Document:

2002 STOCK OPTION PLAN

 

Exhibit 10.11

QUINTILES TRANSNATIONAL CORP.

2002 STOCK OPTION PLAN

     1.  Purposes of the Plan. The Quintiles Transnational Corp. 2002 Stock
Option Plan (the “Plan”) has been established by Quintiles Transnational Corp.
(the “Company”) to (i) attract and retain persons eligible to participate in
the Plan; (ii) motivate such persons, by means of appropriate incentives, to
achieve long-range goals; (iii) provide incentive compensation opportunities
that are competitive with those of other, similar companies; and (iv) further
identify Optionees’ interests with those of the Company’s other shareholders
through compensation based upon the Common Stock and thereby promote the
long-term financial interests of the Company and its Subsidiaries. Options
granted under the Plan may be Incentive Stock Options or Nonqualified Stock
Options, as determined by the Administrator at the time of grant.

     2.  Definitions. As used herein, the following definitions shall apply:

          (a)  “Administrator” means the Board or the Committee (or their designees),
as applicable.

          (b)  “Applicable Laws” means the requirements relating to the
administration of stock option plans under U.S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or quotation
system on which the Common Stock is listed or quoted and the applicable laws of
any other country or jurisdiction where Options are granted under the Plan.

          (c)  “Board” means the Board of Directors of the Company.

          (d)  “Code” means the Internal Revenue Code of 1986, as amended.

          (e)  “Committee” means a committee of Directors appointed by the Board in
accordance with Section 4 hereof.

          (f)  “Common Stock” means the common stock of the Company, par value $.01
per Share.

          (g)  “Consultant” means any person who is not an Employee and who is
engaged by the Company or any Parent or Subsidiary to render consulting or
advisory services to such entity.

          (h)  “Director” means a member of the Board.

          (i)  “Disability” means “permanent and total disability” as defined in
Section 22(e)(3) of the Code.

 

 

          (j)  “Employee” means any person, including officers and Directors,
employed by the Company or any Parent or Subsidiary of the Company. A Service
Provider shall not cease to be an Employee upon (i) any leave of absence
approved by the Company (or by the Parent or Subsidiary that employs the
person) or (ii) a transfer between locations of the Company (or the Parent or
Subsidiary that employs the person) or between the Company, its Parent, any
Subsidiary, or any successor. For purposes of Incentive Stock Options, no such
leave of absence may exceed 90 days, unless reemployment upon expiration of
such leave is guaranteed by statute or contract. Neither service as a Director
nor payment of a Director’s fee shall constitute “employment.”

          (k)  “Exchange Act” means the Securities Exchange Act of 1934, as amended.

          (l)  “Fair Market Value” means, as of any date, the value of Common Stock
determined as follows:

               (i)  If the Common Stock is listed on any established stock exchange or a
national market system, including, without limitation, the Nasdaq National
Market or The Nasdaq Small Cap Market of The Nasdaq Stock Market, its Fair
Market Value shall be the closing sales price for such stock (or the closing
bid, if no sales were reported) as quoted on such exchange or system for the
date of determination (or the next succeeding market trading day, if the date
of determination is not a market trading day), as reported in The Wall Street
Journal, or such other source as the Administrator deems reliable;

               (ii)  If the Common Stock is regularly quoted by a recognized securities
dealer but selling prices are not reported, its Fair Market Value shall be the
mean between the high bid and low asked prices for the Common Stock on the date
of determination (or the next succeeding market trading day, if the date of
determination is not a market trading day); or

               (iii)  In the absence of an established market for the Common Stock, the
Fair Market Value thereof shall be determined in good faith by the
Administrator.

          (m)  “Incentive Stock Option” means an Option intended to qualify as an
“incentive stock option” within the meaning of Section 422 of the Code.

          (n)  “Notice of Grant” means the notice to an Optionee of the key terms of
an Option (e.g., the option type, number of Shares, exercise price, vesting and
expiration date, etc.). The Notice of Grant may be in written or electronic
form (including in the form of one or more electronic screens displaying the
details of an Option) and shall be deemed to be part of the Option Agreement.

          (o)  “Nonqualified Stock Option” means an Option not intended to qualify as
an Incentive Stock Option.

          (p)  “Option” means a stock option granted pursuant to the Plan.

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          (q)  “Option Agreement” means the written agreement between the Company and
an Optionee setting forth the terms and conditions of an Option.

          (r)  “Optionee” means the holder of an outstanding Option granted under the
Plan.

          (s)  “Parent” means a “parent corporation,” whether now or hereafter
existing, as defined in Section 424(e) of the Code.

          (t)  “Rule 16b-3” means Rule 16b-3 under the Exchange Act or any successor
thereto.

          (u)  “Service Provider” means an Employee, Director or Consultant.

          (v)  “Share” means a share of Common Stock, as adjusted in accordance with
Section 12 below.

          (w)  “Subsidiary” means, for purposes of Incentive Stock Options, a
“subsidiary corporation,” whether now or hereafter existing, as defined in
Section 424(f) of the Code. For all other purposes under the Plan (other than
Section 13(a), the term “Subsidiary” means any corporation, partnership, joint
venture, limited liability company or other entity during any period
in which at
least a fifty percent (50%) voting or profits interest is owned, directly or
indirectly, by the Company (or any entity that is a successor to the Company)
and any other business venture designated by the Committee in which the Company
(or any entity that is a successor to the Company) has a significant ownership
interest, as determined in the discretion of the Committee.

     3.  Stock Subject to the Plan. Subject to the provisions of Section 12 of
the Plan, the maximum aggregate number of Shares that may be subject to Options
and sold under the Plan shall be five million (5,000,000) Shares. The Shares
shall be authorized but unissued Common Stock.

          If an Option expires or becomes unexercisable without having been
exercised in full, the unpurchased Shares that were subject thereto shall
become available for future grant or sale under the Plan unless the Plan has
terminated. Shares that have actually been issued under the Plan upon exercise
of an Option shall not be returned to the Plan and shall not become available
for future distribution under the Plan, except that if the Company repurchases
unvested Shares at their original purchase price, such Shares shall become
available for future grant under the Plan.

     4.  Administration of the Plan.

          (a)  Procedure. The Human Resources and Compensation Committee, or such
other Committee as the Board may appoint from time to time, shall administer
the Plan. At the

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discretion of the Board, the Board may take any action under the Plan that
would otherwise be the responsibility of the Committee.

               (i)  Rule 16b-3. To the extent desirable to qualify Options as exempt
under Rule 16b-3, the Committee shall be composed solely of two or more
“Non-Employee Directors,” within the meaning of Rule 16b-3(d)(1), or the
transactions contemplated hereunder shall otherwise be structured to meet the
requirements for exemption under Rule 16b-3.

               (ii)  Section 162(m). To the extent desirable to qualify Options granted
hereunder as “performance-based compensation,” within the meaning of Section
162(m) of the Code, the Committee shall be composed solely of two or more
“outside directors” within the meaning of Section 162(m) of the Code.

               (iii)  Delegation to Officer. The Board or the Committee may authorize one
or more senior executive officers of the Company to authorize or approve grants
of Options within limits specifically prescribed by the Board or the Committee,
as applicable, to the extent permitted by the rules of any applicable stock
exchange or national market system and by Section 55-8-25 of the General
Statutes of North Carolina. The Board or the Committee may revoke or amend the
terms of such a delegation at any time, but such action shall not invalidate
any prior action of such delegate(s) that were consistent with the terms of the
Plan.

          (b)  Powers of the Administrator. Subject to the provisions of the Plan
and, in the case of a Committee, the specific duties delegated by the Board to
such Committee, the Administrator shall have the authority in its discretion:

               (i)  To determine the Fair Market Value of the Shares, select the Service
Providers to whom Options may from time to time be granted hereunder, determine
the dates of grant, determine the type and the number of Shares covered by each
Option, establish the terms, conditions, performance criteria, and other
restrictions and provisions of Options, and approve the forms of Option
Agreements, which need not be identical in each case;

               (ii)  To prescribe, amend and rescind rules and regulations relating to the
Plan, including rules and regulations for the purpose of qualifying for
preferred tax treatment under non-U.S. tax laws;

               (iii)  To satisfy the Company’s required minimum statutory withholding
obligations (based on minimum statutory withholding rates for federal and state
tax purposes, including payroll taxes, that are applicable to supplemental
taxable income) by repurchasing upon exercise of an Option that number of
Shares having a Fair Market Value equal to the amount of the Company’s required
minimum statutory withholding obligation;

               (iv)  To permit the deferral of delivery of Shares upon exercise of
Options, subject to such limitations and procedures as the Administrator may
establish; and

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               (v)  To construe and interpret the terms of the Plan and Options granted
under the Plan and to make all other determinations deemed necessary or
advisable for administering the Plan.

          (c)  Exclusions. The provisions of Section 4(b) above notwithstanding, the
Administrator shall not be authorized under the Plan to grant so-called
“reload” options, to settle any Option in cash, except as permitted under
Section 4(b)(iii) above, or to “reprice” any Option previously granted pursuant
to the Plan, whether through amendment, cancellation or replacement grants, or
any other means.

          (d)  Effect of Administrator’s Decision. All decisions, determinations and
interpretations of the Administrator shall be final and binding on all
Optionees. No member of the Committee or the Board, as applicable, shall be
liable to any person for any action or determination with respect to the Plan
that he or she makes in good faith. In controlling and managing the operation
and administration of the Plan, the Administrator shall take action in a manner
that conforms to the Articles and By-laws of the Company and Applicable Laws.

     5.  Eligibility. Incentive Stock Options may be granted only to Employees.
Nonqualified Stock Options may be granted to any Service Provider. Options
may be granted to a Service Provider in connection with his or her hiring,
retention or otherwise, prior to the date the Service Provider first performs
services to the Company or its Subsidiaries, provided that no such Option shall
vest and be exercisable prior to the date the Service Provider first performs
such services.

     6.  Limitations.

          (a)  Incentive Stock Options. Each Incentive Stock Option shall be
designated as such in the Notice of Grant. Notwithstanding such designation,
the aggregate Fair Market Value of Shares (determined on the date of grant)
with respect to which Incentive Stock Options held by an Optionee are
exercisable for the first time during a calendar year may not exceed One
Hundred Thousand Dollars ($100,000). Shares in excess of such amount shall be
treated for income tax purposes as subject to Nonqualified Stock Options, with
the determination to be made in the order the Options were granted.

          (b)  Section 162(m).

               (i)  No Optionee shall be granted, in any fiscal year of the Company,
Options to purchase more than five hundred thousand (500,000) Shares.

               (ii)  In addition, in connection with his or her initial service, an
Optionee may be granted Options to purchase up to an additional two hundred
thousand (200,000) Shares that shall not count against the limit of Section
6(b)(i) above.

               (iii)  The foregoing limitations shall be adjusted proportionately in
connection with any change in the Company’s capitalization as described in
Section 12 below.

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          (c)  No Right to Continued Service. Neither the Plan nor any Option shall
confer upon any Optionee any right to continued service with the Company, nor
shall it interfere in any way with any right of the Optionee or the Company to
terminate the Optionee’s relationship as a Service Provider at any time.

     7.  Term of Plan. Subject to shareholder approval under Section 18 hereof,
the Plan shall become effective upon its adoption by the Board. It shall
continue in effect for a term of ten (10) years, unless sooner terminated under
Section 15 hereof.

     8.  Term of Option. The term of each Option shall be stated in the
applicable Option Agreement. The term of an Incentive Stock Option granted to
an Optionee who, on the date of grant, owns stock representing more than ten
percent (10%) of the voting power of all classes of stock of the Company or any
Parent or Subsidiary shall be no more than five (5) years.

     9.  Option Exercise Price and Consideration.

          (a)  Exercise Price. The per share exercise price of an Option shall be
determined by the Administrator, subject to the following:

               (i)  In the case of an Incentive Stock Option

                    (A)  granted to an Optionee who, at the time the Option is granted, owns
stock representing more than ten percent (10%) of the voting power of all
classes of stock of the Company or any Parent or Subsidiary, the exercise price
shall be no less than one hundred ten percent (110%) of the Fair Market Value
per Share on the date of grant.

                    (B)  granted to any other Optionee, the exercise price shall be no less
than one hundred percent (100%) of the Fair Market Value per Share on the date
of grant.

               (ii)  In the case of a Nonqualified Stock Option, the per Share exercise
price shall be no less than one hundred percent (100%) of the Fair Market Value
per Share on the date of grant.

               (iii)  Notwithstanding the foregoing, Options may be granted to replace
options granted under a plan or arrangement of a business or entity, all or a
portion of which is acquired by the Company or a Subsidiary, with exercise
prices of less than one hundred percent (100%) of the Fair Market Value per
Share on the date of grant.

          (b)  Consideration. The consideration to be paid for Shares to be issued
upon the exercise of Options, including the method of payment, shall be
determined by the Administrator in accordance with Applicable Laws (and, in the
case of Incentive Stock Options, shall be determined at the time of grant).
Such consideration may consist of (i) cash or its equivalent, (ii) other Shares
that have been owned by the Optionee for more than six (6) months on the date
of surrender and have a Fair Market Value on the date of surrender equal to the

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aggregate exercise price, (iii) delivery of a properly executed exercise
notice, together with irrevocable instructions to a broker in a form acceptable
to the Administrator providing for assignment to the Company of the proceeds of
a sale or loan with respect to some or all of the Shares acquired upon exercise
of an Option, pursuant to a program or procedure approved by the Administrator
(a so-called “cashless exercise”), or (iv) any combination of the above.
Promissory notes of Optionees to the Company shall not be accepted as
consideration for Shares to be issued on exercise of Options.

     10. Exercise of Options.

          (a)  Exercisability. Options granted hereunder shall be exercisable at
such times and under such conditions as determined by the Administrator and set
forth in the Notice of Grant. Except as provided in the Notice of Grant,
Options granted to Service Providers who are “non-exempt” Employees, within the
meaning of the Fair Labor Standards Act, shall not be exercisable within six
(6) months after the date of grant. Options may not be exercised for a
fraction of a Share.

          (b)  Procedure for Exercise. An Option shall be deemed to be exercised
when the Company receives (i) notice of exercise from the Optionee in
accordance with the Option Agreement and (ii) full payment for the Shares in
the form of any consideration and method of payment permitted by the Plan and
authorized by the Administrator. Shares issued upon exercise of an Option
shall be issued in the name of the Optionee or, if requested by the Optionee,
jointly in the name of the Optionee and the Optionee’s spouse.

          (c)  Rights as a Shareholder. Until Shares subject to Options are issued
(as evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company), Optionees shall have no right to
vote or receive dividends or any other rights as shareholders with respect to
such Shares. The Company shall issue (or cause to be issued) Shares promptly
after Options are exercised. No adjustment shall be made for dividends or
other rights for which the record date is prior to the date Shares are issued,
except as provided in Section 12 hereunder. The exercise of an Option shall
decrease the number of Shares thereafter available under the Plan and under the
Option by the number of Shares as to which the Option is exercised.

          (d)  Termination of Relationship as a Service Provider. If an Optionee
ceases to be a Service Provider, other than as a result of the Optionee’s death
or Disability, any Option held by the Optionee may be exercised by the Optionee
to the extent the Option is vested on the date of termination, under the Option
Agreement or other applicable agreement, within such period of time as is
specified in the Option Agreement (but in no event later than the expiration of
the term of the Option). In the absence of a specified time in the Option
Agreement, an Option shall remain exercisable for three (3) months following
the Optionee’s termination. If, on the date of termination, an Optionee is not
vested as to an entire Option, the Shares covered by the unvested portion of
the Option shall revert to the Plan. If, after termination, an Optionee does
not exercise an Option within the time specified in the Option Agreement or
this Section 10(d),

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as applicable, the Option shall terminate, and the Shares covered by the
Option shall revert to the Plan.

          (e)  Disability or Death of Optionee. If an Optionee ceases to be a
Service Provider as a result of the Optionee’s Disability or death, any Option
held by the Optionee may be exercised by the Optionee, the Optionee’s legal
guardian or the Optionee’s estate or a person who acquires the right to
exercise the Option by bequest or inheritance, as applicable, to the extent the
Option is vested on the date of termination, under the Option Agreement or
other applicable agreement, within such period of time as is specified in the
Option Agreement (but in no event later than the expiration of the term of the
Option). In the absence of a specified time in the Option Agreement, the
Option shall remain exercisable for twelve (12) months following the Optionee’s
termination. If, on the date of termination, an Optionee is not vested as to
an entire Option, the Shares covered by the unvested portion of the Option
shall revert to the Plan. If, after termination, an Optionee does not exercise
an Option within the time specified in the Option Agreement or this Section
10(e), as applicable, the Option shall terminate, and the Shares covered by the
Option shall revert to the Plan.

     11. Non-Transferability of Options. Unless determined otherwise by the
Administrator, Options may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
descent and distribution and may be exercised, during the lifetime of the
Optionee, only by the Optionee. If the Administrator in its sole discretion
permits an Option to be transferable, it shall be transferable only by gift or
by domestic relations order to or for the benefit of a “family member” of the
Optionee, as defined in the General Instructions to Form S-8 under the
Securities Act of 1933, as amended.

     12. Effect of Changes in Capitalization. Subject to any required action
by the shareholders of the Company, the number of Shares covered by each
outstanding Option, the number of Shares that have been authorized for issuance
under the Plan but as to which no Options have yet been granted or which have
been returned to the Plan upon cancellation or expiration of Options, as well
as the price per Share covered by each outstanding Option and the repurchase
price per Share of unvested Shares purchased upon exercise of Options, shall be
proportionately adjusted for any increase or decrease in the number of issued
Shares resulting from a stock split, reverse stock split, stock dividend,
split-up, spin-off, combination, exchange or reclassification of the Common
Stock, or any other increase or decrease in the number of issued Shares
effected without receipt of consideration by the Company. The conversion of
any convertible securities of the Company shall not be deemed to have been
“effected without receipt of consideration.” The Board shall make any such
adjustment, and the Board’s determination in that respect shall be final,
binding and conclusive. Except as expressly provided herein, no issuance by
the Company of shares of stock of any class, or securities convertible into
shares of stock of any class, shall affect, and no adjustment by reason thereof
shall be made with respect to, the number or price of Shares subject to
Options.

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     13. Change in Control.

          (a)  Definition. For purposes of this Plan, a “Change in Control” shall
mean the occurrence of any one of the following:

               (i)  An acquisition (other than directly from the Company) of any voting
securities of the Company by any “Person” (as such term is used in Sections
3(a)(9), 13(d)(3) and 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the “Act”)), after which such Person, together with its “affiliates”
and “associates” (as such terms are defined in Rule 12b-2 under the Act),
becomes the “beneficial owner” (as such term is defined in Rule 13d-3 under the
Act), directly or indirectly, of more than one-third (33.33%) of the total
voting power of the Company’s then outstanding voting securities, but excluding
any such acquisition by the Company, any Person of which a majority of its
voting power or its voting equity securities or equity interests is owned,
directly or indirectly, by the Company (solely for purposes of this Section
13(a), a “Subsidiary”), any employee benefit plan of the Company or any of its
Subsidiaries (including any Person acting as trustee or other fiduciary for any
such plan), or Dennis B. Gillings;

               (ii)  The shareholders of the Company approve a merger, share exchange,
consolidation or reorganization involving the Company and any other corporation
or other entity that is not controlled by the Company, as a result of which
less than two-thirds (66.66%) of the total voting power of the outstanding
voting securities of the Company or of the successor corporation or entity
after such transaction are held in the aggregate by the holders of the
Company’s voting securities immediately prior to such transaction; or

               (iii)  The shareholders of the Company approve a liquidation or dissolution
of the Company, or approve the sale or other disposition by the Company of all
or substantially all of the Company’s assets to any Person (other than a
transfer to a Subsidiary of the Company).

          (b)  Effect of a Change in Control.

               (i)  In the event of a Change in Control, the surviving, continuing,
successor, or purchasing corporation or Parent thereof, as the case may be (the
“Acquiring Corporation”) may either assume the Company rights and obligations
under outstanding Options or substitute for outstanding Options substantially
equivalent options to purchase the Acquiring Corporation’s stock.

               (ii)  Except as otherwise determined by the Administrator, in the event
that the Acquiring Corporation does not assume or substitute for outstanding
Options, the Administrator shall notify Optionees in writing that outstanding
Options shall remain outstanding for no less than fifteen (15) days from date
of such notice, shall be exercisable to the extent exercisable under the Plan
and any applicable agreement upon the consummation of the Change

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in Control, and shall terminate and cease to be outstanding upon later of
the expiration of such fifteen (15)-day period or upon the consummation of the
Change in Control. Notwithstanding the foregoing, Shares acquired upon
exercise of Options prior to the Change in Control and any consideration
received pursuant to the Change in Control with respect to such Shares shall
continue to be subject to all applicable provisions of the Option Agreements
evidencing such Options, except as otherwise may be provided in such Option
Agreements.

               (iii)  For the purposes of this Section 13(b), an Option shall be
considered assumed if, following a Change in Control, the Option confers the
right to purchase or receive, for each Share subject to the Option immediately
prior to the Change in Control, the consideration (whether stock, cash, or
other securities or property) received in the Change in Control by holders of
Common Stock (and if holders were offered a choice of consideration, the type
of consideration chosen by the holders of a majority of the outstanding
Shares). If such consideration is not solely common stock of the Acquiring
Corporation, the Administrator may, with the consent of the Acquiring
Corporation, provide for the consideration to be received upon the exercise of
an Option to be solely common stock of the Acquiring Corporation equal in fair
market value to the per share consideration received by holders of Common Stock
in the Change in Control.

     14. Date of Grant. The date of grant of an Option shall, for all
purposes, be the date on which the Administrator makes the determination
granting the Option, or such later date as the Administrator shall determine.
Notice of such determination shall be given to Optionees within a reasonable
time after the date of grant.

     15. Amendment and Termination of the Plan.

          (a)  Amendment and Termination. The Board may at any time amend, alter,
suspend or terminate the Plan, provided that (i) no amendment or termination
may, in the absence of written consent of the Optionee (or, if the Optionee is
not then living, the affected beneficiary), adversely affect the right of any
Optionee or beneficiary under any Option granted under the Plan prior to the
date such amendment is adopted by the Board and (ii) no amendment may increase
the number of Shares reserved for issuance under the Plan under Section 3,
modify the exclusions upon the authority of the Administrator set forth in
Section 4(c), increase the limitations on the number of Shares set forth in
Section 6(b), decrease the minimum Option exercise price set forth in Section
9(a), or effect any other material change in the Plan, unless such amendment is
approved by the Company’s shareholders. Adjustments pursuant to Section 12
hereof shall not be subject to the foregoing limitations of this Section 15(a).

          (b)  Termination for Cause; Noncompetition. The provisions of Section
15(a) notwithstanding, the Administrator shall retain the right and power to
(i) cancel or suspend any Option if the Optionee is terminated for cause, as
determined by the Administrator in its sole discretion, and (ii) provide for
the forfeiture of Shares or other gain under an Option upon the Optionee’s
competing against the Company or any Subsidiary.

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     16. Conditions Upon Issuance of Shares. Notwithstanding any other
provision of the Plan, the Company shall have no obligation to issue and
deliver Shares pursuant to the exercise of an Option unless such exercise and
the issuance and delivery of such Shares shall comply with all Applicable Laws,
including, without limitation, withholding of all taxes and any requirements of
the Securities Act of 1933, as amended. The issuance and delivery of such
Shares shall be further subject to the approval of counsel for the Company with
respect to such compliance. To the extent the Plan provides for the issuance
of stock certificates to reflect the issuance of Shares, the issuance may be
effected on a non-certificated basis to the extent not prohibited by Applicable
Laws.

     17. Reservation of Shares. During the term of the Plan, the Company shall
at all times reserve and keep available a number of Shares sufficient to
satisfy the requirements of the Plan.

     18. Shareholder Approval. The Plan shall be subject to shareholder
approval, which shall be obtained in accordance with Applicable Laws within
twelve (12) months of the adoption of the Plan by the Board.

11SPECIAL BONUS PLAN

 

Exhibit 10.12

Adopted 1-9-03

Quintiles Transnational Corp.

Special Bonus Plan

     1.  Objectives of the Plan. The Special Committee of the Board of
Directors (the “Special Committee”) of Quintiles Transnational Corp. (the
“Company”) is in the process of evaluating the Company’s strategic
alternatives. The objectives of this Special Bonus Plan (the “Plan”) are to
recognize and compensate participating managers for the additional duties and
burdens imposed on them by the strategic alternatives process, to provide
participating managers with an incentive to maintain a level playing field for
potential buyers and to counterbalance any incentive to sell the Company that
might be created by the change-in-control provisions of certain managers’
employment agreements.

     2.  Administration of the Plan. The Plan shall be administered by the
Special Committee. The Special Committee shall have the sole and complete
authority and discretion to determine the managers who shall be participants in
the Plan (the “Participants”), to determine the amount of each bonus payable
under the Plan, to construe and interpret the terms of the Plan and to make all
decisions and determinations it deems necessary or advisable for the
administration of the Plan. All interpretations, decisions and determinations
of the Special Committee shall be final.

     3.  Operation of the Plan. The Plan shall consist of two plans, one to
provide recognition and incentives in connection with the conduct of the
strategic alternatives process (“Plan I”) and one to encourage the giving of
appropriate consideration to strategic alternatives that do not involve a
change in control of the Company (“Plan II”).

     4.  Plan I: Conduct of Strategic Alternatives Process.

          a.     Participants. Participants in Plan I shall be those executives who are
critical to the strategic alternatives process, as determined by the Special
Committee in its sole discretion. Any Participant who commits himself or
herself to a specific potential bidder in an exclusive or inappropriate manner,
as determined by the Special Committee in its sole discretion, shall be
excluded from participation in Plan I, unless the Special Committee has
otherwise agreed in writing to permit such Participant to participate with a
bidder.

          b.     Bonus Pool. Plan I shall have a fixed bonus pool equal to fifty
percent (50%) of the aggregate of the 2002 base salaries of all of the
Participants in Plan I; provided, however, that the Plan I bonus pool shall in
no case be less than One Million Dollars ($1,000,000) nor more than Two Million
Five Hundred Thousand Dollars ($2,500,000).

          c.     Allocation of Bonus Pool.

               (1)  Fifty percent (50%) of the Plan I bonus pool shall be allocated pro
rata to all Plan I Participants who meet minimum performance standards, as
determined by the

 

 

Special Committee in its sole discretion, in the same proportion that each Plan
I Participant’s 2002 base salary bears to the total 2002 base salaries of all
Plan I Participants.

               (2)  The remaining fifty percent (50%) of the Plan I bonus pool shall be
allocated among the Plan I Participants as determined by the Special Committee
in its sole discretion, based on, among other things, the Special Committee’s
assessment of each Participant’s contributions to the strategic alternatives
process and his or her performance of such tasks or services as may be
requested by the Special Committee or its financial or legal advisors during
the course of the strategic alternatives process.

          d.     Payment Schedule. To provide incentives throughout the entire
strategic alternatives process, the total Plan I bonus due each recipient shall
be paid in two tranches:

               (1)  The payments referred to in Section 4(c)(1) above shall be paid upon
the earlier of June 30, 2003 or the public announcement of a sale or other
change-in-control transaction whereby the Company is to be acquired; and

               (2)  The payments referred to in Section 4(c)(2) above shall be paid upon
the closing of a sale or other change-in-control transaction whereby the
Company is acquired or, if no sale or other change-in-control transaction has
been announced as of December 31, 2003 (or has been announced and terminated or
abandoned and no such other transaction is then pending), on December 31, 2003.
If such payments are not made because a sale or other change-in-control
transaction whereby the Company is to be acquired is pending on the payment
date, and the sale or other change-in-control transaction is subsequently
terminated or abandoned, such payments shall be made on the date that is three
(3) months after the first public announcement of such termination or
abandonment to those Participants who are employed by the Company or a
subsidiary of the Company on such date.

In all events, a Participant must be employed by the Company or a subsidiary of
the Company on the applicable payment date in order to be eligible to receive a
Plan I bonus payment.

          e.     Other Compensation. Any Plan I bonus shall be in addition to any other
compensation otherwise due to Participants, including normal year-end bonuses,
change-in-control payments, and any bonuses under Plan II below.

     5.  Plan II: Stand-Alone Scenario Bonus.

          a.     Participants. Participants in Plan II shall be certain executives who
have change-in-control provisions in their employment agreements and who are
critical to the strategic alternatives process, as determined by the Special
Committee in its sole discretion. Any Participant who commits himself or
herself to a specific potential bidder in an exclusive or inappropriate manner,
as determined by the Special Committee in its sole discretion, shall be
excluded from participation in Plan II, unless the Special Committee has
otherwise agreed in writing to permit such Participant to participate with a
bidder.

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          b.     Bonus Pool. Plan II shall have a fixed bonus pool of One Million Five
Hundred Thousand Dollars ($1,500,000).

          c.     Allocation of Bonus Pool. One hundred percent (100%) of the Plan II
bonus pool shall be allocated among the Plan II Participants as determined by
the Special Committee in its sole discretion, based on, among other things, the
Special Committee’s assessment of each Participant’s contributions to the
strategic alternatives process and his or her performance of such tasks or
services as may be requested by the Special Committee or its advisors during
the course of the strategic alternatives process.

          d.     Payment Schedule. The total Plan II bonus pool shall be paid on the
same date as normal 2003 cash bonuses are paid by the Company, provided that
the Company has not announced, on or before the payment date, a sale or other
change-in-control transaction whereby the Company is to be acquired (other than
a sale or other change-in-control transaction that has been terminated or
abandoned). A Plan II Participant must be employed by the Company or a
subsidiary of the Company on the date Plan II bonuses are paid in order to be
eligible to receive a Plan II bonus payment. If Plan II bonus payments are not
made because a sale or other change-in-control transaction whereby the Company
is to be acquired is pending on the payment date, and the sale or other
change-in-control transaction is subsequently terminated or abandoned, Plan II
bonus payments shall be made on the date that is three (3) months after the
first public announcement of such termination or abandonment to those Plan II
Participants who are employed by the Company or a subsidiary of the Company on
such date.

          e.     Sale or Change-in-Control Contingency. In the event that a sale or
other change-in-control transaction whereby the Company is to be acquired is
announced within six (6) months after payment of the Plan II bonus, any
change-in-control payment due to an executive as a result of such transaction
(including any modification thereof) shall be reduced by the amount of the Plan
II bonus paid to such executive. Payments under Plan II shall be conditioned
upon receipt by the Company of the agreement of the Participant receiving the
payment, in form and substance satisfactory to the Special Committee, to
provide for any such reduction that may be required under this Section 5(e).

          f.     Other Compensation. Except as otherwise provided herein, any Plan II
bonus paid shall be in addition to any other compensation otherwise due to
Participants, including normal year-end bonuses, change-in-control payments,
and any bonuses under Plan I above.

     6.  Employment Status. The Plan shall not constitute a contract of
employment or impose on any Participant or on the Company any obligation for
the Participant to remain an employee or contractor of the Company. The Plan
shall not change the status of a Participant’s employment or the Company’s
policies regarding termination of employment. The employment of those
Participants who are employees is and shall continue to be at-will, as defined
under applicable law, or as otherwise set forth in an applicable employment
agreement.

     7.  Amendment and Termination. Upon notice to the affected Participants,
the Company shall have the right to amend or terminate this Plan at any time
prior to the time

3

 

bonuses are paid. Bonuses shall not be considered earned under this Plan
unless and until paid. Bonuses that have been paid under this Plan may not be
revoked or rescinded.

     8.  Assignments and Transfers. The rights and interests of Participants
under the Plan may not be assigned, encumbered or transferred except by will or
the laws of descent and distribution.

     9.  Withholding. The Company shall have the right to deduct from all
amounts paid under this Plan any taxes required by law to be withheld from such
payments.

     10.  Term of Plan. The Plan is effective as of the date hereof and,
subject to Section 7 hereof, shall continue until the bonuses provided for
under the Plan have been distributed.

     11.  Governing Law. This Plan shall be governed by the laws of the State
of North Carolina.

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