provide information regarding the matters to be acted on at the special meeting, including at any adjournment or postponement thereof.

 

At the special meeting you will be asked to consider and vote upon a proposal to adopt the Agreement and Plan of Merger, dated as of July 24, 2007, referred to as the merger agreement, among GG Holdings I, Inc., referred to as Parent, GG Merger Sub I, Inc., referred to as Merger Sub, and PRA. A copy of the merger agreement is attached as Appendix A to the accompanying proxy statement. Under the merger agreement, Merger Sub, a wholly owned subsidiary of Parent, will be merged with and into PRA, with PRA being the surviving corporation. Both Parent and Merger Sub are Delaware corporations formed in connection with the execution of the merger agreement. At the time of consummation of the merger, two affiliated private equity funds, Genstar Capital Partners V, L.P. and Genstar Capital Partners IV, L.P., referred to as Genstar V and Genstar IV, respectively, and sometimes referred to together as Genstar, will own a substantial majority of the equity of, and will control, Parent. If the merger is completed, PRA will continue its operations as a privately held company owned by Parent, and as a result of the merger, shares of PRA common stock will no longer be quoted on the NASDAQ Global Select Market.

 

If PRA’s stockholders adopt the merger agreement and the merger is completed, each share of PRA common stock (other than treasury shares, shares held by Parent or Merger Sub and shares held by PRA stockholders who properly exercise and perfect their appraisal rights under Delaware law with respect to the merger) will be converted into the right to receive $30.50 in cash, without interest and less any applicable withholding taxes.

 

The PRA board of directors established a special committee, consisting of two directors each determined by the PRA board of directors to be disinterested with regard to the proposed transaction, to evaluate, explore, negotiate and make recommendations to the PRA board of directors regarding the sale of PRA. The special committee has unanimously determined that the merger agreement and the merger are advisable and fair to, and in the best interests of, PRA and PRA’s stockholders and recommended that the board of directors approve the merger agreement, the merger and the other transactions contemplated thereby.

 

On July 24, 2007, the PRA board of directors, after considering factors including the unanimous determination and recommendation of the special committee, (1) determined that the merger, the terms thereof and the related transactions contemplated by the merger agreement are advisable and fair to, and in the best interests of, PRA and PRA’s stockholders, (2) declared advisable and approved the merger agreement, the merger and the other transactions contemplated thereby and (3) resolved to recommend adoption of the merger agreement by the PRA stockholders.

 

The PRA board of directors recommends that you vote FOR the adoption of the merger agreement and FOR any proposal to adjourn the special meeting to a later date to solicit additional proxies in favor of the adoption of the merger agreement in the event that there are not sufficient votes represented at the special meeting to adopt the merger agreement.

 

The accompanying proxy statement provides you with detailed information about the merger and the special meeting. We encourage you to read the entire document carefully. You also may obtain more information about PRA from documents we have filed with the Securities and Exchange Commission.

 

Regardless of the number of shares you own, your vote is very important.   The merger cannot be completed unless the merger agreement is adopted by the affirmative vote of the holders of a majority of the outstanding shares of PRA common stock entitled to vote thereon. If you fail to vote on the merger agreement, the effect will be the same as a vote against the adoption of the merger agreement. Whether or not you plan to attend the special meeting,

please complete, date, sign and return the enclosed proxy card in the accompanying reply envelope, or submit your proxy by telephone or the Internet as directed on your proxy card, as promptly as possible.

 

If you have any questions or need assistance voting your shares, please call The Altman Group, our proxy solicitation agent, toll-free at 1-800-314-9816.

 

Thank you for your cooperation and continued support.

 

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved the merger, passed upon the merits or fairness of the merger or passed upon the adequacy or accuracy of the disclosure in the enclosed documents. Any representation to the contrary is a criminal offense.

 

The proxy statement is dated [ • ], 2007, and is first being mailed to stockholders on or about [ • ], 2007.

PRA INTERNATIONAL
12120 Sunset Hills Road
Suite 600
Reston, Virginia 20190

 

proxy card without indicating how you wish to vote, your proxy will be counted as a vote in favor of adoption of the merger agreement and approval of any adjournment of the special meeting referred to above.

 

Under the General Corporation Law of the State of Delaware, holders of PRA common stock who do not vote in favor of adopting the merger agreement will have the right to seek appraisal of the fair value of their shares as determined by the Delaware Court of Chancery if the merger is completed, but only if such stockholders comply with all applicable requirements of Delaware law. In order to properly exercise and perfect appraisal rights, stockholders must give written demand for appraisal of their shares before the vote on the merger at the special meeting and must not vote in favor of the merger. A copy of the applicable Delaware statutory provisions is included as Appendix C to the accompanying proxy statement, and a summary of these provisions can be found under “DISSENTERS’ APPRAISAL RIGHTS” in the accompanying proxy statement.

 

PLEASE DO NOT SEND YOUR STOCK CERTIFICATES AT THIS TIME. IF THE MERGER IS COMPLETED, YOU WILL BE SENT INSTRUCTIONS REGARDING THE SURRENDER OF YOUR STOCK CERTIFICATES.

 

If you have any questions or need assistance in voting your shares, please call The Altman Group, our proxy solicitation agent, toll-free at 1-800-314-9816.

 

The merger agreement and the merger are described in the accompanying proxy statement. A copy of the merger agreement is included as Appendix A to the accompanying proxy statement. We urge you to read the entire proxy statement carefully.

 

BY ORDER OF THE BOARD OF DIRECTORS,

 

William M. Walsh, III

Secretary

 

[ • ], 2007

 

TABLE OF CONTENTS

 

 

SUMMARY TERM SHEET

 

This “Summary Term Sheet,” together with the “Questions and Answers About the Special Meeting and the Merger,” summarizes the material information in the proxy statement. However, they may not contain all of the information that may be important to your consideration of the proposed merger. You should carefully read this entire proxy statement and the other documents to which this proxy statement refers you for a more complete understanding of the matters being considered at the special meeting. In addition, this proxy statement incorporates by reference important business and financial information about PRA. You may obtain the information incorporated by reference into this proxy statement without charge by following the instructions in “WHERE YOU CAN FIND ADDITIONAL INFORMATION” beginning on page 88.

 

The Parties to the Merger.

 

 

See “THE PARTIES TO THE MERGER” beginning on page 53.

 

The Merger.

 

You are being asked to vote to adopt the Agreement and Plan of Merger, dated as of July 24, 2007, among Parent, Merger Sub and PRA, referred to as the merger agreement, pursuant to which Merger Sub will merge with and into PRA, with PRA continuing as the surviving corporation in the merger, sometimes referred to as the surviving corporation. The surviving corporation will continue to do business under the name “PRA International” following the merger and will be a wholly owned subsidiary of Parent. As a result of the merger, PRA will cease to be a publicly traded company. See “THE MERGER AGREEMENT” beginning on page 59. A copy of the merger agreement is attached as Appendix A to this proxy statement. You should read the merger agreement in its entirety because it, and not this proxy statement, is the legal document that governs the merger.

Merger Consideration.

 

If the merger is completed, you will be entitled to receive $30.50 in cash, without interest and less any applicable withholding taxes, for each share of common stock, par value $0.01 per share, of PRA that you own (unless you choose to be a dissenting stockholder by exercising and perfecting your appraisal rights under Delaware law with respect to the merger). If there is no exercise of appraisal rights (and no rolling of shares or options), the total cash consideration paid if the merger is completed would be approximately $796,688,439.50. See “THE MERGER AGREEMENT — Merger Consideration” and “DISSENTERS’ APPRAISAL RIGHTS” beginning on pages 59 and 84, respectively.

 

Treatment of Stock Options

 

At the merger effective time:

 

 

See “THE MERGER AGREEMENT — Treatment of Stock Options” on page 60.

 

Although no agreements have been entered into as of the date of this proxy statement, Genstar has discussed with Terrance J. Bieker, chief executive officer of PRA, the possibility that Parent would offer him and other members of management who hold outstanding stock options and/or common stock immediately prior to the merger the opportunity to exchange, simultaneously with the consummation of the merger, some or all of the outstanding stock options and/or common stock (in lieu of the cash out and cancellation of options and common stock provided in the merger agreement) for shares of Parent common stock or options to purchase shares of Parent common stock, as the case may be. The opportunity to exchange shares of PRA common stock for, or options to purchase shares of, Parent common stock is intended to provide an equity-based incentive and retention benefit with respect to future operations of Parent and its subsidiaries. This offer is subject to further negotiation and discussion between Parent and the offerees, and no terms or conditions with respect to such offer have been finalized as of the date of this proxy statement.

 

Record Date and Voting.

 

You are entitled to vote at the special meeting if you owned shares of PRA common stock at the close of business on [ • ] , the record date for the special meeting. Each outstanding share of our common stock on the record date entitles the holder to one vote on each matter submitted to stockholders for approval at the special meeting and any adjournment thereof. As of the record date, there were [ • ] shares of PRA common stock entitled to be voted at the special meeting. See “THE SPECIAL MEETING OF STOCKHOLDERS — Record Date” and “— Voting Rights; Quorum; Vote Required for Approval,” beginning on page 56.

 

Stockholder Vote Required to Adopt the Merger Agreement.

 

You are being asked to consider and vote upon a proposal to adopt the merger agreement. For us to complete the merger, stockholders holding a majority of the shares of our common stock outstanding at the close of business on the record date and entitled to vote thereon must vote FOR the adoption of the merger agreement. An affirmative vote of a majority of the unaffiliated security holders is not necessary to complete the merger. If all of the affiliated security holders vote their shares in favor of the proposal to adopt the merger agreement only [ • ]% of the unaffiliated security holders would need to vote for such proposal in order for us to complete the merger. If your shares are held in the name of a broker, bank or other nominee, your broker, bank or other nominee will not be

entitled to vote your shares in the absence of specific instructions. These non-voted shares are referred to as broker non-votes. Abstentions and broker non-votes will have the effect of a vote against adoption of the merger agreement. See “THE SPECIAL MEETING OF STOCKHOLDERS — Voting Rights; Quorum; Vote Required for Approval” beginning on page 56.

 

Voting Information.

 

Before voting your shares of PRA common stock, we encourage you to read this proxy statement in its entirety, including its appendices and materials incorporated by reference, and carefully consider how the merger will affect you. To ensure that your shares can be voted at the special meeting, please complete, sign, date and return the enclosed proxy card (which requires no postage if mailed in the United States), or submit your vote via the Internet or by telephone as soon as possible. If a broker holds your shares in “street name,” your broker should provide you with instructions on how to record your vote. See “THE SPECIAL MEETING OF STOCKHOLDERS — Voting and Revocation of Proxies” beginning on page 57.

 

Recommendations of the Special Committee and the Board of Directors.

 

To comply with the requirements of Rule 13e-3 under the Securities Exchange Act of 1934, as amended, referred to as the Exchange Act, our board of directors and the special committee are required to make certain statements as to, among other matters, their belief as to the fairness of the merger to our unaffiliated stockholders. The requirements of Rule 13e-3 under the Exchange Act apply to the merger because Parent and Merger Sub are engaged in a “going private” transaction under the applicable rules. The special committee unanimously determined that the merger is advisable and fair to and in the best interests of PRA’s unaffiliated stockholders, and unanimously recommended that our board of directors approve and adopt the merger agreement and the transactions contemplated by the merger agreement. Based in part on the unanimous recommendation of the special committee, our board of directors determined that the merger is advisable and fair to and in the best interests of PRA’s unaffiliated stockholders, and approved and adopted the merger agreement and the transactions contemplated by the merger agreement. ACCORDINGLY, OUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” THE ADOPTION OF THE MERGER AGREEMENT.

 

See “SPECIAL FACTORS — Recommendations of the Special Committee and Board of Directors; Reasons for Approval of the Merger” beginning on page 18.

 

Position of the Genstar Filers as to Fairness

 

Under SEC rules, Parent, Merger Sub, Genstar III, Genstar IV, Genstar V, Stargen IV, Stargen V, Mr. Conte and Mr. Weltman, who we sometimes refer to collectively as the “Genstar Filers,” are required to make certain statements as to, among other things, their belief as to the fairness of the merger to our unaffiliated stockholders. The Genstar Filers are making statements included below and under “SPECIAL FACTORS — Position of the Genstar Filers as to Fairness” beginning on page 31 solely for the purpose of complying with the requirements of Rule 13e-3 and related rules under the Exchange Act. The Genstar Filers believe that the proposed merger is substantively and procedurally fair to PRA’s unaffiliated stockholders. However, the Genstar Filers have not undertaken any formal evaluation of the fairness of the merger to PRA’s unaffiliated stockholders or engaged a financial advisor for such purpose. See “SPECIAL FACTORS — Position of the Genstar Filers as to Fairness” beginning on page 31.

 

Financing of the Merger

 

Sources of Financing.   Parent estimates that the total amount of funds necessary to consummate the merger and related transactions, including the new financing arrangements, the refinancing of certain existing indebtedness and the payment of customary fees and expenses in connection with the proposed merger and financing arrangements, will be approximately $816 million, which Parent expects will be funded by a new credit facility, subordinated notes and equity financing. Funding of the equity and debt financing is subject to the satisfaction of the conditions set forth in the commitment letters pursuant to which the financing will be provided. See ‘‘SPECIAL FACTORS — Financing”

beginning on page 35. The following arrangements are in place to provide the necessary financing for the merger, including the payment of related transaction costs, charges, fees and expenses:

 

 

 

 

The merger agreement provides that Parent and Merger Sub will, and will cause their affiliates to use commercially reasonable efforts to, arrange and obtain the financing on the terms and conditions contained in the financing commitments they provided to PRA before the merger agreement was signed. The merger agreement also provides that PRA will reasonably cooperate with the arrangement of financing as requested by Parent. See “THE MERGER AGREEMENT — Commercially Reasonable Efforts; Financing” beginning on page 67.

 

informed the Company that such funds intend to vote all of their shares of PRA common stock for the adoption of the merger agreement and for the adjournment proposal.

 

Opinion of the Special Committee’s Financial Advisor.

 

On July 24, 2007, Credit Suisse Securities (USA) LLC, referred to as Credit Suisse, rendered its oral opinion to the special committee (which was subsequently confirmed in writing by delivery of Credit Suisse’s written opinion dated the same date) to the effect that, as of July 24, 2007, the merger consideration to be received by the holders of shares of PRA’s common stock in the merger was fair, from a financial point of view, to such stockholders (other than Parent, Merger Sub, members of our management that will retain or acquire a direct or indirect equity interest in the Company following the merger, and their respective affiliates, referred to collectively as the Excluded Stockholders). We will pay Credit Suisse a fee currently estimated to be approximately $10,485,000 for its services as financial advisor to the special committee in connection with the merger, $550,000 of which became payable upon the delivery of its opinion and $9,735,000 of which is contingent upon the consummation of the merger. We have also agreed to reimburse Credit Suisse for certain expenses and to indemnify Credit Suisse and certain related parties against certain liabilities and expenses arising out of or relating to Credit Suisse’s engagement.

 

Credit Suisse’s opinion was directed to the special committee and only addressed the fairness from a financial point of view of the merger consideration to be received by the holders of our common stock in the merger, other than the Excluded Stockholders, and did not address any other aspect or implication of the merger. The summary of Credit Suisse’s opinion in this proxy statement is qualified in its entirety by reference to the full text of its written opinion, which is included as Appendix B to this proxy statement. The procedures followed, assumptions made, qualifications and limitations on the review undertaken and other matters considered by Credit Suisse in preparing its opinion are set forth in Credit Suisse’s written opinion included as Appendix B to this proxy statement and summarized in “SPECIAL FACTORS — Opinion of Credit Suisse Securities (USA) LLC” beginning on page 23. However, neither Credit Suisse’s written opinion nor the summary of its opinion and the related analyses set forth in this proxy statement are intended to be, and do not constitute advice or a recommendation to any stockholder as to how such stockholder should act or vote with respect to the merger. See “SPECIAL FACTORS — Opinion of Credit Suisse Securities (USA) LLC” beginning on page 23.

 

Material United States Federal Income Tax Consequences.

 

The receipt of cash pursuant to the merger will be a taxable transaction for U.S. federal income tax purposes and may also be a taxable transaction under applicable state, local and other tax laws. You should consult your tax advisors about the tax consequences of the merger to you in light of your particular circumstances. See “SPECIAL FACTORS — Material U.S. Federal Income Tax Consequences” beginning on page 44.

 

Accounting Treatment of the Merger.

 

The merger is expected to be accounted for as a business combination using the purchase method of accounting for financial accounting purposes, whereby the estimated purchase price would be allocated to the assets and liabilities of PRA based on their relative fair values in accordance with Financial Accounting Standards No. 141, Business Combinations.

 

Appraisal Rights.

 

Under the General Corporation Law of the State of Delaware, holders of our common stock who do not vote in favor of adopting the merger agreement will have the right to seek appraisal of the fair value of their shares as determined by the Delaware Court of Chancery if the merger is completed, but only if they comply with all applicable requirements of Delaware law. A summary of the relevant provisions of Delaware law is included in this proxy statement. The appraisal amount could be more than, the same as or less than the amount a stockholder would be entitled to receive under the terms of the merger agreement. Holders of our common stock intending to exercise their appraisal rights must, among other things, submit a written demand for an appraisal to us prior to the vote on the adoption of the merger agreement and must not vote or otherwise submit a proxy in favor of adoption of the merger agreement. Your failure to follow exactly the procedures specified under Delaware law will result in the loss

of your appraisal rights. See “DISSENTERS’ APPRAISAL RIGHTS” beginning on page 84 and the text of the Delaware appraisal rights statute reproduced in its entirety as Appendix C.

 

Termination of the Merger Agreement.

 

Under certain circumstances, PRA and/or Parent may terminate the merger agreement and abandon the merger prior to the merger effective time, whether before or after obtaining the required stockholder approval. See “THE MERGER AGREEMENT — Termination” beginning on page 71. Circumstances under which the merger agreement can be terminated include the following:

 

 

 

 

 

 

The party desiring to terminate the merger agreement is obligated to give written notice of such termination to the other parties.

 

Termination Fee.

 

 

 

See “THE MERGER AGREEMENT — Fees and Expenses” beginning on page 72.

 

Conditions to the Merger.

 

The obligation of each party to consummate the merger is subject to the satisfaction or waiver of a number of conditions. See “THE MERGER AGREEMENT — Conditions to Completing the Merger” beginning on page 70. The conditions include:

 

 

 

 

 

Solicitations of Alternate Transactions.

 

The merger agreement provides that until September 12, 2007 (the “go-shop period”), we were permitted to initiate, solicit and encourage company acquisition proposals, enter into, maintain or continue discussions and negotiations with respect to company acquisition proposals and otherwise cooperate with, assist, participate in, facilitate or take any other action in connection with any inquiries, proposals, discussions or negotiations. During this period, PRA was required to comply with certain terms of the merger agreement described in “THE MERGER AGREEMENT — Solicitation of Alternate Transactions” beginning on page 64.

The merger agreement provides that, other than the permitted activities with respect to company acquisition proposals during the go-shop period summarized above, we are not generally permitted to:

 

 

Notwithstanding the above restrictions, under certain circumstances, PRA may furnish information about PRA to any party making a company acquisition proposal any time before the receipt of PRA stockholders’ approval of the proposed merger. These circumstances are described in “THE MERGER AGREEMENT — Solicitation of Alternate Transactions” beginning on page 64.

 

Interests of PRA’s Directors and Executive Officers.

 

In considering the recommendations of the board of directors, PRA’s stockholders should be aware that certain of PRA’s directors and executive officers have interests in the transaction that are different from, and/or in addition to, the interests of PRA’s stockholders generally. The special committee and our board of directors were aware of these potential conflicts of interest and considered them, among other matters, in reaching their decisions and recommendations with respect to the merger agreement and related matters. See “SPECIAL FACTORS — Interests of PRA’s Directors and Executive Officers in the Merger” beginning on page 39.

 

Market Price of PRA Common Stock.

 

The closing price of PRA common stock on the NASDAQ Global Select Market on July 24, 2007, the last trading date prior to announcement of the proposed merger transaction, was $26.96 per share. The $30.50 per share to be paid for each share of PRA common stock in the merger represents a premium of approximately 13.1% to the closing price of PRA common stock on July 24, 2007.

 

SPECIAL FACTORS

 

Background of the Merger

 

Over the years, the board of directors and senior management of PRA have regularly evaluated PRA’s business and operations, as well as PRA’s long-term strategic goals and alternatives to maximize stockholder value in light of changing business and market conditions. As part of this evaluation, from time to time, the board of directors and management of PRA have considered a possible sale of PRA or a strategic combination of PRA’s business with other complementary businesses.

 

For instance, in the fall of 2005, a strategic bidder approached PRA to discuss a possible combination with PRA in a merger transaction. In connection with this proposed transaction, PRA reviewed the market and certain acquisition alternatives for maximizing stockholder value. PRA granted the strategic bidder a period of exclusivity during which PRA agreed not to solicit other proposals and the strategic bidder delivered a non-binding term sheet to PRA. Although PRA and the strategic bidder conducted extensive negotiations, they did not reach agreement on key terms of the proposed transaction, and PRA’s review of the market did not identify attractive alternative transactions at that time. As a consequence, PRA opted to remain as a public company and continued to operate its business with its own long-term strategy and efforts to enhance stockholder value.

 

In July 2006, the same strategic bidder again approached PRA to discuss a possible combination through a merger transaction. From July to November 2006, the strategic bidder conducted due diligence review of PRA, and the parties engaged in extensive negotiations over the terms of the proposed strategic transaction. PRA granted the strategic bidder a period of exclusivity during which PRA agreed not to solicit other proposals and the strategic bidder delivered a non-binding term sheet to PRA. The strategic bidder and PRA did not reach agreement on the key terms of the proposed transaction, and the parties ceased further discussions.

 

Genstar III and its affiliate Stargen III, sometimes referred to collectively as the Genstar Investor, have been long-time investors in PRA. As a key stockholder, in November 2004, the Genstar Investor supported and participated in the initial public offering of PRA. Since the initial public offering, the Genstar Investor has decreased its shareholdings in PRA. Prior to Genstar’s submitting its initial non-binding indication of interest on March 28, 2007 to acquire PRA, the Genstar Investor owned approximately 12.8% of the then outstanding shares of the Company.

 

In late February 2007, ValueAct Capital, together with its affiliates, reported that their percentage ownership of PRA common stock was 19%. Over the course of 12 months leading to such time, ValueAct Capital and its affiliates had increased their investment in PRA and, in connection with such investment, met with PRA to discuss the possibility of having one of its qualified representatives be nominated for election to PRA’s board of directors at the upcoming PRA stockholders’ meeting.

 

In March 2007, principally to protect the interests of the stockholders in the event of an unsolicited takeover attempt, PRA’s board of directors determined to establish a stockholder rights plan designed to deter coercive takeover tactics and to prevent a bidder from gaining control of PRA without offering a fair price to all of PRA’s stockholders. On March 23, 2007, PRA adopted the rights plan by entering into a rights agreement with American Stock Transfer & Trust Company, as rights agent. Also at this time, PRA’s board of directors reviewed ValueAct Capital’s interest in board representation and determined that an additional board member with the appropriate experience and expertise would be beneficial to PRA and its stockholders.

 

On March 28, 2007, Genstar delivered to PRA’s board of directors an unsolicited non-binding indication of interest from Genstar to acquire all of the outstanding shares of common stock of PRA for a purchase price of $24.50 per share in cash. The proposed purchase price represented a premium of 11.9% to the closing PRA stock price on March 27, 2007. The individuals negotiating the terms of the merger on behalf of Genstar, Parent and Merger Sub were Mr. Conte and Mr. Weltman, each of whom is also a member of our board of directors. Genstar retained UBS Securities LLC, or UBS, to act as its financial advisor and Latham & Watkins LLP, or Latham & Watkins, to act as its legal counsel in connection with the merger. UBS assisted Genstar in the negotiation of the terms of the merger.

 

On March 29, 2007, the board of directors of PRA held a telephonic meeting to discuss Genstar’s non-binding indication of interest. Representatives of Dewey Ballantine LLP (now known as Dewey & LeBoeuf LLP), or

Dewey, joined the meeting at the invitation of the board of directors. Mr. Conte was present at the meeting in his capacity as a member of PRA’s board of directors and as an officer of Genstar. Mr. Conte provided additional background information regarding Genstar’s indication of interest and Genstar’s views as to the financial and strategic situation of the Company. Mr. Conte explained Genstar’s view that because PRA historically has underperformed and grown at a slower rate than its peers, Wall Street analysts’ forecasts and projections of PRA are generally too conservative. Mr. Conte further explained that as a private company PRA’s new management team would be better able to implement PRA’s long-term strategy without regard to near-term market reactions. Mr. Conte explained that Genstar believes its March 28, 2007 offer was fair based on the estimated 2007 EBITDA and that because of Genstar’s familiarity with PRA the only due diligence required by Genstar would be in connection with obtaining financing.

 

Members of the board of directors then discussed the relationships that some of the members of the board of directors had with Genstar. The interests discussed included Mr. Conte’s current position as chairman and a member of the limited liability companies that control Genstar IV, Genstar V, Stargen IV and Stargen V; Messrs. Conte’s and Weltman’s investments in affiliates of Parent, including Stargen IV and Stargen V and the general partners of Genstar V and Genstar IV; and Messrs. Booth’s and Conway’s positions as members of the Strategic Advisory Board of Genstar Capital, LLC and their investments in Stargen IV and Stargen V, which are limited partnerships that are controlled by the general partners of Genstar IV and Genstar V. Mr. Conte is President and a director of Parent and Merger Sub and Mr. Weltman is Vice President and a director of Parent and Merger Sub. Mr. Conte and Mr. Weltman are the only directors and officers of Parent and Merger Sub. The board of directors also discussed Mr. Bieker’s past relationship with Genstar, including his having served as chief executive officer of a public company in which an affiliate of Genstar held a significant share ownership position and of which Messrs. Conte and Weltman served as directors, and his position with PRA at that time as the interim chief executive officer. After lengthy discussion and review of various considerations, the members of the board of directors discussed the advisability of forming a special committee of the board which would be authorized to review Genstar’s indication of interest and to consider alternatives to the indication of interest, including remaining as a public company. Because Mr. Bieker was no longer affiliated with the public company Genstar held a significant ownership interest in and, at the time, stated to PRA’s board of directors that he intended only to be PRA’s chief executive officer for a short period of time, the board of directors determined he was independent of Genstar and an appropriate candidate to serve as a member of the special committee. The board of directors also determined that Mr. Armin M. Kessler and Dr. Judith A. Hemberger were independent of Genstar and appropriate candidates to serve as members of the special committee.

 

Following this discussion, PRA’s board of directors unanimously resolved to appoint a special committee of the board of directors comprised of Messrs. Bieker and Kessler and Dr. Hemberger and authorized the special committee to, among other things, (i) retain counsel and other advisors, (ii) solicit and examine Genstar’s non-binding indication of interest and alternative proposals, (iii) if the special committee deemed it necessary or advisable, negotiate with Genstar or other parties, an appropriate transaction with respect to the Company, subject to the approval of the board of directors as may be required by law, and (iv) consider the fairness to PRA’s unaffiliated stockholders of the consideration to be received pursuant to any such transaction and report its recommendations to the board of directors. The board of directors also unanimously resolved that Mr. Bieker would serve as chairman of the special committee.

 

On March 29, 2007, the special committee met to discuss Genstar’s non-binding indication of interest and the retention of advisors. Representatives from Dewey and Credit Suisse also were present at the invitation of the special committee. At this meeting, the special committee reviewed the qualifications of Dewey and resolved to retain Dewey as its legal counsel. The special committee then reviewed the credentials of Credit Suisse, including its relationships with Genstar and its familiarity with PRA and knowledge and experience in the CRO industry. Among other things, the special committee was advised that Credit Suisse and its affiliates have acted as underwriters in connection with securities offerings by an affiliate of Parent; financial advisor in connection with the sale of an affiliate of Parent; provided or otherwise assisted affiliates of Parent in obtaining financing for acquisitions; and assisted a private equity fund affiliated with Parent in raising investment capital. Following such discussion, the special committee resolved to retain Credit Suisse as its financial advisor based in part on its knowledge and experience and on the value it believed Credit Suisse could bring to the process.

On April 9, 2007, the special committee met telephonically, together with representatives of its legal and financial advisors, to further discuss Genstar’s non-binding indication of interest. Also, at the meeting, the special committee formally engaged Credit Suisse as its financial advisor, approved a conflict of interest waiver requested by Latham & Watkins LLP, or Latham & Watkins, which had been the regular outside counsel for PRA, so that it could serve as Genstar’s legal counsel in connection with the proposed transaction and formally engaged Dewey as its legal counsel. At this meeting, representatives of Credit Suisse reviewed Genstar’s indication of interest, Credit Suisse’s preliminary financial analysis of PRA, as well as certain strategic alternatives that might be available to PRA, including (i) remaining as a public company, (ii) undertaking a leveraged recapitalization, or (iii) pursuing a transaction with a strategic buyer or another financial sponsor. Among the strategic alternatives discussed and considered by the special committee at its meeting on April 9, were continuing as a stand alone entity, a leveraged recapitalization, a merger with or sale to a strategic buyer and a sale to a financial buyer. While the special committee noted that continuing as a stand alone entity and a leveraged recapitalization would permit existing stockholders to participate in the future growth and profitability of the Company, the special committee also recognized that such alternatives presented numerous risks relating to, among other things, the ability of the Company and its current management to meet projected financial and operating targets as well as risks relating to future economic, financial market and industry performance and other factors outside of the control of the Company and its management. After considering the potential benefits and risks associated with these alternatives, the special committee believed that it was in the best interests of the stockholders of the Company to continue to pursue a sale of the Company at a substantial premium rather than to pursue a stand alone strategy or leveraged recapitalization with their associated risks. With respect to a possible sale to a strategic buyer or a financial buyer other than Genstar, the special committee believed that a go-shop provision that permitted the special committee to affirmatively shop the company and seek a higher offer, coupled with a relatively low termination fee, would provide the Company with an adequate opportunity to conduct a post-signing market check without jeopardizing the Genstar proposal. The special committee also discussed the leadership changes that PRA was undertaking and the likelihood that, irrespective of leadership issues, PRA’s financial performance could continue to improve in the near future. The special committee concluded that PRA should not pursue a transaction with Genstar on the basis of Genstar’s indication of interest and that PRA’s resources should be focused on improving performance and filling the vacancies in leadership positions, including finding a chief executive officer. Subsequently, the special committee informed Genstar of its decision not to pursue a transaction with Genstar on the basis of Genstar’s indication of interest.

 

On April 25, 2007, Genstar delivered to the special committee a revised non-binding indication of interest to acquire all of the outstanding shares of PRA common stock for an increased purchase price of $25.50 per share in cash. This offer represented a premium of 12.3% to the closing PRA stock price on April 24, 2007.

 

During the month of April 2007, PRA, through the compensation committee of its board of directors, with additional assistance from its nominating and corporate governance committee and a search committee appointed by the board, consisting of Messrs. Bieker, Booth and Kessler, continued its search to fill vacancies in leadership positions, along with the help of an outside search firm. In connection with this search, Mr. Bieker was identified as one of the most qualified candidates to serve as the chief executive officer. In light of Mr. Bieker’s possible appointment as PRA’s chief executive officer, Mr. Bieker resigned his position on the special committee on April 27, 2007 and Mr. Kessler was named the new chairman of the special committee.

 

On April 30, 2007, the special committee, together with its legal and financial advisors, met telephonically to discuss Genstar’s revised non-binding indication of interest. Only Mr. Kessler was in attendance as a member of the special committee because Dr. Hemberger was unable to attend. The special committee considered whether continuing as a public company or pursuing a transaction with Genstar or another party would maximize value to PRA’s stockholders. A representative of Credit Suisse updated the special committee with respect to its preliminary financial analysis of PRA and the revised indication of interest from Genstar and discussed certain strategic alternatives that might be available to PRA. The preliminary financial analyses updated by Credit Suisse with the special committee at this meeting were preliminary versions of, and were substantially similar to, the valuation analyses discussed with the special committee at the July 24 meeting, more fully described on pages 23 to 29 of this proxy statement, and were based on information, including stock prices, available as of April 27, 2007.

 

On May 7, 2007, each of Mr. Bieker and Mr. Colin Shannon entered into an employment agreement with PRA as chief executive officer, in the case of Mr. Bieker, and president and chief operating officer, in the case of

Mr. Shannon. The employment agreements of Messrs. Bieker and Shannon were previously approved by the compensation committee of PRA’s board of directors.

 

On May 8, 2007, the special committee, together with representatives of its legal and financial advisors, met telephonically to discuss Genstar’s revised non-binding indication of interest. A representative of Dewey reminded the special committee of its fiduciary duties in considering the indication of interest of Genstar. A representative of Credit Suisse updated the special committee with respect to its preliminary financial analysis of PRA and Genstar’s revised non-binding indication of interest and also discussed certain strategic alternatives that might be available to PRA. The preliminary financial analyses updated by Credit Suisse with the special committee at this meeting were preliminary versions of, and were substantially similar to, the valuation analyses discussed with the special committee at the July 24 meeting, more fully described on pages 23 to 29 of this proxy statement, and were based on information, including stock prices, available as of May 4, 2007. The special committee decided that Genstar’s revised non-binding indication of interest was still not in the best interests of PRA’s unaffiliated stockholders and instructed Credit Suisse to communicate to Genstar’s financial advisor the special committee’s decision.

 

On May 10, 2007, Genstar delivered to the special committee a revised non-binding indication of interest to acquire all of the outstanding shares of common stock of PRA for an increased purchase price of $26.25 per share in cash. This offer, which Genstar described as its best and final offer, represented a premium of 13.2% to the closing PRA stock price on May 9, 2007. In its letter, Genstar noted its disappointment that the special committee refused to discuss the merits of their previous indication of interest given the high value it believed was inherent in the indication of interest of April 25, 2007.

 

On May 14, 2007, the special committee, together with representatives of its legal and financial advisors, met telephonically to discuss Genstar’s revised non-binding indication of interest. Representatives of Credit Suisse updated the special committee with respect to its preliminary financial analysis of PRA and Genstar’s revised non-binding indication of interest and again reviewed certain strategic alternatives that might be available to PRA, including remaining as a public company. The preliminary financial analyses updated by Credit Suisse with the special committee at this meeting were preliminary versions of, and were substantially similar to, the valuation analyses discussed with the special committee at the July 24 meeting, more fully described on pages 23 to 29 of this proxy statement, and were based on information, including stock prices, available as of May 11, 2007. Representatives of Credit Suisse also summarized its discussions on behalf of the special committee with UBS, the financial advisor to Genstar, regarding Genstar’s indication of interest to acquire PRA. Credit Suisse advised the special committee that, as requested by the special committee, it had discussed Genstar’s revised non-binding indication of interest with UBS and that UBS had advised Credit Suisse that the revised non-binding indication of interest was Genstar’s best and final offer, noting that Genstar believed it was an attractive offer. The members of the special committee agreed to discuss these matters further. Subsequently, the special committee decided that Genstar’s revised non-binding indication of interest was still not in the best interests of PRA’s stockholders and instructed Credit Suisse to communicate to Genstar’s financial advisor the special committee’s decision.

 

On June 4, 2007, Mr. J. Matthew Bond, PRA’s then executive vice president and chief financial officer, resigned and on June 5, 2007, PRA announced the appointment of Mr. Bond’s replacement, Ms. Linda Baddour, effective as of June 4, 2007.

 

On June 7, 2007, Genstar delivered to the special committee, a revised non-binding indication of interest to acquire all of the outstanding shares of PRA common stock for a purchase price of $28.00 per share in cash. Genstar indicated that this revised proposed purchase price was its best and final offer. The offer represented a premium of 17.8% to the closing PRA stock price on June 6, 2007. The indication of interest further stated that, in order to accommodate any concerns that the special committee might have regarding providing maximum value to PRA’s unaffiliated stockholders, Genstar would entertain a “go-shop” period after execution and announcement of a definitive merger agreement. The indication of interest also incorporated a “rollover option” pursuant to which PRA stockholders would be permitted, at their election, to receive shares in the surviving corporation after the merger in lieu of a portion of the cash consideration, subject to a cap of 20% of the outstanding shares in the surviving corporation.

 

On June 12, 2007, PRA held its annual meeting of stockholders. At that meeting, Messrs. Booth, Conway and Spivy were elected as the class III directors.

Effective June 14, 2007, Dr. Hemberger resigned from the special committee due to personal commitments.

 

In light of Mr. Spivy’s position as a partner of ValueAct Capital, affiliates of which owned approximately 19% of the then outstanding shares of common stock of PRA, and his experience, knowledge and qualifications, the board of directors discussed appointing him to the special committee. Consequently, on June 12, 2007, at a meeting of the board of directors of PRA, the board appointed Mr. Spivy to serve on the special committee, with Mr. Kessler continuing to serve as the chairman of the special committee.

 

On June 14, 2007, the special committee, together with representatives of its legal and financial advisors, met telephonically to discuss Genstar’s revised non-binding indication of interest dated June 7, 2007. A representative of Dewey reviewed with the special committee their fiduciary duties in connection with the consideration of Genstar’s revised indication of interest. A representative of Credit Suisse updated the special committee with respect to its preliminary financial analysis of PRA and Genstar’s revised non-binding indication of interest and reviewed certain strategic alternatives that might be available to PRA, including remaining as a public company. The preliminary financial analyses updated by Credit Suisse with the special committee at this meeting were preliminary versions of, and were substantially similar to, the valuation analyses discussed with the special committee at the July 24 meeting, more fully described on pages 23 to 29 of this proxy statement, and were based on information, including stock prices, available as of June 12, 2007. After further discussion, the members of the special committee agreed to consider these matters further. Subsequently, the special committee decided that Genstar’s revised non-binding indication of interest was still not in the best interests of PRA’s stockholders and instructed Credit Suisse to communicate to Genstar’s financial advisor the special committee’s decision.

 

On June 28, 2007, Mr. Spivy, on behalf of the special committee had discussions with Mr. Conte, on behalf of Genstar, regarding a forthcoming indication of interest from Genstar to acquire PRA. Mr. Conte told Mr. Spivy that Genstar was likely to increase its proposed purchase price from $28.00 to $30.00 per share, but that this revised indication of interest would not include a roll-over option and would contemplate a two-week timeframe for negotiating a definitive agreement.

 

On June 28, 2007, the special committee, together with representatives of its legal and financial advisors, met telephonically to discuss this conversation and the anticipated revised indication of interest from Genstar. Later that same day, Genstar delivered to the special committee a revised non-binding indication of interest to acquire all of the outstanding shares of PRA common stock for an increased purchase price of $30.00 per share in cash. The offer represented a premium of 14.5% to the closing PRA stock price on June 27, 2007. As previously communicated to Mr. Spivy, the revised indication of interest did not provide for a roll-over option. In its letter, Genstar noted that its lenders would require two weeks to complete their due diligence review of PRA and requested an exclusivity commitment of 15 business days for such purpose and for the parties to negotiate the terms and conditions of a definitive agreement.

 

On June 29, 2007, the special committee and its legal and financial advisors met telephonically to consider Genstar’s revised non-binding indication of interest dated June 28, 2007. A representative of Dewey reviewed with the special committee their fiduciary duties in connection with the consideration of the revised indication of interest. The preliminary financial analyses reviewed by Credit Suisse with the special committee at this meeting were preliminary versions of, and were substantially similar to, the valuation analyses discussed with the special committee at the July 24 meeting, more fully described on pages 23 to 29 of this proxy statement, and were based on information, including stock prices, available as of June 27, 2007. A representative of Credit Suisse then reviewed with the special committee its preliminary financial analysis of Genstar’s revised indication of interest. Credit Suisse also discussed certain strategic alternatives that might be available to PRA, in addition to remaining as a public company, including a possible business combination with a strategic purchaser or a sale to another financial sponsor. Following further discussion, both members of the special committee expressed the preliminary view that it would be in the best interest of PRA and its unaffiliated stockholders to pursue Genstar’s non-binding indication of interest. The special committee then considered whether the Company should conduct an auction process before it entered into a merger agreement with Genstar or utilize a “go-shop” mechanism to afford all likely buyers an opportunity to submit an acquisition proposal. The special committee noted that Genstar had requested exclusivity to facilitate the resolution of all outstanding issues and the preparation of transaction documents. Genstar also had stated that any delay could result in the withdrawal or adverse modification of its non-binding indication of interest.

The special committee further noted that an auction process could be disruptive to PRA’s business, especially in light of industry-wide concerns over employee turnover. The special committee concluded that a go-shop mechanism would allow PRA to solicit higher offers from other interested bidders while securing the $30.00 per share purchase price proposed by Genstar. It also concluded that, given the Genstar Investor’s ownership of 12.7% of the outstanding common stock of the Company, the Company should request that the Genstar Investor agree to vote its shares in favor of a superior proposal if one were to emerge while the proposed transaction with Genstar is pending. The special committee considered the strategic alternative of pursuing an alternative transaction with a strategic buyer or another financial buyer, however, it concluded that pursuing a transaction with Genstar upon terms which would secure the value proposed by Genstar and allow PRA to solicit higher offers from other interested bidders was preferable and in the best interests of the unaffiliated stockholders.

 

At the direction of the special committee, Credit Suisse contacted UBS, Genstar’s financial advisor, and outlined the key terms that the special committee would require in order to consider a transaction with Genstar. Credit Suisse first asked UBS if Genstar would increase its offer price. As instructed by the special committee Credit Suisse then informed UBS that the special committee would require a go-shop period during which PRA could actively solicit alternative offers, that a termination fee that would be payable if PRA entered into an alternative transaction with a party solicited during the go-shop period would have to be significantly lower than the termination fee normally paid in public company acquisitions, that it would not permit Genstar the right to match alternative proposals and that it would not agree to the requested exclusivity arrangement. Credit Suisse also informed UBS that the special committee would require Genstar to provide “highly confident” letters from its financing sources stating that they are highly confident that they could raise the debt financing necessary to complete the acquisition of PRA.

 

Over the weekend, UBS responded that $30.00 per share was Genstar’s best and final offer. Genstar’s financial advisor also responded that Genstar would agree to the proposed structure of having a go-shop period and relatively low termination fee during the go-shop period, and also that Genstar agreed that it would proceed with its diligence and negotiations without the benefit of having an exclusivity agreement. On July 2, 2007, Genstar delivered letters from its financing sources stating that they were highly confident that they could raise the financing necessary to complete the acquisition of PRA.

 

On July 2, 2007, the special committee and its legal and financial advisors met telephonically. At that meeting, representatives of Credit Suisse summarized their discussions with UBS regarding Genstar’s latest non-binding indication of interest. Credit Suisse advised the special committee that, as requested by the special committee, it had discussed with UBS certain key terms of a proposed transaction that the special committee would require in order for it to consider a transaction with Genstar including, among other things, a 50 day go-shop period, a termination fee applicable during the go-shop period that is significantly lower than termination fees normally paid in public company acquisitions, no right for Genstar to match superior proposals, no exclusivity arrangement and the provision of highly confident letters from Genstar’s financing sources. In addition, as instructed by the special committee, Credit Suisse also requested an increase in Genstar’s offer price. UBS responded to Credit Suisse on behalf of Genstar that $30.00 was Genstar’s best and final offer and that Genstar was prepared to move ahead without exclusivity, anticipating two to three weeks to execute a definitive merger agreement, and that Genstar was prepared to agree to a 50 day go-shop period with a 1% termination fee applicable during the go-shop period. However, on behalf of Genstar UBS stated that Genstar would want a right to match superior proposals and a covenant that PRA would use its best efforts to promptly file a proxy statement. The special committee authorized Dewey to prepare a draft merger agreement, and the special committee discussed facilitating the due diligence process for Genstar’s lenders.

 

On July 5, 2007, the special committee and its legal and financial advisors met telephonically during which a representative of Dewey updated the special committee on recent developments. Previously, Mr. Bieker had informed Dewey that he had received a request from Mr. Weltman for a meeting with certain members of PRA’s senior management to discuss retention arrangements, assuming a successful completion of the proposed transaction. The special committee approved Genstar’s discussions with PRA management concerning retention arrangements proposed by Genstar. Mr. Spivy and Dewey reminded management of their fiduciary duties to PRA’s stockholders, and Mr. Spivy instructed management not to agree to any arrangement which would reduce the consideration to be received by PRA’s stockholders.

On the evening of July 11, 2007, Mr. Conte and Mr. Weltman met with management and on July 12, 2007, PRA held a management presentation for Genstar and its sources of financing. At this meeting, members of senior management provided an overview of the past performance of the Company and the status of PRA’s business and operations, including matters related to business development, financial performance, corporate services, product registration, scientific and medical affairs and early development services. Mr. Conte and Mr. Weltman discussed with management Genstar’s intention to retain members of management following the proposed merger and to establish equity-based compensation plans for management. Genstar and management did not reach any agreement with respect to any such arrangements. Although the size of such equity-based compensation plan was not determined and no awards were made or promised, Mr. Conte and Mr. Weltman informed management that awards of options to purchase an aggregate of approximately 10% of the fully diluted shares of Parent following the merger could be granted pursuant to such plans and that such option grants would generally vest over five years of continued employment and would entitle the option holder to share in the future appreciation of PRA and Parent.

 

Also, on July 12, 2007, Dewey delivered an initial draft of the merger agreement to Genstar’s legal advisors, Latham & Watkins. The draft merger agreement contemplated, among other things, that the special committee would be free to seek alternative acquisition proposals during a so-called “go-shop” period of 50 days following execution of a definitive merger agreement with Genstar and provided for a reduced termination fee if the merger agreement were to be terminated for a “superior proposal” that was solicited during the go-shop period. The proposed merger agreement did not provide Genstar with a right to match a superior proposal made to PRA by a third party.

 

On July 13, 2007, the special committee and its legal and financial advisors met telephonically to discuss the meetings between Genstar and the senior management of PRA. A representative of Dewey gave the special committee an overview of their fiduciary duties. Credit Suisse then noted that at the management presentation to Genstar on July 12, 2007, members of PRA’s senior management had indicated that they believed that the financial results to be reflected in the upcoming PRA earnings release scheduled for July 25, 2007 would modestly exceed analysts’ consensus. The special committee discussed the timing of a possible merger agreement with Genstar in relation to the scheduled earnings release. Following discussions, the special committee decided to continue negotiating the terms of the merger agreement with Genstar, while continuing to explore strategies to increase the proposed merger consideration.

 

On July 17, 2007, certain members of the management of PRA and the special committee’s legal and financial advisors met telephonically with representatives of Genstar, Genstar’s lenders and their advisors to discuss various regulatory, environmental, litigation, real property and employee benefits matters that had arisen in connection with Genstar’s due diligence, as well as the availability of certain diligence items in the on-line data room.

 

Representatives of Dewey and Latham & Watkins met telephonically on July 18, 2007 to discuss revisions to the draft merger agreement proposed by Latham & Watkins. The draft provided by Latham & Watkins proposed, among other things, a higher termination fee than that proposed by the special committee, a limitation on the payment that Genstar would be required to make in the event that Genstar were unable to obtain the financing necessary to complete the transaction (also referred to as a reverse break-up fee) and a full matching right under which Genstar would have the right to match alternative proposals. Genstar also sought to have the lower termination fee apply only if the merger agreement were terminated during the go-shop period. Representatives of the special committee did not agree to the proposed amount of the termination fee and insisted that the lower termination fee apply to any party with which PRA negotiated during the go-shop period (i.e., any excluded party), whether or not the merger agreement was terminated during the go-shop period. While the special committee agreed to a reverse break-up fee, it proposed a higher amount than proposed by Genstar. The special committee also refused to permit a matching right.

 

Latham & Watkins also informed Dewey that the Genstar Investor would agree to enter into a voting agreement pursuant to which they would vote in favor of the Genstar transaction as well as certain competing transactions, but also requested that ValueAct Capital agree to vote in favor of the transaction. The special committee refused to condition the transaction on Genstar receiving a voting agreement from ValueAct Capital, and Genstar eventually withdrew its request.

 

On July 19, 2007, the special committee and representatives of its legal and financial advisors met telephonically. The advisors updated the special committee on developments concerning Genstar’s non-binding indication of interest, including the recent due diligence calls with Genstar and its financing sources. Credit Suisse then reviewed with the special committee its preliminary financial analysis of PRA. The preliminary financial analyses reviewed by Credit Suisse with the special committee at this meeting were preliminary versions of, and were substantially similar to, the valuation analyses discussed with the special committee at the July 24 meeting, more fully described on pages 23 to 29 of this proxy statement, and were based on information, including stock prices, available as of July 18, 2007. Dewey updated the special committee on the status of the merger agreement negotiations. Also, the special committee again discussed the timing of the proposed execution of the merger agreement with Genstar and the upcoming PRA earnings release scheduled for July 25, 2007. After further discussions, the special committee instructed the legal and financial advisors to continue negotiations of the merger agreement and to pursue, if possible, a higher purchase price from Genstar.

 

The parties continued the negotiations on open items and exchanged drafts of the merger agreement and related transaction documents. During those negotiations, a representative of Latham & Watkins informed a representative of Dewey that $30.00 per share was the maximum amount Genstar could offer and Genstar believed that if the parties did not execute the merger agreement prior to July 23, 2007, there was a significant risk that Genstar would not be able to secure financing for the proposed transaction due to recent developments in the financial markets.

 

On July 20, 2007, the special committee and representatives of its legal and financial advisors reconvened their meeting telephonically. A representative of Dewey also updated the special committee on the progress of the negotiations with Genstar’s legal advisors on the merger agreement, the voting agreement and related documents and identified certain outstanding issues being negotiated between counsel. A representative of Credit Suisse discussed the current volatility of the financing market and the increasing difficulty in securing financing on favorable terms being experienced by some buyers. The special committee also discussed whether Genstar’s desire to execute the merger agreement by July 23, 2007 could be based, in part, on its apprehension that PRA’s earnings release could have a positive impact on PRA’s stock price and, as a result, reduce the premium implied by its $30.00 per share proposed purchase price. After lengthy discussion with its advisors, the special committee concluded that, while it was possible that there could be upward movement in PRA’s stock price as a result of the earnings release scheduled for July 25, 2007, the proposed $30.00 per share purchase price was nonetheless a very attractive price for PRA’s stockholders. The special committee noted that PRA’s stock price had increased significantly over the past several months and, if the investors were expecting greater improvements in PRA’s financial results than those reflected in the upcoming earnings release, then PRA’s stock price could fall after the earnings release, in which case Genstar could decide to either reduce the offered purchase price or retract its offer. The special committee determined that, if Genstar was in fact apprehensive about a potential upward movement in PRA’s stock price, then the special committee should capitalize on such apprehension and try to negotiate for a higher purchase price, in exchange for signing the merger agreement in advance of the upcoming earnings release.

 

Following the meeting, representatives of the special committee continued to press Genstar to increase its proposed purchase price. As a result of these negotiations, Mr. Conte on behalf of Genstar, orally communicated Genstar’s willingness to increase its offer price to $30.50 per share, but insisted that the special committee promptly reach resolution on all outstanding issues given the recent adverse changes in the financing markets and the potential uncertainty surrounding Genstar’s ability to obtain a debt financing commitment letter on favorable terms.

 

The parties’ legal advisers continued to negotiate the terms of the merger agreement, including the amount of the termination fee and the circumstances under which such a fee would be paid.

 

On July 23, 2007, the special committee and representatives of its legal and financial advisors met telephonically. At that meeting, representatives of Credit Suisse updated the special committee on its recent discussions with Genstar. Credit Suisse advised the special committee that, as requested by the special committee, it had discussed an increased offer price with Genstar, as well as Genstar’s concern about maintaining its financing commitments given the then current volatility in the financing markets. Genstar advised Credit Suisse that it would raise the offer price to $30.50, which Genstar stated was its best and final offer, that Genstar was focused on resolving all issues and moving to signing quickly and that Genstar would abandon the proposed transaction if it had

to further increase the offer price. The special committee recognized that the increased offer represented a premium of 12.1% to the closing PRA stock price on July 20, 2007, the last trading day prior to the date of such meeting. The special committee then discussed the state of the financing markets, during which the special committee concurred that the financing markets had weakened significantly. Dewey gave the special committee an overview of their fiduciary duties in connection with Genstar’s indication of interest. After lengthy discussions, the special committee concluded that $30.50 per share, which was $6.00 higher than Genstar’s original offer, was a very attractive price for PRA’s stockholders. The special committee instructed Dewey to continue negotiations with Latham & Watkins in order to finalize the transaction agreements over the course of the next two days.

 

Over the course of July 23 and 24, 2007, the respective advisors finalized the remaining open items of the merger agreement and related documentation. Genstar also delivered to the special committee executed copies of commitment letters from its financing sources.

 

During the afternoon of July 24, 2007, a meeting of the special committee with representatives of its legal and financial advisors was held telephonically. Representatives of Dewey reviewed the fiduciary duties of the special committee in connection with a sale of the Company for cash. Representatives of Credit Suisse reviewed and discussed Credit Suisse’s financial analysis of PRA and the proposed transaction with the special committee, which is more fully described on pages 23 to 29 of this proxy statement. Representatives of Dewey then reviewed in detail for the special committee the material terms of the merger agreement, including the go-shop process provided for in the merger agreement and related termination fee provisions, the main features of the debt commitment letters provided by Genstar’s lenders, and the ancillary transaction documents, including the voting agreement. Following further discussions, Credit Suisse rendered its oral opinion to the special committee (which was subsequently confirmed in writing by delivery of Credit Suisse’s written opinion dated the same date) to the effect that, as of July 24, 2007, the merger consideration to be received by the holders of shares of PRA’s common stock in the merger was fair, from a financial point of view, to such stockholders other than the Excluded Stockholders. The special committee considered the strategic alternative of pursuing an alternative transaction with a strategic buyer or another financial buyer, however, it concluded that pursuing a transaction with Genstar upon terms which would secure the value proposed by Genstar and allow PRA to solicit higher offers from other interested bidders was preferable and in the best interests of the unaffiliated stockholders. The special committee, having deliberated regarding the terms of the proposed transaction with Genstar, unanimously resolved that the merger agreement was advisable, fair to and in the best interests of PRA and PRA’s unaffiliated stockholders and resolved to recommend that (i) the board of directors declare the advisability of, and approve, the merger, the merger agreement and the transactions contemplated thereby, (ii) the board of directors resolve to recommend that PRA’s stockholders vote to adopt the merger agreement and (iii) PRA’s stockholders vote to adopt the merger agreement.

 

That afternoon, following the meeting of the special committee, a meeting of PRA’s board of directors was convened telephonically with Messrs. Booth, Kessler, Spivy and Bieker and Dr. Hemberger in attendance. The other members of the board of directors, Messrs. Conte, Weltman and Conway, waived notice of the meeting and informed Mr. Booth, chairman of the board, that they did not intend to participate in the meeting due to their relationship with Genstar. Also in attendance by invitation of PRA’s board of directors were representatives of the special committee’s legal and financial advisors. After declaring a quorum was present, Mr. Booth recused himself from the meeting and left the call due to his association with Genstar. Mr. Bieker also recused himself from the meeting and left the call due to his potential interest in the proposed transaction.

 

Representatives of Dewey reviewed the board of directors’ fiduciary duties, including the responsibilities of a board conducting a sale of a company for cash. At the request of the special committee, representatives of Credit Suisse then reviewed with the board the financial analysis of PRA and the proposed transaction that Credit Suisse had provided to the special committee to assist the special committee in evaluating the proposed transaction. Representatives of Dewey then reviewed in detail for the board of directors the material terms of the merger agreement, including the go-shop process provided for in the merger agreement, the ancillary documents, including the voting agreement, the main features of the debt commitment letters provided by Genstar, and other legal aspects of the transaction. The members of the board of directors then deliberated at length regarding all aspects of the proposed transaction and its terms. Thereafter, the board of directors (with Messrs. Booth and Bieker returning to the call but abstaining in the vote) approved and declared advisable the merger agreement and the merger and resolved to recommend that PRA’s stockholders adopt the merger agreement.

Following the meeting of the board of directors, PRA and American Stock Transfer & Trust Co., as rights agent, executed an amendment to PRA’s rights agreement which provides that neither the execution of the merger agreement nor the consummation of the merger will trigger the separation or exercise of the stockholder rights or any adverse event under the rights agreement. Shortly thereafter, the merger agreement, dated as of July 24, 2007, was executed by PRA, Parent and Merger Sub, and related documentation was executed, including the limited guaranty by Genstar V, and the voting agreement by Genstar III, Stargen III and PRA. On July 25, 2007, prior to the opening of trading on the NASDAQ Global Select Market, PRA issued a press release announcing the merger and merger agreement.

 

Beginning July 25, 2007, under the terms of the merger agreement and at the direction and under the supervision of the special committee, representatives of Credit Suisse contacted 40 financial sponsors and 21 strategic partners that had been identified by Credit Suisse as potentially having an interest in acquiring or engaging in a business combination with PRA. The financial sponsors and strategic partners were identified based on, among other things, their financial ability to consummate a transaction of this size and/or current operations or investments in businesses that are similar or complimentary to those of PRA. Of the 40 financial sponsors and 21 strategic partners contacted, five financial sponsors and five strategic partners executed confidentiality agreements and the remainder indicated they would not be interested in pursuing a transaction. None of such entities indicated a willingness to propose a transaction at a price higher than the merger consideration to be paid by Genstar.

 

Genstar intends to retain members of management following the merger. Genstar also expects that Mr. Bieker will serve as a director of Parent after the closing of the merger. After September 12, 2007, Mr. Conte and Mr. Weltman have discussed with Mr. Bieker the possibility that Parent would offer him and other members of management who hold outstanding stock options and/or common stock immediately prior to the merger the opportunity to exchange, simultaneously with the consummation of the merger, some or all of the outstanding stock options and/or common stock (in lieu of the cash out and cancellation of options and common stock provided in the merger agreement) for shares of Parent common stock or options to purchase shares of Parent common stock, as the case may be. This offer is subject to further negotiation and discussion between Parent and the offerees, and no terms or conditions with respect to such offer have been finalized as of the date of this proxy statement. Parent has also discussed with Mr. Bieker that Parent expects to establish a new equity-based compensation plan for management. Although the size of such equity-based compensation plan has not been determined and no awards have been made or promised, Parent currently anticipates that such plan would authorize the issuance of stock options to purchase up to an aggregate of 10% of the fully diluted shares of Parent following the merger and that such options would generally vest over five years of continued employment.

 

In late September 2007, Mr. Conte informed Messrs. Booth and Conway that Parent might be interested in having them serve on the board of directors of Parent after the closing of the merger. While it is possible that Parent may ask Mr. Booth and/or Mr. Conway to serve on the board of directors of Parent after consummation of the merger, there are no agreements, arrangements or understanding between Parent and Mr. Booth or Mr. Conway with respect to service on the board. It is anticipated that there will not be any such agreement, arrangement or understanding prior to the closing of the merger.

 

Recommendations of the Special Committee and Board of Directors; Reasons for Approval of the Merger

 

Special Committee

 

The special committee, acting with the assistance of its financial and legal advisors, evaluated and negotiated the proposed merger with Parent and Merger Sub, including the terms and conditions of the merger agreement. On July 24, 2007, based upon such advice, the special committee unanimously determined, that the merger, the terms thereof and the related transactions contemplated by the merger agreement are advisable, fair to, and in the best interests of, PRA and PRA’s unaffiliated stockholders and recommended that (1) the PRA board of directors declare the advisability of, and approve, the merger, the merger agreement and the transactions contemplated thereby and (2) the PRA board of directors recommend to PRA’s stockholders that they vote to adopt the merger agreement.

 

In the course of reaching the determinations and decisions, and making the recommendations, described above, the special committee considered a variety of substantive positive factors and potential benefits of the merger

agreement, the merger and the other transactions contemplated by the merger agreement, each of which the special committee believed supported its decision, including the following:

 

 

 

 

 

 

 

 

 

 

 

 

 

In addition, the special committee believed that sufficient procedural safeguards were and are present to ensure the fairness of the merger and to permit the special committee to represent effectively the interests of PRA’s stockholders other than Parent, Merger Sub and their respective affiliates without retaining an unaffiliated representative to act solely on behalf of such stockholders. The special committee considered a number of factors relating to these procedural safeguards, including those discussed below, each of which it believed supported its decision and provided assurance of the fairness of the merger to the unaffiliated stockholders of PRA:

 

 

 

In light of the procedural safeguards discussed above and the level of current beneficial ownership of PRA common stock by Genstar III and Stargen III and our management other than affiliates of Genstar III and Stargen III, which as of October 25, 2007, represented 12.6% and 3.5%, respectively, of PRA’s common stock, the special committee did not consider it necessary to explicitly require adoption of the merger agreement by at least a majority of PRA’s unaffiliated stockholders.

 

In the course of reaching the determinations and decisions, and making the recommendations, described above, the special committee considered a variety of risks and potentially negative factors relating to the merger agreement, the merger and the other transactions contemplated by the merger agreement, including the following:

 

 

 

 

 

In the course of reaching its decision to approve the merger agreement and the merger, the special committee believed that because PRA is engaged in a service business and therefore PRA’s value is primarily based on its employees and the level of service they are able to provide its clients and not PRA’s tangible assets, the liquidation value of PRA would be significantly lower than PRA’s value as a viable going concern. Accordingly, consideration of liquidation value was not a material factor to the special committee in reaching its determinations and decisions, and making the recommendations, described above. Further, the special committee did not consider net book value, which is an accounting concept, as a factor because it believed that net book value is not a material indicator of the value of PRA as a going concern but rather is indicative of historical costs. PRA’s net book value per share as of June 30, 2007 was $10.86, which is substantially below the $30.50 per share cash merger consideration.

 

The special committee considered the going concern value of PRA in making its fairness determination based on the discounted cash flow analyses with respect to PRA prepared by Credit Suisse and expressly adopted by the special committee (which were based on the projected financial information provided to Credit Suisse by members of senior management of PRA). The special committee believed the discounted cash flow analysis was an appropriate basis to utilize in assessing going concern value because a discounted cash flow analysis is designed to indicate the value of a business based on future financial performance over a sustained period of operations. See “SPECIAL FACTORS — Opinion of Credit Suisse (USA) LLC” beginning on page 23 for a summary of the Credit Suisse valuation analyses provided to the special committee.

 

The foregoing discussion of the information and factors considered by the special committee includes the material factors considered by the special committee. Due to the variety of factors considered in connection with its evaluation, the special committee did not find it practicable to quantify or otherwise assign relative weights to the specific factors considered in reaching its determination and recommendation. In addition, individual members of the special committee may have assigned different weights to various factors. The special committee approved and

recommended the merger agreement and the merger based upon the totality of the information presented to and considered by it.

 

Board of Directors

 

After careful consideration, on July 24, 2007, the PRA board of directors consisting of Messrs. Kessler and Spivy and Dr. Hemberger based on the unanimous recommendation of the special committee, (1) determined that the merger, the terms thereof and the related transactions contemplated by the merger agreement are advisable and fair to, and in the best interests of, PRA and PRA’s unaffiliated stockholders and (2) declared advisable and approved the merger agreement, the merger and the other transactions contemplated thereby. Accordingly, the PRA board of directors recommends that stockholders vote FOR the proposal to adopt the merger agreement and FOR the adjournment proposal.

 

In reaching these determinations, the board of directors considered (i) the financial analysis of PRA provided to the special committee to assist the special committee in evaluating the proposed transaction, which was reviewed with the board of directors by the special committee’s financial advisor at the special committee’s request and (ii) the analysis of the proposed transaction performed by the special committee and its unanimous recommendation, as described above, and adopted the recommendation and analysis of the special committee in reaching its determinations.

 

Messrs. Conte, Weltman and Conway waived notice of the meeting and informed Mr. Booth, chairman of the board, that they did not intend to participate in the meeting due to their relationship with Genstar. Likewise, after declaring a quorum was present, Mr. Booth recused himself from the meeting and left the call due to his interest in certain affiliates of Genstar. Mr. Bieker also recused himself from the meeting and left the call due to his potential interest in the proposed transaction. Thus, due to the relationships of certain members of the board of directors to Genstar or the potential interests of certain members of the board of directors in the proposed transaction, the voting members of the board of directors consisted of two members of the special committee, Messrs. Kessler and Spivy, and one former member of the special committee, Dr. Hemberger.

 

The foregoing discussion summarizes the material factors considered by our board of directors in its consideration of the merger. After considering these factors, the board of directors concluded that the positive factors relating to the merger agreement and the merger outweighed the negative factors. Due to the wide variety of factors considered by our board of directors, and the complexity of these matters, our board of directors did not find it practicable to quantify or otherwise assign relative weights to the foregoing factors. In addition, individual members of our board of directors may have assigned different weights to various factors. The board of directors approved the merger agreement and the merger and recommended that PRA’s stockholders adopt the merger agreement based upon the totality of the information presented to and considered by it.

 

The PRA board of directors recommends that you vote FOR the proposal to adopt the merger agreement and FOR the adjournment proposal.

 

Opinion of Credit Suisse Securities (USA) LLC

 

On July 24, 2007, Credit Suisse rendered its oral opinion to the special committee (which was subsequently confirmed in writing by delivery of Credit Suisse’s written opinion dated the same date) to the effect that, as of July 24, 2007, the merger consideration to be received by the holders of shares of our common stock in the merger was fair, from a financial point of view, to such stockholders, other than the Excluded Stockholders.

 

Credit Suisse’s opinion was directed to the special committee and only addressed the fairness from a financial point of view of the merger consideration to be received by the holders of our common stock in the merger, other than the Excluded Stockholders, and did not address any other aspect or implication of the merger. The summary of Credit Suisse’s opinion in this proxy statement is qualified in its entirety by reference to the full text of its written opinion, which is included as Appendix B to this proxy statement and sets forth the procedures followed, assumptions made, qualifications and limitations on the review undertaken and other matters considered by Credit Suisse in preparing its opinion. However, neither Credit Suisse’s written opinion nor the summary of its opinion and

the related analyses set forth in this proxy statement are intended to be, and do not constitute advice or a recommendation to any stockholder as to how such stockholder should act or vote with respect to the merger.

 

Procedures Followed

 

In arriving at its opinion, Credit Suisse, among other things:

 

 

Material Assumptions, Qualifications and Limitations

 

In connection with its review, Credit Suisse did not assume any responsibility for independent verification of any of the foregoing information and relied on such information being complete and accurate in all material respects. With respect to the financial forecasts for the Company, the management of the Company advised Credit Suisse, and Credit Suisse assumed, that such forecasts were reasonably prepared on bases reflecting the best currently available estimates and judgments of our management as to our future financial performance. Credit Suisse also assumed, with the special committee’s consent, that, in the course of obtaining any regulatory or third party consents, approvals or agreements in connection with the merger, no delay, limitation, restriction or condition would be imposed that would have an adverse effect on the Company and that the merger would be consummated in accordance with the terms of the merger agreement without waiver, modification or amendment of any material term, condition or agreement thereof. In addition, Credit Suisse was not requested to make, and did not make, an independent evaluation or appraisal of the assets or liabilities (contingent or otherwise) of the Company, nor was Credit Suisse furnished with any such evaluations or appraisals. Credit Suisse’s opinion addressed only the fairness, from a financial point of view, to the holders of Company common stock, other than the Excluded Stockholders, of the Consideration to be received in the merger and did not address any other aspect or implication of the merger or any other agreement, arrangement or understanding entered into in connection with the merger or otherwise. Credit Suisse’s opinion was necessarily based upon information made available to it as of the date of the written opinion and financial, economic, market and other conditions as they existed and could be evaluated on such date. Credit Suisse’s opinion did not address the merits of the merger as compared to alternative transactions or strategies that may be available to the Company nor did it address the Company’s underlying decision to proceed with the merger. Credit Suisse was not requested to, and did not, solicit third party indications of interest in acquiring all or any part of the Company.

 

In preparing its opinion to the special committee, Credit Suisse performed a variety of analyses, including those described below. The summary of Credit Suisse’s valuation analyses is not a complete description of the analyses underlying Credit Suisse’s fairness opinion. The preparation of a fairness opinion is a complex process involving various quantitative and qualitative judgments and determinations with respect to the financial, comparative and other analytic methods employed and the adaptation and application of these methods to the unique facts and circumstances presented. As a consequence, neither a fairness opinion nor its underlying analyses are readily susceptible to partial analysis or summary description. Credit Suisse arrived at its opinion based on the results of all analyses undertaken by it and assessed as a whole and did not draw, in isolation, conclusions from or with regard to any individual analysis, analytic method or factor. Accordingly, Credit Suisse believes that its

analyses must be considered as a whole and that selecting portions of its analyses, analytic methods and factors, without considering all analyses and factors or the narrative description of the analyses, could create a misleading or incomplete view of the processes underlying its analyses and opinion.

 

Summary of Analyses

 

In performing its analyses, Credit Suisse considered business, economic, industry and market conditions, financial and otherwise, and other matters as they existed on, and could be evaluated as of, the date of the written opinion. No company, transaction or business used in Credit Suisse’s analyses for comparative purposes is identical to the Company or the proposed merger. While the results of each analysis were taken into account in reaching its overall conclusion with respect to fairness, Credit Suisse did not make separate or quantifiable judgments regarding individual analyses. The implied reference range values indicated by Credit Suisse’s analyses are illustrative and not necessarily indicative of actual values or predictive of future results or values, which may be significantly more or less favorable than those suggested by the analyses. In addition, any analyses relating to the value of assets, businesses or securities do not purport to be appraisals or to reflect the prices at which businesses or securities actually may be sold, which may depend on a variety of factors, many of which are beyond our control and the control of Credit Suisse. Much of the information used in, and accordingly the results of, Credit Suisse’s analyses are inherently subject to substantial uncertainty.

 

Credit Suisse’s opinion and analyses were provided to the special committee in connection with its consideration of the proposed merger and were among many factors considered by the special committee in evaluating the proposed merger. Neither Credit Suisse’s opinion nor its analyses were determinative of the merger consideration or of the views of the special committee, our board of directors or our management with respect to the merger.

 

The following is a summary of the material valuation analyses performed in connection with the preparation of Credit Suisse’s opinion rendered to the special committee on July 24, 2007. The analyses summarized below include information presented in tabular format. The tables alone do not constitute a complete description of the analyses. Considering the data in the tables below without considering the full narrative description of the analyses, as well as the methodologies underlying and the assumptions, qualifications and limitations affecting each analysis, could create a misleading or incomplete view of Credit Suisse’s analyses.

 

For purposes of its analyses, Credit Suisse reviewed a number of financial metrics including:

 

Enterprise Value  — generally the value as of a specified date of the relevant company’s outstanding equity securities (taking into account its outstanding options, warrants and other convertible securities) plus the value of its minority interests plus the amount of its net debt (the amount of its outstanding indebtedness, preferred stock and capital lease obligations less the amount of cash on its balance sheet) as of a specified date.

 

EBITDA  — generally the amount of the relevant company’s earnings before interest, taxes, depreciation, and amortization for a specified time period.

 

Unless the context indicates otherwise, enterprise and per share equity values used in the selected companies analysis described below were calculated using the closing price of our common stock and the common stock of the selected pharmaceutical development companies listed below as of July 23, 2007, and the transaction and per share equity values for the target companies used in the selected transactions analysis described below were calculated as of the announcement date of the relevant transaction based on the purchase prices paid in the selected transactions. Estimates of EBITDA and net income for the Company for the fiscal years ending December 31, 2007 and December 31, 2008 were based on estimates provided by our management. EBITDA and net income for the Company for the fiscal year ending December 31, 2006 and estimated for the fiscal year ending December 31, 2007 were adjusted to add back restructuring costs and other non-recurring costs and expenses based on discussions with our management of $1.7 million (on a pre-tax basis) and $1.3 million (on a post-tax basis) for the fiscal year ending December 31, 2006 and $9.3 million (on a pre-tax basis) and $6.7 million (on a post-tax basis) for the fiscal year ending December 31, 2007.

Selected Companies Analysis

 

Credit Suisse calculated enterprise value multiples of certain financial data for the Company and selected companies.

 

The calculated multiples included:

 

 

The primary and secondary selected companies were selected because they had publicly traded equity securities and were deemed to be similar to PRA in one or more respects including the nature of their business, size, diversification, financial performance and geographic concentration. No specific numeric or other similar criteria were used to select the selected companies and all criteria were evaluated in their entirety without application of definitive qualifications or limitations to individual criteria. As a result, a significantly larger or smaller company with substantially similar lines of businesses and business focus may have been included while a similarly sized company with less similar lines of business and greater diversification may have been excluded. Credit Suisse identified a sufficient number of companies for purposes of its analysis but may not have included all companies that might be deemed comparable to PRA. The primary selected companies were:

 

 

 

 

 

Credit Suisse also considered the following secondary selected companies:

Covance Inc.

Charles River Laboratories, Inc.

 

The selected companies analysis indicated the following for the secondary selected companies:

 

 

The secondary selected companies were not deemed as similar to PRA as the primary selected companies, and consequently, although they were qualitatively considered in determining the implied reference range value per share of our common stock, corresponding multiples for secondary selected companies were not included in the table summarizing the results of the primary selected companies analysis and were not applied to corresponding financial data for the Company provided by our management. Credit Suisse applied multiple ranges of 11.0x to 14.5x for CY2007E EBITDA, 9.0x to 11.5x for CY2008E EBITDA, 23.0x to 28.5x for CY2007E net income per share, and 18.0x to 23.0x for CY2008E net income per share based on the multiple ranges indicated by the selected companies analysis to corresponding financial data for the Company provided by our management. The selected multiple ranges were chosen based on Credit Suisse’s experience and judgment after reviewing the selected companies and their corresponding multiples taken as a whole and do not reflect separate or quantifiable judgments regarding individual multiples or companies. The selected companies analysis indicated an implied reference range value per share of our common stock of $20.50 to $31.00, as compared to the proposed merger consideration of $30.50 per share of our common stock.

 

Selected Transactions Analysis

 

Credit Suisse calculated enterprise value multiples of certain financial data based on the purchase prices for selected publicly-announced transactions involving pharmaceutical development target companies it deemed relevant.

 

The calculated multiples included:

 

 

The selected transactions were selected because the target companies were deemed to be similar to PRA in one or more respects including the nature of their business, size, diversification, financial performance and geographic concentration. No specific numeric or other similar criteria were used to select the selected transactions and all criteria were evaluated in their entirety without application of definitive qualifications or limitations to individual criteria. As a result, a transaction involving the acquisition of a significantly larger or smaller company with substantially similar lines of businesses and business focus may have been included while a transaction involving the acquisition of a similarly sized company with less similar lines of business and greater diversification may have been excluded. Credit Suisse identified a sufficient number of transactions after May 24, 1996 for purposes of its

analysis, but may not have included all transactions that might be deemed comparable to the merger. The selected transactions were:

 

 

The selected transactions analysis indicated the following:

 

 

 

 

Credit Suisse applied multiple ranges of 1.7x to 2.2x for LTM Revenues and 11.0x to 15.1x for LTM EBITDA based on the multiple ranges indicated by the selected transactions analysis to corresponding financial data for the Company provided by our management. The selected multiple ranges were chosen based on Credit Suisse’s experience and judgment after reviewing the selected transactions and their corresponding multiples taken as a whole and do not reflect separate or quantifiable judgments regarding individual multiples or transactions. The selected transactions analysis indicated an implied reference range value per share of our common stock of $22.50 to $30.50, as compared to the proposed merger consideration of $30.50 per share of our common stock.

 

Discounted Cash Flow Analysis

 

Credit Suisse also calculated the net present value of the Company’s unlevered, after-tax cash flows based on the projections provided by our management. In performing this analysis, Credit Suisse used discount rates ranging from 11.5% to 13.5% based on the Company’s estimated weighted average cost of capital (a rate intended to reflect the cost of raising additional capital for our Company) and terminal multiples ranging from 9.0x to 12.0x CY2011 EBITDA based on the selected companies analysis. As indicated in the table set forth below, the discounted cash flow analyses indicated an implied reference range value per share of our common stock of $25.27 to $33.83, as compared to the proposed merger consideration of $30.50 per share of our common stock.

 

 

distractions caused by the public equity market’s valuation of PRA and the focus on the quarter-to-quarter performance often emphasized by the public markets. The Genstar Filers believe that management will benefit from eliminating the duties required in managing a publicly traded company, enabling them to devote more of their time and energy to core business operations. Moreover, the Genstar Filers believe that PRA’s future business prospects can be improved through their active participation in the strategic direction and operations of PRA. Although the Genstar Filers believe that there will be significant opportunities associated with their investment in PRA, they realize that there are also substantial risks (including the risks and uncertainties relating to PRA’s prospects, including the prospects described in management’s projections summarized under “SPECIAL FACTORS — Financial Projections” beginning on page 46).

 

PRA faces a number of challenges in the market place, including the ability of PRA’s customers to cancel contracts, recruiting and staffing new projects, PRA’s need to continue to expand to provide a global platform, potential mergers and other corporate changes with PRA’s customers and the fact that PRA recently hired four new senior executives. Responding to these challenges will require tolerance for volatility in the performance of PRA’s business and a willingness to make long-term business decisions that carry substantial risks. The Genstar Filers believe that these strategies would be most effectively implemented in the context of a private company structure. As a privately-owned company, PRA would have increased flexibility to make decisions that may negatively affect quarterly results but that may, over the long term, increase PRA’s value. In contrast, as a publicly-traded company, PRA currently faces public stockholder and investment analyst pressure to make decisions that may produce better short-term results, but which may over the long term lead to a reduction in the per share price of its publicly-traded equity securities.

 

As a privately-owned company, PRA would also be relieved of many of the other burdens and constraints imposed on companies that are subject to the public reporting requirements under the federal securities laws, including the Exchange Act and Sarbanes-Oxley Act of 2002. The need for management to be responsive to unaffiliated stockholder concerns and to engage in an ongoing dialogue with unaffiliated stockholders may at times distract management’s time and attention from the effective operation and improvement of the business.

 

The Genstar Filers believe that structuring the transaction as a “going private” merger transaction is preferable to other transaction structures because (i) it will enable Parent to acquire all of the outstanding shares of PRA at the same time, (ii) it represents an opportunity for all of PRA’s stockholders to receive fair value for their shares at the same time and (iii) it facilitates the debt financing required to complete the merger transaction. The Genstar Filers believe that the merger transaction will provide a prompt and orderly transfer of ownership of PRA in a single step, without the necessity of financing separate purchases of PRA’s common stock in a tender offer and a second-step merger to acquire shares of common stock not tendered into the tender offer, and without incurring any additional transaction costs associated with such activities.

 

The Genstar Filers rejected using a tender offer to accomplish the transaction because a tender offer would have necessitated financing separate purchases of stock in a tender offer followed by a second-step merger. The Genstar Filers also considered a merger transaction in which all PRA stockholders would have had the opportunity to retain a portion of their shares. In its indication of interest on June 7, 2007, Genstar proposed an acquisition price of $28 per share and a “rollover option” pursuant to which PRA stockholders would be permitted, at their election to receive shares in the surviving corporation after the merger in lieu of a portion of the cash consideration, subject to a cap of 20% of the outstanding shares of the surviving corporation. The special committee did not accept that proposal. Thereafter, Genstar increased its offer to $30.00 per share, and eventually to $30.50 per share. The Genstar Filers rejected the rollover option in favor of acquiring all of the outstanding shares in light of the increased cash consideration and so that the surviving corporation would not have publicly traded stock and thereby would not be subject to public reporting obligations and fiduciary duty issues to unaffiliated, public stockholders.

 

The purpose of the merger for Genstar III is to sell their shareholdings in PRA. Genstar III initially invested in PRA in 2001. Genstar III is no longer making new investments, and is seeking to generate returns to its investors through the sale of its investment in PRA shares. Genstar III has considered other alternatives to selling its shares pursuant to the merger. In particular it has considered selling its shares in open market transactions. However, the amount of PRA shares that it could sell in the open market during any quarterly period is limited and therefore it would take substantially longer to sell its shares in the open market than pursuant to the merger. Similarly, Genstar III

has considered selling its shares in a registered offering. Based on the historical trading prices of PRA, Genstar III believes that if it were to sell its PRA shares in the open market or pursuant to a registered offering, it is unlikely that it would realize an amount per share that is more than the $30.50 price per share to be paid in the merger.

 

Position of the Genstar Filers as to Fairness

 

Under SEC rules the Genstar Filers are required to provide certain information regarding their position as to the substantive and procedural fairness of the merger to the unaffiliated stockholders of PRA. The Genstar Filers are making the statements included in this section of the proxy statement solely for the purposes of complying with the requirements of Rule 13e-3 and related rules under the Exchange Act.

 

The Genstar Filers did not undertake a formal evaluation of the merger. The shareholders of PRA were, as described elsewhere in this proxy statement, represented by the special committee that negotiated with the Genstar Filers on their behalf, with the assistance of independent legal and financial advisors. None of the Genstar Filers participated in the deliberation process of the special committee and none of them participated in the conclusions of the special committee or the board of directors of PRA that the merger was fair to the unaffiliated shareholders of PRA, nor did they undertake any independent evaluation of the fairness of the merger to our unaffiliated stockholders. However, based upon the same factors considered by, and the findings of, the special committee and the board of directors with respect to the fairness of the merger to such unaffiliated stockholders as set forth in this proxy statement, which findings and related analyses, as set forth in this proxy statement, the Genstar Filers adopt, the Genstar Filers believe that the merger agreement and the merger are substantively and procedurally fair to our unaffiliated stockholders. The Genstar Filers believe that these factors provide a reasonable basis for their belief that the merger is procedurally and substantively fair to our unaffiliated stockholders. These factors and findings are described on page 18 under “ — Recommendations of the Special Committee and the Board of Directors; Reasons for Approval of the Merger.”

 

While the foregoing discussion of the information and factors considered by the Genstar Filers in connection with the fairness of the merger agreement and the merger is believed to include all material factors considered by the Genstar Filers in determining the fairness of the merger to our unaffiliated stockholders, the Genstar Filers did not find it practicable to assign, nor did they assign, relative weights to the individual factors considered in reaching their conclusion as to the fairness of the merger to such stockholders.

 

In light of the factors described above, and the fact that the use of a special committee of independent and disinterested directors is a mechanism well recognized to ensure fairness in transactions of this type, the Genstar Filers believe that the merger is substantively and procedurally fair to the unaffiliated stockholders despite the fact that an unaffiliated representative was not retained to act solely on behalf of PRA’s unaffiliated stockholders.

 

The Genstar Filers’ view as to the fairness of the merger to the unaffiliated stockholders of PRA is not a recommendation as to how any such stockholder should vote on the merger. The foregoing discussion of the information and factors considered and weight given by the Genstar Filers while not exhaustive are believed to include all material factors considered by the Genstar Filers.

 

Plans for PRA after the Merger

 

The Genstar Filers (other than Genstar III) have advised PRA that, following the consummation of the merger, they intend that PRA will continue its current operations, except that PRA will cease to be a public company and will instead be a subsidiary of Parent. Following the consummation of the merger, PRA’s common stock will cease to be publicly traded and the registration of PRA’s common stock and PRA’s reporting obligations under the Exchange Act with respect to its common stock will be terminated upon application to the SEC. In addition, upon consummation of the merger, PRA’s common stock will no longer be listed on any exchange or quotation system, including the NASDAQ Global Select Market, and price quotations will no longer be available. PRA will not be subject to the obligations and constraints, and the related direct and indirect costs, associated with having publicly traded equity securities.

 

The Genstar Filers (other than Genstar III) have further advised PRA that they do not have any specific plans or proposals that relate to or would result in an extraordinary corporate transaction following completion of the merger

involving PRA’s corporate structure, business or management, such as a merger, reorganization or liquidation, or sale or transfer of a material amount of assets. However, the Genstar Filers (other than Genstar III) expect to continuously evaluate and review PRA’s business and operations following the merger and may develop new plans and proposals that they consider appropriate to maximize the value of PRA. The Genstar Filers (other than Genstar III) expressly reserve the right to make any changes they deem appropriate in light of such evaluation and review or in light of future developments.

 

Effects of the Merger

 

If the merger is approved by PRA’s stockholders and the other conditions to the closing of the merger are either satisfied or waived, Merger Sub will be merged with and into PRA, with PRA being the surviving corporation. After the merger, Parent will own all of the capital stock of PRA and PRA will no longer be a publicly-traded company. Immediately following the effective time of the merger, Parent will be owned by Genstar V, Genstar IV, CDPQ, possibly other investors and certain other members of our management who may acquire equity interests in Parent.

 

When the merger is completed, each share of PRA common stock issued and outstanding immediately prior to the effective time of the merger (other than treasury shares, shares held by Parent or Merger Sub and shares held by PRA stockholders who choose to be dissenting stockholders by exercising and perfecting their appraisal rights under Delaware law with respect to the merger) will be converted into the right to receive $30.50 in cash without interest and less any applicable withholding taxes. At the effective time of the merger, unless otherwise agreed between Parent and the holder thereof:

 

 

Although no agreements have been entered into as of the date of this proxy statement, Genstar has discussed with Mr. Bieker the possibility that Parent would offer him and other members of management who hold outstanding stock options and/or common stock immediately prior to the merger the opportunity to exchange, simultaneously with the consummation of the merger, some or all of the outstanding stock options and/or common stock (in lieu of the cash out and cancellation of options and common stock provided in the merger agreement) for shares of Parent common stock or options to purchase shares of Parent common stock, as the case may be. The opportunity to exchange shares of PRA common stock for, or to purchase shares of, Parent common stock is intended to provide an equity-based incentive and retention benefit with respect to future operations of Parent and its subsidiaries. This offer is subject to further negotiation and discussion between Parent and the offerees, and no terms or conditions with respect to such offer have been finalized as of the date of this proxy statement.

 

If the merger is completed, PRA stockholders (other than members of our management who acquire equity interests in Parent) will have no interests in PRA’s net book value or net earnings after the merger. The table below sets forth the direct and indirect interest in voting shares of PRA and the interest in PRA’s net book value and net earnings for the Genstar Filers, based on the historical net book value of PRA as of June 30, 2007 and the historical net earnings of PRA for the six months ended June 30, 2007.

 

 

 

 

 

 

 

A primary benefit of the merger to PRA’s stockholders (including Genstar III, but excluding members of our management who may acquire equity interests in Parent) will be the right of such stockholders to receive a cash payment of $30.50, without interest, for each share of PRA common stock held by such stockholders as described above, an approximately 13.1% premium over the closing market price of PRA common stock on July 24, 2007, the last trading day preceding the public announcement of the proposed transaction. Additionally, such stockholders will avoid the risk of any possible decrease in the future earnings, growth or value of PRA following the merger.

The primary detriments of the merger to such stockholders include the lack of an interest of such stockholders in the potential future earnings or growth of PRA. Additionally, the receipt of cash in exchange for shares of PRA common stock pursuant to the merger will be a taxable transaction for U.S. federal income tax purposes.

 

In connection with the merger, members of our management who exchange equity interests in PRA for equity interests in Parent will receive benefits and be subject to obligations in connection with the merger that are different from, or in addition to, the benefits of PRA’s stockholders generally. These incremental benefits and detriments include the right to contribute, in a transaction that is intended to be tax-free for U.S. federal income tax purposes, shares of their PRA common stock and/or options to purchase shares of PRA common stock to Parent in exchange for Parent common stock and/or options to purchase Parent common stock.

 

The primary benefits of the merger to the Genstar Filers (other than Genstar III) and members of our management who may acquire equity interests in Parent collectively include their proportionate share of all of the potential future earnings and growth of PRA which, if PRA successfully executes its business strategies, could exceed the value of their original investment in Parent. Additionally, following the merger, PRA will be a private company indirectly owned by the Genstar Filers (other than Genstar III) and any additional investors permitted by them, and as such will be relieved of the burdens imposed on companies with publicly traded equity, including the pressure to meet analyst forecasts and the requirements and restrictions on trading that PRA’s directors, officers and beneficial owners of more than 10% of the shares of PRA common stock face as a result of the provisions of Section 16 of the Exchange Act. Additionally, in the event the merger is consummated, the Genstar Filers (other than Genstar III) will have their fees and expenses incurred in connection with the transaction reimbursed by the surviving corporation. Additionally, following the merger, our members of management who are currently officers of PRA will retain their officer positions with the surviving corporation.

 

The primary detriments of the merger to the Genstar Filers (other than Genstar III) and members of our management who may acquire equity interests in Parent include the fact that they (and any additional investors permitted by Genstar) will bear all of the risk of any possible decrease in the earnings, growth or value of PRA following the merger. Additionally, their investments in Parent will be illiquid, with no public trading market for such securities, and the equity securities of Parent will be subject to restrictions on transfer.

 

The chairman of the board of directors, Melvin D. Booth, and another member of PRA’s board of directors, Robert E. Conway are limited partners in Stargen IV and Stargen V, and in such capacity, each will have an economic interest in less than 0.1% of the equity interests of Parent. Neither Mr. Booth nor Mr. Conway will have the power to control the voting or disposition of any such equity interests. Neither Mr. Booth nor Mr. Conway will be officers of Parent. While it is possible that Parent may ask Mr. Booth and Mr. Conway to serve on the board of directors of Parent after the consummation of the merger, there are no agreements, arrangements or understandings between Parent and Mr. Booth or Mr. Conway with respect to service on the board. It is anticipated that there will not be any such agreement, arrangement or understanding prior to the closing of the merger.

 

Mr. Conte and Mr. Weltman currently are the directors of Parent and at the effective time will continue as directors of Parent. At the effective time of the merger, the directors of Merger Sub (Mr. Conte and Mr. Weltman) will become the directors of the surviving corporation and the current officers of PRA will become the officers of the surviving corporation. Mr. Bieker is also expected to become a director of Parent and the surviving corporation.

 

PRA’s common stock is currently registered under the Exchange Act and is quoted on the NASDAQ Global Select Market under the symbol “PRAI.” As a result of the merger, PRA will be a privately held corporation, and there will be no public market for its common stock. After the merger, the common stock will cease to be quoted on the NASDAQ Global Select Market, and price quotations with respect to shares of PRA common stock in the public market will no longer be available. In addition, registration of the common stock under the Exchange Act will be terminated. This termination will make certain provisions of the Exchange Act, such as the requirement of furnishing a proxy or information statement in connection with stockholders’ meetings, no longer applicable to PRA. After the effective time of the merger, PRA will also no longer be required to file periodic reports with the SEC.

 

At the effective time of the merger, the certificate of incorporation of PRA will be amended to be the same as the certificate of incorporation of Merger Sub as in effect immediately prior to the effective time of the merger,

except that the name of the corporation will be “PRA International” and, pursuant to the merger agreement, liability exculpating provisions applicable to directors of PRA and indemnification rights of the officers and directors of PRA shall not be amended, repealed or otherwise modified for six years from the merger effective time in any manner that would affect adversely the rights thereunder of such officers and directors, and only to the extent, unless required by law. The bylaws of Merger Sub in effect immediately prior to the effective time of the merger will become the bylaws of the surviving corporation.

 

Effects on PRA if the Merger is not Completed

 

In the event that the proposal to adopt the merger agreement is not approved by PRA’s stockholders or if the merger is not completed for any other reason, our stockholders will not receive any payment for their shares in connection with the merger. Instead, PRA will remain a public company and its common stock will continue to be listed and traded on the NASDAQ Global Select Market. In addition, if the merger is not completed, we expect that management will operate the business in a manner similar to that in which it is being operated today and that PRA stockholders will continue to be subject to the same risks and opportunities as they currently are. Accordingly, if the merger is not consummated, there can be no assurance as to the effect of these risks and opportunities on the future value of PRA common stock. From time to time, PRA’s board will evaluate and review the business operations, properties, dividend policy and capitalization of PRA, among other things, make such changes as are deemed appropriate and continue to seek to identify strategic alternatives to maximize stockholder value. If the proposal to adopt the merger agreement is not approved by PRA’s stockholders or if the merger is not consummated for any other reason, there can be no assurance that any other transaction acceptable to PRA will be offered, or that the business, prospects or results of operations of PRA will not be adversely impacted.

 

In addition, if the merger agreement is terminated under certain circumstances, PRA will be obligated to pay a termination fee of $23.7 million, unless such termination is in connection with a superior proposal submitted by an excluded party (as defined in the merger agreement), in which case PRA must pay a fee of $7.9 million, in each case, to Parent. See “THE MERGER AGREEMENT — Fees and Expenses” beginning on page 72.

 

Accounting Treatment of the Merger

 

The merger is expected to be accounted for as a business combination using the purchase method of accounting for financial accounting purposes, whereby the estimated purchase price would be allocated to the assets and liabilities of PRA based on their relative fair values in accordance with Financial Accounting Standards No. 141, Business Combinations.

 

Financing

 

Equity Financing

 

Parent has received an equity commitment letter, dated as of July 24, 2007, from Genstar V. Pursuant to the equity commitment letter, Genstar V has committed to make a cash equity contribution to Parent of up to $391.26 million in connection with the proposed merger. The obligation to fund commitments under the equity commitment letter is subject to satisfaction of all conditions precedent to Parent’s and Merger Sub’s obligations to complete the merger under the merger agreement. The equity commitment letter will terminate on the earliest of (i) the consummation of the merger, (ii) the occurrence of an event which renders any of the conditions in the letter incapable of being satisfied, (iii) the termination of the merger agreement prior to the closing and (iv) the Outside Date. Genstar V is permitted to assign all or any of its obligations under the equity commitment letter provided such person agrees to assume the obligations under such letter. Pursuant to such an assignment, it is expected that Genstar IV will provide approximately $50 million and Stargen IV and Stargen V will provide approximately $10 million. Parent has invited certain other investors, including CDPQ, an institution which is providing a portion of the debt financing to Parent in connection with the merger, to make minority investments in Parent for up to an aggregate amount of $65 million, however, no agreement has been reached with such potential investors at this time. It is expected that CDPQ will provide $40 million of the equity required to finance the merger. To the extent those or other potential investors do not invest in Parent, Genstar V will provide such equity amount. At the time of the consummation of the merger, Genstar will control Parent.

Debt Commitment Letters

 

Parent has entered into two commitment letters: (x) a commitment letter dated July 24, 2007, and amended and restated as of August 31, 2007, which is referred to as the “senior debt commitment letter”, with UBS Loan Finance LLC, UBS Securities LLC and Jefferies Finance LLC, sometimes referred to collectively as the “senior debt arrangers”, and (y) a commitment letter dated August 31, 2007, which is referred to as the “senior subordinated notes commitment letter” (and together with the senior debt commitment letter, the “commitment letters”), with CDPQ, and collectively with the senior debt arrangers, the “arrangers”). Pursuant to, and subject to the terms and conditions of, the commitment letters,

 

 

 

The senior secured term loan facilities and senior secured revolving credit facilities are sometimes collectively referred to as the “senior secured credit facilities”. The unsecured senior subordinated notes are sometimes referred to as the “senior subordinated notes”. The senior secured credit facilities and the senior subordinated notes are sometimes referred to as the “financing”.

 

The financing commitments in the aggregate total approximately $465 million. The senior debt commitment letter expires on the earlier to occur of April 2, 2008 or the Outside Date. The senior subordinated notes commitment letter expires on April 2, 2008, subject to extension in CDPQ’s sole discretion. The documentation governing each of the senior secured credit facilities and the senior subordinated notes has not been finalized and, accordingly, the actual terms of the financing may differ from those described in this proxy statement.

 

Conditions Precedent to the Debt Commitments

 

The availability of the senior secured credit facilities and the senior subordinated notes is subject to the satisfaction or waiver of a number of conditions, including, without limitation:

 

 

 

In addition, the availability of the senior secured credit facilities is subject to the satisfaction or waiver of the following additional conditions:

 

 

In addition, the availability of the senior subordinated notes financing is subject to the following additional conditions:

 

 

Senior Secured Credit Facilities

 

General.   The US borrower under the senior secured credit facilities will initially be Merger Sub. As a result of the merger, Merger Sub will be merged with and into PRA and thereafter, the borrower will be PRA as the US borrowers and Pharmaceutical Research Associates Group BV, a Netherlands corporation as the Dutch borrower. It is contemplated that such senior secured credit facilities will consist of: (i) a $70 million senior secured term loan facility with a term of seven years made to PRA, (ii) an $85 million “last-out” senior secured term loan facility with a term of seven years to PRA, (iii) a $40 million senior secured term loan facility of with a term of seven years made to the Dutch borrower, (iv) a Euro equivalent of $60 million (approximately €45 million) senior secured term loan facility with a term of seven years made to the Dutch borrower; (v) a $30 million senior secured revolving credit facility with a term of six years made to PRA and (vi) a Euro equivalent of $10 million (approximately €7.5 million) senior secured revolving credit facility with a term of six years made to the Dutch borrower.

UBS Securities LLC and Jefferies Finance LLC have been appointed as joint advisors and joint lead arrangers and will act as joint bookrunning managers for the senior secured credit facilities. UBS AG, Stamford Branch will be the administrative agent and collateral agent for the senior secured credit facilities. In addition, additional agents or co-agents for the senior secured credit facilities may be appointed, with the consent of the senior debt arrangers, prior to consummation of the merger.

 

Interest Rate and Fees.   Loans denominated in dollars under the senior secured credit facilities are expected to bear interest, at the borrowers’ option, at (1) a rate equal to the higher of (a) the federal funds rate plus 0.50% and (b) the prime commercial lending rate of UBS AG, plus (in either case) an applicable margin or (2) a rate equal to LIBOR (London Interbank Offered Rate) plus an applicable margin. Loans denominated in euros under the senior secured credit facilities are expected to bear interest at a rate equal to EURIBOR (Euro Interbank Offered Rate) plus an applicable margin. The applicable margins, with respect to the revolving credit facilities, will be subject to a decrease pursuant to a leverage-based pricing grid.

 

In addition, the borrowers will pay customary commitment fees (subject to a decrease based on leverage) and letter of credit fees, in each case, under the revolving credit facility. Upon the consummation of the merger, Parent has also agreed to pay underwriting fees to the arrangers.

 

Prepayments and Amortization.   The borrowers will be permitted to make voluntary prepayments at any time and required to make mandatory prepayments of term loans with (1) net cash proceeds of asset sales (subject to reinvestment rights and other exceptions, including, without limitation, an exception for ordinary course sales of inventory), (2) net proceeds of issuances of debt or preferred stock (other than permitted issuances), (3) casualty and condemnation proceeds (subject to reinvestment rights), (4) a percentage of PRA’s excess cash flow (to be defined) and (5) a percentage of net proceeds of public issuances of equity securities. The term loans (other than the “last-out” term loans) will also have required interim amortization payments, payable quarterly, with the balance payable at the final maturity date of such term loans.

 

Guarantors.   All obligations under the senior secured credit facilities of PRA will be guaranteed by Parent and each existing and future direct and indirect domestic subsidiary of PRA, sometimes referred to collectively as the “US guarantors”. All obligations under the senior secured credit facilities of the Dutch borrower will be guaranteed by Parent and each existing and future direct and indirect subsidiary of Parent, collectively, sometimes referred to as the “Euro guarantors”, except to the extent such guarantee would be prohibited by applicable law or would result in materially adverse tax consequences and subject to other exceptions as are agreed.

 

Security.   The obligations of PRA and the US guarantors under the senior secured credit facilities will be secured, subject to permitted liens and other agreed upon exceptions, by all the equity interests of PRA and its direct or indirect subsidiaries owned by PRA and each US guarantor and substantially all present and future tangible and intangible assets of PRA and each US guarantor (limited, in the case of foreign subsidiaries, to the extent such pledge would be prohibited by applicable law or would result in materially adverse tax consequences, and, in any event, subject to such other exceptions as are agreed).

 

The obligations of the Dutch borrower and the Euro guarantors under the senior secured credit facilities will be secured, subject to permitted liens and other agreed upon exceptions, by all the equity interests of PRA and its direct or indirect subsidiaries owned by PRA and each Euro guarantor and substantially all present and future tangible and intangible assets of the Dutch borrower and each Euro guarantor, subject to exceptions as are agreed.

 

Other Terms.   The senior secured credit facilities will contain customary representations and warranties and customary affirmative and negative covenants, including, among other things, restrictions on indebtedness, liens, investments and acquisitions, sales of assets, mergers and consolidations, dividends and other distributions on or redemptions of stock and prepayments of certain subordinated indebtedness. The senior secured credit agreement will contain financial maintenance covenants related to interest coverage and leverage. The senior secured credit facilities will also include customary events of default, including a change of control default.

Senior Subordinated Notes

 

General.   The issuer of the senior subordinated notes will initially be Merger Sub. As a result of the merger, Merger Sub will be merged with and into PRA and thereafter, the issuer will be PRA. The aggregate principal amount of the senior subordinated notes will be $170 million with a term of seven years and six months.

 

CDPQ has been appointed as lead arranger and sole administrative agent for the senior subordinated notes.

 

Interest Rate and Fees.   The senior subordinated notes are expected to bear interest on the principal amount of such notes at a rate of 14.25% per annum, payable in cash. At the option of the issuer, interest accruing at a rate of up to 1.25% per annum may be paid in kind. In addition, for one single consecutive 12 month period, the issue may elect to convert interest accruing at a rate of up to 1% per annum tha is otherwise payable in cash to payment in kind. Upon the consummation of the merger, Parent has also agreed to pay a commitment fee to CDPQ.

 

Redemptions.   The issuer will be permitted to make voluntary redemptions of the senior subordinated notes after the first anniversary of the consummation of the merger, subject to payment of premiums, plus all accrued and unpaid interest. To the extent permitted by the senior secured credit facilities (other than with respect to a change of control), the issuer shall offer to redeem the senior subordinated notes upon any public offering of equity securities of PRA or any of its subsidiaries and the issuer may be required to offer to redeem the senior subordinated notes upon any acceleration of the senior subordinated notes or any transaction which constitutes a change of control. In connection with any required redemption, PRA must pay a premium on the principal amount redeemed, plus all accrued and unpaid interest.

 

Guarantors.   All obligations under the senior subordinated notes will be guaranteed by Parent and each existing and future direct and indirect domestic subsidiary of PRA.

 

Subordination.   The senior subordinated notes will be subordinated only to indebtedness under the senior secured credit facilities.

 

Security.   The obligations of the borrowers and the guarantors under the senior subordinated notes will be unsecured.

 

Other Terms.   The senior subordinated notes will contain customary representations and warranties and customary affirmative and negative covenants, including customary exceptions for transactions of this type. Financial maintenance covenants applicable to the subordinated notes will be set at up to a 15% discount to those in senior secured credit facilities and negative covenants therein will include customary incurrence baskets. The senior subordinated notes will also include customary events of default.

 

Except as set forth in this proxy statement, the Genstar Persons do not have any alternative plans for the financing of the transaction in the event the Genstar Persons are not successful in obtaining the financing described in this proxy statement.

 

Guaranty of Genstar V; Remedies under the Merger Agreement

 

In connection with the merger agreement, Genstar V has agreed to guarantee the due and punctual performance and discharge of certain of the payment obligations of Parent under the merger agreement, up to a maximum amount of $23.7 million. The guarantee will remain in full force and effect until the effective time of the merger or, if the merger agreement is terminated under circumstances in which Parent would be obligated to make any payments under the terms of the merger agreement, on the six month anniversary of such termination. This summary is qualified in its entirety by reference to the limited guaranty, a copy of which is attached as Appendix E hereto and is incorporated by reference.

 

Interests of PRA’s Directors and Executive Officers in the Merger

 

In considering the recommendation of the board of directors to vote “FOR” the approval and adoption of the merger agreement, PRA’s stockholders should be aware that certain of PRA’s directors and executive officers have interests in the transaction that are different from, and/or in addition to, the interests of PRA’s stockholders generally. The special committee and our board of directors were aware of these potential conflicts of interest and

considered them, among other matters, in reaching their decisions and recommendations with respect to the merger agreement and related matters.

 

Treatment of Stock Options

 

At the effective time of the merger, each of PRA’s equity-based compensation or stock plans will terminate and all of our equity compensation awards (including awards held by our executive officers and directors, unless otherwise agreed by such holder and Parent) will be subject to the following treatment:

 

 

Although no agreements have been entered into as of the date of this proxy statement, Genstar has discussed with Mr. Bieker the possibility that Parent would offer him and other members of management who hold outstanding stock options and/or common stock immediately prior to the merger the opportunity to exchange, simultaneously with the consummation of the merger, some or all of the outstanding stock options and/or common stock (in lieu of the cash out and cancellation of options and common stock provided in the merger agreement) for shares of Parent common stock or options to purchase shares of Parent common stock, as the case may be. This offer is subject to further negotiation and discussion between Parent and the offerees, and no terms or conditions with respect to such offer have been finalized as of the date of this proxy statement.

 

The table below sets forth, as of October 25, 2007, for each of our directors and executive officers:

 

 

 

 

 

Employment Agreements

 

Certain members of PRA’s management, including its executive officers, have employment agreements providing for the acceleration of equity awards upon a change in control of PRA if the officer is terminated within a certain time period after such change in control. However, because in connection with the merger (1) each outstanding option, and (2) any right of a kind, contingent or accrued, to receive PRA common stock or benefits measured in whole or in part by the value of a number of company common stock under PRA’s incentive plans will become fully vested and free of any restrictions, these provisions will not result in equity awards held by such members of management being treated differently than those held by any other individual (except to the extent that the individual manager elects to exchange his or her options for options to purchase Parent common stock as described above).

 

Management Arrangements

 

As of the date of this proxy statement, we have not entered into any employment agreements with our management, nor amended or modified any existing employment agreements, in connection with the merger. In addition, as of the date of this proxy statement, no member of our management team has entered into any agreement with Parent or its affiliates regarding employment with, or the right to purchase or participate in the equity of, Parent or any of its subsidiaries. Parent has informed us that it currently intends to retain members of our management team following the merger. Parent also has informed us that it intends to establish equity-based incentive compensation plans for management. The size of such equity-based incentive compensation plans has not yet been determined and no awards have been made or promised. Although no agreements have been entered into as of the date of this proxy statement, Genstar has discussed with Mr. Bieker the possibility that Parent would offer him and other members of management who hold outstanding stock options and/or common stock immediately prior to the merger the opportunity to exchange, simultaneously with the consummation of the merger, some or all of the outstanding stock

options and/or common stock (in lieu of the cash out and cancellation of options and common stock provided in the merger agreement) for shares of Parent common stock or options to purchase shares of Parent common stock, as the case may be. The extent to which Parent awards new options to purchase Parent common stock following the merger will depend on the amount of options issued in exchange for options to purchase PRA common stock. Although the size of such equity-based compensation plan has not been determined and no awards have been made or promised, Parent currently anticipates that such plan would authorize the issuance of stock options to purchase up to an aggregate of 10% of the fully diluted shares of Parent following the merger. New options granted pursuant to such plans generally would vest over five years of continued employment and would entitle the option holder to share in the future appreciation of PRA and Parent. The amount of equity that will be held by PRA management at the closing of the merger, including whether such equity will be newly granted options or rollover options, is subject to further negotiation and discussion between Parent and the offerees, and no terms or conditions with respect to such equity have been finalized as of the date of this proxy statement.

 

Indemnification and Insurance

 

Pursuant to the terms of the merger agreement, Parent has agreed:

 

 

These obligations will be binding upon any successor to or assignee of substantially all of the properties and assets of the surviving corporation. See “THE MERGER AGREEMENT — Directors’ and Officers’ Indemnification and Insurance of the Surviving Corporation” beginning on page 67.

 

Special Committee

 

If the merger is completed, members of the special committee will, along with other stock and option holders, receive cash payments for shares of PRA common stock and vested in-the-money options as described below under the heading “THE MERGER AGREEMENT — Treatment of Stock Options.” As members of the PRA board of directors, members of the special committee will also benefit from the indemnification and insurance provisions contained in the merger agreement with respect to their acts or omissions as directors as described above under the heading “— Indemnification and Insurance.” Armin M. Kessler will receive $30,000 as remuneration for his service as chairman of the special committee. Gregory P. Spivy will receive $10,000 for his service as a member of the special committee. Dr. Judith A. Hemberger will receive $10,000 for her period of service as a member of the special committee. Each member of the special committee will be reimbursed for any out-of-pocket expenses incurred in connection with such service.

 

Mr. Weltman will have an indirect economic interest in Parent through his indirect interest in Genstar, Stargen IV and Stargen V. Messrs. Conte and Weltman are President and Vice President respectively, and directors of each of Parent and Merger Sub. Following the consummation of the merger, Messrs. Conte and Weltman will cease to be officers of Parent and Merger Sub, but will continue to serve as directors of Parent and the surviving corporation.

 

The chairman of our board of directors, Melvin D. Booth, and another member of our board of directors, Robert E. Conway, each currently serves as a member of the Strategic Advisory Board of Genstar Capital, LLC. Mr. Booth and Mr. Conway are limited partners in Stargen IV and Stargen V, which are limited partnerships formed by employees of Genstar Capital, LLC to invest in parallel with Genstar. As limited partners, Mr. Booth and Mr. Conway each will have an economic interest in less than 0.1% of the equity interests of Parent. Neither Mr. Booth nor Mr. Conway will have the power to control the voting or disposition of any such equity interests. Neither Mr. Booth nor Mr. Conway will be officers of Parent. While it is possible that Parent may ask Mr. Booth and/or Mr. Conway to serve on the board of directors of Parent after the consummation of the merger, there are no agreements, arrangements or understandings between Parent and Mr. Booth or Mr. Conway with respect to service on the board. It is anticipated that there will not be any such agreement, arrangement or understanding prior to the closing of the merger.

 

Registration Rights Agreement

 

Genstar III, Stargen III and an affiliate of CDPQ have entered into a registration rights agreement with us, under which they may require us at any time to file a registration statement under the Securities Act to register the sale of shares of our common stock, subject to certain limitations. Pursuant to the exercise of demand registration rights by Genstar III, we filed a registration statement on March 7, 2006 to register the resale of up to five million shares of our common stock held by Genstar III and Stargen III, certain of our officers, directors, and other parties. We are required to pay all registration expenses in connection with the first six of these demand registrations under the registration rights agreement. The exercise of a demand registration right, when made, entitles the other existing stockholders to notice of the registration and allows them to include their shares of common stock in the registration. Our registration rights agreement also grants “piggyback” registration rights in connection with registered offerings of common stock that we initiate, for which we must pay all expenses.

 

Stockholders Agreements

 

We have entered into agreements with Genstar III, Stargen III, an affiliate of CDPQ, certain institutional investors and certain current and former executives that contain provisions requiring certain of our stockholders to submit to a sale of PRA upon the satisfaction of stated conditions; allow all stockholders to participate in certain transfers proposed by the majority stockholders; provide a right of first refusal in our favor and in favor of certain of our stockholders with respect to sales by certain of our stockholders; grant preemptive rights to certain stockholders should we undertake to issue new securities upon certain conditions being met; and in some instances grant “piggyback” registration rights under the registration rights agreement described above.

 

Nomination of Directors

 

Under an agreement we entered into with Genstar III and Stargen III, each of Genstar III and Stargen III has the right to elect one of our directors so long as it holds any shares of our common stock.

 

Amendment to PRA’s Rights Agreement

 

PRA entered into a rights agreement, dated as of March 23, 2007, with American Stock Transfer & Trust Company, as rights agent, which contains certain restrictions on PRA’s ability to merge or consolidate with any other entity. On July 24, 2007, immediately prior to the execution of the merger agreement, PRA and the rights agent entered into an amendment to the rights agreement which provides that neither the execution of the merger agreement nor the consummation of the merger will trigger the provisions of the rights agreement. In particular, the amendment to the rights agreement provides that neither Parent, Merger Sub nor any of their affiliates or associates will be deemed to be an acquiring person (as defined in the rights agreement) solely by virtue of the approval, execution, delivery and adoption or performance of the merger agreement or the consummation of the merger or any other transactions contemplated by the merger agreement.

 

Voting Agreement

 

Simultaneously with the execution and delivery of the merger agreement, certain stockholders of PRA, namely Genstar Capital Partners III, L.P., referred to as Genstar III, and Stargen III, L.P., referred to as Stargen III, entered into a voting agreement. Genstar III and Stargen III collectively own approximately 12.7% of the outstanding shares of common stock of PRA. Under the terms of the voting agreement, from the time of the execution of the voting agreement and until the earliest to occur of the date that (a) the merger becomes effective, (b) the transaction contemplated by a superior proposal received by PRA (under the terms of the merger agreement) is consummated, (c) the merger agreement is terminated in accordance with its terms, unless it is terminated by PRA in order to enter into another definitive agreement providing for a superior proposal, (d) such other definitive agreement is terminated, or (e) is February 25, 2008 (or later as provided for in the merger agreement related to the marketing period), Genstar III and Stargen III have agreed to vote their shares in favor of the merger, against all action or agreements that would result in a breach of any covenants, representation or warranty or any other obligation or agreement of PRA under the merger agreement, or in favor of a superior proposal if recommended by the board of directors, as the case may be.

 

Material U.S. Federal Income Tax Consequences

 

The following discussion summarizes the material U.S. federal income tax consequences to the beneficial holders of PRA common stock all of whose shares are converted to cash pursuant to the merger, and is based upon present law (which may change, possibly with retroactive effect). The tax consequences set forth below are not intended to constitute a complete description of all tax consequences relating to the merger.

 

DUE TO THE INDIVIDUAL NATURE OF TAX CONSEQUENCES, YOU SHOULD CONSULT YOUR TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES OF THE MERGER TO YOU, INCLUDING THE EFFECTS OF APPLICABLE FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX LAWS .

 

The following discussion applies only if you hold your shares as a capital asset and does not apply if you acquired your shares, or receive payment pursuant to the merger, in respect of the exercise of stock options or other compensation arrangements with PRA or hold your shares as part of a hedge, straddle or conversion transaction or are a person otherwise subject to special tax treatment under the Internal Revenue Code of 1986, as amended, which we refer to as the “Code.” In addition, this discussion does not address the U.S. federal income tax consequences to a beneficial holder of PRA common stock who, for U.S. federal income tax purposes, is a non-resident alien individual, a foreign corporation, a foreign partnership or a foreign estate or trust, nor does it consider the effect of any state, local or foreign tax laws.

 

The receipt of cash pursuant to the merger will be a taxable transaction for U.S. federal income tax purposes and may also be a taxable transaction under applicable state, local and other tax laws. If you receive cash pursuant to the merger, you will recognize gain or loss equal to the difference, if any, between the amount of cash received and your adjusted tax basis in the shares converted into cash pursuant to the merger (determined before the deduction of any withholding tax). Gain or loss will be determined separately for each block of shares (i.e., shares acquired for the same cost in a single transaction) converted into cash pursuant to the merger. Such gain or loss will be long-term capital gain or loss if your holding period for the shares is more than one year at the time of consummation of the merger. In general, recognized long-term capital gain is subject to U.S. federal income tax at a maximum rate of 15% for individuals and 35% for corporations. The deduction of capital losses is subject to certain limitations.

 

Cash payments received by beneficial holders of PRA common stock pursuant to the merger are subject to information reporting, and will be subject to backup withholding at the applicable rate (currently, 28%) if the beneficial holder or other payee fails to provide a valid taxpayer identification number and comply with certain certification procedures or otherwise establish an exemption from backup withholding. Each beneficial holder should complete and sign the substitute Form W-9 that will be part of the letter of transmittal to be returned to the paying agent in order to provide the information and certification necessary to avoid backup withholding, unless an applicable exemption exists and is otherwise proved in a manner acceptable to the paying agent. Backup withholding is not an additional U.S. federal income tax. Rather, the U.S. federal income tax liability of the person subject to backup withholding will be reduced by the amount of tax withheld. If backup withholding results

in an overpayment of taxes, a refund may be obtained provided that the required information is timely furnished to the Internal Revenue Service.

 

The receipt of cash pursuant to the exercise of statutory appraisal rights will be a taxable transaction for U.S. federal income tax purposes and may also be a taxable transaction under applicable state, local and other tax laws as described above. Any holder considering exercising statutory appraisal rights should consult their own tax advisors with respect to their particular circumstances.

 

Regulatory Approvals

 

The HSR Act provides that transactions such as the merger may not be completed until certain information has been submitted to the Federal Trade Commission of the United States, referred to as the FTC, and the United States Department of Justice, referred to as the DOJ and specified waiting period requirements have been satisfied. On September 21, 2007, PRA and Genstar V made the required filings. Early termination of the 30-day waiting period was granted October 1, 2007. The completion of the merger is also conditional upon its approval under any applicable foreign merger control legislation. All applicable foreign approvals have been obtained.

 

At any time prior to or after the consummation of the merger, the FTC and DOJ could, however, take action to challenge the merger if it deems such action necessary to protect the public interest, including seeking to enjoin completion of the merger. The merger is also subject to state antitrust laws and could be the subject of challenges by state attorneys general or by private parties under federal or state antitrust laws. There can be no assurance that a challenge to the merger will not be made or that, if a challenge is made, PRA will prevail.

 

Under the merger agreement, PRA and Parent have agreed to use their commercially reasonable efforts to obtain all required governmental approvals in connection with the completion of the merger. In addition, PRA and Parent have agreed to use their commercially reasonable efforts to resolve any objections or suits asserted by the FTC or DOJ or any other applicable governmental agency.

 

Except as noted above, and the filing of a certificate of merger in Delaware at or before the effective date of the merger, we are unaware of any material federal, state or foreign regulatory requirements or approvals required for the execution of the merger agreement or completion of the merger.

 

Fees and Expenses of the Merger

 

The merger agreement provides that all expenses incurred in connection with the merger agreement be paid by the party incurring such expenses, whether or not the merger is consummated.

 

PRA estimates that it will incur, and will be responsible for paying, transaction-related fees and expenses, consisting primarily of financial advisory fees, SEC filing fees, HSR Act filing fees, fees and expenses of attorneys and accountants and other related charges, totaling approximately $[ • ] million. This amount consists of the following estimated fees and expenses (in millions):

 

 

In addition, if the merger agreement is terminated under certain circumstances, PRA will be obligated to pay a termination fee of $23.7 million, unless such termination is in connection with a superior proposal submitted by an excluded party (as defined in the merger agreement), in which case PRA must pay a fee of $7.9 million to Parent. Under certain circumstances, PRA may, in each case, be required to pay up to $7.9 million of Parent’s expenses in the event that the merger agreement is terminated. See “THE MERGER AGREEMENT — Fees and Expenses” beginning on page 72.

 

Financial Projections

 

PRA does not, as a matter of course, publicly disclose projections of future revenues or earnings. However, financial forecasts prepared by PRA management were made available to the board of directors, Genstar and its financial advisor, UBS Securities LLC, and the special committee and its financial advisor, Credit Suisse, in connection with the consideration of a potential investment by Genstar in PRA, in the case of Genstar V and UBS Securities LLC, and in connection with their assessment of the Genstar offer, in the case of the board of directors and the special committee and Credit Suisse. We have included the projected financial information deemed material by our special committee and board of directors for purposes of considering and evaluating the merger. The projections were not prepared with a view toward public disclosure or to compliance with published guidelines of the SEC or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information. The inclusion of this information should not be regarded as an indication that Genstar V, our special committee or board of directors, Credit Suisse or any other recipient of this information considered, or now considers, it to be a reliable prediction of future results.

 

The prospective financial information included in this proxy statement has been prepared by, and is the responsibility of, PRA’s management. PricewaterhouseCoopers LLP has neither examined nor compiled the accompanying prospective financial information and, accordingly, PricewaterhouseCoopers LLP does not express an opinion or any other form of assurance with respect thereto. The PricewaterhouseCoopers LLP report included in this proxy statement relates to PRA’s historical financial information. It does not extend to the prospective financial information and should not be read to do so. In compiling the projections, PRA’s management took into account historical performance, combined with estimates regarding revenues, EBITDA and capital spending. The projections were developed in a manner consistent with management’s historical development of budgets and were not developed for public disclosure. Although the projections are presented with numerical specificity, these projections reflect numerous assumptions and estimates as to future events that PRA’s management believed were reasonable at the time the projections were prepared. In addition, factors such as industry performance and general business, economic, regulatory, market and financial conditions, all of which are difficult to predict and beyond the control of PRA’s management, may cause the projections or the underlying assumptions to be inaccurate. Accordingly, there can be no assurance that the projections will be realized, and actual results may be materially greater or less than those contained in the projections. The inclusion of this information should not be regarded as an indication that the Genstar Filers, Credit Suisse or any other recipient of this information considered, or now considers, it to be a reliable prediction of future results.

PRA does not intend to update or otherwise revise the projections to reflect circumstances existing after the date when made or to reflect the occurrence of future events even in the event that any or all of the assumptions underlying the projections are shown to be in error. A summary of the projections is set forth below:

 

 

 

 

QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER

 

The following questions and answers address briefly some questions you may have regarding the special meeting, the merger agreement and the proposed merger. These questions and answers may not address all questions that may be important to you as a stockholder of PRA. Please refer to the more detailed information contained elsewhere in this proxy statement, the appendices to this proxy statement and the documents referred to or incorporated by reference in this proxy statement.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

You may also wish to consult your own legal, tax and/or other financial advisors with respect to the merger agreement, the merger or other matters described in this proxy statement.

 

 

 

other risks detailed in our filings with the SEC, including our most recent filings of quarterly report on Form 10-Q and annual report on Form 10-K. See “WHERE YOU CAN FIND ADDITIONAL INFORMATION” beginning on page 88. The foregoing list and the risks reflected in our documents incorporated by reference in this proxy statement should not be construed to be exhaustive. Many of the factors that will determine our future results or whether or when the merger will be consummated are beyond our ability to control or predict. Actual results or matters related to the merger could differ materially from the forward-looking statements contained in this proxy statement as a result of the timing of the completion of the merger or the impact of the merger on our operating results, capital resources, profitability, cash requirements, management resources and liquidity. In light of the significant uncertainties inherent in the forward-looking statements contained herein, readers should not place undue reliance on forward-looking statements, which reflect our management’s views only as of the date hereof. We cannot guarantee any future results, levels of activity, performance or achievements. The statements made in this proxy statement represent our views as of the date of this proxy statement, and it should not be assumed that the statements made herein remain accurate as of any future date. Moreover, we assume no obligation to update forward-looking statements or update the reasons that actual results could differ materially from those anticipated in forward-looking statements, except as required by law.

 

The safe harbor from liability for forward-looking statements provided by the Private Securities Litigation Reform Act of 1995 does not apply to forward-looking statements made in connection with going private transactions such as the merger.

 

THE PARTIES TO THE MERGER

 

PRA International

 

PRA, a Delaware corporation with its headquarters in Reston, Virginia, was incorporated April 2001 with predecessors dating back to 1976. PRA is a global contract research organization, or CRO, with approximately 2,800 employees working from 24 offices located in North America, Europe, Africa, South America, Australia, and Asia. CROs assist pharmaceutical and biotechnology companies in developing drug compounds, biologics, and drug delivery devices and gaining certain regulatory approval. The conduct of clinical trials, in which a product candidate is tested for safety and efficacy, forms a major part of the regulatory approval process. Completing the approval process as efficiently and quickly as possible is a priority for sponsoring pharmaceutical and biotechnology companies because they must receive regulatory approval prior to marketing their products. PRA conducts clinical trials globally and serves the growing need of pharmaceutical and biotechnology companies to conduct complex clinical trials in multiple geographies concurrently. Revenue for CROs is typically generated on a fee for service basis on either a time and materials or a fixed-price contract arrangement with the client. In 2006, PRA generated service revenue of $303.2 million and operating income of $33.2 million.

 

A detailed description of PRA’s business is contained in its Annual Report on Form 10-K for the year ended December 31, 2006, which is incorporated by reference into this proxy statement. See “WHERE YOU CAN FIND ADDITIONAL INFORMATION” beginning on page 88.

 

PRA’s principal executive offices are located at 12120 Sunset Hills Road, Suite 600, Reston, VA 20190 and its telephone number is (703) 464 – 6300. PRA is publicly traded on the NASDAQ Global Select Market under the symbol “PRAI.”

 

GG Holdings I, Inc. and GG Merger Sub I, Inc.

 

Parent is a Delaware corporation with its principal executive office at c/o Genstar Capital, LLC, 4 Embarcadero Center, Suite 1900, San Francisco, California, and its telephone number is (415) 834-2350. Parent was formed solely for the purposes of entering into the merger agreement and consummating the transactions contemplated by the merger agreement, including arranging the related financing transactions. Parent has not conducted any activities to date other than activities incidental to its formation and in connection with the transactions contemplated by the merger agreement. Parent is owned by Genstar V and Genstar IV. It is contemplated that other investors will make minority investments in Parent; however, Genstar would retain control of Parent at the time of the consummation of the merger.

 

Parent is currently owned by Genstar V. It is currently expected that at the closing of the merger, the equity of Parent will be provided as follows:

 

 

 

 

 

 

At the time of the consummation of the merger, Genstar will own a substantial majority of the outstanding shares of Parent and will control Parent.

 

Merger Sub is a Delaware corporation and a wholly owned subsidiary of Parent with its principal executive office at c/o Genstar Capital, LLC, 4 Embarcadero Center, Suite 1900, San Francisco, California, and its telephone number is (415) 834-2350. Merger Sub was formed solely for the purposes of entering into the merger agreement and consummating the transactions contemplated by the merger agreement, including arranging the related financing transactions. Merger Sub has not conducted any activities to date other than activities incidental to its formation and in connection with the transactions contemplated by the merger agreement. Upon the completion of the merger, Merger Sub will cease to exist and PRA will survive as a wholly owned subsidiary of Parent.

 

Jean-Pierre L. Conte and Robert J. Weltman are directors of PRA and also are members of the limited liability companies that control Genstar IV and Genstar V. Mr. Conte is President and a director of each of Parent and Merger Sub. Mr. Weltman is Vice President and a director of each of Parent and Merger Sub. Mr. Conte and Mr. Weltman are the only officers and directors of Parent and Merger Sub.

 

Additional information regarding the transaction participants is set forth on Appendix F.

 

Corporate Structure

 

The corporate structure of PRA prior to the consummation of the merger is as follows. None of the Genstar Filers (other than Genstar III) owns any shares of PRA.

 

 

 

¹  Mr. Conte is a member of the entity that controls the general partner of each of Genstar III and Stargen III.

 

Pursuant to the merger, PRA will be merged with and into Merger Sub, with PRA as the surviving corporation. The merger will result in PRA becoming a wholly owned subsidiary of Parent. As a result of the merger Genstar III will cease to own any shares of PRA.

 

 

 

 

THE SPECIAL MEETING OF STOCKHOLDERS

 

This proxy statement is furnished in connection with the solicitation of proxies by PRA’s board of directors in connection with the special meeting of our stockholders relating to the merger.

 

 

Proposals to be Considered at the Special Meeting

 

At the special meeting, you will be asked to consider and vote on the following proposals:

 

 

Record Date

 

PRA’s board of directors has fixed the close of business on [ • ] as the record date for the special meeting, and only holders of record of PRA common stock on the record date are entitled to vote (in person or by proxy) at the special meeting. On the record date, there were [ • ] shares of PRA common stock outstanding and entitled to vote.

 

Voting Rights; Quorum; Vote Required for Approval

 

Each share of PRA common stock entitles its holder to one vote on all matters properly coming before the special meeting. The presence in person or representation by proxy of stockholders entitled to cast a majority of the votes of all issued and outstanding shares entitled to vote shall constitute a quorum for the purpose of considering the proposals. Shares of PRA common stock represented at the special meeting but not voted, including shares of PRA common stock for which proxies have been received but for which stockholders have abstained, will be treated as present at the special meeting for purposes of determining the presence or absence of a quorum for the transaction of all business. In the event that a quorum is not present at the special meeting, it is expected that the meeting will be adjourned or postponed to solicit additional proxies.

 

Adoption of the merger agreement requires the affirmative vote of the holders of a majority of the outstanding shares of PRA common stock entitled to vote on the matter. An affirmative vote of a majority of the unaffiliated security holders is not necessary to complete the merger. If all of the affiliated security holders vote their shares in favor of the proposal to adopt the merger agreement only [ • ]% of the unaffiliated security holders would need to vote for such proposal in order for us to complete the merger. For the proposal to adopt the merger agreement, you may vote FOR, AGAINST or ABSTAIN. Abstentions will not be counted as votes cast or shares voting on the proposal to adopt the merger agreement, but will count for the purpose of determining whether a quorum is present. If you ABSTAIN, it will have the same effect as a vote AGAINST the adoption of the merger agreement. In addition, if your shares are held in the name of a broker, bank or other nominee, your broker, bank or other nominee will not be entitled to vote your shares in the absence of specific instructions. These non-voted shares, or “broker non-votes,” will be counted for purposes of determining a quorum, but will have the same effect as a vote AGAINST the adoption of the merger agreement. Your broker, bank or other nominee will vote your shares only if you provide instructions on how to vote by following the instructions provided to you by your broker, bank or other nominee.

The proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies requires the affirmative vote of the holders of a majority of the outstanding shares of PRA common stock present or represented by proxy at the special meeting and entitled to vote on the matter. For the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies, you may vote FOR, AGAINST or ABSTAIN. Abstentions and broker non-votes will count for the purpose of determining whether a quorum is present, but abstentions and broker non-votes will not count as shares present and entitled to vote on the proposal to adjourn the meeting. As a result, abstentions and broker non-votes will have no effect on the vote to adjourn the special meeting, which requires the vote of the holders of a majority of the shares of PRA common stock present or represented by proxy at the meeting and entitled to vote on the matter.

 

As of the record date, the directors and executive officers of PRA held and are entitled to vote, in the aggregate, [ • ] shares of PRA common stock, representing approximately [ • ] % of the outstanding voting PRA common stock. The directors and executive officers have informed PRA that they currently intend to vote all of their shares of PRA common stock FOR the adoption of the merger agreement and FOR the adjournment proposal. Two of our directors are affiliated with Genstar III and Stargen III, which collectively own approximately 12.6% of the outstanding shares of PRA common stock, and Genstar III and Stargen III have agreed to vote their shares for the approval of the adoption of the merger agreement subject to their agreement to vote for a superior proposal if such superior proposal is recommended by the board of directors or special committee. If our directors and executive officers vote their shares in favor of adopting the merger agreement, [ • ] % of the outstanding shares of PRA common stock will have voted for the proposal to adopt the merger agreement. This means that additional holders of in excess of [ • ] % of all shares entitled to vote at the special meeting would need to vote for the proposal to adopt the merger agreement in order for it to be adopted.

 

Another member of our board of directors is a partner of ValueAct Capital, an affiliate of ValueAct Capital Master Fund L.P. and ValueAct Capital Master Fund III, L.P., referred to together as the ValueAct Funds, which together own shares representing an aggregate of approximately 18.5% of the outstanding shares of PRA common stock. Such director has informed the Company that the ValueAct Funds intend to vote all of their shares of PRA common stock “FOR” the adoption of the merger agreement and “FOR” the adjournment proposal.

 

Voting and Revocation of Proxies

 

Stockholders of record may submit proxies by mail.   Stockholders who wish to submit a proxy by mail should mark, date, sign and return the proxy card in the envelope furnished. If you hold your shares in your name as a stockholder of record, you may vote by telephone or electronically through the Internet by following the instructions included with your proxy card. Stockholders who hold shares beneficially through a nominee (such as a bank or broker) may be able to submit a proxy by mail, or by telephone or the Internet if those services are offered by the nominee.

 

Proxies received at any time before the special meeting, and not revoked or superseded before being voted, will be voted at the special meeting. Where a specification is indicated by the proxy, it will be voted in accordance with the specification. If you sign your proxy card without indicating your vote, your shares will be voted FOR the adoption of the merger agreement and FOR the adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies, and in accordance with the recommendations of our board of directors on any other matters properly brought before the special meeting for a vote or any adjournment or postponement thereof.

 

You have the right to revoke your proxy at any time before the vote taken at the special meeting:

 

 

Please do not send in your stock certificates with your proxy card.   When the merger is completed, a separate letter of transmittal will be mailed to you that will enable you to receive the merger consideration.

 

Rights of Stockholders Who Object to the Merger

 

Stockholders of PRA are entitled to appraisal rights under Delaware law in connection with the merger. This means that you are entitled to have the value of your shares determined by the Delaware Court of Chancery and to receive payment based on that valuation. The ultimate amount you receive as a dissenting stockholder in an appraisal proceeding may be more than, the same as or less than the amount you would have received under the merger agreement.

 

To exercise your appraisal rights, you must submit a written demand for appraisal to PRA before the vote is taken on the merger agreement and you must not vote in favor of the adoption of the merger agreement. Your failure to follow exactly the procedures specified under Delaware law will result in the loss of your appraisal rights. See “DISSENTERS’ APPRAISAL RIGHTS” beginning on page 84 and the text of the Delaware appraisal rights statute reproduced in its entirety as Appendix C.

 

Solicitation of Proxies

 

This proxy solicitation is being made and paid for by PRA on behalf of its board of directors. In addition, we have retained The Altman Group to assist in the solicitation. We will pay The Altman Group $5,000 plus out-of-pocket expenses for their assistance in the solicitation of proxies for the special meeting. Our directors, officers and employees may also solicit proxies by personal interview, mail, e-mail, telephone, facsimile or other means of communication. These persons will not be paid additional remuneration for their efforts. We will also request brokers and other fiduciaries to forward proxy solicitation material to the beneficial owners of shares of PRA common stock that the brokers and fiduciaries hold of record. We will reimburse them for their reasonable out-of-pocket expenses. In addition, we will indemnify The Altman Group against any losses arising out of that firm’s proxy soliciting services on our behalf.

 

Other Business

 

We are not currently aware of any business to be acted upon at the special meeting other than the matters discussed in this proxy statement. Under our bylaws, business transacted at the special meeting is limited to the purposes stated in the notice of the special meeting, which is provided at the beginning of this proxy statement. If other matters properly come before the special meeting, or at any adjournment or postponement of the special meeting, we intend that shares of PRA common stock represented by properly submitted proxies will be voted in accordance with the recommendations of our board of directors.

 

Questions and Additional Information

 

If you have more questions about the merger or how to submit your proxy, or if you need additional copies of this proxy statement or the enclosed proxy card or voting instructions, please call The Altman Group, our proxy solicitor, at 1-800-314-9816, or contact PRA in writing at our principal executive offices at PRA International, 12120 Sunset Hills Road, Suite 600, Reston, VA 20190, Attention: Investor Relations Department, or by telephone at (703) 464-6300.

 

Availability of Documents

 

The reports, opinions, analyses or appraisals referenced in this proxy statement and filed as exhibits to the Schedule 13E-3 filed by PRA with the SEC will be made available for inspection and copying at the principal executive offices of PRA during its regular business hours by any interested holder of PRA common stock.

 

THE MERGER AGREEMENT

 

This section describes the material terms of the merger agreement. The following summary is qualified in its entirety by the merger agreement, which is attached to this proxy statement as Appendix A and is incorporated herein by reference. This summary may not contain all of the information that is important to you. Stockholders are urged to read the merger agreement in its entirety.

 

Structure of the Merger

 

At the effective time of the merger, Merger Sub will merge with and into PRA and the separate corporate existence of Merger Sub will cease. PRA will continue as the surviving corporation and will be a wholly owned subsidiary of Parent.

 

Effective Time of the Merger

 

The merger will become effective upon the filing of a certificate of merger with the Secretary of State of the State of Delaware or at such later time as is specified in the certificate of merger, which time is referred to as the merger effective time.

 

Certificate of Incorporation; Bylaws and Directors and Officers of the Surviving Corporation

 

At the merger effective time: