10-K405

                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549
                                   FORM 10-K

(Mark One)

[X]    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
       ACT OF 1934

       For the fiscal year ended December 31, 1999

                                      OR

[_]    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
       EXCHANGE ACT OF 1934

       For the transition period from _______________ to _______________

                        Commission file number 0-27570

                   PHARMACEUTICAL PRODUCT DEVELOPMENT, INC.
            (Exact name of registrant as specified in its charter)

                                                    
               North Carolina                                    56-1640186
(State or other jurisdiction of incorporation          (IRS Employer Identification No.)
              or organization)



      3151 South Seventeenth Street
       Wilmington, North Carolina                                   28412
(Address of principal executive offices)                         (Zip Code)


      Registrant's telephone number, including area code: (910) 251-0081

Securities registered pursuant to Section 12(b) of the Act:  None

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

                    Common Stock, par value $0.10 per share
                               (Title of class)

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

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

The aggregate market value of the common stock held by non-affiliates of the
registrant was $338,153,375 as of February 16, 2000, based upon the closing
price of the Common Stock on that date on the NASDAQ National Market System.
Shares of Common Stock held by each executive officer and director and by each
person who owns 10% or more of the outstanding Common Stock have been excluded
in that such persons may be deemed to be affiliates. This determination of
affiliate status might not be conclusive for other purposes.

The number of shares outstanding of the registrant's class of Common Stock, par
value $0.10 per share, was 24,737,721 as of February 16, 2000.

                      DOCUMENTS INCORPORATED BY REFERENCE

The Company's definitive Proxy Statement for its 2000 Annual Meeting of
Stockholders (certain parts as indicated herein Part III).


                                    PART I

     Statements in this Report that are not descriptions of historical facts are
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995.  These statements reflect management's current
view with respect to certain future events and financial performance, but are
subject to risks and uncertainties.  Actual results could differ materially from
those currently anticipated due to a number of factors, including those set
forth herein and in the Company's other SEC filings, and including, in
particular: risks relating to government regulation; dependence on certain
industries; the fixed price nature of contracts; the commencement, completion or
cancellation of large contracts; progress of ongoing contracts; potential
liability associated with the Company's lines of business; risks associated with
acquisitions; continued success in sales growth; dependence on personnel;
management of growth; and competition.  Because a large percentage of the
Company's operating costs are relatively fixed, variations in the timing and
progress of large contracts can materially affect results.

Item 1.   Business

Company Overview
- ----------------

     Pharmaceutical Product Development, Inc. and its subsidiaries (collectively
the "Company") provide a broad range of research and development and consulting
services in the life and discovery sciences segments.  PPD Development, Inc. is
the Company's life sciences subsidiary.  The Company believes that PPD
Development is the fourth largest contract research organization ("CRO") in the
world, providing integrated product development resources on a global basis to
complement the research and development activities of companies in the
pharmaceutical and biotechnology industries.  PPD Discovery, Inc., the Company's
discovery sciences subsidiary, focuses on the discovery segment of the
pharmaceutical research and development outsourcing market.

  Life Sciences Group

     The Company's Life Sciences Group provides services through PPD
Development, Inc. and its wholly owned subsidiaries (collectively "PPD
Development") in the Americas (United States, Canada and South America), Africa,
Asia, Europe and the Pacific Rim.  PPD Informatics, a division of PPD
Development, provides software development and system integration services to
the pharmaceutical and biotechnology industries.  PPD ATP, a division of PPD
Development, provides customized inbound and outbound telecommunications
programs targeting consumers and healthcare providers.

     PPD Development provides its clients services designed to reduce drug
development time.  Reduced development time allows the client to get its
products into the market faster and to maximize the period of marketing
exclusivity and the economic return for those products.  In addition, PPD
Development's integrated services offer its clients a variable cost alternative
to the fixed costs associated with internal drug development.  PPD Development's
professional CRO services include Phase I clinical testing, laboratory services,
patient and investigator recruitment, Phase II-IV clinical trial monitoring and
management, clinical data management and biostatistical analysis, regulatory
consulting and submissions, medical writing, pharmacovigilance, and healthcare
economics and outcomes research.  The Company believes that it is one of a few
CROs in the world capable of providing such a broad range of global clinical
development services.

     PPD Informatics became a division of the Company through the Company's
acquisition of Belmont Research, Inc. in March 1997.  PPD Informatics' clients
include international and domestic pharmaceutical and biotechnology companies,
and government agencies, including the FDA.  PPD Informatics develops
specialized software products to support different aspects of the pharmaceutical
research and development process, including drug discovery, clinical trials and
regulatory review.  Current PPD Informatics software products include:
TableTrans(R), which automates data transformation; CrossGraphs(R), which
provides graphical displays of complex research data; Resolve(TM), which manages
data queries to investigator sites; and Classify(TM), which manages global
coding capabilities.

     PPD ATP became a division of the Company through the acquisition of ATP,
Inc. in March 1999. PPD ATP manages telephone inquiries from consumers and
healthcare providers by utilizing on-line, licensed pharmacists, other
healthcare professionals and other customer assistance specialists who are
available 24 hours a
                                       1


day, 365 days a year. In addition to telephone inquiries and responses, PPD ATP
also receives medical information inquiries from consumers and healthcare
providers via text-based and electronic formats and provides responses via these
same communication vehicles. PPD ATP creates and implements customized inbound
and outbound telecommunication programs for pharmaceutical manufacturers, chain
drug stores, managed care organizations and other corporations with healthcare
enhancing objectives.

     During 1998, the Life Sciences Group also included Intek Labs, Inc., which
the Company acquired in November 1997.  Intek provides molecular genotyping,
phenotyping and large-scale genomic DNA purification and archiving services
through its Good Laboratory Practice (GLP) certified laboratories.  Intek also
furnishes pharmacogenetic services for clinical trials.  In February 1999, Intek
became a subsidiary of PPGx, Inc., the Company's pharmacogenomics joint venture
with Axys Pharmaceuticals, Inc.  PPGx provides comprehensive pharmacogenomics
products and services to pharmaceutical and biotechnology companies.
Pharmacogenomics is the use of genetic information to predict the safety,
toxicity and/or efficacy of drugs in individual patients or groups of patients.
The Company believes that pharmacogenomics is becoming widely adopted as a drug
discovery and development tool and increasingly important as part of an
individual's diagnosis and treatment regimen. The Company owns a minority
position in PPGx, with the option to increase its ownership share at any time.
The Company also has exclusive marketing rights to PPGx pharmacogenomics
products and services, sold under the brand name, Pharmacogenomic Solutions(TM).

  Discovery Sciences Group

     PPD Discovery, Inc. was established in June 1997 when the Company acquired
SARCO, Inc., a combinational chemistry company, and the GSX System, a functional
genomics platform technology.  PPD Discovery focuses on the discovery research
segment of the pharmaceutical research and development outsourcing market.  In
May 1998, the Company created PPD GenuPro, Inc., a wholly owned subsidiary,
which holds licenses to a number of compounds in the genitourinary field.  PPD
GenuPro manages and performs the discovery research and development of these
compounds and will then license these compounds to pharmaceutical or
biotechnology companies.  In May 1999, the Company formed PPD Virtual, a
subsidiary of the Company.  PPD Virtual provides consultant and management
services for product portfolio management, strategic development and commercial
product assessment.  At this time, PPD GenuPro was realigned as a division of
PPD Virtual.

  Environmental Sciences Group

     Prior to selling its environmental sciences segment on January 31, 1999,
the Company also provided environmental sciences services.  Environmental
sciences services included assessment and management of chemical and
environmental health risk, site investigation and remediation planning and
litigation support.  In addition to the industries mentioned above, the
environmental sciences segment also marketed services to clients in the
industrial, manufacturing and oil and gas industries.  The environmental
sciences segment marketed its services primarily in the United States and
Europe.  The results of operations of the environmental sciences segment for the
periods prior to its disposition are presented as discontinued operations in the
Company's financial statements.

Industry Overview
- -----------------

  Life Sciences Group

     The CRO industry provides independent product development services to the
pharmaceutical and biotechnology industries and derives substantially all of its
revenue from the drug development expenditures of these companies.  The CRO
industry has evolved from providing limited clinical services in the 1970s to a
full-service industry today that encompasses the clinical research process
(including pre-clinical evaluations), study design, clinical trial management,
data collection, biostatistical analysis and product registration support.  The
Company provides all of these services in accordance with applicable government
regulations covering clinical trials and the drug approval process in the
jurisdictions where the services are provided, including the regulations of the
United States Food and Drug Administration ("FDA"), the European Medicines
Evaluation Agency ("EMEA") and other regulatory authorities.

     The healthcare industry is subject to changing political, economic and
regulatory influences that may affect the pharmaceutical and biotechnology
industries.  Implementation of government healthcare reform may adversely affect
research and development expenditures by pharmaceutical and biotechnology
companies, which could

                                       2


decrease the business opportunities available to the Company. The Company is
unable to predict the likelihood of such or similar legislation being enacted
into law or the effects such legislation would have on the Company. As a general
matter, the clinical CRO industry is not capital-intensive and the financial
costs of entry into the industry are relatively low. The CRO industry is highly
fragmented, with several hundred small, limited-service providers, several
medium-sized CROs and a few full-service CROs with international capabilities.
Although there are few barriers to entry for small, limited-service providers,
the Company believes that there are significant barriers to becoming a full-
service CRO with international capabilities. Some of these barriers include the
cost and experience necessary to develop broad therapeutic expertise; the
ability to manage large, complex clinical trials; the experience to prepare
regulatory submissions; and the infrastructure and experience to respond to the
international needs of clients.

     Historically, pharmaceutical companies used internal programming resources
to produce much of the software used in their drug discovery, clinical
development and regulatory compliance processes.  Now these companies also seek
external sources, including the Company's PPD Informatics division, to meet
these automation needs both through custom application development and through
customization of commercial packaged software. We believe that our range of
technical experience in clinical research systems positions us well to provide
these services.

  Discovery Sciences Group

     Drugs are chemical compounds that interact with biological targets in the
body.  Discovering and developing new drugs is an extremely expensive and time-
consuming process.  Pharmaceutical Research and Manufacturers of American
Association (PhRMA) estimates that the average cost of bringing a drug to market
exceeds $359 million and takes approximately 10-15 years.  Recent figures from
the PhRMA, Center for Medicines Research and Company's estimates indicate that
global research-based pharmaceutical and biotechnology companies invested
approximately $44 billion in R&D activities in 1999.  On average, these
companies allocate over 40% of their R&D budget to pre-clinical R&D functions.
Pre-clinical R&D functions include identification and validation of biological
targets, screening to identify lead compounds, chemical optimization of those
leads, toxicology and safety testing in animals, and formulation and stability
testing for the new experimental drug.

     PPD Discovery includes a chemical and preclinical technology company that
provides lead generation, lead prioritization and lead optimization services,
and computational and preclinical development resources to the pharmaceutical,
biotechnology, agrochemical and animal health industries.

     The GSX System identifies targets for drug discovery by the selective
inhibition of genes responsible for key steps in a disease process. The system
is based on the finding that a gene fragment, when introduced into cells,
sometimes specifically inhibits the function of the whole gene from which the
fragment was obtained.

     PPD Discovery markets its products and services to those research-based
companies looking for outsourced research support.  The Company believes that
this outsourcing trend will continue over the next decade.

The Drug Development Process
- ----------------------------

     Before a new drug is marketed, the drug must undergo extensive testing and
regulatory review in order to determine that it is safe and effective.  The
development process consists of two stages: pre-clinical and clinical.  The
first stage is pre-clinical research, in which the new drug is tested in vitro
(test tube) and in vivo (in animals) generally over a one- to three-year period,
in order to determine the basic biological activity and safety of the drug.  The
Company provides Investigational New Drug ("IND") submission preparation and
compilation but does not provide animal-based services in this stage of
development.

     If the drug is perceived to be safe for human testing, the drug then enters
the clinical stage.  The clinical stage is one of the most time-consuming and
expensive parts of the drug development process.  The drug undergoes a series of
tests in humans, including healthy volunteers as well as patients with the
targeted disease or condition.  The Company provides full development services
for the clinical stage.

     Prior to commencing human clinical trials in the United States, the sponsor
must file an IND application with the FDA.  In order to receive IND status, the
sponsor of the new drug must provide available manufacturing data, pre-clinical
data, information about any use of the drug in humans for other purposes and a
detailed plan for the proposed clinical trials.  The design of these trials,
also referred to as the study protocols, is essential to the

                                       3


success of the drug development effort, because the protocols must correctly
anticipate the nature of the data to be generated and results that the FDA will
require before approving the drug. In the absence of any FDA comments within 30
days after the IND filing, human clinical trials may begin.

     Although there is no statutory definition of the structure or design of
clinical trials, human trials usually start on a small scale to assess safety
and then expand to larger trials to test efficacy.  These trials are usually
grouped into the following three phases, with multiple trials generally
conducted within each phase:

     .    Phase I. Phase I trials involve testing the drug on a limited number
          of healthy individuals, typically 20 to 80 persons, to determine the
          drug's basic safety data relating to tolerance, absorption, metabolism
          and excretion as well as other pharmacological indications and
          actions. This phase lasts an average of six months to one year.

     .    Phase II. Phase II trials involve testing a small number of volunteer
          patients, typically 100 to 200 persons, who suffer from the targeted
          disease or condition, to determine the drug's effectiveness and dose
          response relationship. This phase lasts an average of one to two
          years.

     .    Phase III. Phase III trials involve testing large numbers of patients,
          typically several hundred to several thousand persons, to verify
          efficacy on a large scale, as well as long-term safety. These trials
          involve numerous sites and generally last two to three years.

     After the successful completion of all three clinical phases, the sponsor
of a new drug in the United States submits a New Drug Application ("NDA") to the
FDA requesting that the product be approved for marketing.  The NDA is a
comprehensive, multi-volume filing that includes, among other things, the
results of all pre-clinical and clinical studies, information about the drug's
composition and the sponsor's plans for producing, packaging and labeling the
drug.  In addition, while the FDA does not use price as a criterion for
approving a new drug, advisory panels of scientists that help the FDA evaluate
new types of therapies have started taking cost into consideration.  The FDA's
review of an NDA can last from a few months (for drugs related to life-
threatening circumstances) to many years, with the average review lasting 18
months.  Drugs that successfully complete this review may be marketed in the
United States, subject to any conditions imposed by the FDA.

     As a condition to its approval of a drug, the FDA might require that the
sponsor conduct additional clinical trials following receipt of NDA approval to
monitor long-term risks and benefits, study different dosage levels or evaluate
different safety and efficacy parameters in target patient populations.  In
recent years, the FDA has increased its reliance on these trials, known as Phase
IV trials, which allow new drugs that show early promise to reach patients
without the delay associated with the conventional review process.  Phase IV
trials usually involve thousands of patients.  Phase IV trials also are
initiated by pharmaceutical manufacturers to gain longer market value for an
approved product.  For example, large-scale trials would be used to prove
efficacy and safety of new dosage administration forms for approved drugs, such
as inhalation form versus tablets or a sustained-release form versus capsules
taken multiple times per day.

Regulatory Environment
- ----------------------

     The market for the services offered by the Company's CRO operations has
developed as a result of significant laws and regulations governing the
development and testing of certain drugs and chemicals as well as the impact of
chemicals on the environment.  Many countries require safety testing prior to
obtaining governmental approval to market pharmaceutical products.  The results
of clinical tests conducted upon pharmaceutical products must be submitted to
appropriate government agencies, such as the FDA in the United States, the EMEA
and national regulatory agencies in Europe, and the Ministry of Health and
Welfare in Japan, as part of the relevant pre-market approval process in
individual countries.  The Company's business depends on its ability to comply
with these strict and ever-changing laws and regulations.

Trends Affecting the CRO Industry
- ---------------------------------

     In 1999, worldwide expenditures on research and development by
pharmaceutical and biotechnology companies are estimated to have been $44
billion, of which the Company estimates $10 to $12 billion was spent on drug
development activities which were outsourced.  The Company believes that
approximately $5.5 billion of such spending was on preclinical/laboratory and
clinical development.

                                       4


     The Company believes that the outsourcing of drug development activities by
pharmaceutical and biotechnology companies has been increasing and will continue
to increase for the following reasons:

     Cost Containment Pressures

     Market forces and governmental initiatives have placed significant pressure
on pharmaceutical and biotechnology companies to reduce drug prices.  Pressures
on profit margins have arisen from increased competition as a result of patent
expiration, market acceptance of generic drugs, and governmental and private
efforts to reduce healthcare costs.  In addition, private managed care
organizations are beginning to limit the selection of drugs from which
affiliated physicians may prescribe, thereby further increasing competition
among pharmaceutical and biotechnology companies.  The Company believes that the
pharmaceutical industry is responding to these pressures by downsizing
operations, decentralizing the internal research and development process, and
converting the fixed costs of maintaining a research and development
infrastructure to variable costs by outsourcing drug development activities to
CROs.  The downsizing of research and development activities also creates demand
for CROs as internal development bottlenecks arise when a large number of
compounds emerge from the research process and need to be pushed through the
development pipeline.  In addition, increased pressure to differentiate products
and to generate support for product pricing serves as the foundation for growth
in the area of healthcare economics, both with respect to drugs under
development and to products already on the market.

     Revenue Enhancement through Faster Drug Development

     Pharmaceutical and biotechnology companies face increased pressure to bring
innovative, patent-protected medicines to market in the shortest possible time,
while following good scientific practices and adhering to government
regulations.  Pharmaceutical and biotechnology companies are attempting to
increase the speed of new product development, and thereby maximize the period
of marketing exclusivity and economic returns for their products, by outsourcing
development activities to CROs.  The Company believes that CROs, by providing
specialized development services, are often able to perform the needed services
with a higher level of expertise or specialization, and therefore more quickly
than a pharmaceutical or biotechnology company could perform such services
internally.  In addition, some pharmaceutical and biotechnology companies are
beginning to contract with large full-service CROs to conduct all phases of
clinical trials for new product programs lasting several years, rather than
separately contracting specific phases of drug development to several different
CROs, an approach which the Company believes may result in shorter overall
development times.  This trend may favor large full-service CROs like the
Company, but could also increase competitive pressures and risks.

     Biotechnology Industry Growth

     The United States biotechnology industry has grown rapidly over the last
ten years and is developing significant numbers of new drug candidates that will
require regulatory approval.  Many of these new drug candidates are now moving
into clinical development and many biotechnology companies do not have the
necessary staff, expertise or financial resources to conduct clinical trials on
their own.  Accordingly, many of these companies have chosen to outsource the
product development process rather than expend significant time and resources to
develop an internal clinical development capability.  Further, PPD Development's
experience suggests that biotechnology companies are increasingly turning to
CROs for their sophisticated regulatory expertise to provide assistance in the
generation of the ideal development plan.  Moreover, the biotechnology industry
is expanding into and within Europe, providing growth opportunities for CROs
with international capabilities.

     Need for International Support

     More pharmaceutical and biotechnology companies are attempting simultaneous
filings of registration packages in several major jurisdictions rather than
following the past practice of sequential filings.  The studies to support such
registration packages might include a combination of multinational and domestic
trials.  Pharmaceutical and biotechnology companies may turn to CROs for
assistance with such trials, as well as collecting, analyzing, integrating and
reporting the data.  The Company believes that CROs with an international
presence and management experience in the simultaneous filing of multiple
applications may benefit from these trends.

                                       5


     Consolidation in the CRO Industry

     As a result of competitive pressures, the CRO industry is consolidating.
Mergers and acquisitions have resulted in the emergence of several large, full-
service CROs that have the capital, technical and financial resources to conduct
all phases of clinical trials on behalf of pharmaceutical and biotechnology
companies.  As pharmaceutical and biotechnology companies increasingly outsource
development, they may increasingly turn to larger CROs that provide a broad
range of clinical services, while at the same time they may also limit the
number of CROs they choose to provide such services.  The Company believes that
these trends will further concentrate market share among larger CROs with a
track record of speed, flexibility, responsiveness and overall development
experience and expertise.

Company Strategy
- ----------------

     The Company's fundamental strategy is to distinguish its services on the
basis of superior performance to maximize its clients' return on their R&D
investments.  We strive to deliver efficient and innovative services that
accelerate the rate of new product development.  The Company intends to continue
to expand the depth and breadth of its services by (1) capitalizing on its
managerial and operational strengths, (2) focusing on hiring and training its
staff, (3) focusing on its marketing initiatives, (4) developing its services in
healthcare economics and communications consulting, (5) pursuing strategic
acquisitions to enhance discovery and development services, (6) expanding
geographically, (7) pursuing opportunities provided by technological advances,
and (8) expanding on its vertical expertise in five core therapeutic areas.

     The Company differentiates itself from competitors by providing a continuum
of high-quality services, from discovery through aftermarket support.  The
Company intends to be a leader in integrating pharmacogenomics in drug
development and research.

     Managerial and Operational Strength

     The Company is guided by senior management who have spent much of their
careers as research or development experts within major pharmaceutical companies
and who have a record of success bringing drugs to market both nationally and
internationally.  PPD Development concentrates on its core operational strengths
in all phases of clinical studies and other critical path studies such as
treatment INDs.  Timely performance is based on parallel drug development
processes and leveraging the knowledge and experience of management and
investigators.  Basic medical, scientific and regulatory services continue to be
integrated with and streamlined through various technological advances, all
directed toward a reduction in overall development times.  PPD Development
emphasizes efficiencies in each phase of clinical trials initiation and
management, data acquisition, data management and analysis, and report writing
and filing, in order to reduce the time and cost of obtaining regulatory
approval for its clients' products.  As a means of differentiating itself from
its competitors, PPD Development emphasizes therapeutic area specialization, in
particular in the areas of virology/infectious diseases, cardiopulmonary
diseases, neuropyschiatric disorders, oncology and immunology.

     Hiring and Training

     The Company believes that its success is based on the quality and
dedication of its employees.  The Company strives to hire the best available
people in terms of ability, experience, attitude and fit with the Company's
performance philosophy.  New employees are trained extensively, and the Company
believes that it is an industry leader in the thoroughness of its training
programs.  In addition, we encourage our employees to continually upgrade and
broaden their skills through internal and external training programs.  As new
technologies develop, we equip and train our employees to make use of such
technological innovations.

     Global Strategic Marketing Initiatives

     PPD Development focuses its integrated marketing and sales efforts on
companies within the pharmaceutical industry with product development and
clinical needs in the service segments and therapeutic areas in which the
Company specializes.  The sales staff concentrates on making direct contact with
assigned clients and represent PPD's capabilities across all PPD service
segments.  PPD Development's business development personnel consult with
potential clients early in the project consideration stage in order to determine
their requirements.  The business development representative along with the
appropriate operational personnel then invest significant time to determine the
optimal means to design and execute the potential client's product development
or clinical program

                                       6


requirements. PPD Development's recommendations to the potential client with
respect to study design and implementation are an integral part of PPD
Development's bid proposal process and are an important aspect of the integrated
services PPD Development offers. PPD Development believes its preliminary
efforts relating to the evaluation of a proposed clinical protocol and
implementation plan enhances the opportunity for accelerated initiation and
overall success of the clinical trial after the contract has been awarded to PPD
Development.

     We market discovery services through centralized PPD corporate marketing
efforts to supplement localized marketing by scientists to scientists, with
support from appropriate outside consultants and internal PPD consultative
specialists.  We market the functional genomics technology (GSX) primarily to
large pharmaceutical companies, while combinatorial chemistry is directed more
toward biotechnology and virtual companies.

     The Company encourages and sponsors the participation of its personnel in a
variety of scientific endeavors, including the presentation of papers by its
professional staff at national and international professional trade association
meetings and major conferences, and the publication of scientific articles in
respected medical and pharmaceutical journals.  The Company believes such
activities advance and promote its reputation for professional excellence.  The
Company's core marketing and corporate communications plans include advertising
in trade journals, participation at scientific conferences, speakers' bureau,
direct mail/e-mail, presentation and detailing materials, educational symposia
and media relations.

     Healthcare Economics and Outcomes Research

     The healthcare market in the United States is evolving from a fragmented
system of individual providers with little incentive to control costs to a
managed care system in which large organizations attempt to lower the cost of
healthcare through a number of means.  The Company believes that such market
dynamics support the need for healthcare economics analysis and outcomes
research.  PPD Development offers programs integrating such analysis in clinical
development programs to support regulatory approval, as well as pricing,
marketing and reimbursement strategies.  While PPD Development's current focus
in this area is on its traditional client base within the pharmaceutical and
biotechnology industries, with respect to both drugs under development and
products already on the market PPD Development expects to extend such services
to payors and providers as well.

     Acquisitions

     The Company intends to continue to actively seek strategic acquisitions,
both within and outside current CRO service segments.  Acquisition candidates
must provide opportunities for innovation, synergy and growth.  The Company's
criteria for acquisitions include complementary client lists, ability to
increase market share within and across clients, complementary therapeutic area
and service segment strengths, strategic geographic capabilities and particular
process expertise.

     Acquisitions involve numerous risks, including difficulties in the
integration of the operations and services of the acquired companies, the
expenses incurred in connection with attempted or successful acquisitions and in
connection with subsequent assimilation of operations and products, the
diversion of management's attention from other business concerns and the
potential loss of key employees of the acquired company.  If the Company
consummates any acquisitions in the future, there can be no assurance that those
acquisitions will be successfully integrated into the Company's operations.

     Geographical Expansion

     PPD Development currently has operations in the Americas (the United
States, Canada and South America), Europe (including Eastern Europe), South
Africa, Asia and the Pacific Rim.  PPD Development has identified certain
strategic areas of promise where CROs currently have limited or no presence and
intends to selectively pursue these and other strategic opportunities
internationally.  Geographic expansion involves numerous risks, including up-
front expenses, potential political or economic instability, assimilation of
staff and cultural differences.

     Technological Advances

     PPD Development believes that optimizing the use of information technology
can accelerate the drug development process and yield valuable marketing
information.  PPD Development has broad experience in the use of information
technology in clinical trial management and offers a wide range of technology-
based services.

                                       7


Services offered include initial market research and study design, accelerated
patient recruitment, remote monitoring and data acquisition, ongoing study
management, data analysis, outcomes research, patient and disease management,
and the submission of electronic New Drug Applications. The Company utilizes a
mixture of commercially available third-party systems and selected internally
developed software to offer its clients advanced technology for expediting the
drug development process.

Services Offered
- ----------------

   Life Sciences Group

     PPD Development has designed its various global services to be flexible and
integrated in order to assist its clients in optimizing their research and
development spending through the clinical stages of the drug development
process.  PPD Development provides Phase I clinical testing, laboratory
services, patient and investigator recruitment, Phase II-IV clinical trial
monitoring and management, clinical data management and biostatistical analysis,
regulatory consulting and submission, medical writing, pharmacovigilance, and
healthcare economics and outcomes research for its clients.  These resources are
provided individually or as an integrated package of services to meet the
client's needs.  PPD Informatics provides innovative software development and
system integration services and creates a data link between discovery and
development.

     Phase I Clinical Testing

     After an Investigational New Drug Application has been filed with the FDA,
human testing of a new drug can begin.  The drug is typically first administered
to healthy volunteers to determine the drug's basic safety data based on
tolerance, absorption, metabolism, excretion and other pharmacological actions.
Later, special studies are conducted in volunteers and special patient
populations to further define the drug's overall pharmacological profile.  The
Company believes that PPD Development is one of the industry's largest Phase I
providers, with clinical testing services conducted in its 220-bed unit in
Austin, Texas, its 70-bed unit located near Research Triangle Park, North
Carolina and its 50-bed unit in Leicester, England.  The Company's professional
nursing staff administers general Phase I safety tests, special population
studies, and bioavailability and bioequivalence testing.  Special population
studies might involve the elderly, women or patients with specific diagnoses,
such as renal failure or asymptomatic HIV disease.  The Austin, Texas site also
has a Dental Research Center to evaluate the safety and effectiveness of new
analgesic compounds used in molar extractions.  Supporting the Phase I
operations in Austin is an in-house clinical laboratory.  The laboratory
performs analytical assays on volunteer specimens to ensure that each subject
qualifies for the study and is not adversely affected by a drug.  The fact that
the laboratory is housed in the same physical facility as the volunteers
guarantees fast response times to unexpected outcomes.  The unit is accredited
by the College of American Pathologists.  It also provides services to function
as a central laboratory for Phase II-IV studies.  Instruction manuals and
specimen collection kits are mailed to investigative sites, which then return
samples to the laboratory for processing and report generation.

     The Company's clinical research studies rely upon the ready accessibility
and willing participation of volunteer subjects.  These subjects generally
include volunteers from the communities in which the studies are conducted,
including the Phase I centers in Austin, Research Triangle Park and Leicester,
which to date have provided a substantial pool of potential subjects for
research studies.  However, the Company's business could be adversely affected
if the Company were unable to attract suitable and willing volunteers.

     The Company also provides bioavailability and bioequivalence testing
services. This testing is generally conducted each time the dosage, form or
formulation of the drug is modified. It involves administration of the test
compounds and obtaining biological fluids sequentially over time to measure
absorption, distribution, metabolization and excretion of the drug.

     PPD Development manages its Phase I services to maximize scheduling
flexibility and efficiency. The services also can integrate with PPD
Development's other service segments such as laboratory, pharmacokinetic and
biostatistical services. PPD Development believes it is one of the few full-
service CROs offering Phase I clinical testing in the United States and Europe.

     Laboratory Services

     PPD Development provides bioanalytical, product analysis and biodiscovery
services through its Good Laboratory Practice (GLP)-certified laboratories in
Richmond, Virginia and Middleton, Wisconsin.  PPD

                                       8


Development's laboratories analyze biological fluid samples from animal and
human clinical studies. The latter includes those conducted by PPD Development's
Phase I units for drug and metabolite content and concentration. PPD Development
currently has over 850 validated assays available for its clients' use in
conducting laboratory analyses, qualifying PPD Development for a wide range of
assignments. PPD Development's laboratories also process fluid samples for pre-
clinical studies.

     The Company's Discovery Sciences Group links drug discovery to development
by providing rapid in vivo screening of new chemical entities, producing
pharmacokinetic and enzyme-kinetic profiles to assess stability, metabolism and
bioavailability of compounds.  This non-GLP, high-throughput proof-of-principle
method of screening provides companies with a lower-cost way to quickly assess
viability of multiple lead compounds.

     Product analysis services include dissolution and stability studies, which
are necessary to characterize dosage form release patterns and stability under
various environmental conditions in the intended package for marketing.  These
studies must be carried out over the commercial life of products, beginning at
the clinical trial stage.  New formulations require the same set of studies as
the original dosage form.  Our measurement services include Gas
Chromatography/Mass Spectrometry, Liquid Chromatography/Mass Spectrometry (LC/MS
and LC/MSMS), High Performance Liquid Chromatography, Gas Chromatography,
Radioimmunoassay and Enzyme Linked Immunosorbent Assay.  Support services
include HIV-positive sample handling, sample/data management for kinetic studies
from multi-center trials and sample/data archiving.

     PPD Development is one of a few full-service CROs able to offer its clients
the advantages of both bioanalytical and product analysis, as well as Phase I
clinical testing.

     Phase II-IV Clinical Trial Management

     The core of PPD Development's business is a comprehensive package of
services for the conduct of Phase II-IV clinical trials, which, in concert with
its other analytical and Phase I testing services, pharmacogenomics and
informatics, allows PPD Development to offer its clients an integrated package
of clinical management services.  The Company has significant clinical trials
experience in the areas of:

   AIDS                       Primary disease and treatment/prophylaxis of
                              opportunistic infections

   Analgesia                  Acute and chronic pain modeling

   Biotechnology              Growth hormone, multiple sclerosis, sepsis, wound
                              healing

   Cardiovascular disease     Hypertension, angina pectoris

   Central nervous system     Schizophrenia, depression, epilepsy, chronic pain,
     disease                  anxiety, obsessive-compulsive disorders, panic
                              disorders

   Dermatology                Wound healing, acne, hair loss, psoriasis

   Gastroenterology           Duodenal ulcer, gastric ulcer, gastro-esophageal
                              reflux disease H. pylori, nonsteroidal anti-
                              inflammatory drug-induced ulcers, inflammatory
                              bowel disease

   Infectious disease         Acute and chronic bacterial and fungal diseases,
                              including pneumonia, influenza and sinusitis

   Metabolic disease          Diabetes, hormone replacement therapy

   Oncology                   Prostate, colorectal, breast and lung cancer

   Pulmonary/Allergy          Asthma, allergic rhinitis, community acquired
                              pneumonia, Acute Respiratory Distress Syndrome

   Rheumatology               Rheumatoid and osteoarthritis

   Virology                   Herpes simplex, hepatitis B, chronic hepatitis C

   Women's health             Osteoporosis, oral contraception

     Clients' needs are served by conducting clinical trials through a dedicated
project team. A project manager supervises all aspects of the conduct of the
clinical trial, while PPD Development's clinical research associates are in the
field monitoring the trial at the various investigational sites where it is
being conducted. Within this project-oriented structure, PPD Development can
manage every aspect of the clinical trial in Phases II through IV of the

                                       9


drug development process. Services offered include protocol development, case
report form ("CRF") design, feasibility studies, investigator selection,
recruitment and training, site initiation and monitoring, accelerated patient
enrollment, development of training materials for investigators, and training of
clients' staff.

     PPD Development monitors its clinical trials in compliance with government
regulations.  PPD Development has adopted global standard operating procedures
("SOPs") which are intended to satisfy regulatory requirements and serve as a
tool for controlling and enhancing the quality of its clinical trials.  All PPD
Development SOPs are in compliance with Good Clinical Practice ("GCP")
requirements and the International Conference on Harmonization ("ICH")
standards. The FDA has adopted the ICH's standards, and, the European Community
has agreed to conduct all studies in accordance with the standards from ICH,
which sets global clinical study standards based on GCP.  Data generated during
clinical trials are compiled, analyzed, interpreted and submitted in report form
to the FDA or other relevant regulatory agencies for purposes of obtaining
regulatory approval.  The Company provides expert consulting on conducting
clinical trials for simultaneous regulatory submissions to multiple countries.

     PPD Development provides its clients with one or more of the following core
Phase II-IV clinical trials management services using parallel processing to
accelerate the development process:

     Study Design

     PPD Development serves its clients in the critical area of study design by
applying its experience in the preparation of study protocols and CRFs.  A study
protocol defines the medical issues to be examined in evaluating the safety and
efficacy of a drug, the number of patients required to produce statistically
valid results, the clinical tests to be performed, the time period over which
the study will be conducted, the frequency and dosage of drug administration,
and the exact patient criteria.  The success of the study depends not only on
the ability of the protocol to correctly predict requirements of regulatory
authorities, but also on the ability of the protocol to fit coherently with the
other aspects of the development process and the ultimate marketing strategy for
the drug.  This process includes healthcare economic components to support
rational pricing and positioning.

     Once the study protocol has been finalized, CRFs must be developed to
record the information to be obtained from the clinical studies.  The various
other disciplines involved in the drug development process, including data
management, must work closely with the clinical trial management project team to
assure that the data are recorded in a form that is efficient for subsequent
data entry, management and reporting.  Proper CRF design is critical to allowing
investigators and field monitors to conduct their respective jobs quickly,
accurately and effectively.

     Investigator Recruitment

     During clinical trials, physicians (also referred to as investigators) at
hospitals, clinics or other locations (also referred to as investigational
sites) supervise administration of the drug to patients.  PPD Development
recruits investigators who contract directly with either the Company or its
client.  For large scale Phase IV trials, we use our Telecommunications Center
(TCC) for investigator recruitment.  The TCC integrates telephones, relational
databases, computerized scripts and customized tracking software for
investigator recruitment, and centralized management of large scale Phase IV
trials.  During 1999 the TCC staff recruited and obtained investigative review
board approval for over 5,000 sites in three months. The successful rapid
identification and recruitment of investigators who have the appropriate
expertise and an adequate base of patients who satisfy the requirements of the
study protocol are critical to the timely completion of the trial.

     PPD Development maintains and constantly expands and refines its
computerized database of over 24,000 investigators.  Information regarding PPD
Development's experience with these investigators, including factors relevant to
rapid study initiation, are contained in the database.  This information allows
project managers to efficiently choose the appropriate investigators for a
particular study.

     Study Monitoring

     PPD Development provides study-monitoring services, which include
investigational site initiation, patient enrollment assistance and data
collection through subsequent site visits.  These visits also serve to assure
that data is gathered according to GCP, according to the requirements of the
client and applicable regulatory authorities, and as specified in the study
protocol.

                                       10


     Project management and field-monitoring services are the operational heart
of Phase II and III clinical studies.  In many instances, a project's timely
completion is based on meeting deadlines during the first few months of study
initiation.  Therefore, PPD Development focuses at an early stage on identifying
and quickly completing the critical rate-limiting steps of screening and
selecting qualified investigators, processing pre-study regulatory paperwork,
obtaining investigative review board approvals and scheduling investigational
site initiation visits.  Drugs under study cannot be released to the
investigational sites, and thus the study cannot begin, until these activities
have been completed.

     Following study initiation, PPD Development utilizes a number of
appropriate methods of accelerating patient recruitment.  This may involve PPD
Development's integrated systems of telephone recruitment, telefaxing and media
advertising.  As with Phase I clinical trials, rapid patient recruitment is
critical to the Company's success in providing services to maximize clients'
return on R&D investments.

     Patient data must be obtained from the field efficiently, quickly and
accurately to speed subsequent data entry, management and analysis, and report
writing.  PPD Development reviews data through visits by its field monitors to
investigative sites.  Field personnel receive orientation training and routine
updates on changes in federal study regulations and new company SOPs for quality
trial monitoring and reporting.  Field personnel are equipped with laptop
computers for the purpose of SOP and regulatory information updates as well as
report generation.

     PPD Development has monitored many clinical trials, including a number of
very large studies.  For example, PPD Development is in its second five-year
contract with the National Institutes of Health ("NIH") to monitor
investigational sites for AIDS treatment related trials sponsored by the NIH.
This project involves approximately 500 investigational sites and total
enrollment of approximately 88,000 patients.  PPD Development has monitored
49,000 patients in 251 protocols since the beginning of the project in 1990.
There has also been over 2,300 pharmacy, regulatory and operational audits at
the sites.

     Clinical Data Management and Biostatistical Analysis

     The professionals who manage PPD Development's data management and
biostatistical analysis operations have extensive pharmaceutical and
biotechnology industry experience in the design and construction of local and
multinational clinical trial databases.  PPD Development provides clients with
assistance in such areas as study design, sample size determination, CRF design
and production, fax based monitoring, database design and construction, New Drug
Application preparation and production (including electronic submissions to the
FDA), and FDA presentations and defense.

     The Company offers data management and biostatistical analysis services
both separately and as part of an integrated drug development program. During
the design of development plans and protocols, PPD Development offers consulting
services relating to sample size parameters for patient enrollment, development
of data analysis plans and randomization schemes. During clinical trials, PPD
Development assists in the rapid acquisition of clean and accurate data.
Following completion of the clinical trials, PPD Development assists in report
preparation and FDA presentations. PPD Development's biostatisticians might
participate with clients in meetings with the FDA to present and defend
biostatistical analyses. PPD Development has expertise in electronically
capturing and integrating geographically diverse data. PPD Development uses
SAS(R), Oracle(R), Domain's Clintrial(TM), Oracle Clinical(TM), Clintrace(TM)
and other third party software, as specified by clients, combined with
customized programs developed by PPD Development.

     Performing data management and biostatistical analysis activities in
parallel with other drug development activities where possible can reduce drug
development time.  For example, data management personnel work with clinical
program managers and field monitors to continuously enter data, program output
tables and listings, and validate the database so that there is a rapid
progression to final tables, listing preparation and biostatistical analyses.
Similarly, there is a close working relationship with medical writing and
regulatory service personnel.

     Treatment Investigational New Drug Application

     A treatment Investigational New Drug Application includes a procedure to
allow patients to receive a new drug not yet approved for a serious or immediate
life-threatening disease, such as AIDS or multiple sclerosis, for which no
comparable or satisfactory therapy is available.  This treatment is provided
during the clinical trial phase

                                      11


of development, but outside the controlled clinical trial. The treatment IND
application process has the advantage of getting a new drug into an expanded
patient base early, as well as allowing earlier publicity about the potential
success of the drug. PPD Development's involvement in a treatment IND
application might range from simply monitoring the treatment to providing an
integrated set of services involving full investigational site management, data
management, biostatistical analysis and report writing.

     Medical Writing and Regulatory Services

     PPD Development provides full planning services for product development
including pre-clinical review, CMC consulting and clinical protocol development.
These activities are complemented by report writing, program management and
regulatory services designed to reduce overall development time.  Strategic
planning and program management provided over the course of a product
development life-cycle helps to ensure that regulatory dossiers are assembled in
a minimum of time and are focused on obtaining the desired labeling for the
compound.  These development services integrate with PPD Development's other
services to speed the process consistent with good service and regulatory
compliance.

     PPD Development maintains a large internal compliance and quality assurance
department to provide in-process monitoring of GCP performance.  PPD Development
also offers these services to clients to assess trials conducted by the client
or another CRO.

     Drug and Medical Information

     PPD ATP is a drug and medical information company located in RTP, North
Carolina.  PPD ATP provides custom-designed pharmaceutical and medical
information programs in support of post-marketed pharmaceutical products.  PPD
ATP services include but are not limited to clinical consultations with
pharmacists, nurses, veterinarians and other customer assistance specialists
delivered to consumers and healthcare professionals via telephone, text-based or
electronic communication formats.

     Healthcare Economics, Outcomes and Marketing Research

     PPD Development offers a number of services in the healthcare economics
area to pharmaceutical and biotechnology companies as well as managed care
payors and providers.  These services include: prospective and retrospective
clinicoeconomics analysis; quality of life and drug therapy evaluation; large
sample market research; clinical hypothesis testing for product marketing;
enhanced patient, investigator and managed care plan recruiting; managed care
consulting; patient therapeutic support systems; and disease management
consulting.  This research helps clients demonstrate the value of their products
in cost-sensitive markets without costly delays from designing and implementing
new randomized clinical trials.

     Discovery Sciences Group

     PPD Discovery consists of a chemical technology and preclinical development
company, and the GSX System, a functional genomics platform technology for
target discovery.  GSX is a proprietary whole-cell-based system that facilitates
the rapid identification, validation and functional analysis of novel targets.

     GSX identifies targets for drug discovery by the selective inhibition of
genes responsible for key steps in a disease process. The system is based on the
finding that a gene fragment, when introduced into cells, sometimes specifically
inhibits the function of the whole gene from which the fragment was obtained.
Effective inhibitory fragments are obtained by breaking the DNA containing the
genes of interest into many different random pieces, inserting these fragments
into a population of tester cells and identifying the rare individual cells that
acquire a selected new property as a consequence of the inhibitory action.
Examples of desirable cellular properties that can be selected include increased
resistance to a virus or increased sensitivity to a drug.  The "winning" DNA
fragments are then recovered from the selected cells and analyzed to determine
what genes, and thereby targets, they represent.  Activities surrounding the GSX
technology are conducted in Research Triangle Park, North Carolina and Menlo
Park, California.

     PPD Discovery includes a chemical and preclinical technology company that
provides lead generation, lead prioritization and lead optimization services,
and computational and preclinical development resources to the pharmaceutical,
biotechnology, agrochemical and animal health industries.  PPD Discovery has
developed synthesis protocols to produce numerous small-molecule combinatorial
libraries in the 5,000 to 10,000 component range.

                                       12


PPD Discovery has developed the SAR-System(TM) software package to efficiently
manage library design, compound tracking (plate maps), ID assignment and ISIS
database interface. While focusing on enhancing lead compound activity, PPD
Discovery also emphasizes simultaneous improvement of physicochemcial and
pharmacokinetic parameters of lead compound(s). PPD Discovery offers drug
metabolism assays using LC/MS/MS technology, cytochrome P450 enzyme assays for
characterization of in vitro metabolic profiles and stability, and full service
in vivo pharmacokinetic ("PK") screening of single or multiple New Chemical
Entities ("NCEs") for the investigation of metabolism and preclinical PK in
animal models. PPD Discovery also works with sponsors to create customized
preclinical development plans which include screening studies to identify lead
compounds or compound families as well as studies necessary for a successful
IND.

     PPD Discovery's chemical and preclincial technology is located in
Middleton, Wisconsin and at a new, 61,000 square foot research facility in North
Carolina. PPD Discovery's research facilities are fully equipped to perform
solid and solution-phase combinatorial chemistry, custom synthesis, solution-
phase medicinal chemistry, and in vitro and in vivo preclinical assays.  PPD
Discovery maintains full analytical and computational capabilities in support of
its combinatorial, medicinal chemistry, and preclinical technology activities.

     Products include base libraries, which are chemical compounds designed for
high throughput biological screening: focus libraries, which are custom designed
chemical libraries provided exclusively to a client: and preclinical in vitro an
in vivo assay technology.  Services include research collaborations and
partnerships with research-based discovery companies.  These collaborations and
partnerships are typically structured for a fixed period of time or around
discrete client projects.  PPD Discovery's preclincial services department also
offers consulting in the area of preclinical product development.  PPD Discovery
works with clients to create custom preclincial development plans, which include
screening studies to identify lead compounds or compound families necessary for
a successful IND.

Clients and Marketing
- ---------------------

     The Company's Life Sciences Group provides services primarily to
pharmaceutical and biotechnology companies.  For the year ended December 31,
1999, approximately 85.5% of the Company's Life Sciences Group's net revenue was
attributable to clinical services and 14.5% to laboratory services.  For the
year ended December 31, 1999, net revenue of the Life Sciences Group was derived
approximately as follows:



                                                                 Percentage of
     Source                                                       Net Revenue
     ------                                                      --------------
                                                              
     Pharmaceutical                                                  84.55%
     Biotechnology                                                    8.05
     Government                                                       1.76
     Other                                                            5.64


     During 1999, the Company provided services to 42 of the top 50
pharmaceutical companies in the world as ranked by 1998 healthcare research and
development spending.

     The Company provides services to the pharmaceutical and biotechnology
industries and its revenue is highly dependent on expenditures on research and
development by clients in these industries.  Accordingly, the Company's
operations could be materially and adversely affected by the current trend
toward consolidation in these industries, general economic downturns in these
industries, or other factors resulting in a decrease in research and development
expenditures.  Furthermore, the Company has benefited to date from the
increasing tendency of pharmaceutical and biotechnology companies to outsource
large clinical research projects.  Should this trend be reversed, the revenue of
the Company could be materially and adversely affected.  The Company believes
that concentration of business among certain large customers is not uncommon in
the CRO industry.  The Company has experienced such concentration in the past
and may experience such concentration in the future.  However, during 1999 and
1998, no single client contributed more than 10% of the Company's total net
revenue.  In 1999, the Company's ten largest clients accounted for approximately
41.8% of the Company's total net revenue and approximately 15.2% of the
Company's total 1999 net revenue was derived from clients located outside the
U.S., in particular in Europe and Japan.

                                       13


Contractual Arrangements
- ------------------------

     Many of PPD Development's contracts are fixed price, with some variable
components, and range in duration from a few months to several years.  In other
contracts, PPD Development is paid based on applying agreed upon hourly rates to
hours worked.  Generally, for multi-year contracts involving clinical trials, a
portion of the contract fee is paid at the time the trial is initiated, with the
balance of the contract fee payable in installments over the trial duration.
The installment payments are typically performance-based, relating payment to
pre-established events or milestones, such as investigator recruitment, patient
enrollment or database delivery.  For fixed-price contracts, PPD Development
bears the risk of cost overruns, but benefits if costs are lower than
anticipated.  Underpricing of such contracts or significant cost overruns could
have a material adverse effect on the Company.  Most of PPD Development's
contracts for the provision of its services, including contracts with government
agencies, are terminable by the client upon 30 to 90 days' notice under certain
circumstances, including the client's decision to terminate the development of
the product or end the study.  Contracts might be terminated for a variety of
reasons, including the failure of a product to satisfy safety requirements,
unexpected or undesired results of the product, the client's decision to forego
a particular study, or insufficient patient enrollment or investigator
recruitment.  Although the contracts typically require payment of certain fees
for winding down the study and, in some cases, a termination fee, the loss of a
single large contract or of multiple contracts could materially and adversely
affect the Company.

Backlog
- -------

     Our backlog consists of anticipated net revenue from letters of intent,
verbal commitments and contracts that have not been completed.  Net revenue is
defined as professional fee income (gross revenue) less reimbursed costs,
consisting principally of investigator fees and travel.  Once contracted work
begins, net revenue is recognized over the life of the contract.  In some cases,
PPD Development begins work for a client before a contract is signed.  The
backlog of the Life Sciences Group for the services described above under
written agreements, including signed letters of intent, was $353.8 million in
net revenue at December 31, 1999, compared to $291.7 million in net revenue at
December 31, 1998.

     PPD Development believes that its backlog as of any date is not necessarily
a meaningful predictor of future results, because backlog can be affected by a
number of factors, including the size and duration of contracts, many of which
are performed over several years.  Additionally, contracts generally are subject
to early termination by the client or delay for many reasons, including
unexpected test results.  Also, the scope of a contract can change during the
course of a study.  PPD Development might not be able to fully realize its
entire backlog as net revenue.

Competition
- -----------

     The CRO industry consists of several hundred small, limited-service
providers, several medium-sized CROs and a few full-service global drug
development companies.  The CRO industry is consolidating and, in recent years,
a few large, full-service competitors have emerged.  This trend of industry
consolidation will likely result in greater competition among the larger CROs
for clients and acquisition candidates.  PPD Development's large competitors
include Covance, Inc., Kendle International, Inc., Parexel International
Corporation, ICON, Phoenix International and Quintiles Transnational
Corporation.  PPD Development also competes against some medium-sized companies,
and in-house research and development departments of pharmaceutical and
biotechnology companies, as well as universities and teaching hospitals.  In
addition, the CRO industry has few barriers to entry.  Newer, smaller entities
with specialty focuses, such as those therapeutically aligned, may compete
aggressively against larger CROs for clients.  Increased competition might lead
to price and other forms of competition that may adversely affect PPD
Development's operating results.

     CROs compete on the basis of several factors, including reputation for on-
time quality performance, expertise and experience in specific therapeutic
areas, scope of service offerings, strengths in various geographic markets,
technological expertise and systems, ability to acquire, process, analyze and
report data in a time-saving accurate manner, ability to manage large-scale
clinical trials both domestically and internationally, expertise and experience
in healthcare economics and client communication.  Although there can be no
assurance that it will continue to do so, the Company believes that it competes
favorably in these areas.

     PPD Informatics has agreements with several of the major software vendors
in pharmaceutical applications (for example, Domain Pharma and Oracle).
Competitors for PPD Informatic's consulting services include major

                                       14


consulting companies with pharmaceutical industry groups (for example, Andersen
Consulting, CSC and EDS) and smaller companies with a pharmaceutical industry
focus (for example, DataCeutics, Netforce and ISCG). Competitors for PPD
Informatic's software products include larger software vendors such as SAS, but
primarily are smaller, specialized software companies.

     The outsource chemistry and preclinical research industry consists of
several dominant providers and numerous smaller niche companies.  PPD Discovery
faces significant competition from these companies, as well as competition from
research teams funded internally by pharmaceutical and biotechnology companies.
While the trend to outsource research is increasing, the vast majority of
research spending by these companies is for their own internal research
personnel.

     PPD Discovery competes principally on the basis of reputation, scientific
and technical expertise, experience and qualifications of professional staff,
quality of services, and ability to delivery quality products to the client's
specifications.  As such, PPD Discovery's ability to attract and retain
qualified technical personnel is a key component in its ability to successfully
compete in the outsource contract research market.

Potential Liability and Insurance
- ---------------------------------

     Clinical research services involve the testing of new drugs on human
volunteers pursuant to a study protocol.  This testing exposes the Company to
the risk of liability for personal injury or death to patients resulting from,
among other things, possible unforeseen adverse side effects or improper
administration of the new drug.  Many of these patients are already seriously
ill and are at risk of further illness or death.  The Company attempts to manage
its risk of liability for personal injury or death to patients from
administration of products under study through measures such as contractual
indemnification provisions with clients and through insurance maintained by
clients.  The contractual indemnifications generally do not protect the Company
against certain of its own actions, such as negligence.  The contractual
arrangements are subject to negotiation with clients and the terms and scope of
indemnification vary from client to client and from trial to trial.  Although
most of PPD Development's clients are large, well-capitalized companies, the
financial performance of these indemnities is not secured.  Therefore, the
Company bears the risk that the indemnifying party might refuse, or not have the
financial ability, to fulfill its indemnification obligations.  The Company
could be materially and adversely affected if it were required to pay damages or
incur defense costs in connection with a claim that is beyond the scope of an
indemnity provision or beyond the scope or level of insurance coverage or where
the indemnifying party does not fulfill its indemnification obligations.  Until
September 1996, the Company did not maintain liability insurance with respect to
these risks.  The Company currently maintains professional liability insurance
coverage of up to $10.0 million per claim, with an annual aggregate policy limit
of $10.0 million.  Liability claims might exceed the limits of such coverage and
such insurance might not continue to be available on commercially reasonable
terms or at all.

Government Regulation
- ---------------------

     The laboratory services performed by PPD Development are subject to various
regulatory requirements designed to ensure the quality and integrity of the
testing process.  The industry standards for conducting laboratory testing are
embodied in the regulations for Good Laboratory Practice ("GLP") and Good
Manufacturing Practice ("GMP").  GLP and GMP have been adopted by the FDA, by
the Department of Health in the United Kingdom and by similar regulatory
authorities in other parts of the world.  GLP and GMP stipulate requirements for
facilities, equipment and professional staff.  The regulations require
standardization procedures for studies, for recording and reporting data, and
for retaining appropriate records.  To help ensure compliance, PPD Development
has established quality assurance controls at its laboratory facilities to
monitor ongoing compliance with GLP and GMP regulations by auditing test data
and conducting regular inspections of testing procedures.

     The industry standard for the conduct of clinical research and development
studies is embodied in the ICH regulations for GCP.  As a matter of practice,
the FDA and many other regulatory authorities require that test results
submitted to such authorities be based on studies conducted in accordance with
GCP.  These regulations include (1) complying with regulations governing the
selection of qualified investigators, (2) obtaining specific written commitments
from the investigators, (3) verifying that informed consent is obtained from
patients, (4) monitoring the validity and accuracy of data, (5) verifying drug
or device accountability, and (6) instructing investigators to maintain records
and reports.  For specified periods PPD Development must also maintain reports
for each study for

                                       15


inspection by the study sponsor and governmental authorities during audits.
Noncompliance with GCP can result in the disqualification of data collected
during the clinical trial.

     PPD Development's Global Standard Operating Procedures ("SOPs") are written
in accordance with the Code of Federal Regulations and ICH guidelines agreed
upon by the United States, certain European and the Japanese governments.  This
enables our work to be conducted locally, regionally and globally to standards
that exceed all currently applicable regulatory requirements.

     PPD Development's business depends on the continued government regulation
of the drug development process, especially in the United States.  Changes in
regulation, including a relaxation in regulatory requirements or the
introduction of simplified drug approval procedures, could materially and
adversely affect the demand for the services offered by the Company.

     The failure on the part of PPD Development to comply with applicable
regulations could result in the termination of ongoing research or the
disqualification of data for submission to regulatory authorities.  Furthermore,
the issuance of a notice of finding by a governmental authority against either
PPD Development or its clients based upon a material violation by the Company of
GCP, GLP or GMP requirements could materially and adversely affect the Company.

Intellectual Property
- ---------------------

     The Company has rights in trademarks, such as a design of PPD, The Power of
Selection(TM), Classify, Resolve(TM), Cross Graphs(R), TableTrans(R), First
Pass(TM), and others. In addition, the Company owns, co-owns or has licensed the
rights to eight issued U.S., eight issued foreign; 22 pending U.S., and 36
pending foreign patents.

     PPD Discovery has filed of over 20 patents for genes useful for drug
development, chemical compositions useful as therapeutics, and other drug
development related technology. In addition, PPD Discovery has expanded its
propriety rights by acquiring licenses to technology instrumental for drug
discovery and development. PPD Discovery holds licensing privileges related to
GSX technology and to bacterial assays for human cytochrome P450 metabolism.

     PPD Development also has developed certain computer software and
technically derived procedures intended to maximize the quality and efficiency
of its services. In addition to its rights to certain intellectual property, the
Company believes that other factors such as the technical expertise, knowledge,
ability and experience of the Company's professionals provide significant
benefits to its clients.

Employees
- ---------

     At December 31, 1999, the Company had approximately 3,400 full-time
equivalent employees, of whom 3,150 were employed in the Life Sciences Group, 40
were employed in the Discovery Sciences Group and the remainder was in the
Company's corporate headquarters. Of the Company's employees, approximately 140
hold Ph.D., M.D., Pharm.D. or D.V.M. degrees and approximately 420 hold other
masters or other postgraduate degrees. None of the Company's employees are
subject to a collective bargaining agreement. The Company believes that its
relations with its employees are good.

     The Company's performance depends on its ability to attract and retain
qualified professional, scientific and technical staff. The level of competition
among employers for such skilled personnel is high. The Company believes that
its employee benefit plans enhance employee morale, professional commitment and
work productivity and provide an incentive for employees to remain with the
Company. The Company, like many of its competitors, also relies on a number of
key executives. The loss of services of any of the Company's key executives
could have a material and adverse effect on the Company. While to date the
Company has not experienced any significant problems in attracting or retaining
qualified staff, it might in the future.

Foreign and Domestic Operations
- -------------------------------

     Note 17 of Notes to Consolidated Financial Statements presents information
about the Company's operations by geographic area for each of fiscal years 1999,
1998 and 1997.

                                       16


Item 2.  Properties

     The Company's principal executive offices are located in Wilmington, North
Carolina. In December 1998, the Company entered into a new 15-year build-to-suit
lease for an approximately 61,000 square foot facility in Research Triangle
Park, North Carolina that was completed in January 2000.

     The Company owns and operates a 52-bed Phase I facility in Leicester,
England.  The Company owns a building in Kersewell, Scotland, which it acquired
when it purchased Data Acquisition and Research Limited in December 1996.  The
Company also owns two buildings in Durham, North Carolina, which the Company
acquired when it purchased ATP in March 1999.  All other facilities are leased.
The Company's operations currently occupy approximately 883,000 square feet of
space worldwide, including over 143,000 square feet of space located outside of
the United States.  The Company believes that its facilities have adequate
capacity to handle significant additional business growth.  The locations of the
Company's operating facilities as of December 31, 1999 were as follows:


Life Sciences Group
     The Americas                                 Europe
     ------------                                 ------
          Sao Paulo, Brazil                          Brussels, Belgium
          La Jolla, California                       Cambridge, England
          San Bruno, California                      Chelmsford, England
          Mississauga, Canada                        Leicester, England
          Overland Park, Kansas                      Southampton, England
          Columbia, Maryland                         Charenton-Le-Pont, France
          Cambridge, Massachusetts                   Karlsruhe, Germany
          Lawrenceville, New Jersey                  Nuremberg, Germany
          Durham, North Carolina                     Tel Aviv, Israel
          Morrisville, North Carolina                Milan, Italy
          Research Triangle Park, North Carolina     Kersewell, Scotland
          Wilmington, North Carolina                 Barcelona, Spain
          Blue Bell, Pennsylvania                    Madrid, Spain
          Austin, Texas (1)                          Stockholm, Sweden
          Richmond, Virginia
          Middleton, Wisconsin

     Pacific Rim                                  Eastern Europe
     -----------                                  --------------
          Melbourne, Australia                       Prague, Czech Republic
                                                     Budapest, Hungary
                                                     Warsaw, Poland


     Asia                                         Africa
     ----                                         ------
          Tokyo, Japan                               Johannesburg, South Africa
          Bangkok, Thailand


Discovery Sciences Group
     The Americas
     ------------
          Menlo Park, California
          Morrisville, North Carolina
          Research Triangle Park, North Carolina


_________
(1)  In November 1995, the Company entered into a sale-leaseback transaction
     related to its Austin, Texas, facilities.
     See Note 10 of Notes to Consolidated Financial Statements.

                                       17


Item 3.  Legal Proceedings

     In the normal course of business, the Company is a party to various claims
and legal proceedings.  Although the ultimate outcome of these matters is not
yet determined, management of the Company, after consultation with legal
counsel, does not believe that the resolution of these matters will have a
material effect upon the Company's financial condition or results of operations
in any interim or annual period.

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

     No matter was submitted to a vote of security holders during the fourth
quarter of the fiscal year ended December 31, 1999.


Executive Officers
- ------------------

     The executive officers of the Company as of February 16, 2000, were as
follows:



          Name                 Age                             Position
- -------------------------      ---       --------------------------------------------------------------
                                   
 Fredric N. Eshelman           51        Vice Chairman and Chief Executive Officer

 Fred B. Davenport, Jr.        48        General Counsel, Vice President - Legal and Secretary

 Paul S. Covington             43        Senior Vice President of Medical Affairs, Chief Safety Officer

 Linda Baddour                 41        Interim Chief Financial Officer and Chief Accounting Officer


     Fredric N. Eshelman has served as Chief Executive Officer and as a director
of the Company since July 1990.  Dr. Eshelman founded the Company's predecessor
in 1985.  Prior to rejoining the Company in 1990, Dr. Eshelman served as Senior
Vice President, Development and as a director of Glaxo Inc., a subsidiary of
Glaxo Holdings plc.

     Fred B. Davenport, Jr. is General Counsel, Vice President - Legal and
Secretary of the Company.  Prior to his employment by the Company in December
1996, Mr. Davenport was a Partner in the Wilmington, North Carolina law firm of
Murchison, Taylor, Kendrick and Gibson, L.L.P., which he joined in 1977.  Mr.
Davenport was also a member of the faculty of the University of North Carolina
at Wilmington's Cameron School of Business Administration from 1982 to 1991.

     Paul S. Covington is Senior Vice President of Medical Affairs and Chief
Safety Officer. Dr. Covington joined the Company in September 1991. He is Board
Certified in Internal Medicine and Licensed in North Carolina and Alabama. Prior
to joining the Company, Dr. Covington was in private practice in Clanton,
Alabama from 1985 to 1990 where he served as Chief of Staff and head of Critical
Care and Cardiopulmonary for the local hospital. From 1991 to 1992, he was
Medical Director for the Birmingham site of Future Healthcare Research Centers.

     Linda Baddour is Interim Chief Financial Officer and Chief Accounting
Officer. Prior to her employment by the Company in December 1995, Ms. Baddour
was the Controller for Cooperative Bank for Savings Inc. from 1980 to 1995. Ms.
Baddour is a Certified Public Accountant and received her Masters in Business
Administration from the University of North Carolina at Wilmington.

                                       18


                                    PART II

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

     The Common Stock of the Company, par value $0.10 per share (the "Common
Stock"), is traded under the symbol "PPDI" in the over-the-counter market and is
quoted on the National Market System of the National Association of Securities
Dealers Automated Quotation System ("NASDAQ"). The following table sets forth
the high and low prices for shares of the Common Stock, as reported by the
National Association of Securities Dealers, Inc. These prices are based on
quotations between dealers, which do not reflect retail mark-up, markdown or
commissions.



                                         1999                   1998
                                 ------------------------------------------
                                   High         Low       High       Low
                                 ------------------------------------------
                                                        
First Quarter                    $ 38.50        $27.00    $24.25    $13.00
Second Quarter                   $ 34.25        $21.75    $25.88    $18.50
Third Quarter                    $ 29.00        $11.56    $29.38    $18.63
Fourth Quarter                   $ 15.25        $ 8.56    $30.69    $20.00


     As of February 16, 2000, there were approximately 10,600 holders of the
Company's Common Stock.

     Since its initial public offering, the Company has not paid any cash
dividends on its Common Stock.  The Company has no present plans to pay cash
dividends to its shareholders and, for the foreseeable future, intends to retain
all of its earnings for use in continuing to develop its business.  The
declaration of dividends by the Company is within the discretion of its Board of
Directors and is dependent upon the earnings, financial condition and capital
requirements of the Company, as well as any other factors deemed relevant by the
Board of Directors.

Item 6.   Selected Consolidated Financial Data

     The selected consolidated financial data set forth below for the Company as
of December 31, 1999 and 1998 and for each of the three years in the period
ended December 31, 1999 are derived from the audited consolidated financial
statements included elsewhere herein. The selected financial data set forth
below for the Company as of December 31, 1997, 1996 and 1995 and for each of the
two years in the period ended December 31, 1996 are derived from the financial
statements of the Company not included elsewhere herein. The data presented
below should be read in conjunction with "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and with the Company's
consolidated financial statements and related notes thereto included elsewhere
in this Report.

     The Company's consolidated financial data reflects its former environmental
sciences segment as discontinued operations for all periods presented due to the
sale of this segment on January 31, 1999.  See Note 4 of Notes to Consolidated
Financial Statements.

                                       19




                                                                       Years Ended December 31,
                                                     ------------------------------------------------------------
                                                       1999       1998         1997       1996 (3)     1995(1)(2)
                                                     --------   --------    ---------   ----------    -----------
                                                                   (in thousands, except per share data)
                                                                                       

Net revenue (4)                                      $302,530   $235,553    $187,487    $152,304      $160,495
                                                     --------   --------    --------    --------      --------

Operating expenses                                    265,604    211,349     170,468     143,459       157,837
Loss on sale of business, special charges,
  restructuring costs, merger costs, and acquired
  in-process research and development costs               218      3,163       9,670      14,773        24,290
                                                     --------   --------    --------    --------      --------
                                                      265,822    214,512     180,138     158,232       182,127
                                                     --------   --------    --------    --------      --------
Income (loss) from operations                          36,708     21,041       7,349      (5,928)      (21,632)
Other income (expense), net                             4,337      3,562       1,464       1,804        (2,616)
                                                     --------   --------    --------    --------      --------
Income (loss) from continuing operations
  before provision for income taxes                    41,045     24,603       8,813      (4,124)      (24,248)
Provision (benefit) for income taxes                   12,154      9,448       3,363       2,257       (17,163)
Income (loss) from operations of discontinued
  environmental sciences segment, net (5)                (395)     4,614       4,152       2,874         2,578
Extraordinary loss from early
  extinguishment of debt                                    -          -           -           -          (897)
                                                     --------   --------    --------    --------      --------
Net income (loss)                                    $ 28,496   $ 19,769    $  9,602    $ (3,507)     $ (5,404)
                                                     ========   ========    ========    ========      ========
Income (loss) from continuing operations
  per share:
     Basic                                           $   1.18    $  0.65    $   0.24    $  (0.30)     $  (0.38)
                                                     ========    =======    ========    ========      ========
     Diluted                                         $   1.16    $  0.65    $   0.24    $  (0.30)     $  (0.38)
                                                     ========    =======    ========    ========      ========

Income (loss) from discontinued operations
  per share:
     Basic                                           $  (0.02)  $   0.20    $   0.18    $   0.13      $   0.14
                                                     ========   ========    ========    ========      ========
     Diluted                                         $  (0.01)  $   0.20    $   0.18    $   0.13      $   0.14
                                                     ========   ========    ========    ========      ========

Loss from extraordinary item per share:
     Basic                                           $      -   $      -    $      -    $      -      $  (0.05)
                                                     ========   ========    ========    ========      ========
     Diluted                                         $      -   $      -    $      -    $      -      $  (0.05)
                                                     ========   ========    ========    ========      ========

Net income (loss) per share:
     Basic                                           $   1.16   $   0.85    $   0.42    $  (0.17)     $  (0.29)
                                                     ========   ========    ========    ========      ========
     Diluted                                         $   1.15   $   0.85    $   0.42    $  (0.17)     $  (0.29)
                                                     ========   ========    ========    ========      ========

Weighted average number of shares outstanding:
     Basic                                             24,566     23,186      22,825      21,168        18,815
     Dilutive effect of stock options                     287        169          60           -             -
                                                     --------   --------    --------    --------      --------
     Diluted                                           24,853     23,355      22,885      21,168        18,815
                                                     ========   ========    ========    ========      ========




                                                            As of December 31,
                                             --------------------------------------------------
                                               1999      1998       1997       1996     1995
                                             --------  --------  ----------  --------  --------
                                                              (in thousands)
                                                                        
Consolidated Balance Sheet Data:
Cash and cash equivalents                    $ 61,251  $ 34,083  $   15,879  $ 21,838  $ 13,565
Marketable securities                               -         -       7,994    14,210       242
Working capital                               106,759    93,917      69,950    66,603    37,320
Total assets                                  288,703   236,582     197,047   181,457   142,661
Long-term debt                                    359       161         340     1,428     3,471
Long-term debt, including current portion         570     3,741       5,246     5,649     5,672
Shareholders' equity                          192,464   155,410     127,605   115,306    77,300


                                       20


     Selected Financial Data, excluding results of operations of toxicology
operations (sold 11/95), loss on sale of business, special charges,
restructuring charges, merger costs, acquired in-process research and
development costs, gain on sale of CCCR, discontinued operations, non-recurring
tax benefits and extraordinary loss.



                                                               Years Ended December 31,
                                             -------------------------------------------------------------
                                                1999         1998        1997        1996      1995(1) (2)
                                             ----------    ---------   ---------   ---------  ------------
                                                         (in thousands, except per share data)
                                                                               
Net revenue (4)
Operating expenses                            $ 302,530    $ 235,553   $ 187,487   $ 152,304   $ 122,049
                                                265,604      211,349     170,468     143,459     118,255
Income from operations                        ---------    ---------   ---------   ---------   ---------
Other income (expense), net                      36,926       24,204      17,019       8,845       3,794
                                                  4,437        2,490       1,464       1,804      (2,616)
Income from continuing operations before      ---------    ---------   ---------   ---------   ---------
   provision for income taxes
Provision for income taxes                       41,363       26,694      18,483      10,649       1,178
                                                 16,049       10,274       7,215       4,249         471
Net income                                    ---------    ---------   ---------   ---------   ---------
                                              $  25,314    $  16,420   $  11,268   $   6,400   $     707
Weighted average number of                    =========    =========   =========   =========   =========
   diluted shares outstanding
                                                 24,853       23,355      22,885      21,319      18,815
Net income per share                          =========    =========   =========   =========   =========
                                              $    1.02    $    0.70   $    0.49   $    0.30   $    0.04
                                              =========    =========   =========   =========   =========


________________________________________
(1)  Following termination of its status as an S corporation prior to completion
     of its initial public offering in January 1996, PPD became subject to
     federal and state income taxes. The income tax data for the year ended
     December 31, 1995 reflects the application of corporate income taxes to
     PPD's net income at the statutory combined federal and state tax rate as if
     the termination of PPD's S Corporation status had occurred on January 1,
     1995.

(2)  The loss from continuing operations for 1995 was affected by (i) the sale
     of APBI's toxicology business, which resulted in a pre-tax loss of $19.3
     million charged against operating income, (ii) a special charge against
     operating income of $5.0 million primarily related to the impairment of
     APBI's available for sale investments and (iii) an increase in APBI's tax
     benefit as a result of the reversal of certain tax liabilities recorded in
     prior years for which it was determined that APBI would not be liable for
     payment.

(3)  The net loss for 1996 was affected by $14.8 million of merger costs
     incurred in connection with the acquisition of APBI. After associated tax
     benefits, the impact on net income of such merger costs was $13.0 million.

(4)  Revenues are presented net of subcontractor costs. See accompanying
     consolidated statements of operations.

(5)  The discontinued operations include the Company's environmental sciences
     segment sold in January 1999 and the write off of its remaining investment
     in PACE Incorporated during the fourth quarter of 1995. All periods
     presented have been restated to exclude the results of operations of both
     of the above businesses.

                                       21


Item 7.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations

Overview

     During 1999, the Company reported net income of $28.5 million, or $1.15 per
diluted share, compared to net income of $19.8 million, or $0.85 per diluted
share, during 1998.  Excluding non-recurring tax benefit and merger and
acquisition costs, the Company's adjusted net income of $25.3 million was 54.2%
higher than prior year adjusted net income, excluding merger and acquisition
costs and gain on sale of business, of $16.4 million.

     In March 1999, the Company acquired ATP, Inc. ("PPD ATP"), a health
information services company.  PPD ATP provides customized inbound and outbound
telecommunications programs targeting consumers and healthcare providers.  The
Company acquired all of the outstanding stock of PPD ATP in exchange for
approximately 876,000 shares of the Company's common stock.  This acquisition
was accounted for as a pooling of interests transaction.  Results of operations
for PPD ATP are included in the consolidated results of operations of the
Company beginning January 1, 1999.  Results of operations of the Company for the
periods prior to January 1, 1999 were not restated because PPD ATP's results of
operations for periods prior to January 1, 1999 were not material to the
Company's operating results for these periods.

     In February 1999, the Company formed a joint venture, PPGx, with Axys
Pharmaceuticals, Inc. to pursue the business of pharmacogenomics.  The Company
contributed $1.5 million in cash, the stock of its Intek subsidiary, and the
rights to a software license, for an 18.2% ownership interest in PPGx.  The
Company is accounting for the investment in PPGx under the cost method.  As of
December 31, 1999, the investment in PPGx was valued at $4.2 million and was
recorded in "Other Assets, net" on our balance sheet.  The Company acts as
guarantor on a $8.0 million revolving credit facility for PPGx.  The Company has
exclusive marketing rights to PPGx pharmacogenomics products and services and an
option to increase its ownership share in PPGx.

     Effective January 31, 1999, the Company sold its environmental sciences
segment to Environ Holdings, Inc., a new company formed by the management of the
environmental sciences segment.  The Company received cash of $1.2 million, a
note receivable in the amount of $7.0 million (for which payment was received in
the first quarter of 1999) and a note receivable in the amount of $18.0 million,
which is due over a 12-year period.  The Company has received all principal and
interest payments due on the ENVIRON note receivable through January 2000.  The
Company did not recognize a gain or loss as a result of the sale because the
sales price was equal to the book value of the net assets sold.  The Company
also entered into a three-year consulting agreement to provide certain
consulting services to Environ Holdings for a fee of $0.5 million per year.

     In May 1998, the Company created GenuPro, Inc., a subsidiary of PPD that
holds a license to a number of compounds in the genitourinary field, which were
purchased from Eli Lilly & Co. in the second quarter of 1998. The Company
recorded an acquired in-process research and development charge of $3.2 million
in the second quarter of 1998 related to the purchase of these compounds because
the compounds were in the initial stage of research and development at the date
they were acquired.  GenuPro, Inc. is a part of the Company's Discovery Sciences
Group.

     In February 1998, the Company, through its subsidiary Clinix International
Inc., sold substantially all of the assets of the Chicago Center for Clinical
Research ("CCCR").  The sales price was approximately $7.8 million in the form
of $5.3 million in cash and a promissory note for $2.5 million, which was to be
received over the five year period following the date of sale of CCCR.  The sale
resulted in a gain of approximately $1.1 million, which was recognized as other
income during the first quarter of 1998.  The Company has received all principal
and interest payments on the note receivable for the sale of CCCR, which were
due through January 2000.  As part of the sales agreement, the Company continued
to provide CCCR with certain clinical and administrative services for an agreed
upon amount through the first quarter of 1999.

                                       22


Results of Operations

     The following tables set forth, for the periods indicated, amounts for
certain items in the Company's consolidated financial statements expressed as a
percentage of net revenue from continuing operations and the percentage changes
in dollar amounts of certain items compared with the prior period:

              Percentage of Net Revenue from Continuing Operations



                                             For the Years Ended December 31,
                                     1999              1998                   1997
                                   --------          --------           ---------------
                                    Amount     %      Amount      %      Amount     %
                                   --------  -----   --------   -----   --------  -----
                                                  (dollars in thousands)
                                                                
Net revenue (1):
  Life sciences                    $299,769   99.1%  $234,626    99.6%  $187,201   99.8%
  Discovery sciences                  2,761    0.9        927     0.4        286    0.2
                                   --------  -----   --------   -----   --------  -----
                                    302,530  100.0    235,553   100.0    187,487  100.0
Direct costs:
  Life sciences                     147,439           117,625             94,909
  Discovery sciences                  7,719             3,623              1,859
                                   --------          --------           --------
                                    155,158   51.3    121,248    51.5     96,768   51.6
Selling, general and
 administrative expenses             95,604   31.6     77,784    33.0     62,820   33.5
Depreciation and amortization        14,842    4.9     12,317     5.2     10,880    5.8
Acquired in-process research
  and development costs                   -      -      3,163     1.3      9,112    4.9
Merger costs                            218    0.1          -       -        558    0.3
                                   --------  -----   --------   -----   --------  -----
Operating income                   $ 36,708   12.1%  $ 21,041     8.9%  $  7,349    3.9%
                                   ========  =====   ========   =====   ========  =====




                                                                 Percentage Change
                                                           For the Years Ended December 31,
                                                       ---------------------------------------
                                                        1999 vs. 1998            1998 vs. 1997
                                                       --------------            -------------
                                                                           
   Net revenue:
    Life sciences                                          27.8%                     25.3%
    Discovery sciences                                    197.8                     224.1
     Total net revenue                                     28.4                      25.6
   Direct costs:
    Life sciences                                          25.3                      23.9
    Discovery sciences                                    113.1                      94.9
   Selling, general and administrative expenses            22.9                      23.8
   Depreciation and amortization                           20.5                      13.2


______________________
(1)  Net of subcontractor costs.



                                       23

Year Ended December 31, 1999 Versus Year Ended December 31, 1998

     Net revenue increased $67.0 million, or 28.4%, to $302.5 million in 1999
from $235.6 million last year.  The Life Sciences Group's operations accounted
for 99.1% of the Company's net revenue for 1999.  The Life Sciences Group
generated net revenue of $299.8 million, an increase of $65.1 million, or 27.8%,
from last year.  The growth in the Life Sciences Group operations was primarily
attributable to an increase in the size, scope and number of contracts in the
global CRO Phase II-IV division.  International net revenues increased $7.8
million to $44.8 million in 1999 from $36.3 million in 1998, which contributed
to the increase in net revenue by the Life Sciences Group during 1999.  PPD ATP,
which was acquired in March 1999, contributed $14.3 million to the increase in
net revenue by the Life Sciences Group during 1999.

     The Discovery Sciences Group generated net revenue of $2.8 million, an
increase of $1.8 million, or 197.8%, from last year.  The growth in the
Discovery Sciences operations was primarily attributable to an increase in the
number of contracts in the combinatorial chemistry division.  In addition, the
functional genomics division earned $0.9 million in revenues in 1999 from a
joint development and license agreement (signed during the fourth quarter of
1998, which extends through the second quarter of 2000).  We expect net revenue
to increase in the Discovery Sciences operations during 2000 due to agreements
signed in January 2000.

     Total direct costs increased 28.0% to $155.2 million in 1999 from $121.2
million last year and remained relatively constant as a percentage of net
revenue at 51.3% for the current year as compared to 51.5% last year.  The Life
Sciences direct costs increased to $147.4 million in 1999 as compared to $117.6
million in 1998.  The increased direct cost dollars resulted primarily from
increased personnel costs due to the increase in the size and number of
contracts in the Global CRO Phase II-IV division.  In addition, PPD ATP
contributed $7.0 million to the increase in the direct costs of the Life
Sciences Group during 1999.  The Life Sciences Group direct costs decreased as a
percentage of related net revenue to 49.2% from 50.1%.  This decrease is
principally due to the mix of levels of personnel involved in the contracts
performed, certain fixed costs being allocated over higher revenues and a
focused effort to control the increase in direct costs, as revenues increased.
The Discovery Sciences Group direct costs increased to $7.7 million in 1999 as
compared to $3.6 million in 1998.  This increase was primarily due to $3.5
million in additional costs for a Phase II trial associated with GenuPro in
1999.

     Selling, general and administrative ("SG&A") expenses increased 22.9% to
$95.6 million in 1999 from $77.8 million last year.  The increase is primarily
attributable to an investment in additional administrative personnel to support
the Company's expanding operations.  As a percentage of net revenue, SG&A
expenses decreased to 31.6% in 1999 from 33.0% last year.

     Total depreciation and amortization expense increased $2.5 million, or
20.5%, to $14.8 million from $12.3 million last year.  The increase was related
to the depreciation of the increased investment in property and equipment due
primarily to the acquisition of PPD ATP in March 1999 and the Company's growth.
The Company's capital expenditures were $23.2 million in 1999.  Expanded
capabilities in the Company's labs accounted for approximately 40.3% of this
capital investment, while the enhancement and expansion of information
technology capacities accounted for approximately 28.9% of this capital
investment.  The remaining capital expenditures were predominately incurred in
connection with the expansion of existing operations and the opening of new
offices.

     During the first quarter of 1999, the Company recorded merger costs of $0.2
million in connection with the acquisition of PPD ATP.  These costs were
primarily cash expenses, such as legal and accounting fees, related to this
transaction.

     The Company recorded an acquired in-process research and development charge
of $3.2 million in the second quarter of 1998 as a result of the purchase of a
license to six genitourinary compounds from Eli Lilly & Co. The Company
immediately expensed the costs of the acquisition of these compounds because the
compounds were in the initial phase of development and had no alternative future
use.

     Operating income increased $15.7 million to $36.7 million in 1999, as
compared to $21.0 million last year.  Excluding gain on sale of CCCR, merger
costs, and non-recurring tax benefits, the Company's adjusted operating income
of $36.9 million in 1999 was 52.6% higher than adjusted operating income of
$24.2 million last year.  As a percentage of net revenue, operating income of
12.1% in 1999 represents an improvement from 8.9% of net revenue last year.
These increases were primarily due to the Company's focus on controlling the
increase in both direct and administrative costs, as revenues increased.

     Net interest and other income increased $0.8 million, or 21.8% to $4.3
million for the year ended December 31, 1999 from $3.6 million last year.
Excluding the gain related to the sale of CCCR, net interest and

                                       24


other income of $4.4 million in 1999 was $1.9 million higher than last year. The
increase was primarily the result of the increase in interest income of $2.0
million partially offset by $0.1 million in net interest expense related to an
investment transaction entered into in the fourth quarter of 1999. The Company
recognized $1.6 million in interest income related to the notes receivable from
CCCR and Environ Holdings. The Company expects to recognize an additional $1.6
million during 2000 from these notes.

     The Company recorded a loss from discontinued operations, net of income tax
expense, related to its environmental sciences segment, of $0.4 million in 1999,
as compared to income of $4.6 million in 1998.  The environmental sciences
segment was sold on January 31, 1999.

     The provision for income taxes increased $2.7 million, or 28.6%, to $12.2
million in 1999, as compared to $9.5 million last year.  The Company's effective
income tax rate decreased to 29.6% in 1999 from 38.4% last year primarily due to
an investment transaction entered into in the fourth quarter of 1999, which
created a significant capital gain.  The Company will offset this capital gain
with a capital loss carryforward, which had previously been fully reserved.  As
a result of the reversal of the valuation allowance on this capital loss
carryforward, the Company has recognized a tax benefit of approximately $3.8
million.

     Net income of $28.5 million in 1999 represents an increase of $8.7 million
over $19.8 million last year.  Net income per diluted share of $1.15 for 1999
compares to $0.85 in 1998.  Excluding the impact of the discontinued operations
in both years, the non-recurring tax benefits and merger charges in 1999 and the
gain on sale of CCCR and acquisition-related charges in 1998, the Company's 1999
net income of $25.3 million is 54.2% higher than net income of $16.4 million for
1998.

Year Ended December 31, 1998 Versus Year Ended December 31, 1997

     Net revenue increased $48.1 million, or 25.6%, to $235.6 million in 1998
from $187.5 million in 1997.  The Life Sciences Group's operations accounted for
99.6% of the Company's net revenue for 1998.  The Life Sciences Group generated
net revenue of $234.6 million, up $47.4 million, or 25.3%, from 1997.  The
growth in the Life Sciences Group operations was primarily attributable to an
increase in the size, scope and number of contracts in the global CRO Phase II-
IV division.  The Discovery Sciences Group generated net revenue of $0.9
million, up $0.6 million, or 224.1%, from 1997.  The growth in the Discovery
Sciences operations was primarily attributable to an increase in the number of
contracts in the combinatorial chemistry division.

     Total direct costs increased 25.3% to $121.2 million in 1998 from $96.8
million in 1997 and remained relatively constant as a percentage of net revenue
at 51.5% in 1998 from 51.6% in 1997.  The Life Sciences Group direct costs
decreased as a percentage of related net revenue to 50.1% in 1998 from 50.7% in
1997.  This decrease is principally due to higher utilization of direct labor
employees and a focused effort to control costs.  The Discovery Sciences Group
direct costs increased to $3.6 million in 1998 as compared to $1.9 million in
1997.  This increase was due to a full year of operations being recorded in 1998
as opposed to a half-year of operations being recorded in 1997.  (As discussed
previously, the Discovery Sciences Group was formed in June 1997 through the
acquisitions of SARCO and the GSX System).

     Selling, general and administrative ("SG&A") expenses increased 23.8% to
$77.8 million in 1998 from $62.8 million in 1997.  The increase is primarily
attributable to the investment in additional selling and administrative
personnel to support the Company's expanding operations.  As a percentage of net
revenue, SG&A expenses decreased slightly to 33.0% in 1998 from 33.5% in 1997.

     Total depreciation and amortization expense increased $1.4 million, or
13.2%, to $12.3 million in 1998 from $10.9 million in 1997.  The increase was
related to the Company's growth as well as the ongoing capital investment in the
Company's business.  The Company's capital expenditures (excluding the
environmental sciences segment) were $17.6 million in 1998.  Computer equipment
and software accounted for approximately 47% of this capital investment, while
expanded capabilities in the Company's labs and Discovery Sciences Group
accounted for approximately 12%.

     Acquired in-process research and development decreased $5.9 million, or
65.3%, to $3.2 million in 1998 from $9.1 million in 1997.  The 1999 acquired in-
process research and development charge resulted from the purchase of a license
to six genitourinary compounds from Eli Lilly & Co. during the second quarter of
1998.  The Company immediately expensed the costs of the acquisition of these
compounds because the compounds were in the initial phase of development and had
no alternative future use.  This compares to an acquired in-process research and
development charge of $9.1 million recognized in 1997 related to the acquisition
of the GSX System.

                                       25


     Operating income increased $13.7 million, or 186.3%, to $21.0 million in
1998, from $7.3 million in 1997.  Excluding gain on sale of CCCR and merger
costs, the Company's adjusted operating income of $24.2 million in 1998 was
42.2% higher than adjusted operating income of $17.0 million in 1997.  As a
percentage of net revenue, operating income of 8.9% in 1998 represents a
dramatic improvement from 3.9% of net revenue in 1997.

     Net interest and other income increased $2.1 million to $3.6 million in
1998 from $1.5 million in 1997.  Excluding the gain related to the sale of CCCR,
net interest and other income of $2.5 million in 1998 was $1.0 million higher
than in 1997.  The increase was primarily the result of the covenant not to
compete payments of $0.7 million resulting from the sale of CCCR in the first
quarter of 1998.  The Company expects to receive an additional $0.1 million
related to the non-compete agreement in the first quarter of 1999.

     The Company recorded income from discontinued operations, net of income tax
expense, related to its environmental sciences segment, of $4.6 million in 1998,
as compared to $4.2 million in 1997.  The environmental sciences segment was
sold on January 31, 1999.

     Net income of $19.8 million in 1998 represents an improvement of $10.2
million over net income of $9.6 million in 1997.  Net income per basic and
diluted share of $0.85 for 1998 compares to $0.42 in 1997.  Excluding the impact
of the gain on sale of CCCR and acquisition-related charges in 1998 and the
merger costs in 1997, the Company's 1998 net income of $21.0 million is 36.1%
higher than net income of $15.5 million in 1997.

Liquidity and Capital Resources

     As of December 31, 1999, the Company had $61.2 million of cash and cash
equivalents on hand.  The Company has historically funded its operations and
growth, including acquisitions, with cash flow from operations, borrowings and
through the use of the Company's stock.

     For the year ended December 31, 1999, the Company experienced a net
increase in cash flow from operating activities to $50.6 million as compared to
$23.6 million last year.  The increase in cash flow from operations is primarily
due to an increase in the Company's net revenues and an increase in operating
margins as a percentage of net revenues.  For the 1999 period, net income of
$28.5 million, depreciation and amortization of $15.0 million and the net
decrease of $7.1 million in other assets and liabilities (which includes a $15.7
million increase in unearned income due to various contracts achieving billing
milestones partially offset by a $6.0 million increase in accounts receivable)
resulted in this increase in cash flow from operating activities.  The number of
days revenue outstanding in accounts receivable and unbilled services, net of
unearned income, were 64.0 and 75.1 days (excluding operations and related
balance sheet accounts of the discontinued division at December 31, 1998) as of
December 31, 1999 and December 31, 1998, respectively.  This decrease is a
result of a focused effort by management on improving the accounts receivable
collection process.

     For the year ended December 31, 1999, the Company's investing activities
used $22.0 million in cash.  Capital expenditures of $23.3 million and the
investment in PPGx of $3.5 million were partially offset by net cash received in
the sale of ENVIRON of $3.4 million, $0.7 million in cash received with the
acquisition of PPD ATP and $0.5 million received from the repayment of a note
receivable.

     For the year ended December 31, 1999, the Company's financing activities
provided $0.8 million in cash, as net proceeds from stock option exercises of
$6.2 million and the proceeds from long-term debt of $0.9 million related
primarily to PPD ATP's building loan were partially offset by $6.4 million in
net repayments of long-term debt.

     Working capital as of December 31, 1999 was $106.8 million compared to
$93.9 million at December 31, 1998.  Excluding the environmental sciences
segment from the balance sheet as of December 31, 1998, the adjusted working
capital would have been $75.7 million.  The increase in working capital as
compared to adjusted working capital was due primarily to the increase in cash
and cash equivalents of $27.2 million in 1999.

     For the year ended December 31, 1998, the Company experienced a net
increase in cash flow from operating activities to $23.6 million as compared to
$11.1 million for the year ended December 31, 1997.  The increase in cash flow
from operations is primarily due to an increase in the Company's net revenues
and an increase in operating margins as a percentage of net revenues.  For the
1998 period, net income of $19.8 million, depreciation and amortization of $14.2
million and the acquired in-process research and development of $3.2 million
were offset primarily by the net increase of $13.8 million in other assets and
liabilities (which includes a $28.1 million increase in accounts receivable and
unbilled services due to the growth in revenue).

                                       26


     For the year ended December 31, 1998, the Company's investing activities
used net cash of $11.0 million.  Capital expenditures of $19.3 million, cash
paid for the acquisition of a license to certain compounds of $3.2 million and
$1.8 million in net cash paid for acquisitions were partially offset by $8.0
million in proceeds from the sale of investments and $5.3 million of net
proceeds received from the sale of CCCR.

     For the year ended December 31, 1998, the Company's financing activities
provided $5.6 million in cash, as net proceeds from stock option exercises of
$7.0 million were partially offset by $1.5 million in repayment of long-term
debt.

     In June 1998, the Company obtained a $50.0 million revolving credit
facility with First Union National Bank.  Interest accrues on amounts borrowed
at a floating rate currently equal to LIBOR plus 0.625% per year.  Indebtedness
under the line is unsecured and subject to certain covenants relating to
financial ratios and tangible net worth.  The unused portion of the loan is
available to provide working capital and for general corporate purposes.  As of
December 31, 1999, the Company had $5.7 million reserved under this facility in
the form of a letter of credit.  This credit facility expires in June 2000, at
which time any outstanding balance is due.

     In August 1999, the Company renegotiated a credit facility for $50.0
million with Wachovia Bank, N.A.  Interest accrues on amounts borrowed at a
floating rate currently equal to LIBOR plus 0.625% per year.  Indebtedness under
the line is unsecured and subject to certain covenants relating to financial
ratios and tangible net worth. This credit facility expires in August 2000, at
which time any outstanding balance is due.  There is no amount outstanding under
this credit facility at December 31, 1999.

     In the fourth quarter of 1999, the Company entered into a short sale and
repurchase of U.S. Treasury bonds with a face value of $520 million based on
management's expectations that interest rates would rise between the date the
transaction was entered into and its maturity date of May 15, 2000.  The Company
is required to record these financial instruments at their net fair value on
each reporting date, with any changes in the fair value recorded as either
interest income or interest expense. The Company made a margin deposit of $2.6
million related to this transaction.  The Company recognized a loss of
approximately $0.1 million on this transaction in 1999.  The last interest
redetermination date on this transaction was on January 5, 2000.  The Company
was not required to recognize any additional loss on this transaction at the
interest redetermination date and no longer has any exposure for changes in
interest rates between January 5, 2000 and the maturity date of May 15, 2000.

     The Company expects to continue expanding its operations through internal
growth and strategic acquisitions.  The Company expects these activities will be
funded from existing cash, cash flow from operations, borrowings under its
credit facilities and through the use of the Company's stock.  The Company
believes that such sources of liquidity will be sufficient to fund the Company's
current operations for at least the next 12 months.  The Company is currently
evaluating a number of acquisitions and other growth opportunities, which may
require additional external financing, and the Company might seek funds from
public or private issuances of equity or debt securities.

Year 2000 Compliance

     The Year 2000 issue was the result of computer programs having been written
using two digits, rather than four, to define the applicable year.  As a result,
computer systems and/or software used by many companies in a very wide variety
of applications could experience operating difficulties unless they were
modified or upgraded to adequately process information involving, related to or
dependent upon the four digit field.

     The Company recognized the need to ensure its operations would not be
adversely impacted by Year 2000 failures and had established an internal review
team to address the Year 2000 issue that encompassed operating and
administrative areas of the Company.  During the first quarter of 1997, a team
of experienced information technology staff was assigned to work with Company
personnel to identify and resolve significant Year 2000 issues in a timely
manner.  In addition, executive management regularly monitored the status of the
Company's Year 2000 remediation plans.  The process included an inventory and
assessment of affected equipment and software, development of remediation plans,
execution of those plans and testing of all technology affected by this issue.
In addition, the Company assessed the Year 2000 issue with significant suppliers
and clients.

     At December 31, 1999, the assessment process was 100% complete worldwide
for all equipment (including computer hardware and software technology) used
internally by the Company.  Remediation and testing was 100% complete for
critical systems and for non-critical systems.  All systems, regardless of
whether they required remediation, were tested to ensure Year 2000 compliance.
The Company assessed its significant suppliers in North

                                       27


America and Europe to determine the extent to which the Company could be
vulnerable to third party failure to remediate Year 2000 compliance problems.
The Company communicated regularly with key suppliers and clients and responded
promptly to all requests for information regarding Year 2000 compliance.
Business contingency plans were developed to minimize the impact of outages
across our locations worldwide. In addition, a plan was developed to handle
yearend activities to ensure all critical functions were verified and
operational prior to start of business in the new year. Although there can be no
assurance, based on current information available, management believes that it
will be able to perform all services and provide all products it currently
offers without any material adverse effects arising from failure to remediate
deficiencies arising from Year 2000.

     External and internal costs specifically associated with applying vendor
upgrades, testing and modifying internal use software for Year 2000 compliance
are expensed as incurred.  The Company pays for Year 2000 expenses with cash
from operating activities.  The percentage of the Company's information
technology budget used for remediation was approximately 11% in 1998 and 5% in
1999.  As of December 31, 1999, the Company had spent approximately $1.75
million on Year 2000 compliance.  Of the total amount that the Company spent,
$1.25 million was attributable to internal labor costs for assessment and
testing.  Although internal resources have been dedicated to Year 2000 efforts,
work has been spread across all areas and there has been no material delay in
any major projects.

     At year end all systems were backed up and verified to be operational prior
to the resumption of business after the new year.  Only minor Year 2000 issues
were encountered which resulted in an insignificant amount of cost to the
Company.  These issues did not have an impact on the business and all issues
were resolved within the first week.  The Company has also not experienced any
third party supplier issues.  The Company remains alert to potential Year 2000
related issues that may occur in the future, but believes that there will be no
material impact on operations, liquidity or financial condition.

Exchange Rate Fluctuations and Exchange Controls

     The vast majority of the Company's contracts are entered into by the
Company's United States or United Kingdom subsidiaries.  The contracts entered
into by the United States subsidiaries are almost always denominated in United
States dollars.

     Contracts between the Company's United Kingdom subsidiaries and their
clients are generally denominated in pounds sterling, United States dollar or
Euros. Substantially all of the United Kingdom subsidiaries' expenses, such
as salaries, services, materials and supplies, are paid in pounds sterling.
However, the Company's consolidated financial statements are denominated in
dollars and, accordingly, changes in the exchange rates between the pound
sterling and the dollar will affect the translation of such subsidiaries'
financial results into dollars for purposes of reporting the Company's
consolidated financial results, and also affect the amounts in dollars actually
received by the Company from such subsidiaries.

     The Company currently participates in transactions involving multiple
currencies, but these form only a small percentage of the Company's total
transactions.  In most of those situations, contractual provisions either limit
or reduce the translation risk.  Financial statement translation has not, to
date, been material to the Company's balance sheet.  The reasons for this are
that the majority of international operations are located in the United Kingdom,
which traditionally has had a relatively stable currency, and international
operations have not accounted for a significant portion of total operations
(approximately 15% in 1999).  It is anticipated that those conditions will
persist at least through December 31, 2000.

     There are no material exchange controls currently in effect in any country
in which the Company's subsidiaries conduct operations on the payment of
dividends or otherwise restricting the transfer of funds outside such countries
by a company resident in such countries.  Although the Company performs services
for clients located in a number of foreign jurisdictions, to date, the Company
has not experienced any difficulties in receiving funds remitted from foreign
countries.  However, if any such jurisdictions were to impose or modify existing
exchange control restrictions on the remittance of funds to the Company, such
restrictions could have an adverse effect on the Company's business.

                                       28


Potential Volatility of Quarterly Operating Results and Stock Price

     The Company's quarterly operating results are subject to volatility due to
such factors as the commencement, completion or cancellation of large contracts,
progress of ongoing contracts, acquisitions, the timing of start-up expenses for
new offices, management of growth, changes in the mix of services and the timing
of milestone payments under Discovery Sciences contracts.  Because a large
percentage of the Company's operating costs are relatively fixed, variations in
the timing and progress of large contracts can materially affect quarterly
results.  To the extent the Company's international business increases, exchange
rate fluctuations and other international business risks might also influence
these results.  The Company believes that comparisons of its quarterly financial
results are not necessarily meaningful and should not be relied upon as an
indication of future performance.  However, fluctuations in quarterly results or
other factors beyond the Company's control, such as changes in earnings
estimates by analysts, market conditions in the CRO, environmental,
pharmaceutical and biotechnology industries and general economic conditions,
could affect the market price of the Common Stock in a manner unrelated to the
longer-term operating performance of the Company.

Item 7A.  Quantitative and Qualitative Disclosures about Market Risk

     The Company is exposed to foreign currency risk by virtue of its
international operations.  The Company conducts business in several foreign
countries and approximately 15%, 15% and 13% of the Company's net revenues for
the years ended December 31, 1999, 1998 and 1997, respectively, were derived
from the Company's operations outside the United States.  Funds generated by
each subsidiary of the Company are generally reinvested in the country where
they are earned.  The operations in the United Kingdom have generated more than
37% of the Company's revenue from foreign operations during 1999.  Accordingly,
some exposure exists to potentially adverse movements in the pound sterling and
other foreign currencies.  The United Kingdom has traditionally had a relatively
stable currency.  It is anticipated that those conditions will persist for at
least through December 31, 2000.

     Additionally, the Company's consolidated financial statements are
denominated in U.S. dollars and, accordingly, changes in the exchange rates
between Company subsidiaries' local currency and the U.S. dollar will affect the
translation of such subsidiaries' financial results into U.S. dollars for
purposes of reporting the Company's consolidated financial results.  Translation
adjustments are reported with accumulated other comprehensive income (loss) as a
separate component of shareholders' equity.  Financial statement translation has
not, to date, been material to the Company's balance sheet.  Such adjustments
may in the future be material to the Company's financial statements.

     The Company is exposed to changes in interest rates on its cash
equivalents, short-term investments, the short sale and repurchase of U.S.
Treasury Bonds and amounts outstanding under note payable and lines of credit.
The Company's cash and cash equivalents and short-term investments are invested
in financial instruments with interest rates based on financial market
conditions.

Item 8. Financial Statements and Supplementary Data

     The information called for by this Item is set forth herein commencing on
page F-1.


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

     None.

                                       29


                                   PART III

     Certain information required by Part III is omitted from this report,
because the Registrant intends to file a definitive proxy statement for its 2000
Annual Meeting of Stockholders to be held on May 16, 2000 (the "Proxy
Statement") within 120 days after the end of its fiscal year pursuant to
Regulation 14A promulgated under the Securities Exchange Act of 1934, as
amended, and the information included therein is incorporated herein by
reference to the extent provided below.

Item 10.  Directors and Executive Officers of the Registrant

     The information required by Item 10 of Form 10-K concerning the
Registrant's executive officers is set forth under the heading "Executive
Officers" located at the end of Part I of this Form 10-K.

     The other information required by Item 10 of Form 10-K is incorporated by
reference to the information under the headings "Proposal No. 1 - Election of
Directors" and "Other Information-Section 16(a) Beneficial Ownership Reporting
Compliance" in the Proxy Statement.

Item 11.  Executive Compensation

     The information required by Item 11 of Form 10-K is incorporated by
reference to the information under the heading "Proposal No. 1 - Election of
Directors - Information About the Board of Directors and Its Committees," "Other
Information - Executive Compensation Tables," "--Director Compensation," "--
Report of the Compensation Committee on Executive Compensation," "--Compensation
Committee Interlocks and Insider Participation," and "--Performance Graph" in
the Proxy Statement.

Item 12.  Security Ownership of Certain Beneficial Owners and Management

     The information required by Item 12 of Form 10-K is incorporated by
reference to the information under the heading "Other Information - Principal
Shareholders" in the Proxy Statement.

Item 13.  Certain Relationships and Related Transactions

     None.

                                       30


                                    PART IV

Item 14.    Exhibits, Financial Statement Schedules and Reports on Form 8-K

     (a)  Financial Statements and Financial Statement Schedules

          1. The consolidated financial statements of the Company and its
             subsidiaries filed as part of this Report are listed in the
             attached Index to Consolidated Financial Statements and Financial
             Statement Schedule.

          2. The schedule to the consolidated financial statements of the
             Company and its subsidiaries filed as part of this Report is listed
             in the attached Index to Consolidated Financial Statements and
             Financial Statement Schedule.

          3. The exhibits filed as part of this Report are listed in Item 14(c)
             below.

     (b)  Reports on Form 8-K.  None.

     (c)  Exhibits

Exhibit No.                           Description
- -----------                           -----------
  2.1**        --Plan of Merger to Merge PPD Subsidiary, Inc. with and into
                 Pharmaceutical Product Development Clinical Research Unit, Inc.
                 ("PPD-CRU").
  2.2**        --Plan of Merger to Merge PPD-Europe, Inc. ("PPD Europe") with
                 and into the Registrant.
  2.3*         --Agreement and Plan of Reorganization, dated as of June 20,
                 1996, among the Registrant, Wilmington Merger Corp. and Applied
                 Bioscience International Inc.
  2.4*         --Stock and Asset Master Purchase Agreement by and among
                 Huntingdon International Holdings plc, Huntingdon Life Sciences
                 Inc., Applied Bioscience International Inc. and Pharmaco LSR
                 International Inc., dated as of November 1, 1995, incorporated
                 by reference to Exhibit 2 to Applied Bioscience International
                 Inc.'s Current Report on Form 8-K filed with the Securities and
                 Exchange Commission on December 6, 1996.
  2.5*         --Stock Purchase Agreement among Applied Bioscience International
                 Inc., PPD UK Holdings Limited and Environ Holdings Inc. for the
                 acquisition of all the capital stock of APBI Environmental
                 Sciences Group, Inc., Environmental Assessment Group Limited
                 and Environ International Limited, dated January 31, 1999.
  3.1*         --Restated Articles of Incorporation.
  3.2*         --Amended and Restated Bylaws.
  10.4**       --Plan of Merger to Merge PPD Subsidiary, Inc. with and into PPD-
                 CRU (see Exhibit 2.1).
  10.5**       --Plan of Merger to Merge PPD-Europe with and into the Registrant
                 (see Exhibit 2.2).
  10.8**       --Pharmaceutical Product Development, Inc. Equity Compensation
                 Plan, effective as of October 30, 1995.
  10.9**       --Pharmaceutical Product Development, Inc. Stock Option Plan for
                 Non-Employee Directors, effective as of October 31, 1995.
  10.10**      --Registration Rights Agreement, dated January 24, 1996, by and
                 among the Registrant and certain of its shareholders.
  10.35**      --Lease, dated January 26, 1994, by and between Michael James
                 Lawton, Jeffrey William Ware, Prudential Nominees Limited and
                 Gabbay Group Limited.
  10.39**      --Lease Agreement, dated as of October 25, 1995, by and between
                 PPD-CRU and Perimeter Park West Associates Limited Partnership.
  10.55**      --Lease made January 23, 1996 between PPD-CRU and Western Center
                 Properties, Inc.
  10.57*       --First Amendment to Registration Rights Agreement.
  10.59*       --First Amendment dated May 20, 1999 to Lease Agreement, dated
                 October 25, 1995, between PPD Development and Perimeter Park
                 West Associates Limited Partnership.
  10.60*       --First, Second and Third Amendments to Lease Agreement, dated
                 March 25, 1996, between PPD and BBC Family Limited Partnership.
  10.61*       --Lease Agreement, dated March 25, 1996, between PPD and BBC
                 Family Limited Partnership.
  10.71*       --Lease Agreement by and between ABI (TX) QRS 12-11, Inc. and
                 Pharmaco LSR International Inc., incorporated by reference to
                 Exhibit 10.43 to Applied Bioscience International Inc.'s Annual
                 Report on Form 10-K for the year ended December 31, 1995.
  10.81*       --Employment Agreement, dated as of September 26, 1996, by and
                 between Pharmaceutical Product Development, Inc., and Fred B.
                 Davenport, Jr.
  10.83a-83f*  --Substitute Non-Statutory Stock Option Agreements by and between
                 Pharmaceutical Product Development, Inc. and Grover C. Wrenn,
                 dated as of September 26, 1996.
  10.84*       --Employment Agreement dated June 4, 1997, by and between the PPD
                 Discovery, Inc. and Mark

                                       31


                 E. Furth.
  10.86*       --Pharmaceutical Product Development, Inc. Employee Stock
               --Purchase Plan, dated May 15,1997.
  10.87*       --Amendment to Employee Stock Purchase Plan, dated June 21, 1997.
  10.88*       --Amendment to Stock Option Plan for Non-Employee Directors,
                 dated May 15, 1997.
  10.89*       --Amendment to Equity Compensation Plan, dated May 15, 1997.
  10.90*       --Employment Agreement, effective July 1, 1997, between
                 Pharmaceutical Product Development, Inc. and Fredric N.
                 Eshelman.
  10.91*       --Note and Loan Agreement, dated August 7, 1997, between
                 Pharmaceutical Product Development, Inc. and Wachovia Bank,
                 N.A.
  10.93*       --Lease Agreement dated July 9, 1997, between Weeks Realty, Inc.
                 and PPD Pharmaco, Inc.
  10.96*       --Employment Agreement dated January 1, 1998 between PPD
                 Pharmaco, Inc. and Patrick C. O'Connor.
  10.97*       --Employment Agreement dated January 1, 1998 between PPD
                 Pharmaco, Inc. and Paul S. Covington.
  10.99*       --Amendment to Employment Agreement dated February 2, 1998
                 between Pharmaceutical Product Development, Inc. and Fred B.
                 Davenport, Jr.
  10.100*      --Severance Agreement dated February 2, 1998 between
                 Pharmaceutical Product Development, Inc. and Fredric N.
                 Eshelman.
  10.103*      --Severance Agreement dated February 2, 1998 between
                 Pharmaceutical Product Development, Inc. and Fred B. Davenport,
                 Jr.
  10.106*      --Severance Agreement dated February 2, 1998 between
                 Pharmaceutical Product Development, Inc. and Patrick C.
                 O'Connor.
  10.107*      --Severance Agreement dated February 2, 1998 between
                 Pharmaceutical Product Development, Inc. and Paul S. Covington.
  10.110*      --Amendment to Employee Stock Purchase Plan, dated March 2, 1998.
  10.111*      --Employment Agreement dated May 22, 1998 between Subsidiary No.
                 5, Inc. and Karl B. Thor.
  10.112*      --Severance Agreement dated May 22, 1998 between Subsidiary No.
                 5, Inc. and Karl B. Thor.
  10.113*      --Note and Loan Agreement, dated June 24, 1998 between
                 Pharmaceutical Product Development, Inc. and First Union
                 National Bank.
  10.114*      --Lease Agreement dated June 26, 1998 between Weeks Realty
                 Limited Partnership and PPD Pharmaco, Inc.
  10.115*      --First Amendment to Loan Agreement dated August 6, 1998, between
                 Pharmaceutical Product Development, Inc. and Wachovia Bank,
                 N.A.
  10.116*      --First Amendment to Lease Agreement dated October 28, 1998,
                 between PPD Pharmaco, Inc. and Weeks Realty, Inc.
  10.117*      --Lease Agreement dated September 15, 1998 between PPD Pharmaco,
                 Inc. and BBC Family Limited Partnership.
  10.118*      --Lease Agreement dated December 16, 1998 between PPD Pharmaco,
                 Inc. and Weeks Realty Limited Partnership.
  10.119*      --Employment Agreement dated January 1, 1999 between
                 Pharmaceutical Product Development, Inc. and David R. Williams.
  10.120*      --Severance Agreement dated February 2, 1998 and Amendment No. 1
                 to Severance Agreement dated January 1, 1999 between
                 Pharmaceutical Product Development, Inc. and David R. Williams.
  10.121*      --Loan Agreement dated February 1, 1999, by and among PPGx, Inc.,
                 Pharmaceutical Product Development, Inc., as Guarantor, and
                 First Union National Bank.
  10.122*      --Second Amendment to Loan Agreement dated January 30, 1999,
                 between Pharmaceutical Product Development, Inc. and First
                 Union National Bank.
  10.123*      --Second Amendment to Loan Agreement dated January 30, 1999,
                 between Pharmaceutical Product Development, Inc. and Wachovia
                 Bank, N.A.
  10.124*      --Stock Purchase Agreement dated February 1, 1999 between PPGx,
                 Inc. and Pharmaceutical Product Development, Inc.
  10.125*      --Software License Agreement dated January 31, 1999 between Axys
                 Pharmaceuticals and Pharmaceutical Product Development, Inc.
  10.126*      --PPD Technology Transfer Agreement dated February 1, 1999
                 between PPGx, Inc. and Pharmaceutical Product Development, Inc.
  10.127*      --Assignment and Assumption of License Agreement dated February
                 1, 1999 between Pharmaceutical Product Development, Inc. and
                 PPGx, Inc.
  10.128*      --Credit and Security Agreement dated February 2, 1999, between
                 Applied Bioscience

                                       32


                 International Inc., Environ Holdings, Inc. and APBI
                 Environmental Sciences Group, Inc.
  10.129*      --First Amendment to Credit and Security Agreement dated March
                 30, 1999, between Applied Bioscience International Inc.,
                 Environ Holdings, Inc. and Environ International Corporation
                 (formerly APBI Environmental Sciences Group, Inc.).
  10.130*      --Subordination and Intercreditor Agreement dated March 30, 1999,
                 between First Union National and Applied Bioscience
                 International, Inc.
  10.131*      --Amendment, dated April 14, 1999, to Lease Agreement dated
                 September 15, 1998 between PPD Pharmaco, Inc. and BBC Family
                 Limited Partnership.
  10.132*      --Amendment, dated April 14, 1999, to Lease Agreement dated March
                 25, 1996 between PPD and BBC Family Limited Partnership.
  10.133*      --Fourth Amendment, dated July 6, 1999, to Lease Agreement dated
                 July 9, 1997 between PPD Development, Inc. (formerly known as
                 PPD Pharmaco, Inc.) and Weeks Realty, L.P.
  10.134*      --Pharmaceutical Product Development, Inc. Equity Compensation
                 Plan as amended and restated effective May 12, 1999.
  10.135*      --Amendment to Employment Agreement dated August 20, 1999 between
                 PPD Development, Inc. and Mark Sirgo.
  10.136*      --Termination of Employment Agreement dated September 14, 1999
                 between Pharmaceutical Product Development, Inc. and Thomas
                 D'Alonzo.
  10.137       --Amendment No. 2 and Restatement of Credit and Security
                 Agreement dated November 24, 1999, between Applied Bioscience
                 International Inc., Environ Holdings, Inc. and Environ
                 International Corporation
  10.138       --Termination of Employment Agreement dated October 7, 1999
                 between PPD Development, Inc. and Joshua S. Baker.
  10.139       --Third Amendment to Loan Agreement dated November 11, 1999,
                 between Pharmaceutical Product Development, Inc. and Wachovia
                 Bank N.A.
  10.140       --Employment Agreement dated December 17, 1999 between PPD
                 Development, Inc. and Francis J. Casieri.
  10.141       --Severance Agreement dated December 17, 1999 between
                 Pharmaceutical Product Development, Inc. and Francis J.
                 Casieri.
  10.142       --Termination of Employment Agreement dated February 8, 2000
                 between Pharmaceutical Product Development, Inc. and Rudy C.
                 Howard.
  21           --Subsidiaries of the Registrant.
  23.1         --Consent of PricewaterhouseCoopers LLP
  27           --Financial Data Schedule (for SEC use only).


*     Previously filed.
**    Incorporated by reference to the Registrant's Registration Statement on
      Form S-1, as amended (File No. 33-98996).

                                       33


           PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES

                  INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


                                                                   Page
                                                                   ----

  Report of Independent Accountants                                F-2

  Consolidated Statements of Operations for the Years Ended
      December 31, 1999, 1998 and 1997                             F-3

  Consolidated Balance Sheets as of December 31, 1999 and 1998     F-4

  Consolidated Statements of Shareholders' Equity for the Years
      Ended December 31, 1999, 1998 and 1997                       F-5

  Consolidated Statements of Cash Flows for the Years Ended
      December 31, 1999, 1998 and 1997                             F-6

  Notes to Consolidated Financial Statements                       F-7

                                      F-1


The Board of Directors and Shareholders
Pharmaceutical Product Development, Inc. and its Subsidiaries


     In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, of shareholders' equity and of
cash flows present fairly, in all material respects, the financial position of
Pharmaceutical Product Development, Inc. and its subsidiaries at December 31,
1999 and 1998, and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 1999, in conformity with
accounting principles generally accepted in the United States.  These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits.  We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States, which require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement.  An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation.  We believe that our audits provide a reasonable basis
for the opinion expressed above.



/s/ PRICEWATERHOUSECOOPERS LLP


Raleigh, North Carolina
January 31, 2000

                                      F-2


           PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF OPERATIONS

             FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

                     (in thousands, except per share data)




                                                                               1999       1998       1997
                                                                             ---------  ---------  ---------
                                                                                          

  Life sciences revenues, net of subcontractor costs of $120,666, $91,432
    and $69,094, respectively                                                $299,769   $234,626   $187,201
  Discovery sciences revenues, net of subcontractor costs of $57, $48
    and $45, respectively                                                       2,761        927        286
                                                                             --------   --------   --------
     Net revenue                                                              302,530    235,553    187,487
                                                                             --------   --------   --------

Direct costs - Life sciences                                                  147,439    117,625     94,909
Direct costs - Discovery sciences                                               7,719      3,623      1,859
Selling, general and administrative expenses                                   95,604     77,784     62,820
Depreciation and amortization                                                  14,842     12,317     10,880
Merger costs                                                                      218          -        558
Acquired in-process research and development costs                                  -      3,163      9,112
                                                                             --------   --------   --------
                                                                              265,822    214,512    180,138
                                                                             --------   --------   --------
     Operating income                                                          36,708     21,041      7,349
Interest:
   Income                                                                       3,555      1,584      1,342
   Expense                                                                       (400)      (414)      (478)
                                                                             --------   --------   --------
   Interest income, net                                                         3,155      1,170        864
Other income, net                                                               1,182      2,392        600
                                                                             --------   --------   --------

     Income from continuing operations before
       provision for income taxes                                              41,045     24,603      8,813
Provision for income taxes                                                     12,154      9,448      3,363
                                                                             --------   --------   --------
     Income from continuing operations                                         28,891     15,155      5,450
(Loss) income from operations of discontinued environmental sciences
  segment, net of income taxes of $(251), $3,012 and $2,711, respectively        (395)     4,614      4,152
                                                                             --------   --------   --------

Net income                                                                   $ 28,496   $ 19,769   $  9,602
                                                                             ========   ========   ========

Income from continuing operations per share:
     Basic                                                                   $   1.18   $   0.65   $   0.24
                                                                             ========   ========   ========
     Diluted                                                                 $   1.16   $   0.65   $   0.24
                                                                             ========   ========   ========

Income (loss) from discontinued operations per share:
     Basic                                                                   $  (0.02)  $   0.20   $   0.18
                                                                             ========   ========   ========
     Diluted                                                                 $  (0.01)  $   0.20   $   0.18
                                                                             ========   ========   ========

Net income per share:
     Basic                                                                   $   1.16   $   0.85   $   0.42
                                                                             ========   ========   ========
     Diluted                                                                 $   1.15   $   0.85   $   0.42
                                                                             ========   ========   ========

Weighted average number of common shares outstanding:
     Basic                                                                     24,566     23,186     22,825
     Dilutive effect of stock options                                             287        169         60
                                                                             --------   --------   --------
     Diluted                                                                   24,853     23,355     22,885
                                                                             ========   ========   ========


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

                                      F-3


           PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS

                       AS OF DECEMBER 31, 1999 AND 1998

                       (in thousands, except share data)

                                    Assets



                                                      1999      1998
                                                    --------  --------
Current assets
                                                        
  Cash and cash equivalents                         $ 61,251  $ 34,083
  Accounts receivable and unbilled services, net     114,753   125,065
  Investigator advances                                2,069     1,505
  Prepaid expenses and other current assets           18,588     9,562
  Deferred tax asset                                   4,012     2,751
                                                    --------  --------
     Total current assets                            200,673   172,966

Property and equipment, net                           52,282    42,509
Goodwill, net                                          9,437    14,869
Notes receivable                                      17,714     2,000
Other assets                                           8,597     4,238
                                                    --------  --------
     Total assets                                   $288,703  $236,582
                                                    ========  ========

                     Liabilities and Shareholders' Equity

Current liabilities
 Accounts payable                                   $ 10,103  $  7,812
 Payables to investigators                             5,916     5,204
 Other accrued expenses                               27,471    28,007
 Unearned income                                      50,213    34,446
 Current maturities of long-term debt                    211     3,580
                                                    --------  --------
     Total current liabilities                        93,914    79,049

Long-term debt, less current maturities                  359       161
Deferred rent and other                                1,966     1,962
                                                    --------  --------
     Total liabilities                                96,239    81,172

Commitments and contingencies (Notes 10 and 14)

Shareholders' equity
 Common stock, $0.10 par value, 95,000,000 shares
  authorized; 24,629,000 and 23,433,000 shares
  issued and outstanding, respectively                 2,463     2,343
 Paid-in capital                                     134,029   123,709
 Retained earnings                                    58,697    29,929
 Accumulated other comprehensive loss                 (2,725)     (571)
                                                    --------  --------
     Total shareholders' equity                      192,464   155,410
                                                    --------  --------
     Total liabilities and shareholders' equity     $288,703  $236,582
                                                    ========  ========




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

                                      F-4


           PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

                                 (in thousands)



                                                                                 Retained
                                                                                 Earnings     Comprehensive
                                                  Common Shares       Paid in   (Accumulated     Income
                                                Shares    Par Value   Capital    Deficit)        (Loss)
                                               ------------------------------------------------------------
                                                                               
Balance December 31, 1996                       21,624       $2,163  $112,606       $  (363)
Net income                                                                            9,602      $    9,602
                                                                                              -------------
Other comprehensive income (loss):
   Unrealized loss on investments, net                                                                  (64)
   Translation adjustments                                                                           (1,318)
                                                                                              -------------
   Other comprehensive loss                                                                          (1,382)
                                                                                              -------------
Comprehensive income                                                                             $    8,220
                                                                                              =============
Issuance of common shares in
  connection with acquisitions                   1,165          115        89         1,304
Issuance of common shares for exercise
  of stock options                                 142           16     2,199
Income tax benefit from exercise of
  stock options                                                           510
Distribution to shareholders                                                           (431)
Proceeds of Section 16(b) transaction,
  net of related tax provision of $155                                    276
Other                                               18            1
                                               --------------------------------------------
Balance December 31, 1997                       22,949        2,295   115,680        10,112
Net income                                                                           19,769      $   19,769
                                                                                              -------------
Other comprehensive income (loss):
   Reclassification adjustment for net gain
     included in net income                                                                            (167)
   Translation adjustments                                                                               78
                                                                                              -------------
   Other comprehensive loss                                                                             (89)
                                                                                              -------------
Comprehensive income                                                                             $   19,680
                                                                                              =============
Issuance of common shares for exercise
  of stock options and employee stock
  purchase plan                                    484           48     6,980
Income tax benefit from exercise of
  stock options                                                         1,049
Repayment from shareholders                                                              48
                                               --------------------------------------------
Balance December 31, 1998                       23,433        2,343   123,709        29,929
Net income                                                                           28,496      $   28,496
                                                                                              -------------
Other comprehensive income (loss):
   Translation adjustments                                                                           (2,154)
                                                                                              -------------
Comprehensive income                                                                             $   26,342
                                                                                              =============
Issuance of common shares in connection
   with acquisition                                876           88     2,999           272

Issuance of common shares for exercise
  of stock options and employee stock
  purchase plan                                    320           32     6,168
Income tax benefit from exercise of
  stock options                                                         1,153
                                               --------------------------------------------
Balance December 31, 1999                       24,629       $2,463  $134,029       $58,697
                                               =======       ======  ========   ===========


                                                 Accumulated
                                                     Other
                                                Comprehensive
                                                Income (Loss)       Total
                                               ---------------------------
                                                
Balance December 31, 1996                       $     900         $115,306
Net income                                                           9,602

Other comprehensive income (loss):
   Unrealized loss on investments, net                                 (64)
   Translation adjustments                                          (1,318)

   Other comprehensive loss                        (1,382)

Comprehensive income

Issuance of common shares in
  connection with acquisitions                                       1,508
Issuance of common shares for exercise
  of stock options                                                   2,215
Income tax benefit from exercise of
  stock options                                                        510
Distribution to shareholders                                          (431)
Proceeds of Section 16(b) transaction,
  net of related tax provision of $155                                 276
Other                                                                    1
                                               ---------------------------
Balance December 31, 1997                            (482)         127,605
Net income                                                          19,769

Other comprehensive income (loss):
   Reclassification adjustment for net ga
     included in net income                                           (167)
   Translation adjustments                                              78

   Other comprehensive loss                           (89)

Comprehensive income

Issuance of common shares for exercise
  of stock options and employee stock
  purchase plan                                                      7,028
Income tax benefit from exercise of
  stock options                                                      1,049
Repayment from shareholders                                             48
                                               ---------------------------
Balance December 31, 1998                            (571)         155,410
Net income                                                          28,496

Other comprehensive income (loss):
   Translation adjustments                         (2,154)          (2,154)

Comprehensive income

Issuance of common shares in connection
   with acquisition                                                  3,359

Issuance of common shares for exercise
  of stock options and employee stock
  purchase plan                                                      6,200
Income tax benefit from exercise of
  stock options                                                      1,153
                                               ---------------------------
Balance December 31, 1999                         $(2,725)        $192,464
                                               ==========         ========



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


                                      F-5


           PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

             FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

                                (in thousands)




                                                                  1999       1998       1997
                                                                --------   --------   --------
                                                                             
Cash flows from operating activities:
 Net income                                                     $ 28,496   $ 19,769   $  9,602
 Adjustments to reconcile net income to net cash provided by
   operating activities:
   Depreciation and amortization                                  15,040     14,210     12,394
   Acquired in-process research and development                        -      3,163      9,112
   Gain on sale of CCCR                                                -     (1,071)         -
   Deferred income taxes                                          (6,469)     1,409       (910)
   Loss on disposition of property and equipment                       -         55         32
   (Gain) loss on sale of investments                                  -       (174)         3
   Change in operating assets and liabilities:
     Accounts receivable and unbilled services, net               (5,965)   (28,140)   (24,470)
     Prepaid expenses and investigator advances                   (3,819)      (381)     2,073
     Current income taxes                                          1,369     (2,088)     3,406
     Other assets                                                   (896)     1,468        842
     Accounts payable and other accrued expenses                   6,426      7,046     (8,336)
     Payable to investigators                                        712      1,066     (1,291)
     Unearned income                                              15,704      7,243      8,740
     Other                                                             -          -        (58)
                                                                --------   --------   --------
         Net cash provided by operating activities                50,600     23,575     11,139
                                                                --------   --------   --------
Cash flows from investing activities:
   Purchases of property and equipment                           (23,233)   (19,343)   (13,599)
   Net cash received from sale of businesses                       3,421      5,285          -
   Net cash paid for acquisition of in-process
     research and development costs                                    -     (3,163)    (9,112)
   Proceeds from sale of property and equipment                       31          5        174
   Proceeds from sale of marketable securities                         -      8,000     17,240
   Purchases of marketable securities                                  -          -    (10,972)
   Cash received from repayment of note receivable                   500          -          -
   Cost method investments                                        (3,500)         -     (1,500)
   Net cash received from (paid for) acquisitions                    738     (1,829)       991
                                                                --------   --------   --------
         Net cash used in investing activities                   (22,043)   (11,045)   (16,778)
                                                                --------   --------   --------
Cash flows from financing activities:
   Proceeds from long-term debt                                      982          -        138
   Principal repayments on long-term debt                         (6,406)    (1,480)    (1,355)
   Repayment of capital leases obligation                            (11)         -          -
   Proceeds of Section 16(b) transaction                               -          -        431
   Repayment from (distribution to) shareholders                       -         48       (431)
   Proceeds from exercise of stock options and employee
     stock purchase plan                                           6,200      7,028      2,215
                                                                --------   --------   --------
         Net cash provided by financing activities                   765      5,596        998
                                                                --------   --------   --------
Effect of exchange rate changes on cash and cash equivalents      (2,154)        78     (1,318)
                                                                --------   --------   --------
Net increase (decrease) in cash and cash equivalents              27,168     18,204     (5,959)
Cash and cash equivalents, beginning of the year                  34,083     15,879     21,838
                                                                --------   --------   --------
Cash and cash equivalents, end of the year                      $ 61,251   $ 34,083   $ 15,879
                                                                ========   ========   ========


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

                                      F-6


           PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     (in thousands, except per share data)


1. Summary of Operations and Significant Accounting Policies:

Nature of Business

   Pharmaceutical Product Development, Inc. and its subsidiaries (collectively
the "Company") provide a broad range of research and development and consulting
services in the life sciences and discovery sciences segments. In the life
sciences segment, the Company provides worldwide clinical research and
development of pharmaceutical products and medical devices, biostatistical
analysis and analytical laboratory services. The discovery sciences services
include target identification and validation, compound creation, screening and
compound selection. The Company provides services under contract to clients in
the pharmaceutical, general chemical, agrochemical, biotechnology and other
industries. In addition, the Company performs discovery research on certain
compounds for which the Company holds a license. The Company markets its life
sciences services primarily in the United States and Europe. The Company's
discovery revenues have all been generated in the United States to date.

     Prior to selling its environmental sciences segment on January 31, 1999
(see Note 4), the Company also provided environmental sciences services.
Environmental sciences services included assessment and management of chemical
and environmental health risk, site investigation and remediation planning and
litigation support.  In addition to the industries mentioned above, the
environmental sciences segment also marketed services to clients in the
industrial, manufacturing and oil and gas industries.  The environmental
sciences segment marketed its services primarily in the United States and
Europe.

Principles of Consolidation

     The accompanying consolidated financial statements include the accounts and
results of operations of the Company and its wholly-owned subsidiaries. All
significant intercompany balances and transactions have been eliminated.

Merger Costs and Special Charges

     The Company recorded merger costs of $218 and $558 in connection with the
acquisitions of ATP in 1999 and Belmont Research, Inc., SARCO, Inc., and Intek
Labs, Inc. in 1997. These acquisitions were accounted for using the pooling of
interests method of accounting. These costs were primarily transaction expenses
related to these pooling transactions.

Acquired In-Process Research and Development Costs

     The Company recorded an acquired in-process research and development charge
of $3,163 in the second quarter of 1998 related to the purchase of a license to
six genitourinary compounds from Eli Lilly & Co. The Company immediately
expensed the costs of the acquisition of these compounds because they were in
the initial phase of development at the date of the acquisition and had no
alternative future use.

     The Company acquired the GSX System for $8,700 in cash in June 1997.
Liabilities assumed in this transaction were $832.  The purchase price in excess
of the net assets of the GSX System of $9,112 was allocated to acquired in-
process research and development costs and charged to operations at the
acquisition date, as the technology under development by the GSX System had not
reached technological feasibility and had no alternative future use.

Revenue Recognition

     The Company records revenues from fixed-price contracts on a percentage-of-
completion basis. Revenues from time-and-material contracts are recognized as
hours are accumulated multiplied by the billable rates for each contract.
Revenues are recorded net of reimbursement received from clients for pass-
through expenses, which generally include subcontractor costs that consist of
investigator fees, travel and certain other contract costs.

                                      F-7


           PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     (in thousands, except per share data)

1.   Summary of Operations and Significant Accounting Policies (Continued):

Revenue Recognition (Continued)

     If it is determined that a loss will result from the performance of a
fixed-price contract, the entire amount of the estimated loss is charged against
income in the period in which such determination is made. Clients generally may
terminate a study at any time, which may cause unplanned periods of excess
capacity and reduced revenues and earnings. To offset the effects of early
terminations of significant contracts, the Company attempts to negotiate the
payment of an early termination fee as part of the original contract.

     A portion of the Company's revenue is derived from sale of software
licenses as well as support and maintenance, training and consulting services.
The Company adopted American Institute of Certified Public Accountants ("AICPA")
Statement of Position ("SOP") No. 97-2, "Software Revenue Recognition," as
amended by SOP No. 98-4 effective January 1, 1998. The adoption did not have a
material effect on the timing of the Company's revenue recognition or cause
changes to its revenue recognition policies.

     In December 1998, the AICPA issued Statement of Position No. 98-9,
"Modification of SOP No. 97-2, Software Revenue Recognition, with Respect to
Certain Transactions" ("SOP No. 98-9").  SOP No. 98-9 amends SOP No. 97-2 to
require recognition of revenue using the "residual method" in circumstances
outlined in SOP No. 98-9.  Under the residual method, revenue is recognized as
follows:  (1) the total fair value of undelivered elements, as indicated by
vendor specific objective evidence, is deferred and subsequently recognized in
accordance with the relevant sections of SOP No. 97-2 and (2) the difference
between the total arrangement fee and the amount deferred for the undelivered
elements is recognized as revenue related to the delivered elements.  SOP No.
98-9 is effective for transactions entered into in fiscal years beginning after
March 15, 1999.  Also, the provisions of SOP No. 97-2 that were deferred by SOP
No. 98-4 will continue to be deferred until the date SOP No. 98-9 becomes
effective.  The Company does not expect that the adoption of SOP No. 98-9 will
have a significant impact on the Company's results of operations or financial
position.

     Revenue from sale of software licenses totaled $313, $100 and $0 during the
years ended December 31, 1999, 1998 and 1997, respectively.  Revenue from
software licenses is recognized when there is evidence of an arrangement, the
product has been shipped, fees are fixed and determinable and collection of the
related receivable is probable.  Support and maintenance revenue totaled $90,
$29 and $0 during the years ended December 31, 1999, 1998 and 1997,
respectively.  Support and maintenance revenue is deferred and recognized
ratably over the service period.  Royalty revenue totaled $1,821, $889 and $349
during the years ended December 31, 1999, 1998 and 1997, respectively.  Royalty
revenue is comprised of royalties received from the sale of software licenses
and product maintenance by distributors of the Company's products.  Royalty
revenue is recognized when the Company is notified by the distributor of the
royalty and the amount is fixed and determinable.

Cash and Cash Equivalents

     Cash and cash equivalents consist of unrestricted cash accounts, which are
not subject to withdrawal restrictions or penalties, and all highly liquid
investments with a maturity of three months or less at the date of purchase.

   Supplemental cash flow information consists of the following:

                                              Years Ended December 31,
                                           ------------------------------
                                            1999        1998        1997
                                           -------     -------     ------
Cash paid for interest                     $   319     $   420     $  354
                                           =======     =======     ======
Cash paid for income taxes, net            $15,972     $12,628     $2,583
                                           =======     =======     ======
Assets acquired under capital leases       $   349     $     -     $   44
                                           =======     =======     ======

                                      F-8


           PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     (in thousands, except per share data)

1.   Summary of Operations and Significant Accounting Policies (Continued):

Financial Instruments

     In the fourth quarter of 1999, the Company entered into a short sale and
repurchase of U.S. Treasury bonds with a face value of $520,000 based on
management's expectations that interest rates will rise between the date the
transaction was entered into and its maturity date of May 15, 2000. The Company
is required to record these financial instruments at their net fair value on
each reporting date, with any changes in the fair value recorded as either
interest income or interest expense. Net interest expense of $100 has been
recognized related to this transaction at December 31, 1999. The Company was
required to make a margin deposit of $2,600 related to this transaction.

Investigator Payments

     Billings and payments to investigators are based on predetermined
contractual agreements that may differ from the accrual of the related expense.
Investigator expenses are recognized based upon the status of the work completed
as a percentage of the total procedures required under the contract or based on
patient enrollment over the term of the contract. Payments made in excess of the
accrued expenses are classified as investigator advances, and accrued expenses
in excess of amounts paid are classified as payables to investigators in the
consolidated balance sheet. Contracted physician costs are considered a pass-
through expense and are recorded as a reduction to revenues in the consolidated
statements of operations.

Property and Equipment

     Property and equipment are stated at cost less accumulated depreciation and
amortization. Depreciation is recorded using the straight-line method, based on
estimated useful lives of 20 to 40 years for buildings, five to 12 years for
laboratory equipment, three to five years for computers and related equipment,
and four to 10 years for furniture and equipment. Leasehold improvements are
amortized over the shorter of the respective lives of the leases or the useful
lives of the improvements. Property under capital leases is amortized over the
life of the lease or the service life, whichever is shorter.

Internal Use Software

     The Company accounts for internal use software in accordance with the
provisions of AICPA Statement of Position No. 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use," which requires
certain direct costs and interest costs that are incurred during the application
stage of development to be capitalized and amortized over the useful life of the
software.

Capitalized Software Costs

     Financial Accounting Standards Board Statement No. 86, "Accounting for the
Costs of Computer Software to be Sold, Leased or Otherwise Marketed," requires
the capitalization of certain software development costs once technological
feasibility has been established. The Company considers that technological
feasibility has been established once a working model of a product has been
established and tested. The establishment of technological feasibility and the
ongoing assessment of recoverability of capitalized software development costs
require considerable judgement by management concerning certain external factors
including, but not limited to, technological feasibility, anticipated future
gross revenue, estimated economic life and changes in software and hardware
technologies. To date, the Company has not capitalized any software development
costs, as amounts incurred subsequent to the establishment of technological
feasibility have not been material. Prior to the creation of a working model,
the Company expenses these costs.

                                      F-9


           PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     (in thousands, except per share data)

1.   Summary of Operations and Significant Accounting Policies (Continued):

Goodwill

     The excess of the purchase price of the businesses acquired over the fair
value of net tangible assets and identifiable intangibles and acquired in-
process research and development costs at the date of the acquisitions has been
assigned to goodwill. Goodwill is being amortized over periods of 15 to 40
years. Goodwill is presented net of accumulated amortization at December 31,
1999 and 1998 of $5,064 and $4,926, respectively. The amortization charges for
each of the three years ended December 31, 1999, 1998 and 1997 were $1,005,
$1,235 and $1,401, respectively.

Other Assets

     Other assets are comprised of cost-method investments in certain technology
companies, other intangible assets, two notes receivable and a net long-term
deferred tax asset. Other intangible assets are being amortized over periods of
three to thirty-nine and a half years. See Note 8.

Realizability of Carrying Value of Long-Lived Assets

     The Company is required to review long-lived assets for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable, in accordance with the provisions of Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to be Disposed Of". Accordingly, when
indicators of impairment are present, the Company evaluates the carrying value
of property, plant and equipment and intangibles, including goodwill, in
relation to the operating performance and estimates of future discounted cash
flows of the underlying business and recognizes an impairment, if necessary, to
state property, plant and equipment and intangibles at their fair value. No such
impairment was necessary during any of the three years ended December 31, 1999,
1998 and 1997.

Unbilled Services and Unearned Income

     In general, prerequisites for billings are established by contractual
provisions, including predetermined payment schedules, the achievement of
contract milestones or submission of appropriate billing detail. Unbilled
services arise when services have been rendered but clients have not been
billed. Similarly, unearned income represents amounts billed in excess of
revenue recognized.

Income Taxes

     Income taxes are computed using the asset and liability approach that
requires the recognition of deferred tax assets and liabilities for the expected
future tax consequences of events that have been recognized in the Company's
financial statements or tax returns. In estimating future tax consequences, the
Company generally considers all expected future events other than enactment of
changes in tax law or rates. If it is more likely than not that some portion or
all of a deferred tax asset will not be realized, a valuation allowance is
recorded.

Concentration of Credit Risk

     Statement of Financial Accounting Standards No. 105, "Disclosure of
Information about Financial Instruments with Off-Balance-Sheet Risk and
Financial Instruments with Concentrations of Credit Risk", requires disclosure
of information about financial instruments with off-balance-sheet risk and
financial instruments with concentrations of credit risk. Financial instruments,
which subject the Company to concentrations of credit risk, consist principally
of accounts receivable, cash equivalents and U.S. Treasury Bonds. See Note 16.

                                      F-10


           PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     (in thousands, except per share data)

1.   Summary of Operations and Significant Accounting Policies (Continued):

Concentration of Credit Risk (Continued)

     The Company's clients are primarily pharmaceutical and biotechnology
companies.  No single client accounted for more than 10% of the Company's net
revenue in 1999, 1998 or 1997.  Concentrations of credit risk with respect to
accounts receivable are limited due to the large number of clients comprising
the Company's client base.  Ongoing credit evaluations of customers' financial
condition are performed and, generally, no collateral is required.  The Company
maintains reserves for potential credit losses and such losses, in the
aggregate, have not exceeded management's estimates.

     The Company's cash equivalents consist principally of commercial paper.
Certain bank deposits may at times be in excess of the FDIC insurance limit.
Based on the nature of the financial instruments and/or historical realization
of these financial instruments, management believes they bear minimal risk.

Translation of Foreign Financial Statements

     Assets and liabilities of foreign operations, where the functional currency
is the local currency, are translated into U.S. dollars at the rate of exchange
at each reporting date. Income and expenses are translated at the average rates
of exchange prevailing during the month in which a transaction occurs. Gains or
losses from translating foreign currency financial statements are accumulated in
other comprehensive income. The cumulative translation adjustment included in
other comprehensive income at December 31, 1999 and 1998 totaled $(2,154) and
$78, respectively. Foreign currency transaction gains and losses are included in
other income.

     Funds generated by each subsidiary of the Company are generally reinvested
in the country where they are earned.

Earnings Per Share

     The Company adopted Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" ("SFAS No. 128") on December 31, 1997. The computation of
basic income per share information is based on the weighted average number of
common shares outstanding during the year. The computation of diluted income per
share information is based on the weighted average number of common shares
outstanding during the year plus the effects of any dilutive common stock
equivalents at the end of the year. Earnings per share for all periods presented
in the statements of operations conform to the provisions of SFAS No. 128.

Stock-Based Compensation

     The Company accounts for stock-based compensation based on the provisions
of Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" ("APB No. 25"), which states that no compensation expense is recorded
for stock options or other stock-based awards to employees that are granted with
an exercise price equal to or above the estimated fair value per share of the
Company's common stock on the grant date. In the event that stock options are
granted with an exercise price below the estimated fair value of the Company's
common stock at the grant date, the difference between the fair value of the
Company's common stock and the exercise price of the stock option is recorded as
deferred compensation. Deferred compensation is amortized to compensation
expense over the vesting period of the stock option. The Company has adopted the
disclosure requirements of Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("SFAS No. 123"), which requires
compensation expense to be disclosed based on the fair value of the options
granted at the date of the grant. See Note 11.

                                      F-11


           PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     (in thousands, except per share data)

1.   Summary of Operations and Significant Accounting Policies (Continued):

Comprehensive Income

     The Company adopted Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income" ("SFAS No. 130") effective January 1, 1998.
SFAS No. 130 requires the Company to display an amount representing
comprehensive income for the year in a financial statement which is displayed
with the same prominence as other financial statements. The Company has elected
to present this information in the Statements of Shareholders' Equity. Upon
adoption, all prior period data presented was restated to conform to the
provisions of SFAS No. 130.

Segment Reporting

     The Company adopted Statement of Financial Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related Information" ("SFAS No.
131") on December 31, 1998.  SFAS No. 131 requires the Company to report certain
information about operating segments in complete sets of financial statements
and in condensed financial statements of interim periods issued to shareholders.
It also establishes standards for related disclosures about products and
services, geographic areas and major customers.  See Notes 16 and 17.

Pensions and other Postretirement benefits

     The Company adopted Statement of Financial Accounting Standards No. 132,
"Employers' Disclosures about Pensions and Other Postretirement Benefits" ("SFAS
No. 132") on December 31, 1998.  SFAS No. 132 standardizes the disclosure
requirements for pensions and other postretirement benefits to the extent
practicable, requires additional information on changes in the benefit
obligations and fair values of plan assets that will facilitate financial
analysis, and eliminates certain disclosures that are no longer useful.  See
Note 13.

New Accounting Pronouncements

     In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Investments
and Hedging Activities," (SFAS No. 133").  SFAS No. 133 establishes accounting
and reporting standards for derivatives and hedging activities and supercedes
several existing standards.  SFAS No. 133, as amended by SFAS No. 137, is
effective for all fiscal quarters of fiscal years beginning after June 15, 2000.
The Company does not expect that the adoption of SFAS No. 133 will have a
material impact on the consolidated financial statements.

Use of Estimates

     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

Reclassifications

     Certain prior year amounts have been reclassified to conform to the 1999
presentation.

                                      F-12


           PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     (in thousands, except per share data)

2.   Acquisitions:

Poolings

     In March 1999, the Company acquired ATP, Inc. ("PPD ATP"), a health
information services company.  PPD ATP provides customized inbound and outbound
telecommunications programs targeting consumers and health care providers.  The
Company acquired all of the outstanding stock of PPD ATP in exchange for
issuance of approximately 876 shares of the Company's common stock.  Outstanding
PPD ATP options were exchanged for options to acquire approximately 216 shares
of the Company's common stock.  This acquisition was accounted for using the
pooling of interests method.  Results of operations for PPD ATP are included in
the consolidated results of operations of the Company beginning January 1, 1999.
Results of operations of the Company for periods prior to January 1, 1999 were
not restated as PPD ATP's results of operations for the year ended December 31,
1998 were not material to the Company's 1999 operating results.

     In March 1997, the Company acquired all of the outstanding stock of Belmont
Research, Inc. ("Belmont") in exchange for issuance of approximately 502 shares
of the Company's common stock plus outstanding options to purchase approximately
115 shares of the Company's common stock.  In June 1997, the Company acquired
all of the outstanding stock of SARCO, Inc. ("SARCO").  The consideration for
SARCO consisted of issuance of 263 shares of the Company's common stock.  In
November 1997, the Company acquired all of the outstanding stock of Intek Labs,
Inc. ("Intek").  The consideration for Intek consisted of issuance of 400 shares
of the Company's common stock.  All three of these acquisitions were accounted
for as pooling of interests transactions.  Pro forma information is not
presented nor have the Company's consolidated financial statements for 1996 been
restated to reflect the impact of these acquisitions as the results of
operations of Belmont, SARCO and Intek prior to the dates of the acquisitions
are not material individually or collectively to the Company.

Purchases

     In January 1998, the Company acquired two environmental consulting
businesses for a total of $1,006 in cash and potential for the former owners to
earn an additional amount depending on the profitability of the businesses for a
certain period after the acquisition.  In connection with these acquisitions,
the Company recorded approximately $900 in goodwill.  These businesses were
disposed of with the rest of the environmental sciences segment on January 31,
1999.  See Note 4.

     In January 1997, the Company acquired Technical Assessment Systems, Inc.
("TAS") for $490 in cash, a note for approximately $300 and the potential to
earn an additional amount depending on TAS's profitability for a certain period
after the acquisition.  In connection with the acquisition, the Company recorded
$1,070 in goodwill.  This business was disposed of with the rest of the
environmental sciences segment on January 31, 1999.  See Note 4.  In June 1997,
the Company acquired the GSX System, a functional genomics platform technology.
The GSX System was purchased for approximately $8,700 in cash.  Liabilities
assumed in this transaction were $832.  Pro forma information is not presented
as the acquired companies' results of operations prior to the dates of the
acquisitions are not material individually or collectively to the Company.

3.   Sale of Business:

     In February 1998, the Company, through its subsidiary Clinix International
Inc., sold substantially all of the assets of the Chicago Center for Clinical
Research ("CCCR").  The consideration received by the Company for CCCR totaled
approximately $7,785, which was comprised of $5,285 in cash and a promissory
note of $2,500 payable over five years.  The sale resulted in a gain of
approximately $1,071 that was recognized as other income during the first
quarter of 1998.  As part of the sales agreement, the Company continued to
provide CCCR with certain clinical and administrative services for an agreed
upon amount through the first quarter of 1999.

                                      F-13


          PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     (in thousands, expect per share date)

4.   Discontinued Operations:

     Effective January 31, 1999, the Company sold its environmental sciences
segment ("ENVIRON") to Environ Holdings, Inc., a new company formed by the
management of the environmental sciences segment, for total consideration of
approximately $26,244 in a management buyout. The Company received cash of
$1,244, a four-year note for $7,000 and a 12-year note for $18,000. See Note 7.
The sale resulted in no gain or loss because the sales price was equal to the
book value of the net assets sold at the date of the sale. In the first quarter
of 1999, the Company received full pre-payment of the four-year note.

     The consolidated balance sheet at December 31, 1999 and 1998 includes the
following assets and liabilities of the environmental sciences segment:

                                                   December 31,
                                              ----------------------
                                                1999          1998
                                              --------      --------
     Current assets                            $     -      $ 24,214
     Total assets                                    -        32,527

     Current liabilities                             -         6,030
     Total liabilities                               -         6,209
                                               -------      --------
     Net assets of discontinued operations     $     -      $ 26,318
                                               =======      ========

     The operating results of the environmental sciences segment for the years
ended December 31, 1999, 1998 and 1997 were as follows:



                                                           Years Ended December 31,
                                                   ------------------------------------
                                                     1999          1998          1997
                                                   --------     ----------     --------
                                                                      
            Net revenues                           $  3,866      $ 50,056        47,785
            Income (loss) from operations              (629)        7,627         6,863
            Net (loss) income                          (395)        4,614         4,152


5.   Accounts Receivable and Unbilled Services:

     Accounts receivable and unbilled services consisted of the following:

                                                       December 31,
                                              -----------------------------
                                                 1999                1998
                                              ---------            --------
     Trade:
         Billed                               $  70,005            $  75,405
         Unbilled                                45,814               51,702
         Reserve for doubtful accounts           (1,066)              (2,042)
                                              ---------            ---------
                                              $ 114,753            $ 125,065
                                              =========            =========

     Change in reserve for doubtful accounts consisted of the following:



                                                            Years Ended December 31,
                                                    -----------------------------------
                                                      1999         1998         1997
                                                    --------     --------     ---------
                                                                     
         Balance at beginning of period             $  2,042     $  1,515     $   1,511
         Additions charged to costs and expenses         409          993           647
         Deductions                                     (516)        (466)         (740)
         Sale of environmental sciences segment         (869)           -             -
         Other changes                                     -            -            97
                                                    --------     --------     ---------
         Balance at end of period                   $  1,066     $  2,042     $   1,515
                                                    ========     ========     =========


                                      F-14


          PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     (in thousands, expect per share date)

6.  Property and Equipment:

    Property and equipment, stated at cost, consisted of the following:

                                                          December 31,
                                                      --------------------
                                                        1999        1998
                                                      --------   ---------
    Land                                              $  1,159    $    519
    Buildings and leasehold improvements                15,000      14,002
    Construction in progress and asset deposits          2,216       2,621
    Furniture and equipment                             48,765      41,296
    Computer equipment and software                     43,325      43,688
                                                      --------    --------
                                                       110,465     102,126
    Less accumulated depreciation and amortization      58,183      59,617
                                                      --------    --------
                                                      $ 52,282    $ 42,509
                                                      ========    ========

    The annual depreciation and amortization charges on property and equipment
for each of the three years ended December 31, 1999, 1998 and 1997 were $13,936,
$12,887 and $10,830, respectively.

    The Company had property and equipment under capital leases of $374 and $47
at December 31, 1999 and 1998, respectively.

7.  Notes Receivable:

    Notes receivable consisted of the following:



                                                                            December 31,
                                                                     -------------------------
                                                                       1999             1998
                                                                     --------          -------
                                                                                 
    Note receivable from sale of CCCR                                $  1,500          $ 2,000
    Note receivable from sale of environmental sciences segment        16,214                -
                                                                     --------          -------
                                                                     $ 17,714          $ 2,000
                                                                     ========          =======


    The note receivable related to the sale of CCCR (see Note 3) bears interest
at a rate of 10% and will be received over a five year period, which began on
February 27, 1998, in equal annual payments.

    The note receivable related to the sale of the Company's environmental
sciences segment (see Note 4) will be received over twelve years. The first four
years are interest only payments with the first payment received on December 31,
1999. Principal payments commence on December 31, 2003. The note bears interest
at a rate of 8%.

8.  Other Assets:

    Other assets consisted of the following:
                                                              December 31,
                                                          ---------------------
                                                           1999          1998
                                                          -------       -------
    Investment in PPGx                                    $ 4,186       $     -
    Investment in DAS                                       1,500         1,500
    Long-term deferred tax asset                            1,280         1,555
    Intangible and other assets, net of accumulated
      amortization of $1,106 and $1,190, respectively       1,631         1,183
                                                          -------       -------
                                                          $ 8,597       $ 4,238
                                                          =======       =======

                                      F-15


          PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     (in thousands, expect per share date)

8.   Other Assets (Continued):

     In February 1999, the Company formed a joint venture, PPGx, with Axys
Pharmaceuticals, Inc. ("Axys") to pursue the business of pharmacogenomics.  The
Company contributed $1,500, the net assets of Intek, and assigned the rights to
a certain software license from Axys for an 18.2% ownership interest in PPGx.
The Company is accounting for the investment in PPGx using the cost method of
accounting for investments.

     The Company owns 600 shares of Digital Arts and Sciences ("DAS") Series D
preferred stock, which represent approximately 6.8% ownership of DAS as of
December 31, 1999 and 1998.  The Company's investment in DAS is being accounted
for using the cost method.

     The annual amortization charges on intangible assets for each of the three
years ended December 31, 1999, 1998 and 1997 were $153, $88 and $163,
respectively.

9.   Other Accrued Expenses:

     Other accrued expenses consisted of the following:



                                                                           December 31,
                                                                     -----------------------
                                                                      1999           1998
                                                                     -------        --------
                                                                              
     Accrued salaries, wages, benefits and related costs             $ 21,599       $ 21,721
     Other                                                              5,872          6,286
                                                                     --------       --------
                                                                     $ 27,471       $ 28,007
                                                                     ========       ========


10.  Long-Term Debt and Lease Obligations:

     Long-term debt consisted of the following:



                                                                           December 31,
                                                                     ------------------------
                                                                       1999            1998
                                                                     -------          -------
                                                                                
     Unsecured line of credit facility                               $     -          $ 3,300
     Equipment leases at interest rates up to 9%                         374               47
     Various notes at interest rates up to 9%                            196              394
                                                                     -------          -------
                                                                         570            3,741
     Less current maturities                                             211            3,580
                                                                     -------          -------
                                                                     $   359          $   161
                                                                     =======          =======


     In June 1998, the Company obtained a $50,000 revolving credit facility with
First Union National Bank.  Interest accrues on amounts borrowed at a floating
rate currently equal to LIBOR plus 0.625% per year.  Indebtedness under the line
is unsecured and subject to certain covenants relating to financial ratios and
tangible net worth.  The unused portion of the loan is available to provide
working capital and for general corporate purposes.  As of December 31, 1999,
the Company had $5,700 reserved under this facility in the form of a letter of
credit.  This credit facility expires in June 2000, at which time any
outstanding balance is due.

     In August 1999, the Company renegotiated a credit facility for $50,000 with
Wachovia Bank, N.A.  Interest accrues on amounts borrowed at a floating rate
equal to LIBOR plus 0.625% per year.  Indebtedness under the line is unsecured
and subject to certain covenants relating to financial ratios and tangible net
worth.  As of December 31, 1998, the Company had $3,300 outstanding under this
facility, of which the entire amount was paid in June 1999.  This credit
facility expires in August 2000, at which time any outstanding balance is due.

                                      F-16


          PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     (in thousands, expect per share date)


10.  Long-Term Debt and Lease Obligations (Continued):

     For the years subsequent to December 31, 1999, annual maturities of long-
term debt and payment obligations on capital leases are:

                         2000                   $ 211
                         2001                     188
                         2002                     120
                         2003                       4
                         2004                       5
                         2005 and thereafter       42
                                                -----
                                                $ 570
                                                =====
Operating Leases

     The Company is obligated under noncancellable leases expiring at various
dates through 2015 relating to its operating facilities and certain equipment.
Rental expense for all operating leases, net of sublease income, was $13,625,
$13,330 and $13,492 for the years ended December 31, 1999, 1998 and 1997,
respectively.

     The Company completed a sale-leaseback transaction involving owned real
estate in Austin, Texas in November 1995. Total gross proceeds in the
transaction were $12,000, resulting in a pre-tax gain of approximately $2,100.
The gain, which has been deferred, is classified as deferred rent and other in
the accompanying consolidated balance sheets and is being amortized as a
reduction of rent expense on a straight-line basis over the 15-year lease term.
The facilities are leased to the Company with all responsibility of operations
and maintenance residing with the Company.

     Certain facility leases entered into provided for concessions by the
landlords, including payments for leasehold improvements, moving expenses, and
free rent periods. These concessions have been reflected as deferred rent and
other in the accompanying consolidated financial statements. The Company is
recording rent expense on a straight-line basis for these leases.

     Future minimum payments for all operating lease obligations for years
subsequent to December 31, 1999 are as follows:

            2000                   $ 15,819
            2001                     15,271
            2002                     12,885
            2003                     11,986
            2004                     11,540
            2005 and thereafter      56,386
                                   --------
                                   $123,887
                                   ========

11.  Stock Plans:

Stock Incentive Program

     The Company has two stock option plans (the "Plans") under which the
Company may grant options to its employees and directors for up to 3,600 shares
of common stock. Under the Plans, the exercise price of each option granted must
equal the market price of the Company's stock on the date of grant and an
option's maximum exercise term is 10 years. Options are granted upon approval of
the Board of Directors and vest over various periods, as determined by the Board
of Directors at the date of the grant. The majority of the Company's options
vest over a period of three years.

                                      F-17


           PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     (in thousands, except per share data)


11.  Stock Plans (Continued):

     On January 1, 1996, the Company adopted the disclosure requirements of
Statement of Financial Accounting Standards No. 123 ("SFAS No. 123"),
"Accounting for Stock Based Compensation."  As permitted by SFAS No. 123, the
Company has chosen to apply Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees", and related interpretations in
accounting for the Plans.  Accordingly, no compensation cost has been recognized
for options granted under the Plans.  Had compensation cost for the Company's
Plans been determined based on the fair value at the grant dates for awards
under the Plans consistent with the method required by SFAS No. 123, the
Company's net income and diluted net income per share would have been the pro
forma amounts indicated below.



                                       1999                  1998               1997
                                -------------------  -------------------  -------------------
                                                                  
                                As                   As                      As
                                Reported  Pro Forma  Reported  Pro Forma  Reported  Pro Forma
                                --------  ---------  --------  ---------  --------  ---------
Net income                       $28,496    $25,232   $19,769    $17,236    $9,602     $7,730
Diluted net income per share     $  1.15    $  1.02   $  0.85    $  0.74    $ 0.42     $ 0.34


     For the purposes of the pro forma presentation above, the fair value of
each option grant is estimated on the date of grant using the Black-Scholes
option-pricing model with the following weighted average assumptions used for
grants in 1999, 1998 and 1997: expected volatility of 81.1%, 60.3% and 58.7%,
respectively; risk-free interest of 6.19%, 5.75% and 6.0%, respectively; and
expected lives of five years.  The resulting estimated weighted average fair
value of options granted during 1999, 1998 and 1997 was $13.71, $13.49 and $9.48
per share, respectively. All options granted during the years ended December 31,
1999, 1998 and 1997 were granted with an exercise price equal to the fair value
of the Company's common stock at the grant date.  The estimated pro forma
amounts above include the compensation cost for the Company's Employee Stock
Purchase Plan based on the fair value of the contributions under this plan
consistent with the method of SFAS No. 123.

     A summary of the status of the Plans as of December 31, 1999, 1998 and
1997, and changes during the years ending on those dates, is presented below:



                                              1999                        1998                      1997
                                    -------------------------  -------------------------  ------------------------
                                                 Weighted                    Weighted                  Weighted
                                                 Average                     Average                   Average
                                     Shares    Exercise Price   Shares    Exercise Price   Shares   Exercise Price
                                    ---------  --------------  ---------  --------------  --------  --------------
                                                                                  
Outstanding at beginning of year       1,574           $21.67     1,532           $20.53    1,274           $22.28
Granted                                  594            14.22       381            23.20      526            15.56
Exercised                               (221)           18.78      (256)           15.69     (158)           14.74
Forfeited                               (340)           24.67       (83)           25.97     (110)           24.55
                                       -----                      -----                     -----
Outstanding at end of year             1,607           $18.69     1,574           $21.67    1,532           $20.53
                                       =====           ======     =====           ======    =====           ======
Options exercisable at year end        1,008           $18.40       837           $21.90      841           $20.80
                                       =====           ======     =====           ======    =====           ======


     Included in options granted during the year ended December 31, 1999, were
216 options granted due to the acquisition of ATP. (See Note 2).

                                      F-18


           PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     (in thousands, except per share data)



11.  Stock Plans (Continued):

     The following table summarizes information about the Plans' stock options
at December 31, 1999:



                                         Options Outstanding                     Options Exercisable
                           ------------------------------------------------  ---------------------------
                             Number      Weighted Average       Weighted       Number        Weighted
        Range of           Outstanding       Remaining          Average      Exercisable     Average
     Exercise Prices       at 12/31/99   Contractual Life    Exercise Price  at 12/31/99  Exercise Price
- -------------------------- -----------   ----------------  ----------------  -----------  --------------
                                                                           
    $  0.00-$ 10.00             217          8.8 years           $  4.43          193         $  4.04
    $ 10.01-$ 20.00             616          7.7 years           $ 14.63          312         $ 16.05
    $ 20.01-$ 30.00             704          6.3 years           $ 25.06          496         $ 25.18
    $ 30.01-$ 40.00              64          9.1 years           $ 33.77            1         $ 33.50
    $ 40.01-$ 50.00               6          2.2 years           $ 40.55            6         $ 40.55
                              -----                                             -----
                              1,607                                             1,008
                              =====                                             =====


Savings Related Stock Option Plan

     The Company has a United Kingdom Savings Related Stock Option Plan under
which options are granted to employees who elect to purchase shares of common
stock at the end of a five or seven-year period. Savings are accumulated through
voluntary payroll deductions. The Company contributes a bonus to each
participant's savings account equal to nine monthly contributions at the end of
the five-year period and 18 monthly contributions at the end of the seven-year
period. When the savings period ends, the employee may elect to purchase the
shares using the savings balance, including the bonus; purchase some of the
shares and receive the savings balance in cash; or receive the savings and bonus
in cash. Currently, employees of the Company's United Kingdom subsidiary,
Pharmaco International Ltd., participate in this plan. Outstanding options of
APBI at the time of the merger with the Company in 1996 were converted into
options to purchase the Company's common stock in accordance with the exchange
ratio provided for in the merger agreement.

Employee Stock Purchase Plan

     The Board of Directors has reserved 500 shares of the Company's common
stock for issuance under the Employee Stock Purchase Plan (the "ESPP"). The ESPP
has two six-month offering periods (each an "Offering Period") annually,
beginning January 1 and July 1, respectively. The first Offering Period under
the ESPP began July 1, 1997. Eligible employees can elect to make deductions
from 1% to 15% of their compensation during each payroll period of an Offering
Period. Special limitations apply to eligible employees who own 5% or more of
the outstanding common stock of the Company. None of the contributions made by
eligible employees to purchase the Company's common stock under the ESPP are tax
deductible to the employees. At the end of an Offering Period, the total payroll
deductions by an eligible employee for that Offering Period will be used to
purchase common stock of the Company at a price equal to 85% of the lesser of
(a) the reported closing price of the Company's common stock for the first day
of the Offering Period, or (b) the reported closing price of the common stock
for the last day of the Offering Period. Only 150 shares will be available for
purchase during each of the Offering Periods beginning with the period
commencing January 1, 1998.

     Employees eligible to participate in the ESPP include employees of the
Company and its United States operating subsidiaries, except those employees who
customarily work less than 20 hours per week or five months in a year. Since the
eligible employee determines both participation in and contributions to the
ESPP, it is not possible to determine the benefits and amounts that would be
received by an eligible participant or group of participants in the future.

                                      F-19


           PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     (in thousands, except per share data)


11.  Stock Plans (Continued):

     At December 31, 1999, $1,073 had been contributed to the ESPP relating to
unissued shares. Shares were not issued on December 31, 1999 since the market
had to be closed before a purchase price could be determined. On January 5,
2000, 106 shares were issued. During 1999, $2,048 had been contributed to the
ESPP and 98 shares were issued. The compensation costs for the ESPP as
determined based on the fair value of the contributions under the ESPP,
consistent with the method of SFAS No. 123, was $466 and $532 and is reflected
in the pro forma net income and diluted net income per share for 1999 and 1998,
respectively as disclosed above.

12.  Income Taxes:

     The components of income (loss) before provision for income taxes were as
follows:





                                                           Years Ended December 31,
                                                        ------------------------------
                                                           1999       1998       1997
                                                        --------   --------   --------
                                                                        
     Domestic                                           $ 38,782   $ 24,875   $ 10,044
     Foreign                                               2,263       (272)    (1,231)
                                                        --------    -------    -------
     Income (loss) from continuing operations             41,045     24,603      8,813
     Domestic                                               (683)     7,357      6,169
     Foreign                                                  37        269        694
                                                        --------   --------    -------
     Income from discontinued operations                    (646)     7,626      6,863
                                                        --------   --------    -------
          Total                                         $ 40,399   $ 32,229    $15,676
                                                        ========   ========    =======


     The components of the provision for income taxes were as follows:




                                                           Years Ended December 31,
                                                        -----------------------------
                                                           1999       1998      1997
                                                        ---------   --------   ------
                                                                      
     State income taxes:
          Current                                       $  1,620    $    942   $   313
          Deferred                                          (329)         99       (97)
     Federal income taxes:
          Current                                         10,113       9,607     5,305
          Deferred                                          (589)      1,549       115
     Foreign income taxes:
          Current                                          1,288         503       438
          Deferred                                          (200)       (240)        -
                                                        --------    --------   -------
     Provision for income taxes                         $ 11,903    $ 12,460   $ 6,074
                                                        ========    ========   =======


     The income tax provision is included in the financial statements as
  follows:



                                                           Years Ended December 31,
                                                        -------------------------------
                                                           1999       1998        1997
                                                        ---------   -------     -------
                                                                       
     Continuing operations                              $ 12,154    $  9,448    $ 3,363
     Discontinued operations                                (251)      3,012      2,711
                                                        --------    --------    -------
          Total                                         $ 11,903    $ 12,460    $ 6,074
                                                        ========    ========    =======



                                      F-20


           PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     (in thousands, except per share data)



12.  Income Taxes (Continued):

     The 1999, 1998 and 1997 current foreign income tax expense represents
the foreign income tax liabilities associated with the Company's foreign
operations.

     The 1999 federal and state tax expense reflects the benefit related to the
utilization of capital loss carryforwards to offset the capital gains derived
from the Company's investment activities.

     Taxes computed at the statutory U.S. federal income tax rate of 35% are
reconciled to the provision for income taxes as follows:



                                                                                     Years Ended December 31,
                                                                                    ----------------------------
                                                                                      1999       1998     1997
                                                                                    --------- --------- --------
                                                                                               
     Effective tax rate                                                                 29.5%     38.7%    38.7%
                                                                                    ========  ========  =======
     United States federal statutory rate of 35%                                    $ 14,140  $ 11,280  $ 5,487
     State taxes (net of federal benefit)                                                839       677      237
     Utilization of capital loss carry forward                                        (3,853)   (1,799)       -
     Tax gain in excess of book                                                            -     1,319        -
     Foreign taxes in excess of U.S. rate                                                591       423        -
     Allowance for limitation of utilization of foreign
       tax losses                                                                        (91)      (38)     533
     Goodwill and other items not deductible for income
       tax purposes                                                                      432       450      449
     Other                                                                               261       175     (371)
     Benefit of federal statutory rate reduction from 35% to 34%                           -         -     (100)
     Deferred taxes set up for S to C conversion on
       acquisitions                                                                     (211)        -     (161)
     Change in valuation allowance                                                      (205)      (27)       -
                                                                                    --------  --------  -------
     Provision for income taxes                                                     $ 11,903  $ 12,460  $ 6,074
                                                                                    ========  ========  =======


     During 1997, the Company began recording deferred taxes at a 35% federal
rate due to expected levels of income in the future.

     Components of the net current deferred tax asset are as follows:



                                                                 December 31,
                                                              ------------------
                                                                1999      1998
                                                              --------  --------
                                                                  
     Future benefit of foreign net operating losses           $ 2,732   $ 2,736
     Allowance for doubtful accounts                              319       413
     Accruals                                                   3,157     2,002
     Valuation allowance                                       (2,196)   (2,400)
                                                              -------   -------
     Net current deferred tax asset                           $ 4,012   $ 2,751
                                                              =======   =======


                                      F-21


           PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     (in thousands, except per share data)



12.  Income Taxes (Continued):

     Components of the net long-term deferred tax asset, which are included in
other assets on the consolidated balance sheets, are as follows:



                                                                  December 31,
                                                               -----------------
                                                                 1999     1998
                                                               -------- --------
                                                                  
     Depreciation and amortization                             $ 2,148  $ 1,504
     Deferred rent                                                   -      220
     Other                                                        (868)    (169)
                                                               -------  -------
     Net long-term deferred tax asset                          $ 1,280  $ 1,555
                                                               =======  =======


     A valuation allowance was recorded against the foreign net operating
loss carryforwards because there is a significant uncertainty that the deferred
tax assets will be realized.

     The cumulative amount of undistributed earnings of foreign subsidiaries for
which the Company has not provided U.S. income taxes at December 31, 1999 was
$2,132. No provision has been made for the additional taxes that would result
from the distribution of earnings of foreign subsidiaries since such earnings
have been permanently reinvested in the foreign operations.

     During 1997, the Company utilized all U.S. net operating loss carryforwards
and alternative minimum tax credit carryforwards.

13.  Employee Savings and Pension Plans:

Savings Plans

     The Company provides a 401(k) Retirement Savings Plan to its U.S.
employees. The Company matches 50% of an employee's savings up to 6% of pay, and
these contributions vest ratably over a four-year period. Company matching
contributions for all employees for each of the three years ended December 31,
1999, 1998 and 1997 were $2,562, $2,201 and 1,945, respectively.

Pension Plans

     Pension costs are determined under the provisions of Statement of Financial
Accounting Standards No. 87, "Employers' Accounting for Pensions", and related
disclosures are determined under the provisions of Statement of Financial
Accounting Standards No. 132, "Employers' Disclosures about Pensions and other
Postretirement Benefits," which was adopted by the Company in 1998.  There was
no impact on the Company's financial statement balances as a result of the
adoption of this pronouncement.

     The Company has a separate contributory defined benefit plan (the "U.K.
Plan") for its qualifying United Kingdom employees and directors employed by the
Company's U.K. subsidiaries. The benefits for the U.K. Plan are based primarily
on years of service and average pay at retirement. Plan assets consist
principally of investments managed in a mixed fund.

                                      F-22


           PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     (in thousands, except per share data)


13.  Employee Savings and Pension Plans (Continued):

     Pension costs for the U.K. Plan included the following components:



                                                           Years Ended December 31,
                                                         ----------------------------
                                                           1999      1998      1997
                                                         --------  --------  --------
                                                                    
     Service cost-benefits earned
      during the year                                    $    740  $    662  $    738
     Interest cost on projected
      benefit obligation                                      756       777       631
     Expected return on plan assets                        (1,006)     (984)     (954)
     Net amortization and deferral                            205       (13)      (13)
                                                         --------  --------  --------
     Net periodic pension cost                           $    695  $    442       402
                                                         ========  ========  ========


     The change in benefit obligation, change in plan assets and funded status
     of the defined benefit plan were as follows:



                                                           Years Ended December 31,
                                                         ----------------------------
                                                           1999      1998      1997
                                                         --------  --------  --------
                                                                    
     Change in benefit obligations
      Benefit of obligation at beginning of year         $ 11,545  $  8,528  $  8,404
      Service cost                                            740       662       738
      Interest cost                                           756       777       631
      Net actuarial loss (gain)                             2,047     2,046      (403)
      Benefits paid                                          (273)     (513)     (540)
      Foreign currency translation adjustment                (308)       45      (302)
                                                         --------  --------  --------
      Benefit obligation at end of year                  $ 14,507  $ 11,545  $  8,528
                                                         ========  ========  ========
     Change in plan assets
      Fair value of plan assets at beginning of year     $ 12,579  $ 10,931  $  9,963
      Actual asset return                                   3,626     1,535     1,451
      Employer contributions                                  457       430       366
      Plan participants' contributions                        195       141        50
      Benefits and expenses paid                             (273)     (513)     (540)
      Foreign currency translation adjustment                (334)       55      (359)
                                                         --------  --------  --------
      Fair value of plan assets at end of year           $ 16,250  $ 12,579  $ 10,931
                                                         ========  ========  ========
     Net amount recognized
      Funded status                                      $  1,743  $  1,034  $  2,404
      Unrecognized transition asset                           (69)      (85)      (97)
      Unrecognized net actuarial loss (gain)                  265     1,085      (406)
                                                         --------  --------  --------
      Prepaid pension cost                               $  1,939  $  2,034  $  1,901
                                                         ========  ========  ========


     Assumptions used to determine pension costs and projected benefit
     obligations were as follows:



                                                           1999      1998      1997
                                                         --------  --------  --------
                                                                    
     Discount rate                                            5.5%      7.5%      8.5%
     Rate of compensation increase                            3.0%      5.0%      6.0%
     Long-term rate of return on plan assets                  8.0%      8.5%      9.5%


                                      F-23


           PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     (in thousands, except per share data)


13.  Employee Savings and Pension Plans (Continued):

     Prior to January 31, 1999, the Company maintained the APBI Environmental
Sciences Group, Inc. Pension Plan (the "ENVIRON Pension Plan"), a tax-qualified,
defined-contribution money-purchase pension plan, for the benefit of its
eligible ENVIRON employees. ENVIRON is required to make annual contributions to
the ENVIRON Pension Plan in an amount equal to the sum of 3.75% of each eligible
employee's total compensation, plus 3.75% of the portion of such employee's
compensation in excess of the Social Security wage base. Participants vest in
20% of their account balances after two years of service and 20% per year until
they are fully vested. The annual pension expense of the ENVIRON Pension Plan
for the two years ended December 31, 1998 and 1997 was $697 and $638,
respectively. As of December 31, 1998, accrued pension cost, included in other
accrued expenses, was $651.

     All benefits under the ENVIRON Pension Plan became the responsibility of
the purchaser of the environmental services segment on January 31, 1999.

14.  Commitments and Contingencies:

     The Company currently maintains liability insurance on a "claims made"
basis for professional acts, errors and omissions. The policy has a self-insured
retention per claim of $250. As of December 31, 1999 and 1998, there are no open
claims related to this coverage above the self-insured retention.

     The Company currently is self-insured for group health for employees
located within the United States. The Company maintains insurance on a "claims
made" basis, up to a maximum of $100 per occurrence. As of December 31, 1999 and
1998 the Company maintained a reserve of approximately $1,752 and $1,483,
respectively, included in other accrued expenses on the consolidated balance
sheets to cover estimated open claims and claims incurred but not reported.

     In the normal course of business, the Company is a party to various claims
and legal proceedings. The Company records a reserve for these matters when an
adverse outcome is probable and the amount of the potential liability is
reasonably estimable. Although the ultimate outcome of these matters is
currently not determinable, management of the Company, after consultation with
legal counsel, does not believe that the resolution of these matters will have a
material effect upon the Company's financial condition or results of operations
for an interim or annual period.

15.  Related Party Transactions:

     The Company was related through common ownership with E.M. Associates,
Inc., which provided investigative board services to the Company. The Company
had transactions with E.M. Associates, Inc. of $37 in expenses for the year
ended December 31, 1997. There were no transactions with E.M. Associates during
the year ended December 31, 1999 or 1998.

16.  Fair Value of Financial Instruments:

     The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value:

Accounts Receivable, Accounts Payable and Accrued Liabilities

     The carrying amount approximates fair value because of the short maturity
of these items.

Notes Receivable

     The notes receivable from the sale of CCCR and ENVIRON are carried at their
original value plus any accrued and unpaid interest. The Company believes the
carrying value approximates market on December 31, 1999.

                                      F-24


           PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     (in thousands, except per share data)


16.  Fair Value of Financial Instruments (Continued):

Investment in DAS and PPGx

     The Company's investment in DAS and PPGx are recorded at $1,500 and $4,186,
respectively, at December 31, 1999. The Company's investment in DAS and PPGx are
accounted for using the cost method of accounting as the investment in DAS and
PPGx are not tradeable and the Company does not exert significant influence on
the operations of DAS or PPGx.

Derivative Financial Instrument

     The Company entered into a purchase and sale of a U.S. Treasury Bond with a
face value of $520,000 during the fourth quarter of 1999 with the same financial
institution. The Company has the legal right of offset with regard to the
obligation to pay for the cost of the U.S. Treasury Bond and the investment in
the U.S. Treasury Bond. The fair value of this net obligation of $100 at
December 31, 1999 was based on the quoted market price of these investments and
is determined as follows:

     Fair Value of U.S. Treasury Bond        $ 537,958
     Fair Value of Purchase Obligation        (538,058)
                                             ---------
                                             $    (100)
                                             =========

Long-Term Debt

     The fair value of the Company's long-term debt is estimated based on the
quoted market prices for the same or similar issues or on the current rates
offered to the Company for debt of the same remaining maturities. Fair value
approximates the carrying amount as the Company's debt instruments bear interest
based on variable rates.

Letters of Credit

     The Company utilizes letters of credit to back certain guarantees and
insurance policies. The letters of credit reflect fair value as a condition of
their underlying purpose and are subject to fees competitively determined in the
market place.

17.  Business Segment Data:

     During 1999 and 1998, the Company operated in three business segments- life
sciences, environmental sciences and discovery sciences. The Company sold its
environmental sciences segment in January 1999 (see Note 4). Accordingly, the
income statements have been restated to conform to the provisions of APB 30,
"Reporting the Results of Operations - Reporting the Effects of Disposal of a
Segment of a Business, and Extraordinary, Unusual, and Infrequently Occurring
Events and Operations". The consolidated balance sheets and statement of cash
flows have not been restated to exclude the assets, liabilities and cash flows
of the environmental sciences segment.

                                      F-25


           PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     (in thousands, except per share data)


17.  Business Segment Data (Continued):

     Revenues by principal business segment are separately stated in the
consolidated financial statements. Merger costs and acquired in-process research
and development costs incurred in 1999, 1998 and 1997 of $218, $3,163 and
$9,670, respectively, were not allocated to the Company's business segments and
are shown separately for purposes of business segment analysis. Income taxes are
allocated evenly to each division for purposes of business segment analysis,
except for the 1999 tax benefit of $3,800 from the reversal of a portion of the
valuation allowance on the Company's capital loss carryforward which has been
specifically identified to the Life Sciences segment. Income from operations,
net income, depreciation and amortization, identifiable assets and capital
expenditures by principal business segment were as follows:



                                                       Years Ended December 31,
                                                 -----------------------------------
                                                   1999         1998         1997
                                                 ---------    ---------    ---------
                                                                  
     Income from operations: (a)
         Life sciences                           $  44,669    $  28,693    $  19,344
         Discovery sciences                         (7,743)      (4,489)      (2,325)
         Merger costs and acquired in-process
           research and development costs             (218)      (3,163)      (9,670)
                                                 ---------    ---------    ---------
         Total                                   $  36,708    $  21,041    $   7,349
                                                 =========    =========    =========

     Net income:
         Life sciences                           $  33,630    $  17,882    $   6,856
         Discovery sciences                         (4,739)      (2,727)      (1,406)
         Environmental sciences                       (395)       4,614        4,152
                                                 ---------    ---------    ---------
         Total                                   $  28,496    $  19,769    $   9,602
                                                 =========    =========    =========

     Depreciation and amortization: (a)
         Life sciences                           $  14,294    $  11,897    $  10,651
         Discovery sciences                            548          420          229
                                                 ---------    ---------    ---------
         Total                                   $  14,842    $  12,317    $  10,880
                                                 =========    =========    =========

     Identifiable assets: (b)
         Life sciences                           $ 286,424    $ 200,382    $ 165,855
         Discovery sciences                          2,279        3,672        1,465
         Environmental sciences                          -       32,528       29,727
                                                 ---------    ---------    ---------
         Total                                   $ 288,703    $ 236,582    $ 197,047
                                                 =========    =========    =========

     Capital expenditures:
         Life sciences                           $  22,644    $  16,866    $  11,589
         Discovery sciences                            589          740          495
         Environmental sciences                          -        1,737        1,515
                                                 ---------    ---------    ---------
         Total                                   $  23,233    $  19,343    $  13,599
                                                 =========    =========    =========


(a)  Does not include results of operations of the environmental sciences
     segment which was sold January 31, 1999. See Note 4.

(b)  The note receivable from the sale of the environmental sciences segment is
     included in the Life Sciences segment. See Note. 4.

                                      F-26


           PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     (in thousands, except per share data)


18.  Operations by Geographic Area:

     The following table presents information about the Company's operations by
geographic area:

                                                    Years Ended December 31,
                                                 ------------------------------
                                                   1999       1998       1997
                                                 --------   --------   --------
     Net revenue:  (a)
         United States                           $257,717    199,295    162,822
         U.K.                                      16,391     16,506     14,583
         Other (b)                                 28,422     19,752     10,082
                                                 --------   --------   --------
         Total                                   $302,530   $235,553   $187,487
                                                 ========   ========   ========
     Operating income (loss): (a)
         United States                           $ 35,362   $ 20,749   $  8,778
         U.K.                                        (469)    (1,004)      (575)
         Other (b)                                  1,815      1,296       (854)
                                                 --------   --------   --------
         Total                                   $ 36,708   $ 21,041   $  7,349
                                                 ========   ========   ========
     Identifiable assets:
         United States                           $244,403   $183,411   $157,543
         U.K.                                      27,988     36,825     27,063
         Other (b)                                 16,312     16,346     12,441
                                                 --------   --------   --------
         Total                                   $288,703   $236,582   $197,047
                                                 ========   ========   ========

(a) Does not include results of operations of the environmental sciences segment
    which was sold January 31, 1999. See Note 4.

(b) Principally consists of revenue from 16 countries, ten of which are located
    in Europe, none of which individually comprise more than 5% of net revenue,
    operating income (loss) or identifiable assets.

                                      F-27


           PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     (in thousands, except per share data)


19.  Quarterly Financial Data (Unaudited):




               1999                    First     Second    Third      Fourth    Total
- -----------------------------------    -----     ------    -----      ------    -----
                                                                
Net revenue                          $ 69,610   $ 76,254  $ 79,358   $ 77,308  $302,530
Operating income                        9,029      9,805    10,962      6,912    36,708
Net income from continuing
  operations                            6,256      6,622     7,396      8,617    28,891
Net income (loss) from operations
  of discontinued environmental
  sciences segment                       (125)         -      (270)         -      (395)
Net income                              6,131      6,622     7,126      8,617    28,496
Net income per share:
     Basic                           $   0.25   $   0.27  $   0.29   $   0.35  $   1.16
     Diluted                         $   0.25   $   0.27  $   0.29   $   0.35  $   1.15
Income from continuing
  operations per share:
     Basic                           $   0.26   $   0.27  $   0.30   $   0.35  $   1.18
     Diluted                         $   0.25   $   0.27  $   0.30   $   0.35  $   1.16

             1998 (a)
- -----------------------------------
Net revenue                          $ 52,153   $ 57,465  $ 61,452   $ 64,483  $235,553
Operating income                        3,976      2,183     6,596      8,286    21,041
Net income from continuing
  operations                            3,434      1,669     4,428      5,624    15,155
Net income from operations of
  discontinued environmental
  sciences segment                      1,102      1,206     1,198      1,108     4,614
Net income                              4,536      2,875     5,626      6,732    19,769
Net income per share:
     Basic                           $   0.20   $   0.12  $   0.24   $   0.29  $   0.85
     Diluted                         $   0.20   $   0.12  $   0.24   $   0.29  $   0.85
Income from continuing
  operations per share:
     Basic                           $   0.15   $   0.07  $   0.19   $   0.24  $   0.65
     Diluted                         $   0.15   $   0.07  $   0.19   $   0.24  $   0.65


________________

(a)  Quarterly financial operating results have been restated to reflect the
     environmental sciences segment as discontinued operations.

                                      F-28


           PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     (in thousands, except per share data)


20.  Subsequent Events:

           In February 2000, the Company acquired the assets of the Pharmazyme
division of Immune Complex Corporation for $1,500 in cash.  This acquisition
will be accounted for using the purchase method of accounting and the Company
will record goodwill in excess of the fair market value of the assets acquired.
Pharmazyme is a developer, producer and marketer of drug metabolism reagent
products and services.

                                      F-29


                                  SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.

                                   PHARMACEUTICAL PRODUCT DEVELOPMENT, INC.


Date: March 1, 2000                By:    /s/ Fredric N. Eshelman, Pharm.D.
                                          ---------------------------------
                                   Name:  Fredric N. Eshelman, Pharm.D.
                                   Title: Chief Executive Officer

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

                                                                            
/s/ Fredric N. Eshelman, Pharm.D.    Director and Chief Executive Officer         March 1, 2000
- ----------------------------------   (Principal Executive Officer)
Fredric N. Eshelman, Pharm.D.

/s/ Linda Baddour                    Interim Chief Financial Officer and Chief    March 1, 2000
- ----------------------------------
Linda Baddour                        Accounting Officer (Principal Financial
                                     Officer)

/s/ Ernest Mario, Ph.D.              Director                                     March 1, 2000
- ----------------------------------
Ernest Mario, Ph.D.

/s/ Stuart Bondurant, M.D.           Director                                     March 1, 2000
- ----------------------------------
Stuart Bondurant, M.D.

/s/ Abraham Cohen                    Director                                     March 1, 2000
- ----------------------------------
Abraham E. Cohen

/s/ Frederick Frank                  Director                                     March 1, 2000
- ----------------------------------
Frederick Frank

/s/ Paul J. Rizzo                    Director                                     March 1, 2000
- ----------------------------------
Paul J. Rizzo

/s/ John A. McNeill, Jr.             Director                                     March 1, 2000
- ----------------------------------
John A. McNeill, Jr.

/s/ Donald C. Harrison, M.D.         Director                                     March 1, 2000
- ----------------------------------
Donald C. Harrison, M.D.



                                      S-1

EX-10.137

                                                                  EXHIBIT 10.137


                      AMENDMENT NO. 2 AND RESTATEMENT OF
                         CREDIT AND SECURITY AGREEMENT


                                    between


                     APPLIED BIOSCIENCE INTERNATIONAL INC.
                                   (Lender)

                                      and

                            ENVIRON HOLDINGS, INC.,
                                      and
                       ENVIRON INTERNATIONAL CORPORATION
                                  (Borrower)



                         Dated as of November 24, 1999


                               TABLE OF CONTENTS
                               -----------------


                                                                                     PAGE NO.
                                                                                              -------
                                                                                           
ARTICLE I CONSTRUCTION AND DEFINED TERMS.........................................................1
SECTION 1.01.     Articles and Sections..........................................................1
SECTION 1.02.     Exhibits and Schedules.........................................................1
SECTION 1.03.     Credit Documents...............................................................1
SECTION 1.04.     Discretionary Consents.........................................................1
SECTION 1.05.     Accounting Terms...............................................................2
SECTION 1.06.     Time...........................................................................2
SECTION 1.07.     Defined Terms..................................................................2

ARTICLE II-A CREDIT FACILITY - REVOLVING CREDIT LOANS............................................20
SECTION 2A.01.    Revolving Credit Loans.........................................................20
SECTION 2A.02.    Requests.......................................................................20
SECTION 2A.03.    Covenant to Pay;  Revolving Credit Notes.......................................20
SECTION 2A.04.    Interest Payments..............................................................21
SECTION 2A.05.    Principal Payments.............................................................21
SECTION 2A.06.    Collateral Account Payments....................................................21
SECTION 2A.07.    Use of Revolving Credit Loan Proceeds..........................................21

ARTICLE II-B CREDIT FACILITY - TERM LOAN AND ACQUISITION
     LOAN         ...............................................................................21
SECTION 2B.01.    Term Loan and Acquisition Loan.................................................21
SECTION 2B.02.    Covenant to Pay;  Term Note....................................................21
SECTION 2B.03.    Payment Schedule...............................................................21
SECTION 2B.04.    Use of Term Loan and Acquisition Loan Proceeds.................................22

ARTICLE II-C CREDIT FACILITY - LETTERS OF CREDIT.................................................22
SECTION 2C.01.    Letter of Credit Applications..................................................22
SECTION 2C.02.    Letter of Credit Expiry Dates..................................................22
SECTION 2C.03.    Letter of Credit Fees..........................................................22
SECTION 2C.04.    Letter of Credit Reserves......................................................22
SECTION 2C.05.    Payments on Letters of Credit..................................................22
SECTION 2C.06.    Instruction to Pay; Indemnification............................................23
SECTION 2C.07.    Use of Letters of Credit.......................................................24
SECTION 2C.08.    Letters of Credit Denominated in Other Than U.S. Dollars.......................24

ARTICLE II-D CREDIT FACILITY - GENERAL CREDIT PROVISIONS.........................................24
SECTION 2D.01.    Lender Records.................................................................24
SECTION 2D.02.    Computation of Interest........................................................25
SECTION 2D.03.    Late Charges; Default Interest.................................................25
SECTION 2D.04.    Omitted........................................................................25
SECTION 2D.05.    Unused Credit Fee..............................................................25
SECTION 2D.06.    Mandatory Additional Payments..................................................25
SECTION 2D.07.    Prepayments....................................................................25



                                                                                              
SECTION 2D.08.    Manner of Payments.............................................................26
SECTION 2D.09.    Application of Payments........................................................26
SECTION 2D.10.    Capital Adequacy...............................................................26
SECTION 2D.11.    Rate Adequacy..................................................................26
SECTION 2D.12.    Regulatory Change..............................................................26
SECTION 2D.13.    Designation of Agent and Attorney-in-Fact......................................27
SECTION 2D.14.    Net Payments...................................................................28

ARTICLE II-E CREDIT FACILITY - CONDITIONS........................................................29
SECTION 2E.01.    Fulfillment of Conditions......................................................29
SECTION 2E.02.    Conditions to all Loans and Letters of Credit..................................29
SECTION 2E.03.    Conditions to Term Loan. and Acquisition Loan..................................29
SECTION 2E.04.    Conditions to All Revolving Credit Including the Initial Revolving Credit......31

ARTICLE III REPRESENTATIONS AND WARRANTIES.......................................................32
SECTION 3.01.     Conditions.....................................................................32
SECTION 3.02.     Existence......................................................................32
SECTION 3.03.     Action.........................................................................33
SECTION 3.04.     Approvals......................................................................33
SECTION 3.05.     Ownership......................................................................33
SECTION 3.06.     Subsidiaries...................................................................33
SECTION 3.07.     Financial Statements...........................................................34
SECTION 3.08.     Solvency.......................................................................34
SECTION 3.09.     Investments....................................................................34
SECTION 3.10.     Deposit Accounts...............................................................34
SECTION 3.11.     Indebtedness...................................................................34
SECTION 3.12.     Liens..........................................................................34
SECTION 3.13.     Material Agreements............................................................34
SECTION 3.14.     Legal Proceedings..............................................................34
SECTION 3.15.     Accounts.......................................................................34
SECTION 3.16.     Insurance......................................................................34
SECTION 3.17.     Intellectual Property..........................................................34
SECTION 3.18.     Special Property...............................................................34
SECTION 3.19.     Margin Stock...................................................................34
SECTION 3.20.     Tax Identification Numbers.....................................................34
SECTION 3.21.     Business.......................................................................35
SECTION 3.22.     Name, Structure................................................................36
SECTION 3.23.     Designated Locations...........................................................36
SECTION 3.24.     Labor Status...................................................................36
SECTION 3.25.     ERISA Status...................................................................36
SECTION 3.26.     Environmental Status...........................................................38
SECTION 3.27.     Investment Company Act.........................................................39
SECTION 3.28.     Omitted........................................................................39
SECTION 3.29.     Commercial Loan................................................................39
SECTION 3.30.     No Broker......................................................................39



                                      ii


                                                                                              
SECTION 3.31.     Obligor Information............................................................39
SECTION 3.32.     Independent Access.............................................................40
SECTION 3.33.     Taxes..........................................................................40
SECTION 3.34.     Applicable Laws................................................................40
SECTION 3.35.     Risk Management Agreements.....................................................40
SECTION 3.36.     Year 2000 Issues...............................................................40
SECTION 3.37.     Direct Obligation; Full Faith and Credit.......................................40
SECTION 3.38.     No Recordation Necessary.......................................................40
SECTION 3.39.     Wages, Severance Pay, Etc......................................................41
SECTION 3.40.     Stock Purchase Agreement.......................................................41
SECTION 3.41.     Omitted........................................................................41
SECTION 3.42.     Omitted........................................................................41
SECTION 3.43.     Principals.....................................................................41

ARTICLE IV AFFIRMATIVE COVENANTS.................................................................41
SECTION 4.01.     Information....................................................................42
SECTION 4.02.     Reporting Notification Events..................................................43
SECTION 4.03.     Existence......................................................................43
SECTION 4.04.     Places of Business.............................................................43
SECTION 4.05.     Property.......................................................................43
SECTION 4.06.     Insurance......................................................................43
SECTION 4.07.     Taxes..........................................................................44
SECTION 4.08.     Compliance with Laws...........................................................44
SECTION 4.09.     Material Agreements............................................................44
SECTION 4.10.     Permitted Indebtedness.........................................................44
SECTION 4.11.     Maintenance of Primary Account.................................................44
SECTION 4.12.     Credit Administration Costs;  Brokers..........................................44
SECTION 4.13.     Review and Audit...............................................................44
SECTION 4.14.     Rate Hedging...................................................................45
SECTION 4.15.     Use of Loan Proceeds...........................................................45
SECTION 4.16.     ERISA and Related Matters......................................................45
SECTION 4.17.     Environmental Matters..........................................................45
SECTION 4.18.     Year 2000 Compatibility........................................................46
SECTION 4.19.     Consolidated Funded Debt to EBITDA.............................................46
SECTION 4.20.     Senior Funded Debt to EBITDA...................................................46
                  ----------------------------
SECTION 4.21.     Net Worth......................................................................46
SECTION 4.22.     Debt Service Coverage..........................................................47
SECTION 4.23.     Negative Net Income............................................................47
SECTION 4.24.     Key Principals.................................................................48
SECTION 4.25.     Capital Contribution...........................................................48

ARTICLE IV-A ADDITIONAL SECURITY PROVISIONS......................................................48
SECTION 4A.01.    Security Interest..............................................................50
SECTION 4A.02.    Chattel Paper and Instruments..................................................50
SECTION 4A.03.    Borrower's Collection Privileges...............................................50
SECTION 4A.04.    Collateral Account.............................................................51



                                      iii


                                                                                              
SECTION 4A.05.    Lock-Box.......................................................................51
SECTION 4A.06.    Additional Collateral..........................................................51
SECTION 4A.07.    Further Assurances of Collateral...............................................51

ARTICLE V NEGATIVE COVENANTS.....................................................................51
SECTION 5.01.     Restricted Payments............................................................51
SECTION 5.02.     Investments....................................................................51
SECTION 5.03.     Indebtedness...................................................................51
SECTION 5.04.     Maintenance of Permitted Indebtedness..........................................51
SECTION 5.05.     Judgments......................................................................50
SECTION 5.06.     Transactions with Affiliates and Selling Shareholders..........................52
SECTION 5.07.     Line of Business; Name; Structure..............................................52
SECTION 5.08.     Stock..........................................................................52
SECTION 5.09.     Dividends; Distributions; Repurchases..........................................52
SECTION 5.10.     Subsidiaries...................................................................52
SECTION 5.11.     Control........................................................................52
SECTION 5.12.     Consolidations; Mergers; Dispositions; Acquisitions............................53
SECTION 5.13.     Liens; Bailments; Certain Sales................................................53
SECTION 5.14.     Risk Management Agreements.....................................................53

ARTICLE VI EVENTS OF DEFAULT;  CERTAIN REMEDIES UPON DEFAULT.....................................53
SECTION 6.01.     Events of Default..............................................................53
SECTION 6.02.     Acceleration...................................................................54
SECTION 6.03.     Other Remedies.................................................................56
SECTION 6.04.     Receiver.......................................................................57
SECTION 6.05.     Waivers........................................................................58
SECTION 6.06.     Arbitration....................................................................58

ARTICLE VII MISCELLANEOUS........................................................................59
SECTION 7.01.     Further Assurances.............................................................59
SECTION 7.02.     Successors and Assigns.........................................................59
SECTION 7.03.     Severability...................................................................59
SECTION 7.04.     Governing Law..................................................................59
SECTION 7.05.     Jurisdiction; Venue; Service...................................................60
SECTION 7.06.     Counterparts...................................................................60
SECTION 7.07.     Survival.......................................................................60
SECTION 7.08.     Notices........................................................................60
SECTION 7.09.     Lender Appointed Attorney-in-Fact..............................................61
SECTION 7.10.     Remedies Cumulative............................................................61
SECTION 7.11.     Amendments, Waivers and Consents...............................................61
SECTION 7.12.     Waivers of Claims; Consequential and Punitive Damages..........................62
SECTION 7.13.     No Third Party Beneficiaries...................................................62
SECTION 7.14.     Entire Agreement...............................................................62
SECTION 7.15.     Waiver of Jury Trial...........................................................62
SECTION 7.16.     Judgment Currency..............................................................62



                                      iv


                                                                                              
SECTION 7.17.     Waiver of Immunity.............................................................63
SECTION 7.18.     Publicity......................................................................63

ARTICLE VIII  NO FURTHER OBLIGATION - REVOLVING CREDIT LOANS AND LETTERS OF CREDIT...............63
- ----------------------------------------------------------------------------------

SECTION 8.01.     Repayment of Term Loan and Subordination Agreement.............................63
SECTION 8.02.     Continuing Obligation to Subordinate...........................................64
SECTION 8.03.     EAGL Security..................................................................64



                                       v


                                   SCHEDULES

         SCHEDULE 3.05     Ownership Disclosure
         SCHEDULE 3.09     Investment Disclosure
         SCHEDULE 3.10     Deposit Accounts Disclosure
         SCHEDULE 3.11     Indebtedness Disclosure
         SCHEDULE 3.12     Lien Disclosure
         SCHEDULE 3.13     Material Agreements Disclosure
         SCHEDULE 3.14     Proceedings Disclosure
         SCHEDULE 3.16     Insurance Disclosure
         SCHEDULE 3.17     Intellectual Property Disclosure
         SCHEDULE 3.18     Special Property Disclosure
         SCHEDULE 3.19     Margin Stock Disclosure
         SCHEDULE 3.20     Tax Identification Number Disclosure
         SCHEDULE 3.21     Business Disclosure
         SCHEDULE 3.22     Name, Structure Disclosure
         SCHEDULE 3.23     Designated Locations Disclosure
         SCHEDULE 3.24     Labor Disclosure
         SCHEDULE 3.25     ERISA Disclosure
         SCHEDULE 3.25A    UK Plan Disclosure
         SCHEDULE 3.26     Environmental Disclosure
         SCHEDULE 3.35     Risk Management Agreements Disclosure
         SCHEDULE 3.39     Benefits Disclosure
         SCHEDULE 3.43     Principals Disclosure

         SCHEDULE I

                                      vi


                      AMENDMENT NO. 2 AND RESTATEMENT OF
                         CREDIT AND SECURITY AGREEMENT


          THIS AMENDMENT NO. 2 AND RESTATEMENT OF CREDIT AND SECURITY AGREEMENT
(this "Restatement"), dated this 24th day of November, 1999, made by and among
APPLIED BIOSCIENCE INTERNATIONAL INC., a Delaware corporation ("Lender"),
ENVIRON HOLDINGS, INC., a Delaware corporation ("EHI"), and ENVIRON
INTERNATIONAL CORPORATION (formerly APBI Environmental Sciences Group, Inc.), a
Virginia corporation ("US Corporation"), hereby amends and restates in its
entirety that certain Credit and Security Agreement dated February 2, 1999 by
and among Lender, EHI and US Corporation (as heretofore amended by Amendment No.
1 to Credit and Security Agreement dated March 30, 1999 by and among Lender, EHI
and US Corporation, herein the "Credit Agreement").

                             W I T N E S S E T H:

          WHEREAS, Lender, EHI and US Corporation desire to amend and restate in
its entirety the Credit Agreement to make minor changes thereto and to correct
certain typographical, spelling and other errors and omissions therein.

          NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Lender, EHI and US Corporation hereby agree to amend and restate
in its entirety the Credit Agreement as follows:

                                   ARTICLE I
                        CONSTRUCTION AND DEFINED TERMS

     SECTION 1.01. Articles and Sections.  The Article and Section headings and
                   ---------------------
captions in this Agreement are for convenience only and shall not affect the
construction or interpretation of this Agreement. The references in this
Agreement to Articles and Sections shall be read as Articles or Sections of this
Agreement unless otherwise specifically provided.

     SECTION 1.02. Exhibits and Schedules. The references in this Agreement to
                   ----------------------
specific Exhibits and Schedules shall be read as references to such specific
Exhibits and Schedules attached, or intended to be attached, to this Agreement
and any counterpart of this Agreement and regardless of whether they are in fact
attached to this Agreement, and including any amendments, supplements, and
replacements thereto from time to time.

     SECTION 1.03. Credit Documents. References in this Agreement to Credit
                   ----------------
Documents, and any of the documents that are included within the definition of
Credit Documents, shall include such amendments, supplements, and replacements
as may be made thereto or therefor from time to time.

     SECTION 1.04. Discretionary Consents. Wherever a provision of this
                   ----------------------
Agreement


or any other Credit Document provides for Lender's consent, any such consent may
be provided or withheld in Lender's reasonable discretion (unless otherwise
expressly provided herein or in such other Credit Document) and the granting of
consent in one instance shall not constitute or imply the granting of consent in
any similar or other instance.

     SECTION 1.05.  Accounting Terms. Accounting terms used but not otherwise
                    ----------------
defined in this Agreement shall have the meanings provided by, and be construed
in accordance with, GAAP.

     SECTION 1.06.  Time. Time is of the essence of this Agreement.
                    ----

     SECTION 1.07.  Defined Terms. Unless otherwise expressly stated in this
                    -------------
Agreement, capitalized terms used in this Agreement shall have the following
meanings:

     "Account Debtor"  Any Person as to whom any Borrower is a creditor, and
including any person obligated to any Borrower pursuant to any Account,
Instrument, Chattel Paper, General Intangible, Document, Investment Property,
charter or lease, and including any guarantor, endorser, or surety of any of the
foregoing Property, and any Person that provides security for any of the
foregoing Property, and any maker or endorser of any Item of Payment given to
Debtor other than cash.

     "Accounts"  As defined in Section 4A.01.

     "Acquisition Loan"  The acquisition loan referred to in Article II-B of
this Agreement.

     "Additional LIBOR Costs"  Costs that Lender determines are attributable to
Lender's making or maintaining Loans based upon the LIBOR Rate or its obligation
to make Loans based upon the LIBOR Rate under this Agreement, or any reduction
in any amount receivable by Lender under this Agreement in respect of any such
Loans or such obligation.

     "Affiliate" means, as to any Person, any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person, and including any Subsidiary of such Person.
For purposes of this definition, "control" (including, with correlative
meanings, the terms "controlling," "controlled by," and "under common control
with"), as used with respect to any Person, shall mean the possession, directly
or indirectly, of the power to direct or cause the direction of the management
or policies of such Person, whether through ownership of voting securities, by
agreement or otherwise; provided that legal or beneficial ownership of thirty
percent (30%) or more of the voting securities (or other ownership interests
other than limited partnership interests) of a Person shall in any event be
deemed to be control.

     "Applicable Law"  As to any Person, all Laws applicable to such Person and
all Laws applicable to any Property of such Person.

     "Applicable Revolving Credit Loan Interest Rate"  The floating and
fluctuating interest rate per annum at all times equal to the LIBOR Market Index
Rate plus the Applicable Revolving

                                       2


Credit Loan Margin. The Applicable Revolving Credit Loan Interest Rate shall
increase or decrease, as the case may be, with increases and decreases in the
LIBOR Market Index Rate.

     "Applicable Revolving Credit Loan Margin"  Two percent (2.00%) per annum.

     "Applicable Term Loan Interest Rate" The floating and fluctuating interest
rate per annum at all times equal to the LIBOR Rate plus the Applicable Term
Loan Margin. At the commencement of each Interest Period, the Applicable Term
Loan Interest Rate shall increase or decrease, as the case may be, with
increases and decreases in the LIBOR Rate. The Applicable Term Loan Interest
Rate shall remain in effect, subject to the provisions of this Agreement, from
and including the first day of the Interest Period to and including the last day
of the Interest Period for which it is determined.

     "Applicable Term Loan Margin"  As set forth in the following schedule:

          -----------------------------------------------------------
            Consolidated Funded Debt        Applicable Term Loan
            to EBITDA                       Margin
          -----------------------------------------------------------
          *  4.0:1                          235 basis points
          -----------------------------------------------------------
          *  3.0:1, but ** 4.0:1            225 basis points
          -----------------------------------------------------------
          *  2.5:1, but ** 3.0:1            215 basis points
          -----------------------------------------------------------
          ** 2.5:1                          175 basis points
          -----------------------------------------------------------

* more than equal to
** less than


     "Article 8" Article 8 of the UCC.

     "Article 9" Article 9 of the UCC.

     "Articles of Incorporation"  As to any corporation, the Articles of
Incorporation or Certificate of Incorporation, or similar charter document, and
all amendments thereto.

     "Available Letter of Credit Amount"  The amount equal to the lesser of (a)
the Letter of Credit Maximum Amount, or (b) the Available Revolving Credit
Amount.

     "Available Revolving Credit Amount"  As of any date of determination, the
amount equal to (a) the Revolving Credit Committed Amount less (b) the aggregate
of the outstanding principal balances of any Revolving Credit Loans and the
aggregate face amounts of any outstanding Letters of Credit.

     "Lender Accounts"  As defined in Section 4A.01.

     "Borrower" or "Borrowers" EHI and US Corporation, individually or
collectively.

     "Borrower Group"  The Borrowers and their Consolidated Subsidiaries.

     "Borrower Group Agent"  As defined in Section 2D.13.

     "Business Day"  Any day other than a Saturday, Sunday or legal holiday on
which

                                       3


Lender is open for the transaction of a substantial part of its business.

     "Capital Adequacy Requirement" Any law, rule, regulation or guideline
regarding capital adequacy (including any law, rule, regulation or guideline
adopted pursuant to or arising out of the report of the Basle Committee on
Lending Regulations and Supervisory Practices entitled "International
Convergence of Capital Measurement and Capital Standards" dated July 1988 (as
amended, modified and supplemented and in effect from time to time or any
replacement thereof)), or the adoption or implementation of any Regulatory
Change regarding capital adequacy, or any change in the interpretation or
administration of any thereof by any Governmental Authority charged with the
interpretation or administration thereof, or compliance by Lender (or Lender's
holding company) with any request or directive, regarding capital adequacy
(whether or not having the force of law) of any Governmental Authority.

     "Capital Expenditure" For any Person, expenditures (including the aggregate
amount of Capital Lease Obligations incurred during such period) made by such
Person to acquire, use, or construct fixed assets, plant or equipment (including
office equipment, software, hardware and other computer equipment), or Real
Estate Property and including renewals, improvements and replacements, but
excluding repairs, computed in accordance with GAAP.

     "Capital Lease Obligations" For any Person, all obligations of such Person
to pay rent or other amounts under a lease of Property, or other agreement
conveying the right to use Property, to the extent such obligations are required
to be classified and accounted for as a capital lease on a balance sheet of such
Person under GAAP, and, for purposes of this Agreement, the amount of such
obligations shall be the capitalized amount thereof, determined in accordance
with GAAP. Notwithstanding the foregoing, Capital Lease Obligations shall also
include so-called synthetic leases that would not otherwise be classified as
capital leases under GAAP and the amount of such obligations shall be the
capitalized amount thereof determined as though such obligations were classified
as capital leases under GAAP.

     "Change of Control" A change in the power to direct or cause the direction
of the management or policies of any Obligor, whether through ownership of
voting securities, by agreement or otherwise. Without limiting the generality of
the foregoing, each of the following shall be deemed to constitute a Change in
Control: (a) a change in the legal or beneficial ownership of fifty percent
(50%) or more of the voting securities (or other ownership interests other than
limited partnership interests) of any Obligor, or (b) except as contemplated in
the Shareholder Agreement, if any Obligor is a corporation, the replacement of a
majority of the Board of Directors of such Obligor from the Directors who
constituted the Board of Directors of such Obligor on the later of (i) the date
of election of the original Board of Directors of such Obligor, or (ii) the
Effective Date, or (c) if any Obligor is a partnership or limited liability
company, the replacement of the managing general partner or managing member, as
the case may be, or (d) the sale, transfer, or other disposition of all or
substantially all of such Obligor's assets in one or a series of transactions to
the extent such sale, transfer or other disposition constitutes a material
portion of Borrower Group's business..

     "Chattel Paper" As defined in Section 4A.01.

                                       4


     "Code" means the Internal Revenue Code of 1986, as amended.

     "Collateral" As defined in Section 4A.01.

     "Collateral Account"  A non-interest bearing deposit account, or at
Lender's election, an interest-bearing deposit account, controlled by Lender,
into which Items of Payment processed through the Lock-Box or otherwise received
by any Borrower or Lender are to be deposited after an Event of Default and
demand by Lender.

     "Collection Costs"  All commercially reasonable costs and expenses of
administering and enforcing this Agreement and the other Credit Documents, and
including any and all costs and expenses of collecting the Obligations and
exercising Lender's rights and remedies under the Credit Documents as against
the Collateral and any other Property intended by this Agreement and the other
Credit Documents to be given to Lender as security for the Obligations.

     "Consolidated"  When used with reference to the Consolidated financial
statements of the Borrower Group, shall mean the financial statements of EHI and
its Consolidated Subsidiaries as consolidated in accordance with GAAP, after the
elimination of inter-company items.

     "Consolidated Funded Debt" The sum of all indebtedness for borrowed money,
including, without limitation, capital lease obligations, subordinated debt
(including debt subordinated to Lender), and unreimbursed drawings under letters
of credit, or any other monetary obligation evidenced by a note, bond, debenture
or other agreement of that person or entity.

     "Consolidated Subsidiaries" Any Person the assets and liabilities of which
are required to be consolidated with those of any Borrower in its consolidated
financial statements in accordance with GAAP.

     "Consolidated Tangible Net Worth"  The sum of the following in respect of
the Borrower Group (on a consolidated basis and excluding intercompany items):
(i) the amount of issued and outstanding share capital, plus (ii) the amount of
additional paid-in-capital and retained income (or, in the case of a deficit,
minus the amount of such deficit), plus (iii) any accrual for monies to be paid
or received from shareholders in connection with the repurchase or sale of stock
under the Shareholders Agreement, minus (iv) the  following (without duplication
of deductions in respect of items already deducted in arriving at surplus and
retained earning): the book value of all assets which would be treated as
intangibles under the generally accepted accounting principles and practices in
the United States of America including, without limitation, capitalized
expenses, goodwill, trademarks, trade names, franchises, copyrights, patents and
unamortized debt discount and expenses.

     "Credit Commencement Date"  The Effective Date.

     "Credit Document" or "Credit Documents" This Agreement, the Notes, each
Pledge Agreement, each Seller Subordination Agreement, each UK Credit Document,
and each and every other agreement (of any kind), promissory note, instrument,
allonge, letter of credit

                                       5


application, assignment, certificate, guaranty, indemnity, bond, financing
statement, annex, exhibit, schedule, notice, request or other document that
evidences, secures, guarantees or otherwise relates directly or indirectly to
the Obligations or Lender's rights and remedies with respect thereto, or that is
given to Lender to induce Lender to make, issue or extend the Obligations or any
thereof. "Credit Document" shall not include any swap agreement (as defined in
11 U.S.C. (S)101.

     "Credit Termination Date" March 1, 2002, as the same may be extended with
respect to the Revolving Credit Loans pursuant to this Agreement.

     "Default" Any event, occurrence, circumstance, act, or failure to act
which is or with the giving of notice and/or the passage of time would become an
Event of Default.

     "Default Rate" As applicable to any Loan, the interest rate per annum that
is three percent (3.00%) per annum greater than the interest rate that would be
applicable to such Loan prior to the occurrence of an Event of Default.

     "Depositary" Each financial institution at which any Borrower has a deposit
account or a securities account or a Lender Account.

     "Depositary Agreement" A written agreement, satisfactory to Lender in form
and substance, among Borrower, Lender and a Depositary.

     "Designated Location" Any place of business or other location for each
Borrower Group member listed on Schedule 3.23.
                                -------------

     "Disclosure Letter" The disclosure letter delivered by Selling
Shareholders to EHI pursuant to and concurrently with the Stock Purchase
Agreement.

     "Documents" As defined in Section 4A.01.

     "Dollars" The lawful currency of the United States of America.

     "EAGL" Environmental Assessment Group Limited, a private company limited
by shares incorporated in England and Wales, which, upon consummation of the
purchase of the Shares, shall be wholly owned by EHI.

     "EBITDA" For any period, on a rolling four (4) quarter period basis, the
consolidated net income of the Borrower Group for such period, after all
expenses and other proper charges, except interest, depreciation, amortization
and income taxes, determined in accordance with GAAP, and net of incentive
compensation, and eliminating, without duplication: (i) all intercompany items,
(ii) all earnings attributable to equity interests in persons that are not
subsidiaries unless actually received by the Borrower Group, (iii) all income
arising from the forgiveness, adjustment, or negotiated settlement of any
indebtedness (except for the recovery of trade account receivables previously
charged off directly against income in the ordinary course of business not to
exceed three percent (3%) of EBITDA for such period), (iv) any extraordinary

                                       6


items of income or expense, (v) any increase or decrease in income arising from
any change in the Borrower Group's method of accounting, (vi) any interest
income, and (vii) any non-cash compensation charge recorded to reflect
appreciation of the Borrower Group's stock or stock options (provided however,
that the exclusion in this subsection (vii) shall not apply to any Borrower who
has converted its method of accounting to fixed plan accounting).

     "Effective Date" February 2, 1999.

     "EHI Principals" Mitchell B. Smith, Joseph H. Highland, Ph.D., and the
other individuals listed in Schedule 3.43, who are residents of the United
States and management employees of the U.S. Corporation and as of the Effective
Date are the sole shareholders of EHI.

     "EIL" Environ International Limited, a private company limited by shares
incorporated in England and Wales, which, upon consummation of the purchase of
the Shares, shall be wholly owned by EHI.

     "Environmental Affiliate" As to any Person (referred to in this definition
as the "successor"), any other Person whose liability (contingent or otherwise)
for an Environmental Claim the successor has retained, assumed or otherwise
become or remained liable for, whether by contract, operation of law or
otherwise.

     "Environmental Claim" With respect to any Person, any written notice,
claim, suit, order, information request, demand or other communication (referred
to in this definition collectively as a "claim") by any other Person alleging,
asserting or relating to such first Person's liability for investigatory costs,
cleanup costs, governmental response costs, damages to natural resources or
other Property, personal injuries, fines or penalties arising out of, based on
or resulting from (i) the presence, release, or threatened release into the
environment, of any Regulated Substance at any location, whether or not owned by
such Person, or (ii) circumstances forming the basis of any liability or
violation under any Environmental Law. Environmental Claim shall include any
claim by any governmental authority or other Person for enforcement, cleanup,
removal, response, remedial or other actions or damages pursuant to any
applicable Environmental Law, and any claim by any third party seeking damages,
contribution, indemnification, cost recovery, compensation or injunctive relief
resulting from the presence of Regulated Substances or arising from alleged
injury or threat of injury to health, safety or the environment.

     "Environmental Laws" Any statute, regulation, rule, permit, code, common
law, judicial decision, order or judgment of any applicable federal, state,
local or foreign jurisdiction relating to pollution, hazardous substances,
hazardous wastes, petroleum or otherwise relating to protection of the
environment, natural resources or human health, including, by way of example and
not by way of limitation, the Clean Air Act, the Clean Water Act, the Resource
Conservation and Recovery Act, the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA"), the Toxic Substances Control Act, and
the Emergency Planning and Community Right-to-Know Act, all as amended.

     "Environmental Permits" All registrations, licenses, permits,
authorizations and

                                       7


approvals that are required by any Environmental Laws or any Governmental
Authority responsible for the administration of any Environmental Laws,
including any necessary National Pollution Discharge Elimination System Permits.

     "ERISA" The Employee Retirement Income Security Act of 1974 and the
regulations promulgated and rulings issued thereunder, as amended from time to
time.

     "ERISA Affiliate" Any trade or business (whether or not incorporated)
which is treated as a single employer with any Borrower under Section 414 of the
Code.

     "ERISA Event" Any of the following:  (i) a Reportable Event with respect
to a Qualified Plan or a Multiemployer Plan; (ii) any prohibited transaction
described in Section 406 of ERISA which is not exempt by reason of Section 408
of ERISA, or any prohibited transaction described in Section 4975(c) of the Code
which is not exempt by reason of Section 4975(c) or (d) of the Code, with
respect to any Plan (other than a Multiemployer Plan); (iii) a complete or
partial withdrawal from a Multiemployer Plan by any Borrower or any ERISA
Affiliate; (iv) the complete or partial withdrawal of any Borrower or an ERISA
Affiliate from a Qualified Plan during a plan year in which the withdrawing
entity was, or was treated as, a "substantial employer" as defined in Section
4001(a)(2) of ERISA; (v) a failure to pay when due any amount which, under the
provisions of any Plan or applicable law relating to any Plan, Borrower or any
ERISA Affiliate is required to pay; (vi) the filing of a notice of intent to
terminate, or the treatment of a plan amendment as a termination, under Sections
4041 or 4041A of ERISA; (vii) an event or condition which might reasonably be
expected to constitute grounds under Section 4042 of ERISA for the termination
of, or the appointment of a trustee to administer, any Qualified Plan or
Multiemployer Plan; (viii) the imposition of any liability under Title IV of
ERISA, other than PBGC premiums due but not delinquent under Section 4007 of
ERISA, upon Borrower or any ERISA Affiliate; (ix) a violation of Sections 404 or
405 of ERISA, or of the exclusive benefit rule under Section 403(c) of ERISA, by
any fiduciary (as defined in Section 3(21) of ERISA) or disqualified person (as
defined in Section 4975(e) of the Code) with respect to any Plan for which any
Borrower or any ERISA Affiliate may be directly or indirectly liable; (x) the
incurrence by any Borrower or any ERISA Affiliate of an obligation to pay
additional premiums to the PBGC under Section 4006(a)(3)(E) of ERISA with
respect to any Plan; and (xi) any lien on the assets of any Borrower arising in
connection with any Plan.

     "Equipment" As defined in Section 4A.01.

     "Event of Default" An Event of Default set forth in Article VI .

     "Financial Covenants" The financial covenants of the Borrower Group set
forth in Section 4.19 through 4.23 of this Agreement.

     "GAAP or generally accepted accounting principles" Generally accepted
accounting principles in the United States of America as in effect from time to
time as set forth in the opinions and pronouncements of the Accounting
Principles Board and the American Institute of Certified Public Accountants and
the statements and pronouncements of the Financial Accounting Standards Board
which are applicable to the circumstances as of the date of

                                       8


determination consistently applied. For Persons incorporated outside the United
States, "GAAP" shall mean the accounting principles that are generally accepted
within the jurisdiction of such Person's incorporation.

     "General Intangibles" As defined in Section 4A.01.

     "Governmental Authority" Any executive, judicial, legislative or other
branch, department, office, commission, board, bureau, agency, or
instrumentality of the government of any jurisdiction, including the federal
government of the United States and any foreign country, and any state,
provincial, local or municipal government, and including any monetary authority,
and including the Persons holding or exercising the powers, privileges,
discretions, titles, offices or authorities of any thereof, and including any
central bank or comparable authority or agency.

     "Guarantee" A guaranty or endorsement of, contingent agreement to purchase
or to furnish funds for the payment or maintenance of, or otherwise to be or
become contingently liable under or with respect to, the Indebtedness, other
obligations, net worth, or an agreement to purchase, sell, lease (as lessee or
lessor), or license (as licensee or licensor) Property, products, materials,
supplies or services primarily for the purpose of enabling a debtor to make
payment of such debtor's obligations or an agreement to assure a creditor
against loss, and including causing a bankor other financial institution to
issue a letter of credit or other similar instrument for the benefit of another
Person, but excluding endorsements for collection or deposit in the ordinary
course of business.

     "Guarantor" Any Person other than Borrower who at any time provides to
Lender collateral security or other credit support for the Obligations,
including any co-borrower, endorser, guarantor, surety, or accommodation party,
any Person who furnishes, issues, confirms, or advises any letter of credit for
the benefit of Lender, any Person who furnishes any bond for the benefit of
Lender, any person who makes any guaranty, security agreement, pledge agreement,
negative pledge agreement, collateral assignment, indemnity agreement, deed of
trust, or similar collateral security arrangement for the benefit of Lender, or
any Person who hypothecates, pledges or delivers any Property to Lender to
secure the Obligations.

     "Guaranty Agreement" With regard to each Guarantor, a Guaranty Agreement
satisfactory to Lender in form and substance.

     "Held Items" As defined in Section 4A.01.

     "Include and including" Unless otherwise expressly limited herein, the
words "include" and "including" shall be read to mean "include, without
limitation," and "including, without limitation," as the case may be.

     "Indebtedness" As applied to any Person, and as measured without
duplication, all items (except items of capital stock, capital or paid-in-
surplus or of retained earnings) (a) which in accordance with GAAP, would be
included in determining total liabilities as shown on the liability side of a
balance sheet of such Person, and (b) to the extent not otherwise included in
clause (a) of this definition, all of such Person's (i) Indebtedness for
Borrowed Money, (ii) trade

                                       9


accounts payable, and (iii) indebtedness of another Person secured by any Lien
to which any Property owned or held by such Person is subject, whether or not
the indebtedness secured thereby shall have been assumed, and (iv) obligations
under any Guarantee.

     "Indebtedness for Borrowed Money" As applied to any Person, and as measured
without duplication, all of such Person's Indebtedness from (a) obligations in
respect of money borrowed, and including those evidenced by bonds, debentures,
notes and other debt instruments, (b) Capital Lease Obligations, (c)
Indebtedness on which interest is accrued or charged, (d) reimbursement
obligations under letters of credit, liquidated, contingent or otherwise, (e)
obligations of, or indebtedness issued or assumed by, such Person, to pay the
deferred purchase price or acquisition price of Property or services, and
including (i) Capital Expenditures, (ii) trade accounts that are payable more
than thirty (30) days after the date the respective goods are delivered or the
respective services are rendered, and (iii) trade accounts payable that have
been outstanding more than thirty (30) days, and (f) obligations as a guarantor,
surety, or accommodation party of items of another Person that as to such other
Person would constitute Indebtedness for Borrowed Money of such other Person
under the preceding clauses of this definition.

     "Instruments" As defined in Section 4A.01.

     "Intellectual Property" Patents, trademarks, service marks, collective
marks, certification marks, trade names, commercial names, brand names,
copyrights, and mask works, and including other intangible Property with respect
to which a security interest in such Property would be subject to a statute of
the United States or any Law of any foreign jurisdiction (to the extent that
such statute or Law governs the rights of parties to, and third parties affected
by, transactions in such particular types of Property), and rights relating to
any of the foregoing, and applications, registrations, re-applications, and re-
registrations for any of the foregoing, and amendments, reissues, renewals, or
supplementations of, or substitutions or replacements for, any of the foregoing,
and including other rights or interests in any of the foregoing, and rights to
sue for past, present or future violations or infringements of any of the
foregoing, and including any agreements, rights, options, or licenses to
purchase or otherwise acquire or use or benefit from (or to sell or otherwise
permit any other Person to acquire or use or benefit from) any of the foregoing,
and goodwill associated with or related to any of the foregoing or any Borrower
or any Borrower's business. Intellectual Property includes manufacturing
formulas, trade secrets, know how, shop rights, designs, logos, tags, labels,
franchises, distributorships, customer lists, rights to contract and/or
insurance expirations and renewals, personal services contracts, employment
contracts, confidentiality agreements and similar covenants, rights under
agreements not to compete and similar covenants of any Person regarding any of
the foregoing, and including opinions and advice of counsel, consultants,
advisors, and experts (including research materials, engineering reports and
other work product of employees), as memorialized in any form, regarding any of
the foregoing.

     "Interest Period" Initially, the period commencing on the date hereof and
ending on the day immediately preceding the first Payment Date, and thereafter,
each period commencing on the first day after the last day of the immediately
preceding Interest Period and ending on the day immediately preceding the next
Payment Date, provided, (i) any Interest Period that would

                                       10


otherwise end on a day that is not a New York business day shall be extended to
the next New York business day, unless such extension would carry such Interest
Period into the next month, in which event such Interest Period shall end on the
preceding New York business day; (ii) any Interest Period that ends in a month
for which there is no day which numerically corresponds to the Payment Date
shall end on the last New York business day of such month, and (iii) any
Interest Period that would otherwise extend past the maturity date of the
applicable Loan shall end on the maturity date of such Loan.

     "Inventory" As defined in Section 4A.01.

     "Investment Property" As defined in Section 4A.01.

     "Investments" With respect to any Person: (a) any Indebtedness for Borrowed
Money of any other Person owed to such Person; (b) the acquisition (whether for
cash, Property, services or securities or otherwise) of capital stock, bonds,
notes, debentures, partnership interests or other ownership interests or other
securities of any other Person or any agreement to make any such acquisition
(including any "short sale" or any sale of any securities at a time when such
securities are not owned by the Person entering into such sale); (c) acquire by
purchase or otherwise any of the outstanding capital stock of, or all or
substantially all of the business, property or assets of, any Person, (d) the
making of any deposit with, or advance, loan or extension of credit to, any
other Person (including the purchase of Property from another Person subject to
an understanding or agreement, contingent or otherwise, to resell such Property
to such Person, but excluding trade credit extended by a Person arising from
inventory sold or services provided in the ordinary course of such Person's
business).

     "Item of Payment" As to any Person, all checks, drafts, cash, and other
remittances of payment of, or on account of, any Accounts, Instruments, Chattel
Paper, Documents, or General Intangibles, or Investment Property or received as
proceeds of the sale or lease of any Property or as payment for any services
rendered.

     "Laws" At any time, all laws, statutes, regulations, ordinances, rules,
codes, decrees, orders, and other directives of any federal, state, district,
territorial, or local government within the United States of America (or any
national, state, provincial or local government outside the United States), or
any branch, department, agency or office thereof, applicable to any party to any
Credit Document, or to any Property (including any Collateral) of any party to
any Credit Document, or to any business, industry, or other activity in which
any party to the Credit Documents may be engaged from time to time, including
all Environmental Laws.

     "Letter of Credit" Any standby letter of credit issued by Lender under this
Agreement or any other Credit Document in a face amount denominated in Dollars
or British currency for Borrower's account.

     "Letter of Credit Application" A letter of credit application completed on
Lender's customary form, or such other form that Lender may find satisfactory in
Lender's discretion, and executed and submitted to Lender by Borrower, together
with such other information, documents, and instruments as Lender may request
Borrower to submit to Lender with such

                                       11


application form.

     "Letter of Credit Collateral Account" Any deposit account, at and/or for
the benefit of Lender, into which Borrower may be required by Lender, from time
to time, and in accordance with the terms of this Agreement, to make cash
deposits to be held by Lender as cash collateral to secure Borrower's contingent
and other reimbursement obligations to Lender under outstanding Letters of
Credit.

     "Letter of Credit Fee" The amount equal to two percent (2.0%) per annum of
the face amount of each Letter of Credit (with a minimum fee of Three Hundred
Dollars ($300).

     "Letter of Credit Maximum Amount" Five Hundred Thousand Dollars
($500,000).

     "Letter of Credit Reserve Amount" An amount reasonably determined by Lender
to reserve against fluctuations in conversion rates between U.S. Dollars and
Other Currency in the event Lender issues Letters of Credit in Other Currency.
Such amount shall reduce the Letter of Credit Maximum Amount and shall be
subject to recalculation from time to time in Lender's reasonable discretion
whenever there are outstanding Letters of Credit in Other Currency.

     "LIBOR Business Day" Any Business Day that is also a day for trading by and
between lenders in Dollar deposits in the London interbank market.

     "LIBOR Market Index Rate" For any day, the rate for 1-month U.S. dollar
deposits as reported on Telerate page 3750 as of 11:00 a.m., London time, on
such day, or if such day is not a London business day, then the immediately
preceding London business day (or if not so reported, then as determined by
Lender from another recognized source or interbank quotation).

     "LIBOR Rate" With respect to each day during each Interest Period, the
rate for U.S. dollar deposits of 1-month maturity as reported on Telerate page
3750 as of 11:00 a.m., London time, on the second London business day before the
relevant Interest Period begins (or if not so reported, then as determined by
Lender from another recognized source or interbank quotation).

     "LIBOR Rate Loans" Loans bearing interest at a rate determined on the
basis of the LIBOR Rate.

     "LIBOR Reserve Requirement" For any day as used in the determination of
the LIBOR Rate, the aggregate (without duplication) of the rates (expressed as a
decimal fraction) or reserve requirements in effect on such day under any
regulations of the Board of Governors of the Federal Reserve System (or other
Governmental Authority having jurisdiction with respect thereto) prescribed for
eurocurrency funding (currently referred to as Eurocurrency liabilities in
Regulation D) maintained by a member bank of such system.

     "Lien" means any security interest, security agreement, real estate
mortgage, chattel mortgage, deed of trust, title retention contract, security
title, factor's lien, assignment, pledge, grant or conveyance for security
purposes or in settlement of debt, or other arrangement for security purposes,
deed-in-lieu of foreclosure or to secure debt, judgment lien or other lien,

                                       12


charge or encumbrance of any kind, or condemnation or other taking of Property
by any Governmental Authority (and including the commencement or pendency of any
proceedings relating to any proposed condemnation or other taking) and including
any of the foregoing arising by operation of statute or other law or the
application of equitable principles, whether perfected or unperfected, avoidable
or unavoidable, consensual or nonconsensual.

     "Lien Notice" means any instrument, document, agreement, or notice given
to, or filed, recorded, or registered with, any Person (including any
Governmental Authority), and regardless of whether required by any Law, for the
purpose of effecting, perfecting, protecting, maintaining, registering, or
giving notice of any Lien (or the possibility of a Lien and regardless of
whether any Lien other than the Lien Notice exists or the effect of the Lien
Notice) upon any of any Borrower's Property, or for any precautionary purposes,
including any of the following that may be given to, or filed, recorded, or
registered with, any Person (including any Governmental Authority) for any of
the foregoing purposes: financing statements, vehicle security interest or lien
filings, mortgages, deeds of trust, judgments, leases, indentures, security
agreements, collateral assignments, and notices of any of the foregoing.

     "Loan Request" Any written request for a Revolving Credit Loan in the form
required by Lender and executed and delivered to Lender by Borrower.

     "Loans" Individually and collectively, the Revolving Credit Loans, Term
Loan and the Acquisition Loan made under this Agreement.

     "Lock-Box" Any Obligor's lock-box administered by Lender, in accordance
with the terms of a lock-box agreement with such Obligor in form and substance
satisfactory to Lender, to which address such Obligor instructs Account Debtors
to mail or deliver Items of Payment.

     "Margin Stock" means margin stock within the meanings of Regulations G, T,
U and X of the Board of Governors of the Federal Reserve System (or any
successor) as the same may be modified and supplemented and in effect from time
to time.

     "Material Adverse Effect" A material adverse effect on (a) the property,
business, operations, financial condition, prospects, liabilities or
capitalization of the Obligors on a consolidated basis, (b) the ability of the
Obligors on a consolidated basis to perform their obligations under any of the
Credit Documents, (c) the validity or enforceability of any of the Credit
Documents, or (d) the rights and remedies of Lender under any Credit Documents.

     "Material Agreement" Any contract or agreement if the breach of such
contract or agreement by any Person or the modification or termination of such
contract or agreement by any Person would be likely to have a Material Adverse
Effect.

     "Multiemployer Plan" A multiemployer plan as defined in Sections 3(37) or
4001(a)(3) of ERISA or Section 414 of the Code in which employees of any
Borrower or an ERISA Affiliate participate or to which any Borrower or any ERISA
Affiliate contribute or is required to contribute.

                                       13


     "Negative Net Income" As defined in Section 4.23.

     "Net Income" For any period, as applied to any Person, the net income (or
deficit) of such Person for such period (taken as a cumulative whole), after
giving effect to deduction of or provision  for all operating expenses, all
taxes, any non-cash compensation charge recorded to reflect appreciation of the
Borrower Group's stock or stock options, and all other proper deductions, for
such period, all as determined in accordance with GAAP.

     "Net Worth" At any date, total assets minus total liabilities.  For the
purposes of this computation, total liabilities shall include all subordinated
debt and shall exclude any accrual for monies to be paid or received from
shareholders in connection with the repurchase or sale of stock under the
Shareholders Agreement.

     "Non-Loan Lender Credit Reserve" A non-cash reserve required by Lender in
its reasonable discretion for indebtedness, liabilities and other obligations to
Lender arising out of automated clearing house transactions, cash management
transactions, swap agreements, or other non-loan credit risks.

     "Notes" The Term Note, Revolving Credit Notes and Seller Note under this
Agreement.

     "Notification Event"  Any of the following events or occurrences:  (a) any
Default or Event of Default; or (b) any Lien or Lien Notice upon any Property of
any Borrower other than Permitted Liens; or (c) any Proceedings other than those
disclosed on Schedule 3.13 are commenced or Threatened if such pending or
             -------------
Threatened Proceeding could reasonably be expected to have a Material Adverse
Effect; or (d) any ERISA Event; or (e) the occurrence of any event or condition
that, with respect to any Borrower, gives rise to unfunded pension liabilities
or similar liabilities, severance liabilities, unemployment liabilities, wage
claims, or the like, in favor of any Person, including without limitation, any
tax authority or Governmental Authority, if such claims or liabilities could,
individually or in the aggregate, have a Material Adverse Effect; or (f) any
Environmental Claim; or (g) the occurrence of any event or condition that
constitutes a default or event of default under any Indebtedness of any Borrower
(other than the Obligations) if the acceleration of such Indebtedness as a
result of such default or event of default would have a Material Adverse Effect;
or (h) any event or fact (or change of fact) or any circumstance (or change of
circumstance) that warrants the revision of any Obligor Information in order to
cause such Obligor Information to be, and to continue to be, true, accurate and
complete in all material respects at all times; or (i) any change in incumbency
in one or more of the following offices of any Borrower's management: Chief
Executive Officer, Chief Operating Officer, Treasurer, or Director of Finance;
or (j) any occurrence, that would not otherwise be a Notification Event within
the scope of the foregoing clauses of this definition of Notification Event,
which has or reasonably may have a Material Adverse Effect.

     "Obligations"  All now existing and hereafter arising obligations,
indebtedness, and liabilities of any Borrower to Lender of any kind, whether
primary, secondary, contingent, direct or indirect, joint or several, or for
payment or for performance, and including any Borrower's obligations to pay to
Lender as and when due all principal, interest, costs and expenses, and fees
arising from or relating to loans made, or other credits granted or created, or
financial

                                       14


accommodations extended, by Lender to any Borrower at any time and in any
amount, and including such thereof as may arise in respect of letters of credit
issued, advised, confirmed, or paid by Lender on any Borrower's application or
for any Borrower's account, and including all of any Borrower's obligations,
indebtedness, and liabilities to Lender for payment or performance under this
Agreement and the other Credit Documents, and including any other claims or
judgments that Lender may have against any Borrower at any time, and including
all of each Borrower's now existing or future obligations to Lender under or in
connection with any swap agreements (as defined in 11 U.S.C. Section 101), and
including any of the foregoing arising before, during, or after the initial or
any renewal term of the Credit Documents after the commencement of any case with
respect to any Borrower under the United States Bankruptcy Code or any similar
statute (including the payment of interest and other amounts which would accrue
and become due but for the commencement and pendency of such case). Without
limiting the generality of the foregoing, the Obligations include the Loans.

     "Obligor Information" Any information furnished to Lender by or on behalf
of any Obligor at any time, including all such information furnished to Lender
in connection with Borrower's application for the credits and other
accommodations contemplated by this Agreement and the other Credit Documents,
including any information contained in any credit or loan application, or letter
of credit application, and in any financial statements, tax returns, appraisals,
environmental audits, reports, correspondence, opinion letters, annexes,
schedules, lists and exhibits relating to such application or otherwise relating
to the matters and transactions contemplated by the Credit Documents, and
including all representations and other information made to or furnished to
Lender in the Credit Documents and in the Exhibits, Schedules and certificates
relating thereto, and including any and all financial statements, tax returns,
reports, certificates, notices, annexes, schedules, lists and exhibits,
furnished to Lender from time to time in accordance with the terms of the Credit
Documents or otherwise relating to any Obligor.

     "Obligors" Each Borrower and any Guarantor.

     "Opening Day Balance Sheets" The opening day balance sheets of each
Borrowing Group member, which are more specifically described in Section 2E.03
and 4.21 and.

     "Opening Consolidated Tangible Net Worth" As defined in Section 4.21.

     "Operating Lease" Any lease of Property other than a lease that is a
Capital Lease Obligation.

     "Operating Lease Obligations" For any Person, expenditures made by such
Person or any of its Subsidiaries to lease any Property, other than expenditures
under Capital Lease Obligations.

     "Original Currency" As defined in Section 7.17.

     "Other Currency" As defined in Section 7.17.

     "Other Personalty" As defined in Section 4A.01.

                                       15


     "Payment Date" As defined in Section 2A.04.

     "Payment Year" As defined in Section 4.21.

     "Payment Office" Lender's office at 3151 Seventeenth Street Extension,
Wilmington, North Carolina 28412, or such other location as may be designated by
Lender upon written notice to Borrower.

     "PBGC" The Pension Benefit Guaranty Corporation or any entity succeeding
to any or all of its functions under ERISA.

     Permitted Indebtedness" Any of the following Indebtedness of any Borrower:
(a) Indebtedness arising in the ordinary course of business, other than
Indebtedness for Borrowed Money, that is classified as a current liability under
GAAP, (b) Indebtedness arising in the ordinary course of business, other than
Indebtedness for Borrowed Money, that is not classified as a current liability
under GAAP, (c) Permitted Indebtedness for Borrowed Money, (d) Indebtedness
under swap agreements (as defined in 11 U.S.C. (S)101) with Lender or any of its
Affiliates and any swap agreements (as defined in 11 U.S.C. (S)101) executed in
conformance with Section 4.14 or Section 5.14; (e) Indebtedness under the Seller
Note and the Stock Purchase Agreement; (f) purchase of EHI stock pursuant to the
Shareholder Agreement; and (g) any other Indebtedness specifically listed on
Schedule 3.11 on the Effective Date.
- -------------

     "Permitted Indebtedness for Borrowed Money"  Collectively, the Obligations
and any other Indebtedness for Borrowed Money specifically listed on Schedule
                                                                     --------
3.11 on the Effective Date.
- ----

     "Permitted Investments" With respect to any Borrower (a) any Investment in
any Person that is a direct wholly-owned Subsidiary of such Borrower on the
Effective Date; (b) loans in the ordinary course of business to employees of any
Borrower or any direct wholly-owned Subsidiary of any Borrower for any
Borrower's or such Subsidiary's business purposes and not to exceed Two Hundred
Fifty Thousand Dollars ($250,000) in the aggregate outstanding at any time; (c)
normal and customary advances of sales commissions to employees of any Borrower;
(d) endorsements of negotiable instruments and similar negotiable documents in
the ordinary course of any Borrower's business; (e) deposits with, including
certificates of deposit issued by, Lender or Lender's parent; (f) Investments
made through Lender, which must be reasonably acceptable to Lender; (g) swap
agreements (as defined in 11 U.S.C. (S)101) with Lender or any of its Affiliates
and any swap agreements (as defined in 11 U.S.C. (S)101) executed in conformance
with Section 4.14 or Section 5.14; (h) any Investments specifically listed on
Schedule 3.09 on the Effective Date; and (i) purchases of EHI stock pursuant to
- -------------
the Shareholder Agreement; and (j) any Investments which, during any twenty-four
(24) month period, do not exceed in the aggregate Five Hundred Thousand Dollars
($500,000).

     "Permitted License"  With regard to any Obligor, the use by any other
Person of Intellectual Property of such Obligor in accordance with an arms-
length written license agreement pursuant to which royalties are paid to such
Obligor in the ordinary course of

                                       16


business.

     "Permitted Lien"  Each Lien listed on Schedule 3.12 and any of the
                                           -------------
following Liens: (i) any Lien in favor of Lender; (ii) Liens for taxes which are
not yet delinquent; (iii) security interests that secure the Seller Note that
are (1) by their terms expressly subordinate to the security interests of
Lender, (2) if recorded, subordinate of record to the security interests of
Lender, and (3) subject to the terms of the Seller Subordination Agreement; (iv)
on a consolidated basis, (1) Liens on equipment and other personal property
(which Liens secure only such purchase-money financing) or (2) capital leases,
the sum of which Liens on equipment and other personal property and capital
leases not to exceed in the aggregate Five Hundred Thousand Dollars ($500,000)
incurred in any fiscal year or Two Million Dollars ($2,000,000) in the aggregate
from and after the Effective Date; and (v) customary landlord Liens under
Operating Leases, which Liens are limited to tangible personal property on the
leased premises and security deposits.

     "Person" Any natural person, corporation, limited liability company,
partnership, joint venture, entity, association, joint-stock company, trust or
unincorporated organization and any Governmental Authority.

     "Plan" An employee benefit plan (as defined in Section 3(3) of ERISA)
which any Borrower or any ERISA Affiliate sponsors or maintains or to which any
Borrower or any ERISA Affiliate is making or is obligated to make contributions,
including any Multiemployer Plan or Qualified Plan.

     "Pledge Agreement" Any written pledge agreement in form and substance
satisfactory to Lender, given by any Person to pledge to Lender such Person's
capital stock in Borrower or any other Person to secure all or any part of the
Obligations.

     "PPDI" Pharmaceutical Product Development, Inc., the parent corporation of
Selling Shareholders.

     "Primary Responsible Officer" As to any Obligor, the Chief Executive
Officer, the President, the Treasurer and the Director of Finance of such
Obligor.

     "Prime Rate" The rate of interest announced by a bank identified by Lender
from time to time as its prime rate.  Such Prime Rate is not represented to be
the lowest rate of interest offered by any such bank.  The rate of interest
shall change automatically and immediately as of the date of any change in the
Prime Rate, without notice to Borrower or any endorser, surety or guarantor.

     "Principals" Collectively, the EHI Principals and the UK Principals.

     "Proceedings" Any action, arbitration, audit, hearing, investigation,
litigation, or suit (whether civil, criminal, administrative, investigative, or
informal) commenced, brought, conducted, or heard by or before, or otherwise
involving any Governmental Authority or arbitrator.

                                       17


     "Proceeds" As defined in Section 4A.01.

     "Products" As defined in Section 4A.01.

     "Property" Any right or interest in or to property of any kind whatsoever,
whether real, personal, or mixed, and whether tangible or intangible.

     "Prorated Consolidated Net Worth Increase" As defined in Section 4.21.

     "Purchase Price" The purchase price payable by EHI to acquire the Shares
pursuant to the Stock Purchase Agreement.

     "Qualified Plan" A pension plan (as defined in Section 3(2) of ERISA)
intended to be tax-qualified under Section 401(a) of the Code which any Borrower
or any ERISA Affiliate sponsors or maintains, or to which any such person is
making, or is obligated to make, contributions, or, in the case of a multiple-
employer plan (as described in Section 4064(a) of ERISA), has made contributions
at any time during the immediately preceding period covering at least five (5)
plan years, but excluding any Multiemployer Plan.

     "Quarterly Payment Dates" January 10, April 10, July 10, and October 10 of
each year prior to the Credit Termination Date.

     "Real Estate Property" As to any Person, any now owned or hereafter
acquired right, title or interest in, and any right to occupy or to use, any
Property that is land, improvements to land (and/or space in such improvements),
any condominium unit or cooperative unit, or fixtures, and any equipment and
other personal property used or useful in connection with the occupancy, use,
improvement or operation thereof, including any fee interest and any leasehold
interest, and including all easements and other appurtenances relating thereto,
and all rents, incomes, and profits arising therefrom from time to time, and
including any rights (but not any duties) arising under any deeds, leases,
contracts or other instruments relating thereto.

     "Receiver" Any receiver, trustee, custodian, liquidator or similar
fiduciary.

     "Records" As defined in Section 4A.01.

     "Redemption Payment" As defined in Section 4.21.

     "Regulated Substance or Regulated Substances" Any substance, material, or
waste that is regulated or listed under any Environmental Laws, and such
substances, materials, or wastes include, but are not limited to, any whose
release or threatened release may pose a risk to human health or the
environment, and also include (a) asbestos in any form, (b) urea formaldehyde
foam insulation, (c) paint containing lead, (d) transformers or other equipment
that contain dielectric fluid polychlorinated biphenyls at levels of fifty (50)
parts per million or more, (e) radioactive materials, and (f) petroleum or
petroleum hydrocarbons in any form.

     "Regulation D" means Regulation D of the Board of Governors of the Federal
Reserve

                                       18


System as from time to time in effect and any successor to all or a portion
thereof establishing reserve requirements

     "Regulatory Change" Any change after the Effective Date in United States
federal, state or foreign law or regulation (including Regulation D), including
the issuance of any final regulations or guidelines, or the adoption or making
of any interpretation, directive or request applying to a class of Lenders,
including Lender, of or under any United States federal, state or foreign law or
regulations (whether or not having the force of law and whether or not failure
to comply therewith would be illegal) by any Governmental Authority charged with
the interpretation or enforcement thereof.

     "Reportable Event" Any event described in Section 4043 of ERISA or in
regulations of the PBGC (other than an event for which the thirty (30) day
notice to the PBGC is waived by regulations).

     "Responsible Officer" With respect to the subject matter of any
representation, warranty, covenant, agreement, obligation, notification
requirement, or certificate contained in or delivered to Lender pursuant to any
of the Credit Documents, the President, the Chief Executive Officer, the Chief
Financial Officer, Director of Finance or the Treasurer of any Obligor, or any
other corporate officer of such Obligor who in the normal performance of his or
her operational responsibilities should have knowledge of such matter and the
requirements with respect thereto.

     "Responsible Officer's Certificate" A certificate in form and substance
satisfactory to Lender and signed by a Responsible Officer to the effect that to
the best knowledge and belief of such Responsible Officer, after due inquiry of
each Primary Responsible Officer, no Default or Event of Default exists, or if
any Default or Event of Default does exist, specifying the nature and extent
thereof and what action Borrower proposes to take with respect thereto, and
which certificate shall also demonstrate compliance with the financial covenants
of this Agreement.

     "Revolving Credit" Revolving Credit Loans and Letters of Credit.

     "Revolving Credit Committed Amount" The lesser of (a) Three Million Five
Hundred Thousand Dollars ($3,500,000) or (b) the sum of (x) Two Million Dollars
($2,000,000) plus (y) the amount equal to one-third (1/3) of the amount of the
principal payments made by Borrower on the Term Loan.

     "Revolving Credit Loans"  The revolving credit loans referred to in Section
2A.01.

     "Revolving Credit Note"  Any promissory note, in form and substance
satisfactory to Lender, executed and delivered to Lender by the Borrowers to
further evidence the Borrowers' agreement and obligation to repay Revolving
Credit Loans.

     "Risk Management Agreement" Any interest rate swap agreement, basis swap,
forward rate agreement, commodity swap, interest rate option, forward foreign
exchange agreement, rate cap agreement, rate floor agreement, rate collar
agreement, currency swap agreement, cross-currency rate swap agreement, currency
option, equity or equity index option, bond option, or

                                       19


any similar agreement or derivative product (including any option to enter into
any of the foregoing and including any master agreement for any of the foregoing
together with all supplements) or similar arrangement between any Borrower and
one or more financial institutions or other intermediaries, counterparties or
participants.

     "Seller Note" The Promissory Note dated of even date from EHI made payable
to the Selling Shareholders in the amount of Eighteen Million Dollars
($18,000,000).

     "Seller Subordinated Obligations" All now existing and hereafter arising
indebtedness and other obligations of the Borrowers or the Guarantors to the
Lender under the Seller Note which are subordinated in accordance with the terms
of this Agreement upon and subject to the terms generally set forth on Schedule
1 attached hereto. Lender agrees to subordinate the Seller Note in accordance
with terms and conditions to be set forth in the Subordination Agreement, which
terms and conditions must be reasonably acceptable to Lender. The Subordination
Agreement must contain provisions reflective of the general terms set forth on
Schedule 1 and such other terms and conditions required by Lender.
- ----------

     "Seller Subordination Agreement"  The Subordination Agreement described on
Schedule 1 attached hereto.
- ----------

     "Selling Shareholders" Collectively, (1) Applied Bioscience International,
Inc., a Delaware corporation and seller of all of the shares in the US
Corporation and (2) PPD UK Holding Limited, a private company incorporated in
England and Wales and seller of all of the shares of the UK Corporations.

     "Senior Funded Debt" All Indebtedness for Borrowed Money (excluding the
Seller Subordinated Obligations) and any other debt subordinated to FUNB (as
hereinafter defined) or Lender pursuant to a written subordination agreement
acceptable to the Lender in its reasonable discretion.

     "Shareholder Agreement" The Shareholder Agreement dated as of January 31,
1999 among the Principals.

     "Shares" Collectively, all of the capital stock in the US Corporation and
the UK Corporations.

     "Solvent"  (a) The fair market value of each Borrower's Property is greater
than the total amount of such Borrower's liabilities (including such Borrower's
contingent liabilities), (b) the present fair salable value of each Borrower's
assets is not less than the amount that will be required to pay such Borrower's
probable liabilities on its debts as they become absolute and matured, (c) each
Borrower does not intend to, and does not believe that it will, incur debts or
liabilities beyond such Borrower's ability to pay as such debts and liabilities
mature, and (d) each Borrower is not engaged in business or a transaction for
which such Borrower's assets would constitute unreasonably small capital. For
such purposes, any contingent liability (including pending litigation,
Guarantees, other off-balance-sheet liabilities, unfunded vested liabilities
under Plans and claims for federal, state, local and foreign taxes, if any) is
to be valued at the

                                       20


amount that, in light of all the facts and circumstances existing at such time,
represents the amount that can reasonably be expected to become an actual or
matured liability.

     "Special Property" Vehicles, trailers, rolling stock, shipping containers,
airplanes, ships, boats, barges and other vessels, broadcasting and other
communications transmission equipment, satellites, and any engines, parts,
components, or accessories to any of the foregoing, farm products, minerals, and
timber, goods that are or are to become fixtures, Intellectual Property, any
property with respect to which a security interest in such property would be
subject to any statute of the United States or any statute or other law of any
foreign jurisdiction, to the extent that such statute or law governs the rights
of parties to any third parties affected by transactions in particular types of
property, and any tangible personal property not located at a Designated
Location.

     "Stock Purchase Agreement" The Stock Purchase Agreement dated January 31,
1999 among the Selling Shareholders, as sellers, and EHI, as purchaser.

     "Subordination Agreement" As defined in Section 8.01.

     "Subsidiary" As to any Person, (i) any corporation or limited liability
company (A) that is directly or indirectly controlled by such Person or any
Subsidiary of such Person or (B) if more than fifty percent (50%) of the voting
and/or non-voting stock or other ownership shares of such corporation or limited
liability company is owned by such Person or any Subsidiary of such Person, (ii)
any joint venture or partnership (A) in which such Person or any Subsidiary of
such Person is a general partner or (B) if more than fifty percent (50%) of the
partnership interests in such venture or partnership are owned by such Person or
any Subsidiary of such Person, (iii) any trust for the benefit of such Person or
any Subsidiary of such Person, or any other organization, trust or other entity
as to which such Person or any Subsidiary of such Person is in control, and (iv)
to the extent not otherwise included by the preceding clauses, any Subsidiary of
any corporation, limited liability company, partnership, organization, trust or
other entity described in clauses (i), (ii), or (iii).

     "Term Loan" The term loan referred to in Article II-B of this Agreement.

     "Term Note" A term promissory note, in form and substance satisfactory to
Lender, executed and delivered to Lender by Borrower to further evidence the
Borrowers' agreement and obligation to repay the Term Loan.

     "Threatened" A claim, Proceeding, dispute, action, or other matter will be
deemed to have been "Threatened" if any demand or statement has been made in
writing or any notice has been given in writing, or if any other event has
occurred or any other circumstance exists, that would lead a prudent Person to
conclude that such a claim, Proceeding, dispute, action, or other matter is
likely to be asserted, commenced, taken, or otherwise pursued in the future.

     "UCC" The Virginia Uniform Commercial Code.

     "UK Corporations" Collectively EAGL and EIL.

                                       21


     "UK Credit Documents" The Guaranty Agreements executed by each of the UK
Corporations and any other documents executed by the UK Corporations in
connection with the Guaranty Agreements and for the benefit of Lender.

     "UK Principals" The individuals listed on Schedule 3.43, who are residents
                                               -------------
of the United Kingdom and management employees of EHI or EAGL and EIL upon and
after the Effective Date.

     "UK Transaction" The purchase of all of the Shares in the UK Corporations
by EHI pursuant to the Stock Purchase Agreement.

     "Unfunded Benefit Liability" The excess of a Plan's benefit liabilities
(as defined in Section 4001(a)(16) of ERISA) over the current value of such
Plan's assets, determined in accordance with the assumptions used by the Plan's
actuaries for funding the Plan pursuant to Section 412 of the Code for the
applicable plan year.

     "Unused Credit Fee" A fee payable on the unused portion of the Revolving
Credit in accordance with the following schedule:

      ----------------------------------------------------------------
         Consolidated Funded Debt to              Unused Credit Fee
         EBITDA
      ----------------------------------------------------------------
      *  4.0:1                                    50 basis points
      ----------------------------------------------------------------
      *  3.0:1, but ** 4.0:1                      37.5 basis points
      ----------------------------------------------------------------
      *  2.5:1, but ** 3.0:1                      25 basis points
      ----------------------------------------------------------------
      ** 2.5:1                                    25 basis points
      ----------------------------------------------------------------

* is equal to more than
** is less than

     "US Transaction"  The purchase of all of the Shares in the US Corporation
by EHI pursuant to the Stock Purchase Agreement.

     "Year 2000 Issues" With respect to any Person, anticipated costs, problems
and uncertainties associated with the inability of certain computer applications
and imbedded systems to effectively handle data, including dates, on and after
January 1, 2000, as it affects the business, operations, and financial condition
of such Person, and such Person's customers, suppliers and vendors.

                                       22


                                 ARTICLE II-A
                                 ------------
                   CREDIT FACILITY - REVOLVING CREDIT LOANS
                   ----------------------------------------

     In the event Lender subordinates the Seller Note to a revolving credit
facility and term loan in accordance with Schedule 1 attached hereto, then the
                                          ----------
provisions of this Article II-A shall cease to be of further force and effect,
and in such event all amounts outstanding under the Revolving Credit Loans and
the Term Loan shall be repaid in full prior to Lender's subordination of the
Seller Note to any revolving credit facility.

     SECTION 2A.01.  Revolving Credit Loans. Lender shall, upon the terms and
                     ----------------------
subject to the conditions hereinafter set forth, and from time to time on or
after the Credit Commencement Date and before the Credit Termination Date, make
Revolving Credit Loans to the Borrower in an aggregate amount not to exceed, at
any time, the Revolving Credit Committed Amount less the sum of (a) the
aggregate face amounts of all outstanding Letters of Credit caused to be issued
by the Lender under this Agreement or any other Credit Documents, (b) the Letter
of Credit Reserve Amount, if any, and (c) the Non-Loan Lender Credit Reserve, if
any.  With the written consent of each Borrower and each Guarantor, Lender may,
in Lender's sole and absolute discretion, extend the Credit Termination Date at
any time for up to an additional twelve (12) months.

     SECTION 2A.02.  Requests. From time to time on or after the Credit
                     --------
Commencement Date and before the Credit Termination Date, Borrower may request
Revolving Credit Loans by giving Loan Requests to Lender, provided that:

          (a)  Borrower shall not request Revolving Credit Loans in an amount
     which, if advanced, would cause the Available Revolving Credit Amount to be
     less than One Dollar ($1.00);

          (b)  each Loan Request shall be given to Lender at least one (1)
     Business Day prior to the proposed date of such Revolving Credit Loan and
     shall state the proposed Business Day on which to make the Revolving Credit
     Loan; and

          (c)  all Revolving Credit Loans shall be made in amounts of even
     multiples of Fifty Thousand Dollars ($50,000).

     SECTION 2A.03. Covenant to Pay;  Revolving Credit Notes. Borrower jointly
                    ----------------------------------------
and severally covenants and agrees to repay the Revolving Credit Loans to
Lender, together with all accrued interest and late charges thereon, and all
out-of-pocket expenses of Lender and fees relating thereto, without set-off,
defense or counterclaim of any kind, in accordance with the terms of this
Agreement, the Revolving Credit Notes and the other Credit Documents.
Borrower's agreement and obligation to pay Revolving Credit Loans, together with
all accrued interest and late charges thereon, and all out-of-pocket expenses of
Lender and fees relating thereto, shall in Lender's discretion be further
evidenced by one or more Revolving Credit Notes, and each Revolving Credit Note
may evidence one or more Revolving Credit Loans, and Borrower shall promptly,
upon Lender's request from time to time, execute and deliver to Lender Revolving
Credit Notes as further evidence of Borrower's agreement and obligation to pay
the

                                       23


Revolving Credit Loans. Lender is irrevocably authorized but not obligated to
record the date and amount of each Revolving Credit Loan, and each payment made
to Lender on the Revolving Credit Loans, on the Revolving Credit Notes or on
schedules attached to the Revolving Credit Notes or otherwise in Lender's
discretion, provided that the failure to record such information shall not
affect the Borrower's obligation to repay the Revolving Credit Loans.

     SECTION 2A.04. Interest Payments. Interest on the outstanding principal
                    -----------------
balances of Revolving Credit Loans shall accrue and be payable at the Applicable
Revolving Credit Loan Interest Rate, and payments of accrued and unpaid interest
on the Revolving Credit Loans shall be made monthly in arrears on the first
(1st) day of each month (the "Payment Date").

     SECTION 2A.05. Principal Payments. Unless otherwise set forth in any
                    ------------------
applicable Revolving Credit Note, and subject to acceleration upon the
occurrence of an Event of Default and to such mandatory prepayments as may be
required in accordance with the terms of this Agreement, unless sooner paid in
full, the outstanding balances of all Revolving Credit Loans shall be due and
payable on the Credit Termination Date.

     SECTION 2A.06. Collateral Account Payments. Upon and after the occurrence
                    ---------------------------
of an Event of Default, Lender shall be entitled to apply the collected balances
in the Collateral Account, or any portion thereof, at any time and from time to
time, against the outstanding balance of any Loans, and/or to make deposits to
the Letter of Credit Collateral Account in accordance with the terms of this
Agreement, in such order as Lender may determine in Lender's discretion.

     SECTION 2A.07. Use of Revolving Credit Loan Proceeds. The proceeds of the
                    -------------------------------------
Revolving Credit Loans shall be used solely to provide working capital to the US
Corporation in the ordinary course of its business.  The proceeds of the
Revolving Credit Loans shall not be used for any acquisition-related costs or
expenses in connection with the acquisition of the Shares.


                                 ARTICLE II-B
                                 ------------
               CREDIT FACILITY - TERM LOAN AND ACQUISITION LOAN
               ------------------------------------------------

     SECTION 2B.01. Term Loan and Acquisition Loan. Lender agrees, upon the
                    ------------------------------
terms and subject to the conditions of this Agreement, to make a Term Loan to
Borrower in the amount of up to Seven Million Dollars ($7,000,000).  Lender
further agrees, upon the terms subject to the conditions of this Agreement, to
make an Acquisition Loan to Borrower in the amount of Eighteen Million Dollars
($18,000,000).

     SECTION 2B.02. Covenant to Pay;  Term Note. Borrower jointly and severally
                    ---------------------------
covenants and agrees to execute and deliver to Lender the Term Note and the
Seller Note immediately upon the execution and delivery of this Agreement and to
repay the Term Loan and Acquisition Loan to Lender, together with all accrued
interest and late charges thereon, and all expenses, costs and fees relating
thereto, without set-off, defense or counterclaim of any kind, in accordance
with the terms of this Agreement and the Term Note and the Seller Note.

                                       24


     SECTION 2B.03.  Payment Schedule. The Term Loan shall be repayable
                     ----------------
beginning on March 1, 1999 in forty-seven (47) equal consecutive monthly
payments of principal in the amount of One Hundred Forty-Five Thousand Eight
Hundred Thirty-Three and 33/100 Dollars ($145,833.33) each, plus, on each
Payment Date, a payment of interest on the unpaid principal balance at the
Applicable Term Loan Interest Rate, and one final installment of the entire
unpaid principal balance and all accrued but unpaid interest thereon due and
payable on February 1, 2003.  The Acquisition Loan shall be repayable in
accordance with the terms set forth in the Seller Note to be delivered upon
execution of this Agreement.

     SECTION 2B.04.  Use of Term Loan and Acquisition Loan Proceeds. The
                     ----------------------------------------------
proceeds of the Term Loan and the Acquisition Loan shall be used solely to pay a
portion of the Purchase Price.

                                 ARTICLE II-C
                                 ------------
                      CREDIT FACILITY - LETTERS OF CREDIT
                      -----------------------------------

     SECTION 2C.01.  Letter of Credit Applications. Each Letter of Credit issued
                     -----------------------------
under this Agreement shall be issued pursuant to a Letter of Credit Application
and shall be issued in form and substance satisfactory to Lender in Lender's
discretion. In the event of a conflict between the terms of this Agreement and
the terms of a Letter of Credit Application, the terms of this Agreement shall
control unless otherwise expressly stated in the Letter of Credit Application
accepted by Lender. Borrower may from time to time submit Letter of Credit
Applications to Lender in accordance with the terms of this Agreement, and upon
such applications Lender may cause to be issued Letters of Credit for Borrower's
account. Letter of Credit Applications shall be submitted to Lender not later
than 10:00 a.m., Eastern Time, at least five (5) Business Days prior to the
Business Day on which Borrower requests that the Letter of Credit be issued.
Borrower shall not submit any Letter of Credit Application to Lender for a
Letter of Credit in a face amount that, if issued, would cause the aggregate
face amounts of all outstanding Letters of Credit to exceed the Available Letter
of Credit Amount.

     SECTION 2C.02.  Letter of Credit Expiry Dates. Each Letter of Credit shall
                     -----------------------------
expire on a date not more than one (1) year after the date that the Letter of
Credit is issued, provided that no Letter of Credit shall be issued with an
expiration date on or after the Credit Termination Date.

     SECTION 2C.03.  Letter of Credit Fees. Borrower shall pay to Lender a
                     ---------------------
Letter of Credit Fee for each Letter of Credit issued under this Agreement, and
such Letter of Credit Fee shall be due and payable at the time of issuance of
the Letter of Credit. Borrower shall also pay to Lender on demand such issuance,
amendment, and letter of credit transaction fees as may be announced by Lender
from time to time.

     SECTION 2C.04.  Letter of Credit Reserves. If any change in any Law or in
                     -------------------------
the interpretation thereof by any court or other governmental authority charged
with administration thereof generally applicable to the issuance of letters of
credit shall either (a) impose, modify or deem applicable any reserve, special
deposit or similar requirement against any Letter of Credit, or (b) impose on
Lender any other condition regarding this Agreement or any Letter of Credit,

                                       25


and the result of any event referred to in clauses (a) or (b) of this Section
shall be to increase the cost to Lender of issuing any Letter of Credit, then
upon demand by Lender, Borrower shall pay to Lender such additional amounts as
may be necessary to compensate Lender for such increased costs. A certificate
submitted by Lender to Borrower, stating such increased costs of issuing Letters
of Credit, shall be conclusive, absent manifest error, as to the amount of such
increased costs.

     SECTION 2C.05.  Payments on Letters of Credit.
                     -----------------------------

          (a) Borrower covenants and agrees to immediately and without demand,
and without set-off, defense or counterclaim of any kind, reimburse Lender in
Dollars in immediately available funds all amounts drawn under Letters of
Credit.

          (b) Prior to the occurrence of an Event of Default, and unless
otherwise immediately reimbursed to Lender in Dollars in immediately available
funds by Borrower, but only to the extent that Revolving Credit Loans may be
made under this Agreement in the necessary amounts at such times, all amounts
drawn under Letters of Credit may be reimbursed to Lender with proceeds of
Revolving Credit Loans made by Lender to Borrower (and regardless of whether
Borrower shall have requested such Revolving Credit Loans) for the purpose of
making such reimbursements.  All such amounts reimbursed with the proceeds of
Revolving Credit Loans shall be repayable in accordance with the terms of this
Agreement and the other Credit Documents.

          (c) Upon the occurrence of an Event of Default, all of Borrower's
reimbursement obligations under Letters of Credit, including Borrower's
obligations to reimburse Lender for amounts drawn under Letters of Credit and
Borrower's contingent obligations for amounts not yet drawn under outstanding
Letters of Credit, whether then due or otherwise, shall be immediately due and
payable by Borrower.  All amounts paid to Lender in respect of such contingent
obligations for amounts not yet drawn shall be held by Lender in the Letter of
Credit Collateral Account as cash collateral and applied by Lender to reimburse
Lender from time to time for amounts drawn under Letters of Credit until all
Letters of Credit have expired and Lender shall have been reimbursed for all
amounts drawn under Letters of Credit, and Borrower hereby assigns to Lender and
grants Lender a security interest in all amounts so held in any Letter of Credit
Collateral Account as cash collateral for Borrower's reimbursement obligations
under Letters of Credit.  If Borrower fails to pay such reimbursement
obligations immediately, including such amounts as are required to be held in
the Letter of Credit Collateral Account, Lender may, in Lender's discretion and
without any obligation to do so, and regardless of whether Borrower shall have
requested such Revolving Credit Loans or given Lender instructions to the
contrary, make Revolving Credit Loans to Borrower and directly apply the
proceeds of such Revolving Credit Loans to the payment of some or all of such
reimbursement obligations and to the funding of some or all such amounts to be
held in, and disbursed to Lender from, the Letter of Credit Collateral Account.
All such amounts paid or held from the proceeds of Revolving Credit Loans shall
be repayable in accordance with the terms of this Agreement and the other Credit
Documents.

          (d) Borrower's agreement and obligation to reimburse Lender for
amounts due

                                       26


and payable as set forth in the preceding clauses of this Section (including all
such amounts in respect of contingent obligations) shall be absolute and
unconditional under all circumstances and shall be paid without set-off,
counterclaim, or defense to payment that Borrower may have against the
beneficiary of any such Letter of Credit or Lender or any other Person,
including any set-off, counterclaim or defense based on any drawing documents
proving to be forged, fraudulent or invalid, or the legality, validity,
regularity or enforceability of such Letter of Credit or any Letter of Credit
Application, this Agreement, the Notes, or any other Credit Documents.

     SECTION 2C.06.  Instruction to Pay; Indemnification.
                     -----------------------------------

          (a) Borrower hereby irrevocably instructs Lender to pay any draft
complying with the terms of any Letter of Credit.  Borrower assumes all risks of
the acts and omissions of the beneficiary and other users of any Letter of
Credit.

          (b) Lender and its branches, affiliates and/or correspondents shall
not be responsible for and Borrower shall indemnify and hold Lender and its
branches, affiliates and correspondents harmless from and against all liability,
loss and expense (including reasonable attorney's fees and costs) incurred by
Lender or its branches, affiliates or correspondents relative to or as a
consequence of (i) any failure of Borrower to perform the agreements hereunder
and under any Letter of Credit Application, (ii) any Letter of Credit
Application, this Agreement, any Letter of Credit and any drafts and acceptances
under or purporting to be under any Letter of Credit, (iii) any action taken or
omitted by Lender or its branches, affiliates or correspondents at the request
of the Revolving Credit Loan Borrower Group, (iv) any failure or inability to
perform in accordance with the terms of any Letter of Credit by reason of any
control or restriction rightfully or wrongfully exercised by any de facto or de
jure government, group or individual asserting or exercising governmental
powers, and (v) any consequences arising from causes beyond the control of
Lender or its branches, affiliates or correspondents.

          (c) Except for gross negligence and willful misconduct of Lender, and
its branches, affiliates and correspondents, Lender and its branches, affiliates
and correspondents, shall not be liable or responsible in any respect for any
(i) error, omission, interruption or delay in transmission, dispatch or delivery
of any one or more messages or advices in connection with any Letter of Credit,
whether transmitted by cable, telegraph, mail or otherwise and despite any
cipher or code which may be employed, or (ii) action, inaction or omission which
may be taken or suffered by it or them in good faith or through inadvertence in
identifying or failing to identify any beneficiary or otherwise in connection
with any Letter of Credit.

          (d) Any Letter of Credit may be amended, modified or revoked only upon
the receipt by Lender from Borrower and the beneficiary (including any
transferees and assignees of the original beneficiary), of a written consent and
request for such amendment, modification or revocation, and then only on such
terms and conditions as Lender may prescribe in Lender's discretion.

          (e) If any Laws, orders of court and/or rulings or regulations of any
governmental authorities of the United States, any state, or foreign government
permits the beneficiary under a Letter of Credit to require Lender or its
branches, affiliates or correspondents

                                       27


to pay drafts under or purporting to be under a Letter of Credit after the
expiration date of the Letter of Credit, Borrower shall reimburse Lender for any
such payment pursuant to Section 2C.05.

          (f) Except as may otherwise be specifically provided in a Letter of
Credit or Letter of Credit Application, the laws of the Commonwealth of Virginia
and the Uniform Customs and Practice for Documentary Credits, 1993 Revision,
International Chamber of Commerce Publication No. 500 shall govern the Letters
of Credit.  In the event of a conflict between the Uniform Customs and Practice
for Documentary Credits and the laws of the Commonwealth of Virginia, the
Uniform Customs and Practice for Documentary Credits shall prevail.

     SECTION 2C.07. Use of Letters of Credit. Each Letter of Credit shall be
                    ------------------------
used solely for a general corporate purposes of the US Corporation.  In
addition, the US Corporation may have Letters of Credit issued on behalf of the
UK Corporations in other than U.S. Dollars.

     SECTION 2C.08  Letters of Credit Denominated in Other Than U.S. Dollars.
                    --------------------------------------------------------
For purposes of determining the outstanding balance of Letters of Credit, the
aggregate principal amount of Letters of Credit issued and outstanding in other
than U.S. Dollars shall be converted to the U.S. Dollar equivalent amount, as
calculated by Lender in Lender's reasonable discretion, on the date of such
determination.

                                 ARTICLE II-D
                                 ------------
                  CREDIT FACILITY - GENERAL CREDIT PROVISIONS
                  -------------------------------------------

     SECTION 2D.01. Lender Records. Absent manifest error, Lender's records of
                    --------------
Loans made and payments received in respect of Loans, including Lender's entries
on any Revolving Credit Notes or schedules that may be attached to Revolving
Credit Notes from time to time, and of Letters of Credit, and all amounts drawn
thereunder and all reimbursements thereof, shall be presumed correct.
Notwithstanding the foregoing, the absence of a Revolving Credit Note or
Lender's failure to record loan amounts or payments or other related information
(or any error in recording such amounts or other information) shall not limit or
affect any Borrower's agreement and obligation to repay the Loans, and all
accrued interest and other amounts on the Loans, in accordance with the terms of
this Agreement, the Notes, and the other Credit Documents.

     SECTION 2D.02. Computation of Interest. All interest shall accrue based on
                    ------------------------
a 360-day year for the actual number of days outstanding.

     SECTION 2D.03. Late Charges; Default Interest. If any payment of principal
                    ------------------------------
or interest due on either of the Loans, or any payment under any reimbursement
obligation in respect of any Letter of Credit, is not paid to Lender within ten
(10) days after the date that such payment is due, then Lender, in Lender's sole
discretion, shall be entitled to impose on Borrower a "late charge" equal to
five percent (5%) of the amount not paid when due, and Borrower and the
Guarantors shall be obligated to pay each such late charge to Lender immediately
upon the imposition thereof by Lender.  In Lender's discretion, upon and after
the occurrence of an Event of Default, interest on the outstanding principal
balances of all Loans shall accrue and be payable

                                       28


at the Default Rate.

     SECTION 2D.04.  Omitted.

     SECTION 2D.05.  Unused Credit Fee. Borrower shall pay to Lender the Unused
                     -----------------
Credit Fee for each year or portion thereof prior to the termination of Lender's
obligations to extend Revolving Credit under this Agreement.  The accrued
portion of the Unused Credit Fee shall be due and payable to Lender in arrears
on each Quarterly Payment Date.  Borrower hereby authorizes Lender to debit
Borrower's account maintained with Lender to pay the Unused Credit Fee on each
Quarterly Payment Date.  For purposes of the calculation of the Unused Credit
Fee, the unused portion of the Revolving Credit shall be the average daily
Available Revolving Credit Amount during the applicable quarter.  The Unused
Credit Fee shall be based upon the Consolidated Funded Debt to EBITDA ratio for
the preceding fiscal quarter for which Lender shall have received quarterly
financial statements pursuant to this Agreement, e.g. the Unused Credit Fee for
the period from January through March of a particular year shall be based upon
the quarterly financial statements for the fiscal quarter ending the immediately
preceding December.

     SECTION 2D.06.  Mandatory Additional Payments. At any time that the
                     -----------------------------
aggregate outstanding principal balance of Revolving Credit Loans, plus the
aggregate face amounts of outstanding Letters of Credit, exceeds the Revolving
Credit Committed Amount, Borrower shall immediately and without demand, and
without set-off, defense or counterclaim of any kind, make payments to Lender of
Revolving Credit Loans in the amount necessary in order to reduce the aggregate
outstanding balance of Revolving Credit Loans so that the aggregate outstanding
balance of Revolving Credit Loans, plus the aggregate face amounts of
outstanding Letters of Credit, will not exceed the Revolving Credit Committed
Amount.

     SECTION 2D.07.  Prepayments. Borrower may prepay Revolving Credit Loans,
                     -----------
the Term Loan and the Acquisition Loan in whole or in part at any time without
premium or penalty.  All prepayments of the Term Loan or the Acquisition Loan
shall be applied in inverse order of the maturity of the scheduled payments.
Any prepayment of the Loans shall not affect Borrower's obligation to continue
to make payments under and in accordance with any swap agreement (as defined in
11 U.S.C. (S)101), which payments shall be governed exclusively by the term of
such swap agreement.

     SECTION 2D.08.  Manner of Payments. All payments to be made to Lender shall
                     ------------------
be made in Dollars in immediately available funds without set-off, defense,
counterclaim or deduction of any kind, not later than 12:00 noon, Eastern Time,
at the Payment Office on the dates specified for such payments under this
Agreement, the Revolving Credit Notes, the Term Note, the Seller Note or the
other Credit Documents.  Borrower's failure to make any such payments by 12:00
noon, Eastern Time, on the dates on which such payments are due shall not be an
Event of Default so long as such payments are made later on the day that such
payments are due provided that any such payments made after 12:00 noon, Eastern
Time, on the dates such payment are due shall be deemed to have been made on the
next Business Day thereafter for purposes of calculating interest on amounts
outstanding under the Loans.  Payments made in other than Dollars shall be
accepted subject to collection.

                                       29


     SECTION 2D.09.  Application of Payments. Payments made by Borrower to
                     -----------------------
Lender shall be applied in such order as Lender may determine in Lender's
discretion.

     SECTION 2D.10.  Capital Adequacy. Borrower shall pay to Lender from time to
                     ----------------
time upon Lender's demand such additional amounts as Lender may determine in
Lender's discretion to be necessary to compensate Lender for any reduction in
the rate of return on Lender's capital (or on the capital of Lender's holding
company, if any) due to the applicability of any Capital Adequacy Requirement,
as a consequence of the existence of Lender's obligations under this Agreement,
to a level below, by an amount reasonably deemed by Lender to be material, that
which Lender (or Lender's holding company) could have achieved but for such
Capital Adequacy Requirement.

     SECTION 2D.11.  Rate Adequacy. If Lender reasonably determines in Lender's
                     -------------
reasonable discretion that (a) deposits in Dollars (in the applicable amounts)
or quotations of interest rates for the relevant deposits are not being offered
to Lender in the relevant amounts or for the relevant maturities for purposes of
determining the rates of interest on LIBOR Rate Loans under this Agreement, or
(b) the applicable LIBOR Rate will not adequately and fairly reflect Lender's
cost of funding LIBOR Rate Loans for such Interest Periods, then any obligation
to make such LIBOR Rate Loans under this Agreement shall be suspended until such
time as the inadequacy or unavailability of LIBOR Rate Loans no longer exists.
In the event LIBOR Rate Loans are not available on account of operation of this
Section, Lender shall use the Prime Rate as an alternate index or reference
rate.

     SECTION 2D.12.  Regulatory Change. Borrower shall pay to Lender from time
                     -----------------
to time, upon Lender's demand, such additional amounts as Lender may determine
in Lender's reasonable discretion to be necessary to compensate Lender for any
Additional LIBOR Costs resulting from any Regulatory Change that:  (a) subjects
Lender to any tax, duty or other charge in respect of the LIBOR Rate Loans (or
the Notes evidencing LIBOR Rate Loans) or subjects the Lender to changes in the
basis of taxation of any amounts payable to Lender under this Agreement (or the
Notes) in respect of any LIBOR Rate Loans or Lender's obligations to make LIBOR
Rate Loans (excluding changes in the rate of tax on the overall net income of
Lender by the jurisdiction in which Lender has its principal office); or (b)
imposes, modifies, or deems applicable any reserve, special deposit or similar
requirements (other than the LIBOR Reserve Requirements used in the calculation
of the LIBOR Rate under this Agreement) relating to any extensions of credit or
against assets of, or any deposits with, or other liabilities of, Lender
(including any LIBOR Rate Loans or any deposits referred to in the definition of
LIBOR Base Rate in this Agreement), or Lender's commitment to make LIBOR Rate
Loans under this Agreement; or (c) imposes any other condition affecting this
Agreement or the Notes (or any of such extensions or credit or liabilities) or
Lender's commitment to make LIBOR Rate Loans under this Agreement.
Additionally, if any Regulatory Change or any event affecting the United States
money markets or the London interbank market, causes Lender to either (X) incur
Additional LIBOR Costs based on or measured by the excess above a specified
level of the amount of a category of deposits or other liabilities of Lender
that includes deposits by reference to which the interest rate on LIBOR Rate
Loans is determined as provided in this Agreement or a category of extensions of
credit or other assets of Lender that includes LIBOR Rate Loans, or (Y) become
subject to restrictions on the amount of such category of liabilities or assets
that it may

                                       30


hold, then, if Lender so elects, the obligation of Lender to make or renew LIBOR
Rate Loans under this Agreement shall be suspended until such Regulatory Change
ceases to be in effect or the effects of such other event cease.

     SECTION 2D.13.  Designation of Agent and Attorney-in-Fact. Each Borrower
                     -----------------------------------------
that is a party to any Credit Document hereby irrevocably appoints EHI (referred
to herein as the "Borrower Group Agent") as the agent and attorney-in-fact for
such Borrower with full power and authority to act on behalf of such Borrower in
all respects with respect to any actions, waivers, consents, payments, receipts,
or notices, whether or not required under this Agreement or the other Credit
Documents, or as the Borrower Group Agent may engage in, provide, give or take
in its sole and unfettered discretion.  Each such Borrower agrees that all
actions taken, waivers or consents provided, payments made or received, or
notices given or received, by Lender, in each case by or to the Borrower Group
Agent, shall be effective as to such Borrower regardless of whether such action,
waiver, consent or notice was taken or approved by, or given or received by, any
Person other than the Borrower Group Agent.  In all respects and circumstances,
Lender is entitled to rely without limitation on any and all actions, waivers,
consents, and notices of the Borrower Group Agent as actions, waivers, consents
or notices of all such Borrowers, including any and all agreements to modify or
amend in any respect, or grant any waiver or consent under, or to give or
receive any notice with respect to, this Agreement or any other Credit
Documents, and Lender is under no expectation or obligation whatsoever to
inquire as to whether any such action or waiver was approved or ratified by, or
notice given or received by, any such Borrower, and may act as if any such
action, waiver, consent, or notice was engaged in, provided, taken, given or
received by each such Borrower.  In this respect, absent written notice to the
contrary with respect to a specified matter, it is agreed that, in each and
every circumstance insofar as Lender is concerned, any action taken, waiver or
consent given, or notice given or received by the Borrower Group Agent, shall be
deemed taken, given or received by each such Borrower even absent an express
indication that such action is taken, such waiver or consent is given, or such
notice is given or received by any such Borrower.

     SECTION 2D.14.  Net Payments. Any and all payments of principal, interest,
                     ------------
fees and other Obligations by Borrower hereunder and under the Notes and the
other Credit Documents shall be made free and clear of and without deduction for
any and all Taxes.  As used herein, "Taxes" means (a) All present or future
taxes, levies, imposts, deductions, charges or withholding, and all liabilities,
imposed by any taxing authority in any jurisdiction (other than the United
States, except as otherwise provided in clause (b) of this sentence) by reason
of the payment of principal, interest, fees and other Obligations hereunder, and
(b) shall also include taxes imposed by any United States taxing authority by
reason of the payment of increased amounts pursuant to clause (i) of the next
sentence, but only to the extent attributable to such increase.  If any such
Taxes shall be required by law to be deducted from or in respect of any
principal, interest, fees or other Obligations payable to Lender hereunder: (i)
the sum payable by Borrower shall be increased as necessary so that after taking
all such Taxes into account, Lender shall receive an amount equal to the sum it
would have received had no such deductions been made; (ii) the applicable
Borrower Group shall make all required deductions for such Taxes; and (iii) the
applicable Borrower Group shall pay the full amount deducted to the relevant
taxing authority in accordance with applicable law and shall furnish Lender with
proof of such payment.  The term "Taxes" shall not include any taxes imposed on
the income of the Lender.

                                       31


                                 ARTICLE II-E
                                 ------------
                         CREDIT FACILITY - CONDITIONS
                         ----------------------------

     SECTION 2E.01.  Fulfillment of Conditions. In requesting, applying for, or
                     -------------------------
taking the Term Loan or any Revolving Credit Loan or any Letter of Credit from
Lender, Borrower shall be deemed to have represented and warranted to Lender
that each of the following conditions in this Article have been fulfilled.
Borrower's failure to fulfill one or more of the following conditions shall not
be relieved by the making of any Loan or the issuance of any Letter of Credit.
Neither the making of any Loan nor the issuance of any Letter of Credit shall
constitute a waiver of any of the following conditions.

     SECTION 2E.02.  Conditions to all Loans and Letters of Credit. The
                     ---------------------------------------------
following are conditions precedent to the making of the Term Loan and all
Revolving Credit and must be fulfilled to Lender's satisfaction:

          (a) On and as of the date each Loan is made, and on and as of the date
each Letter of Credit is issued, each representation and each warranty made in
this Agreement and in any other Credit Documents shall be true, accurate, and
complete;

          (b) On and as of the date each Loan is made, and on and as of the date
that each Letter of Credit is issued, no Default or Event of Default shall have
occurred and be continuing;

          (c) All Credit Documents required by Lender from time to time shall
have been fully executed by the parties thereto and delivered to Lender; stock
certificates representing all of the Shares and stock powers for such Shares
signed in blank shall have been delivered to Lender; and all actions necessary
for the perfection and protection of Lender's security interests under this
Agreement and the other Credit Documents, and all actions necessary to maintain
the first priority of such security interests, shall have been taken and
completed; notwithstanding the foregoing, execution and delivery of the UK
Credit Documents shall not be required as a condition to funding of the Term
Loan;

          (d) Borrower shall have paid to Lender in the manner described herein
all reasonable out-of-pocket expense of Lender and all fees then due and payable
through the date of the making of such Loan or the issuance of such Letter of
Credit;

          (e) After the Effective Date, and as of the date each Loan is made or
Letter of Credit is issued, there shall not have occurred any material and
adverse change in the Obligors' consolidated financial position, nor any
condition, event, or act which would have a Material Adverse Effect; and

          (f) Lender shall have received certificates of insurance, satisfactory
to Lender in form and substance with copies of each insurance policy required
under this Agreement or any of the other Credit Documents endorsed in favor of
Lender as required by the Credit Documents to be delivered promptly following
the Effective Date, and such insurance shall be in full force

                                       32


and effect.

     SECTION 2E.03.  Conditions to Term Loan and the Acquisition Loan. The
                     ------------------------------------------------
following are conditions precedent to the making of the Term Loan and the
Acquisition Loan  and must be fulfilled to Lender's satisfaction:

          (a)  Lender shall have received the following:

               (i)   copies of resolutions of the Board of Directors of each
Borrower, authorizing the execution, delivery and performance of this Agreement
and the other Credit Documents, and the borrowing hereunder, and such other
matters as Lender may require, in form and substance satisfactory to Lender,
certified by the Secretary or Assistant Secretary of such Borrower;

               (ii)  a certificate of the Secretary or Assistant Secretary of
each Borrower as to the correctness and completeness of the copy of the By-laws
of such Borrower attached thereto and as to the incumbency and signatures of the
officers of such Borrowers who execute the Credit Documents;

               (iii) a copy of the Articles of Incorporation of each Borrower,
certified by an officer of such Borrower as being correct and complete, together
with a certificate of the appropriate officer or department of the state in
which such Borrower is incorporated as to the good standing and, if applicable,
authority of such Borrower, with copies of the Articles of Incorporation of such
Borrower on file;

               (iv)  certificates of the appropriate officers or departments of
the states in which each Borrower is not incorporated but does business as to
such Borrower's qualification and good standing to conduct business as a foreign
corporation in such states;

               (v)   an opinion letter or opinion letters from counsel
(including Virginia counsel) to each Obligor in form and substance satisfactory
to Lender;

               (vi)  Omitted.

               (vii) such additional supporting certifications and other
documents as Lender may reasonably request.

          (b)  The US Transaction and the UK Transaction shall each have
occurred subject only to the funding of the Term Loan and the Acquisition Loan.
The Borrowers shall have delivered to Lender a complete copy of the fully
executed Stock Purchase Agreement, with complete copies of all exhibits
(executed, as applicable) and schedules, and complete copies of all documents,
letters, disclosures (including all Disclosure Letters referred to in the Stock
Purchase Agreement), certificates, instruments (including instruments or
certificates representing the Shares) and any other materials delivered to the
Obligors in connection with or pursuant to the terms of the Stock Purchase
Agreement, and Lender shall have found such items to be satisfactory in the
Lender's sole discretion. The Stock Purchase Agreement shall not have been

                                       33


amended, nor shall any obligations, rights, or remedies thereunder have been
waived, without prior written notice to, and the prior written consent of,
Lender.

          (c) The Collateral has a value acceptable to Lender.

          (d)  Omitted.

          (e) Lender shall have received the estimated Opening Day Balance
Sheets prepared by Borrower.

          (f) Lender shall have received such information regarding the
Principals as Lender may have requested.  All information provided to Lender
regarding the Principals shall be subject to Lender's review and must be
satisfactory to Lender in Lender's sole discretion.

          (g) Lender shall have received for each Borrower, and for each of the
Principals, copies of all shareholder agreements, employment agreements, non-
competition agreements, confidentiality agreements, information protection
agreements and the like, which shareholder agreements, employment agreements,
non-competition agreements, confidentiality agreements, information protection
agreements and the like are in form and substance satisfactory to Lender.

          (h) Omitted.

          (i) Obligors' intangible assets shall include, without limitation, on
the Effective Date the worldwide trademark rights to the use (and to license
others to use) the names "Environ" and "Environ International" and "Environ
International Corporation" (and any related tradenames) in the same manner in
which they are currently used by the US Corporation and the UK Corporations,
which rights must be unencumbered except by the security interests and
collateral assignments in favor of Lender or by Permitted Liens.  As used in the
preceding sentence, "worldwide" means the United States of America, and its
territories and possessions (and the Commonwealth of Puerto Rico), the United
Kingdom and any other jurisdictions in which any of the Obligors does business.

          (j) The Principals shall have made a minimum cash equity contribution
to EHI of One Million Dollars ($1,000,000) in the aggregate prior to the
purchase of the Shares and the funding of the Term Loan and the Acquisition
Loan.

     SECTION 2E.04.  Conditions to All Revolving Credit Including the Initial
                     --------------------------------------------------------
Revolving Credit. The following are conditions precedent to the making of all
- ----------------
Revolving Credit Loans and the issuance of all Letters of Credit and must be
fulfilled to Lender's satisfaction:

          (a) The Term Loan and the Acquisition Loan shall not be in default.

          (b) With respect to the UK Corporations, Lender shall have received
each of the following:

                                       34


          (i)   Guarantor Board Resolutions - In respect of each Guarantor, a
                ---------------------------
copy, certified as true, complete and up-to-date, of minutes of the meeting(s)
of the Board of Directors of such Guarantor at which valid resolutions were
adopted approving the Credit Documents to which it is party and the assumption
of its obligations thereunder and authorizing a person or persons to execute and
deliver such Credit Documents and all notices, communications or documents to be
given by such Guarantor or on its behalf pursuant to or in connection therewith,
together with certified copies of unanimous shareholders resolutions approving
and authorizing the execution of such Credit Documents;

          (ii)  Shareholder Resolutions - certified copies of shareholder
                -----------------------
resolutions of the Guarantors [and their subsidiaries] resolving to make such
amendments to their Memoranda and Articles of Association as Lender shall have
specified prior to the Effective Date;

          (iii) Legal Due Diligence Report - an original copy of the legal due
                --------------------------
diligence report, if any, prepared by Allen & Overy on behalf of the Borrowers
and addressed to, among others, Lender;

          (iv)  Pension Report - an original copy of the actuarial report
                --------------
prepared by an actuary (or other person in Lender's discretion) acceptable to
Lender on behalf of the Borrowers and addressed to, among others, Lender;

          (v)   Accountant's Report - an original copy of the accountant's
                -------------------
financial due diligence report prepared by accountants acceptable to Lender in
respect of the Guarantors and addressed to, among others, Lender;

          (vi)  Membership of Board - confirmation of the approval by Lender of
                -------------------
the membership of the Board of Directors of the Guarantors;

          (vii) Statutory Declaration and Report - a certified copy of the
                --------------------------------
statutory declaration made in the prescribed form by all of the directors of
each Guarantor as required by Section 155(b) of the Companies Act 1985 and of
the statutory report of each of the Guarantor's auditors required under Section
156(4) of the Companies Act 1985;

          (viii) Asset Confirmation - a letter from the auditors of each
                 ------------------
Guarantor, addressed to Lender and confirming that the provisions of Section
155(2) of the Companies Act 1985 are not being breached by any such Guarantor.

     (c)  Lender shall have received an opinion letter or opinion letters from
both United States and United Kingdom counsel to each UK Corporation in form and
substance satisfactory to Lender.

     (d)  Borrowers and Guarantors shall have executed and delivered to Lender
such Credit Documents and amendments to Credit Documents as Lender may request.

     (e)  Immediately upon making the Revolving Credit Loan or issuing the
Letter

                                       35


of Credit, as the case may be, (i) the sum of (A) the aggregate outstanding
principal balances of the Revolving Credit Loans plus (B) the aggregate of the
face amounts of the outstanding Letters of Credit, if any, will not exceed the
Revolving Credit Committed Amount, and (ii) the aggregate of the face amounts of
the outstanding Letters of Credit, if any, will not exceed the Letter of Credit
Maximum Amount.


                                  ARTICLE III
                                  -----------
                        REPRESENTATIONS AND WARRANTIES
                        ------------------------------

     Each Borrower hereby makes the following representations and warranties to
Lender (a) on and as of the Effective Date.

     SECTION 3.01.  Conditions. All conditions precedent to the making of the
                    ----------
applicable Loan or Letter of Credit as set forth in Article II have been
satisfied in full.

     SECTION 3.02.  Existence. Each Borrower:
                    ---------

          (a) is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization;

          (b) has all requisite corporate power, and has all material
governmental licenses, authorizations, consents and approvals to own its assets
and carry on its business as now being or as proposed to be conducted; and

          (c) is qualified to do business and is in good standing in all
jurisdictions in which the nature of the business conducted by it makes such
qualification necessary and where failure so to qualify could (either
individually or in the aggregate) have a Material Adverse Effect.

     SECTION 3.03.  Action.
                    ------

          (a) Each Borrower has all necessary corporate power, authority and
legal right to execute, deliver and perform Borrower's obligations under each of
the Credit Documents; and

          (b) The execution, delivery and performance by each Borrower of each
of the Credit Documents have been duly authorized by all necessary corporate or
other action on Borrower's part (including any required shareholder or like
approvals); and

          (c) This Agreement has been duly and validly executed and delivered by
each Borrower and constitutes, and the Term Note and other Credit Documents,
when executed and delivered by such Borrower, will constitute such Borrower's,
legal, valid and binding obligation, enforceable against such Borrower, as the
case may be, in accordance with its terms.

     SECTION 3.04.  Approvals. No authorizations, approvals or consents of, and
                    ---------
no filings or registrations with, any governmental or regulatory authority or
agency, or any securities exchange, are necessary for the execution, delivery or
performance of the Credit

                                       36


Documents by any Borrower or for the legality, validity or enforceability
thereof, except for financing statement filings in respect of the security
interests created in favor of Lender pursuant to this Agreement and the other
Credit Documents. The borrowings hereunder, and the execution, delivery and
performance of each of the Credit Documents will not (a) contravene any
applicable provision of law, any applicable order of any court or other agency
of government, or (b) contravene the Articles of Incorporation or By-laws or any
indenture, agreement or other instrument binding upon any Borrower, or (c) be in
conflict with, result in the breach of or constitute (with due notice or lapse
of time or both) a default under any such indenture, agreement or other
instrument binding upon any Borrower, or (d) result in the creation or
imposition of any Lien, charge or encumbrance of any nature whatsoever upon any
of the property or assets of any Borrower, except pursuant to this Agreement and
the other Credit Documents.

     SECTION 3.05.  Ownership. Schedule 3.05 contains a true, accurate, and
                    ---------  -------------
complete description of the capital structure of each Borrower and identifies
each Person who owns or holds any equity right, title or interest in each
Borrower.

     SECTION 3.06.  Subsidiaries. US Corporation has no Subsidiaries other than
                    ------------
Technical Assessment Systems, Inc..  EAGL has no Subsidiaries other than EAG, a
private company limited by shares incorporated in England and Wales.  EIL has no
Subsidiaries other than Integrated Systems Assessment Limited, a private company
limited by shares incorporated in England and Wales.  US Corporation, EAGL, EIL,
EAG, Technical Assessment Systems, Inc. and Integrated Systems Assessment
Limited have and shall have no Affiliates other than each other.

     SECTION 3.07.  Financial Statements.
                    --------------------

          (a)  The financial statements of the US Corporation and the UK
Corporation provided to Lender dated as of November 30, 1998, together with
related consolidated statements of income, stockholders' equity and changes in
financial position or cash flow are true, accurate, and complete in all material
respects and fairly represent the financial condition of such Persons (and their
Consolidated Subsidiaries, if any) as of such date; such financial statements
were prepared in accordance with GAAP applied on a consistent basis (except as
noted therein); and since the date of such financial statements there has been
no material adverse change in the financial condition of the US Corporation and
the UK Corporation (and their Consolidated Subsidiaries, if any).  Since
November 30, 1998 no dividends, distributions, loans or advancements of any kind
have been made or given to any Person holding any equity right, title or
interest in the US Corporation and the UK Corporation other than compensation in
the ordinary course of business, that, if this Agreement had been in effect
during the period from November 30, 1998 through the date of this Agreement,
would not conflict with any provision of this Agreement.

          (b)  The estimated Opening Day Balance Sheets, which have been
prepared and certified by the treasurer or other officer of each member of the
Borrower Group, are true and correct.

                                       37


     SECTION 3.08.  Solvency. Each Borrower is, and after giving effect to the
                    --------
consummation of this Agreement and the incurrence of any Obligations incurred
hereunder, will be, Solvent.  No Borrower is contemplating either the filing of
a petition by such Borrower under any state or federal bankruptcy or insolvency
laws or the liquidation of all or a major portion of such Borrower's Property,
and such Borrower has no knowledge of any Person contemplating the filing of any
such petition against such Borrower.  No Borrower is currently the subject of
any bankruptcy or similar proceeding under any state or federal law and none of
such Borrower's Property is under the jurisdiction of any bankruptcy court or
other court having similar jurisdiction.

     SECTION 3.09.  Investments. Schedule 3.09 contains a true, accurate, and
                    -----------  -------------
complete listing of each Investment of each Borrower.  No Borrower has any
Investments other than Permitted Investments.

     SECTION 3.10.  Deposit Accounts. Schedule 3.10 contains a true, accurate,
                    ----------------  -------------
and complete listing of each deposit account of each Borrower.

     SECTION 3.11.  Indebtedness. Schedule 3.11 contains a true, accurate, and
                    ------------  -------------
complete listing of all Indebtedness of each Borrower.  No Borrower has any
Indebtedness other than Permitted Indebtedness.

     SECTION 3.12.  Liens. Each Borrower has good and marketable title to its
                    -----
Property free of all Liens, except for Permitted Liens.  Schedule 3.12 contains
                                                         -------------
a true, accurate, and complete listing of each Lien on each Borrower's Property.

     SECTION 3.13.  Material Agreements. Schedule 3.13 contains a true,
                    -------------------  -------------
accurate, and complete listing of each Material Agreement that burdens any
Borrower or from which any Borrower derives direct or indirect benefits.  To
each Borrower's knowledge, no default or event of default by any Person under
any Material Agreement has occurred and is continuing.  No Borrower is a party
to, or bound by, any contract or instrument, or subject to any charter or other
corporate restriction, materially and adversely affecting the business,
property, assets, operations or condition, financial or otherwise, of any
Borrower.

     SECTION 3.14.  Legal Proceedings. Except as set forth in Schedule 3.14,
                    -----------------                         -------------
there is no pending Proceeding that has been commenced by or against any Obligor
that relates to or may be reasonably expected to materially adversely affect on
a consolidated basis the business of or the Property owned by or used by the
Obligors and, to each Borrower's knowledge, no such Proceeding has been
Threatened.

     SECTION 3.15.  Accounts. All Accounts that may be listed on any accounts
                    --------
aging or listing furnished to Lender by or on behalf of Borrower at any time,
and all Accounts included in Borrower's assets on any financial statement
furnished to the Lender by or on behalf of Borrower at any time (including,
without limitation, the Opening Day Balance Sheets), and unless otherwise
expressly and clearly stated on such aging, listing or financial statement and
thereby disclosed to the Lender: (a) shall have arisen from services performed
by Borrower for, or goods sold by Borrower to, the appropriate Account Debtor in
a commercial transaction; (b)

                                       38


the Account is based on an enforceable order or contract, written or oral, for
services performed or goods sold, and the same were performed or sold in
accordance with such order or contract; (c) Borrower's title to the Account is
good and marketable and is not subject to any Lien other than Permitted Liens;
(d) the amount shown on the books of Borrower and on any invoice or statement
delivered to Lender regarding the Account is owing to Borrower.

     SECTION 3.16.  Insurance. Schedule 3.16 contains a true, accurate, and
                    ---------  -------------
complete listing of each insurance policy (including policies of worker's
compensation insurance, liability insurance, casualty insurance and business
interruption insurance) maintained in full force and effect by each Borrower.

     SECTION 3.17.  Intellectual Property. Each Borrower holds, owns, or is
                    ---------------------
licensed to use, all Intellectual Property necessary to conduct its businesses
as now conducted or intended to be conducted, free of burdensome restrictions,
and without known conflict with the rights of others.  All of the Intellectual
Property held, owned by, used by, or licensed to, each Borrower, or in which any
Borrower has any right or interest, is listed on Schedule 3.17.  Except as may
                                                 -------------
be expressly stated on Schedule 3.17, each Borrower holds, owns, and has the
                       -------------
exclusive right or license to use the Intellectual Property listed on Schedule
                                                                      --------
3.17, subject to no rights of any other Person.
- ----

     SECTION 3.18.  Special Property. No Borrower uses, owns or otherwise has
                    ----------------
rights to any Special Property, other than Special Property that is (a)
Intellectual Property listed on Schedule 3.17 or (b) Property listed on Schedule
                                -------------                           --------
3.18.
- ----

     SECTION 3.19.  Margin Stock. No Borrower is engaged principally, or as one
                    ------------
of its activities, in the business of extending credit for the purpose, whether
immediate, incidental or ultimate, of buying or carrying Margin Stock, and no
part of the proceeds of any extension of credit hereunder will be used to buy or
carry any Margin Stock.  No Borrower owns Margin Stock except as disclosed on
Schedule 3.19, and as of the date hereof the aggregate value of all Margin Stock
- --------------
owned by any Borrower does not exceed twenty-five percent (25%) of the assets of
such Borrower.

     SECTION 3.20.  Tax Identification Numbers. The tax identification number
                    --------------------------
for each Borrower and Guarantor is correctly set forth opposite its name on
Schedule 3.20.  EHI does not have a tax identification number on the Effective
- -------------
Date, but EHI has applied for it as of the Effective Date.

     SECTION 3.21.  Business. The business of each Borrower is as described on
                    --------
Schedule 3.21.
- -------------

     SECTION 3.22.  Name, Structure. Except for the name change of the US
                    ---------------
Corporation contemporaneously with the execution of this Agreement to Environ
International Corporation or as otherwise listed on Schedule 3.22, no Borrower
                                                    -------------
has changed its name or organizational structure within the two (2) year period
immediately preceding the Effective Date or purchased or acquired any Property
from any Person other than Property which in the hands of such Person was such
Person's inventory and was sold to Borrower in the ordinary course of such

                                       39


Person's business.

     SECTION 3.23.  Designated Locations. The street address, and county and
                    --------------------
state, of each place of business of each Borrower and each place where such
Borrower has, leases, maintains or stores Property, are listed on Schedule 3.23.
                                                                  -------------
The mailing address of Borrower's chief executive office is 4350 North Fairfax
Drive, Suite 300, Arlington, Virginia  22203, which is in Arlington County,
Virginia.  As of the Effective Date, and except as disclosed on Schedule 3.23,
                                                                -------------
Borrower does not own any interest, including any leasehold interest, in real
estate.

     SECTION 3.24.  Labor Status. No Borrower has experienced a strike, labor
                    ------------
dispute, slowdown or work stoppage due to labor disagreements which could have a
Material Adverse Effect and there is no such strike, dispute, slowdown or work
stoppage threatened against any Borrower.  Except as disclosed on Schedule 3.24,
                                                                  -------------
no Borrower is a party to any labor, employment or management contracts between
such Borrower and any of its employees or any person or group that represents
any of its employees.

     SECTION 3.25.  ERISA Status.
                    ------------

          (a)  Schedule 3.25 is a true, accurate, and complete listing of each
               -------------
Plan.  Each Plan is in compliance in all material aspects with the applicable
provisions of ERISA and the Code.  Except as otherwise expressly indicated on
Schedule 3.25, each Qualified Plan and each Multiemployer Plan has been
- -------------
determined by the Internal Revenue Service to qualify under Section 401 of the
Code, and the trusts created thereunder have been determined to be exempt from
tax under Section 501 of the Code, and nothing has occurred that would cause the
loss of such qualification or tax-exempt status.  There are no outstanding
liabilities under Title IV of ERISA with respect to any Plan which could
reasonably be expected to have a Material Adverse Effect.  No Plan subject to
Title IV of ERISA has any Unfunded Benefit Liability which could reasonably be
expected to have a Material Adverse Effect.  Neither Borrower nor any ERISA
Affiliate has transferred any Unfunded Benefit Liability to a person other than
an ERISA Affiliate or has otherwise engaged in a transaction that could be
subject to Section 4069 or 4212(c) of ERISA which could reasonably be expected
to have a Material Adverse Effect.  Neither any Borrower nor any ERISA Affiliate
has incurred nor reasonably expects to incur (x) any liability (and no event has
occurred which, with the giving of notice under Section 4219 of ERISA, would
result in such liability) under Sections 4201 or 4243 of ERISA with respect to a
Multiemployer Plan, or (y) any liability under Title IV of ERISA (other than
premiums due but not delinquent under Section 4007 of ERISA) with respect to a
Plan, which could, in either event, reasonably be expected to have a Material
Adverse Effect.  No application for a funding waiver or an extension of any
amortization period pursuant to Section 412 of the Code has been made with
respect to any Plan (other than a Multiemployer Plan).  No ERISA Event has
occurred or is reasonably expected to occur with respect to any Plan which could
reasonably be expected to have a Material Adverse Effect.  Each Borrower and
each ERISA Affiliate has complied in all material respects with the notice and
continuation coverage requirements of Section 4980B of the Code.  Neither any
Borrower nor any ERISA Affiliate has any contingent liability for post-
retirement benefits under a welfare plan (as defined in Section 3(1) of ERISA),
other than liability for continuation of coverage described in Section 4980B of
the Code, except as disclosed on the financial statements of each Borrower
prepared in accordance with GAAP

                                       40


applied on a consistent basis and delivered to Lender.

          (b)  In respect of the UK Corporations, Schedule 3.25A contains a
                                                  --------------
true, accurate and complete listing of all agreements or arrangements for the
provision of pensions, allowances, lump sums or other similar benefits on
retirement, death or long term ill health for the benefit of any current or
former employee of either UK Corporation or their dependents, including ex
gratia arrangements (each a "UK Plan"). To the best knowledge of Obligors:

               (i)   Full and accurate particulars of each UK Plan have been
disclosed including, without limitation, copies of the current trust deed and
rules plus any amending deeds or resolutions, members' booklets plus any
subsequent announcements to members, membership details, details of
contributions payable by and in respect of members, most recent actuarial report
and valuation, most recent scheme accounts, evidence of Inland Revenue approval
and contracting-out status and evidence of compliance with the Pensions Act 1995
and regulations.

               (ii)  Other than as disclosed there are no other Pension Schemes
for current or past directors or employees of the Company.

               (iii) In relation to each UK Plan within the three years ending
on the date of this agreement no power to augment benefits has been exercised,
no discretion has been exercised to admit an employee to membership of the
pension scheme who would not otherwise be eligible and no discretion has been
exercised to provide a benefit which would not otherwise be provided; all
benefits (other than a refund of contributions with interest where appropriate)
payable under each UK Plan on the death of a member while in an employment to
which the pension scheme relates are fully insured by a policy with an insurance
company of good repute; there are no contributions to a UK Plan which are due
but unpaid and have remained unpaid for more than one month and in any event
contributions have been paid which are at least equal to and by the due date
specified in any schedule of contributions or payments applicable under Section
58 or 87 of the Pensions Act 1995; no takeover protection provision will be
triggered by Completion; each UK Plan is sufficiently funded on an ongoing basis
using the assumptions used in the last actuarial valuation to secure at least
the benefits accrued to Completion (other than those which are insured) and in
addition is sufficiently funded to meet the minimum funding requirement as
defined in Section 56 of the Pensions Act 1995, and all information provided to
the Pension Scheme actuary for the purposes of the last actuarial valuation was
true, accurate and complete in all respects and there have been no events since
the date of that valuation which would show a deterioration of the funding
position of a UK Plan were such a valuation to be undertaken at the date of
Completion.

               (iv)  Each UK Plan is either approved by the Board of Inland
Revenue for the purposes of Chapter I Part XIV of the Income and Corporation
Taxes Act 1988 or is a scheme under which the benefits provided or to be
provided are consistent with the approval of the scheme by the Board of Inland
Revenue for such purposes and is a scheme in respect of which an application for
such approval has been made and has not been withdrawn or refused and the Board
of Inland Revenue have not given notice to the applicant that they believe the
application has been dropped; is established under irrevocable trusts; has been
administered in accordance with all applicable laws (including Article 119 of
the Treaty of Rome), regulations

                                       41


and requirements of any competent governmental body or regulatory authority and
the trusts and rules of the UK Plan; has not been the subject of any report of
wrongdoing or irregularities to the Occupational Pensions Regulatory Authority
nor are there any circumstances which would justify such a report; is a scheme
in respect of which all actuarial, consultancy, legal and other fees, charges or
expenses have been paid and for which no services have been provided for which
an account or invoice has not been rendered; and has no investment in employer-
related assets as defined in Section 40 of the Pensions Act 1995.

               (v)  No claim has been threatened or made or litigation commenced
against the trustees or administrators of any UK Plan or against UK Corporations
or any other person whom either UK Corporation is or may be liable to indemnify
or compensate in respect of any matter arising out of or in connection with any
UK Plan.  There are no circumstances which may give rise to any such claim or
litigation.  There are no unresolved disputes under any UK Plan's internal
dispute resolution procedure.

     SECTION 3.26.  Environmental Status. Except as set forth in Schedule 3.26:
                    --------------------                         -------------

          (a)  Each Borrower has obtained and maintained all Environmental
Permits necessary to conduct its business, both as done currently and as
proposed except insofar as collectively any non-compliance would not have a
Material Adverse Effect.

          (b)  Each Borrower has complied with all Environmental Laws (including
Environmental Permits) except insofar as collectively any non-compliance would
not have a Material Adverse Effect.

          (c)  To the knowledge of each Borrower, neither any Borrower nor any
Environmental Affiliate known to it, whether actively or passively, has
released, emitted, buried, leaked, or disposed of Regulated Substances on any
Property ever owned, leased or operated by any of them.

          (d)  To the best knowledge of each Borrower, no one else, whether
actively or passively, has released, emitted, buried, leaked, or otherwise
disposed of Regulated Substances on any Property while owned, operated or leased
by any Borrower or any Environmental Affiliate known to it.

          (e)  To Borrower's knowledge, there are no asbestos containing
materials, polychlorinated biphenyls or radioactive substances located on
Property now owned, operated or leased by any Borrower.

          (f)  Neither any Borrower nor any Environmental Affiliate known to it
has operated a treatment, storage or disposal facility requiring a permit or
having interim status under the Resource Conservation and Recovery Act, as
amended, or any comparable state laws, nor, to Borrower's knowledge, has any
Property of any Borrower or any Environmental Affiliate known to it been used
for such purposes.

          (g)  To Borrower's knowledge, there have been no underground storage
tanks,

                                       42


pipelines or surface impoundments at any Properties when owned, leased or
operated by Borrower or any Environmental Affiliate known to it which was
violative of any Environmental Law during such period of ownership, use or
operation.

          (h)  Neither any Borrower nor any Environmental Affiliate known to it
has received any Environmental Claim pursuant to any Environmental Law or
relating to any potential environmental liability which is not resolved and
which is likely to have a Material Adverse Effect.

          (i)  To the best knowledge of each Borrower, no other party has
received any Environmental Claim pursuant to any Environmental Law, including
CERCLA or any comparable state law or relating to any environmental liability
relating to any Borrower or any Environmental Affiliate known to it, any of
their Property or any property where wastes generated by any of them have been
sent which is not resolved and which is likely to have a Material Adverse
Effect.

          (j)  To Borrower's knowledge, none of the Property ever owned,
operated or leased by any Borrower or any known Environmental Affiliate is
listed on any environmental regulatory list of contaminated properties,
including the National Priorities List promulgated pursuant to the Comprehensive
Environmental Response, Compensation and Liability Act, the CERCLIS or any
federal, state or local counterpart with respect to such period of Borrower's
ownership, operation and lease which is not resolved and which is likely to have
a Material Adverse Effect.

          (k)  To Borrower's knowledge, there are no conditions on any adjacent
or neighboring properties which threaten the Property of any Borrower.

          (l)  To Borrower's knowledge, no Liens exist under or pursuant to any
Environmental Laws on any Property owned, operated or leased by any Borrower,
and to Borrower's knowledge no government action has been taken or is in process
that could subject any such Property to such Liens and no Borrower would be
required to place any notice or restriction relating to the presence of
Regulated Substances at any Property owned or leased by it in any deed or lease
to such Property.

          (m)  Each Borrower has disclosed to Lender, prior to the date of this
Agreement, its waste practices, its use of regulated substances and all
potentially material environmental matters and has disclosed all reports,
assessments, remedial action plans or other similar documents relating to any
material environmental condition of Property or operations of any Borrower and
any Environmental Affiliates known to it.

     SECTION 3.27.  Investment Company Act. No Borrower is an "investment
                    ----------------------
company," or a company "controlled" by an "investment company," within the
meaning of the Investment Company Act of 1940, as amended.

     SECTION 3.28.  Omitted.

                                       43


     SECTION 3.29.  Commercial Loan. The Loans made under this Agreement are
                    ---------------
made solely for a business or commercial purpose and not for any personal,
family, or household purpose.  The terms of this Agreement and Notes do not
violate any applicable Laws that regulate credit, including any applicable Laws
regarding usury and the charging of interest, late charges, fees, or any costs
and charges under this Agreement.

     SECTION 3.30.  No Broker. No Borrower has made any agreement or taken any
                    ---------
action that may cause anyone to become entitled to a commission or finder's fee
or other compensation of any kind attributable to any extensions of credit or
other matters or transactions contemplated under this Agreement and the other
Credit Documents.

     SECTION 3.31.  Obligor Information. There is no fact or circumstance or
                    -------------------
anticipated event known to any Responsible Officer that could have a Material
Adverse Effect that has not been disclosed to Lender in this Agreement, the
other Credit Documents, or in another writing furnished to Lender on or before
the Effective Date for use in connection with the transactions contemplated by
this Agreement and the other Credit Documents.  The Obligor Information
furnished to Lender on or before the Effective Date is true, accurate, and
complete in all material respects, and does not omit any material fact or facts
necessary to make the Obligor Information not misleading, and all Obligor
Information furnished to Lender after the Effective Date shall be true, accurate
and complete in all material respects.

     SECTION 3.32.  Independent Access. Each Obligor has adequate means to
                    ------------------
obtain from each other Obligor, on a continuing basis, information concerning
the condition, financial and otherwise, of all other Obligors, and the Obligors
are not relying on Lender to furnish such information either now or in the
future.  Neither Lender, nor any Affiliate of Lender, nor any of its or their
employees, attorneys, accountants, appraisers or other consultants or advisers
have made any representations, warranties or agreements of any kind to or with
the Principals, EHI, or the other Obligors, regarding the Stock Purchase
Agreement or the matters and transactions contemplated thereby, or the
businesses and assets that are directly or indirectly the subject matter
thereof.

     SECTION 3.33.  Taxes. Each Borrower has filed and will continue to file all
                    -----
United States income tax returns and all state income tax returns that are
required to be filed, and has paid, or made adequate provisions for the payment
of, all taxes which have or may become due pursuant to said returns or pursuant
to any assessment received by Borrower except such taxes, if any, as are being
contested in good faith and as to which adequate reserves have been provided.

     SECTION 3.34.  Applicable Laws. Each Borrower is in compliance, in all
                    ---------------
material respects, with all Applicable Laws.

     SECTION 3.35.  Risk Management Agreements. No Borrower is a party to any
                    --------------------------
Risk Management Agreement, except as listed on Schedule 3.35.
                                               -------------

     SECTION 3.36.  Year 2000 Issues. Each Borrower and its subsidiaries have
                    ----------------
made a full and complete assessment of the Year 2000 Issues and have a realistic
and achievable program for remediating any applicable Year 2000 Issues on a
timely basis.  Based on this

                                       44


assessment and program, each Borrower reasonably believes that Year 2000 Issues
cannot be expected to have a Material Adverse Effect.

     SECTION 3.37.  Direct Obligation; Full Faith and Credit. This Agreement,
                    ----------------------------------------
the Notes, and the other Credit Documents to which any Borrower is a party, and
each of the Obligations of each Borrower hereunder or thereunder, are direct,
unconditional and general obligations of each Borrower jointly and severally for
the payment of which the full faith and credit of each Borrower is pledged.

     SECTION 3.38.  No Recordation Necessary. This Agreement and each of the
                    ------------------------
other Credit Documents are in proper form under Virginia law for the enforcement
hereof or thereof against each Borrower under Virginia law, and to ensure the
legality, validity, enforceability, priority or admissibility in evidence of
this Agreement and the other Credit Documents, it is not necessary that this
Agreement or any other Credit Document or any other document, except UCC
financing statements, be filed, registered or recorded with, or executed or
notarized before, any court or other authority in Virginia or that any
registration charge or stamp or similar tax be paid on or in respect of this
Agreement or any other Credit Document or any other document.

     SECTION 3.39.  Wages, Severance Pay, Etc. No Borrower has pension benefits,
                    -------------------------
wages, severance pay or unemployment benefits unpaid and owing to any employees
currently employed or severed or retired, except as described on Schedule 3.39.
                                                                 -------------

     SECTION 3.40.  Stock Purchase Agreement. The Stock Purchase Agreement is in
                    ------------------------
full force and effect, complies with all Applicable Laws, has not been modified
or amended, and no obligations, rights, or remedies thereunder have been waived.

     SECTION 3.41.  Omitted.

     SECTION 3.42.  Omitted.

     SECTION 3.43.  Principals. All of the Principals are identified in Schedule
                    ----------                                          --------
3.43.
- ----

                                  ARTICLE IV
                                  ----------
                             AFFIRMATIVE COVENANTS
                             ---------------------

     Each Borrower covenants and agrees that as of the Effective Date  and until
the later of the Credit Termination Date or payment in full of all Obligations
owed by any Borrower to Lender, unless Lender shall otherwise consent in
writing:

     SECTION 4.01.  Information. Each Borrower shall deliver to Lender, or cause
                    -----------
to be delivered to Lender, the following:

          (a)  Omitted.

          (b)  as soon as available, but in any event within ninety (90) days
after the close of each fiscal year of each Borrower (and Guarantors), audited
financial statements

                                       45


reflecting their operations during such fiscal year, including, without
limitation, a balance sheet, profit and loss statement and statement of cash
flows, with supporting schedules, all on a consolidated and consolidating basis,
and setting forth in comparative form consolidated figures for the preceding
fiscal year, all in reasonable detail and audited by a certified public
accountant of recognized national standing reasonably acceptable to Lender,
whose opinion shall be unqualified and shall be to the effect that such
consolidated financial statements have been prepared in accordance with GAAP
applied on a consistent basis (excepting changes noted thereon with which such
accountants concur), except that for the fiscal year 1999, no information for
the preceding fiscal year 1998 will be provided for Environ Holdings, Inc., as
Environ Holdings, Inc. was incorporated and began operations in 1999;

          (c) as soon as available, but in no event more than forty-five (45)
days after the end of each of the first three fiscal quarters, a balance sheet
of each Borrower (and Guarantors) and statements of income and retained earnings
and of cash flows for each Borrower (and the Guarantors) for such quarterly
period and for the portion of the fiscal year ending with such period, all on a
consolidated and consolidating basis, in each case setting forth in comparative
form consolidated figures for the corresponding period of the preceding fiscal
year (except that the balance sheet shall be compared to that at prior year
end), all in reasonable form and detail acceptable to Lender, and accompanied by
the certificate of the Director of Finance of the applicable Borrower (and the
Guarantors) to the best of his or her knowledge, information and belief, as
being true and correct in all material respects and as having been prepared in
accordance with GAAP applied on a consistent basis, subject to changes resulting
from normal year-end audit adjustments;

          (d) at the time of the delivery of the financial statements provided
for in Sections 4.01 (a) and (b), a Responsible Officer's Certificate;

          (e) within the period for delivery of the annual financial statements
provided in Section 4.01(b), a certificate of the accountants conducting the
annual audit stating that they have reviewed this Agreement and stating further
whether, in the course of their audit, they have become aware of any Default or
Event of Default existing on the date of such statements arising as a result of
a violation of any Financial Covenants of this Agreement, and if any such
Default or Event of Default exists, specifying the nature and extent thereof.
However, it is recognized and agreed that the audit performed in accordance with
the requirements of Section 4.01(b) for the fiscal year 1999 is an auit of
records beginning as of the Effective Date, and that any figures for fiscal year
1999 prior to the Effective Date have not been subject to audit. However, the
Parties hereto have reviewed and accepted the calculations of EBITDA set forth
in Schedule 4.01(e) for the period of January 1, 1999- February 1, 1999, and
such calculations will be included in the certificate required hereunder;

          (f) promptly upon transmission thereof, copies of any filings and
registrations with, and reports to, the Securities and Exchange Commission, or
any successor agency, by any Borrower or Guarantor, and copies of all financial
statements, proxy statements, notices and reports as such Borrower or Guarantor
shall send to its shareholders or to the holders of any other Indebtedness of
any Borrower or Guarantor in their capacity as holders;

                                       46


          (g) within the period for quarterly and annual financial statements,
summary agings of accounts receivable, and accounts payable listings, for each
Borrower and the Guarantors each current as of the last day of the then most
recently ended quarter, together with such other information as Lender may
reasonably request regarding the accounts receivable and accounts payable;

          (h) within thirty (30) days after each filing by each Borrower and
each Guarantor of any tax return or extension thereof pursuant to the taxing
authority of any Governmental Authority, a photocopy of each such tax return,
with all related forms, schedules, and related information signed and certified
by the applicable Borrower or Guarantor as true and complete;

          (i) with reasonable promptness upon any such request, such other
information regarding the business, properties or financial or operating
condition of any Borrower or Guarantor as Lender may reasonably request.

     SECTION 4.02.  Reporting Notification Events. Immediately upon any
                    -----------------------------
Responsible Officer obtaining knowledge thereof, but in any event within five
(5) Business Days after any Responsible Officer obtains such knowledge, each
Borrower shall give Lender written notice of each Notification Event, which
written notice shall include (i) a description of the Notification Event
(including an estimate of any anticipated liability or Material Adverse Effect
that may arise from such Notification Event other than the occurrence of a
Default or Event of Default), (ii) the date of the Notification Event and the
date that the Responsible Officer first obtained knowledge of the Notification
Event, and (iii) a description of the manner in which any Borrower has addressed
or otherwise responded to the Notification Event or intends to address or
otherwise respond to the Notification Event.

     SECTION 4.03.  Existence. Each Borrower shall maintain its corporate or
                    ---------
other legal existence, in each jurisdiction in which it is incorporated or
otherwise formed, and in each jurisdiction where it is required to register or
qualify to do business except for failures to register or qualify which,
individually or in the aggregate, would not have a Material Adverse Effect.

     SECTION 4.04.  Places of Business. Borrower shall give Lender at least
                    ------------------
thirty (30) days' prior written notice of the intended opening of any new
location in addition to the Designated Locations.  Prior to such opening, such
Borrower shall deliver to Lender a revised Schedule 3.26 adding such new
                                           -------------
location as a Designated Location and shall execute and deliver, or cause to be
executed and delivered, to Lender such agreements, documents, and instruments as
Lender may deem necessary or desirable in Lender's discretion to protect
Lender's interest in the Collateral at such new location, including UCC
financing statements.  Such Borrower shall provide to Lender such UCC financing
statement search reports as Lender may reasonably request to confirm the absence
of competing Lien Notices and to confirm the priority of Lender's UCC financing
statements.  If Borrower closes for business at any Designated Location, such
Borrower shall give Lender at least thirty (30) days' prior written notice with
a written explanation of the reason for closing such Designated Location.  Upon
and after the occurrence of an Event of Default which remains uncured, no
Borrower shall open or close any place of business without Lender's prior
written consent, which consent shall not be unreasonably

                                       47


withheld, delayed or conditioned.

     SECTION 4.05.  Property. Each Borrower shall maintain, preserve and protect
                    --------
all Property that is material to the business of such Borrower and keep such
Property in good repair, working order and condition, normal wear and tear
excepted, and from time to time as necessary make, or cause to be made, all
repairs, renewals, additions, improvements, and replacements thereto as
necessary in order that the business carried on in connection therewith may be
properly conducted at all times in accordance with customary and prudent
business practices for similar businesses.

     SECTION 4.06.  Insurance. Each Borrower shall maintain in full force and
                    ---------
effect at all times insurance (including worker's compensation insurance,
liability insurance, casualty insurance and business interruption insurance) in
such amounts, covering such risks and liabilities, and with such deductibles as
are in accordance with normal industry practice unless higher limits or other
types of coverage are required by the terms of the other Credit Documents,
provided that the insurance coverages maintained by each Borrower shall at all
times be at least comparable in amount and in all other material respects, as
the coverages described on Schedule 3.16.  Each Borrower shall provide to Lender
                           -------------
promptly upon Lender's request from time to time certificates, policies or
endorsements as Lender shall require as proof of such insurance, and if any
Borrower fails to do so, Lender is authorized, but not required, to obtain such
insurance at the expense of the Obligors.  All insurance policies shall provide
for at least thirty (30) days' prior written notice to Lender of any
cancellation or reduction in coverage and Lender may act as attorney-in-fact for
any Borrower in obtaining, and at any time an Event of Default exists,
adjusting, settling, amending and canceling such insurance.  Each Borrower shall
cause Lender to be named as a loss payee and an additional insured (but without
any liability for any premiums) under all such insurance policies as to which
such is obtainable at no or reasonable cost and shall cause each Borrower to
obtain non-contributory Lender's loss payable endorsements to all such insurance
policies in form and substance satisfactory to Lender.  Such Lender's loss
payable endorsements shall specify that the proceeds of such insurance shall be
payable to Lender as its interests may appear and further specify that Lender
shall be paid regardless of any act or omission by any Borrower or any other
Person.  To the extent Borrower defaults in regularly scheduled payments on the
Notes or other Credit Documents, all proceeds of such casualty insurance and
business interruption insurance not applied to repair and replacement of the
Property shall be paid to Lender for application to the Obligations in
accordance with the terms of this Agreement and the other Credit Documents or
otherwise.  Lender shall not be responsible for any failure to collect any
insurance proceeds due under the terms of any policy regardless of the cause of
such failure.

     SECTION 4.07.  Taxes. Each Borrower shall pay and discharge, or cause to be
                    -----
paid and discharged, promptly all taxes, assessments, and governmental charges
or levies imposed upon any Borrower or upon any Borrower's income and profits,
or upon any of its Property or any part thereof, before the same shall become in
default, as well as all lawful claims for labor, materials and supplies or
otherwise which, if unpaid, might become a Lien upon such Property or any part
thereof; provided, however, that no Borrower shall be required to pay and
discharge or to cause to be paid and discharged any such tax, assessment,
charge, levy or claim so long as the validity thereof shall be contested in good
faith by appropriate proceedings and such Borrower

                                       48


shall have set aside on its books adequate reserves with respect to any such
tax, assessment, charge, levy or claim, so contested.

     SECTION 4.08.  Compliance with Laws. Each Borrower shall comply, in all
                    --------------------
material respects, with all Applicable Laws.

     SECTION 4.09.  Material Agreements. Each Borrower shall comply, in all
                    -------------------
material respects, with all Material Agreements, and shall diligently preserve,
protect, and enforce such Borrower's rights and remedies under all Material
Agreements.

     SECTION 4.10.  Permitted Indebtedness. Each Borrower shall pay all of its
                    ----------------------
Permitted Indebtedness promptly and in accordance with the contractual terms of
such Permitted Indebtedness as set forth in the documentation for such Permitted
Indebtedness.

     SECTION 4.11.  Maintenance of Primary Account.  Omitted.
                    ------------------------------

     SECTION 4.12.  Credit Administration Costs;  Brokers. Each Borrower shall
                    -------------------------------------
pay and cause all other Obligors to pay all reasonable out-of-pocket costs and
expenses of Lender in connection with the Loans promptly upon Lender's demand
from time to time.  Each Borrower shall indemnify and hold harmless Lender from
and against any claim by any Person not contracted with by Lender for a
commission or finder's fee or other compensation of any kind attributable to any
extensions of credit or other matters or transactions contemplated under this
Agreement and the other Credit Documents, and shall pay Lender's attorney's
fees, litigation expenses and court costs in defending any such claims.

     SECTION 4.13.  Review and Audit. Each Borrower shall maintain its financial
                    ----------------
books and records in accordance with GAAP.  Lender shall be permitted access to
all Records at any location, including any Designated Location during normal
business hours on reasonable notice and shall be permitted to take copies, at
Borrower's expense, of such Records as Lender may request.  Each Borrower shall
permit and authorize Lender through any Person designated by Lender ("Lender's
Designee"), at such times and as often as Lender may reasonably request, to
visit, inspect, examine, audit and verify any of the properties and Records of
each Borrower relevant to the subject matter of this Agreement or any other
Credit Documents or any Obligor Information or the financial condition of each
Borrower.  The actions of Lender and Lender's Designee pursuant to this Section
shall be scheduled and conducted so as not to be unreasonably disruptive to
Borrower's operations.

     SECTION 4.14.  Rate Hedging. Upon the request of Lender, Borrower shall
                    ------------
hedge the floating interest expense of the Term Loan for the full term of the
Term Loan by maintaining one or more interest rate swap transactions with Lender
or with another financial institution approved by Lender in writing in an
aggregate notional amount equal to at least fifty percent (50%) of the initial
amount funded under the Term Loan, with Borrower making fixed rate payments and
receiving floating rate payments to offset changes in the variable interest
expense of the Term Loan, all upon terms and subject to such conditions as shall
be acceptable to Lender (or if such transaction is with another financial
institution, all upon terms and subject to conditions as shall be approved by
Lender in writing).

                                       49


     SECTION 4.15.  Use of Loan Proceeds. The proceeds of the Loans shall be
                    --------------------
used solely for the purpose expressly permitted in Article II.

     SECTION 4.16.  ERISA and Related Matters. Each Borrower shall promptly
                    -------------------------
furnish to Lender copies prepared or received by such Borrower or any ERISA
Affiliate of: (i) at the request of Lender, each annual report (Internal Revenue
Service Form 5500 series) and all accompanying schedules, actuarial reports,
financial information concerning the financial status of each Plan, and
schedules showing the amounts contributed to each Plan by or on behalf of
Borrower or any ERISA Affiliates for the most recent three (3) plan years; (ii)
all notices of intent to terminate or to have a trustee appointed to administer
any Plan under Title IV of ERISA; (iii) all written demands by the PBGC under
Subtitle D of Title IV of ERISA; (iv) all notices required to be sent to
employees or to the PBGC under Section 302 of ERISA or Section 412 of the Code;
(v) all written notices received with respect to a Multiemployer Plan concerning
(x) the imposition or amount of withdrawal liability pursuant to Section 4202 of
ERISA, (y) a termination described in Section 4041A of ERISA, or (z) a
reorganization or insolvency described in Subtitle E of Title IV of ERISA; (vi)
any new Plan that is subject to Title IV of ERISA or Section 412 of the Code
adopted by Borrower or any ERISA Affiliate; (vii) any amendment to any Plan that
is subject to Title IV of ERISA or Section 412 of the Code, if such amendment
results in a material increase in benefits or Unfunded Benefit Liability; or
(viii) at the request of Lender, information regarding any unfunded pension
liabilities or similar liabilities, severance liabilities, unemployment
liabilities, wage claims, or the like, if favor of any Person including without
limitation, an tax authority or Governmental Authority; and, in respect of each
UK Plan copies of (ix) any actuarial report and valuation of that UK Plan, and
any other actuarial advice material to the funding of the UK Plan; (x) any
amending deeds or documents; (xi) notification of any decision to terminate the
UK Plan; (xii) and notification of any litigation commenced or threatened
against the UK Plan, its trustees or the applicable UK Corporation in respect of
the UK Plan including any complaint made to the Pensions Ombudsman.

     SECTION 4.17.  Environmental Matters. Each Borrower shall cause all
                    ---------------------
Property owned or operated by Borrower to be kept free of contamination from
Regulated Substance and any other harmful or physical conditions except as
otherwise would be in compliance with applicable Environmental Laws.  If any
Obligor receives notice or becomes aware of any Environmental Claim or any
violation of Environmental Laws or any contamination with Regulated Substances
that relates to any of them or their respective Properties, then Obligor shall
promptly provide written notice thereof to Lender and, upon written request of
Lender, shall provide Lender with such reports, certificates, engineering
studies or other written material or data as Lender may require so as to satisfy
Lender that Obligor reasonably is in compliance with its obligations under this
Agreement.  In addition, if Lender shall at any time have reason to believe that
any of the representations and warranties contained in Section 3.26 of this
                                                       ------------
Agreement is not accurate in any respect, or that any Borrower is in breach of
its obligations under the foregoing provisions of this Section, Lender shall
have the right at any time and from time to time to employ, or to require any
Obligors at the Obligors' expense to employ, a qualified environmental
consultant acceptable to Lender to conduct a pertinent environmental review,
audit, assessment or report concerning the pertinent Borrower's operations and
Property.  Each Borrower shall cooperate fully with such consultant in any such
audits, including by providing

                                       50


such access to any Borrower's books, records, Property, employees and agents and
by furnishing such written and oral information as such consultant may
reasonably request in connection with any such audits. Each Obligor (jointly and
severally) shall indemnify and hold harmless Lender (and Lender's employees,
agents, officers, directors, successors, and assigns) from all Environmental
Claims directly or indirectly relating to or arising out of or based upon any
presence or threatened presence of Regulated Substances at any Property owned or
operated by any Borrower at any time or based upon any conduct or omission of
any Borrower at any time or upon the breach by any Borrower of any covenant,
agreement, representation, or warranty contained in this Agreement or any other
Credit Documents or upon the violation of any Environmental Laws. This indemnity
shall include (a) any Environmental Claim for personal injury (including
sickness, disease, or death or the fear of any thereof), tangible property
damage, nuisance, pollution, contamination, leak, spill, release, or other
effect on the environment, and (b) the cost of any required, necessary, or
appropriate response, investigation, repair, clean-up, treatment, removal,
remediation, or detoxification of any Property or other properties affected by
such release or threatened release, and the preparation and implementation of
any other required, necessary or appropriate actions in connection with any
Property or other properties affected by such release or threatened release. The
covenants, agreements, representations, and warranties of Borrower contained in
this Section shall survive the payment of the Obligations and the termination of
this Agreement.

     SECTION 4.18.  Year 2000 Compatibility. Each Borrower shall take all action
                    -----------------------
necessary to assure that such Borrower's computer based systems are able to
operate and effectively process data including dates on and after January 1,
2000.  At the request of Lender, each Borrower shall provide Lender with
assurance acceptable to Lender of such Borrower's Year 2000 compatibility.

     SECTION 4.19.  Consolidated Funded Debt to EBITDA. The ratio of
                    ----------------------------------
Consolidated Funded Debt to EBITDA for the Borrower Group shall not exceed the
following:



          --------------------------------------------------------------------------------
          Applicable Period                                                 Ratio
          --------------------------------------------------------------------------------
                                                                         
          Effective Date through December 31, 1999                          5.00:1
          --------------------------------------------------------------------------------
          January 1, 2000 to December 31, 2000                              4.50:1
          --------------------------------------------------------------------------------
          January 1, 2001 to December 31, 2001                              4.00:1
          --------------------------------------------------------------------------------
          January 1, 2002 to December 31, 2002                              3.75:1
          --------------------------------------------------------------------------------
          January 1, 2003 to December 31, 2003 and thereafter               3.50:1
          --------------------------------------------------------------------------------


     SECTION 4.20.  Senior Funded Debt to EBITDA. The Borrower Group's ratio of
                    ----------------------------
Senior Funded Debt to EBITDA shall not exceed 2.50:1.

     SECTION 4.21.  Consolidated Tangible Net Worth. The Borrower Group's
                    -------------------------------
Consolidated Tangible Net Worth shall increase during the term of the Seller
Note according to the chart below. For the first year of the term of the Seller
Note, the increase in Consolidated Tangible Net Worth shall be determined as of
December 31, 1999 and calculated by subtracting

                                       51


Borrower Group's Consolidated Tangible Net Worth as of February 2, 1999 (the
"Opening Consolidated Tangible Net Worth", as shown on the Opening Day Balance
Sheets prepared by Arthur Andersen). Thereafter, for each successive year of the
term of the Seller Note, the increase in Borrower Group's Consolidated Tangible
Net Worth shall be determined as of December 31 of such year and calculated by
subtracting the Opening Consolidated Tangible Net Worth.

                                                      Cumulative  Increase
     Effective Date through December 30, 1999              $   917,000

     Effective Date through December 30, 2000                1,917,000

     Effective Date through December 30, 2001                2,917,000

     Effective Date through December 30, 2002                3,917,000

     Effective Date through December 30, 2003                4,917,000

     Effective Date through December 30, 2004                5,917,000

     Effective Date through December 30, 2005                6,917,000

     Effective Date through December 30, 2006                7,917,000

     Effective Date through December 30, 2007                8,917,000

     Effective Date through December 30, 2008                9,917,000

     Effective Date through December 30, 2009               10,917,000

     Effective Date through December 30, 2010               11,917,000

     In addition, the Borrower covenants and agrees that Borrower will not make
any payment to any shareholder in connection with the repurchase or sale of
stock under the Shareholder Agreement (a "Redemption Payment") if such
Redemption Payment would cause Borrower Group's Consolidated Tangible Net Worth,
determined as of the date of any such Redemption Payment, to be less than the
sum of:  (a) the Consolidated Tangible Net Worth of the Borrower Group as of
December 31 of the year immediately prior to the year in which the Redemption
Payment is made (the "Payment Year") and (b) the Prorated Consolidated Tangible
Net Worth Increase (as defined hereafter). For purposes of this Agreement, the
"Prorated Consolidated Tangible Net Worth Increase" shall be determined by
multiplying the dollar amount of the required annual increase in the Borrower
Group's Consolidated Tangible Net Worth for the Payment Year (as set forth in
this Section 4.21) by a fraction, the numerator of which shall be equal to the
number of calendar days in the Payment Year which have elapsed as of the date of
the Redemption Payment, and the denominator of which shall be equal to the
number of calendar days in the Payment Year.

                                       52


     SECTION 4.22.  Debt Service Coverage. The Borrower Group's ratio of (a)
                    ---------------------
consolidated EBITDA, net of incentive compensation, to (b) the sum of (i)
consolidated portion of current long term debt, (ii) consolidated portion of
current long term capital leases, and (iii) consolidated interest expense shall
be at least 1.30:1.

     SECTION 4.23.  Negative Net Income. At no time shall Obligors on a
                    -------------------
consolidated basis sustain losses, ("Negative Net Income" defined as: Net Income
exclusive of which calculation shall exclude any non-cash compensation charge
recorded to reflect appreciation of Borrower Group's stock or stock options,
provided however that any such non-cash compensation charge shall not be
excluded from the calculation of Net Income for any Borrower that has converted
its method of accounting to fixed plan accounting), in any two consecutive
fiscal quarters or for any fiscal year.

     SECTION 4.24.  Principals. The Principals shall maintain in full force and
                    ----------
effect employment agreements and such other agreements that contain economic
disincentives to competition provisions covering at least one year after
termination of employment with any Borrower or Guarantor.

     SECTION 4.25.  Capital Contribution.  As of the date of this Agreement, the
                    ---------------------
shareholders of EHI, as a group, have contributed to the capital of EHI cash in
an amount of not less than One Million Dollars ($1,000,000).

                                 ARTICLE IV-A
                                 ------------
                        ADDITIONAL SECURITY PROVISIONS
                        ------------------------------

     SECTION 4A.01. Security Interest. To further secure the  Seller Note, and
                    -----------------
all principal, interest, costs and expenses (including, without limitation, all
costs of collection related thereto and all amounts advanced to protect the
validity, security and priority of Lender's Liens in the Collateral securing the
Seller Note) due Lender in respect thereof, and all amendments, allonges,
extensions, modifications, renewals, restatements and substitutions thereto and
therefor, and without limiting the legal operation and effect of any other
Credit Document, each Borrower hereby collaterally assigns to Lender, and grants
Lender a security interest in, all of such Borrower's Property described below,
now owned and hereafter acquired, created or arising, and all of such Borrower's
Property listed on any Schedule to this Agreement, now owned and hereafter
acquired, created or arising, and in each case regardless of where such Property
may be located and whether such Property may be in the possession of any
Borrower, Lender, or a third party, and, if any of such Property may be held or
stored with any Person other than a Borrower, together with all of each
Borrower's rights now owned and hereafter acquired, created or arising relating
to the storage and retrieval thereof and access thereto (all of which Property
described below or listed on any such Schedule and all such rights of storage,
retrieval and access being referred to herein as "Collateral"):

          (a) All of each Borrower's "accounts" (as defined in Article 9), and
including all obligations for the payment of money arising out of each
Borrower's rendition of services, or sale, lease or other disposition of each
Borrower's goods or other property, and including all

                                       53


rentals, lease payments, and other moneys earned and to be earned, due and to
become due, under any lease, and all rights of stoppage in transit, replevin,
repossession and reclamation and other rights and remedies of an unpaid vendor,
lienor or secured party, and all guaranties or other contracts of suretyship
with respect to any of the foregoing property, and all deposits, letters of
credit, and other security for the obligation of any Account Debtor relating in
any way to any of the foregoing property, and all credit and other insurance for
any of the foregoing property and all contract rights ("Accounts"); and

          (b) All of each Borrower's right, title and interest in any and all
depositary accounts, including any and all other demand, time, savings, passbook
and like accounts, and including any Lock-Box, collateral accounts, cash
management accounts, safe-keeping accounts, and safe-deposit boxes, and
including any and all amounts and contents therein and thereof and all of each
Borrower's rights under agreements relating thereto, and all of each Borrower's
rights relating to the storage and retrieval thereof and access thereto ("Lender
Accounts"); and

          (c) All of each Borrower's "chattel paper" (as defined in Article 9)
("Chattel Paper"); and

          (d) All of each Borrower's "documents" (as defined in Article 9)
("Documents"); and

          (e) All of each Borrower's "equipment" (as defined in Article 9) and
goods which are or are to become fixtures ("Equipment"); and

          (f) All of each Borrower's "general intangibles" (as defined in
Article 9) of every kind and description, and including all (i) advertisements
in any medium (and other marketing and promotional materials in any medium),
brochures, signs, stationery, business forms, packaging and shipping materials,
telephone numbers, post office addresses, mailing addresses, e-mail addresses,
so-called "web" sites and addresses and all codes and rights relating thereto,
programs and software, licenses, permits, consents, and approvals of any
Governmental Authorities and other Persons, federal, state, and local tax refund
claims, financing statements in which any Borrower's interest appears as a
secured party or lessor, and things in action, (ii) Intellectual Property, (iii)
to the extent not otherwise included as Intellectual Property, all goodwill
associated with or related to any of the foregoing or each Borrower or each
Borrower's business, (iv) all obligations and indebtedness owing to any Borrower
(other than Accounts), and (v) all rights and claims in respect of refunds for
taxes paid ("General Intangibles"); and

          (g) All of each Borrower's moneys, securities and other property, now
or hereafter held or received by, or in transit to, Lender, whether for
safekeeping, pledge, custody, transmission, collection or otherwise, and any
balances, sums and credits of each Borrower held by Lender at any time existing
and all of each Borrower's Lender Accounts at Lender ("Held Items"); and

          (h) All of each Borrower's promissory notes or other instruments or
agreements evidencing any Borrower's right to payment from any Person or
Persons, and including, without limitation, all of each Borrower's "instruments"
(as defined in Article 9), and

                                       54


letters of credit ("Instruments"); and

          (i) All of each Borrower's "inventory" (as defined in Article 9),
including all raw materials, work in process, parts, components, assemblies,
supplies and materials used or consumed in any Borrower's business, all goods,
wares and merchandise, finished or unfinished, held for sale or lease or leased
or furnished or to be furnished under contracts of service or hire
("Inventory"); and

          (j) All of each Borrower's "securities" (whether certificated or
uncertificated), "security entitlements," "securities accounts," "commodity
contracts," "commodity accounts" and other "investment property" (as defined in
Article 8A or Article 9, as the case may be) ("Investment Property"); and

          (k) All of each Borrower's right, title and interest in any tangible
or intangible personal property that is not described within the other defined
terms included within the definition of Collateral ("Other Personalty"); and

          (l) All cash and non-cash "proceeds" (as the term is used in Article
9) and all other amounts received in respect of any sale, exchange, lease,
license or other disposition of any Collateral, and including insurance proceeds
("Proceeds"); and

          (m) All products of Collateral ("Products"); and

          (n) All of each Borrower's books, records, documents, ledger cards,
invoices, bills of lading and other shipping evidence, credit files, computer
programs, tapes, discs, diskettes, and other data and software storage medium
and devices, customer lists, mailing lists, mailing labels, business forms and
stationery, and other property and general intangibles evidencing or relating to
each Borrower's Accounts, Inventory and/or other Collateral, or any Account
Debtor, (including any rights of any Borrower with respect to the foregoing
maintained with or by any other person) ("Records").

     SECTION 4A.02.  Chattel Paper and Instruments. Each Borrower shall mark or
                     -----------------------------
stamp the first page and the signature page of all Chattel Paper with a legend
clearly and conspicuously stating that such Chattel Paper is subject to a
continuing security interest in favor of Lender, and promptly upon Lender's
request from time to time, and at each Borrower's sole cost and expense, and
without limiting the effect of any other provision of this Agreement or any
other Credit Document, each Borrower shall:  (i) deliver to Lender such Chattel
Paper, and execute and deliver to Lender such assignments of Chattel Paper and
related endorsements of Chattel Paper, as Lender may request, and shall cause
the makers of the Chattel Paper to deliver to Lender such acknowledgments of the
assignments of Chattel Paper as Lender may request; and (ii) deliver to Lender
such Instruments, and execute and deliver to Lender such collateral assignments
of Instruments and related endorsements of Instruments, as Lender may request,
and shall cause the makers of the Instruments to deliver to Lender such
acknowledgments of assignment of Instruments as Lender may request.

     SECTION 4A.03.  Borrower's Collection Privileges. To further secure the
                     --------------------------------
Seller

                                       55


Note, and all principal, interest, costs and expenses (including, without
limitation, all costs of collection related thereto and all amounts advanced to
protect the validity, security and priority of Lender's Liens in the Collateral
securing the Seller Note) due Lender in respect thereof, and all amendments,
allonges, extensions, modifications, renewals, restatements and substitutions
thereto and therefor, and in addition to Lender's other rights, powers, and
remedies under this Agreement, including those under Section 7.09, each Borrower
agrees that Lender shall have the exclusive right to collect from Account
Debtors, in the name of such Borrower or Lender, or in the name of Lender's
designee, all Accounts, Chattel Paper, Documents, General Intangibles,
Instruments, Investment Property and similar Collateral; provided, however, that
prior to the revocation of the privilege by Lender in writing in Lender's
discretion at any time after the occurrence and continuance of an Event of
Default, each Borrower shall be privileged to collect such Borrower's Accounts,
Chattel Paper, Documents, General Intangibles, Instruments, Investment Property
and similar Collateral in the ordinary course of such Borrower's business so
long as such Borrower shall apply all proceeds of such Collateral and
collections in accordance with the terms of this Agreement. Nothing in this
Agreement shall be construed as obligating Lender to take any actions to collect
any Collateral.

     SECTION 4A.04. Collateral Account. Following the occurrence of an Event of
                    ------------------
Default and requirement by Lender that any Borrower maintain a Lock-Box, each
Borrower shall maintain a Collateral Account into which Items of Payment
received and processed through the Lock-Box, and any other payments received by
such Borrower from Account Debtors, shall be deposited on the date of such
Borrower's receipt thereof.

     SECTION 4A.05. Lock-Box. Following the occurrence of an Event of Default
                    --------
and notice from Lender that a Lock-Box shall be required, each Borrower shall
maintain a Lock-Box administered by Lender in accordance with Lender's standard
Lock-Box service and shall direct each Account Debtor to make payments on
Accounts to the Lock-Box address.

     SECTION 4A.06  Additional Collateral. If any Borrower proposes to acquire
                    ---------------------
additional Property which would constitute Collateral, and if the security
interest of Lender would not be a first priority perfected security interest
upon acquisition of such Property, then except with respect to Permitted Liens,
as to which this Section shall not apply, such Borrower shall, before acquiring
such Property,  take whatever actions Lender may require in order that, upon the
acquisition of such Property, Lender will have a first priority perfected
security interest therein.

     SECTION 4A.07  Further Assurances of Collateral. Each Borrower shall
                    --------------------------------
execute such further agreements, documents, financing statements and other
instruments as may reasonably be requested by Lender in order to perfect the
security interests granted herein.  To the extent that possession of the
Collateral may be necessary or advisable to perfect the collateral assignment
and security interests granted hereby, each Borrower shall deliver such
Collateral to Lender upon the request of Lender; provided that before the
occurrence of an Event of Default, Lender shall not require physical possession
of Collateral if such possession would materially impair Borrowers' ability to
transact business in a commercially reasonably manner.  Without limiting the
generality of the foregoing, each Borrower hereby covenants and agrees that all
Liens granted to Lender under this Agreement and/or any other Credit Documents,
are, and shall

                                       56


at all times be, first priority Liens, subject only to Permitted Liens, and that
no Property of any Borrower shall be subject to any Lien (regardless of
priority) except for Permitted Liens.

                                   ARTICLE V
                                   ---------
                              NEGATIVE COVENANTS
                              ------------------

     Each Borrower covenants and agrees that from the date hereof and until the
later of the Credit Termination Date or payment in full of all Obligations owed
by any Borrower or Guarantor to Lender, unless Lender shall otherwise consent in
writing:

     SECTION 5.01.  Restricted Payments. No Obligor shall make any payment of
                    -------------------
any incentive bonus or other incentive compensation (including the reasonable
value of non-cash compensation) at any time that a monetary Default or non-
monetary Event of Default exists under any of the Credit Documents or if such
bonus or other incentive compensation would cause the Borrower Group to breach
any of the Financial Covenants.

     SECTION 5.02.  Investments. No Obligor shall make, acquire or hold any
                    -----------
Investments other than Permitted Investments.

     SECTION 5.03.  Indebtedness. No Obligor shall incur, create, assume or
                    ------------
suffer to exist any Indebtedness other than Permitted Indebtedness.

     SECTION 5.04.  Maintenance of Permitted Indebtedness. No Obligor shall
                    -------------------------------------
prepay any Permitted Indebtedness, excepting any prepayments of the Obligations.
No Obligor shall modify any agreement relating to any Permitted Indebtedness.
No Obligor shall make any payment on the Seller Subordinated Obligations except
as expressly permitted in the Seller Subordination Agreement.

     SECTION 5.05.  Judgments. No Obligor shall permit any judgment that is not
                    ---------
covered by insurance entered against such Obligor to remain unsatisfied for a
period of more than thirty (30) days after the judgment has become final.

     SECTION 5.06.  Transactions with Affiliates and Selling Shareholders.
                    -----------------------------------------------------
Obligors may engage in transactions with Affiliates so long as such transactions
(a) are on terms and conditions comparable to third-party arms length
transactions; or (b) are employment or other compensation and benefit
arrangements, including bonuses, incentive compensation, and stock option plans,
which arrangements are entered into by such Obligor reasonably and in the
ordinary course of such Obligor's business; or (c) are between such Obligor and
an Obligor which is directly or indirectly wholly-owned by another Obligor.

     SECTION 5.07.  Line of Business; Name; Structure. No Obligor shall engage
                    ---------------------------------
in any business other than the business engaged in by such Obligor on the
Effective Date and described on Schedule 3.22.  No Obligor shall refuse, or
                                -------------
divert or refer to any other Person other than another Obligor any business or
business opportunity that such Obligor could reasonably be expected to profit
from in the ordinary course of such Obligor's business.  No shareholder,
officer, director or employee of any Obligor shall divert from such Obligor, or
refer to any

                                       57


person other than a Obligor, any business or business opportunity that could be
served by a Obligor in the ordinary course of such Obligor's business. Except
for the name change of US Corporation to Environ International Corporation, no
Obligor shall change its name or organizational structure without the prior
written consent of Lender.

     SECTION 5.08.  Stock. Except for EHI which may issue additional shares of
                    -----
capital stock subject to the Shareholders' Agreement, no Obligor shall issue any
additional shares of capital stock or other Equity Rights or Equity Interests
except for securities (a) in respect of which it has no absolute and unqualified
obligation to redeem or to pay cash distributions or dividends, and (b) the
issuance of which does not result in an Event of Default.

     SECTION 5.09.  Dividends; Distributions; Repurchases. No Obligor shall
                    -------------------------------------
declare or pay any dividend on, or make any other distribution of assets on
account of, or redeem, purchase or otherwise acquire for value (other than
redemptions in accordance with the Shareholders Agreement as in effect on the
date hereof), any shares of any class of its capital stock, or any equity
interest in it held by any Person (other than one Obligor to another Obligor),
or any equity rights in it held by any Person if there is an existing Default or
if any of the foregoing would result in a violation of any of the Financial
Covenants or of any of the financial covenants set forth in the Seller Note or
credit agreement executed by Borrower in connection with the Seller Note.

     SECTION 5.10.  Subsidiaries. Except as may be expressly permitted in
                    ------------
Section 3.06 on the Effective Date, no Obligor shall (a) be or become a
- ------------
Subsidiary of any Person or (b) form or acquire or cause or permit any Person to
be, a Subsidiary of any Obligor.  Notwithstanding the foregoing, Borrowers may
create new wholly owned Subsidiaries without the prior written consent of Lender
so long as (a) such Subsidiaries are in the same business as Borrowers, (b) each
such Subsidiary enters into a guaranty of the Loans on  terms and conditions
reasonably satisfactory to Lender, and (c) such Subsidiary secures its guaranty
obligations by granting Lender a security interest in all of such Subsidiary's
assets.

     SECTION 5.11.  Control. No Change of Control of any Obligor shall occur.
                    -------

     SECTION 5.12.  Consolidations; Mergers; Dispositions; Acquisitions. Except
                    ---------------------------------------------------
for Permitted Investments and as permitted by Section 5.10 above, no Obligor
shall (i) enter into any transaction of merger or consolidation, or
reorganization, or liquidate, wind up or dissolve itself, or suffer any
liquidation or dissolution, or (ii) convey, sell, lease, license, transfer or
otherwise dispose of, in one transaction or a series of transactions, all or any
substantial or material portion of its business, Property or tangible or
intangible assets, whether now owned or hereafter acquired, or (iii) sell,
assign, convey, lease, license, abandon, transfer or otherwise dispose of, any
of its Property or other assets which do not constitute Collateral except in the
ordinary course of business, or (iv) acquire by purchase or otherwise any of the
outstanding capital stock of, or all or substantially all of the business,
Property or assets of, any Person.  No Obligor shall sell, assign, convey,
lease, license, abandon, transfer or otherwise dispose of, any Collateral,
except that any Obligor may make (i) sales of Inventory in the ordinary course
of such Obligor's business, (ii) sales for fair consideration of Equipment or
other Property that is obsolete or no longer useful in such Obligor's business,
and (iii) Permitted Licenses of Intellectual Property.

                                       58


     SECTION 5.13.  Liens; Bailments; Certain Sales. No Obligor shall (a)
                    -------------------------------
create, incur, assume or suffer to exist any Lien or Lien Notice upon any
Property of any Obligor other than Permitted Liens (including any Lien Notices
that are Permitted Liens), or (b) license any Property of any Obligor to any
other Person unless such license is a Permitted License, or (c) directly or
indirectly, sell with or without recourse, or discount or factor, any Obligor's
Accounts, Chattel Paper, Instruments, General Intangibles, or Documents.

     SECTION 5.14.  Risk Management Agreements. No Obligor shall be a party to
                    --------------------------
any Risk Management Agreement, other than with an entity approved by Lender,
except as listed on Schedule 3.35 or as may be expressly required by a provision
                    -------------
of this Agreement.

                                  ARTICLE VI
                                  ----------
               EVENTS OF DEFAULT;  CERTAIN REMEDIES UPON DEFAULT
               -------------------------------------------------

     SECTION 6.01.  Events of Default. Subject to Section 6.01(s), each of the
                    -----------------
following events shall constitute an Event of Default attributable to all
Obligors:

          (a)  Any Obligor's failure to pay within ten (10) days after the
Payment Date any amount of principal or interest of any Loan due on such Payment
Date; or

          (b)  Any Obligor's failure to pay any late charges, Loan related
expenses or fees of Lender, or any other sums (other than principal and
interest) due under any of the Credit Documents within ten (10) days after
Lender's demand for such payments; or

          (c)  If any representation or warranty made by any Obligor in any
Credit Document is not true, accurate and complete in all material respects when
made; or

          (d)  If any Obligor shall fail to fulfill the requirements of any
insurance provisions of the Credit Documents; or

          (e)  Any Borrower's failure to notify Lender of any Notification Event
as required in accordance with the requirements of Section 4.02; or

          (f)  The Borrower Group's failure to satisfy any of the Financial
Covenants; or

          (g)  The failure by Obligor to fulfill a covenant of this Agreement or
any other Credit Documents.

          (h)  If any statement, report, appraisal, certificate, opinion, or
other information furnished to Lender by any Person on behalf of Borrower in
connection with the Borrowers' application for the Loans was not true, accurate
and complete in all material respects when so furnished to Lender and on the
Effective Date; or

          (i)  If any statement, report, certificate, opinion, or other
information furnished to Lender with or in accordance with the terms of this
Agreement (including all annexes,

                                       59


schedules, and exhibits to the Credit Documents and all materials delivered to
Lender to satisfy any condition of this Agreement) is not true, accurate and
complete in all material respects when so furnished to Lender; or

          (j) The determination in good faith by Lender that a material adverse
change has occurred on a consolidated basis in the financial or operating
condition or business prospects of the Obligors from the condition set forth in
the most recent financial statements of the Obligors furnished to Lender in
connection with the Loans, or from the financial or operating condition or
business prospects of the Obligors as heretofore most recently disclosed to
Lender in writing by the Obligors, or the occurrence of any other fact, event or
circumstance which Lender reasonably believes is likely to have a Material
Adverse Effect on the Obligors on a consolidated basis; or

          (k) If one or more judgments or decrees shall be entered against any
Obligor involving a liability of Two Hundred Fifty Thousand Dollars ($250,000)
or more in the aggregate which shall not have been satisfied, vacated,
discharged or stayed or bonded pending appeal within thirty (30) days from the
entry thereof and which is not covered by insurance; or

          (l) The occurrence of a Change of Control of any Obligor; or

          (m) If any Obligor shall default in any payment of any Indebtedness to
any Person, including any Affiliate of Lender (other than the Obligations), or
shall breach any other terms, representations, warranties, covenants,
conditions, or other provisions applicable to any such Indebtedness if the
occurrence of any such default or breach would entitle the holder of such
Indebtedness to accelerate such Indebtedness or exercise any other remedies (and
the acceleration thereof or exercise of remedies would have a Material Adverse
Effect on the Borrower Group, and, if there is a cure period applicable to any
such breach or default, such breach or default shall not have been cured within
the cure period applicable thereto; or

          (n) If any Obligor shall (i) apply for or consent to the appointment
of a receiver, trustee or liquidator of itself or any of its property, (ii)
admit in writing its inability to pay its debts as they mature, (iii) make a
general assignment for the benefit of creditors, (iv) be adjudicated bankrupt or
insolvent, (v) file a voluntary petition in bankruptcy or a petition or an
answer seeking reorganization or an arrangement with creditors or to take
advantage of any bankruptcy, reorganization, insolvency, readjustment of debt,
dissolution or liquidation law or statute, or an answer admitting the material
allegations of a petition filed against it in any proceeding under any such law
or if corporate or other action shall be taken by such Obligor for the purposes
of effecting any of the foregoing, or (vi) consent to, approve of or
acquiescence in any such proceeding or the appointment of any receiver of or
trustee for any of its property, or suffer any such receivership, trusteeship or
proceeding to continue undischarged for a period of sixty (60) days; or

          (o) Omitted.

          (p) the net loss through death, disability or voluntary or involuntary
termination of employment within a fiscal year of Principals (after taking into
account the hiring

                                       60


of new Principals and the promotion to Principal of existing employees) who are
responsible for clients with average annual gross revenues over the most recent
two complete fiscal years equal to or greater than twenty percent (20%) of the
gross revenues of the US Corporation in the most recent complete fiscal year; or

          (q) Borrower shall default in any swap agreement (as defined in 11
U.S.C. (S)101) with Lender or any Affiliate of Lender; or

          (r) If (a) with respect to any Plan, there shall occur any of the
following which could  reasonably be expected to have a Material Adverse Effect:
(i) the violation of any of the provisions of ERISA;  (ii) the loss by a Plan
intended to be a Qualified Plan of its qualification under Section 401(a) of the
Code; (iii) the incurrence of liability under Title IV of ERISA; (iv) a failure
to make full payment when due of all amounts which, under the provisions of any
Plan or applicable law, any Borrower or any ERISA Affiliate is required to make;
(v) the filing of a notice of intent to terminate a Plan under Sections 4041 or
4041A of ERISA; (vi) a complete or partial withdrawal of Borrower or an ERISA
Affiliate from any Plan; (vii) the receipt of a notice by the plan administrator
of a Plan that the PBGC has instituted proceedings to terminate such Plan or
appoint a trustee to administer such Plan; (viii) a commencement or increase of
contributions to, or the adoption of or the amendment of, a Plan;  and (ix) the
assessment against any Borrower or any ERISA Affiliate of a tax under Section
4980B of the Code; or (b) the Unfunded Benefit Liability of all of the Plans of
Borrower, and each ERISA Affiliate shall, in the aggregate, exceed an amount
that could reasonably be expected to have a Material Adverse Effect on Borrower
Group.

          (s) The provisions described in Section 6.01(c), (d) and (f) through
(j) shall not constitute Events of Default hereunder unless the events described
in such actions are not cured within thirty (30) days after notice from Lender;
provided that if Borrower commences a cure within the initial thirty (30) day
cure period and diligently pursues to cure the Default thereafter, Borrower
shall have up to sixty (60) days to cure such Default if it is not capable of
cure within thirty (30) days.

     SECTION 6.02.  Acceleration. Upon the occurrence of an Event of Default,
                    ------------
and at any time thereafter unless and until such Event of Default has been
waived by Lender in writing or cured to the satisfaction of Lender as expressly
acknowledged by Lender in writing, Lender may take any or all of the following
actions against any or all Obligors:  (a) declare the Credit Termination Date
accelerated (without the necessity of any notice) on any Loan; and/or (b)
declare the unpaid principal of, and all accrued and unpaid interest on, the
Loan and any and all other outstanding and unpaid Obligations to be due,
whereupon the same shall be immediately due and payable without presentment,
demand, protest or other notice of any kind, all of which are hereby waived by
each Borrower and each other Obligor; and/or (c) enforce any and all rights and
interests created and existing under the Credit Documents and all rights of set-
off; provided, however, without limiting the generality of the foregoing, upon
the occurrence of an Event of Default described in Section 6.01(n) above, (i)
the Credit Termination Date shall be immediately accelerated (without the
necessity of any notice), and (ii) the unpaid principal of, and all accrued and
unpaid interest on, the Loan and any and all other outstanding and unpaid
Obligations shall be immediately due and payable to Lender without any action on
the part of Lender, and without

                                       61


presentment, demand, protest, or other notice of any kind, all of which are
hereby waived.

     SECTION 6.03.  Other Remedies. In addition to the foregoing, upon the
                    --------------
occurrence of an Event of Default, and at any time thereafter unless and until
such Event of Default has been waived by Lender in writing or cured to the
satisfaction of Lender as expressly acknowledged by Lender in writing, Lender
may do any of the following:

          (a) Collect and enforce payment of all of each Borrower's Deposit
Accounts, Accounts, General Intangibles, Chattel Paper, Instruments and
Documents and rights and remedies with respect to such Property as would
otherwise be exercised by any Borrower, including:  the power to take possession
of and endorse in the name of such Borrower, any Items of Payment of any kind
and any other documents received;  the power to extend the time of payment of,
the time to sue for, and the time to give acquittances for, monies due;  and the
power to withdraw proceeds deposited in the name of the applicable Borrower in
any bank or savings institution.

          (b) Sell or otherwise dispose of the Collateral, or any part thereof,
at public or private sale (or at any broker's board or on any securities
exchange) or otherwise, for cash, upon credit or for future delivery as Lender
shall deem appropriate.  Each such purchaser at any such sale shall hold the
property sold absolutely, free from any claim or right on the part of any
Borrower, and each Borrower hereby waives (to the extent permitted by law) all
rights of redemption, stay and appraisal which any Borrower now has or may at
any time in the future have under any rule of law or statute now existing or
hereafter enacted.  Lender shall give each Borrower at least ten (10) days'
written notice (which each Borrower agrees is reasonable notice within the
meaning of Section 9-504(3) of the UCC) of Lender's intention to make any sale
of Collateral owned by any Borrower.  Such notice, in the case of a public sale,
shall state the time and place for such sale and, in the case of a sale at a
broker's board or on a securities exchange, shall state the board or exchange at
which such sale is to be made and the day on which the Collateral, or portion
thereof, will first be offered for sale at such board or exchange.  Any such
public sale shall be held at such time or times within ordinary business hours
and at such place or places as Lender may fix and state in the notice of such
sale, and at any such sale, the Collateral, or portion thereof, to be sold may
be sold in one lot as an entirety or in separate parcels, as Lender may (in its
discretion) determine, and Lender shall not be obligated to make any sale of any
Collateral if Lender shall determine not to do so, regardless of the fact that
notice of sale of such Collateral shall have been given, and Lender may, without
notice or publication, adjourn any public or private sale or cause the same to
be adjourned from time to time by announcement at the time and place fixed for
sale, and such sale may, without further notice, to any Borrower or anyone else,
be made at the time and place to which the same was so adjourned.  In case any
sale of all or any part of the Collateral is made on credit or for future
delivery, the Collateral so sold may be retained by Lender until the sale price
is paid by the purchaser or purchasers thereof, but Lender shall not incur any
liability in case any such purchaser or purchasers shall fail to take up and pay
for Collateral so sold and, in case of any such failure, such of the Collateral
may be sold again upon notice to Borrower as set forth in this Section.  At any
public sale made pursuant to this Section, Lender may bid for or purchase, free
(to the extent permitted by law) from any right of redemption, stay or appraisal
on the part of Borrower (all said rights being also hereby waived and released
to the extent permitted by law), the Collateral or any part thereof offered for
sale

                                       62


and may make payment on account thereof by using any claim then due and
payable to Lender from Borrower as a credit against the purchase price, and
Lender may, upon compliance with the terms of sale, hold, retain and dispose of
such property without further accountability to any Borrower therefor.  For
purposes hereof, a written agreement to purchase the Collateral or any portion
thereof shall be treated as a sale thereof; Lender shall be free to carry out
such sale pursuant to such agreement, and Borrower shall not be entitled to the
return of the Collateral or any portion thereof subject thereto, notwithstanding
the fact that after Lender shall have entered into such an agreement, all Events
of Default shall have been remedied and the Obligations paid in full.  As an
alternative to exercising the power of sale herein conferred upon Lender, Lender
may proceed by a suit or suits at law or in equity to foreclose this Agreement
and to sell the Collateral or any portion thereof pursuant to a judgment or
decree of a court or courts having competent jurisdiction or pursuant to a
proceeding by a court-appointed Receiver.  Upon any sale of Collateral by Lender
(including a sale pursuant to a power of sale granted by statute or under a
judicial proceeding), the receipt of Lender or of the officer making the sale
shall be a sufficient discharge to the purchaser or purchasers of the Collateral
being sold, and such purchaser or purchasers shall not be obligated to see to
the application of any part of the purchase money paid over to Lender or such
officer or be answerable in any way for the misapplication thereof.  Borrower
agrees that in selling or otherwise disposing of the Collateral and in
exercising Lender's rights and remedies to the Collateral, Lender and/or any
Receiver and/or any designee of Lender and/or any Receiver shall have the
unrestricted and irrevocable right (so long as not violative of law) to
advertise, sell, lease, license or otherwise dispose of the Collateral under and
together with, and shall otherwise have the unrestricted and irrevocable right
to use, without limitation, in connection therewith, any and all of Borrower's
advertisements in any medium (and other marketing and promotional materials in
any medium), brochures, signs, stationery, business forms, packaging and
shipping materials, programs, software, licenses, permits, consents, approvals,
and Intellectual Property relating to such Collateral and/or Borrower's
business, and all agreements with employees and former employees relating to any
of the foregoing, and each Borrower shall indemnify and hold harmless Lender and
any Receiver, and their designees, shareholders, directors, officers, employees,
agents, attorneys, accountants, and other advisors, from and against any and all
claims (including claims for royalties and/or money damages and/or claims for
injunctive relief), liabilities, damages, royalties, and penalties of any
Person, and Lender's and any Receiver's costs and expenses (including attorney's
fees) and those of their designees, shareholders, directors, officers,
employees, agents, attorneys, accountants, and other advisors, incurred to
defend against any thereof.

          (c) With regard to all Collateral so collected, sold or otherwise
disposed of, to the extent permitted by applicable law, Lender shall have
absolute discretion as to the time of application of any such proceeds, moneys
or balances in accordance with this Agreement, first, to the settlement of all
                                               -----
Liens on the Collateral prior to Lender's Lien; second, to the payment of all
                                                ------
Collection Costs; and third, to the payment of all Obligations, and, in case of
                      -----
any deficiency, Lender may collect such deficiency from any Borrower (provided
however, nothing in this provision shall be construed in derogation or
limitation of any guaranty of payment or used to construe any guaranty of
payment as being merely a guaranty of collection).

          (d) Notwithstanding anything in this Agreement or any other Credit
Document to the contrary, Lender's declaration of default and exercise of
remedies with respect

                                       63


to any swap agreement (as defined in 11 U.S.C. (S)101) between an Obligor and
Lender shall not be governed by this Agreement or any other Credit Documents,
but rather by the applicable swap agreement (as defined in 11 U.S.C. (S)101).

     SECTION 6.04.  Receiver. If an Event of Default shall occur and be
                    --------
continuing, Lender shall be entitled as a matter of right and to the extent
permitted by law, without notice to any Obligor, and without regard to the
adequacy of security, to the immediate ex parte appointment of a Receiver by a
                                       -- -----
court having jurisdiction in order to carry out all rights and remedies
available to Lender upon such Event of Default, and to manage, protect and
preserve the Collateral, and any other Property of any Borrower and continue to
operate or liquidate any Borrower's business and to collect all revenues and
profits thereof and apply the same to the payment of all expenses and other
charges of such receivership, custodianship or similar appointment, including
compensation of the Receiver and to the payment of the Obligations, and to the
payment of such other claims and expenses as may appear appropriate.  If Lender
shall apply for the appointment of, or the taking of possession by, a Receiver,
to hold, operate or liquidate all or any substantial part of the properties or
assets of any Borrower, such Borrower hereby consents to any such appointment
and taking of possession.  Each Borrower shall deliver to any Receiver so
appointed upon Lender's request all original Records, and any other records,
books, and other information regarding the Collateral, and any other Property of
such Borrower and the operations of the business of such Borrower.

     SECTION 6.05.  Waivers. Each Borrower waives presentment, demand, notice of
                    -------
dishonor, and protest, and all demands and notices of any action taken by Lender
under this Agreement, except as otherwise provided herein, are hereby waived,
and any indulgence of Lender, substitution for, exchange of or release of
collateral, or addition or release of any person liable on the collateral is
hereby assented and consented to and shall not operate or be claimed to operate
to release or exonerate any other collateral or person or any claim of Lender.

     SECTION 6.06.  Arbitration.
                    -----------

          (a)  Upon demand of any party hereto, whether made before or after
institution of any judicial proceeding, any claim or controversy arising out of,
or relating to this Agreement or the Credit Documents between the parties hereto
(a "Dispute") shall be resolved by binding arbitration conducted under and
governed by the Commercial Financial Disputes Arbitration Rules (the
"Arbitration Rules") of the American Arbitration Association (the "AAA") and the
Federal Arbitration Act.  Disputes may include, without limitation, tort claims,
counterclaims, disputes as to whether a matter is subject to arbitration, claims
brought as class actions, or claims arising from documents executed in the
future.  A judgment upon the award may be entered in any court having
jurisdiction.  Notwithstanding the foregoing, this arbitration provision does
not apply to disputes under or related to swap agreements.

          (b)  Special Rules. All arbitration hearings shall be conducted in the
               -------------
city in which the office of Lender first stated above is located. A hearing
shall begin within 90 days of demand for arbitration and all hearings shall be
concluded within 120 days of demand for arbitration. These time limitations may
not be extended unless a party shows cause for extension and then for no more
than a total of 60 days. The expedited procedures set forth in Rule 51 et

                                       64


seq. of the Arbitration Rules shall be applicable to claims of less than
$1,000,000. Arbitrators shall be licensed attorneys selected from the Commercial
Financial Dispute Arbitration Panel of the AAA. The parties do not waive
applicable Federal or state substantive law except as provided herein.

          (c) Preservation and Limitation of Remedies.  Notwithstanding the
              ---------------------------------------
preceding binding arbitration provisions, the parties agree to preserve, without
diminution, certain remedies that any party may exercise before or after an
arbitration proceeding is brought. The parties shall have the right to proceed
in any court of proper jurisdiction or by self-help to exercise or prosecute the
following remedies, as applicable: (i) all rights to foreclose against any real
or personal property or other security by exercising a power of sale or under
applicable law by judicial foreclosure including a proceeding to confirm the
sale; (ii) all rights of self-help including peaceful occupation of real
property and collection of rents, set-off, and peaceful possession of personal
property; and (iii) obtaining provisional or ancillary remedies including
injunctive relief, sequestration, garnishment, attachment, appointment of
receiver and filing an involuntary bankruptcy proceeding. Any claim or
controversy with regard to any party's entitlement to such remedies is a
Dispute. Each party agrees that it shall not have a remedy of punitive or
exemplary damages against the other in any Dispute and hereby waive any right or
claim to punitive or exemplary damages they have now or which may arise in the
future in connection with any Dispute, whether the Dispute is resolved by
arbitration or judicially. The parties acknowledge that by agreeing to binding
arbitration they have irrevocably waived any right they may have to a jury trial
with regard to a Dispute.

                                  ARTICLE VII
                                  -----------
                                 MISCELLANEOUS
                                 -------------

     SECTION 7.01.  Further Assurances. Each Borrower shall execute and deliver
                    ------------------
to Lender such further assurances of this Agreement and the matters contemplated
by this Agreement and the other Credit Documents, including any Lien Notices in
favor of Lender, promptly from time to time upon Lender's written request.

     SECTION 7.02.  Successors and Assigns. This Agreement and the other Credit
                    ----------------------
Documents shall be binding upon and inure to the benefit of Lender and its
successors and assigns and any holders of the Notes.  No Borrower shall, without
Lender's prior written consent, which consent may be withheld in Lender's
discretion, assign any of such Borrower's rights under this Agreement or any of
the other Credit Documents to any Person, and any attempt of such an assignment
by any Borrower without Lender's prior written consent shall be void.  Lender
may sell or assign to any financial institution or institutions, and such
financial institution or institutions may further sell or assign a participation
interest (undivided or divided) in, Lender's rights and benefits under this
Agreement and the other Credit Documents, and to the extent of that assignment
such assignee or assignees shall have the same rights and benefits against each
Borrower under this Agreement and the other Credit Documents as it or they would
have had if such assignee or assignees were Lender making the Loans.  Each
Borrower shall promptly upon Lender's request furnish confirmation in writing to
any such assignees such information as Lender or any such assignee may request
regarding any matters, or the status thereof, relating to the Loans, the Notes,
this Agreement, the other Credit Documents, or any

                                       65


Obligor Information. Lender may from time to time in its discretion appoint
agents for the purpose of servicing and administering this Agreement and the
transactions contemplated hereby and enforcing or exercising any rights or
remedies of Lender provided under this Agreement and under the other Credit
Documents or otherwise. In furtherance of such agency, Lender may from time to
time direct that each Borrower and any other Obligor provide notices,
certificates, reports, and other Obligor Information contemplated by this
Agreement (or duplicates thereof) to such agent. Each Obligor consents to the
appointment of any such agent and agrees to provide all such notices,
certificates, reports, and other Obligor Information to such agent and to
otherwise deal with such agent acting on behalf of Lender in the same manner as
would be required if dealing with Lender itself and Lender agrees to give each
Borrower notice of the appointment of any such agent.

     SECTION 7.03.  Severability. Any provision of this Agreement prohibited by
                    ------------
the laws of any jurisdiction shall, as to such jurisdiction, be ineffective to
the extent of such prohibition, or modified to conform with such laws, without
invalidating the remaining provisions of this Agreement, and any such
prohibition in any jurisdiction shall not invalidate such provisions in any
other jurisdiction.

     SECTION 7.04.  Governing Law. This Agreement and the other Credit Documents
                    -------------
and the rights and obligations of the parties hereunder and thereunder shall be
governed by and construed and interpreted in accordance with the laws of the
Commonwealth of Virginia (excluding Virginia conflict of laws rules), including
all matters of construction, validity and performance, regardless of the
location of the parties or any Property, excepting, however, that the UCC (or
decisional law) of a jurisdiction other than Virginia may provide the method of
perfection of liens and security interests created under this Agreement and the
other Credit Documents.

     SECTION 7.05.  Jurisdiction; Venue; Service. Each Borrower irrevocably
                    ----------------------------
consents to the non-exclusive personal jurisdiction of the courts of the
Commonwealth of Virginia and, if a basis for federal jurisdiction exists, the
non-exclusive jurisdiction of the United States District Court for the District
of Virginia.  Each Borrower agrees that venue shall be proper in any circuit
court of the Commonwealth of Virginia selected by Lender or, if a basis for
federal jurisdiction exists, in any Division of the United States District Court
for the District of Virginia.  Each Borrower waives any right to object to the
maintenance of any suit or claim in any of the state or federal courts of the
Commonwealth of Virginia on the basis of improper venue or of inconvenience of
forum.  Any suit or claim brought by any Borrower against Lender that is based,
in whole or in part, directly or indirectly, on this Agreement or any matters
relating to this Agreement or the other Credit Documents, shall be brought in a
court only in the Commonwealth of Virginia.  No Borrower shall file any
counterclaim against Lender in any suit or claim brought by Lender against such
Borrower in a jurisdiction outside of the Commonwealth of Virginia unless under
the rules of the court in which Lender brought such suit or claim the
counterclaim is mandatory, and not permissive, and would be considered waived
unless filed as a counterclaim in the claim or suit instituted by Lender against
such Borrower.  Each Borrower agrees that any forum outside the Commonwealth of
Virginia is an inconvenient forum and that a suit brought by such Borrower
against Lender in any court outside the Commonwealth of Virginia should be
dismissed or transferred to a court located in the Commonwealth of Virginia.
Each of the parties

                                       66


hereto further irrevocably consents to the service of process out of any of the
aforementioned courts in any such action or proceeding by the mailing of copies
thereof by registered or certified mail, postage prepaid, to it at the address
set out for notices in this Agreement, such service to become effective thirty
(30) days after such mailing. Nothing herein shall affect the right of Lender to
serve process in any other manner permitted by law or to commence legal
proceedings or to otherwise proceed against any Borrower or any other Person in
any other jurisdiction.

     SECTION 7.06.  Counterparts. This Agreement may be executed in any number
                    ------------
of counterparts, each of which when so executed and delivered shall be an
original, but all of which shall constitute one and the same instrument.  It
shall not be necessary in making proof of this Agreement to produce or account
for more than one such counterpart.

     SECTION 7.07.  Survival. All representations and warranties and indemnities
                    --------
made by any Borrower herein shall survive delivery of the Notes and the making
of the Loan.

     SECTION 7.08.  Notices. Any notice required or permitted by or in
                    -------
connection with this Agreement shall be in writing and shall be made by
telecopy, or by hand delivery, or by overnight delivery service, or by certified
mail, return receipt requested, postage prepaid, addressed to the parties at the
appropriate address set forth below or to such other address as may be hereafter
specified by written notice by the parties to each other.  Notice shall be
considered given as of the earlier of the date of actual receipt, or the date of
the telecopy or hand delivery, one (1) Business Day after delivery to an
overnight delivery service, or three (3) Business Days after the date of
mailing, independent of the date of actual delivery or whether delivery is ever
in fact made, as the case may be, provided the giver of notice can establish
that notice was given as provided herein.  Notwithstanding the aforesaid
procedures, any notice or demand upon any Obligor, in fact received by such
Obligor, shall be sufficient notice or demand.  Each undersigned Obligor (other
than Borrower) hereby appoints Borrower as his, her or its agent for purposes of
receiving notices under this Agreement and the other Credit Documents, so that
notices given to Borrower shall be fully effective notice to Borrower and to
each such other undersigned Obligor (other than Borrower).

                  If to Lender:       APPLIED BIOSCIENCE INTERNATIONAL INC.
                                      3151 Seventeenth Street Extension
                                      Wilmington, North Carolina 28412
                                      Telecopy: (910) 772-6951

                  If to Obligors:     Environ Holdings, Inc.
                                      4350 North Fairfax Drive
                                      Suite 300
                                      Arlington, Virginia 22203
                                      Attn: Guy Lewis
                                      Telecopy No. (703) 516-2462

     SECTION 7.09.  Lender Appointed Attorney-in-Fact. Each Borrower hereby
                    ---------------------------------
appoints Lender as such Borrower's attorney-in-fact, with power of substitution,
which appointment is coupled with an interest and irrevocable but which
appointment shall not be

                                       67


exercised except during the continuance of any Event of Default hereunder, to do
each of the following in the name of such Borrower or in the name of Lender or
otherwise, for the use and benefit of Lender, but at the cost and expense of
such Borrower, and with or without notice to such Borrower: (a) notify the
Account Debtors to make payments directly to Lender, and to take control of the
cash and non-cash proceeds of any Collateral; (b) compromise, extend, or renew
any of the Collateral or deal with the same as it may deem advisable; (c)
release, make exchanges, substitutions, or surrender of all or any part of the
Collateral; (d) remove from such Borrower's place of business all Records
relating to or evidencing any of the Collateral or without cost or expense to
Lender, make such use of such Borrower's places of business as may be reasonably
necessary to administer, control and collect the Collateral; (e) repair, alter
or supply goods, if any, necessary to fulfill in whole or in part the purchase
order or similar order of any Account Debtor; (f) demand, collect, receipt for
and give renewals, extensions, discharges and releases of any of the Collateral;
(g) institute and prosecute legal and equitable proceedings to enforce
collection of, or realize upon, any of the Collateral; (h) settle, renew, extend
compromise, compound, exchange or adjust claims with respect to any of the
Collateral or any legal proceedings brought with respect thereto; (i) endorse
the name of such Borrower upon any Items of Payment relating to the Collateral
or upon any proof of claim in bankruptcy against an Account Debtor; (j)
institute and prosecute legal and equitable proceedings to reclaim any of the
goods sold to any Account Debtor obligated on an Account at a time when such
Account Debtor was insolvent; and (k) receive and open all mail addressed to
such Borrower and notify the postal authorities to change the address for the
delivery of mail to such Borrower to such address as Lender may designate.

     SECTION 7.10.  Remedies Cumulative. No failure or delay on the part of
                    -------------------
Lender in exercising any right, power or privilege hereunder or under any other
Credit Document and no course of dealing between any Obligor and Lender shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, power or privilege hereunder or under any other Credit Document preclude
any other or further exercise thereof or the exercise of any other right, power
or privilege hereunder or thereunder.  The rights and remedies provided herein
are cumulative and not exclusive of any rights or remedies which Lender would
otherwise have.  No notice to or demand on any Borrower in any case shall
entitle such Borrower or any Obligor to any other or further notice or demand in
similar or other circumstances or constitute a waiver of the rights of Lender to
any other or further action in any circumstances without notice or demand.

     SECTION 7.11.  Amendments, Waivers and Consents. Neither this Agreement nor
                    --------------------------------
any other Credit Document nor any of the terms hereof or thereof may be amended,
changed, waived, discharged or terminated unless such amendment, change, waiver,
discharge or termination is in writing signed by Lender.

     SECTION 7.12.  Waivers of Claims; Consequential and Punitive Damages. Each
                    -----------------------------------------------------
Borrower and Lender hereby waive to the fullest extent permitted by law all
claims to consequential and punitive damages in any lawsuit or other legal
action brought by either of them against the other of them in respect of any
claim between them arising under this Agreement, the other Credit Documents, or
any other agreement or agreements between them at any time, including any such
agreements, whether written or oral, made or alleged to have been made at any
time prior to the date hereof, and all agreements made hereafter or otherwise,
and

                                       68


any and all claims arising under common law or under any statute of any state or
the United States of America, whether any such claims be now existing or
hereafter arising, now known or unknown. In making this waiver Lender and each
Borrower acknowledge and agree that there shall be no claims for consequential
or punitive damages made by Lender against any Borrower and there shall be no
claims for consequential or punitive damages made against Lender by any
Borrower. Lender and each Borrower acknowledge and agree that this waiver of
claims for consequential damages and punitive damages is a material element of
the consideration for this Agreement.

     SECTION 7.13.  No Third Party Beneficiaries. There shall be no third party
                    ----------------------------
beneficiaries of this Agreement.

     SECTION 7.14.  Entire Agreement. Borrower and Lender agree that the Credit
                    ----------------
Documents are a complete and exclusive expression of all the terms of the Loans
and agrees that all prior agreements, statements, and representations, whether
written or oral, which relate in any way to the Loans are hereby superseded and
shall be given no force and effect, and that no promise, inducement, or
representation has been made to any Obligor which relates in any way to the
Loans, other than what is expressly stated in the Credit Documents.  Each
Borrower has executed the Credit Documents in full, understands the terms
therein, and is executing this Agreement after the opportunity to have full
consultation with counsel of such Borrower's choice.

     SECTION 7.15.  WAIVER OF JURY TRIAL. EACH BORROWER AND LENDER HEREBY WAIVE
                    --------------------
ALL RIGHT TO TRIAL BY JURY OF ANY AND ALL CLAIMS BETWEEN THEM OF ANY TYPE,
INCLUDING CLAIMS ARISING UNDER AND/OR RELATING IN ANY WAY TO THIS AGREEMENT
AND/OR THE OTHER CREDIT DOCUMENTS AND/OR THE TRANSACTIONS CONTEMPLATED BY THE
CREDIT DOCUMENTS.  EACH BORROWER AND LENDER ACKNOWLEDGES THAT THIS IS A WAIVER
OF A LEGAL RIGHT AND THAT THIS WAIVER IS MADE KNOWINGLY AND VOLUNTARILY AFTER
CONSULTATION WITH COUNSEL OF ITS CHOICE.  ALL CLAIMS ARISING UNDER THIS
AGREEMENT AND/OR THE OTHER CREDIT DOCUMENTS AND/OR THE TRANSACTIONS CONTEMPLATED
BY THE CREDIT DOCUMENTS SHALL BE TRIED BEFORE A JUDGE OF A COURT HAVING
JURISDICTION, WITHOUT A JURY.

     SECTION 7.16.  Judgment Currency.
                    -----------------

          (a) If, for the purposes of obtaining judgment in any court, it is
necessary to convert a sum due hereunder or under the Notes or any other Credit
Document from a currency ("Original Currency") to another currency ("Other
Currency"), the parties hereto agree to the fullest extent they may effectively
do so, that the rate of exchange used shall be that at which Lender could in
accordance with normal banking procedures purchase the Original Currency with
the Other Currency on the second Business Day preceding that on which such final
judgment is given.

          (b) The obligation of any Borrower in respect of any sum due in the
Original

                                       69


Currency from any Borrower to Lender hereunder or under the Notes
shall, notwithstanding any judgment in any Other Currency, be discharged only if
and to the extent that on the Business Day following receipt by Lender of any
sum adjudged to be so due in such Other Currency, Lender may in accordance with
normal Banking procedures purchase such amount of the Original Currency with
such Other Currency which it could have purchased on the second Business Day
preceding that on which the final judgment referred to in clause (a) above is
given.  If the amount of the Original Currency so purchased is less than the
amount of the Original Currency that Lender could have purchased on the second
Business Day preceding that on which such final judgment is given, each Borrower
agrees, as a new and separate obligation and notwithstanding any such judgment,
to indemnify Lender against, and pay Lender on demand, such difference, and if
the amount of the Original Currency so purchased exceeds the amount of the
Original Currency which Lender could have purchased on the second Business Day
preceding that on which such final judgment is given, Lender agrees to remit to
such Borrower such excess.

     SECTION 7.17.  Waiver of Immunity. Each Borrower hereby represents,
                    ------------------
warrants and agrees that to the extent that any Borrower or any of such
Borrower's property and assets may have or hereafter acquire any right of
sovereign or other immunity from suit, court jurisdiction, attachment in aid of
execution of judgment, set-off, execution or other legal process, such Borrower
hereby irrevocably waives, to the fullest extent permitted by law, such right of
immunity with respect to such Borrower's obligations hereunder and with respect
to legal proceedings to enforce the same and to enforce any judgment rendered in
such proceedings.

     SECTION 7.18.  Publicity. Lender may, in Lender's discretion and at
                    ---------
Lender's expense, publicize or otherwise advertise by so-called "tombstone"
advertising or otherwise Lender's financing transactions with Borrowers and
Guarantors.  Lender may include references to Borrowers and Guarantors (and may
use any logo or other distinctive symbol associated with Borrowers or
Guarantors), and the transactions contemplated by this Agreement, in connection
with any advertising, promotion, or marketing undertaken by Lender.

                                 ARTICLE VIII
                                 ------------
                   NO FURTHER OBLIGATION - REVOLVING CREDIT
                   ----------------------------------------
                          LOANS AND LETTERS OF CREDIT
                          ---------------------------

     SECTION 8.01.  Repayment of Term Loan and Subordination Agreement. As of
                    --------------------------------------------------
March 30, 1999, Borrower has refinanced the Term Loan (the "FUNB Term Loan")
with First Union National Bank ("FUNB") and repaid to Lender all amounts
outstanding with respect to the Term Loan.  In connection with the refinancing,
Lender entered into a Subordination and Intercreditor Agreement with FUNB dated
March 30, 1999 (the "Subordination Agreement") pursuant to which Lender has
agreed, inter alia, to subordinate the Seller Note to the FUNB Term Loan and to
        ----- ----
a revolving credit facility to be extended by FUNB to Borrower.  In
consideration of Lender's entrance into the Subordination Agreement, Borrower
covenants and agrees that, notwithstanding anything in this Restatement to the
contrary, (i) Lender has and shall have no obligation to make Revolving Credit
Loans to Borrower under Article II-A hereof or to issue any Letters of Credit to
or for the benefit of Borrower pursuant to Article II-C hereof, and (ii) Article
II-A and Article II-C hereof shall be of no further force or effect and this
Restatement shall interpreted as though such Sections do not appear and (iii) so
long as any Obligations (as such

                                       70


term is defined in the FUNB Credit Agreement) remain outstanding from Borrower
to FUNB or FUNB shall have any obligation or commitment under the FUNB Credit
Agreement to take any action required to be taken by FUNB under the terms of the
FUNB Credit Agreement or to advance any monies to Borrower, Lender shall not (a)
make the Revolving Credit Loan to Borrower or (b) issue any Letter of Credit to
Borrower pursuant to the terms of Article II-C hereof.

     SECTION 8.02. Continuing Obligation to Subordinate. So long as the Seller
                   ------------------------------------
Note is outstanding in the event that the Lender does not extend to Borrower a
working capital line of credit upon expiration of the "Working Capital Loan" (as
defined and provided for in that certain Credit and Security Agreement dated as
of March 30, 1999 between FUNB and the Borrower), Lender will subordinate the
Seller Note to any third party working capital line or lines of credit which in
the aggregate do not exceed $3,500,000 and which is made upon the same terms and
conditions as the aforementioned "Working Capital Loan" in all material
respects.

     SECTION 8.03  EAGL Security.  As a condition of Lender continuing to make
                   ---------------
available funds advanced under the Seller Note, EHI shall cause its subsidiary
EAGL to provide Lender with security for the Borrowers' obligations arising
under the Seller Note. Such security shall comprise a Guaranty and a Mortgage
Debenture. EHI shall also deliver a Pledge of EAGL stock to Lender which shall
also secure Borrower's obligations arising under the Seller Note. It is
expressly understood and agreed that the security provided by EAGL to Lender
shall be governed by the terms and provisions of the Subordination Agreement.

                                       71


     IN WITNESS WHEREOF, Lender and each Borrower, intending to be legally bound
hereby, have caused this Restatement to be duly executed and delivered under
seal as of the date first above written.

WITNESS:                        LENDER:
                                APPLIED BIOSCIENCE INTERNATIONAL INC.


/s/ Jean G. Wachtel                   By: /s/ Fred B. Davenport, Jr. (SEAL)
- -------------------                        -------------------------
                                      Name: Fred B. Davenport, Jr.
                                      Title: Vice President


                                BORROWERS:
                                ENVIRON HOLDINGS, INC.
                                a Delaware corporation


/s/ Margaret D. Breyer                By: /s/ Joseph H. Highland (SEAL)
- ----------------------                    ----------------------
                                          Name:  Joseph H. Highland
                                          Title: Chairman & CEO



                                 ENVIRON INTERNATIONAL CORPORATION
                                 a Virginia corporation


/s/ Margaret D. Breyer           By: /s/ Joseph H. Highland (SEAL)
    ------------------               ----------------------
                                 Name:  Joseph H. Highland
                                 Title: Chairman & CEO

                                       72

EX-10.138

                                                                  EXHIBIT 10.138


                      TERMINATION OF EMPLOYMENT AGREEMENT


     THIS TERMINATION OF EMPLOYMENT AGREEMENT, made this 7th day of October,
1999, by and between PPD Development, Inc. ("PPD"), and Joshua S. Baker
("Employee").

     WHEREAS, PPD and Employee entered into that certain employment agreement
dated October 1, 1997 (the "Employment Agreement"); and

     WHEREAS, the parties desire to terminate the Employment Agreement pursuant
to the terms and conditions more specifically set forth herein.

     NOW, THEREFORE, in consideration of the mutual promises, covenants and
considerations contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:

     1.   Termination of Employment Agreement. The Employment Agreement shall be
          ------------------------------------
deemed terminated as of the close of business on October 7, 1999 (the
"Termination Date").

     2.   Rights and Obligations.
          ----------------------

          a.  Neither party hereto shall have any further rights or obligations
under the Employment Agreement, except (a) such rights and obligations as shall
have accrued prior to the Termination Date, and (b) such rights and obligations
which by the terms of the Employment Agreement survive the Termination date.

          b.  Notwithstanding anything in Section 2.a. or in the 1999 PPD
Employee Bonus Plan (the "Plan") to the contrary, Employee shall be paid such
bonus under the Plan for fiscal year 1999 as he would have been entitled to
receive as if he were employed by PPD on the date all other bonuses are paid
under the Plan, except that the amount of Employee's bonus paid to him shall be
prorated based on the Termination Date.

     3.   Miscellaneous.
          -------------

          a.  This agreement constitutes the entire agreement between the
parties with respect to the subject matter hereof and may not be altered or
amended except by writing signed by the parties.

          b.  This agreement shall be governed by the laws of State of North
Carolina.


          c.   This agreement shall inure to the benefit of and be binding upon
PPD, its successors and assigns, and Employee, his heirs, successors, assigns
and personal representatives.

     IN WITNESS WHEREOF, the parties have caused this agreement to be executed
as of the date first hereinabove set forth.


PPD DEVELOPMENT, INC.


By:    /s/ Fredric N. Eshelman
       -----------------------
Name:  Fredric N. Eshelman
Title: Chief Executive Officer



    /s/ Joshua S. Baker         (SEAL)
- ------------------------------
Joshua S. Baker

                                       2

EX-10.139

                                                                  EXHIBIT 10.139

                       THIRD AMENDMENT TO LOAN AGREEMENT


          THIS THIRD AMENDMENT TO LOAN AGREEMENT (this "Amendment") is made as
of the 11th day of November, 1999, by and among PHARMACEUTICAL PRODUCT
DEVELOPMENT, INC., a North Carolina corporation (together with its successors,
the "Borrower"); PPD DEVELOPMENT, INC., (the "Guarantor"); and WACHOVIA BANK,
N.A., a national banking association (together with its endorsees, successors
and assigns, the "Bank").

                               R E C I T A L S:
                               ---------------

          The Borrower, the Guarantor and the Bank are parties to a certain Loan
Agreement dated as of August 7, 1997, as amended pursuant to an Amendment to
Loan Agreement dated as of August 6, 1998 and a Second Amendment to Loan
Agreement dated as of January 30, 1999 (the "Loan Agreement").

          Capitalized terms used in this Amendment which are not otherwise
defined in this Amendment shall have the respective meanings assigned to them in
the Loan Agreement.

          The Borrower has requested certain modifications to the Loan Agreement
and the Bank is willing to modify the Loan Agreement subject to the terms,
provisions and conditions set forth in this Amendment.

          NOW, THEREFORE, in consideration of the Recitals, the mutual promises
herein contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Borrower, the Guarantor and
the Bank, intending to be legally bound hereby, agree as follows:

          SECTION 1.  Recitals.  The Recitals are incorporated herein by
                      --------
reference and shall be deemed to be a part of this Amendment.

          SECTION 2.  Amendments.  Effective from and after August 5, 1999, the
                      ----------
Loan Agreement is hereby amended as follows:

          2.1  Extension of Termination Date. The Termination Date is hereby
               -----------------------------
extended to August 3, 2000.

          2.2  Section 2.3 is hereby amended and restated to read in its
entirety as follows:

          2.3  Interest Rate. Loans outstanding hereunder shall bear interest at
               -------------
a per annum rate equal to (i) the LIBOR Rate plus the Applicable Margin or (ii)
                                             ----
the Base Rate plus the
              ----


Applicable Margin, as the Borrower may elect; provided that after the occurrence
and during the continuance of an Event of Default, the principal and, to the
extent permitted by law, interest on the Loans and any other amounts owing
hereunder shall bear interest, payable on demand, at a rate equal to the Base
Rate plus three percent (3%). Interest will be payable in arrears on each
Interest Payment Date. As used herein, the term "Applicable Margin" shall mean,
for any day, an amount equal to: (1) five eighths of one percent (0.625%) on
each day that the aggregate principal amount of all Loans outstanding on such
day shall be less than the amount equal to fifty percent (50%) of the Commitment
on such day; and (2) eight hundred twenty-five thousandths of one percent
(.825%) on each day that the aggregate principal amount of all Loans outstanding
on such day is equal to or greater than the amount equal to fifty percent (50%)
of the Commitment on such day. For purposes of determining the Applicable Margin
for any day, a change in the principal amount of all outstanding Loans shall be
effective on the date of such change.

          2.4 In Section 6.9 subsections (f) and (g) are re-lettered as (g) and
(h), respectively, and a new subsection (f) is hereby added to Section 6.9 of
the Loan Agreement to read as follows:

          (f) Investments in and to ADoctorInYourHouse.com in an aggregate
     principal amount (on a cost basis) not to exceed $5,000,000 at any time;

          SECTION 3.  Conditions to Effectiveness.  The effectiveness of this
                      ---------------------------
Amendment and the obligations of the Bank hereunder are subject to receipt by
the Bank of the following:

          (a) an original Amendment, duly executed by the Borrower and the
     Guarantor;

          (b) a certificate of incumbency satisfactory to the Bank, certifying
     as to the names, true signatures and incumbency of the officer or officers
     of the Borrower and the Guarantor authorized to execute and deliver this
     Amendment;

          (c) such other documents or items as the Bank or its counsel may
     reasonably request.

The effectiveness of this Amendment and the obligations of the Bank hereunder
are further subject to the condition that no Event of Default or event or
condition which with notice or lapse of time, or both, would constitute an Event
of Default under the Loan Agreement, as hereby amended, shall have occurred and
be continuing, and the representations and warranties contained in Section 5 of
the Loan Agreement, as amended herein, are true on and as of the date hereof.

          SECTION 4.  No Other Amendment.  Except for the amendments set forth
                      ------------------
above, the Loan Agreement shall remain unchanged and in full force and effect.
This Amendment is not intended to effect, nor shall it be construed as, a
novation.  The Loan Agreement and this Amendment shall be construed together as
a single agreement.  Nothing

                                      -2-


herein contained shall waive, annul, alter, limit, diminish, vary or affect any
provision, condition, covenant or agreement contained in the Loan Agreement,
except as herein amended, nor affect or impair any rights, powers or remedies
under the Loan Agreement as hereby amended. The Bank does hereby reserve all of
its rights and remedies against all parties who may be or may hereafter become
secondarily liable for the repayment of the Loan. The Borrower and the Guarantor
promise and agree to perform all of the requirements, conditions, agreements and
obligations under the terms of the Loan Agreement, as hereby amended, the Loan
Agreement, as amended, being hereby ratified and affirmed. The Borrower and
Guarantor hereby expressly agree that the Loan Agreement, as amended, is in full
force and effect and confirm that they have no set off, counterclaim or defense
with respect to the Loan Agreement, the Loan, the Note, the Guaranty contained
in the Loan Agreement or the Guaranteed Obligations.

          SECTION 5.  Representations and Warranties.  The Borrower and the
                      ------------------------------
Guarantor hereby represent and warrant to the Bank as follows:

          (a) No Event of Default or event or condition which with notice or
     lapse or time, or both, would constitute an Event of Default under the Loan
     Agreement, as hereby amended, has occurred and is continuing on the date
     hereof.

          (b) The representations and warranties contained in Section 5 of the
     Loan Agreement, as amended herein, are true on and as of the date of this
     Amendment.

          (c) This Amendment has been duly authorized, validly executed and
     delivered by one or more authorized officers of the Borrower and the
     Guarantor, and constitutes the legal, valid and binding obligation of the
     Borrower and Guarantor enforceable against them in accordance with its
     terms.

          (d) The execution and delivery of this Amendment and the Borrower's
     and the Guarantor's performance hereunder do not and will not require the
     consent or approval of any regulatory authority or governmental authority
     or agency having jurisdiction over the Borrower or the Guarantor, nor be in
     contravention of or in conflict with the Articles of Incorporation or
     Bylaws of the Borrower or the Guarantor, or the provision of any statute,
     or any judgment, order or indenture, instrument, agreement or undertaking
     to which the Borrower or the Guarantor is party or by which the Borrower's
     or the Guarantor's assets or properties are or may become bound.

          SECTION 6.  Counterparts.  This Amendment may be executed in
                      ------------
counterparts, each of which shall be deemed to be an original and all of which,
taken together, shall constitute one and the same agreement.

          SECTION 7.  Governing Law.  This Amendment shall be deemed to be made
                      -------------
pursuant to the laws of the State of North Carolina with respect to agreements
made and to be

                                      -3-


performed wholly in the State of North Carolina and shall be construed,
interpreted, performed and enforced in accordance therewith.

          SECTION 8.  Costs and Expenses.  The Borrower shall pay any and all
                      ------------------
out-of-pocket expenses in connection with the preparation, execution and
delivery of this Amendment, including, without limitation, the fees and expenses
of the Bank's counsel in connection therewith.

          SECTION 9.  Entire Agreement.  This Amendment contains the entire
                      ----------------
agreement of the parties with respect to the subject matter hereof, and there
are no representations, inducements or other provisions among the parties
regarding such subject matter other than those expressed herein in writing.  All
changes, additions or deletions to this Amendment must be in writing and signed
by all parties.

          IN WITNESS WHEREOF, the parties hereto have caused their respective
duly authorized officers or representatives to execute and deliver this
Amendment as of the day and year first above written.

                                             BORROWER:

ATTEST:                                      PHARMACEUTICAL PRODUCT
                                             DEVELOPMENT, INC.

/s/ Fred B. Davenport, Jr.   Secretary       By: /s/ Rudy C. Howard
- --------------------------                   ----------------------
                                             Title: CFO
[CORPORATE SEAL]



                                             BANK:

                                             WACHOVIA BANK, N.A.


                                             By: /s/ Keith Sherman
                                                 ----------------------
                                             Title: SVP
                                                    ---

                                      -4-


                                  GUARANTOR:

ATTEST:                                  PPD DEVELOPMENT, INC.


/s/ Fred B. Davenport, Jr.           By: /s/ Rudy C. Howard
- ------------------------                 -------------------
      Secretary                      Title:       CFO
      ---------                             ----------------
      [Corporate Seal]

                                      -5-

EX-10.140

                                                                  EXHIBIT 10.140


                             EMPLOYMENT AGREEMENT
                             --------------------

          THIS EMPLOYMENT AGREEMENT (hereinafter the "Agreement"), made this
17th day of December, 1999 (the "Effective Date"), by and between PPD
Development Development, Inc., a Texas corporation (hereinafter "PPD Development
Development"), and Francis J. Casieri (hereinafter "Employee").

                                   RECITALS:

          A.  Employee desires employment upon the terms and conditions herein
stated.

          B.  PPD Development desires to employ Employee upon the terms and
conditions herein stated.

          C.  Employee and PPD Development desire to embody in writing the terms
and conditions of such employment in this Agreement.

          NOW, THEREFORE, in consideration of the mutual promises, covenants and
considerations contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:

          1.  Employment.  PPD Development hereby employs Employee and Employee
              ----------
hereby accepts such employment on a full time basis as Senior Vice President -
Global Business Development upon the terms and conditions hereinafter set forth.

          2.  Term.   The term of this Agreement shall be for one year,
              ----
beginning January 1, 2000  and ending December 31, 2000, unless sooner
terminated as provided herein.  Thereafter, this Agreement shall be
automatically renewed for successive one-year terms upon the terms and
conditions herein set forth except for (a) salary adjustments as provided for in
Section 9 below and (b) new bonus plans as provided in Section 3 below, unless
either party gives notice as herein provided to the other of said party's intent
not renew this Agreement not less than 60 days prior to the expiration of the
one-year term then in effect.

          3.  Salary.  For all services rendered by Employee under this
              ------
Agreement, PPD Development shall pay to employee an annual base salary of
$162,000 for the initial one-year term hereof.  During the initial one-year term
of this Agreement Employee shall also be entitled to a Quarterly Bonus if the
Businesses (as hereinafter defined) attain a certain level of Authorizations for
the applicable quarter, as set forth in Appendix I attached.  Each Quarterly
                                        ----------
Bonus to which Employee is entitled shall be paid within thirty (30) days after
its determination. Employee shall also be entitled to an annual bonus as
provided for in Appendix I attached, which annual bonus, if any, shall be paid
                ----------
to Employee at the same time annual bonuses, if any, for the initial one-year
term


hereof are or would have been paid to other senior executives of PPD
Development. In addition, Employee shall be entitled to an award of non-
qualified stock options under the Pharmaceutical Product Development, Inc.
("PPD") Equity Compensation Plan if Authorizations for the Businesses attain
certain Annual Targets for the initial one-year term hereof as set forth in
Appendix I.  Any award of stock options for the initial one-year term shall have
- ----------
an exercise price equal to the NASDAQ closing price on December 31, 2000, and
shall contain such other terms and conditions, including a three-year linear
vesting schedule, as included in stock option awards generally for other senior
executives of PPD Development.  A new bonus plan shall be agreed upon by
Employee and PPD Development  for each  one-year renewal term of this Agreement.

          4.  Duties.  Employee shall have overall responsibility for business
              ------
development  of (a) PPD Development and all of its subsidiaries as of the
Effective Date, except Pharmaco Investments, Inc., (b) PPD Global Ltd., (c)
Leicester Clinical Research Centre Ltd. and (d) Chelmsford Clinical Trials Unit
Ltd. (collectively, the "Businesses").  Employee's duties shall include but not
be limited to supervision of the Businesses' sales and bids and contracts
divisions.  Employee shall carry out his duties and responsibilities under the
general supervision of the Chief Executive Officer of PPD.  Employee shall
undertake such travel as may be required to perform the duties prescribed
herein.  During the term of this Agreement, Employee shall devote substantially
all of his working time, attention and energies to the business of PPD
Development.

          5.  Working Facilities.  PPD Development shall furnish Employee with
              ------------------
office space, equipment, technical, secretarial and clerical assistance and such
other facilities, services, support and supplies as may be reasonably needed to
perform the duties herein prescribed in an efficient and professional manner.

          6.  Non-Compete.  During the term of this Agreement, Employee hereby
              -----------
agrees that he shall not (a) become an officer, employee, director, agent,
representative, member, associate or consultant of or to a corporation,
partnership or other business entity or person, (b) directly or indirectly
acquire a proprietary interest in a corporation, partnership or other business
entity or person, or (c) directly or indirectly own any stock in a corporation
(other than a publicly traded corporation of which Employee owns less than five
percent (5%) of the outstanding stock) which is engaged in the business of
managing clinical research programs for pharmaceutical and medical products or
in any other business which is developed by PPD Development during the term of
this Agreement anywhere in the United States (whether or not such business is
physically located within the United States).  The parties agree that the
business and operations of PPD Development are national in scope.  For that
reason, the parties agree that a geographical limitation on the foregoing
covenant is not appropriate.

          7.  Termination.  Notwithstanding any other provision of this
              -----------
Agreement, PPD Development may terminate Employee's employment hereunder upon
the occurrence of any of the following events:

                                       2


               a.  Death of Employee.

               b.  A determination by the Chief Executive Officer of PPD, acting
in good faith but made in the sole discretion of the Chief Executive Officer,
that Employee has failed to substantially perform his duties under this
Agreement.

               c.  A determination by the Chief Executive Officer of PPD, acting
in good faith but made in the sole discretion of the Chief Executive Officer,
that Employee (i) has become physically or mentally incapacitated and is unable
to perform his duties under this Agreement as a result of such disability, which
inability continues for a period of sixty (60) consecutive calendar days, (ii)
has breached any of the material terms of this Agreement, including failure to
meet Quarterly Targets as set forth in Appendix I attached, (iii) has
                                       ----------
demonstrated gross negligence or willful misconduct in the execution of his
duties, or (iv) has been convicted of a felony.

          8.   Disclosure of Information. As a condition of employment, Employee
               -------------------------
shall abide by all of the terms of that certain Proprietary and Inventions
Agreement between Employee and PPD dated September 7, 1999.

          9.   Benefits.  During the term hereof, Employee shall be entitled to
               --------
participate in all benefits provided by PPD Development to its employees
generally, including but not limited to health insurance, disability insurance
and retirement plans, all of which are currently provided to employees of PPD
Development, subject to the eligibility requirements of any plan(s) establishing
same. Employee shall be subject to PPD Development's policies applicable to
other executive employees of PPD Development with respect to periodic reviews
and increases in salary, and shall be considered for and eligible to participate
in benefits, if any, provided generally by PPD Development to its executive
employees, including but not limited to issuance of stock options, cash bonuses,
etc., to the extent such stock options, bonuses, etc., are not otherwise
provided for herein (including in Appendix I), in connection with Employee's
                                  ----------
duties and performance as an executive employee. Employee shall be entitled to
four (4) weeks paid vacation during each year.

          10.  Expenses.  PPD Development shall pay all expenses of Employee
               --------
which are directly related to Employee's duties hereunder in accordance with
Company guidelines in effect from time to time.

          11.  Remedies.  In the event of Employee's actual or threatened breach
               --------
of the provisions of Section 6 of this Agreement, PPD Development shall be
entitled to a temporary restraining order and/or permanent injunction
restraining Employee from such breach.  Nothing herein shall be construed as
preventing PPD Development from pursuing any other available remedies for such
breach or threatened breach, including recovery of damages from Employee and
from any corporation, partnership or other business entity or person with which
the Employee has entered or attempted to enter into a relationship.

                                       3


          12.  Entire Agreement.  This Agreement constitutes the entire
               ----------------
agreement between the parties with respect to the subject matter hereof and may
not be altered or amended except by agreement in writing signed by the parties.

          13.  Waiver of Breach.  Waiver by either party of a breach of any
               ----------------
provision of this Agreement by the other party shall not operate as a waiver of
any subsequent breach by the other party.  No waiver shall be valid unless in
writing and signed by the party against whom the waiver is sought.

          14.  Severability.  If any portion of this Agreement shall be declared
               ------------
invalid by a court of competent jurisdiction, the remaining portion shall
continue in full force and effect as if this Agreement has been executed with
the invalid portion eliminated and this Agreement shall be so construed.

          15.  Benefit.  This Agreement shall inure to the benefit of and be
               -------
binding upon PPD Development, its successors and assigns, and Employee, his
heirs, successors, assigns and personal representatives.

          16.  Applicable Law.  This Agreement shall be governed by the laws of
               --------------
the State of North Carolina.

          17.  Assignment.  Neither party hereto may assign said party's rights
               ----------
or obligations hereunder without the prior written consent of the other.

          18.  Notice.  Any notice required or permitted hereunder shall be
               ------
delivered in person or mailed certified mail, return receipt requested, if to
either party  at PPD's principal office in Wilmington, North Carolina (and, in
addition as to Employee, at his last known residence address) and shall  be
deemed received when actually received.  Any notice from Employee to PPD
Development shall be addressed to the Chief Executive Officer of PPD.  Either
party hereto may change the notice address provided for herein upon ten (10)
days prior written notice to the other in the manner prescribed.

          19.  Arbitration.  Any dispute, controversy or claim arising out of or
               -----------
relating to this Agreement, including but not limited to any breach, or as to
its existence, validity, interpretation, performance or non-performance, or
damages, including claims in tort, shall be decided by a single neutral
arbitrator in Wilmington, North Carolina in binding arbitration pursuant to the
commercial Arbitration Rules of the American Arbitration Association then in
effect.  The parties to any such arbitration shall be limited to the parties to
this Agreement or any successor thereof.   The arbitration shall be conducted in
accordance with the procedural laws of the United States Federal Arbitration
Act, as amended.  The written decision of the arbitrator shall be final and
binding, and may be entered and enforced in any court of competent jurisdiction
and each party specifically acknowledges and agrees to waive any right to a jury
trial in any such

                                       4


forum. Each party to the arbitration shall pay its fees and expenses, unless
otherwise determined by the arbitrator.

          20.  Amendment; Modification.  No amendment or modification of this
               -----------------------
Agreement and no waiver by any party of the breach of any covenant contained
herein shall be binding unless executed in writing by party against whom
enforcement of such amendment, modification or waiver is sought.

          21.  Counterparts.  This Agreement may be executed in multiple
               ------------
counterparts, each of which shall be deemed an original and all of which taken
together  shall constitute one and the same Agreement.

          22.  Descriptive Headings: Interpretation.  The descriptive headings
               ------------------------------------
in this Agreement are inserted for convenience of reference only and are not
intended to be part of or to affect the meaning or interpretation of this
Agreement.

          IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the date first hereinabove set forth.

                              PPD DEVELOPMENT, INC.


                              By: /s/ Fred N. Eshelman
                                  --------------------
                              Name: Fred N. Eshelman
                                    ----------------
                              Title: Chief Executive Officer
                                     -----------------------


                              /s/ Francis J. Casieri (SEAL)
                              ----------------------
                              Francis J. Casieri

                                       5

EX-10.141

                                                                  EXHIBIT 10.141

                              SEVERANCE AGREEMENT


     THIS AGREEMENT, made this 17th day of December, 1999, by and between
Pharmaceutical Product Development, Inc. ("PPD") and Francis J. Casieri
("Employee").

     WHEREAS, Employee is a valued employee of PPD and in order to induce
Employee to remain in the employ of PPD, PPD desires to provide the severance
benefits hereinafter described in the event of a "Change in Control", as
hereinafter defined, of PPD.

     NOW, THEREFORE, it is agreed as follows:

     1.   Definitions
          -----------

          a.  "Change in Control" means a change of control of a nature that
would be required to be reported in response to Item 6(e) of Schedule 14A of
Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended
("Exchange Act"), provided that such a Change in Control shall be deemed to have
occurred if any "person" (as such term is used in Sections 13(d) and 14(d)(2) of
the Exchange Act) is or becomes the beneficial owner, directly or indirectly, of
securities of PPD representing 50% or more of the combined voting power of PPD's
then outstanding securities.

          b.  "Constructive Termination" means a termination of Employee's
employment by PPD during the Covered Period initiated by Employee after (i) a
substantial diminution or alteration in the duties of Employee, (ii) a reduction
by PPD in Employee's base salary in effect on the date of the Change in Control,
or (iii) the relocation of Employee's primary work location to a location that
is more than twenty-five (25) miles from Employee's primary work location prior
to the Change in Control. Constructive Termination specifically does not include
termination of Employee by reason of death, Disability or retirement at or after
age 65. Employee shall give PPD written notice of a Constructive Termination,
which notice shall provide a brief description of the circumstances which
Employee asserts gives rise to a right of Constructive Termination, and PPD
shall have ten (10) days from receipt of said notice within which to remedy said
circumstances.

          c.  "Covered Period" means the time period commencing on the date of
and coincident with a Change of Control and ending one year thereafter.

          d.  "Disability" means the inability of Employee to perform his
assigned duties for PPD for a period of three (3) months due to Employee's
physical or mental illness as determined by a reputable medical doctor.

          e.  "PPD" means Pharmaceutical Product Development, Inc. and all of
its subsidiaries and affiliated entities.


          f.  "Termination for Cause" means (i) an act or acts involving fraud,
embezzlement or theft from PPD, (ii) Employee's willful and repeated failure to
follow directions of the Board of Directors that continues for at least ten (10)
days following written notice of the Board of Directors of such failure to
follow directions, or (iii) termination for cause as defined in and made
pursuant to a then effective employment agreement, if any, between Employee and
PPD.

     2.   Compensation  Upon Change of Control.     If during the Covered Period
          -------------------------------------
(i) PPD terminates Employee's employment for reason other than Termination for
Cause or (ii)  Employee's employment is terminated by reason of Constructive
Termination, Employee shall be entitled to the following compensation and
benefits:

          a.  PPD shall pay Employee a lump sum equal to Employee's W-2
compensation for the twelve (12) months ending on the last day of the month
preceding the month of Employee's termination, said sum to be paid within ten
(10) days after Employee's termination of employment.

          b.  PPD shall pay Employee any bonus or deferred compensation (whether
in the form of cash, stock or otherwise) accrued but unpaid as of Employee's
termination, said sum to be paid within ten (10) days after Employee's
termination of employment.

          c.  For a period of one-year after Employee's termination of
employment with PPD, PPD shall continue to pay for and provide existing employee
welfare benefits which Employee is receiving as of the date of termination of
employment, including life insurance, health, medical, dental, vision and
wellness, accidental death and dismemberment and disability benefits; provided,
however, that PPD's obligations under this clause shall terminate from the date
that Employee first becomes eligible after termination of employment with PPD
for similar coverage under another employer's plan.

          d.  Notwithstanding anything to the contrary in any award agreement
for non-qualified stock options, (i) all unvested shares underlying PPD non-
qualified stock options granted more than six months prior to the date of
Employee's termination shall become fully vested as of the date of Employee's
termination, and (ii) Employee shall continue to be treated under each award
agreement as if he was an employee of PPD until the first to occur of (x) the
third anniversary of Employee's termination of employment, or (y) the expiration
of the exercise period provided for therein; provided, however, in the event of
Employee's death or his disability (as disability is defined in the award
agreement) after the date of Employee's termination of employment hereunder, the
time for exercise after death or such disability prescribed in the award
agreement shall apply. The provisions of this subsection shall also apply to any
and all substitute stock options granted to Employee in exchange for Employee's
PPD non-qualified stock options to which this subsection applies.

                                       2


     3.   Miscellaneous.
          -------------

          a.  PPD will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of PPD, to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that PPD would be required
to perform it if no succession had taken place.

          b.  This Agreement shall inure to the benefit of and be enforceable by
Employee's personal or legal representatives, executives, administrators,
successors, heirs, distributees, devisees and legatees.

          c.  For purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
given (i) by certified mail, return receipt requested, postage prepaid, or (ii)
by recognized overnight carrier, and shall be deemed received when actually
received. Notices shall be addressed as follows:

          If to PPD:      Pharmaceutical Product Development, Inc.
                          3151 17th South Street
                          Wilmington, North Carolina  28412
                          Attention: Chief Executive Officer


          If to Employee: Francis J. Casieri

                          _____________________________

                          _____________________________

Either party hereto may change the notice address by giving notice thereof in
the same manner as provided for herein.

          d.  No waiver by either party hereto at any time of any breach by the
other party hereto of, or compliance with, any provision or condition of this
Agreement to be performed by such other party shall be deemed a subsequent
waiver of the same or similar provisions or conditions.

          e.  No agreements or representations, oral or otherwise, expressed or
implied, with respect to the subject matter hereof have been made by either
party which are not set forth expressly in this agreement, and this Agreement
supersedes and replaces in its entirety all prior agreements and
representations, expressed, implied,  oral or otherwise, made by PPD to or with
Employee.

                                       3


          f.  This Agreement shall be governed by and interpreted under the laws
of the State of North Carolina.

          g.  The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.

          h.  This Agreement may be executed in one or more counterparts, each
of which shall be deemed an original but all of which together shall constitute
one and the same instrument.

          i.   All legal expenses incurred by Employee in the successful
enforcement of any of the terms of this Agreement shall be paid by PPD.

     IN WITNESS WHEREOF, the parties have executed this Agreement effective the
date first hereinabove set forth.



                                        PHARMACEUTICAL PRODUCT
                                        DEVELOPMENT, INC.


                                        By: /s/ Fred N. Eshelman
                                            --------------------
                                        Name:  Fred N. Eshelman
                                        Title: Chief Executive Officer


                                        EMPLOYEE



                                             /s/ Francis J. Casieri     (SEAL)
                                        --------------------------------
                                        Name:  Francis J. Casieri

                                       4

EX-10.142

                                                                  EXHIBIT 10.142

                      TERMINATION OF EMPLOYMENT AGREEMENT

     THIS  TERMINATION OF EMPLOYMENT AGREEMENT, made this 8th day of February,
2000, by and between Pharmaceutical Product Development, Inc. ("PPD"), and Rudy
C. Howard ("Employee").

     WHEREAS, PPD and Employee entered into that certain employment agreement
dated January 1, 1998 (the "Employment Agreement"); and

     WHEREAS, the parties desire to terminate the Employment Agreement pursuant
to the terms and conditions more specifically set forth herein.

     NOW, THEREFORE, in consideration of the mutual promises, covenants and
considerations contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:

     1.  Termination of Employment Agreement. The Employment Agreement shall be
         ------------------------------------
deemed terminated as of the close of business on February 8, 2000 (the
"Termination Date").

     2.  Rights and Obligations.  Neither party hereto shall have any further
         ----------------------
rights or obligations under the Employment Agreement, except (a) such rights and
obligations as shall have accrued prior to the Termination Date, and (b) such
rights and obligations which by the terms of the Employment Agreement survive
the Termination date.

     3.  Miscellaneous.
         -------------

          a.  This agreement constitutes the entire agreement between the
parties with respect to the subject matter hereof and may not be altered or
amended except by writing signed by the parties.

          b.  This agreement shall be governed by the laws of State of North
Carolina.

          c.  This agreement shall inure to the benefit of and be binding upon
PPD, its successors and assigns, and Employee, his heirs, successors, assigns
and personal representatives.


     IN WITNESS WHEREOF, the parties have caused this agreement to be executed
as of the date first hereinabove set forth.


PHARMACEUTICAL PRODUCT DEVELOPMENT, INC.



By:  /s/ Fredric N. Eshelman
     -----------------------
Name:  Fredric N. Eshelman
Title: Chief Executive Officer

  /s/ Rudy C. Howard   (SEAL)
- -----------------------
Rudy C. Howard

                                       2

EX-21

                                                                      EXHIBIT 21


          Pharmaceutical Product Development, Inc., and Subsidiaries
                                 Subsidiaries

The subsidiaries of Pharmaceutical Product Development, Inc., as of February 16,
2000, are as follows:



                                                                     Jurisdiction of Incorporation
                                                                                 or
                     Name of Subsidiary                                     Organized in
     -----------------------------------------------------           -----------------------------
                                                                  
  1.  Applied Bioscience International Inc.                                  Delaware
  2.  PPD Development, Inc.                                                   Texas
  3.  Pharmaco International Holdings, Inc.                                  Delaware
  4.  Pharmaco Investments Inc.                                              Delaware
  5.  PPD France SNC                                                          France
  6.  PPD Scandinavia AB                                                      Sweden
  7.  PPD Canada, Ltd.                                                        Canada
  8.  PPD Do Brazil-Suporte                                                   Brazil
  9.  PPD Do Brazil-Suporte a Pesquisa, LTDA                                  Brazil
 10.  Pharmaco International Holdings GmbH                                   Germany
 11.  PPD Pharmaco GmbH                                                      Germany
 12.  PPD Poland Sp. zo.o                                                     Poland
 13.  PI Praha, s.r.o.                                                    Czech Republic
 14.  PPD Germany GmbH & Co. KG                                              Germany
 15.  Pharmaceutical Product Development (Pty) Ltd.                        South Africa
 16.  PPD Hungary R&D, Ltd.                                                  Hungary
 17.  PPD UK Holdings Ltd.                                                United Kingdom
 18.  PPD Global Ltd.                                                     United Kingdom
 19.  Leicester Clinical Research Centre, Ltd.                            United Kingdom
 20.  Chelmsford Clinical Trials Unit Ltd.                                United Kingdom
 21.  Gabbay Ltd.                                                         United Kingdom
 22.  Data Analysis & Research (DAR) Ltd.                                 United Kingdom
 23.  APBI Investor Relations Inc.                                          New Jersey
 24.  Clinix International Inc.                                              Delaware
 25.  APBI Finance Corporation                                               Delaware
 26.  PPD Pharmaco Mexico S.A. de C.V.                                        Mexico
 27.  PPD Australia Pty Limited                                             Australia
 28.  PPD Italy SRL                                                           Italy
 29.  PPD Spain, S.L.                                                         Spain
 30.  PPD Development (Thailand) Co., Ltd.                                   Thailand
 31.  Cambridge Applied Nutrition Toxicology and Bioscience Limited       United Kingdom
 32.  Clinical Technology Centre (International) Limited                  United Kingdom
 33.  Genupro, Inc.                                                       North Carolina
 34.  Belmont Research, Inc.                                              Massachusetts
 35.  PPD Discovery, Inc.                                                 North Carolina
 36.  Target Discovery, Inc.                                              North Carolina
 37.  SARCO, Inc.                                                            Delaware
 38.  PPD Virtual, Inc.                                                   North Carolina
 39.  ATP                                                                 North Carolina



Subsidiaries 1, 34, 35 and 38 are wholly owned subsidiaries of Pharmaceutical
Product Development, Inc.

Subsidiaries 2, 17, 23, 24 and 25 are wholly owned subsidiaries of Subsidiary 1.

Subsidiaries 3, 4 and 39 are wholly owned subsidiaries of Subsidiary 2.

Subsidiary 5 is owned 99% by Subsidiary 3 and 1% by Subsidiary 23.

Subsidiaries 6, 7, 8, 10, 15, 27, 28, 29 and 30 are wholly owned subsidiaries of
Subsidiary 3.

Subsidiary 9 is a wholly owned subsidiary of Subsidiary 8.

Subsidiaries 11, 12 and 13 are wholly owned subsidiaries of Subsidiary 10.

Subsidiary 14 is owned 72% by Subsidiary 10 and 28% by Subsidiary 11.

Subsidiary 16 is owned 96.7% by Subsidiary 10 and 3.3% by Subsidiary 2.

Subsidiaries 18, 19, 20, 21 and 22 are wholly owned subsidiaries of Subsidiary
17.

Subsidiaries 31 and 32 are wholly owned subsidiaries of Subsidiary 18.

Subsidiaries 36 and 37 are wholly owned subsidiaries of Subsidiary 35.

Subsidiary 26 is owned 99% by Subsidiary 3 and 1% by Subsidiary 2.

Subsidiary 33 is a wholly owned subsidiary of Subsidiary 38.

EX-23

                                                                    EXHIBIT 23.1


CONSENT OF INDEPENDENT ACCOUNTANTS



We consent to the incorporation by reference in the registration statement of
Pharmaceutical Product Development, Inc. and its subsidiaries on Form S-8 (File
No. 333-20925) of our report dated January 31, 2000, on our audits of the
consolidated financial statements of Pharmaceutical Product Development, Inc.
and its subsidiaries as of December 31, 1999 and 1998 and for each of the three
years in the period ended December 31, 1999, which report is included in this
annual report on Form 10-K.



PRICEWATERHOUSECOOPERS LLP


Raleigh, North Carolina
March 1, 2000

EX-27

 



<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
PHARMACEUTICAL PRODUCT DEVELOPMENT INC. CONSOLIDATED BALANCE SHEET AND STATEMENT
OF OPERATIONS INCLUDED WITHIN THIS FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.

<MULTIPLIER> 1,000

                             
<PERIOD-TYPE>                   12-MOS
<FISCAL-YEAR-END>                          DEC-31-1999
<PERIOD-START>                             JAN-01-1999
<PERIOD-END>                               DEC-31-1999
<CASH>                                          61,251
<SECURITIES>                                         0
<RECEIVABLES>                                  115,819
<ALLOWANCES>                                     1,066
<INVENTORY>                                          0
<CURRENT-ASSETS>                               200,673
<PP&E>                                         110,465
<DEPRECIATION>                                  58,183
<TOTAL-ASSETS>                                 288,703
<CURRENT-LIABILITIES>                           93,914
<BONDS>                                              0
<PREFERRED-MANDATORY>                                0
<PREFERRED>                                          0
<COMMON>                                         2,463
<OTHER-SE>                                     190,001
<TOTAL-LIABILITY-AND-EQUITY>                   288,703
<SALES>                                              0
<TOTAL-REVENUES>                               302,530
<CGS>                                                0
<TOTAL-COSTS>                                  155,158
<OTHER-EXPENSES>                               110,664
<LOSS-PROVISION>                                     0
<INTEREST-EXPENSE>                                 400
<INCOME-PRETAX>                                 41,045
<INCOME-TAX>                                    12,154
<INCOME-CONTINUING>                             28,891
<DISCONTINUED>                                   (395)
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                    28,496
<EPS-BASIC>                                       1.16
<EPS-DILUTED>                                     1.15