e10vq

/s/ William J. Gedale

/s/ Ronald R. Baker

William J. Gedale
Chairman, Compensation Committee
Board of Directors

Ronald R. Baker

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LCPXTvUWvq2HqXqJfwfinsgmrCljBc75OdOWE2xr/fLVF4AH/t1ND33kJ6S8tzA4 t0mhVwho/p5fTZikd1T/xQ== 0000950133-02-003809.txt : 20021114 0000950133-02-003809.hdr.sgml : 20021114 20021114173739 ACCESSION NUMBER: 0000950133-02-003809 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 20020930 FILED AS OF DATE: 20021114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BIORELIANCE CORP CENTRAL INDEX KEY: 0001036629 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMMERCIAL PHYSICAL & BIOLOGICAL RESEARCH [8731] IRS NUMBER: 521541583 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-22879 FILM NUMBER: 02826587 BUSINESS ADDRESS: STREET 1: C/O MICROBIOLOGICAL ASSOCIATES INC STREET 2: 9900 BLACKWELL RD CITY: ROCKVILLE STATE: MD ZIP: 20850 BUSINESS PHONE: 3017381000 MAIL ADDRESS: STREET 1: C/O MICROBIOLOGICAL ASSOCIATES INC STREET 2: 9900 BLACKWELL RD CITY: ROCKVILLE STATE: MD ZIP: 20850 10-Q 1 w65102e10vq.htm FORM 10-Q e10vq

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)


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

For the quarterly period ended September 30, 2002


[ ]	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 0-22879

BIORELIANCE CORPORATION
(Exact name of the registrant as specified in its charter)


Delaware		52-1541583
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

14920 Broschart Road
Rockville, Maryland		20850
(Address of principal executive offices)		(Zip code)

Registrant’s telephone number, including area code:
(301) 738-1000

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

As of October 15, 2002, 8,453,592 shares of registrant’s common stock, par value $.01 per share, were outstanding.

BIORELIANCE CORPORATION

TABLE OF CONTENTS


		Page
		Number


PART I	FINANCIAL INFORMATION


	Item 1 - Financial Statements:

	Consolidated Balance Sheets as of December 31, 2001 and September 30, 2002 (Unaudited)	3

	Consolidated (Unaudited) Statements of Income for the Three and Nine Months Ended September 30, 2001 and 2002.	4

	Consolidated (Unaudited) Statements of Cash Flows for the Nine Months Ended September 30, 2001 and 2002.	5

	Notes to Consolidated (Unaudited) Financial Statements	6

	Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations	9

	Item 3 - Quantitative and Qualitative Disclosures About Market Risks	20

	Item 4 - Controls and Procedures	21


PART II	OTHER INFORMATION	22

SIGNATURES		23

CERTIFICATIONS PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002		24

EXHIBIT INDEX		26

BIORELIANCE CORPORATION

CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)


							September 30,
				December 31,			2002
				2001			(Unaudited)


Assets
Current assets:
	Cash and cash equivalents			$	27,536		$	35,808
	Accounts receivable, net				22,335			22,496
	Other current assets				1,747			3,156

		Total current assets			51,618			61,460
Property and equipment, net					39,177			40,392
Deposits and other assets					280			212
Deferred income taxes					1,062			825

			Total assets	$	92,137		$	102,889

Liabilities and Stockholders’ Equity
Current liabilities:
	Current portion of long-term debt and capital lease obligations			$	919		$	918
	Accounts payable				2,312			1,929
	Accrued employee compensation and benefits				5,323			3,885
	Other accrued liabilities				2,544			4,925
	Customer advances				4,972			5,776
	Deferred income taxes				4,102			4,779

		Total current liabilities			20,172			22,212
Long-term debt and capital lease obligations					10,977			10,883

			Total liabilities		31,149			33,095

Stockholders’ equity:
	Preferred stock, $.01 par value: 6,900,000 shares authorized; no shares issued and outstanding				—			—
	Common stock, $.01 par value: 15,000,000 shares authorized; 8,362,040 and 8,451,656 shares issued and outstanding				84			85
	Additional paid-in capital				55,018			55,610
	Retained earnings				7,782			15,856
	Accumulated other comprehensive loss				(1,896	)		(1,757	)

		Total stockholders’ equity			60,988			69,794

			Total liabilities and stockholders’ equity	$	92,137		$	102,889

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

BIORELIANCE CORPORATION

CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)


			Three Months Ended						Nine Months Ended
			September 30,						September 30,
			2001			2002			2001			2002

Revenue			$	18,578		$	21,594		$	50,177		$	61,340

Expenses:
	Cost of sales			11,197			12,090			32,402			35,083
	Selling, general and administrative			3,984			4,215			11,748			12,736
	Research and development			284			225			1,027			681

		Total operating expenses		15,465			16,530			45,177			48,500

Income from operations				3,113			5,064			5,000			12,840

Other (income) expense:
	Interest income			(196	)		(191	)		(682	)		(508	)
	Interest expense			198			236			629			658
	Other (income) expense			22			20			293			(30	)

		Net other expense		24			65			240			120

Income before income taxes				3,089			4,999			4,760			12,720
Income tax provision				853			1,825			1,248			4,643

Net income			$	2,236		$	3,174		$	3,512		$	8,077

Net income per share:

	Basic		$	0.27		$	0.38		$	0.43		$	0.96

	Diluted		$	0.26		$	0.36		$	0.41		$	0.91

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

BIORELIANCE CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)


					Nine Months Ended
					September 30,

					2001			2002

Cash flows from operating activities:
	Net income				$	3,512		$	8,077
	Adjustments to reconcile net income to net cash provided by operating activities:
			Depreciation			3,361			3,475
			Compensation element of options			39			—
			Amortization expense			37			10
			Amortization of bond discounts			(114	)		—
			Loss on disposal			94			136
			Deferred income taxes, net			463			914
			Changes in current assets and liabilities:
				Accounts receivable, net		(1,960	)		161
				Other current assets		(276	)		(1,368	)
				Accounts payable		(281	)		(521	)
				Accrued employee compensation and benefits		254			(1,468	)
				Other accrued liabilities		637			2,353
				Customer advances		2,504			453
			(Increase) decrease in deposits and other assets			(80	)		135

				Net cash provided by operating activities		8,190			12,357

Cash flows from investing activities:
		Purchases of marketable securities				(2,455	)		—
		Proceeds from the maturities of marketable securities				11,000			—
		Purchases of property and equipment				(2,770	)		(5,021	)
		Proceeds from the sale of property and equipment				—			124

				Net cash provided by (used in) investing activities		5,775			(4,897	)

Cash flows from financing activities:
			Proceeds from exercise of stock options			421			593
			Payments on debt and capital lease obligations			(918	)		(700	)

				Net cash used in financing activities		(497	)		(107	)

Effect of exchange rate changes on cash and cash equivalents						120			919

Net increase in cash and cash equivalents						13,588			8,272
Cash and cash equivalents, beginning of period						8,231			27,536

Cash and cash equivalents, end of period					$	21,819		$	35,808

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

BIORELIANCE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

(1) Description of the Business

BioReliance Corporation (the Corporation) is a contract service organization that provides testing and development, and manufacturing services for biologics and other biomedical products to biotechnology and pharmaceutical companies worldwide.

(2) Interim Financial Statements Presentation

The accompanying interim financial statements are unaudited and have been prepared by the Corporation pursuant to the rules and regulations of the Securities and Exchange Commission (SEC) regarding interim financial reporting. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements, and therefore these consolidated financial statements should be read in conjunction with the audited consolidated financial statements, and related notes thereto, included in the Corporation’s Annual Report on Form 10-K. In the opinion of management, the unaudited consolidated financial statements for the three-month and nine-month periods ended September 30, 2001 and 2002 include all normal and recurring adjustments that are necessary for a fair presentation of the results of the interim period. The results of operations for the three-month and nine-month periods ended September 30, 2001 and 2002 are not necessarily indicative of the results for the entire year ending December 31, 2002.

(3) Net Income Per Share

The Corporation calculates earnings per share (EPS) on both a basic and diluted basis. Dilutive securities are excluded from the computation in periods in which they have an anti-dilutive effect. Net income available to common stockholders and common equivalent stockholders is equal to net income for all periods presented.

The following table represents reconciliations between the weighted average common stock outstanding used in basic EPS and the weighted average common and common equivalent shares outstanding used in diluted EPS for each of the periods presented (in thousands):


	Three Months Ended				Nine Months Ended
	September 30,				September 30,

	2001		2002		2001		2002


Weighted average common stock outstanding		8,225		8,444		8,208		8,425
Stock options, as if converted		322		432		349		474

Weighted average common and common equivalent shares outstanding		8,547		8,876		8,557		8,899

(4) Segment Information

Summarized financial information concerning the Corporation’s reportable segments for the three months and nine months ended September 30 is shown in the following table (in thousands):


				Three Months						Nine Months
				Ended September 30,						Ended September 30,

				2001			2002			2001			2002


Revenue:
	Testing and Development			$	15,777		$	18,131		$	42,737		$	51,477
	Manufacturing				2,801			3,463			7,440			9,863

			Total	$	18,578		$	21,594		$	50,177		$	61,340

Gross Profit (Loss)

	Testing and Development			$	7,688		$	9,717		$	18,984		$	26,319
	Manufacturing				(307	)		(213	)		(1,209	)		(62	)

		Total		$	7,381		$	9,504		$	17,775		$	26,257

Summarized financial information concerning the Corporation’s revenue and gross profit by geographic region for the three months and nine months ended September 30 is shown in the following table (in thousands):


					Three Months				Nine Months
					Ended September 30,				Ended September 30,

					2001		2002		2001		2002

Revenue:
	United States				$	15,624	$	17,304	$	41,949	$	50,050
	Europe					2,954		4,290		8,228		11,290

			Total		$	18,578	$	21,594	$	50,177	$	61,340

Gross Profit:
		United States			$	6,060	$	7,051	$	13,909	$	20,046
		Europe				1,321		2,453		3,866		6,211

				Total	$	7,381	$	9,504	$	17,775	$	26,257

(5) New Accounting Pronouncements

In July 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. (FAS) 141, “Business Combinations” (FAS 141) and FAS 142, “Goodwill and Other Intangible Assets” (FAS 142). FAS 141 addresses the initial recognition and measurement of goodwill and other intangible assets acquired in a business combination. FAS 142 addresses the initial recognition and measurement of intangible assets acquired outside of a business combination, whether acquired individually or with a group of other assets, and the accounting and reporting for goodwill and other intangibles subsequent to their acquisition. These standards require all future business combinations to be accounted for using the purchase method of accounting. Goodwill will no longer be amortized but instead will be subject to impairment tests at least annually. The Corporation was required to adopt FAS 141 and FAS 142 on a prospective basis as of January 1, 2002; however, certain provisions

of these new standards may also apply to any acquisitions concluded after June 30, 2001. The initial adoption of this guidance did not have a material impact on the Corporation’s results of operations or financial position. The guidance may impact the way in which the Corporation will account for future transactions.

In October 2001, the FASB issued FAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (FAS 144). FAS 144 supercedes FASB Statement No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of”. FAS 144 applies to all long-lived assets (including discontinued operations) and consequently amends Accounting Principles Board Opinion No. 30, “Reporting Results of Operations-Reporting the Effects of Disposal of a Segment of a Business”. The Corporation adopted FAS 144 on January 1, 2002. The initial adoption of this guidance has not had a material impact on the Corporation’s results of operations or financial position.

In April 2002, the FASB issued FAS No. 145, “Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections” (FAS 145). FAS 145 rescinds FAS No. 4, “Reporting Gains and Losses from Extinguishment of Debt”, and an amendment of that statement, FAS No. 64, “Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements”. FAS No. 145 also rescinds FAS No. 44, “Accounting for Intangible Assets of Motor Carriers” and amends FAS No. 13, “Accounting for Leases”, to eliminate an inconsistency between the required accounting for sale-leaseback transactions and the required accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions. FAS 145 also amends other existing authoritative pronouncements to make various technical corrections, clarify meanings, or describe their applicability under changed conditions. The Corporation does not believe that adoption of FAS No. 145 will have a material impact on its results of operations or financial position.

In June 2002, the Financial Accounting Standards Board issued FAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities” (FAS 146). FAS 146 addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring).” The provisions of this Statement are effective for exit or disposal activities that are initiated after December 31, 2002, with early application encouraged. The Corporation does not expect application of this Statement to have a material impact on the Corporation’s financial statements.


Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations

Certain statements made in this Report on Form 10-Q are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate, or imply future results, performance, or achievements, which generally are not historical in nature, and may contain the words “believe”, “anticipate”, “expect”, “estimate”, “project”, “will be”, “will continue”, “will likely result”, or similar words or phrases. Forward-looking statements in this Report on Form 10-Q include, among others, statements regarding:

• the anticipated growth of revenue and improvement in profit margins,

• the Corporation’s ability to use additional capacity in its manufacturing facility and the effect on earnings of underutilization of this facility,

• the Corporation’s plans to expand capacity in both its testing and development and manufacturing business segments, including the timing and completion of any such expansion,

• the anticipated increase in selling, general and administrative expenses and the hiring of new employees,

• plans to improve the Corporation’s information systems and sales and marketing infrastructure,

• the anticipated leveling off of research and development expenses,

• the amount and impact of a change in tax rates,

• the Corporation’s ability to fund its operations with existing cash, cash flows from operations and its line of credit, and

• the impact of foreign currency exchange rate fluctuations on the Corporation.

Forward-looking statements involve risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. The risks and uncertainties are detailed from time to time in reports filed by BioReliance with the SEC, including in its Forms 10-K.

As and when made, management believes that these forward-looking statements are reasonable. The Corporation undertakes no obligation to revise or publicly release the results of any revision to these forward-looking statements. Therefore, readers are cautioned not to place undue reliance on these forward-looking statements since new risk factors emerge from time to time and it is not possible for management to predict all such risk factors, nor can it assess the impact of all such risk factors on the Corporation’s business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

The following discussion and analysis of the Corporation’s financial condition and results of operations should be read in conjunction with the Corporation’s consolidated financial statements and related notes thereto included elsewhere in this Form 10-Q.

Results of Operations
(Dollars in tables are in thousands)

For the three months ended September 30, 2002, the Corporation had gross revenue of $21.6 million, an increase of 16% over gross revenue of $18.6 million for the three months ended September 30, 2001. Earnings per share for the three months ended September 30, 2002 were $0.36 (diluted) compared with $0.26 (diluted) for the three months ended September 30, 2001.

For the nine months ended September 30, 2002, the Corporation had gross revenue of $61.3 million, an increase of 22% over gross revenue of $50.2 million for the nine months ended September 30, 2001. Earnings per share for the nine months ended September 30, 2002 were $0.91 (diluted) compared with $0.41 (diluted) for the nine months ended September 30, 2001.

Gross Revenue by Segment

The following table shows a comparison of revenue by operational segment for the three months and nine months ended September 30, 2001 and 2002:


	Three Months Ended							Nine Months Ended
	September 30,							September 30,

	2001		2002		Fav. (Unfav.) %			2001		2002		Fav. (Unfav.) %


Testing and Development	$	15,777	$	18,131		15	%	$	42,737	$	51,477		20	%

Manufacturing		2,801		3,463		24	%		7,440		9,863		33	%


Total	$	18,578	$	21,594		16	%	$	50,177	$	61,340		22	%

The increases in testing and development revenue for the three months and nine months ended September 30, 2002 are due primarily to the continued increases in the rates of new orders, both in the U.S. and Europe. The increase in U.S. testing and development revenue results from increases in both biologics testing services and toxicology services. Additionally, U.S. testing and development revenue for the three months and nine months ended September 30, 2002 includes an adjustment of approximately $150,000 relating to long-term contracts. The increase in European testing and development revenue was driven by increases in revenue generated in all major service areas.

The increases in manufacturing revenue for the three months and nine months ended September 30, 2002 represent increases in both the U.S. and Europe. U.S. increases are attributable to increases in virtually all manufacturing services as a result of the continued ramp-up of the Corporation’s U.S. manufacturing facility. Revenue growth for the three months and nine months ended September 30, 2002 continued to be impacted by project delays resulting from client requests for additional process development and client regulatory issues.

Price increases provided a relatively minor portion of the revenue increases in both of the Corporation’s business segments for the three months and nine months ended September 30, 2002.

Approximately 20% of the Corporation’s manufacturing revenue for the three and nine months ended September 30, 2002, resulted from work performed under the Corporation’s smallpox vaccine contracts. Approximately 7% and 6% of the Corporation’s total revenue for the three months and nine months ended September 30, 2002, respectively, resulted from work performed under these smallpox vaccine contracts. Work under these contracts is subject to government prime contractor-issued task orders, contract amendments and potential expansion and acceleration; thus, the future revenue related to these contracts cannot be predicted with certainty. As with all government related contracts, these contracts are subject to termination by the government at any time.

Gross Revenue by Geographic Region

The following table shows a comparison of revenue by geographic region for the three months and nine months ended September 30, 2001 and 2002:


	Three Months Ended							Nine Months Ended
	September 30,							September 30,

	2001		2002		Fav. (Unfav.) %			2001		2002		Fav. (Unfav.) %


United States	$	15,624	$	17,304		11	%	$	41,949	$	50,050		19	%

Europe		2,954		4,290		45	%		8,228		11,290		37	%

Total	$	18,578	$	21,594		16	%	$	50,177	$	61,340		22	%

The increases in revenue generated in the United States for the three months and nine months ended September 30, 2002 resulted from increases in orders, which fueled increased revenue from both the testing and development and manufacturing segments. Revenue generated in the United States for the three and nine months ended September 30, 2002 includes an adjustment of approximately $150,000 relating to long-term contracts.

The increases in revenue generated in Europe for the three months and nine months ended September 30, 2002 reflect an increase in revenue generated both in the Corporation’s U.K. and German facilities. As the German facility continues to run near capacity, revenue fluctuations in that facility are primarily attributable to different pricing structures among contracts, and revenue growth, if any, will likely be modest for the remainder of 2002.

The Corporation expects that testing and development revenue will continue to increase in the foreseeable future, and it expects that manufacturing revenue in the U.S. will increase with the Corporation’s smallpox vaccine and other commercial contracts in the U.S. manufacturing facility, but there can be no assurance that any such expectations will prove to be correct. The Corporation is planning for laboratory expansions that would become available to meet anticipated growth in the U.S. and Europe over a two-to-three year period.

Gross Profit by Operating Segment

The following table compares gross profit and gross margin by operational segment for the three months and nine months ended September 30, 2001 and 2002:


						Three Months Ended						Nine Months Ended
						September 30,									September 30,

			2001			2002			Fav. (Unfav.) %			2001			2002			Fav. (Unfav.) %

Testing and Development
	Gross Profit		$	7,688		$	9,717			26	%	$	18,984		$	26,319			39	%
	Gross Margin			49	%		54	%					44	%		51	%

Manufacturing
		Gross Profit (Loss)		(307	)		(213	)		31	%		(1,209	)		(62	)		95	%
		Gross Margin		(11	%)		(6	%)					(16	%)		(1	%)


Total
		Gross Profit	$	7,381		$	9,504			29	%	$	17,775		$	26,257			48	%
		Gross Margin		40	%		44	%					35	%		43	%

The increases in testing and development gross margins for the three months and nine months ended September 30, 2002 were driven by increased gross profits generated in both the U.S. and the U.K. The increased gross profits are a result of increased revenue, combined with lower expenses related to decreased consulting fees, and operating tax credits that pertained largely to prior periods. These decreased costs were only partially offset by increases in variable costs relating to labor, direct materials, and subcontracted work.

The improvement in manufacturing gross margins for the three months ended September 30, 2002 reflects an increase in gross profits from European manufacturing operations, offset partly by a decrease in U.S. manufacturing margins. U.S. manufacturing margins decreased because of project delays resulting from client requests for additional process development.

The improvement in manufacturing gross margins for the nine months ended September 30, 2002 is due to a significant decrease in the losses generated in the U.S. as well as an increase in the gross profit from European manufacturing operations. Increased revenue was partially offset by increases in both variable and fixed costs.

The Corporation expects future revenue growth to exceed cost increases related to its U.S. manufacturing facility, thereby improving gross margins. However, the build-out and validation of this facility has demanded and will continue to demand considerable time and resources, and there are high fixed costs related to the facility. The Corporation continues to utilize substantially less than full capacity in this facility. This facility will likely constrain earnings for the Corporation at least for the foreseeable future. Management cannot predict when, if ever, the facility will generate profits. Without the results of operations of this facility, the Corporation’s total gross margins would have been 52% and 49% respectively for the three months and nine months ended September 30, 2002, as compared to 46% and 43% respectively, for the three months and nine months ended September 30, 2001.

Gross Profit by Geographic Region

The following table compares gross profit and gross margin by geographic region for the three months and nine months ended September 30, 2001 and 2002:


		Three Months Ended									Nine Months Ended
		September 30,									September 30,

		2001			2002			Fav. (Unfav.) %			2001			2002			Fav. (Unfav.) %

United States
	Gross Profit	$	6,060		$	7,051			16	%	$	13,909		$	20,046			44	%
	Gross Margin		39	%		41	%					33	%		40	%

Europe
	Gross Profit		1,321			2,453			86	%		3,866			6,211			61	%
	Gross Margin		45	%		57	%					47	%		55	%


Totals
	Gross Profit	$	7,381		$	9,504			29	%	$	17,775		$	26,257			48	%
	Gross Margin		40	%		44	%					35	%		43	%

The increase in U.S. gross margins for the nine months ended September 30, 2002 resulted from improved gross profits in the testing and development segment and reduced losses in the manufacturing segment. The increased gross profit is a result of increased revenue, combined with lower expenses related to decreased consulting fees, and operating tax credits that pertained largely to prior periods. These decreased costs were only partially offset by increases in variable costs relating to labor, direct materials, and subcontracted work. The increase in U.S. gross margins for the three months ended September 30, 2002 reflect increases in U.S. testing and development margins, partially offset by decreases in U.S. manufacturing margins, resulting from those factors described above. Without the results of operations of the U.S. manufacturing facility, U.S. gross margins would have been 50% and 48% respectively for the three months and nine months ended September 30, 2002, as compared to 46% and 42% respectively, for the three months and nine months ended September 30, 2001.

The improvement in European gross margins for the three months and nine months ended September 30, 2002 is attributable to increased profits in both the testing and development and manufacturing segments resulting from continued efficient utilization of capacity, higher revenue, and a more favorable product mix. European gross margins exceeded U.S. gross margins for the three months and nine months ended September 30, 2002, largely because U.S. margins are affected by fixed costs associated with the U.S. manufacturing facility. The U.S. testing and development segment also includes several units with historically low margins, which are not part of the U.K. testing and development business.

The Corporation expects margins in the testing and development segment, both in the U.S. and Europe, to improve moderately with economies of scale in the foreseeable future. The rate of improvement is expected to be impacted by expenditures related to planned additions to capacity beginning in 2003 in Europe and the U.S.

Operating Expenses

The following table shows a comparison of operating expenses, other than cost of sales, for the three months and nine months ended September 30, 2001 and 2002:


	Three Months Ended							Nine Months Ended
	September 30,							September 30,

	2001		2002		Fav. (Unfav.) %			2001		2002		Fav. (Unfav.) %

Selling, General and Administrative	$	3,984	$	4,215		(6	%)	$	11,748	$	12,736		(8	%)

Research and Development		284		225		20	%		1,027		681		34	%

Total	$	4,268	$	4,440		(4	%)	$	12,775	$	13,417		(5	%)

Selling, general and administrative expenses increased for the three months and nine months ended September 30, 2002 primarily due to increases in professional fees associated with special projects and labor and fringe costs. These increases were partially offset by a reduction in the Corporation’s bad debt expense. Selling, general and administrative expenses are expected to increase as the Corporation hires additional administrative staff, implements additional applications for its information systems and makes additional investments for technical sales support and its marketing infrastructure. As a percentage of revenue, selling, general and administrative expenses decreased to 20% and 21% for the three months and nine months ended September 30, 2002 respectively from 21% and 23% for the three months and nine months ended September 30, 2001, respectively. The decrease can be attributed principally to increased revenues, continued programs to control expenses, and the successful integration of past enhancements and expansion in sales, marketing and information systems.

Research and development expenses represent the investment of internal resources to develop new methods and tests to support the Corporation’s services. The decrease in these expenses is related to a shift in the Corporation’s priorities from undertaking long-term research projects to the development of tests that can be delivered to the clients in a relatively shorter period. The Corporation expects these expenses to remain near these levels for the foreseeable future.

Non-Operating Expenses

The following table shows a comparison of non-operating expenses for the three months and nine months ended September 30, 2001 and 2002:


		Three Months Ended									Nine Months Ended
		September 30,									September 30,

		2001			2002			Fav. (Unfav.) %			2001			2002			Fav. (Unfav.) %


Other Expense		$	24		$	65			(171	%)	$	240		$	120			50	%


Income Taxes
	Provision	$	853		$	1,825			(114	%)	$	1,248		$	4,643			(272	%)
	Effective Rate		28	%		37	%					26	%		37	%

The Corporation’s net other expense improved to $120,000 for the nine months ended September 30, 2002 compared to $240,000 in the corresponding period of the previous year. The improvement was primarily due to foreign currency translation gains and business tax refunds, partially offset by increased losses on the disposal of fixed assets and increased net interest expense (income) due to lower interest rates on the Corporation’s money market investments. The Corporation’s net other expense increased to $65,000 for the three months ended September 30, 2002 compared to $24,000 in the corresponding period of the previous year. The increase was primarily due to increased net interest and foreign currency exchange losses resulting from a recent strengthening of the dollar against the euro.

The increase in the effective tax rate for the three months and nine months ended September 30, 2002 is the result of the Corporation’s reversion in 2002 to a tax rate more in line with the Corporation’s long-term historical rates. The lower tax rate for the three months and nine months ended September 30, 2001 resulted from the utilization of tax credits and carry forwards in 2001. The Corporation expects tax rates to remain at current levels for the remainder of 2002 and into the foreseeable future. Since the Corporation has international operations, its effective tax rate may vary from quarter to quarter due to changes in the distribution of its pre-tax earnings, among other factors.

Liquidity and Capital Resources

The Corporation has funded its business through existing cash, cash flows from operations, long-term bank loans and capital leases. At September 30, 2002, the Corporation had cash and cash equivalents of $35.8 million, compared to $27.5 million at December 31, 2001.

The Corporation generated cash flows from operations of $12.4 million for the nine months ended September 30, 2002, compared to $8.2 million for the nine months ended September 30, 2001. Net income as adjusted for depreciation, amortization, compensation element of options, loss on disposal and deferred income taxes, provided $12.6 million and $7.4 million for the nine months ended September 30, 2002 and 2001, respectively. Changes in other assets and liabilities used cash of $0.2 million for the nine months ended September 30, 2002, primarily due to increases in other current assets and decreases in accounts payable and accrued employee compensation and benefits, only partially offset by increases in other accrued liabilities and customer advances. Changes in other assets and liabilities provided cash of $0.8 million for the nine months ended September 30, 2001, primarily due to increases in customer advances and other accrued liabilities, only partially offset by increases in accounts receivable.

Foreign currency exchange fluctuations accounted for increases in cash of $0.9 million for the nine months ended September 30, 2002 as a result of the euro and the pound sterling both strengthening against the dollar as compared to $0.1 million for the nine months ended September 30, 2001.

Working capital, net of a cash increase of $8.3 million, decreased by $0.5 million as a result of an increase in current liabilities of $2.0 million, partially offset by an increase in current assets, excluding cash. The increase in current liabilities was primarily due to an increase in other accrued liabilities, customer advances and deferred income taxes, partially offset by decreases in accounts payable and accrued employee compensation and benefits. Current assets increased primarily as a result of an increase in other current assets.

The Corporation believes that its existing cash and cash equivalents of $35.8 million at September 30, 2002, cash flows from operations for 2002, and available borrowings of $2.0 million under its revolving loan agreement will provide sufficient liquidity to meet the Corporation’s operating plan, planned capital expenditures, and interest and principal payments on the Corporation’s debt for 2002.

A decrease in demand for the Corporation’s services could reduce operating cash flows, which in turn would impact liquidity. The key factors that could affect the Corporation’s sources of cash include the following:

• the Corporation’s ability to generate orders for new contracts;

• the ability of the Corporation to utilize its facilities, particularly the U.S. manufacturing facility;

• the size and growth of the overall markets for biopharmaceuticals; and,

• the economies in the U.S. and Europe.

Additionally, a significant deterioration in the Corporation’s financial performance and ratios could accelerate the maturity of principal outstanding under the Corporation’s loans.

Capital Leases

The Corporation’s U.S. manufacturing facility in Rockville, Maryland became operational in the second quarter of 2000. The Corporation leases this facility under three capital leases that require it to make net noncancelable lease payments totaling approximately $11.7 million through 2034. The Corporation has also guaranteed indebtedness related to the construction of this facility of approximately $4.3 million at September 30, 2002. A portion of the lease payments is equivalent to the interest and principal due on the indebtedness.

Under an interest rate swap with respect to one of these capital leases, the variable interest rate portion of the indebtedness was effectively converted into debt with a fixed rate of 6.14% per annum. This swap expires on November 1, 2009. Amounts paid or received under the interest rate swap are recognized as interest income or expense in the periods in which they accrued and are recorded in the same category as that arising from the indebtedness. As a result of a decrease in the variable interest rate, for the three months and nine months ended September 30, 2002, the Corporation recorded $47,000 and $144,000, respectively, of additional interest expense related to this interest rate swap. In accordance with the Statement of Financial Accounting Standard (FAS) 133, the Corporation adjusted the liability for the change in the fair value of this swap from $232,000 at December 31, 2001 to $648,000 at September 30, 2002. The corresponding amount is reflected in other comprehensive expense, as the Corporation has met the criteria of FAS 133 to record the contract as a cash flow hedge. This hedge will be extinguished with the lease obligation to which it pertains.

The Corporation accounts for the leases and subleases of its U.S. manufacturing facility as capital leases. The assets underlying the capital leases are included with the Corporation’s owned property and equipment at September 30, 2002. Property and equipment at September 30, 2002 included approximately $7.0 million, net of accumulated depreciation and amortization, related to these capital leases. The related obligation is included in the Corporation’s liabilities at September 30, 2002.

Capital Expenditures

During the nine months ended September 30, 2002 and 2001, the Corporation invested $5.0 million and $2.8 million, respectively, for capital expenditures. These capital expenditures were for additional equipment related to the Corporation’s U.S. manufacturing facility, upgrade of its information systems, and other operating needs including the routine replacement and upgrade of operating equipment.

Estimated capital expenditures of $1.5 million for the remainder of 2002 include capacity expansions in U.S. biologics testing, U.S. manufacturing and German manufacturing. The Corporation’s plans also include additional investments in information systems, as well as normal replacements.

The Corporation expects to continue expanding its operations through internal growth, and expansion of capacity in most or all of its operating facilities. The Corporation expects to fund its growth and its planned capital expenditures from existing cash and cash flows from operations. In the future, the Corporation may also undertake additional bank borrowings and leases or other financing, to the extent that funds are available on favorable terms and conditions. While the Corporation remains confident that expansion of its capacity will contribute to growth, there can be no assurance that such expansion will be fully utilized or that funding for the plans will meet with the Corporation’s expectations.

Although the Corporation has no agreements or arrangements in place with respect to any future acquisition, there may be acquisition or other growth opportunities that require additional external financing, and the Corporation may, from time to time, seek to obtain funds from public or private issuances of equity or debt securities on a strategic basis. There can be no assurances that such financing will be available on terms acceptable to the Corporation.

Borrowings and Credit Facilities

The Corporation has a mortgage loan of $4.3 million from Bank of America with a maturity date of November 30, 2009 that was used to finance the construction of one of its facilities in Rockville, Maryland. In addition to a principal payment of $10,576 per month, the mortgage loan bears interest at the London Inter-Bank Offering Rate (LIBOR) plus the applicable LIBOR Rate Additional Percentage (LIBOR Rate Option). The LIBOR Rate Option ranges from 1.0% to 2.15% depending on the Corporation achieving certain funded debt to EBITDA ratios. At September 30, 2002, the applicable interest rate on the mortgage loan was 1.81% and the LIBOR Rate Option was 1.40%. At September 30, 2002, approximately $2.2 million was outstanding on the mortgage loan.

Under an interest rate swap, the variable interest rate portion of the mortgage loan was effectively converted into debt with a fixed rate of 6.14% per annum. This swap expires November 1, 2009. Amounts paid or received under the interest rate swap are recognized as interest income or expensed in the periods in which they accrued and are recorded in the same category as that arising from the mortgage loan. As a result of a decrease in the variable interest rate, for the three months and nine months ended September 30, 2002, the Corporation recorded $24,000 and $73,000, respectively, of additional interest expense related to the interest rate swap. In accordance with FAS 133, the Corporation adjusted the liability for the change in the fair value of this swap from $116,000 at December 31, 2001 to $305,000 at September 30, 2002. The corresponding amount is reflected in other comprehensive expense, as the Corporation has met the criteria of FAS 133 to record the contract as a cash flow hedge. This hedge will be extinguished with the mortgage loan to which it pertains.

The Corporation has available borrowings up to $2.0 million under a revolving loan agreement with Bank of America. The revolving loan agreement requires monthly interest payments on the unpaid

principal. The unpaid principal and all unpaid accrued interest is payable in full on May 31, 2003, and the line of credit expires at that time. Amounts borrowed under the revolving loan agreement bear interest at the LIBOR rate plus the applicable LIBOR Rate Option that ranges from 0.85% to 2.0% depending on the Corporation achieving certain funded debt to EBITDA ratios. During the first nine months of 2002, no amounts were borrowed under this revolving loan agreement.

All of the Corporation’s agreements with Bank of America are cross collateralized and are secured by a deed of trust on one of the Corporation’s laboratory facilities in Rockville, Maryland. The agreements require the Corporation to comply with financial and restrictive covenants, including fixed charge coverage and funded debt to EBITDA ratios. Specifically:

• Maintain a ratio of total funded indebtedness to EBITDA not greater than 3.50 to 1.00 as of the end of each fiscal quarter, calculated on the preceding four-quarter period. EBITDA is defined as earnings before interest, taxes, depreciation and amortization.

• Maintain a fixed charge coverage ratio as of the end of each quarter of at least 1.25 to 1.00. This ratio is determined by dividing EBITDA by the sum of interest expense and current-maturities of long-term debt and capital leases.

At September 30, 2002, the Corporation was in compliance with all covenants under its loan agreements.

The Corporation has a $3.0 million loan from the Department of Business and Economic Development, a department of the State of Maryland. The Corporation was required to use the proceeds to expand and relocate its activities in Rockville, Maryland. The loan requires quarterly principal payments of $107,143 plus accrued interest and matures on June 30, 2006. The loan bears interest at rates from 0.0% to 7.5% based on the Corporation’s achieving specific employment levels through 2005. The current interest rate is 0.0%. The terms of the loan contain annual reporting requirements, including the reporting of employment data. At September 30, 2002, approximately $1.6 million was outstanding on the loan.

Foreign Currency

The accounts of the Corporation’s international subsidiaries are measured using local currency as the functional currency. Assets and liabilities of these subsidiaries are translated into United States dollars at period-end exchange rates, and revenue and expense accounts are translated at average monthly exchange rates. Net exchange gains and losses resulting from these translations are excluded from net income and are accumulated in a separate component of stockholders’ equity. Translation gains and losses that arise from some intercompany transactions denominated in a currency other than the functional currency are included in the results of operations as incurred. The Corporation recorded net exchange gains of $0.1 million and $0.3 million for the three months ended September 30, 2002 and 2001 respectively. The Corporation recorded net exchange gains of $0.7 million for the nine months ended September 30, 2002 compared to minimal net exchange losses for the nine months ended September 30, 2001.

Since the revenues and expenses of the Corporation’s international operations generally are denominated in local currencies, exchange rate fluctuations between such local currencies and the United States dollar will subject the Corporation to currency translation risk with respect to the reported results of its international operations as well as to other risks sometimes associated with international operations. The Corporation derived 20% and 16% of its revenue for the three months ended September 30, 2002 and 2001, respectively, and 18% and 16% of its revenue for the nine months ended September 30, 2002 and September 30, 2001, respectively, from services performed in the United Kingdom and Germany. In addition, the Corporation may be subject to currency risk when the Corporation’s service

contracts are denominated in a currency other than the currency in which the Corporation incurs expenses related to such contracts.

The Corporation may experience fluctuations in financial results from the Corporation’s operations outside the United States, and the Corporation may not be able, contractually or otherwise, to reduce the currency risks associated with its operations. At the present time, the Corporation does not use derivative financial instruments to manage or control foreign currency risk because most of its revenue and related expenses are in the same functional currencies. While the Corporation may use such financial instruments in the future, these financial instruments may not be successful in managing or controlling foreign currency risk.

European Monetary Union

Within Europe, the European Economic and Monetary Union (the EMU) introduced a new currency, the euro, on January 1, 1999. The new currency is in response to the EMU’s policy of economic convergence to harmonize trade policy, eliminate business costs associated with currency exchange and to promote the free flow of capital, goods and services.

On January 1, 1999, the participating countries adopted the euro as their local currency, initially available for currency trading on currency exchanges and non-cash (banking) transactions. As of July 1, 2002, the participating countries were scheduled to withdraw all legacy currency and use the euro exclusively. The introduction of the euro has not had a material adverse effect on the Corporation, and the Corporation does not anticipate any material adverse effects as a result of the euro conversion. However, unforeseen legislation, changes in commercial cross-border practices or a significant devaluation of the euro could have an adverse effect on the future results of operations and financial position of the Corporation.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Corporation is exposed to market risk from adverse changes in interest rates and foreign currency exchange rates.

Interest Rate Risks

The Corporation is exposed to interest rate risk primarily through its investments in cash equivalents. The Corporation’s investment policy stipulates investment in short-term, low-risk instruments. At September 30, 2002, had $35.8 million in cash and cash equivalents. If interest rates fall, floating rate securities may generate less interest income. The Corporation does not believe that it is exposed to any material interest rate risk as a result of its investments in cash equivalents.

At September 30, 2002, the Corporation had total debt of $11.8 million, most of which bears interest at a fixed interest rate. Thus, the Corporation does not believe that it is exposed to any material interest rate risk as a result of borrowing activities.

Foreign Currency Exchange Risk

The Corporation’s international operations are subject to foreign exchange rate fluctuations. The Corporation derived 20% and 18% of its revenue for the three months and nine months ended September 30, 2002, respectively, from services performed in the United Kingdom and Germany. The Corporation does not hedge its foreign currency exposure. Management does not believe that the Corporation’s exposure to foreign currency rate fluctuations is material. See “Foreign Currency” in “Management’s Discussion and Analysis of Financial Condition and Results of Operation” for a more detailed discussion of our foreign currency risks and exposures.

Item 4. Controls and Procedures

Within 90 days prior to the filing date of this Quarterly Report on Form 10-Q, the Corporation’s management, including its Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Corporation’s design and operation of its disclosure controls and procedures pursuant to Rule 13a-14(c) and 15d-14(c) of the Securities Exchange Act of 1934. Based upon that evaluation, such officers concluded that the Corporation’s disclosure controls and procedures are effective in timely alerting them to material information relating to the Corporation, required to be included in this Quarterly Report on Form 10-Q.

The Corporation’s management has also evaluated the Corporation’s internal controls and there have been no significant changes in the Corporation’s internal controls or in other factors, which could significantly affect internal controls subsequent to the date that the Corporation carried out its evaluation.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

None

Item 2. Changes in Securities and Use of Proceeds

As of September 30, 2002, the Corporation had used approximately $19.5 million of the net proceeds from its initial public offering toward planning and construction for manufacturing expansion, purchases of laboratory equipment and information systems hardware and software, and debt repayments.

At September 30, 2002, approximately $12.7 million of the net proceeds of the initial public offering were invested in money market funds.

Item 3. Defaults upon Senior Securities

None

Item 4. Submission of Matters to Vote of Security Holders

None

Item 5. Other Information

None

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits


10.1		Employment Agreement — Ronald R. Baker

10.2		Employment Agreement — John L. Coker

10.3		Employment Agreement — Raymond F. Cosgrove, Ph.D.

10.4		Employment Agreement — Allan J. Darling, Ph.D.

10.5		Employment Agreement — David Jacobson-Kram, Ph.D.

10.6		Employment Agreement — Capers W. McDonald

10.7		Form of Employee Confidentiality, Trade Secrets and Noncompetition Agreement

99.1		Officer Certification of Chief Executive Officer

99.2		Officer Certification of Chief Financial Officer

(b) Reports on Form 8-K

None

SIGNATURES

Pursuant to the requirements 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.

Dated: November 14, 2002


				BioReliance Corporation (Registrant)


				By /s/ Capers W. McDonald
				Capers W. McDonald President and Chief Executive Officer


				By /s/ John L. Coker
				John L. Coker Vice President, Finance and Administration, Chief Financial Officer, Treasurer and Secretary (Principal Financial and Accounting Officer)

BIORELIANCE CORPORATION

CERTIFICATION PURSUANT TO
SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002

CERTIFICATION

I, Capers W. McDonald, certify that:

1. I have reviewed this quarterly report on Form 10-Q of BioReliance Corporation;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:


a)		designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b)		evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

c)		presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):


a)		all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b)		any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6. The registrant’s other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: November 14, 2002

___/s/ Capers W. McDonald

Capers W. McDonald
President and Chief Executive Officer

BIORELIANCE CORPORATION

CERTIFICATION PURSUANT TO
SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002

CERTIFICATION

I, John L. Coker, certify that:


a)		designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b)		evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

c)		presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;


a)		all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b)		any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

Date: November 14, 2002

/s/ John L. Coker

John L. Coker
Vice President, Finance and Administration
and Chief Financial Officer

EXHIBIT INDEX


EXHIBIT NO.		DESCRIPTION

10.1		Employment Agreement — Ronald R. Baker

10.2		Employment Agreement — John L. Coker

10.3		Employment Agreement — Raymond F. Cosgrove, Ph.D.

10.4		Employment Agreement — Allan J. Darling, Ph.D.

10.5		Employment Agreement — David Jacobson-Kram, Ph.D.

10.6		Employment Agreement — Capers W. McDonald

10.7		Form of Employee Confidentiality, Trade Secrets and Noncompetition Agreement

99.1		Officer Certification of Chief Executive Officer

99.2		Officer Certification of Chief Financial Officer

26 EX-10.1 3 w65102exv10w1.htm EMPLOYMENT AGREEMENT-RONALD R. BAKER exv10w1

EXHIBIT 10.1

EMPLOYMENT AGREEMENT

THIS AGREEMENT is effective the 5th day of August, 2002 by and between BioReliance Corporation, a Delaware corporation with principal offices located at 14920 Broschart Road, Rockville, Maryland 20850, and all of its subsidiary companies and its successors or assigns (the “Corporation”) and Ronald R. Baker (the “Executive”).

1. POSITION AND EMPLOYMENT RELATIONSHIP:

1. The Executive is currently employed as the Vice President, Sales and Marketing (“Vice President”). Commencing on the effective date of this Agreement for a term of twelve (12) months (hereinafter referred to as “Term”), the Corporation hereby agrees to continue to employ the Executive in his current positions or a comparable position consistent with his qualifications and experience, and the business needs of the Corporation. At the end of this twelve (12) month Term, this Agreement and all its provisions will renew once for another Term of twelve (12) months, unless ninety (90) days prior to the end of the original Term, the Executive or the President and Chief Executive Officer of the Corporation provides written notice to the other of an intent not to renew the Agreement.

2. Such employment relationship is not at-will and is instead governed by the terms and conditions set forth in this Agreement. The Employment relationship, however, may be terminated by the Corporation or the Executive prior to the expiration of this twelve (12) month Term pursuant to sections E, F, I, and J respectively of this Agreement.

3. As Vice President, the Executive shall perform such duties as may be assigned to the Executive from time to time by the Corporation’s President and Chief Executive Officer (“CEO”) or the Corporation’s Board of Directors (“Board”), including, but not limited to the following: developing and executing plans toward attainment of current and long-range objectives, including achieving orders, revenue, revenue growth and income objectives, maximum return on invested capital, and quality, client satisfaction and employee development goals; developing financial plans and budgets; overseeing all reporting functions; coordinating activities with other vice presidents and supporting departmental directors;supporting Corporate activities including market and sales analyses, strategic planning, R&D planning and project selection, engagement and assessments of potential partners, and the like; supporting the evaluation and analysis of acquisition opportunities, if any, as may be identified from time to time by the President and CEO; helping develop and document novel or typical service programs, procedures and the like; meeting with clients, understanding their product and production methods, and developing timely

Page 1 of 9

and cost-effective strategies acceptable to them and to various national regulatory authorities; helping design major projects and, as appropriate, assist in writing major project plans; closing key proposals; directing complex business activities, in particular projects of significant scale and scope; solving challenging business and service problems; building client relationships; and anticipating follow-on client engagements.

2. LIMITATION ON OUTSIDE ACTIVITIES: The Executive shall devote his full employment energies, interest, abilities and time to the performance of the obligations hereunder and shall not, without written consent of the Corporation, through its President and CEO, render to others any service of any kind for compensation, and in addition, shall not engage in any activity which conflicts or interferes with the performance of the Executive’s duties hereunder.

3. COMPENSATION: For all services rendered by Executive pursuant to this Agreement, Corporation will pay to Executive, and the Executive will accept as full compensation hereunder, the following:

1. Base Salary: The Executive’s annual base salary (“salary”) during calendar year 2002, as determined by the Compensation Committee of the Board, shall be two hundred thousand dollars ($200,000). The salary will be subject to all appropriate federal, state and local withholding requirements and will be payable in equal bi-weekly installments. The Executive’s salary during a subsequent calendar year during the Term of this Agreement will be determined by the Compensation Committee of the Board, but in no event shall the Executive’s salary be less than the salary he received during the prior calendar year.

2. Performance Bonus: If the Executive remains in the employ of the Corporation through December 31 of each year during the Term of this Agreement, the Executive shall be eligible for a performance bonus (“bonus”) based on individual and corporate performance factors relating to mutually acceptable objectives. Executive’s bonus will be subject to all appropriate federal, state and local withholding requirements. The exact amount of the bonus will be at the discretion of the Compensation Committee of the Board. Unless otherwise specified in this Agreement, the Corporation will be obligated to pay the Executive the bonus as long as the Executive (a) does not resign from the Corporation before December 31 of each year, or (b) is not terminated for Cause (as hereinafter defined), or (c) does not fail to meet his individual performance objectives. This bonus may also be paid out on a quarterly basis at the discretion of the Compensation Committee of the Board.

3. Stock Options: As an inducement to remain in the employ of the Corporation and as an incentive to build the Corporation’s value, the Corporation may grant to

Page 2 of 9

the Executive additional stock options. The number of option shares to be granted and their timing and other terms will be determined by the Compensation Committee of the Board and governed by the Corporation’s 1997 Incentive Plan (as adopted May 28, 1997 and amended and restated September 24, 1997, May 21, 1998, May 13, 1999, and June 10, 2002) [hereinafter referred to as “1997 Incentive Plan"], which is attached hereto as Exhibit 1.

D. BENEFITS AND PERQUISITES:

1. Medical and Other Insurance Coverage: The Corporation shall provide such medical and other insurance coverage to the Executive to the extent and on the terms that such benefits are made available to other similarly situated employees. This provision does not alter the Corporation’s right to modify or eliminate any employee benefit plan from time to time and does not guarantee the continuation of any kind or level of benefit or perquisite.

2. Paid Personal Leave: The Executive shall receive vacation, sick and personal holiday leave pursuant to the Corporation’s Paid Personal Leave Policy (“PPL”) under the schedule for an Executive of the Company, which is attached hereto as Exhibit 2 and incorporated herein by reference.

3. Other Perquisites and Benefits: The Corporation will provide the Executive with appropriate office space, as it deems necessary, and will provide telephone, computer, email and internet access as required to perform the Executive’s duties during the term of his employment.

E. COMPENSATION UPON CHANGE IN CONTROL: Notwithstanding any other provision in this Agreement, if there is a “change in control” of the Corporation (as hereinafter defined) during the Term of this Agreement, and within twelve (12) months thereafter, either (1) the Executive is terminated Without Cause (as hereinafter defined in section F) or (2) the Executive’s responsibilities are significantly reduced and, as a result, the Executive terminates his employment pursuant to section J, the Executive shall be entitled to the compensation and benefits set forth below. For purposes of this provision, it shall not be considered a significant reduction in the Executive’s responsibilities if changes in these responsibilities are those that would be normally anticipated as a result of the Corporation becoming a subsidiary or a division of another company and thus no longer a separately traded public company, provided that the Executive has responsibilities that would customarily be associated with those of a vice president, sales and marketing, of a subsidiary or a sales manager of a division of a public company.

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salary will be paid within ten (10) working days of termination of employment and (b) beginning six (6) months after termination of employment, equal monthly payments for eight (8) months thereafter. This second payment in section (b) will be correspondingly reduced by any base compensation payments the Executive receives through new employment. The Executive is obligated to inform the Corporation, its successors and assigns, in writing within ten (10) calendar days of his acceptance of such new employment and include in this notice what his base compensation and expected start date are. However, if the Executive’s base compensation at such new employment is equal to or exceeds his prior base salary at the Corporation, the Executive may simply confirm this fact in the notice in lieu of disclosing the actual new base compensation figure.

2. Stock Options: The disposition of any and all stock options granted by the Corporation to the Executive will be governed by the 1997 Incentive Plan.

3. Bonus Compensation: The Corporation shall pay the Executive, within thirty (30) calendar days of termination, his performance bonus, pro-rated to reflect the date of termination.

4. Medical Benefits: If the Executive elects to continue medical benefits coverage under COBRA, the Corporation will pay the applicable COBRA premium for a period of the lesser of eighteen (18) months or until such time as the Executive obtains other employment that provides medical benefits coverage, provided the Executive and any of his eligible dependents elect COBRA continuation coverage. This provision is otherwise subject to all applicable COBRA continuation requirements and does not alter the Corporation’s right to amend or terminate its medical plan.

5. Other Benefits: If the Executive is involved in pre-approved course work eligible for reimbursement under the Corporation’s Tuition Assistance Program (“Program”) or has an education assistance loan outstanding under that Program, the Corporation will reimburse any remaining balance due on the course work and forgive any indebtedness in connection with the outstanding education assistance loan. This provision is otherwise subject to all applicable Tuition Assistance Program requirements and does not alter the Corporation’s right to amend or terminate its Program.

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The privileges, compensation, and benefits set forth in section E survive the expiration of this Agreement as long as there is a “change in control” as herein defined during the Term of this Agreement.

All compensation paid by the Corporation under section E will be subject to all appropriate federal, state and local withholding requirements. Also, notwithstanding anything contained in this Agreement to the contrary, to the extent that any payment or distribution of any type to or for the benefit of the Executive by the Corporation, any affiliate of the Corporation, any person who acquires ownership or effective control of the Corporation or ownership of a substantial portion of the Corporation’s assets (within the meaning of Section 280G of the Internal Revenue Code of 1986 as amended (the “Code”), and the regulations thereunder), or any affiliate of such person, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise (the “Total Payment”), is or will be subject to the excise tax imposed under Section 4999 of the Code (the “Excise Tax”), then the Total Payments shall be reduced (but not below zero) if and to the extent necessary so that no portion of the Total Payments will be subject to the Excise Tax. The Corporation shall reduce or eliminate the Total Payments by first reducing or eliminating the portion of the Total Payments which is payable in cash and then by reducing or eliminating payments which are not payable in cash, in each case in reverse order beginning with payments or benefits which are paid the farthest in time from the determination that the Total Payments need to be reduced. All determinations required to be made under this provision shall be made by a nationally recognized accounting firm that is the Corporation’s outside auditor at the time of such determinations.
Any dispute between the Executive and the Corporation, it successors and assigns, involving section E will be resolved by arbitration in accordance with section Q below, except any 280G determination made by Corporation’s outside auditor shall be binding, final, and conclusive upon the Corporation and the Executive.

F. TERMINATION OF EMPLOYMENT: During the Term of this Agreement, Executive’s employment is not at-will and may be terminated by the Corporation only on two bases: (1) Cause; or (2) Without Cause. As used in this Agreement, “Cause” shall mean that the Executive:

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(4) was convicted of a felony or other serious crime;

(5) has engaged in the unlawful use of narcotics;

(6) engaged in abusive use of alcohol to a degree, or in a manner, that would materially and adversely affect the performance of the Executive’s assigned work or degrade the reputation of the Corporation;

(7) violated the terms of the Confidentiality, Trade Secrets and Noncompetition Agreement he signed on December 4, 2000;

(8) violated or breached the terms of this Agreement; or

(9) is unable to perform the essential functions of his position due to disability, injury, or illness as set forth in section I below or due to death.

In accordance with these definitions of Cause, the Board, or a delegated committee of the Board, will in its sole discretion decide whether the Executive shall be terminated for Cause after affording the Executive an opportunity to be heard on the matter. The Board, or the delegated committee of the Board, will in its sole discretion determine the time, place, and manner of the opportunity for the Executive to be heard, but to the extent practicable any such meeting will take place in Montgomery County, Maryland during regular business hours. If the Executive fails to appear or to follow the manner of opportunity afforded by the Board or its committee, the Board, or the delegated committee, may render its decision without hearing the Executive’s views.
Any reason for termination other than those set forth above will be deemed to be Without Cause.

G. TERMINATION WITHOUT CAUSE — EFFECT ON FUTURE COMPENSATION: In the event Executive is terminated Without Cause and there has not been a “change in control” as defined in section E of the Agreement, Executive will be entitled to receive the following compensation and benefits:

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3. Bonus Compensation: The Corporation shall pay the Executive, within thirty (30) calendar days of termination, his performance bonus, pro-rated to reflect the date of termination.

4. Medical Benefits: If the Executive elects to continue medical benefits coverage under COBRA, the Corporation will pay the applicable COBRA premium for a period of the lesser of eighteen (18) months or until such time as the Executive obtains other employment that provides medical benefits coverage, provided the Executive and any of his eligible dependents elect COBRA continuation coverage. This provision is otherwise subject to all applicable COBRA continuation requirements and does not alter the Corporation’s right to amend or terminate its medical plan.

5. Other Benefits: If the Executive is involved in pre-approved course work eligible for reimbursement under the Corporation’s Tuition Assistance Program (“Program”) or has an education assistance loan outstanding under that Program, the Corporation will reimburse any remaining balance due on the course work and forgive any indebtedness in connection with the outstanding education assistance loan. This provision is otherwise subject to all applicable Tuition Assistance Program requirements and does not alter the Corporation’s right to amend or terminate its Program.

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Board may provide the Executive with additional compensation, if the Board in its discretion deems such additional compensation warranted. Also, the disposition of any and all stock options granted by the Corporation to the Executive will be governed by the 1997 Incentive Plan.

K. CONFIDENTIALITY AND NONCOMPETITION: By signing below, the Executive acknowledges his ongoing and continuing obligation to abide by the Confidentiality, Trade Secrets and Noncompetition Agreement that he executed on December 4, 2000 (“Trade Secrets Agreements”), which is attached hereto as Exhibit 3 and incorporated herein by reference.

L. NO PRIOR AGREEMENTS: The Executive represents and warrants that he is not a party or otherwise subject to or bound by the terms of any contract, agreement or understanding which in any manner would limit or otherwise affect his ability to perform his obligations hereunder. The Executive further represents and warrants that his employment with the Corporation will not require the disclosure or use of any confidential information belonging to prior employers or to other persons or entities. The Executive understands that the Corporation does not expect or desire and in fact disapproves of and forbids the Executive to use or disclose, in the performance of his duties for the Corporation, any such confidential information belonging to prior employers or other persons or entities.

M. ASSIGNMENT: This Agreement is personal to Executive and may not be assigned in any way by Executive without prior written consent by the Board of Directors of the Corporation. Any attempted assignment by Executive will be void. Notwithstanding anything in this section to the contrary, however, this Agreement may be assigned by the Corporation to any parent, subsidiary, successor, or affiliate entity. The rights and obligations under this Agreement will inure to the benefit of and will be binding upon the heirs, legatees, administrators, and personal representatives of Executive and upon the successors, representatives, and assigns of the Corporation.

N. ILLEGAL OR INVALID PROVISION: The parties intend for all provisions of this Agreement to be enforced and enforceable to the fullest extent permitted by law. If any provision of this Agreement is held to be illegal, invalid, or unenforceable under present or future laws in effect during the term hereof, however, that provision will be fully severable. This Agreement will be construed and enforced as if such illegal, invalid, or unenforceable provision had never comprised a part hereof, and the remaining provisions will remain in full force and effect and will not be affected by the illegal, invalid, or unenforceable provision or by its severance from this Agreement. Furthermore, in lieu of each such illegal, invalid, or unenforceable provision, there will be added automatically, as a part of this Agreement, a provision as similar in terms to such illegal, invalid, or unenforceable provision as may be possible and be legal, valid, and enforceable.

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O. GOVERNING LAW: This Agreement shall be construed and governed by the laws of the State of Maryland without regard to any conflict of laws rules or provisions.

P. ENTIRE AGREEMENT: This Agreement constitutes the entire Agreement between the Corporation and the Executive. This Agreement may not be changed orally, but only by an agreement in writing signed by the parties. This Agreement supersedes all prior agreements, discussions or statements regarding the Executive’s employment, except for the Confidentiality, Trade Secrets and Noncompetition Agreement attached hereto as Exhibit 3, which will survive.

Q. ARBITRATION: Notwithstanding any other provision in this Agreement, any claim or controversy relating to or arising out of this Agreement shall be resolved exclusively by arbitration in accordance with the commercial rules then obtaining of the American Arbitration Association. This Arbitration provision, including any challenges to its enforceability, is governed by the Federal Arbitration Act. The arbitration shall take place in Montgomery County, Maryland. The Corporation and Executive shall bear separately their respective attorney’s fees. The Corporation shall bear the cost of the arbitration and any fees required by the commercial rules then obtaining of the American Arbitration Association.

R. MUTUAL UNDERSTANDING: Each party has read this entire Agreement, fully understands the contents hereof, has had the opportunity to obtain independent advice as to its legal effect, and is under no duress or obligation of any kind to execute it. This Agreement reflects the mutual understanding of the parties with the respect to all subject matters addressed herein and will be construed accordingly.

BioReliance Corporation

By: /s/ William J. Gedale By: /s/ Ronald R. Baker

William J. Gedale
Chairman, Compensation Committee
Board of Directors Ronald R. Baker

Address: 14920 Broschart Road
Rockville, MD 20850

Date: August 26, 2002 Date: August 5, 2002

Page 9 of 9 EX-10.2 4 w65102exv10w2.htm EMPLOYMENT AGREEMENT-JOHN L. COKER exv10w2

EXHIBIT 10.2

EMPLOYMENT AGREEMENT

THIS AGREEMENT is effective the 12th day of August, 2002 by and between BioReliance Corporation, a Delaware corporation with principal offices located at 14920 Broschart Road, Rockville, Maryland 20850, and all of its subsidiary companies and its successors or assigns (the “Corporation”) and John L. Coker (the “Executive”).

1. POSITION AND EMPLOYMENT RELATIONSHIP:

1. The Executive is currently employed as the Vice President, Finance and Administration, and Chief Financial Officer (“Vice President”). Commencing on the effective date of this Agreement for a term of twelve (12) months (hereinafter referred to as “Term”), the Corporation hereby agrees to continue to employ the Executive in his current positions or a comparable position consistent with his qualifications and experience, and the business needs of the Corporation. At the end of this twelve (12) month Term, this Agreement and all its provisions will renew once for another Term of twelve (12) months, unless ninety (90) days prior to the end of the original Term, the Executive or the President and Chief Executive Officer of the Corporation provides written notice to the other of an intent not to renew the Agreement.

2. Such employment relationship is not at-will and is instead governed by the terms and conditions set forth in this Agreement. The Employment relationship, however, may be terminated by the Corporation or the Executive prior to the expiration of this twelve (12) month Term pursuant to sections E, F, I, and J respectively of this Agreement.

3. As Vice President, the Executive shall perform such duties as may be assigned to the Executive from time to time by the Corporation’s President and Chief Executive Officer (“CEO”) or the Corporation’s Board of Directors (“Board”), including but not limited to the following: developing Corporate and divisional financial plans and budgets; overseeing all reporting functions; coordinating activities with other vice presidents and supporting departmental directors; supporting Corporate activities including investor relations, bank and other financial relations, external auditor activities, strategic planning, engagement and assessments of potential partners; supporting market and sales analyses, R&D planning and project selection, and the like; helping develop and execute plans toward attainment of current and long-range objectives, including achieving orders, revenue, revenue growth and income objectives, maximum return on invested capital; supporting timely availability and effective and efficient operation of facilities and capital equipment, purchasing, information systems and human resource systems; helping meet quality, client satisfaction and employee development goals; supporting the evaluation and analysis

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of merger, acquisition or divestiture opportunities, if any, as may be identified from time to time by the President and CEO and the Board of Directors; helping develop and document typical or novel commercial service programs, procedures and the like; meeting with major clients, understanding their nontechnical service needs, and helping develop timely and cost-effective strategies acceptable to them and to various regulatory authorities; helping design major projects and, as appropriate, assist in writing major project plans; helping close key proposals; directing complex business activities, in particular projects of significant scale and scope; solving challenging business and service problems; building client relationships; and anticipating future business needs.

1. Base Salary: The Executive’s annual base salary (“salary”) during calendar year 2002, as determined by the Compensation Committee of the Board, shall be two hundred and thirty thousand dollars ($230,000). The salary will be subject to all appropriate federal, state and local withholding requirements and will be payable in equal bi-weekly installments. The Executive’s salary during a subsequent calendar year during the Term of this Agreement will be determined by the Compensation Committee of the Board, but in no event shall the Executive’s salary be less than the salary he received during the prior calendar year.

2. Performance Bonus: If the Executive remains in the employ of the Corporation through December 31 of each year during the Term of this Agreement, the Executive shall be eligible for a performance bonus (“bonus”) based on individual and corporate performance factors relating to mutually acceptable objectives. Executive’s bonus will be subject to all appropriate federal, state and local withholding requirements. The exact amount of the bonus will be at the discretion of the Compensation Committee of the Board. Unless otherwise specified in this Agreement, the Corporation will be obligated to pay the Executive the bonus as long as the Executive (a) does not resign from the Corporation before December 31 of each year, or (b) is not terminated for Cause (as hereinafter defined), or (c) does not fail to meet his individual performance objectives. This bonus may also be paid out on a quarterly basis at the discretion of the Compensation Committee of the Board.

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3. Stock Options: As an inducement to remain in the employ of the Corporation and as an incentive to build the Corporation’s value, the Corporation may grant to the Executive additional stock options. The number of option shares to be granted and their timing and other terms will be determined by the Compensation Committee of the Board and governed by the Corporation’s 1997 Incentive Plan (as adopted May 28, 1997 and amended and restated September 24, 1997, May 21, 1998, May 13, 1999, and June 10, 2002) [hereinafter referred to as “1997 Incentive Plan”], which is attached hereto as Exhibit 1.

D. BENEFITS AND PERQUISITES:

E. COMPENSATION UPON CHANGE IN CONTROL: Notwithstanding any other provision in this Agreement, if there is a “change in control” of the Corporation (as hereinafter defined) during the Term of this Agreement, and within twelve (12) months thereafter, either (1) the Executive is terminated Without Cause (as hereinafter defined in section F) or (2) the Executive’s responsibilities are significantly reduced and, as a result, the Executive terminates his employment pursuant to section J, the Executive shall be entitled to the compensation and benefits set forth below. For purposes of this provision, it shall not be considered a significant reduction in the Executive’s responsibilities if changes in these responsibilities are those that would be normally anticipated as a result of the Corporation becoming a subsidiary or a division of another company and thus no longer a separately traded public company, provided that the Executive has responsibilities that would customarily be associated with those of a chief financial officer of the Corporation as a private company.

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1. Base Compensation: The Corporation shall pay the Executive sixteen (16) months of his then current base salary. This compensation will be paid in two parts, as follows: (a) an initial lump-sum payment of eight (8) months of base salary will be paid within ten (10) working days of termination of employment and (b) beginning six (6) months after termination of employment, equal monthly payments for eight (8) months thereafter. This second payment in section (b) will be correspondingly reduced by any base compensation payments the Executive receives through new employment. The Executive is obligated to inform the Corporation, its successors and assigns, in writing within ten (10) calendar days of his acceptance of such new employment and include in this notice what his base compensation and expected start date are. However, if the Executive’s base compensation at such new employment is equal to or exceeds his prior base salary at the Corporation, the Executive may simply confirm this fact in the notice in lieu of disclosing the actual new base compensation figure.

2. Stock Options: The disposition of any and all stock options granted by the Corporation to the Executive will be governed by the 1997 Incentive Plan.

3. Bonus Compensation: The Corporation shall pay the Executive, within thirty (30) calendar days of termination, his performance bonus, pro-rated to reflect the date of termination.

4. Medical Benefits: If the Executive elects to continue medical benefits coverage under COBRA, the Corporation will pay the applicable COBRA premium for a period of the lesser of eighteen (18) months or until such time as the Executive obtains other employment that provides medical benefits coverage, provided the Executive and any of his eligible dependents elect COBRA continuation coverage. This provision is otherwise subject to all applicable COBRA continuation requirements and does not alter the Corporation’s right to amend or terminate its medical plan.

5. Other Benefits: If the Executive is involved in pre-approved course work eligible for reimbursement under the Corporation’s Tuition Assistance Program (“Program”) or has an education assistance loan outstanding under that Program, the Corporation will reimburse any remaining balance due on the course work and forgive any indebtedness in connection with the outstanding education assistance loan. This provision is otherwise subject to all applicable Tuition Assistance Program requirements and does not alter the Corporation’s right to amend or terminate its Program.

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A “change in control” for purpose of this Agreement shall be deemed to have occurred if the Corporation is subject to an acquisition in accordance with Section 2.12 (a) of the Corporation’s 1997 Incentive Plan, which is attached hereto as Exhibit 1.

The privileges, compensation, and benefits set forth in section E survive the expiration of this Agreement as long as there is a “change in control” as herein defined during the Term of this Agreement.

All compensation paid by the Corporation under section E will be subject to all appropriate federal, state and local withholding requirements. Also, notwithstanding anything contained in this Agreement to the contrary, to the extent that any payment or distribution of any type to or for the benefit of the Executive by the Corporation, any affiliate of the Corporation, any person who acquires ownership or effective control of the Corporation or ownership of a substantial portion of the Corporation’s assets (within the meaning of Section 280G of the Internal Revenue Code of 1986 as amended (the “Code”), and the regulations thereunder), or any affiliate of such person, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise (the “Total Payment”), is or will be subject to the excise tax imposed under Section 4999 of the Code (the “Excise Tax”), then the Total Payments shall be reduced (but not below zero) if and to the extent necessary so that no portion of the Total Payments will be subject to the Excise Tax. The Corporation shall reduce or eliminate the Total Payments by first reducing or eliminating the portion of the Total Payments which is payable in cash and then by reducing or eliminating payments which are not payable in cash, in each case in reverse order beginning with payments or benefits which are paid the farthest in time from the determination that the Total Payments need to be reduced. All determinations required to be made under this provision shall be made by a nationally recognized accounting firm that is the Corporation’s outside auditor at the time of such determinations.

Any dispute between the Executive and the Corporation, it successors and assigns, involving section E will be resolved by arbitration in accordance with section Q below, except any 280G determination made by Corporation’s outside auditor shall be binding, final, and conclusive upon the Corporation and the Executive.

F. TERMINATION OF EMPLOYMENT: During the Term of this Agreement, Executive’s employment is not at-will and may be terminated by the Corporation only on two bases: (1) Cause; or (2) Without Cause. As used in this Agreement, “Cause” shall mean that the Executive:

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(2) materially failed or refused to perform the Executive’s essential duties and obligations as an employee of the Corporation;

(3) committed an act of willful misconduct;

(4) was convicted of a felony or other serious crime;

(5) has engaged in the unlawful use of narcotics;

(6) engaged in abusive use of alcohol to a degree, or in a manner, that would materially and adversely affect the performance of the Executive’s assigned work or degrade the reputation of the Corporation;

(7) violated the terms of the Confidentiality, Trade Secrets and Noncompetition Agreement he signed on June 5, 2000;

(8) violated or breached the terms of this Agreement; or

(9) is unable to perform the essential functions of his position due to disability, injury, or illness as set forth in section I below or due to death.

In accordance with these definitions of Cause, the Board, or a delegated committee of the Board, will in its sole discretion decide whether the Executive shall be terminated for Cause after affording the Executive an opportunity to be heard on the matter. The Board, or the delegated committee of the Board, will in its sole discretion determine the time, place, and manner of the opportunity for the Executive to be heard, but to the extent practicable any such meeting will take place in Montgomery County, Maryland during regular business hours. If the Executive fails to appear or to follow the manner of opportunity afforded by the Board or its committee, the Board, or the delegated committee, may render its decision without hearing the Executive’s views.

Any reason for termination other than those set forth above will be deemed to be Without Cause.

G. TERMINATION WITHOUT CAUSE — EFFECT ON FUTURE COMPENSATION: In the event Executive is terminated Without Cause and there has not been a “change in control” as defined in section E of the Agreement, Executive will be entitled to receive the following compensation and benefits:

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payments and will be subject to all appropriate federal, state and local withholding requirements.

2. Stock Options: The disposition of any and all stock options granted by the Corporation to the Executive will be governed by the 1997 Incentive Plan.

3. Bonus Compensation: The Corporation shall pay the Executive, within thirty (30) calendar days of termination, his performance bonus, pro-rated to reflect the date of termination.

4. Medical Benefits: If the Executive elects to continue medical benefits coverage under COBRA, the Corporation will pay the applicable COBRA premium for a period of the lesser of eighteen (18) months or until such time as the Executive obtains other employment that provides medical benefits coverage, provided the Executive and any of his eligible dependents elect COBRA continuation coverage. This provision is otherwise subject to all applicable COBRA continuation requirements and does not alter the Corporation’s right to amend or terminate its medical plan.

5. Other Benefits: If the Executive is involved in pre-approved course work eligible for reimbursement under the Corporation’s Tuition Assistance Program (“Program”) or has an education assistance loan outstanding under that Program, the Corporation will reimburse any remaining balance due on the course work and forgive any indebtedness in connection with the outstanding education assistance loan. This provision is otherwise subject to all applicable Tuition Assistance Program requirements and does not alter the Corporation’s right to amend or terminate its Program.

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J. TERMINATION OF EMPLOYMENT BY EXECUTIVE: Executive may terminate his employment upon thirty (30) days written notice to the President and CEO. Unless otherwise provided herein, if the Executive terminates his employment, the Executive shall only be entitled to base compensation through the last day actually worked as well as any bonus compensation for which the work period and performance criteria have been fully met. The Board may provide the Executive with additional compensation, if the Board in its discretion deems such additional compensation warranted. Also, the disposition of any and all stock options granted by the Corporation to the Executive will be governed by the 1997 Incentive Plan.

K. CONFIDENTIALITY AND NONCOMPETITION: By signing below, the Executive acknowledges his ongoing and continuing obligation to abide by the Confidentiality, Trade Secrets and Noncompetition Agreement that he executed on June 5, 2000 (“Trade Secrets Agreements”), which is attached hereto as Exhibit 3 and incorporated herein by reference.

L. NO PRIOR AGREEMENTS: The Executive represents and warrants that he is not a party or otherwise subject to or bound by the terms of any contract, agreement or understanding which in any manner would limit or otherwise affect his ability to perform his obligations hereunder. The Executive further represents and warrants that his employment with the Corporation will not require the disclosure or use of any confidential information belonging to prior employers or to other persons or entities. The Executive understands that the Corporation does not expect or desire and in fact disapproves of and forbids the Executive to use or disclose, in the performance of his duties for the Corporation, any such confidential information belonging to prior employers or other persons or entities.

M. ASSIGNMENT: This Agreement is personal to Executive and may not be assigned in any way by Executive without prior written consent by the Board of Directors of the Corporation. Any attempted assignment by Executive will be void. Notwithstanding anything in this section to the contrary, however, this Agreement may be assigned by the Corporation to any parent, subsidiary, successor, or affiliate entity. The rights and obligations under this Agreement will inure to the benefit of and will be binding upon the heirs, legatees, administrators, and personal representatives of Executive and upon the successors, representatives, and assigns of the Corporation.

N. ILLEGAL OR INVALID PROVISION: The parties intend for all provisions of this Agreement to be enforced and enforceable to the fullest extent permitted by law. If any provision of this Agreement is held to be illegal, invalid, or unenforceable under present or future laws in effect during the term hereof, however, that provision will be fully severable. This Agreement will be construed and enforced as if such illegal, invalid, or unenforceable provision had never comprised a part hereof, and the remaining provisions will remain in full force and effect and will not be affected by the illegal, invalid, or unenforceable provision or by its severance from this Agreement. Furthermore, in lieu of each such illegal, invalid, or unenforceable provision, there will be added automatically, as a part of this Agreement,

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a provision as similar in terms to such illegal, invalid, or unenforceable provision as may be possible and be legal, valid, and enforceable.

O. GOVERNING LAW: This Agreement shall be construed and governed by the laws of the State of Maryland without regard to any conflict of laws rules or provisions.

P. ENTIRE AGREEMENT: This Agreement constitutes the entire Agreement between the Corporation and the Executive. This Agreement may not be changed orally, but only by an agreement in writing signed by the parties. This Agreement supersedes all prior agreements, discussions or statements regarding the Executive’s employment, except for the Confidentiality, Trade Secrets and Noncompetition Agreement attached hereto as Exhibit 3, which will survive.

Q. ARBITRATION: Notwithstanding any other provision in this Agreement, any claim or controversy relating to or arising out of this Agreement shall be resolved exclusively by arbitration in accordance with the commercial rules then obtaining of the American Arbitration Association. This Arbitration provision, including any challenges to its enforceability, is governed by the Federal Arbitration Act. The arbitration shall take place in Montgomery County, Maryland. The Corporation and Executive shall bear separately their respective attorney’s fees. The Corporation shall bear the cost of the arbitration and any fees required by the commercial rules then obtaining of the American Arbitration Association.

R. MUTUAL UNDERSTANDING: Each party has read this entire Agreement, fully understands the contents hereof, has had the opportunity to obtain independent advice as to its legal effect, and is under no duress or obligation of any kind to execute it. This Agreement reflects the mutual understanding of the parties with the respect to all subject matters addressed herein and will be construed accordingly.


BioReliance Corporation

By:	/s/ William J. Gedale William J. Gedale Chairman, Compensation Committee Board of Directors	By:	/s/ John L. Coker John L. Coker

Address: 14920 Broschart Road Rockville, MD 20850

Date:	August 13, 2002	Date:	August 12, 2002

Page 9 of 9 EX-10.3 5 w65102exv10w3.htm EMPLOYMENT AGREEMENT-RAYMOND F. COSGROVE, PH.D exv10w3

(BIORELIANCE-LOGO)

EXHIBIT 10.3

26 August 2002

Dr. Raymond F. Cosgrove
Managing Director, BioReliance Ltd.
Stirling University Innovation Park
Hillfoots Road
Stirling, United Kingdom FK9 4NF

Dear Ray:

I am pleased to provide you with this agreement amending your original offer of employment dated January 29, 1993, as previously amended by Ms. Robinson’s letter of January 16, 1996, and Mr. McDonald’s letter of June 6, 2000, as follows:

Specifically, at paragraph 4. Termination, we henceforth provide the following agreement which will substitute entirely the paragraph previously in force:

4. Termination of Employment:

A. Termination Upon Change In Control: Notwithstanding any other provision in this Agreement, if there is a “change in control” of BioReliance Corporation (as hereinafter defined) during the term of this Agreement, and within twelve (12) months thereafter, either (1) the Executive is terminated Without Cause (as hereinafter defined) or (2) the Executive’s responsibilities are significantly reduced and, as a result, the Executive terminates his employment pursuant to this Agreement, the Executive shall be entitled to the compensation and benefits set forth below.

(1) Base Compensation: The Company shall pay the Executive sixteen (16) months of his then current base salary. This compensation will be paid in two parts, as follows: (a) an initial lump-sum payment of eight (8) months of base salary will be paid within ten (10) working days of termination of employment and (b) beginning six (6) months after termination of employment, equal monthly payments for eight (8) months thereafter. This second payment in section (b) will be correspondingly reduced by any base compensation payments the Executive receives through new employment. The Executive is obligated to inform the Company, its successors and assigns, in writing within ten (10) calendar days of his acceptance of such new employment and include in this notice what his base compensation and expected start date are. However, if the Executive’s base compensation at such new employment is equal to or exceeds his prior base salary at the Company, the Executive may simply confirm this fact in the notice in lieu of disclosing the actual new base compensation figure.

(2) Stock Options: The disposition of any and all stock options granted by BioReliance Corporation to the Executive will be governed by the 1997 Incentive Plan (as amended and restated).

(3) Bonus Compensation: The Company shall pay the Executive, within thirty (30) calendar days of termination, his performance bonus, pro-rated to reflect the date of termination.

(4) Medical Benefits: If the Executive elects to continue medical benefits coverage under the UK Company’s Private Healthcare program, the Company will pay the applicable premium for a period of the lesser of sixteen (16) months or until such time as the Executive obtains other employment that provides private healthcare coverage, provided the Executive and any of his eligible dependants elect the UK Company’s Private Healthcare program. This provision is otherwise subject to all applicable UK Company Private Healthcare program continuation requirements and does not alter the Company’s right to amend or terminate its medical plan.

(5) Other Benefits: The Company will continue to provide other benefits current at the time of termination, e.g. fully expensed lease car, for a period of the lesser of sixteen (16) months or until such time as the Executive obtains other employment that provides similar benefits.

A “change in control” for purpose of this Agreement shall be deemed to have occurred if BioReliance Corporation is subject to an acquisition in accordance with Section 2.12 (1) of BioReliance Corporation’s 1997 Incentive Plan (as amended and restated), which is attached hereto as Exhibit 1.

The privileges, compensation, and benefits set forth in this section, Termination Upon Change In Control, survive the expiration of this Agreement as long as there is a “change in control” as herein defined during the term of this Agreement.

All compensation paid by the Company will be subject to all appropriate UK tax laws.

B. Termination Other Than Upon Change In Control

Termination by the Executive: The Executive may terminate his employment upon ninety (90) days written notice to the President and CEO. Unless otherwise provided herein, if the Executive terminates his employment, the Executive shall only be entitled to base compensation through the last day actually worked as well as any bonus compensation for which the work period and performance criteria have been fully met. The Board may provide the Executive with additional compensation, if the Board in its discretion deems such additional compensation warranted. Also, the disposition of any and all stock options granted by BioReliance Corporation to the Executive will be governed by the 1997 Incentive Plan (as amended and restated).

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Termination by the Company: The Executive’s employment may be terminated by the Company only on two bases: (1) Cause or (2) Without Cause.

(1) Cause: As used in this Agreement, “Cause” shall mean that the Executive:

(a) committed an act or acts of personal dishonesty intended to result in the Executive’s personal enrichment at the expense of the Company, and which constitute(s) fraud, embezzlement, grand larceny or any felonious act;

(b) materially failed or refused to perform the Executive’s essential duties and obligations as an employee of the Company;

(c) committed an act of willful misconduct;

(d) was convicted of a felony or other serious crime;

(e) has engaged in the unlawful use of narcotics;

(f) engaged in abusive use of alcohol to a degree, or in a manner, that would materially and adversely affect the performance of the Executive’s assigned work or degrade the reputation of the Company;

(g) violated the terms of the Confidentiality, Trade Secrets and Noncompetition Agreement he signed on 6 September 1999;

(h) violated or breached the terms of this Agreement; or

(i) is unable to perform the essential functions of his position due to disability, as set forth below, or due to death.

In accordance with these definitions of Cause, the Board of Directors, or a delegated committee of the Board, will in its sole discretion decide whether the Executive shall be terminated for Cause after affording the Executive an opportunity to be heard on the matter. The Board, or the delegated committee of the Board, will in its sole discretion determine the time, place, and manner of the opportunity for the Executive to be heard, but to the extent practicable any such meeting will take place in Montgomery County, Maryland, USA during regular business hours. If the Executive fails to appear or to follow the manner of opportunity afforded by the Board or its committee, the Board, or the delegated committee, may render its decision without hearing the Executive’s views.

Disability: If the Executive is unable to perform the essential functions of his position due to illness, injury, or incapacity for a period of more than fourteen

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(14) weeks, the compensation otherwise payable to him under this Agreement shall cease and the Company may terminate his employment unless the Board determines otherwise or the Executive is able to perform the essential functions of his position with reasonable accommodation.

Effect on Future Compensation – Termination for Cause: In the event Executive is terminated for Cause, Executive will be entitled to no future compensation from the Company and any and all stocks options granted by BioReliance Corporation to the Executive will be disposed of in accordance with the 1997 Incentive Plan (as amended and restated). Moreover, the Executive will not earn any additional compensation after the effective date of such termination.

Any reason for termination other than those set forth above will be deemed to be Without Cause.

(2) Without Cause: If the Executive is terminated Without Cause or the Executive’s responsibilities are significantly reduced and, as a result, the Executive terminates his employment pursuant to this Agreement, the Executive shall be entitled to the compensation and benefits set forth below.

Effect on Future Compensation – Termination Without Cause: In the event the Executive is terminated Without Cause and there has not been a “change in control” as defined in this Agreement, the Executive will be entitled to receive the following compensation and benefits:

(a) notice of at least twelve (12) months of continued employment, or

(b) up to twelve (12) months pay in lieu of notice, or

(c) a combination of the two.

According to Company policy, such pay in lieu of notice will be paid through the normal payroll and will cease upon the Executive becoming gainfully employed elsewhere. Regular healthcare benefits will continue at the Company’s expense throughout the duration of approved pay in lieu of notice. Any and all stocks options granted by BioReliance Corporation to the Executive will be disposed of in accordance with the 1997 Incentive Plan (as amended and restated).

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As a new paragraph, 7. Arbitration, we henceforth provide the following agreement:

7. Arbitration:

Notwithstanding any other provision in this Agreement, any claim or controversy relating to or arising out of this Agreement shall be resolved exclusively by arbitration in accordance with the commercial rules then obtaining of the American Arbitration Association. This Arbitration provision, including any challenges to its enforceability, is governed by the Federal Arbitration Act. The arbitration shall take place in Montgomery County, Maryland. The Company and Executive shall bear separately their respective attorney’s fees. The Company shall bear the cost of the arbitration and any fees required by the commercial rules then obtaining of the American Arbitration Association.

Sincerely,

/s/ Capers W. McDonald

Capers W. McDonald
President and CEO

Copy: William Gedale; Chairman, Compensation Committee of the Board

Please indicate your acceptance of this amendment by signing two attached duplicates of this letter and returning one to my office in the original and retaining the other in the Company’s UK offices also in the original.

Acceptance:


/s/ Ray Cosgrove		30 August 2002

(signature)		(date)

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(BIORELIANCE-LOGO)


		June 6, 2000

Dr. Raymond F. Cosgrove
Managing Director, BioReliance Ltd.
Stirling University Innovation Park
Hillfoots Road
Stirling, United Kingdom FK9 4NF

Dear Ray,

I am pleased to provide you with this letter agreement amending your original offer of employment dated January 29, 1993, and amended by Ms. Robinson’s letter of January 16, 1996, as follows:

Specifically, at paragraph 4. Termination. we henceforth provide the following agreement which will substitute entirely the paragraph previously in force:

4. Termination

Your decision to voluntarily resign from your position must provide the Company with a minimum of ninety (90) days notice. Likewise, a Company initiated termination will include either (a) notice of at least twelve (12) months of continued employment, or (b) up to twelve (12) months pay in lieu of notice, or (c) a combination of the two. According to Company policy, such pay in lieu of notice will be paid through the normal payroll and will cease upon your becoming gainfully employed elsewhere. Regular health care benefits will continue at Company expense throughout the duration of approved pay in lieu of notice.

Sincerely yours,

/s/ Capers W. McDonald

Capers W. McDonald
President and CEO


Copies:		William Gedale; Chairman, Compensation Committee Ralph Adams; Director, Human Resources (U.S.)

(MICROBIOLOGICAL ASSOCIATES-LOGO)


		Life Sciences Center 9900 Blackwell Road • Rockville • Maryland 20850 (301) 738-1000 • fax (301) 738-1036

January 16, 1996

Raymond F. Cosgrove, Ph.D.
Managing Director
Microbiological Associates, Ltd.
Stirling University – Innovation Park
Hillfoots Road
Stirling
Scotland FK9 4NF

Dear Ray,

We are extremely pleased with your contributions to MA Ltd. over the past three years and are therefore providing you with this letter agreement to amend your original offer of employment dated January 29, 1993.

Specifically, at paragraph 4. Termination, we henceforth provide the following agreement which will substitute entirely the prior paragraph:

4. Termination

Your decision to voluntarily resign from your position must provide MA with a minimum of ninety (90) days notice. Likewise, a Company initiated termination will include either (a) notice of at least one hundred eighty (180) days of continued employment, or (b) up to one hundred eighty (180) days pay in lieu of notice, or (c) a combination of the two. According to Company policy, such pay in lieu of notice will be paid through the normal payroll and will cease upon your becoming gainfully employed elsewhere. Regular health care benefits will continue at Company expense throughout the duration of approved pay in lieu of notice.

We feel this agreement represents our recognition of your increased responsibilities since your initial offer of employment, and we trust this is acceptable to you.

Sincerely,

/s/ Constance J. Robinson

Constance J. Robinson
Director of Human Resources

CJR:rlb

(MICROBIOLOGICAL ASSOCIATES-LOGO)


		Life Sciences Center 9900 Blackwell Road • Rockville • Maryland 20850 (301) 738-1000 • fax (301) 738-1036

January 29, 1993

Raymond F. Cosgrove, Ph.D.
3 Marlowe Road
Wallasey,
Merseyside, L44 3BZ
United Kingdom

Dear Ray,

I am extremely pleased to provide you with this offer of employment. Upon acceptance, I believe we have embarked upon what will prove to be a very fruitful and enjoyable relationship.

This letter sets forth our agreement for your employment as follows:

1. Responsibilities:

You will be employed as Executive Director of MA International, Ltd. (MAI), reporting to me as President and Chief Executive Officer of Microbiological Associates, Inc. (MA). A description of the managing and operating responsibilities of the position are attached to this letter.

As Executive Director, you will devote your full time and best efforts to the business and affairs of MAI and agree that you will not perform services for remuneration for any other firm or organization, whether or not in competition with MA or MAI, without my consent as MA President.

2. Compensation:

Base Salary: You will be paid an initial base salary of £42,000 per year under MAI’s normal payroll schedule.

Performance Bonus: You will be eligible to participate in MA Corporate bonus and profit sharing plans, as approved annually by the MA Board of Directors, based on acceptance performance as mutually determined.

Stock Options: The Board of Directors will be petitioned to approve an initial grant of qualified incentive stock options for you to purchase 40,000 shares of MA’s authorized common stock at an exercise price at the Fair Market Value as established by the Board.

The exercise price and all other terms governing the grant of these options will be in accordance with MA’s then current qualified stock option plan and stock option agreement.

Annual Reviews: Your base salary will be reviewed annually with appropriate increases based on performance versus position requirements and mutually agreed objectives.

Benefits: You will be eligible to participate in and receive benefits under all present and future life, disability, medical, and pension plans generally made available to all MAI employees.

Four weeks of personal vacation and ten paid holidays will be made available to you each year. This includes nine standard U.K. holidays and one personal day annually.

Relocation assistance will be provided up to maximum of 17% of your initial base salary. In the event you should voluntarily terminate your employment with MAI within twelve (12) months of your start date, you will be responsible for repaying to MAI the costs paid by the Company relating to your relocation.

For your exclusive use, MAI will lease an automobile and reimburse you for the costs of maintenance and insurance. Through June 1995, this will be the 1992 BMW 520iSE currently on lease to the Company. Thereafter, an appropriate lease cost level will be determined for an automobile of your choosing.

Additional details about these plans are described in the attached Benefits Summary and in individual plan statements to be provided upon your acceptance.

3. Start Date:

You have agreed to start work as soon as practical, within three weeks from your date of signing this letter agreement. We should agree on a specific date as soon as possible.

4. Termination:

Your decision to voluntarily resign from your position must provide MAI with a minimum of sixty (60) days notice. Likewise, a company initiated termination will include sixty (60) days pay in lieu of notice.

5. Confidentiality Agreement:

During your employment with MAI you may not directly or indirectly engage in, own an interest in, or enter the employment of or act as an agent, advisor, or consultant to any person or business entity that is, or is about to become directly involved in competition to MAI or MA’s then current businesses.

You have agreed to execute the Company’s Employee Confidentiality and Trade Secrets Agreement, as attached, as part of your acceptance.

6. Timing of Offer:

This offer is valid through Friday, February 12, 1993. Please complete the attached Confidentiality Agreement and sign your acceptance of this offer on the enclosed copy and return both to my office prior to the above date.

When you have signed and delivered the Company copies of these documents to me or to Mr. Robin Orr at MAI, you may elect to also sign out your assigned automobile at any time prior to commencing full time work.

Ray, I am excited about your joining MAI. Your strengths will add significantly to the Corporation.

Sincerely,

/s/ Capers W. McDonald

Capers W. McDonald
President and Chief Executive Officer

Attachments

Accepted and agreed:


	/s/ Ray Cosgrove	1st Feb 1993

CWM/cjk

EX-10.4 6 w65102exv10w4.htm EMPLOYMENT AGREEMENT- ALLAN J. DARLING, PH.D. exv10w4

EXHIBIT 10.4

EMPLOYMENT AGREEMENT

1. POSITION AND EMPLOYMENT RELATIONSHIP:

1. The Executive is currently employed as the Vice President, U.S. Biosafety Testing (“Vice President”). Commencing on the effective date of this Agreement for a term of twelve (12) months (hereinafter referred to as “Term”), the Corporation hereby agrees to continue to employ the Executive in his current position or a comparable position consistent with his qualifications and experience, and the business needs of the Corporation. At the end of this twelve (12) month Term, this Agreement and all its provisions will renew once for another Term of twelve (12) months, unless ninety (90) days prior to the end of the original Term, the Executive or the President and Chief Executive Officer of the Corporation provides written notice to the other of an intent not to renew the Agreement.

2. Such employment relationship is not at-will and is instead governed by the terms and conditions set forth in this Agreement. The Employment relationship, however, may be terminated by the Corporation or the Executive prior to the expiration of this twelve (12) month Term pursuant to sections E, F, I, and J respectively of this Agreement.

3. As Vice President, the Executive shall perform such duties as may be assigned to the Executive from time to time by the Corporation’s President and Chief Executive Officer (“CEO”) or the Corporation’s Board of Directors (“Board”), including, but not limited to the following: developing and executing plans toward attainment of current and long-range objectives, including achieving revenue, revenue growth and income objectives, maximum return on invested capital, and quality, client satisfaction and employee development goals; developing financial plans and budgets; overseeing all reporting functions; coordinating activities with other vice presidents and supporting departmental directors; supporting Corporate activities including market analyses, strategic planning, R&D planning and project selection, engagement and assessments of potential partners, and the like; supporting the evaluation and analysis of acquisition opportunities, if any; developing and documenting novel or typical service programs, procedures, methodologies and the like; meeting with clients, understanding their product and production methods and developing timely and cost-effective strategies acceptable to them and to various national regulatory authorities; designing major projects and, as appropriate, writing

Page 1 of 9

major project plans; closing key proposals; directing complex technical activities, in particular projects of significant scale and scope; solving challenging technical, regulatory and service problems; building client relationships; and anticipating follow-on client engagements.

1. Base Salary: The Executive’s annual base salary (“salary”) during calendar year 2002, as determined by the Compensation Committee of the Board, shall be two hundred and ten thousand dollars ($210,000). The salary will be subject to all appropriate federal, state and local withholding requirements and will be payable in equal bi-weekly installments. The Executive’s salary during a subsequent calendar year during the Term of this Agreement will be determined by the Compensation Committee of the Board based upon the recommendation of the President and CEO, but in no event shall the Executive’s salary be less than the salary he received during the prior calendar year.

2. Performance Bonus: If the Executive remains in the employ of the Corporation through December 31 of each year during the Term of this Agreement, the Executive shall be eligible for a performance bonus (“bonus”) based on individual and corporate performance factors relating to mutually acceptable objectives. Executive’s bonus will be subject to all appropriate federal, state and local withholding requirements. The exact amount of the bonus will be at the discretion of the Compensation Committee of the Board. Unless otherwise specified in this Agreement, the Corporation will be obligated to pay the Executive the bonus as long as the Executive (a) does not resign from the Corporation before December 31 of each year, or (b) is not terminated for Cause (as hereinafter defined), or (c) does not fail to meet his individual performance objectives. This bonus may also be paid out on a quarterly basis at the discretion of the Compensation Committee of the Board.

3. Stock Options: As an inducement to remain in the employ of the Corporation and as an incentive to build the Corporation’s value, the Corporation may grant to the Executive additional stock options. The number of option shares to be granted and their timing and other terms will be determined by the Compensation Committee of

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the Board and governed by the Corporation’s 1997 Incentive Plan (as adopted May 28, 1997 and amended and restated September 24, 1997, May 21, 1998, May 13, 1999, and June 10, 2002) [hereinafter referred to as “1997 Incentive Plan”], which is attached hereto as Exhibit 1.

D. BENEFITS AND PERQUISITES:

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is equal to or exceeds his prior base salary at the Corporation, the Executive may simply confirm this fact in the notice in lieu of disclosing the actual new base compensation figure.

2. Stock Options: The disposition of any and all stock options granted by the Corporation to the Executive will be governed by the 1997 Incentive Plan.

3. Bonus Compensation: The Corporation shall pay the Executive, within thirty (30) calendar days of termination, his performance bonus, pro-rated to reflect the date of termination.

4. Medical Benefits: If the Executive elects to continue medical benefits coverage under COBRA, the Corporation will pay the applicable COBRA premium for a period of the lesser of eighteen (18) months or until such time as the Executive obtains other employment that provides medical benefits coverage, provided the Executive and any of his eligible dependents elect COBRA continuation coverage. This provision is otherwise subject to all applicable COBRA continuation requirements and does not alter the Corporation’s right to amend or terminate its medical plan.

5. Other Benefits: If the Executive is involved in pre-approved course work eligible for reimbursement under the Corporation’s Tuition Assistance Program (“Program”) or has an education assistance loan outstanding under that Program, the Corporation will reimburse any remaining balance due on the course work and forgive any indebtedness in connection with the outstanding education assistance loan. This provision is otherwise subject to all applicable Tuition Assistance Program requirements and does not alter the Corporation’s right to amend or terminate its Program.

Page 4 of 9

Internal Revenue Code of 1986 as amended (the “Code”), and the regulations thereunder), or any affiliate of such person, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise (the “Total Payment”), is or will be subject to the excise tax imposed under Section 4999 of the Code (the “Excise Tax”), then the Total Payments shall be reduced (but not below zero) if and to the extent necessary so that no portion of the Total Payments will be subject to the Excise Tax. The Corporation shall reduce or eliminate the Total Payments by first reducing or eliminating the portion of the Total Payments which is payable in cash and then by reducing or eliminating payments which are not payable in cash, in each case in reverse order beginning with payments or benefits which are paid the farthest in time from the determination that the Total Payments need to be reduced. All determinations required to be made under this provision shall be made by a nationally recognized accounting firm that is the Corporation’s outside auditor at the time of such determinations.
Any dispute between the Executive and the Corporation, it successors and assigns, involving section E will be resolved by arbitration in accordance with section Q below, except any 280G determination made by Corporation’s outside auditor shall be binding, final, and conclusive upon the Corporation and the Executive.

(1) committed an act or acts of personal dishonesty intended to result in the Executive’s personal enrichment at the expense of the Corporation, and which constitute(s) fraud, embezzlement, grand larceny or any felonious act;

(2) materially failed or refused to perform the Executive’s essential duties and obligations as an employee of the Corporation;

(3) committed an act of willful misconduct;

(4) was convicted of a felony or other serious crime;

(5) has engaged in the unlawful use of narcotics;

(6) engaged in abusive use of alcohol to a degree, or in a manner, that would materially and adversely affect the performance of the Executive’s assigned work or degrade the reputation of the Corporation;

Page 5 of 9

(7) violated the terms of the Confidentiality, Trade Secrets and Noncompetition Agreement he signed on March 1, 1999;

(8) violated or breached the terms of this Agreement; or

(9) is unable to perform the essential functions of his position due to disability, injury, or illness as set forth in section I below or due to death.

G. TERMINATION WITHOUT CAUSE — EFFECT ON FUTURE COMPENSATION: In the event Executive is terminated Without Cause and there has not been a “change in control” as defined in section E, Executive will be entitled to receive the following compensation and benefits:

1. Base Compensation: The Corporation shall pay the Executive his then current salary for the remaining Term of this Agreement or for a period of six (6) months, which ever period is greater. Such compensation shall be paid in equal monthly payments and will be subject to all appropriate federal, state and local withholding requirements.

2. Stock Options: The disposition of any and all stock options granted by the Corporation to the Executive will be governed by the 1997 Incentive Plan.

3. Bonus Compensation: The Corporation shall pay the Executive, within thirty (30) calendar days of termination, his performance bonus, pro-rated to reflect the date of termination.

4. Medical Benefits: If the Executive elects to continue medical benefits coverage under COBRA, the Corporation will pay the applicable COBRA premium for a period of the lesser of eighteen (18) months or until such time as the Executive obtains other employment that provides medical benefits coverage, provided the

Page 6 of 9

Executive and any of his eligible dependents elect COBRA continuation coverage. This provision is otherwise subject to all applicable COBRA continuation requirements and does not alter the Corporation’s right to amend or terminate its medical plan.

5. Other Benefits: If the Executive is involved in pre-approved course work eligible for reimbursement under the Corporation’s Tuition Assistance Program (“Program”) or has an education assistance loan outstanding under that Program, the Corporation will reimburse any remaining balance due on the course work and forgive any indebtedness in connection with the outstanding education assistance loan. This provision is otherwise subject to all applicable Tuition Assistance Program requirements and does not alter the Corporation’s right to amend or terminate its Program.

H. TERMINATION WITH CAUSE — EFFECT ON FUTURE COMPENSATION: In the event Executive is terminated for Cause, Executive will be entitled to no future compensation from the Corporation and any and all stocks options granted by the Corporation to the Executive will be disposed of in accordance with the 1997 Incentive Plan. Moreover, the Executive will not earn any additional compensation after the effective date of such termination.

I. DISABILITY: If the Executive is unable to perform the essential functions of his position due to illness, injury, or incapacity for a period of more than twelve weeks following the use of all available Paid Personal Leave (“PPL”), the compensation otherwise payable to him under this Agreement shall cease and the Corporation may terminate his employment unless the Board determines otherwise or the Executive is able to perform the essential functions of his position with reasonable accommodation.

J. TERMINATION OF EMPLOYMENT BY EXECUTIVE: Executive may terminate his employment upon thirty (30) days written notice to the President and CEO. Unless otherwise provided herein, if the Executive terminates his employment, the Executive shall only be entitled to base compensation through the last day actually worked as well as any bonus compensation for which the work period and performance criteria have been fully met. The Board may provide the Executive with additional compensation, if the Board in its discretion deems such additional compensation warranted. Also, the disposition of any and all stock options granted by the Corporation to the Executive will be governed by the 1997 Incentive Plan.

K. CONFIDENTIALITY AND NONCOMPETITION: By signing below, the Executive acknowledges his ongoing and continuing obligation to abide by the Confidentiality, Trade Secrets and Noncompetition Agreement that he executed on March 1, 1999 (“Trade Secrets Agreements”), which is attached hereto as Exhibit 3 and incorporated herein by reference.

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L. NO PRIOR AGREEMENTS: The Executive represents and warrants that he is not a party or otherwise subject to or bound by the terms of any contract, agreement or understanding which in any manner would limit or otherwise affect his ability to perform his obligations hereunder. The Executive further represents and warrants that his employment with the Corporation will not require the disclosure or use of any confidential information belonging to prior employers or to other persons or entities. The Executive understands that the Corporation does not expect or desire and in fact disapproves of and forbids the Executive to use or disclose, in the performance of his duties for the Corporation, any such confidential information belonging to prior employers or other persons or entities.

M. ASSIGNMENT: This Agreement is personal to Executive and may not be assigned in any way by Executive without prior written consent by the Board of Directors of the Corporation. Any attempted assignment by Executive will be void. Notwithstanding anything in this section to the contrary, however, this Agreement may be assigned by the Corporation to any parent, subsidiary, successor, or affiliate entity. The rights and obligations under this Agreement will inure to the benefit of and will be binding upon the heirs, legatees, administrators, and personal representatives of Executive and upon the successors, representatives, and assigns of the Corporation.

N. ILLEGAL OR INVALID PROVISION: The parties intend for all provisions of this Agreement to be enforced and enforceable to the fullest extent permitted by law. If any provision of this Agreement is held to be illegal, invalid, or unenforceable under present or future laws in effect during the term hereof, however, that provision will be fully severable. This Agreement will be construed and enforced as if such illegal, invalid, or unenforceable provision had never comprised a part hereof, and the remaining provisions will remain in full force and effect and will not be affected by the illegal, invalid, or unenforceable provision or by its severance from this Agreement. Furthermore, in lieu of each such illegal, invalid, or unenforceable provision, there will be added automatically, as a part of this Agreement, a provision as similar in terms to such illegal, invalid, or unenforceable provision as may be possible and be legal, valid, and enforceable.

O. GOVERNING LAW: This Agreement shall be construed and governed by the laws of the State of Maryland without regard to any conflict of laws rules or provisions.

P. ENTIRE AGREEMENT: This Agreement constitutes the entire Agreement between the Corporation and the Executive. This Agreement may not be changed orally, but only by an agreement in writing signed by the parties. This Agreement supersedes all prior agreements, discussions or statements regarding the Executive’s employment, except for the Confidentiality, Trade Secrets and Noncompetition Agreement attached hereto as Exhibit 3, which will survive.

Q. ARBITRATION: Notwithstanding any other provision in this Agreement, any claim or controversy relating to or arising out of this Agreement shall be resolved exclusively by

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arbitration in accordance with the commercial rules then obtaining of the American Arbitration Association. This Arbitration provision, including any challenges to its enforceability, is governed by the Federal Arbitration Act. The arbitration shall take place in Montgomery County, Maryland. The Corporation and Executive shall bear separately their respective attorney’s fees. The Corporation shall bear the cost of the arbitration and any fees required by the commercial rules then obtaining of the American Arbitration Association.

R. MUTUAL UNDERSTANDING: Each party has read this entire Agreement, fully understands the contents hereof, has had the opportunity to obtain independent advice as to its legal effect, and is under no duress or obligation of any kind to execute it. This Agreement reflects the mutual understanding of the parties with the respect to all subject matters addressed herein and will be construed accordingly.

BioReliance Corporation

By: /s/ William J. Gedale By: /s/Allan J. Darling

William J. Gedale
Chairman, Compensation Committee
Board of Directors Allan J. Darling, Ph.D.

Address: 14920 Broschart Road
Rockville, MD 20850

Date: August 26, 2002 Date: August 12, 2002

Page 9 of 9 EX-10.5 7 w65102exv10w5.htm EMPLOYMENT AGREEMENT-DAVID JACOBSON-KRAM, PH.D. exv10w5

EXHIBIT 10.5

EMPLOYMENT AGREEMENT

1. POSITION AND EMPLOYMENT RELATIONSHIP:

1. The Executive is currently employed as the Vice President, Toxicology and Laboratory Animal Diagnostic Services (“Vice President”). Commencing on the effective date of this Agreement for a term of twelve (12) months (hereinafter referred to as “Term”), the Corporation hereby agrees to continue to employ the Executive in his current position or a comparable position consistent with his qualifications and experience, and the business needs of the Corporation. At the end of this twelve (12) month Term, this Agreement and all its provisions will renew once for another Term of twelve (12) months, unless ninety (90) days prior to the end of the original Term, the Executive or the President and Chief Executive Officer of the Corporation provides written notice to the other of an intent not to renew the Agreement.

2. Such employment relationship is not at-will and is instead governed by the terms and conditions set forth in this Agreement. The Employment relationship, however, may be terminated by the Corporation or the Executive prior to the expiration of this twelve (12) month Term pursuant to sections E, F, I, and J respectively of this Agreement.

3. As Vice President, the Executive shall perform such duties as may be assigned to the Executive from time to time by the Corporation’s President and Chief Executive Officer (“CEO”) or the Corporation’s Board of Directors (“Board”), including, but not limited to the following: developing and executing plans toward attainment of current and long-range objectives, including achieving revenue, revenue growth and income objectives, maximum return on invested capital, and quality, client satisfaction and employee development goals; developing financial plans and budgets; overseeing all reporting functions; coordinating activities with other vice presidents and supporting departmental directors; supporting Corporate activities including market analyses, strategic planning, R&D planning and project selection, engagement and assessments of potential partners, and the like; supporting the evaluation and analysis of acquisition opportunities, if any, as may be identified from time to time by the President and CEO; developing and documenting novel or typical service programs, procedures, methodologies and the like; meeting with clients, understanding their product and development methods, and developing timely

Page 1 of 9

and cost-effective strategies acceptable to them and to various national regulatory authorities; designing major projects and, as appropriate, writing major project plans; closing key proposals; directing complex technical activities, in particular projects of significant scale and scope; solving challenging technical, regulatory and service problems; building client relationships; and anticipating follow-on client engagements.

1. Base Salary: The Executive’s annual base salary (“salary”) during calendar year 2002, as determined by the Compensation Committee of the Board, shall be two hundred and thirty thousand dollars ($230,000). The salary will be subject to all appropriate federal, state and local withholding requirements and will be payable in equal bi-weekly installments. The Executive’s salary during a subsequent calendar year during the Term of this Agreement will be determined by the Compensation Committee of the Board based upon the recommendation of the President and CEO, but in no event shall the Executive’s salary be less than the salary he received during the prior calendar year.

2. Performance Bonus: If the Executive remains in the employ of the Corporation through December 31 of each year during the Term of this Agreement, the Executive shall be eligible for a performance bonus (“bonus”) based on individual and corporate performance factors relating to mutually acceptable objectives. Executive’s bonus will be subject to all appropriate federal, state and local withholding requirements. The exact amount of the bonus will be at the discretion of the Compensation Committee of the Board. Unless otherwise specified in this Agreement, the Corporation will be obligated to pay the Executive the bonus as long as the Executive (a) does not resign from the Corporation before December 31 of each year, or (b) is not terminated for Cause (as hereinafter defined), or (c) does not fail to meet his individual performance objectives. This bonus may also be paid out on a quarterly basis at the discretion of the Compensation Committee of the Board.

3. Stock Options: As an inducement to remain in the employ of the Corporation and as an incentive to build the Corporation’s value, the Corporation may grant to the

Page 2 of 9

Executive additional stock options. The number of option shares to be granted and their timing and other terms will be determined by the Compensation Committee of the Board and governed by the Corporation’s 1997 Incentive Plan (as adopted May 28, 1997 and amended and restated September 24, 1997, May 21, 1998, May 13, 1999, and June 10, 2002) [hereinafter referred to as “1997 Incentive Plan”], which is attached hereto as Exhibit 1.

D. BENEFITS AND PERQUISITES:

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employment and include in this notice what his base compensation and expected start date are. However, if the Executive’s base compensation at such new employment is equal to or exceeds his prior base salary at the Corporation, the Executive may simply confirm this fact in the notice in lieu of disclosing the actual new base compensation figure.

2. Stock Options: The disposition of any and all stock options granted by the Corporation to the Executive will be governed by the 1997 Incentive Plan.

3. Bonus Compensation: The Corporation shall pay the Executive, within thirty (30) calendar days of termination, his performance bonus, pro-rated to reflect the date of termination.

4. Medical Benefits: If the Executive elects to continue medical benefits coverage under COBRA, the Corporation will pay the applicable COBRA premium for a period of the lesser of eighteen (18) months or until such time as the Executive obtains other employment that provides medical benefits coverage, provided the Executive and any of his eligible dependents elect COBRA continuation coverage. This provision is otherwise subject to all applicable COBRA continuation requirements and does not alter the Corporation’s right to amend or terminate its medical plan.

5. Other Benefits: If the Executive is involved in pre-approved course work eligible for reimbursement under the Corporation’s Tuition Assistance Program (“Program”) or has an education assistance loan outstanding under that Program, the Corporation will reimburse any remaining balance due on the course work and forgive any indebtedness in connection with the outstanding education assistance loan. This provision is otherwise subject to all applicable Tuition Assistance Program requirements and does not alter the Corporation’s right to amend or terminate its Program.

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person who acquires ownership or effective control of the Corporation or ownership of a substantial portion of the Corporation’s assets (within the meaning of Section 280G of the Internal Revenue Code of 1986 as amended (the “Code”), and the regulations thereunder), or any affiliate of such person, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise (the “Total Payment”), is or will be subject to the excise tax imposed under Section 4999 of the Code (the “Excise Tax”), then the Total Payments shall be reduced (but not below zero) if and to the extent necessary so that no portion of the Total Payments will be subject to the Excise Tax. The Corporation shall reduce or eliminate the Total Payments by first reducing or eliminating the portion of the Total Payments which is payable in cash and then by reducing or eliminating payments which are not payable in cash, in each case in reverse order beginning with payments or benefits which are paid the farthest in time from the determination that the Total Payments need to be reduced. All determinations required to be made under this provision shall be made by a nationally recognized accounting firm that is the Corporation’s outside auditor at the time of such determinations.
Any dispute between the Executive and the Corporation, it successors and assigns, involving section E will be resolved by arbitration in accordance with section Q below, except any 280G determination made by Corporation’s outside auditor shall be binding, final, and conclusive upon the Corporation and the Executive.

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(7) violated the terms of the Confidentiality, Trade Secrets and Noncompetition Agreement he signed on June 22, 1998;

(8) violated or breached the terms of this Agreement; or

(9) is unable to perform the essential functions of his position due to disability, injury, or illness as set forth in section I below or due to death.

G. TERMINATION WITHOUT CAUSE — EFFECT ON FUTURE COMPENSATION: In the event Executive is terminated Without Cause and there has not been a “change in control” as defined in section E, Executive will be entitled to receive the following compensation and benefits:

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period of the lesser of eighteen (18) months or until such time as the Executive obtains other employment that provides medical benefits coverage, provided the Executive and any of his eligible dependents elect COBRA continuation coverage. This provision is otherwise subject to all applicable COBRA continuation requirements and does not alter the Corporation’s right to amend or terminate its medical plan.

5. Other Benefits: If the Executive is involved in pre-approved course work eligible for reimbursement under the Corporation’s Tuition Assistance Program (“Program”) or has an education assistance loan outstanding under that Program, the Corporation will reimburse any remaining balance due on the course work and forgive any indebtedness in connection with the outstanding education assistance loan. This provision is otherwise subject to all applicable Tuition Assistance Program requirements and does not alter the Corporation’s right to amend or terminate its Program.

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Secrets and Noncompetition Agreement that he executed on June 22, 1999 (“Trade Secrets Agreements”), which is attached hereto as Exhibit 3 and incorporated herein by reference.

L. NO PRIOR AGREEMENTS: The Executive represents and warrants that he is not a party or otherwise subject to or bound by the terms of any contract, agreement or understanding which in any manner would limit or otherwise affect his ability to perform his obligations hereunder. The Executive further represents and warrants that his employment with the Corporation will not require the disclosure or use of any confidential information belonging to prior employers or to other persons or entities. The Executive understands that the Corporation does not expect or desire and in fact disapproves of and forbids the Executive to use or disclose, in the performance of his duties for the Corporation, any such confidential information belonging to prior employers or other persons or entities.

M. ASSIGNMENT: This Agreement is personal to Executive and may not be assigned in any way by Executive without prior written consent by the Board of Directors of the Corporation. Any attempted assignment by Executive will be void. Notwithstanding anything in this section to the contrary, however, this Agreement may be assigned by the Corporation to any parent, subsidiary, successor, or affiliate entity. The rights and obligations under this Agreement will inure to the benefit of and will be binding upon the heirs, legatees, administrators, and personal representatives of Executive and upon the successors, representatives, and assigns of the Corporation.

N. ILLEGAL OR INVALID PROVISION: The parties intend for all provisions of this Agreement to be enforced and enforceable to the fullest extent permitted by law. If any provision of this Agreement is held to be illegal, invalid, or unenforceable under present or future laws in effect during the term hereof, however, that provision will be fully severable. This Agreement will be construed and enforced as if such illegal, invalid, or unenforceable provision had never comprised a part hereof, and the remaining provisions will remain in full force and effect and will not be affected by the illegal, invalid, or unenforceable provision or by its severance from this Agreement. Furthermore, in lieu of each such illegal, invalid, or unenforceable provision, there will be added automatically, as a part of this Agreement, a provision as similar in terms to such illegal, invalid, or unenforceable provision as may be possible and be legal, valid, and enforceable.

O. GOVERNING LAW: This Agreement shall be construed and governed by the laws of the State of Maryland without regard to any conflict of laws rules or provisions.

P. ENTIRE AGREEMENT: This Agreement constitutes the entire Agreement between the Corporation and the Executive. This Agreement may not be changed orally, but only by an agreement in writing signed by the parties. This Agreement supersedes all prior agreements, discussions or statements regarding the Executive’s employment, except for the Confidentiality, Trade Secrets and Noncompetition Agreement attached hereto as Exhibit 3, which will survive.

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Q. ARBITRATION: Notwithstanding any other provision in this Agreement, any claim or controversy relating to or arising out of this Agreement shall be resolved exclusively by arbitration in accordance with the commercial rules then obtaining of the American Arbitration Association. This Arbitration provision, including any challenges to its enforceability, is governed by the Federal Arbitration Act. The arbitration shall take place in Montgomery County, Maryland. The Corporation and Executive shall bear separately their respective attorney’s fees. The Corporation shall bear the cost of the arbitration and any fees required by the commercial rules then obtaining of the American Arbitration Association.

R. MUTUAL UNDERSTANDING: Each party has read this entire Agreement, fully understands the contents hereof, has had the opportunity to obtain independent advice as to its legal effect, and is under no duress or obligation of any kind to execute it. This Agreement reflects the mutual understanding of the parties with the respect to all subject matters addressed herein and will be construed accordingly.

BioReliance Corporation

By: /s/ William S. Gedale By: /s/ David Jacobson-Kram

William J. Gedale
Chairman, Compensation Committee
Board of Directors David Jacobson-Kram, Ph.D.

Address: 14920 Broschart Road
Rockville, MD 20850

Date: August 7, 2002 Date: August 5, 2002

Page 9 of 9 EX-10.6 8 w65102exv10w6.htm EMPLOYMENT AGREEMENT- CAPERS W. MCDONALD exv10w6

EXHIBIT 10.6

EMPLOYMENT AGREEMENT

THIS AGREEMENT is effective the 22nd day of August, 2002 by and between BioReliance Corporation, a Delaware corporation with principal offices located at 14920 Broschart Road, Rockville, Maryland 20850, and all of its subsidiary companies and its successors or assigns (the “Corporation”) and Capers W. McDonald (the “Executive”).

1. POSITION AND EMPLOYMENT RELATIONSHIP:

1. The Executive is currently employed as the President and Chief Executive Officer (“CEO”) of the Corporation. Commencing on the effective date of this Agreement for a term of twelve (12) months (hereinafter referred to as “Term”), the Corporation hereby agrees to continue to employ the Executive in his current position or a comparable position consistent with his qualifications and experience, and the business needs of the Corporation. At the end of this twelve (12) month Term, this Agreement and all its provisions will renew once for another Term of twelve (12) months, unless ninety (90) days prior to the end of the original Term, the Executive or the Chairman of the Board of the Corporation provides written notice to the other of an intent not to renew the Agreement.

2. Such employment relationship is not at-will and is instead governed by the terms and conditions set forth in this Agreement. The Employment relationship, however, may be terminated by the Corporation or the Executive prior to the expiration of this twelve (12) month Term pursuant to sections E, F, I, and J respectively of this Agreement.

3. As President and CEO, the Executive shall hold the responsibilities of the most senior executive in the Corporation and shall perform such duties as may be assigned to the Executive from time to time by the Corporation’s Board of Directors (“the Board”), including, but not limited to the following: overseeing all corporate functions; directing the organization toward the attainment of sales and profit goals and maximum return on invested capital; formulation of current and long-range plans and objectives including quality, client satisfaction and Executive development goals; and representing the organization in relations with its clients and the communities in which it does business.

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3. COMPENSATION: For all services rendered by Executive pursuant to this Agreement, Corporation will pay to Executive, and the Executive will accept as full compensation hereunder, the following:

1. Base Salary: The Executive’s annual base salary (“salary”) during calendar year 2002, as determined by the Compensation Committee of the Board, shall be four hundred and three thousand dollars ($403,000). The salary will be subject to all appropriate federal, state and local withholding requirements and will be payable in equal bi-weekly installments. The Executive’s salary during a subsequent calendar year during the Term of this Agreement will be determined by the Compensation Committee of the Board, but in no event shall the Executive’s salary be less than the salary he received during the prior calendar year.

2. Performance Bonus: If the Executive remains in the employ of the Corporation through December 31 of each year during the Term of this Agreement, the Executive shall be eligible for a performance bonus (“bonus”) based on individual and corporate performance factors relating to mutually acceptable objectives. Executive’s bonus will be subject to all appropriate federal, state and local withholding requirements. The exact amount of the bonus will be at the discretion of the Compensation Committee of the Board. Unless otherwise specified in this Agreement, the Corporation will be obligated to pay the Executive the bonus as long as the Executive (a) does not resign from the Corporation before December 31 of each year, or (b) is not terminated for Cause (as hereinafter defined), or (c) does not fail to meet his individual performance objectives. This bonus will be paid within thirty (30) calendar days after receipt by the Corporation of its audited financial statements.

3. Stock Options: As an inducement to remain in the employ of the Corporation and as an incentive to build the Corporation’s value, the Corporation may grant to the Executive additional stock options. The number of option shares to be granted and their timing and other terms will be determined by the Compensation Committee of the Board and governed by the Corporation’s 1997 Incentive Plan (as adopted May 28, 1997 and amended and restated September 24, 1997, May 21, 1998, May 13, 1999, and June 10, 2002) [hereinafter referred to as “1997 Incentive Plan"], which is attached hereto as Exhibit 1.

D. BENEFITS AND PERQUISITES:

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benefit plan from time to time and does not guarantee the continuation of any kind or level of benefit or perquisite.

2. Paid Personal Leave: The Executive shall receive vacation, sick and personal holiday leave pursuant to the Corporation’s Paid Personal Leave Policy (“PPL”) under the schedule for an Executive of the Company, which is attached hereto as Exhibit 2 and incorporated herein by reference.

3. Other Perquisites and Benefits: The Corporation will provide the Executive with appropriate office space, as it deems necessary, and will provide telephone, computer, email and internet access as required to perform the Executive’s duties during the term of his employment.

E. COMPENSATION UPON CHANGE IN CONTROL: Notwithstanding any other provision in this Agreement, if there is a “change in control” of the Corporation (as hereinafter defined) during the Term of this Agreement and within twelve (12) months thereafter, either (1) the Executive is terminated Without Cause (as hereinafter defined in section F) or (2) the Executive’s responsibilities are significantly reduced and, as a result, the Executive terminates his employment pursuant to section J, the Executive shall be entitled to the compensation and benefits set forth below. For purposes of this provision, it shall not be considered a significant reduction in the Executive’s responsibilities if changes in these responsibilities are those that would be normally anticipated as a result of the Corporation becoming a subsidiary or a division of another company and thus no longer a separately traded public company, provided that the Executive has responsibilities that would customarily be associated with those of a president and chief executive officer of a subsidiary or a general manager of a division comparable to the Corporation.

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2. Stock Options: The disposition of any and all stock options granted by the Corporation to the Executive will be governed by the 1997 Incentive Plan.

3. Bonus Compensation: The Corporation shall pay the Executive his performance bonus, pro-rated, within thirty (30) calendar days after receipt by the Corporation of its audited financial statements.

4. Medical Benefits: If the Executive elects to continue medical benefits coverage under COBRA, the Corporation will pay the applicable COBRA premium for a period of the lesser of eighteen (18) months or until such time as the Executive obtains other employment that provides medical benefits coverage, provided the Executive and any of his eligible dependents elect COBRA continuation coverage. This provision is otherwise subject to all applicable COBRA continuation requirements and does not alter the Corporation’s right to amend or terminate its medical plan.

5. Other Benefits: If the Executive is involved in pre-approved course work eligible for reimbursement under the Corporation’s Tuition Assistance Program (“Program”) or has an education assistance loan outstanding under that Program, the Corporation will reimburse any remaining balance due on the course work and forgive any indebtedness in connection with the outstanding education assistance loan. This provision is otherwise subject to all applicable Tuition Assistance Program requirements and does not alter the Corporation’s right to amend or terminate its Program.

4 of 9

the Total Payments shall be reduced (but not below zero) if and to the extent necessary so that no portion of the Total Payments will be subject to the Excise Tax. The Corporation shall reduce or eliminate the Total Payments by first reducing or eliminating the portion of the Total Payments which is payable in cash and then by reducing or eliminating payments which are not payable in cash, in each case in reverse order beginning with payments or benefits which are paid the farthest in time from the determination that the Total Payments need to be reduced. All determinations required to be made under this provision shall be made by a nationally recognized accounting firm that is the Corporation’s outside auditor at the time of such determinations.

Any dispute between the Executive and the Corporation, it successors and assigns, involving section E will be resolved by arbitration in accordance with section Q below, except any 280G determination made by Corporation’s outside auditor shall be binding, final, and conclusive upon the Corporation and the Executive.

F. TERMINATION OF EMPLOYMENT: During the Term of this Agreement, Executive’s employment is not at-will and may be terminated by the Corporation only on two bases: (1) Cause; or (2) Without Cause. As used in this Agreement, “Cause” shall mean that the Executive:

Page 5 of 9

(9) is unable to perform the essential functions of his position due to disability, injury, or illness as set forth in section I below or due to death.

In accordance with these definitions of Cause, the Board, or a delegated committee of the Board, will in its sole discretion decide whether the Executive shall be terminated for Cause after affording the Executive an opportunity to be heard on the matter. The Board, or the delegated committee of the Board, will in its sole discretion determine the time, place, and manner of the opportunity for the Executive to be heard, but to the extent practicable any such meeting will take place in Montgomery County, Maryland during regular business hours. If the Executive fails to appear or to follow the manner of opportunity afforded by the Board or its committee, the Board, or the delegated committee, may render its decision without hearing the Executive’s views.

Any reason for termination other than those set forth above will be deemed to be Without Cause.

G. TERMINATION WITHOUT CAUSE — EFFECT ON FUTURE COMPENSATION: In the event Executive is terminated Without Cause and there has not been a “change in control” as defined in section E of the Agreement, Executive will be entitled to receive the following compensation and benefits:

1. Base Compensation: The Corporation shall pay the Executive his then current base salary for twelve (12) months. Such compensation shall be paid in equal monthly payments and will be subject to all appropriate federal, state and local withholding requirements.

2. Stock Options: The disposition of any and all stock options granted by the Corporation to the Executive will be governed by the 1997 Incentive Plan.

3. Bonus Compensation: The Corporation shall pay the Executive his performance bonus, pro-rated, within thirty (30) calendar days after receipt by the Corporation of its audited financial statements.

4. Medical Benefits: If the Executive elects to continue medical benefits coverage under COBRA, the Corporation will pay the applicable COBRA premium for a period of the lesser of eighteen (18) months or until such time as the Executive obtains other employment that provides medical benefits coverage, provided the Executive and any of his eligible dependents elect COBRA continuation coverage. This provision is otherwise subject to all applicable COBRA continuation requirements and does not alter the Corporation’s right to amend or terminate its medical plan.

Page 6 of 9

5. Other Benefits: If the Executive is involved in pre-approved course work eligible for reimbursement under the Corporation’s Tuition Assistance Program (“Program”) or has an education assistance loan outstanding under that Program, the Corporation will reimburse any remaining balance due on the course work and forgive any indebtedness in connection with the outstanding education assistance loan. This provision is otherwise subject to all applicable Tuition Assistance Program requirements and does not alter the Corporation’s right to amend or terminate its Program.

H. TERMINATION WITH CAUSE — EFFECT ON FUTURE COMPENSATION: In the event Executive is terminated for Cause, Executive will be entitled to no future compensation from the Corporation and any and all stocks options granted by the Corporation to the Executive will be disposed of in accordance with the 1997 Incentive Plan. Moreover, the Executive will not earn any additional compensation after the effective date of such termination.

I. DISABILITY: If the Executive is unable to perform the essential functions of his position due to illness, injury, or incapacity for a period of more than twelve weeks following the use of all available Paid Personal Leave (“PPL”), the compensation otherwise payable to him under this Agreement shall cease and the Corporation may terminate his employment unless the Board determines otherwise or the Executive is able to perform the essential functions of his position with reasonable accommodation.

J. TERMINATION OF EMPLOYMENT BY EXECUTIVE: Executive may terminate his employment upon thirty (30) days written notice to the Chairman of the Board. Unless otherwise provided herein, if the Executive terminates his employment, the Executive shall only be entitled to base compensation through the last day actually worked as well as any bonus compensation for which the work period, performance criteria, and receipt of audited financial statements requirement have been fully met. The Board may provide the Executive with additional compensation, if the Board in its discretion deems such additional compensation warranted. Also, the disposition of any and all stock options granted by the Corporation to the Executive will be governed by the 1997 Incentive Plan.

K. CONFIDENTIALITY AND NONCOMPETITION: By signing below, the Executive acknowledges his ongoing and continuing obligation to abide by the Confidentiality, Trade Secrets and Noncompetition Agreement that he executed on June 15, 1998 (“Trade Secrets Agreements”), which is attached hereto as Exhibit 3 and incorporated herein by reference.

L. NO PRIOR AGREEMENTS: The Executive represents and warrants that he is not a party or otherwise subject to or bound by the terms of any contract, agreement or understanding which in any manner would limit or otherwise affect his ability to perform his obligations hereunder. The Executive further represents and warrants that his employment with the

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Corporation will not require the disclosure or use of any confidential information belonging to prior employers or to other persons or entities. The Executive understands that the Corporation does not expect or desire and in fact disapproves of and forbids the Executive to use or disclose, in the performance of his duties for the Corporation, any such confidential information belonging to prior employers or other persons or entities.

M. ASSIGNMENT: This Agreement is personal to Executive and may not be assigned in any way by Executive without prior written consent by the Board of Directors of the Corporation. Any attempted assignment by Executive will be void. Notwithstanding anything in this section to the contrary, however, this Agreement may be assigned by the Corporation to any parent, subsidiary, successor, or affiliate entity. The rights and obligations under this Agreement will inure to the benefit of and will be binding upon the heirs, legatees, administrators, and personal representatives of Executive and upon the successors, representatives, and assigns of the Corporation.

N. ILLEGAL OR INVALID PROVISION: The parties intend for all provisions of this Agreement to be enforced and enforceable to the fullest extent permitted by law. If any provision of this Agreement is held to be illegal, invalid, or unenforceable under present or future laws in effect during the term hereof, however, that provision will be fully severable. This Agreement will be construed and enforced as if such illegal, invalid, or unenforceable provision had never comprised a part hereof, and the remaining provisions will remain in full force and effect and will not be affected by the illegal, invalid, or unenforceable provision or by its severance from this Agreement. Furthermore, in lieu of each such illegal, invalid, or unenforceable provision, there will be added automatically, as a part of this Agreement, a provision as similar in terms to such illegal, invalid, or unenforceable provision as may be possible and be legal, valid, and enforceable.

O. GOVERNING LAW: This Agreement shall be construed and governed by the laws of the State of Maryland without regard to any conflict of laws rules or provisions.

P. ENTIRE AGREEMENT: This Agreement constitutes the entire Agreement between the Corporation and the Executive. This Agreement may not be changed orally, but only by an agreement in writing signed by the parties. This Agreement supersedes all prior agreements, discussions or statements regarding the Executive’s employment, except for the Confidentiality, Trade Secrets and Noncompetition Agreement attached hereto as Exhibit 3, which will survive.

Q. ARBITRATION: Notwithstanding any other provision in this Agreement, any claim or controversy relating to or arising out of this Agreement shall be resolved exclusively by arbitration in accordance with the commercial rules then obtaining of the American Arbitration Association. This Arbitration provision, including any challenges to its enforceability, is governed by the Federal Arbitration Act. The arbitration shall take place in Montgomery County, Maryland. The Corporation and Executive shall bear separately

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their respective attorney’s fees. The Corporation shall bear the cost of the arbitration and any fees required by the commercial rules then obtaining of the American Arbitration Association.

R. MUTUAL UNDERSTANDING: Each party has read this entire Agreement, fully understands the contents hereof, has had the opportunity to obtain independent advice as to its legal effect, and is under no duress or obligation of any kind to execute it. This Agreement reflects the mutual understanding of the parties with the respect to all subject matters addressed herein and will be construed accordingly.


BioReliance Corporation

By:	/s/ William J. Gedale William J. Gedale Chairman, Compensation Committee Board of Directors	By:	/s/ Capers W. McDonald Capers W. McDonald

Address: 14920 Broschart Road Rockville, MD 20850

Date:	August 6, 2002	Date:	August 22, 2002

Page 9 of 9 EX-10.7 9 w65102exv10w7.htm FORM OF EMPLOYEE CONFIDENTIALITY exv10w7

EXHIBIT 10.7

EMPLOYEE CONFIDENTIALITY, TRADE SECRETS
AND NONCOMPETITION AGREEMENT



Employee	Employee No.	Hire Date

Recitals

A. BioReliance Corporation and its subsidiaries and affiliates ( collectively, the “Corporation”) is involved in a broad range of biological research, testing and manufacturing services.

B. The Employee recognizes that the Corporation’s success in a highly competitive marketplace depends upon maintaining the confidentiality of its proprietary information, trade secrets, and client and prospective client information. The Employee also recognizes that, while employed by the Corporation, he/she will have access to and might become familiar with various proprietary and confidential information and trade secrets relating to, owned by and regularly used in the operation of the Corporation and its affiliated entities including, but not limited to, processes, formulas, designs, customer lists, business contacts, methods of operation, results of analysis, business, marketing and pricing plans and strategies, financial data, costs, revenues and similar information (“Confidential Information”). The Employee acknowledges that his/her employment with the Corporation will, of necessity, provide him/her with specialized knowledge and familiarity with such Confidential Information which, if used in competition with the Corporation or any of its affiliated entities could cause serious harm to the Corporation.

Agreements

IN CONSIDERATION OF the Corporation’s agreement to employ the Employee, and the Employee’s agreement to accept employment with the Corporation, the parties acknowledge the receipt of sufficient consideration and agree as follows:

Section 1. Exclusive Services

While employed by the Corporation, the Employee shall devote his or her complete business time, attention, energies, efforts and skills to the Corporation’s business; shall not engage, directly or indirectly, in any other business activity without the express written consent of the Corporation’s Chief Executive Officer and shall not, directly or indirectly (either as an employee, employer, consultant, agent or in any other capacity), engage or participate in any business that is in any manner whatsoever in, or the Employee knows to be contemplating entering into, competition with business of the Corporation or any of its affiliated entities.

Section 2. Non-Disclosure of Confidential Information; Corporation Documents

(a) Non-Disclosure. The Employee shall maintain the confidentiality of all Confidential Information and shall not disclose, either directly or indirectly, Confidential Information to any person, firm or business, or use Confidential Information, except as required in the course of employment with the Corporation or as authorized in writing by the Corporation’s Chief Executive Officer, during the term of such employment or at any time thereafter. Similarly, the Employee shall maintain the confidentiality of all Confidential Information of any third party with whom the Corporation has a business relationship, provided that such Confidential Information is disclosed to the Employee in the course of the Employee’s employment with the Corporation.

(b) Exception to Non-Disclosure. This section shall not apply to, and the Employee may use or discuss freely, any Confidential Information which is now, or subsequently becomes, in the public domain, provided the employee’s actions did not cause such information to enter into the public domain.

(c) Corporation Property. All files, records, documents, drawings, equipment and other similar items relating in any manner to the Corporation’s business, whether prepared by the Employee or otherwise coming into his or her possession (collectively, “Documents”), shall remain the exclusive property of the Corporation and shall not be removed without the prior written consent of the Corporation’s Chief Executive Officer, and upon termination of employment, the Employee shall immediately return any and all Documents, or reproductions of such Documents, to the Corporation.

Section 3. Rights to Intellectual Property

(a) Ownership. Any and all inventions, processes, discoveries, know-how, improvements, patent rights, letters patent, programs, copyrights, trademarks, trade names, service marks and applications thereof, in the United States and all other countries, and any and all rights and interest in, to and under the same, made, invented, acquired or possessed by the Employee, resulting or arising out of, directly or indirectly, the services performed by the Employee for the Corporation (the “Intellectual Property”), shall be promptly disclosed to the Corporation and shall be the exclusive property of the Corporation.


Employee Confidentiality, Trade Secrets and Noncompetition Agreement		Page 2 of 5

(b) Assignment of Intellectual Property. The Employee shall, without additional compensation (unless authorized by the Corporation), execute all documents, and perform any and all other acts necessary or desired by the Corporation, to fully and completely vest and confirm in the Corporation all rights contemplated by Section 3(a) of this Agreement. The failure of the Corporation to execute the documents or perform the acts required to vest in the Corporation all rights contemplated by Section 3(a) shall not constitute a waiver of the Corporation of any rights available under this agreement.

(c) Employee’s Unpatented Inventions. Within seven (7) days of the Hiring Date referred to above, the Employee shall provide the Corporation with a list describing all unpatented inventions made or conceived by the Employee prior to the date of this agreement. The Corporation shall attach this list to, and maintain a copy of the list with, this Agreement. Any inventions described on the list shall be excluded from the requirement of this Section 3 and shall remain the exclusive property of the Employee.

Section 4. Noncompetition

(a) Non-Compete. While employed by the Corporation, and for a period of one year after the termination or expiration thereof, the Employee will not directly or indirectly:


(i)		as an individual proprietor, partner, stockholder, officer, employee, director, joint venturer, investor, lender, or in any other capacity whatsoever (other than as the holder of not more than one percent (1%) of the total outstanding stock of a publicly held Corporation), engage in the business of developing, producing, marketing or selling services or products of the kind or type developed or being developed, produced, marketed or sold by the Corporation while the Employee was employed by the Corporation; or

(ii)		recruit, solicit or induce, or attempt to induce, any employee or employees of the Corporation to terminate their employment with, or otherwise cease their relationship with, the Corporation; or

(iii)		solicit, divert or take away, or attempt to divert or to take away, the business or patronage of any of the clients, customers or accounts, or prospective clients, customers or accounts, of the Corporation which were contacted, solicited or served by the Employee while employed by the Corporation


Employee Confidentiality, Trade Secrets and Noncompetition Agreement		Page 3 of 5

(b) Enforceability. If any restriction set forth in this Section 4 is found by any court of competent jurisdiction to be unenforceable because it extends for too long a period of time or over too great a range of activities or in too broad a geographic area, it shall be interpreted to extend only over the maximum period of time, range of activities or geographic area as to which it may be enforceable.

(c) Reasonable Restrictions. The restrictions contained in this Section 4 are necessary for the protection of the business and goodwill of the Corporation and are considered by the employee to be reasonable for such purpose and are not an unreasonable restriction on the Employee’s livelihood. The employee agrees that any breach of this Section 4 will cause the Corporation substantial and irreparable damage and therefore, in the event of any such breach, in addition to such other remedies which may be available, the Corporation shall have the right to seek specific performance and injunctive relief.

Section 5. Other Obligations

Except as otherwise disclosed to the Corporation’s Chief Executive Officer in writing prior to the execution of this Agreement, the execution and performance of this Agreement by the Employee, and the performance by the Employee of his or her employment responsibilities with the Corporation, will not conflict with or result in a breach of or a default under any terms, condition, or provisions of any contract or agreement, including, but not limited to, any employment, confidentiality or non-competition agreements, to which the Employee is a party.

Section 6. Remedies

In the event of a breach or a threatened breach of this Agreement by the Employee, or, in the event the Employee’s employment with the Corporation breaches any other contract to which the Employee is a party, the Corporation shall be entitled to all remedies available at law and equity, including recovery from the Employee of all damages, costs and expenses incurred by the Corporation in protecting or enforcing its rights hereunder, including reasonable attorney’s fees. Nothing in this Agreement shall be deemed a waiver of the Corporation of any rights available under any law, including Maryland Uniform Trade Secrets Act.


Employee Confidentiality, Trade Secrets and Noncompetition Agreement		Page 4 of 5

Section 7. Miscellaneous

(a) Governing Law. This Agreement shall be constructed in accordance with, and shall be governed by, the laws of the State of Maryland.

(b) Separability. The invalidity or unenforceability of any provision of this Agreement shall not impair the validity or enforceability of any other provision.

(c) Entire Agreement. This Agreement embodies the entire agreement and understanding of the parties with respect to the subject matter contained herein. This Agreement supersedes any and all prior agreements and understandings between the parties with respect to such subject matter.

(d) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their successors and assigns.

IN WITNESS WHEREOF, the parties have executed this Agreement as of ______, 2000.


		BioReliance Corporation

		By:


		Name:

		Title:



		Employee Signature


		Employee Printed Name

9/25/00


Employee Confidentiality, Trade Secrets and Noncompetition Agreement		Page 5 of 5

EX-99.1 10 w65102exv99w1.htm OFFICER CERTIFICATION OF CHIEF EXECUTIVE OFFICER exv99w1

EXHIBIT 99.1

Certification Pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant To
Section 906 of the Sarbanes-Oxley Act of 2002

I, Capers W. McDonald, President and Chief Executive Officer of BioReliance Corporation (the Corporation), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. § 1350, that:

(1) the Quarterly Report on Form 10-Q of the Corporation for the period ended September 30, 2002, as filed with the Securities and Exchange Commission on the date hereof (the Report), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation.

/s/ Capers W. McDonald

Capers W. McDonald
President and Chief Executive Officer
November 14, 2002

EX-99.2 11 w65102exv99w2.htm OFFICER CERTIFICATION OF CHIEF EXECUTIVE OFFICER exv99w2

EXHIBIT 99.2

Certification Pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant To
Section 906 of the Sarbanes-Oxley Act of 2002

I, John L. Coker, Vice President, Finance and Administration and Chief Financial Officer of BioReliance Corporation (the Corporation), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. § 1350, that:

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation.

/s/ John L. Coker

John L. Coker
Vice President, Finance and Administration
and Chief Financial Officer
November 14, 2002

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	•		the anticipated growth of revenue and improvement in profit margins,
	•		the Corporation’s ability to use additional capacity in its manufacturing facility and the effect on earnings of underutilization of this facility,
	•		the Corporation’s plans to expand capacity in both its testing and development and manufacturing business segments, including the timing and completion of any such expansion,
	•		the anticipated increase in selling, general and administrative expenses and the hiring of new employees,
	•		plans to improve the Corporation’s information systems and sales and marketing infrastructure,
	•		the anticipated leveling off of research and development expenses,
	•		the amount and impact of a change in tax rates,
	•		the Corporation’s ability to fund its operations with existing cash, cash flows from operations and its line of credit, and
	•		the impact of foreign currency exchange rate fluctuations on the Corporation.

	•		the Corporation’s ability to generate orders for new contracts;
	•		the ability of the Corporation to utilize its facilities, particularly the U.S. manufacturing facility;
	•		the size and growth of the overall markets for biopharmaceuticals; and,
	•		the economies in the U.S. and Europe.

	•		Maintain a ratio of total funded indebtedness to EBITDA not greater than 3.50 to 1.00 as of the end of each fiscal quarter, calculated on the preceding four-quarter period. EBITDA is defined as earnings before interest, taxes, depreciation and amortization.

	•		Maintain a fixed charge coverage ratio as of the end of each quarter of at least 1.25 to 1.00. This ratio is determined by dividing EBITDA by the sum of interest expense and current-maturities of long-term debt and capital leases.

1.		I have reviewed this quarterly report on Form 10-Q of BioReliance Corporation;

2.		Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which statements were made, not misleading with respect to the period covered by this quarterly report;

3.		Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4.		The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

	1.		The Executive is currently employed as the Vice President, Sales and Marketing (“Vice President”). Commencing on the effective date of this Agreement for a term of twelve (12) months (hereinafter referred to as “Term”), the Corporation hereby agrees to continue to employ the Executive in his current positions or a comparable position consistent with his qualifications and experience, and the business needs of the Corporation. At the end of this twelve (12) month Term, this Agreement and all its provisions will renew once for another Term of twelve (12) months, unless ninety (90) days prior to the end of the original Term, the Executive or the President and Chief Executive Officer of the Corporation provides written notice to the other of an intent not to renew the Agreement.

	2.		Such employment relationship is not at-will and is instead governed by the terms and conditions set forth in this Agreement. The Employment relationship, however, may be terminated by the Corporation or the Executive prior to the expiration of this twelve (12) month Term pursuant to sections E, F, I, and J respectively of this Agreement.

	3.		As Vice President, the Executive shall perform such duties as may be assigned to the Executive from time to time by the Corporation’s President and Chief Executive Officer (“CEO”) or the Corporation’s Board of Directors (“Board”), including, but not limited to the following: developing and executing plans toward attainment of current and long-range objectives, including achieving orders, revenue, revenue growth and income objectives, maximum return on invested capital, and quality, client satisfaction and employee development goals; developing financial plans and budgets; overseeing all reporting functions; coordinating activities with other vice presidents and supporting departmental directors;supporting Corporate activities including market and sales analyses, strategic planning, R&D planning and project selection, engagement and assessments of potential partners, and the like; supporting the evaluation and analysis of acquisition opportunities, if any, as may be identified from time to time by the President and CEO; helping develop and document novel or typical service programs, procedures and the like; meeting with clients, understanding their product and production methods, and developing timely

2.		LIMITATION ON OUTSIDE ACTIVITIES: The Executive shall devote his full employment energies, interest, abilities and time to the performance of the obligations hereunder and shall not, without written consent of the Corporation, through its President and CEO, render to others any service of any kind for compensation, and in addition, shall not engage in any activity which conflicts or interferes with the performance of the Executive’s duties hereunder.

3.		COMPENSATION: For all services rendered by Executive pursuant to this Agreement, Corporation will pay to Executive, and the Executive will accept as full compensation hereunder, the following:

	1.		Base Salary: The Executive’s annual base salary (“salary”) during calendar year 2002, as determined by the Compensation Committee of the Board, shall be two hundred thousand dollars ($200,000). The salary will be subject to all appropriate federal, state and local withholding requirements and will be payable in equal bi-weekly installments. The Executive’s salary during a subsequent calendar year during the Term of this Agreement will be determined by the Compensation Committee of the Board, but in no event shall the Executive’s salary be less than the salary he received during the prior calendar year.

	2.		Performance Bonus: If the Executive remains in the employ of the Corporation through December 31 of each year during the Term of this Agreement, the Executive shall be eligible for a performance bonus (“bonus”) based on individual and corporate performance factors relating to mutually acceptable objectives. Executive’s bonus will be subject to all appropriate federal, state and local withholding requirements. The exact amount of the bonus will be at the discretion of the Compensation Committee of the Board. Unless otherwise specified in this Agreement, the Corporation will be obligated to pay the Executive the bonus as long as the Executive (a) does not resign from the Corporation before December 31 of each year, or (b) is not terminated for Cause (as hereinafter defined), or (c) does not fail to meet his individual performance objectives. This bonus may also be paid out on a quarterly basis at the discretion of the Compensation Committee of the Board.

	3.		Stock Options: As an inducement to remain in the employ of the Corporation and as an incentive to build the Corporation’s value, the Corporation may grant to

	1.		Medical and Other Insurance Coverage: The Corporation shall provide such medical and other insurance coverage to the Executive to the extent and on the terms that such benefits are made available to other similarly situated employees. This provision does not alter the Corporation’s right to modify or eliminate any employee benefit plan from time to time and does not guarantee the continuation of any kind or level of benefit or perquisite.

	2.		Paid Personal Leave: The Executive shall receive vacation, sick and personal holiday leave pursuant to the Corporation’s Paid Personal Leave Policy (“PPL”) under the schedule for an Executive of the Company, which is attached hereto as Exhibit 2 and incorporated herein by reference.

	3.		Other Perquisites and Benefits: The Corporation will provide the Executive with appropriate office space, as it deems necessary, and will provide telephone, computer, email and internet access as required to perform the Executive’s duties during the term of his employment.

			salary will be paid within ten (10) working days of termination of employment and (b) beginning six (6) months after termination of employment, equal monthly payments for eight (8) months thereafter. This second payment in section (b) will be correspondingly reduced by any base compensation payments the Executive receives through new employment. The Executive is obligated to inform the Corporation, its successors and assigns, in writing within ten (10) calendar days of his acceptance of such new employment and include in this notice what his base compensation and expected start date are. However, if the Executive’s base compensation at such new employment is equal to or exceeds his prior base salary at the Corporation, the Executive may simply confirm this fact in the notice in lieu of disclosing the actual new base compensation figure.

	2.		Stock Options: The disposition of any and all stock options granted by the Corporation to the Executive will be governed by the 1997 Incentive Plan.

	3.		Bonus Compensation: The Corporation shall pay the Executive, within thirty (30) calendar days of termination, his performance bonus, pro-rated to reflect the date of termination.

	4.		Medical Benefits: If the Executive elects to continue medical benefits coverage under COBRA, the Corporation will pay the applicable COBRA premium for a period of the lesser of eighteen (18) months or until such time as the Executive obtains other employment that provides medical benefits coverage, provided the Executive and any of his eligible dependents elect COBRA continuation coverage. This provision is otherwise subject to all applicable COBRA continuation requirements and does not alter the Corporation’s right to amend or terminate its medical plan.

	5.		Other Benefits: If the Executive is involved in pre-approved course work eligible for reimbursement under the Corporation’s Tuition Assistance Program (“Program”) or has an education assistance loan outstanding under that Program, the Corporation will reimburse any remaining balance due on the course work and forgive any indebtedness in connection with the outstanding education assistance loan. This provision is otherwise subject to all applicable Tuition Assistance Program requirements and does not alter the Corporation’s right to amend or terminate its Program.

	(1)		committed an act or acts of personal dishonesty intended to result in the Executive’s personal enrichment at the expense of the Corporation, and which constitute(s) fraud, embezzlement, grand larceny or any felonious act;

	(2)		materially failed or refused to perform the Executive’s essential duties and obligations as an employee of the Corporation;

	(3)		committed an act of willful misconduct;

	(4)		was convicted of a felony or other serious crime;

	(5)		has engaged in the unlawful use of narcotics;

	(6)		engaged in abusive use of alcohol to a degree, or in a manner, that would materially and adversely affect the performance of the Executive’s assigned work or degrade the reputation of the Corporation;

	(7)		violated the terms of the Confidentiality, Trade Secrets and Noncompetition Agreement he signed on December 4, 2000;

	(8)		violated or breached the terms of this Agreement; or

	(9)		is unable to perform the essential functions of his position due to disability, injury, or illness as set forth in section I below or due to death.

	1.		Base Compensation: The Corporation shall pay the Executive his then current salary for the remaining Term of this Agreement or for a period of six (6) months, which ever period is greater. Such compensation shall be paid in equal monthly payments and will be subject to all appropriate federal, state and local withholding requirements.

	2.		Stock Options: The disposition of any and all stock options granted by the Corporation to the Executive will be governed by the 1997 Incentive Plan.

H.		TERMINATION WITH CAUSE — EFFECT ON FUTURE COMPENSATION: In the event Executive is terminated for Cause, Executive will be entitled to no future compensation from the Corporation and any and all stocks options granted by the Corporation to the Executive will be disposed of in accordance with the 1997 Incentive Plan. Moreover, the Executive will not earn any additional compensation after the effective date of such termination.

I.		DISABILITY: If the Executive is unable to perform the essential functions of his position due to illness, injury, or incapacity for a period of more than twelve weeks following the use of all available Paid Personal Leave (“PPL”), the compensation otherwise payable to him under this Agreement shall cease and the Corporation may terminate his employment unless the Board determines otherwise or the Executive is able to perform the essential functions of his position with reasonable accommodation.

J.		TERMINATION OF EMPLOYMENT BY EXECUTIVE: Executive may terminate his employment upon thirty (30) days written notice to the President and CEO. Unless otherwise provided herein, if the Executive terminates his employment, the Executive shall only be entitled to base compensation through the last day actually worked as well as any bonus compensation for which the work period and performance criteria have been fully met. The

		Board may provide the Executive with additional compensation, if the Board in its discretion deems such additional compensation warranted. Also, the disposition of any and all stock options granted by the Corporation to the Executive will be governed by the 1997 Incentive Plan.

K.		CONFIDENTIALITY AND NONCOMPETITION: By signing below, the Executive acknowledges his ongoing and continuing obligation to abide by the Confidentiality, Trade Secrets and Noncompetition Agreement that he executed on December 4, 2000 (“Trade Secrets Agreements”), which is attached hereto as Exhibit 3 and incorporated herein by reference.

L.		NO PRIOR AGREEMENTS: The Executive represents and warrants that he is not a party or otherwise subject to or bound by the terms of any contract, agreement or understanding which in any manner would limit or otherwise affect his ability to perform his obligations hereunder. The Executive further represents and warrants that his employment with the Corporation will not require the disclosure or use of any confidential information belonging to prior employers or to other persons or entities. The Executive understands that the Corporation does not expect or desire and in fact disapproves of and forbids the Executive to use or disclose, in the performance of his duties for the Corporation, any such confidential information belonging to prior employers or other persons or entities.

M.		ASSIGNMENT: This Agreement is personal to Executive and may not be assigned in any way by Executive without prior written consent by the Board of Directors of the Corporation. Any attempted assignment by Executive will be void. Notwithstanding anything in this section to the contrary, however, this Agreement may be assigned by the Corporation to any parent, subsidiary, successor, or affiliate entity. The rights and obligations under this Agreement will inure to the benefit of and will be binding upon the heirs, legatees, administrators, and personal representatives of Executive and upon the successors, representatives, and assigns of the Corporation.

N.		ILLEGAL OR INVALID PROVISION: The parties intend for all provisions of this Agreement to be enforced and enforceable to the fullest extent permitted by law. If any provision of this Agreement is held to be illegal, invalid, or unenforceable under present or future laws in effect during the term hereof, however, that provision will be fully severable. This Agreement will be construed and enforced as if such illegal, invalid, or unenforceable provision had never comprised a part hereof, and the remaining provisions will remain in full force and effect and will not be affected by the illegal, invalid, or unenforceable provision or by its severance from this Agreement. Furthermore, in lieu of each such illegal, invalid, or unenforceable provision, there will be added automatically, as a part of this Agreement, a provision as similar in terms to such illegal, invalid, or unenforceable provision as may be possible and be legal, valid, and enforceable.

O.		GOVERNING LAW: This Agreement shall be construed and governed by the laws of the State of Maryland without regard to any conflict of laws rules or provisions.

P.		ENTIRE AGREEMENT: This Agreement constitutes the entire Agreement between the Corporation and the Executive. This Agreement may not be changed orally, but only by an agreement in writing signed by the parties. This Agreement supersedes all prior agreements, discussions or statements regarding the Executive’s employment, except for the Confidentiality, Trade Secrets and Noncompetition Agreement attached hereto as Exhibit 3, which will survive.

Q.		ARBITRATION: Notwithstanding any other provision in this Agreement, any claim or controversy relating to or arising out of this Agreement shall be resolved exclusively by arbitration in accordance with the commercial rules then obtaining of the American Arbitration Association. This Arbitration provision, including any challenges to its enforceability, is governed by the Federal Arbitration Act. The arbitration shall take place in Montgomery County, Maryland. The Corporation and Executive shall bear separately their respective attorney’s fees. The Corporation shall bear the cost of the arbitration and any fees required by the commercial rules then obtaining of the American Arbitration Association.

R.		MUTUAL UNDERSTANDING: Each party has read this entire Agreement, fully understands the contents hereof, has had the opportunity to obtain independent advice as to its legal effect, and is under no duress or obligation of any kind to execute it. This Agreement reflects the mutual understanding of the parties with the respect to all subject matters addressed herein and will be construed accordingly.

		In accordance with these definitions of Cause, the Board, or a delegated committee of the Board, will in its sole discretion decide whether the Executive shall be terminated for Cause after affording the Executive an opportunity to be heard on the matter. The Board, or the delegated committee of the Board, will in its sole discretion determine the time, place, and manner of the opportunity for the Executive to be heard, but to the extent practicable any such meeting will take place in Montgomery County, Maryland during regular business hours. If the Executive fails to appear or to follow the manner of opportunity afforded by the Board or its committee, the Board, or the delegated committee, may render its decision without hearing the Executive’s views.

		Any reason for termination other than those set forth above will be deemed to be Without Cause.

G.		TERMINATION WITHOUT CAUSE — EFFECT ON FUTURE COMPENSATION: In the event Executive is terminated Without Cause and there has not been a “change in control” as defined in section E of the Agreement, Executive will be entitled to receive the following compensation and benefits:

4.		Termination of Employment:

A.		Termination Upon Change In Control: Notwithstanding any other provision in this Agreement, if there is a “change in control” of BioReliance Corporation (as hereinafter defined) during the term of this Agreement, and within twelve (12) months thereafter, either (1) the Executive is terminated Without Cause (as hereinafter defined) or (2) the Executive’s responsibilities are significantly reduced and, as a result, the Executive terminates his employment pursuant to this Agreement, the Executive shall be entitled to the compensation and benefits set forth below.

	(2)		Stock Options: The disposition of any and all stock options granted by BioReliance Corporation to the Executive will be governed by the 1997 Incentive Plan (as amended and restated).

	(3)		Bonus Compensation: The Company shall pay the Executive, within thirty (30) calendar days of termination, his performance bonus, pro-rated to reflect the date of termination.

	(4)		Medical Benefits: If the Executive elects to continue medical benefits coverage under the UK Company’s Private Healthcare program, the Company will pay the applicable premium for a period of the lesser of sixteen (16) months or until such time as the Executive obtains other employment that provides private healthcare coverage, provided the Executive and any of his eligible dependants elect the UK Company’s Private Healthcare program. This provision is otherwise subject to all applicable UK Company Private Healthcare program continuation requirements and does not alter the Company’s right to amend or terminate its medical plan.

	(5)		Other Benefits: The Company will continue to provide other benefits current at the time of termination, e.g. fully expensed lease car, for a period of the lesser of sixteen (16) months or until such time as the Executive obtains other employment that provides similar benefits.

		A “change in control” for purpose of this Agreement shall be deemed to have occurred if BioReliance Corporation is subject to an acquisition in accordance with Section 2.12 (1) of BioReliance Corporation’s 1997 Incentive Plan (as amended and restated), which is attached hereto as Exhibit 1.

		The privileges, compensation, and benefits set forth in this section, Termination Upon Change In Control, survive the expiration of this Agreement as long as there is a “change in control” as herein defined during the term of this Agreement.

		All compensation paid by the Company will be subject to all appropriate UK tax laws.

B.		Termination Other Than Upon Change In Control

		Termination by the Executive: The Executive may terminate his employment upon ninety (90) days written notice to the President and CEO. Unless otherwise provided herein, if the Executive terminates his employment, the Executive shall only be entitled to base compensation through the last day actually worked as well as any bonus compensation for which the work period and performance criteria have been fully met. The Board may provide the Executive with additional compensation, if the Board in its discretion deems such additional compensation warranted. Also, the disposition of any and all stock options granted by BioReliance Corporation to the Executive will be governed by the 1997 Incentive Plan (as amended and restated).


			In accordance with these definitions of Cause, the Board of Directors, or a delegated committee of the Board, will in its sole discretion decide whether the Executive shall be terminated for Cause after affording the Executive an opportunity to be heard on the matter. The Board, or the delegated committee of the Board, will in its sole discretion determine the time, place, and manner of the opportunity for the Executive to be heard, but to the extent practicable any such meeting will take place in Montgomery County, Maryland, USA during regular business hours. If the Executive fails to appear or to follow the manner of opportunity afforded by the Board or its committee, the Board, or the delegated committee, may render its decision without hearing the Executive’s views.

			Disability: If the Executive is unable to perform the essential functions of his position due to illness, injury, or incapacity for a period of more than fourteen


			(14) weeks, the compensation otherwise payable to him under this Agreement shall cease and the Company may terminate his employment unless the Board determines otherwise or the Executive is able to perform the essential functions of his position with reasonable accommodation.

			Effect on Future Compensation – Termination for Cause: In the event Executive is terminated for Cause, Executive will be entitled to no future compensation from the Company and any and all stocks options granted by BioReliance Corporation to the Executive will be disposed of in accordance with the 1997 Incentive Plan (as amended and restated). Moreover, the Executive will not earn any additional compensation after the effective date of such termination.

	(2)		Without Cause: If the Executive is terminated Without Cause or the Executive’s responsibilities are significantly reduced and, as a result, the Executive terminates his employment pursuant to this Agreement, the Executive shall be entitled to the compensation and benefits set forth below.

			Effect on Future Compensation – Termination Without Cause: In the event the Executive is terminated Without Cause and there has not been a “change in control” as defined in this Agreement, the Executive will be entitled to receive the following compensation and benefits:


	(a)		notice of at least twelve (12) months of continued employment, or

	(b)		up to twelve (12) months pay in lieu of notice, or

	(c)		a combination of the two.

7.		Arbitration:

		Notwithstanding any other provision in this Agreement, any claim or controversy relating to or arising out of this Agreement shall be resolved exclusively by arbitration in accordance with the commercial rules then obtaining of the American Arbitration Association. This Arbitration provision, including any challenges to its enforceability, is governed by the Federal Arbitration Act. The arbitration shall take place in Montgomery County, Maryland. The Company and Executive shall bear separately their respective attorney’s fees. The Company shall bear the cost of the arbitration and any fees required by the commercial rules then obtaining of the American Arbitration Association.

4.		Termination

		Your decision to voluntarily resign from your position must provide the Company with a minimum of ninety (90) days notice. Likewise, a Company initiated termination will include either (a) notice of at least twelve (12) months of continued employment, or (b) up to twelve (12) months pay in lieu of notice, or (c) a combination of the two. According to Company policy, such pay in lieu of notice will be paid through the normal payroll and will cease upon your becoming gainfully employed elsewhere. Regular health care benefits will continue at Company expense throughout the duration of approved pay in lieu of notice.

	1.		The Executive is currently employed as the President and Chief Executive Officer (“CEO”) of the Corporation. Commencing on the effective date of this Agreement for a term of twelve (12) months (hereinafter referred to as “Term”), the Corporation hereby agrees to continue to employ the Executive in his current position or a comparable position consistent with his qualifications and experience, and the business needs of the Corporation. At the end of this twelve (12) month Term, this Agreement and all its provisions will renew once for another Term of twelve (12) months, unless ninety (90) days prior to the end of the original Term, the Executive or the Chairman of the Board of the Corporation provides written notice to the other of an intent not to renew the Agreement.

	2.		Such employment relationship is not at-will and is instead governed by the terms and conditions set forth in this Agreement. The Employment relationship, however, may be terminated by the Corporation or the Executive prior to the expiration of this twelve (12) month Term pursuant to sections E, F, I, and J respectively of this Agreement.

	3.		As President and CEO, the Executive shall hold the responsibilities of the most senior executive in the Corporation and shall perform such duties as may be assigned to the Executive from time to time by the Corporation’s Board of Directors (“the Board”), including, but not limited to the following: overseeing all corporate functions; directing the organization toward the attainment of sales and profit goals and maximum return on invested capital; formulation of current and long-range plans and objectives including quality, client satisfaction and Executive development goals; and representing the organization in relations with its clients and the communities in which it does business.

		the Total Payments shall be reduced (but not below zero) if and to the extent necessary so that no portion of the Total Payments will be subject to the Excise Tax. The Corporation shall reduce or eliminate the Total Payments by first reducing or eliminating the portion of the Total Payments which is payable in cash and then by reducing or eliminating payments which are not payable in cash, in each case in reverse order beginning with payments or benefits which are paid the farthest in time from the determination that the Total Payments need to be reduced. All determinations required to be made under this provision shall be made by a nationally recognized accounting firm that is the Corporation’s outside auditor at the time of such determinations.

		Any dispute between the Executive and the Corporation, it successors and assigns, involving section E will be resolved by arbitration in accordance with section Q below, except any 280G determination made by Corporation’s outside auditor shall be binding, final, and conclusive upon the Corporation and the Executive.

F.		TERMINATION OF EMPLOYMENT: During the Term of this Agreement, Executive’s employment is not at-will and may be terminated by the Corporation only on two bases: (1) Cause; or (2) Without Cause. As used in this Agreement, “Cause” shall mean that the Executive: