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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 June 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to ______________
Commission File Number 0-22879
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 July 31, 1999, 7,928,213 shares of registrant's Common Stock, par value
$.01 per share, were outstanding.
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BIORELIANCE CORPORATION
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C>
PART I FINANCIAL INFORMATION
Item 1 - Financial Statements:
Consolidated Balance Sheets as of December 31, 1998 and
June 30, 1999 ................................................... 3
Consolidated Statements of Income for the Three Months and
Six Months Ended June 30, 1998 and 1999 ......................... 4
Consolidated Statements of Cash Flows for the Six Months
Ended June 30, 1998 and 1999 .................................... 5
Notes to Consolidated 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
PART II OTHER INFORMATION ......................................................... 21
SIGNATURES ........................................................................ 23
EXHIBIT INDEX ..................................................................... 24
</TABLE>
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PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BIORELIANCE CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
JUNE 30,
DECEMBER 31, 1999
1998 (UNAUDITED)
-------- --------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents ..................................... $ 8,847 $ 12,626
Marketable securities ......................................... 18,250 9,911
Accounts receivable, net ...................................... 21,399 20,555
Other current assets .......................................... 2,506 1,884
-------- --------
Total current assets ...................................... 51,002 44,976
Property and equipment, net ......................................... 25,371 28,069
Deposits and other assets ........................................... 572 990
-------- --------
Total assets .............................................. $ 76,945 $ 74,035
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt ............................. $ 4,628 $ 4,007
Accounts payable .............................................. 2,685 3,044
Accrued employee compensation and benefits .................... 1,955 1,998
Other accrued liabilities ..................................... 1,732 1,737
Customer advances ............................................. 2,632 1,764
Deferred income taxes ......................................... 1,551 0
-------- --------
Total current liabilities ................................. 15,183 12,550
Deferred taxes ...................................................... 25 1,790
Long-term debt ...................................................... 7,914 7,891
-------- --------
Total liabilities ......................................... 23,122 22,231
-------- --------
Commitments and contingencies
Stockholders' equity:
Convertible 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;
7,821,344 and 7,911,469 shares issued and outstanding ....... 78 79
Additional paid-in capital .................................... 52,586 52,736
Retained earnings (deficit) ................................... 1,449 (25)
Accumulated other comprehensive income ........................ (290) (986)
-------- --------
Total stockholders' equity ................................ 53,823 51,804
-------- --------
Total liabilities and stockholders' equity ................ $ 76,945 $ 74,035
======== ========
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
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BIORELIANCE CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------ ------------------------
1998 1999 1998 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenue ................................... $ 12,677 $ 11,816 $ 24,648 $ 22,132
-------- -------- -------- --------
Expenses:
Cost of sales ..................... 6,611 7,585 13,757 15,175
Selling, general and administrative 3,810 4,336 6,704 8,421
Research and development .......... 347 310 733 665
-------- -------- -------- --------
10,768 12,231 21,194 24,261
-------- -------- -------- --------
Income (loss) from operations ............. 1,909 (415) 3,454 (2,129)
-------- -------- -------- --------
Other (income) expense:
Interest income ................... (434) (325) (920) (786)
Interest expense .................. 73 191 232 384
Other (income) expense ............ 139 196 271 243
-------- -------- -------- --------
(222) 62 (417) (159)
-------- -------- -------- --------
Income (loss) before income taxes ......... 2,131 (477) 3,871 (1,970)
Income tax provision (benefit) ............ 813 (130) 1,547 (496)
-------- -------- -------- --------
Net income (loss) ......................... $ 1,318 $ (347) $ 2,324 $ (1,474)
-------- -------- -------- --------
Net income (loss) per share:
Basic ............................. $ 0.17 $ (0.04) $ 0.30 $ (0.19)
======== ======== ======== ========
Diluted ........................... $ 0.16 $ (0.04) $ 0.28 $ (0.19)
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
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BIORELIANCE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
------------------------
1998 1999
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) .............................................. $ 2,324 $ (1,474)
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation ............................................... 1,546 2,160
Amortization expense ....................................... 118 127
Amortization of bond premiums and discounts ................ (96) (290)
Loss on disposal ........................................... 20 2
Deferred income taxes, net ................................. -- 214
Changes in current assets and liabilities:
Accounts receivable, net ............................... (3,869) 1,013
Other current assets ................................... (438) 551
Accounts payable ....................................... (679) 468
Accrued employee compensation and benefits ............. (788) 49
Other accrued liabilities .............................. 710 (129)
Customer advances ...................................... 438 (785)
Increase in deposits and other assets ...................... (96) (616)
-------- --------
Net cash provided by (used in) operating activities (810) 1,290
-------- --------
Cash flows from investing activities:
Purchases of marketable securities ........................... (21,997) (5,871)
Proceeds from the maturities of marketable securities ........ 23,150 14,500
Purchases of property and equipment .......................... (1,492) (4,824)
-------- --------
Net cash provided by (used in) investing activities (339) 3,805
-------- --------
Cash flows from financing activities:
Proceeds from exercise of stock options ..................... 249 151
Payments on debt ............................................ (400) (329)
Payments on capital lease obligations ....................... (341) (474)
Repurchase and cancellation of treasury stock ............... (139) --
-------- --------
Net cash used in financing activities ............. (631) (652)
-------- --------
Effect of exchange rate changes on cash and cash equivalents ..... 51 (664)
-------- --------
Net increase (decrease) in cash and cash equivalents ............. (1,729) 3,779
Cash and cash equivalents, beginning of period ................... 6,227 8,847
-------- --------
Cash and cash equivalents, end of period ......................... $ 4,498 $ 12,626
======== ========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
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BIORELIANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) DESCRIPTION OF THE BUSINESS
BioReliance Corporation (the "Corporation") is a contract service
organization providing nonclinical testing and contract manufacturing services
for biologics 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 the 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 six-month periods ended June 30, 1998 and 1999 include all
normal and recurring adjustments which are necessary for a fair presentation of
the results of the interim period. The results of operations for the three-month
and six-month periods ended June 30, 1998 and 1999 may not necessarily be
indicative of the results for the entire year ending December 31, 1999.
(3) NET INCOME (LOSS) 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
which they have an anti-dilutive effect. Net income (loss) available to common
stockholders and common equivalent stockholders is equal to net income (loss)
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:
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
1998 1999 1998 1999
----- ----- ----- -----
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Weighted average common stock
outstanding ...................... 7,799 7,858 7,766 7,846
Stock options, as if converted .. 452 -- 570 --
----- ----- ----- -----
Weighted average common and common
equivalent shares outstanding .... 8,251 7,858 8,336 7,846
===== ===== ===== =====
</TABLE>
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(4) SEGMENT INFORMATION
Summarized financial information concerning the Corporation's reportable
segments, for the three months and six months ended June 30, is shown in the
following table:
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
1998 1999 1998 1999
-------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Revenues:
Testing and Development $ 11,415 $ 11,213 $ 22,023 $ 20,151
Manufacturing 1,262 603 2,625 1,981
-------- -------- -------- --------
Total $ 12,677 $ 11,816 $ 24,648 $ 22,132
======== ======== ======== ========
Gross Profit:
Testing and Development $ 6,302 $ 4,896 $ 11,131 $ 7,684
Manufacturing (236) (665) (240) (727)
-------- -------- -------- --------
Total $ 6,066 $ 4,231 $ 10,891 $ 6,957
======== ======== ======== ========
</TABLE>
The following table outlines the Corporation's revenues and gross profit by
geographic region for the three months and six months ended June 30:
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
1998 1999 1998 1999
------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Revenues:
United States $11,072 $10,026 $21,187 $18,544
Europe 1,605 1,790 3,461 3,588
------- ------- ------- -------
Total $12,677 $11,816 $24,648 $22,132
======= ======= ======= =======
Gross Profit:
United States $ 5,678 $ 3,573 $ 9,753 $ 5,944
Europe 388 658 1,138 1,013
------- ------- ------- -------
Total $ 6,066 $ 4,231 $10,891 $ 6,957
======= ======= ======= =======
</TABLE>
(5) NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 133, "Accounting for Derivatives Instruments and for Hedging Activities."
SFAS No. 133 requires all derivatives to be recorded on the balance sheet at
fair value and establishes "special accounting" for the following three
different types of hedges: hedges of changes in the fair value of assets,
liabilities or firm commitments; hedges of the variable cash flows of forecasted
transactions; and hedges of foreign currency exposures of net investments in
foreign operations. SFAS No. 133 is effective for years beginning after June 15,
1999, with earlier adoption permitted. On July 8, 1999, the FASB issued SFAS No.
137, "Accounting for Derivative Instruments and Hedging Activities - Deferral of
the Effective Date of FASB Statement No. 133." SFAS No. 137 defers the effective
date of SFAS No. 133 until fiscal years beginning after
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June 15, 2000. The Corporation believes that the effect of adoption of SFAS No.
133 will not be material.
(6) CONTINGENCIES
The Corporation is involved in various claims and legal proceedings arising
in the ordinary course of business. The Corporation does not believe that such
claims or proceedings, individually or in the aggregate, will have a material
adverse effect on the Corporation's consolidated financial position or results
of operations.
The Corporation has been identified by the U.S. Environmental Protection
Agency ("EPA") as one of several hundred potentially responsible parties
("PRPs") under CERCLA with respect to the Ramp Industries, Inc., site in Denver,
Colorado. Although the Corporation believes that it sent only a small quantity
of waste to this site, liability under CERCLA can exceed a PRP's pro rata share
of cleanup costs. The EPA has incurred approximately $5 million to date to
remove wastes from this site and expects to incur approximately an additional
$1.3 million to remove the remaining wastes. However, the estimated total
cleanup costs have not been determined. A joint settlement proposal was
developed in October 1997 and submitted to EPA Region VIII representatives, who
have agreed to support the proposal to Senior EPA management and the Department
of Justice. There can be no assurance at this time that the joint settlement
proposal will be accepted by the Department of Justice. The Corporation believes
that the outcome of this matter will not have a material adverse effect on the
Corporation's financial position or results of operations.
(7) SUBSEQUENT EVENTS
On July 1, 1999, the Corporation received the proceeds of a $3,000,000 loan
from the Department of Business and Economic Development, a principal department
of the State of Maryland. The Corporation is required to use the proceeds in
connection with the Corporation's expansion and relocation 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% to 7.5% based on the Corporation's achieving specific employment
levels over the next nine years. The terms of the loan contain annual reporting
requirements, including the periodic reporting of employment data.
8
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Certain statements made in this Report 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, 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 involve risks and
uncertainties that 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 Securities and Exchange
Commission, including in its Prospectus, dated July 28, 1997, and its Forms 10-K
and 10-Q, and include, among others, the following: general economic and market
conditions; the size and growth of the overall markets for biopharmaceuticals,
including the amounts spent on research and development by biotechnology and
pharmaceutical companies; changes in government regulations; the size, timing
and mix of contracts for the Corporation's products and services; the ability of
BioReliance to attract and retain qualified technical and management personnel;
seasonal demand for the Corporation's products and services; fluctuations and
difficulty in forecasting operating results; the ability of BioReliance to
sustain, manage or forecast its growth and utilize its facilities; the loss of
significant contracts or customers; business disruptions and other factors
referenced in the above reports. 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.
Given these risks and uncertainties, investors should not place undue reliance
on forward-looking statements as a prediction of actual results.
While BioReliance does, from time to time, communicate with securities
analysts, it is against BioReliance's policy to disclose to them any material
non-public information or other confidential information. Accordingly,
shareholders should not assume that BioReliance agrees with any statement or
report issued by any analyst irrespective of the content of the statement or
report. Furthermore, BioReliance has a policy against issuing or confirming
financial forecasts or projections issued by others. Thus, to the extent that
reports issued by securities analysts contain any projections, forecasts or
opinions, such reports are not the responsibility of BioReliance.
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.
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RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1999 COMPARED WITH THREE MONTHS ENDED JUNE 30, 1998
Revenue was $11.8 million in the three months ended June 30, 1999, a
decrease of 7.1% from revenue of $12.7 million in the three months ended June
30, 1998. The decrease was attributable to a decrease in both the U.S. testing
and development and manufacturing segments. Testing and development services
generated revenue of $11.2 million for the three months ended June 30, 1999, a
decrease of 1.8% from revenue of $11.4 million for the three months ended June
30, 1998. Manufacturing services generated revenue of $.6 million for the three
months ended June 30, 1999 and $1.3 million for the three months ended June 30,
1998. The decrease in testing and development revenue can be attributed to lower
than expected orders primarily in the U.S. In addition, in the development area,
a number of projects were delayed or diminished in scope by some customers. The
testing and development revenue decrease in the U.S. was partially offset by an
increase in European testing and development revenue, as evidenced by increased
viral clearance revenues in both Germany and the U.K. In the manufacturing
segment, revenue decreased for both the U.S. and Europe. European manufacturing
revenues were adversely affected by client delays for planned projects and
delays in obtaining new manufacturing contracts in Germany in the second
quarter. Testing and development services and manufacturing services accounted
for 94.8% and 5.2%, respectively, of the Corporation's revenue for the three
months ended June 30, 1999 and 90.0% and 10.0%, respectively, of the
Corporation's revenue for the three months ended June 30, 1998. Revenue
generated in Europe increased from $1.6 million for the three months ended June
30, 1998 to $1.8 million for the three months ended June 30, 1999, a 12.5%
increase.
Cost of sales was $7.6 million for the three months ended June 30, 1999, an
increase of 15.1% over cost of sales of $6.6 million in the three months ended
June 30, 1998. As a percentage of total revenue, cost of sales increased to
64.1% for the three months ended June 30, 1999 from 52.1% for the three months
ended June 30, 1998. The increase was primarily due to increased cost of sales
in the U.S. related to increased direct expenses such as materials and labor and
related fringe benefits. Gross profit for testing and development services was
$4.9 million for the three months ended June 30, 1999, a decrease from gross
profit of $6.3 million for the three months ended June 30, 1998. The decrease in
gross profit can be primarily attributed to a decrease in revenues for testing
and development combined with an increase in cost of sales. Gross profit for
manufacturing reflected a loss of $.7 million for the three months ended June
30, 1999, while manufacturing services generated a loss of $.2 million for the
three months ended June 30, 1998. Gross profit for Europe increased from $.4
million for the three months ended June 30, 1998 to $.7 million for the three
months ended June 30, 1999, an increase of 75%.
Selling, general and administrative expense was $4.3 million for the three
months ended June 30, 1999, an increase of 13.1% over selling, general and
administrative expense of $3.8 million in the three months ended June 30, 1998.
As a percentage of revenue, selling, general and administrative expenses
increased to 36.6% for the three months ended June 30, 1999 from 30.0% for the
three months ended June 30, 1998. The increase is a result of an increase in
facilities costs as the Corporation moved to a new headquarters in the latter
half of 1998, as well
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as increased depreciation and other expenses related to the Corporation's
investment in an enterprise information system, expansion of the U.K. facility
capacity, and an increase in the bad debt allowance. The increase in the bad
debt allowance is primarily the result of ongoing reviews of all customer
projects and trade receivables.
Research and development expense remained constant at $.3 million for the
three months ended June 30, 1999 and June 30, 1998. These expenses represent the
investment of internal resources to develop new methods and tests to support the
Corporation's services.
The Corporation reported a loss from operations of $.4 million for the three
months ended June 30, 1999, as compared to income from operations of $1.9
million for the three months ended June 30, 1998. The change can be attributed
to decreases in revenue and an increase in cost of sales and operating expenses.
The Corporation expensed net interest and other income of $62,000 for the
three months ended June 30, 1999, a decrease of 130.0% compared to net interest
and other income of $.2 million in the three months ended June 30, 1998.
Interest income was $.3 million for the three months ended June 30, 1999 and $.4
million for the three months ended June 30, 1998. Interest expense was $.2
million for the three months ended June 30, 1999 and $.1 million for the three
months ended June 30, 1998.
The benefit from income taxes was $130,000 for the three months ended June
30, 1999, compared to a provision for income taxes of $813,000 for the three
months ended June 30, 1998. The effective tax rate was 27.2% for the three
months ended June 30, 1999 and 38.1% for the three months ended June 30, 1998.
The benefit is the result of the loss before income taxes recorded for the three
months ended June 30, 1999.
The Corporation reported a net loss of $.3 million for the three months
ended June 30, 1999, as compared to net income of $1.3 million for the three
months ended June 30, 1998. The loss can be attributed to decreased revenues and
increased cost of sales and operating expenses, slightly offset by an income tax
benefit, for the three months ended June 30, 1999.
SIX MONTHS ENDED JUNE 30, 1999 COMPARED WITH SIX MONTHS ENDED JUNE 30, 1998
Revenue was $22.1 million in the six months ended June 30, 1999, a decrease
of 10.2% from revenue of $24.6 million in the six months ended June 30, 1998.
The decrease was attributable to both U.S. segments, testing and development and
manufacturing. Testing and development services generated revenue of $20.1
million for the six months ended June 30, 1999, a decrease of 8.6% from revenue
of $22.0 million for the six months ended June 30, 1998. Manufacturing services
generated revenue of $2.0 million for the six months ended June 30, 1999 and
$2.6 million for the six months ended June 30, 1998. The decrease can be
attributed to lower than expected orders in the U.S. Additionally, in the
development area, a number of projects were delayed or the scope of planned
projects was diminished by some customers. In manufacturing services, increases
in revenue generated by Germany and the U.K. partially offset the decrease in
the U.S. revenues. The increase in manufacturing in Europe is primarily
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attributable to additional revenues from a new contract in 1999. Testing and
development services and manufacturing services accounted for 91.0% and 9.0%,
respectively, of the Corporation's revenue for the six months ended June 30,
1999 and 89.3% and 10.7%, respectively, of the Corporation's revenue for the six
months ended June 30, 1998. Revenue generated in Europe increased from $3.5
million for the six months ended June 30, 1998 to $3.6 million for the six
months ended June 30, 1999, a 2.8% increase.
Cost of sales was $15.2 million for the six months ended June 30, 1999, an
increase of 10.1% over cost of sales of $13.8 million for the six months ended
June 30, 1998. As a percentage of total revenue, cost of sales increased to
68.5% for the six months ended June 30, 1999 from 55.8% for the six months ended
June 30, 1998. The increase in cost of sales, primarily in the testing and
development segment relates to increased direct expenses such as materials and
labor and related fringe benefits. Gross profit for testing and development
services was $7.7 million for the six months ended June 30, 1999, a decrease
from a gross profit of $11.1 million for the six months ended June 30, 1998.
Gross profit for manufacturing services generated a loss of $.7 million for the
six months ended June 30, 1999, while manufacturing services generated a loss of
$.2 million for the six months ended June 30, 1998. Gross profit for Europe
decreased from $1.1 million for the six months ended June 30, 1998 to $1.0
million for the six months ended June 30, 1999, a decrease of 9.1%. The decrease
in gross profit is a result of the combination of a decrease in revenues and an
increase in cost of sales.
Selling, general and administrative expense was $8.4 million for the six
months ended June 30, 1999, an increase of 25.4% over selling, general and
administrative expense of $6.7 million in the six months ended June 30, 1998. As
a percentage of revenue, selling, general and administrative expenses increased
to 38% for the six months ended June 30, 1999 from 27.1% for the six months
ended June 30, 1998. The increase is a result of an increase in facilities costs
as the Corporation moved to a new headquarters in the latter half of 1998, as
well as increased depreciation and other expenses related to the Corporation's
investment in an enterprise information system, and an increase in bad debt
allowance. The increase in the bad debt allowance is primarily the result of
ongoing reviews of customer projects and trade receivables.
Research and development expense remained constant at $.7 million for the
six months ended June 30, 1999 and June 30, 1998. These expenses represent the
investment of internal resources to develop new methods and tests to support the
Corporation's services.
The Corporation reported a loss from operations of $2.1 million for the six
months ended June 30, 1999, as compared to income from operations of $3.5
million for the six months ended June 30, 1998. The change can be attributed to
decreases in revenue and increases in operating expenses.
The Corporation earned net interest and other income of $.2 million for the
six months ended June 30, 1999 and $.4 million for the six months ended June 30,
1998. Interest income was $.8 million for the six months ended June 30, 1999 and
$.9 million for the six months ended June 30, 1998. Interest expense was $.4
million for the six months ended June 30, 1999 and $.2 million for the six
months ended June 30, 1998.
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The benefit from income taxes was $496,000 for the six months ended June 30,
1999, compared to a provision for income taxes of $1,547,000 for the six months
ended June 30, 1998. The effective tax rate was 25.1% for the six months ended
June 30, 1999 and 39.9% for the six months ended June 30, 1998. The benefit is
the result of the loss before income taxes recorded for the six months ended
June 30, 1999.
The Corporation reported a net loss of $1.5 million for the six months ended
June 30, 1999, as compared to net income of $2.3 million for the six months
ended June 30, 1998. The loss can be attributed to decreased revenues and
increased operating expenses, which were slightly offset by an income tax
benefit for the six months ended June 30, 1999.
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 June 30, 1999, the
Corporation had cash, cash equivalents and marketable securities of $22.5
million, compared to cash, cash equivalents and marketable securities of $27.1
million at December 31, 1998.
The Corporation generated cash flows from operations of $1.3 million for the
six months ended June 30, 1999, compared to using net cash from operations of
$.8 million in the six months ended June 30, 1998. Net income (loss), as
adjusted for depreciation and amortization, and deferred income taxes, provided
$.7 million and $3.9 million of cash for the six months ended June 30, 1999 and
1998, respectively. This decrease in adjusted net income (loss) was due
primarily to the Corporation's net loss for the six months ended June 30, 1999.
Changes in other assets and liabilities provided cash of $.6 million for the six
months ended June 30, 1999 primarily due to decreases in accounts receivable and
other current assets and increases in accounts payable, offset by decreases in
customer advances and increases in deposits and other assets. Changes in other
assets and liabilities used cash of $4.7 million for the six months ended June
30, 1998 primarily due to an increase in accounts receivable and other current
assets and decreases in accounts payable offset by an increase in customer
advances.
Working capital decreased to $32.4 million at June 30, 1999, compared to
$35.8 million at December 31, 1998. The net decrease in working capital
primarily was due to a decrease in cash and cash equivalents and marketable
securities and decreases in accounts receivable and other current assets. This
decrease in current assets was partially offset by a decrease in current
liabilities, resulting primarily from a decrease in the current portion of the
deferred income tax liability and repayments on debt obligations.
The Corporation spent $4.8 million for capital expenditures for the six
months ended June 30, 1999 and $1.5 million for the six months ended June 30,
1998. Capital expenditures for the six months ended June 30, 1999 were primarily
related to continued investments in facilities and information systems.
The Corporation's corporate headquarters facility in Rockville, Maryland,
constructed under a build-to-lease agreement, was completed in August 1998. The
headquarters facility
13
<PAGE> 14
consolidated existing research and development, other laboratory and
administrative activities and expanded the Corporation's laboratory and other
capacity for operations. The lease agreement requires the Corporation to make
noncancelable lease payments totaling approximately $11.5 million over the
remaining 14 years.
In April 1998, the Corporation entered into third-party leasing and
subleasing arrangements with Montgomery County, Maryland and a developer
providing for the construction of the exterior shell of a new manufacturing
facility in Rockville, Maryland. These arrangements require the Corporation to
make certain net noncancelable lease payments totaling approximately $13.3
million over the next twenty years and to guarantee indebtedness of
approximately $4.5 million incurred by the developer to construct the exterior
shell of the facility.
At June 30, 1999, the Corporation had commitments to spend approximately
$14.0 million in capital expenditures including leasehold improvements and
laboratory equipment during the remainder of 1999 and the first quarter of 2000
related to this new manufacturing facility. The Corporation accounts for the
leases and subleases of the manufacturing facility as capital leases. The assets
underlying the capital leases are included with the Corporation's owned property
and equipment as of June 30, 1999. Property and equipment at June 30, 1999
includes approximately $4.6 million related to these capital leases, of which
$100,000 is capitalized interest. The related obligation is included in the
Corporation's liabilities at June 30, 1999.
A portion of the Corporation's capital expenditures during the first six
months of 1999 included an investment in an enterprise information system. The
Corporation expects to spend an additional $2.1 million on information systems
during the remainder of 1999. The Corporation believes that its information
systems will maximize compatibility and integration internally and with the
Corporation's clients.
In addition, at June 30, 1999, the Corporation had commitments to spend
approximately $326,000 for furniture and building fixtures and approximately
$16,000 for laboratory equipment.
The Corporation expects to continue expanding its operations through
internal growth, geographic expansion and possible strategic acquisitions. The
Corporation expects to fund its growth from existing cash, cash flows from
operations, bank borrowings and lease financing. 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.
Based on its current operating plan, the Corporation believes that available
liquid resources are sufficient to meet its foreseeable cash needs.
14
<PAGE> 15
BORROWINGS AND CREDIT FACILITIES
In 1994, the Corporation obtained a loan of $4,300,000 from NationsBank with
a maturity date of November 30, 1999 (the "Mortgage Loan"). The terms of the
Mortgage Loan were amended in October 1997 and April 1998 to modify the
Corporation's financial covenants, release foreign subsidiaries as guarantors
and make other modifications. In addition to a principal payment of $30,000 per
month, the note 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 0.85% to 2.0% depending on the Corporation
achieving certain funded debt to EBITDA ratios. At June 30, 1999 the applicable
interest rate was 7.0% and the LIBOR Rate Option was 2.0%. At June 30, 1999,
approximately $2.7 million was outstanding on the loan.
In May 1995, the Corporation entered into an interest rate swap agreement
whereby the variable interest rate of the Mortgage Loan was effectively
converted into debt with a fixed rate of 6.55% per annum. This agreement expires
on November 30, 1999. Amounts to be paid or received under the interest rate
swap agreement are recognized as interest income or expense in the periods in
which they accrue and are recorded in the same category as that arising from the
Mortgage Loan. The swap agreement is a standard contract that has no imbedded
options or other terms involving a higher level of complexity or risk. The
interest rate swap agreement and the LIBOR Rate Option resulted in an 8.55%
effective interest rate at June 30, 1999. The effect of the interest rate swap
agreement on interest expense was not material in the quarters ended June 30,
1998 and 1999.
The Corporation has available borrowings up to $1,000,000 under the terms of
a revolving loan agreement with NationsBank. 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, 2001. Amounts
borrowed under the revolving loan agreement bear interest at the same rate as
the Mortgage Loan. At June 30, 1999, no amounts were outstanding under the
facility. This line of credit expires in May 2001.
The Corporation financed the acquisition of BIOMEVA in July 1996 and
obtained additional funds for working capital and expansion of its business
through a promissory note with NationsBank in the amount of $1.8 million with an
original maturity of June 30, 1999. The note requires monthly principal payments
of $30,000, and bears interest at the same rate as the Mortgage Loan. At June
30, 1999, $.7 million was outstanding on the note. The interest rate on the note
was 6.9% at June 30, 1999. The note was amended on June 30, 1999 to extend the
maturity date to June 30, 2001. The amendment requires the Corporation to
continue making monthly principal payments of $30,000 plus interest through June
30, 2001.
All of the Corporation's agreements with NationsBank 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 meet certain financial and restrictive ovenants, including
maintaining profitability, certain tangible net worth levels and funded debt to
EBITDA ratios.
15
<PAGE> 16
On July 1, 1999, the Corporation received the proceeds of a $3,000,000 loan
from the Department of Business and Economic Development, a principal department
of the State of Maryland. The Corporation is required to use the proceeds in
connection with the Corporation's expansion and relocation 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% to 7.5% based on the Corporation's achieving specific employment
levels over the next nine years. The terms of the loan contain annual reporting
requirements, including the reporting of employment data.
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 such translations
are excluded from net income and are accumulated in a separate component of
stockholders' equity.
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 risks sometimes
associated with international operations. The Corporation derived 15.2% of its
revenue for the three months ended June 30, 1999 and 12.7% of its revenue for
the three months ended June 30, 1998 from services performed outside of the
United States. The Corporation derived 16.2% of its revenue for the six months
ended June 30, 1999 and 14.0% of its revenue for the six months ended June 30,
1998 from services performed outside of the United States. 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.
There can be no assurance that the Corporation will not experience
fluctuations in financial results from the Corporation's operations outside the
United States, and there can be no assurance the Corporation will be able,
contractually or otherwise, to reduce the currency risks associated with its
operations. Although at the present time the Corporation does not use derivative
financial instruments to manage or control foreign currency risk, there can be
no assurance that the Corporation will not use such financial instruments in the
future or that any such use will be successful in managing or controlling
foreign currency risk.
16
<PAGE> 17
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. The existing local currencies, or legacy
currencies, are planned to remain legal tender through January 1, 2002.
Beginning on January 1, 2002, Euro-denominated bills and coins are planned to be
issued for cash transactions. For a period of six months from this date, both
legacy currencies and the Euro are planned to be legal tender. On or before July
1, 2002, the participating countries are planned to withdraw all legacy currency
and use the Euro exclusively.
The introduction of the Euro may have potential implications for the
Corporation's existing operations. Currently, Germany is the only participating
country in the EMU in which the Corporation has operations. While one cannot
predict such events, many authorities expect non-participating European Union
countries, such as Great Britain, to eventually join the EMU. The Corporation
does not currently expect to experience any operational disruptions or to incur
any costs as a result of the introduction of the Euro that would materially
affect the Corporation's liquidity or capital resources.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS 133"). SFAS 133 requires all derivatives to be
recorded on the balance sheet at fair value and establishes "special accounting"
for the following three different types of hedges: hedges of changes in the fair
value of assets, liabilities or firm commitments; hedges of the variable cash
flows of forecasted transaction; and hedges of foreign currency exposures of net
investments in foreign operations. SFAS 133 is effective for years beginning
after June 15, 1999, with earlier adoption permitted. On July 8, 1999, the FASB
issued SFAS No. 137, "Accounting for Derivative Instruments and Hedging
Activities - Deferral of the Effective Date of FASB Statement No. 133." SFAS No.
137 defers the effective date of SFAS No. 133 until fiscal years beginning after
June 15, 2000. The Corporation believes that the effect of adoption of SFAS 133
will not be material.
YEAR 2000 READINESS
The Corporation uses a significant number of information technology ("IT")
and non-IT computer systems in its operations. The IT systems include the
Corporation's accounting systems, office and administrative systems,
communications systems and other corporate
17
<PAGE> 18
systems. The non-IT systems include embedded microprocessors that control
laboratory equipment and facilities equipment.
The year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any of the
Corporation's computer programs or hardware that have date-sensitive software or
embedded chips may recognize a date using "00" as the year 1900 rather than the
year 2000. This could result in a system failure or miscalculations causing
disruptions of operations, including, among other things, a temporary inability
to process transactions, send invoices, or engage in similar normal business
activities.
The Corporation has established a task force to address the year 2000 issue.
The task force has implemented a three-phase approach. The first phase, which is
substantially complete, consists of an inventory of all IT and non-IT systems.
The second phase, which is also substantially complete, consists of setting
priorities and developing a test plan. The third phase, testing and remediation,
began during the fourth quarter of 1998 and is continuing.
The Corporation depends on various suppliers to continue its operations. The
Corporation is working with its suppliers to determine whether they and their
products are or will be year 2000 compliant. The Corporation has received
compliance certifications from some suppliers, and is following up with the
other suppliers to obtain such certificates. However, the Corporation does not
control its suppliers, and cannot fully audit their year 2000 compliance, and
for some suppliers the Corporation may have no feasible alternative supplier
available. The failure of such suppliers to remediate year 2000 problems in a
timely manner could have a material adverse effect on the Corporation.
The Corporation has not completed its analysis of its most reasonably likely
worst case year 2000 scenarios. The Corporation's task force intends to
investigate these scenarios and, throughout 1999, to develop contingency plans
to reduce or avoid harm to the Corporation's business and operations.
The Corporation's historical costs for remediation are not material and the
Corporation does not anticipate that its future remediation costs will be
material. Starting in 1997, the Corporation began implementation of an
enterprise information system that is year 2000 compliant. The Corporation does
expect to have to replace certain application software to be year 2000
compliant. Estimates of these costs are preliminary, but could be as much as $.5
million, of which approximately $.2 million has been expended to date. The
Corporation has not delayed any material projects as a result of the year 2000
issue.
The Corporation's plans to complete the year 2000 modifications are based on
management's best estimates, which were derived utilizing assumptions of future
events including the continued availability of certain resources and other
factors. Estimates on the status of completion and the expected completion dates
are based on costs incurred to date compared to total expected costs. However,
there can be no guarantee that these estimates will be achieved and actual
results could differ materially from those plans. Failure by the Corporation or
its suppliers to complete year 2000 remediation in a timely manner could have a
18
<PAGE> 19
material adverse effect on the Corporation. Specific factors that might cause
such material differences include, but are not limited to, the cooperation of
third party suppliers, the availability and cost of personnel trained in this
area, the ability to locate and correct all relevant computer codes, and similar
uncertainties.
19
<PAGE> 20
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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 short-term marketable securities and cash equivalents and its
debt agreements. The Corporation's investment policy calls for investment in
short-term, low risk instruments. At June 30, 1999, the Corporation had $9.9
million invested in government and governmental agency securities. A rise in
interest rates would have an adverse impact on the fair market value of fixed
rate securities. If interest rates fall, floating rate securities may generate
less interest income. The Corporation manages its exposure to interest rate
risks through investing in securities with maturities of one year or less.
Additionally, the Corporation is exposed to risk from changes in interest
rates as a result of its borrowing activities. At June 30, 1999, the Corporation
had total debt of $11.9 million. The Corporation's debt consists of a mortgage
loan with approximately $2.7 million outstanding; a promissory note with
approximately $.7 million outstanding and capital lease obligations of
approximately $8.5 million outstanding. The Corporation's exposure to losses is
partially managed through an interest rate swap agreement related to the
mortgage loan.
FOREIGN CURRENCY EXCHANGE RISK
The Corporation's international operations are subject to foreign exchange
rate fluctuations. The Corporation derived 15.2% and 12.7% of its revenue for
the three months ended June 30, 1999 and 1998, respectively, from services
performed in the United Kingdom and Germany. The Corporation derived 16.2% and
14.0% of its revenue for the six months ended June 30, 1999 and 1998,
respectively, from services performed in the United Kingdom and Germany. Since
the revenue 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 foreign
operations as well as to risks sometimes associated with international
operations. 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
United Kingdom and Germany have traditionally had relatively stable currencies.
The Corporation currently does not hedge its foreign currency exposure.
Management does not believe that the Corporation's exposure to foreign currency
rate fluctuations is material.
20
<PAGE> 21
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
As of June 30, 1999 the Corporation had used approximately $15.0 million of
the net proceeds from the Corporation's initial public offering toward debt
repayment and purchases of laboratory equipment, information systems hardware
and software, and interior construction and furnishings of the Corporation's new
facilities.
At June 30, 1999, approximately $9.9 million of the net proceeds of the
initial public offering were invested in short-term United States government
securities, and the balance was invested in money market funds pending the
purchase of additional United States government securities or in other operating
accounts of the Corporation.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
At the Annual Meeting of Shareholders held on May 13, 1999, the following
proposals were adopted by the margins indicated:
1. To reelect Ms. Hamilton and Dr. Scherlis as directors of the Corporation
to terms expiring in 2002.
<TABLE>
<CAPTION>
Number of Shares
For Withheld
<S> <C> <C>
Victoria Hamilton 7,232,126 101,720
Leonard Scherlis, M.D. 7,232,126 101,720
</TABLE>
2. To approve the Amended and Restated BioReliance 1997 Incentive Plan.
<TABLE>
<S> <C>
For 5,598,699
Against 1,214,547
Abstain 520,600
</TABLE>
21
<PAGE> 22
3. To ratify the appointment of PricewaterhouseCoopers LLP as the
Corporation's auditors.
<TABLE>
<S> <C>
For 7,324,637
Against 7,409
Abstain 1,800
</TABLE>
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The documents required to be filed as exhibits to this report under Item
601 of Regulation S-K are listed in the Exhibit Index included elsewhere in this
report, which list is incorporated herein by reference.
(b) Reports on Form 8-K
None
22
<PAGE> 23
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: August 13, 1999
BioReliance Corporation
(Registrant)
By /s/ Capers W. McDonald
----------------------------------
Capers W. McDonald
President and Chief Executive
Officer
By /s/ Patrick J. Spratt
----------------------------------
Patrick J. Spratt
Vice President, Chief Financial
Officer and Treasurer
(Principal Financial and Accounting
Officer)
23
<PAGE> 24
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C>
10.34 Promissory Note, dated May 10, 1999, by James Nelson Harris and
BioReliance Corporation.
10.35 Loan Agreement, dated June 28, 1999, by and between Department
of Business and Economic Development, a principal department of
the State of Maryland and BioReliance Corporation.
10.36 Note Modification Agreement, dated June 11, 1999, by and between
NationsBank, N.A. and BioReliance Corporation, BioReliance
Testing and Development, Inc., BioReliance Manufacturing, Inc.
and Magenta Viral Production, Inc.
10.37 Note Modification Agreement, dated July 27, 1999, by and between
NationsBank, N.A. and BioReliance Corporation, BioReliance
Testing and Development f/k/a MA BioServices, Inc., BioReliance
Manufacturing, Inc. f/k/a Magenta Corporation and Magenta Viral
Production, Inc.
</TABLE>
24
<PAGE> 1
EXHIBIT 10.34
PROMISSORY NOTE
$100,000.00 MAY 10 , 1999
FOR VALUE RECEIVED, JAMES NELSON HARRIS, residing at 9890 Washingtonian
Blvd., Apt. 907, Gaithersburg, MD 20878 ("the "Borrower"), promises to pay to
the order of BioReliance Corporation (the "Corporation"), the principal sum of
ONE HUNDRED THOUSAND DOLLARS ($100,000) (the "Loan"), together with interest
thereon at the rate or rates hereafter specified and any and all other sums
which may be owing to the Corporation by the Borrower pursuant to the Promissory
Note (the "Note"). The following terms shall apply to this Note.
1. Interest. For the period from the date of this Note through the fourth
anniversary of the date of this Note (the "Maturity Date"), the unpaid
principal balance outstanding from time to time pursuant to this Note shall
bear interest at the rate of 5 1/2% percent per annum, compounded annually.
2. Calculation of Interest. Interest shall be calculated on the basis of three
hundred sixty (360) days per year factor applied to the actual days on
which there exists an unpaid balance hereunder.
3. Repayment. The Borrower shall pay any remaining principal balance, accrued
and unpaid interest on the Maturity Date, on which date this Note shall
mature, and the entire unpaid principal balance and accrued and unpaid
interest thereon shall be due and payable; provided, however, that on each
anniversary of the date hereof that the Borrower continues to be employed
by the Corporation, $25,000 of the principal amount, together with interest
accrued thereon, will be forgiven and the Borrower will not be obligated to
pay such forgiven amount. The Borrower shall be responsible for any tax
liability resulting from the forgiveness of any amount under this Note,
including any withholding obligations on the part of the Corporation.
4. Late Payment Charge. If any payment due hereunder is not received by the
Corporation within 15 calendar days after its due date, the Borrower shall
pay a late payment charge equal to five percent (5%) of the amount then
due.
5. Application of Payments. All payments made pursuant to this Note shall be
applied first to accrued interest, then to principal, and then to late
payments, charges or other sums owed to the Corporation, or in such other
order or proportion as the Corporation, in the Corporation's sole
discretion, may elect from time to time.
6. Prepayment. The Borrower may prepay this Note in whole or in part at any
time or from time to time without premium or penalty. The Corporation shall
apply any
<PAGE> 2
voluntary prepayment first to late charges and fees, then to accrued
interest and default interest, and then to principal in the inverse order
of scheduled maturities.
7. Place of Payment. All payments due under this Note shall be made during
regular business hours, without notice, to the Corporation, 14920 Broschart
Road, Rockville, Maryland 20850, Attention: CFO, or to any other place that
the Corporation may designate in writing, and shall be made in coin or
currency of the United States of America which at the time of payment is
legal tender for the payment of public or private debts.
8. Default. The occurrence of any one or more of the following events shall
constitute a default (a "Default") under the terms of this Note: (i) the
failure of the Borrower to pay the Corporation when due any and all amounts
payable by the Borrower to the Corporation under the terms of this Note; or
(ii) the Borrower's employment with Corporation terminates prior to the
fourth anniversary hereof (except for a termination by the Corporation
without cause).
9. Acceleration. Upon a Default, the Corporation, in the Corporation's sole
and absolute discretion and without further notice or demand, may declare
the entire unpaid principal balance of this Note (exclusive of forgiven
amounts) plus accrued interest and all other sums due under this Note to be
immediately due and payable and may exercise and all rights and remedies
available under any of the Loan Documents.
10. Confession of Judgment. Upon a Default, the Borrower authorizes the clerk
or any attorney of any court of record to appear for it and enter judgment
by confession without prior notice or opportunity for prior hearing for the
principal balance then outstanding under this Note, together with interest,
court costs and an attorney's fee equal to 15% of the sum of the principal
balance then outstanding and interest then due hereunder, hereby waiving
and releasing, to the extent permitted by law, all errors and all rights of
exemption, appeal, stay of execution, inquisition, and extension upon any
levy on real estate or personal property to which the Borrower may
otherwise be entitled under the laws of the United States of America or of
any state or possession of the United States of America now in force or
which may hereafter be passed. The authority and power to appear for and
enter judgment against the Borrower shall not be exhausted by one or more
exercises thereof, or by any imperfect exercise thereof, and shall not be
extinguished by any judgment entered pursuant thereto. Such authority and
power may be exercised on one or more occasions, from time to time, in the
same or different jurisdictions, as often as the Corporation shall deem
necessary or desirable, for all of which this Note shall be a sufficient
warrant.
11. Consent to jurisdiction. The Borrower irrevocably submits to the
jurisdiction of any state or federal court sitting in the State of Maryland
over any suit, action, or proceeding arising out of, or relating to, this
Note. The Borrower irrevocably waives, to the fullest extent permitted by
law, any objection that the Borrower may now or hereafter have to the
setting of venue of any suit, action, or proceeding brought in any
2
<PAGE> 3
such court and any claim that any suit, action, or proceeding brought in
any such court was brought in an inconvenient forum.
12. Service of Process. The Borrower hereby consents to process being served in
any suit, action, or proceeding instituted in connection with this Note by
the mailing of a copy thereof by certified mail, postage prepaid, return
receipt requested, to the Borrower at the following address 14920 Broschart
Road, Rockville, Maryland 20850. The Borrower irrevocably agrees that the
service specified herein shall be deemed to be service of process upon the
Borrower in any suit, action, or proceeding. Nothing in this Note shall
affect the Corporation's right to serve process in any other manner
otherwise permitted by law.
13. Notices. Any notice hereunder shall be deemed effective for all purposes as
of the date the communication is mailed, postage prepared, be registered on
certified mail, return receipt requested, to be delivered to address,
addressed as follows:
(i) if to Borrower:
9890 Washingtonian Blvd.
Apt. 907
Gaithersburg, MD 20878
(ii) if to Corporation:
14920 Broschart Road
Rockville, MD 20850
Attention: General Counsel
14. Expenses of Collection. If this Note is referred to an attorney for
collection after a Default, the Borrower shall pay all costs of collection,
including attorneys' fees equal to 15% of the sum of the principal balance
then outstanding and interest then due hereunder.
15. Waiver of Protest. The Borrower waives presentment, notice of dishonor and
protest.
16. Choice of Law; Modifications; Cumulative Rights; Extensions of Maturity.
(a) No modification or amendment of this Note shall be effective unless in
writing signed by the Corporation and the Borrower, and each
modification or amendment, if any, shall apply only with respect to
the specific instance involved.
(b) No waiver of any provision of this Note shall be deemed to be made by
the Corporation unless in writing signed by the Corporation. Any
waiver shall apply only with respect to the specific instance
involved.
3
<PAGE> 4
(c) By accepting partial payment of any amount due and payable under this
Note, the Corporation shall not be deemed to waive the right either to
require prompt payment when due of all other amounts due and payable
under this Note or to exercise any rights and remedies available to it
in order to collect all other amounts due and payable under this Note.
(d) Each right, power and remedy of the Corporation hereunder or under
applicable law shall be cumulative and concurrent and the exercise of
any one or more of them shall not preclude the simultaneous or later
exercise by the Corporation of any or all other rights, power, or
remedies.
(e) No failure or delay by the Corporation to insist upon the strict
performance of any one or more provisions of this Note or to exercise
any right, power, or remedy consequent upon a breach thereof shall
constitute a waiver thereof, or preclude the Corporation from
exercising any such right, power or remedy.
17. Illegality. In case any provision (or any part of any provision) contained
in this Note shall for any reason be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision (or remaining part of
the affected provision) of this Note, but this Note shall be construed as
if such invalid, illegal or unenforceable provision (or any part thereof)
had never been contained herein, but only to the extent it is invalid,
illegal or unenforceable.
[SIGNATURES APPEAR ON THE NEXT PAGE]
4
<PAGE> 5
IN WITNESS WHEREOF, and intending to be legally bound hereby, the
undersigned executes this Note under seal as Borrower on the above written date.
WITNESS: BORROWER:
- -----------------------
Name: /s/ James N. Harris (SEAL)
------------------ -------------------------------------
Name: James N. Harris
------------------------------------
Title: Vice President, Sales and Marketing
------------------------------------
STATE OF MARYLAND, CITY/COUTY OF , TO WIT:
I HEREBY CERTIFY that on this_________ day of_________________________ ,
199__ , before me, a Notary Public in and for the State and City/County
aforesaid, personally appeared_____________, who acknowledge himself to be James
N. Harris, now or satisfactorily proven to me to be the person whose name is
subscribed to the within instrument, and acknowledged that he executed the same
for the purposes therein contained as its duly
authorized________________.
AS WITNESS my hand and Notarial Seal.
--------------------------------
Notary Public
My Commission expires:
-------------------------
5
<PAGE> 1
EXHIBIT 10.35
LOAN AGREEMENT
THIS LOAN AGREEMENT (this "Agreement") is entered into as of this 28th
day of June, 1999, by and between DEPARTMENT OF BUSINESS AND ECONOMIC
DEVELOPMENT, a principal department of the State of Maryland (the
"Department"), and BIORELIANCE CORPORATION, a Delaware corporation (the
"Borrower").
RECITALS
1. Pursuant to the provisions of Section 7-314 of the State Finance
and Procurement Article of the Annotated Code of Maryland (the "Act"), the
Economic Development Opportunities Program Fund (the "Fund") was created in
order to maximize extraordinary economic development opportunities in the
State of Maryland (the "State").
2. Pursuant to the provisions of the Act, the Governor of the State,
with the approval of the Joint Legislative Policy Committee of the Maryland
General Assembly (the "Legislative Policy Committee"), is empowered to
transfer funds by budget amendment into the expenditure account of an
executive agency, which funds may be loaned by the executive agency for the
purposes, and pursuant to the criteria, set forth in the Act.
3. The Fund is not intended to substitute for funds from other State
or local programs for which a project may be eligible and for which
sufficient resources exist.
4. Pursuant to the approval of the Legislative Policy Committee, the
Department will make a loan to the Borrower in the principal sum not to
exceed $3,000,000 (the "Loan"). The Loan is subject to the terms and
conditions of this Agreement and evidenced by a promissory note of even date
herewith made by the Borrower payable to the Department in the principal
amount of the Loan (the "Note").
5. The Loan proceeds will be used in connection with Project 1
(defined below), Project 2 (defined below), and Project 3 (defined below)
(collectively, the "Project").
6. Project 1 consists of the following activities (the "Project 1"):
(a) leasing of the land consisting of 4.3051 acres known as 9920 Medical
Center Drive in Rockville, Maryland from BPG Industrial Partners II. L.L.C.
("BPG") to BioReliance Manufacturing, Inc., a wholly-owned subsidiary of the
Borrower and previously known as MAGENTA Corporation ("BioReliance
Manufacturing") pursuant to the BioReliance Manufacturing Lease (defined
below), which lease provides that BPG will construct the shell of a 58,000
square foot facility, including a 10,000 square foot mezzanine and will
install other systems as well as construct the parking lot, driveways,
sidewalks and
<PAGE> 2
landscaping, all of which shall be leased by BioReliance Manufacturing (the
"BioReliance Manufacturing Building"); (b) BioReliance Manufacturing's
construction of tenant improvements to the BioReliance Manufacturing Building
as set forth in the BioReliance Manufacturing Lease (the "BioReliance
Manufacturing Improvements"); and (c) BioReliance Manufacturing's acquisition
and installation of equipment into the BioReliance Manufacturing Building
(the "BioReliance Manufacturing Equipment") to make it operative as a
bio-manufacturing facility (all collectively, the "BioReliance Manufacturing
Facility").
7. Project 2 consists of the following activities (the "Project 2"):
(a) leasing of approximately 50,000 square feet of a building located at
14920 Broschart Road in Rockville, Maryland, from FP Rockledge, L.L.C. ("FP")
to BioReliance Testing and Development, Inc., a wholly-owned subsidiary of
the Borrower and previously known as MA BioServices, Inc. ("BioReliance
Testing") pursuant to the Headquarters Lease Agreement (defined below), which
lease provides that FP will renovate the building and install tenant
improvements for use by BioReliance Testing as a laboratory and by the
Borrower for its new Headquarters (defined below) (the "Headquarters
Building"); (b) the Borrower's relocation and vacating of its administrative
offices and personnel from 1803 Research Boulevard in Rockville, Maryland to
the Headquarters Building; (c) the Borrower's relocation of several existing
labs from 15235 Shady Grove Road, Rockville, Maryland to the Headquarters
Facility; (d) the Borrower's relocation of the operations of 9620 Medical
Center Drive to the Headquarters Facility and 9630 Medical Center Drive,
Rockville, Maryland (the "Medical Drive Existing Facility"); and (e) the
Borrower's acquisition and installation of equipment into the Headquarters
Building (the "Headquarters Equipment"), the Headquarters Building and
Headquarters Equipment collectively, the "Headquarters Facility".
8. Project 3 consists of the following activities (the "Project
3"): (a) leasing of a portion of 2 parcels of land located at 9900 Blackwell
Road in Rockville, Maryland, consisting of approximately 7.5 acres, from the
County to the Borrower pursuant to the Blackwell Facility Lease (defined
below), on which land the Borrower constructed a research and development
facility (the "Blackwell Facility"); (b) the Borrower's renovation of the
Blackwell Facility to accommodate expansion of the Borrower's business of
bio-testing; and (c) the Borrower's purchase and installation of equipment
into the Blackwell Facility.
NOW, THEREFORE, in consideration of the foregoing recitals and for
other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, and to secure the full and absolute payment and
performance of each of the Obligations, the parties agree as follows:
ARTICLE I
DEFINITIONS
<PAGE> 3
All accounting terms not specifically defined herein shall have the
meanings determined by generally accepted accounting principles, consistently
applied. All terms previously defined in this Agreement are incorporated
herein by reference. Unless specifically provided otherwise or the context
otherwise requires, when used in this Agreement:
"Approval Letters" means collectively:
(a) The letter dated May 27, 1998, from James D. Fielder,
Jr., Ph.D. to Thomas V. Miller and Casper R. Taylor;
(b) Summary dated June 1998, from Karl S. Aro to the
Legislative Policy Committee; and
(c) The letter dated June 22, 1998, from Karl S. Aro to
James T. Brady.
"BioReliance Manufacturing Lease" means the Project Lease dated
April 1, 1998, between BPG and BioReliance Manufacturing for the BioReliance
Manufacturing Facility.
"Borrower's Subsidiaries" means one or more domestic corporations
that are wholly-owned by the Borrower. For the purposes of this Agreement,
BioReliance Manufacturing and BioReliance Testing shall be deemed Borrower's
Subsidiaries on the condition that such entities remain corporations
wholly-owned by the Borrower.
"Blackwell Facility Lease" means the Lease dated December 20,
1983 between the Local Government and the Borrower for the Blackwell Facility.
"Borrower's Contribution" means the Borrower's provision of
$32,000,000 for the Project to be expended as set forth in the Project Budget.
"Completion Date" means December 31, 2003.
"Condemnation" means any taking of title, of use, or of any other
property interest under the exercise of the power of eminent domain, whether
temporarily or permanently, by any Governmental Authority or by any person
acting under Governmental Authority.
"Default" means any default under Article V of this Agreement.
"Eighth Employee Date" means June 30, 2005.
"Eighth Period" means from January 1, 2005 to the Eighth Employee
Date.
<PAGE> 4
"Employees" means permanent-full-time employees (a) who are
employed by the Borrower or one of the Borrower's Subsidiaries at the Life
Sciences Center for at least 1800 hours per year, without a fixed term of
employment (in each case including vacation and leave), (b) who receive an
employer subsidized health care benefits package, (c) who receive similar
other benefits as other employees of the Borrower or the Borrower's
Subsidiaries, (d) who make an hourly wage of at least 150% of the federal
minimum wage; (e) who receive their salaries from BioReliance Testing, as
common paymaster; and (f) whose payroll records are kept by BioReliance
Testing. For this purpose, any employee who has been hired to work at least
1800 hours per year, but has not worked for the Borrower or one of the
Borrower's Subsidiaries for an entire calendar year, shall be deemed to meet
the 1800 hour requirement if the employee has satisfied such requirement on a
pro-rata basis (based upon the time actually worked for the Borrower or the
Borrower's Subsidiaries for such calendar year.) "Employee" shall not
include an employee of an entity acquired by the Borrower or Borrower's
Subsidiaries after the date of this Agreement, if the employee's place of
employment immediately prior to the acquisition was in the State.
"Environmental Requirement" means any Law or other agreement or
restriction, whether public or private (including, but not limited to, any
condition or requirement imposed by any insurer or surety company), now
existing or hereafter created, issued or enacted and all amendments thereto,
modifications thereof and substitutions therefor, which in any way pertains
to human health, safety or welfare, Hazardous Materials, Hazardous Materials
Contamination or the environment (including, but not limited to, ground, air,
water or noise pollution or contamination, and underground or above ground
tanks) and shall include without limitation, the Resource Conservation and
Recovery Act (the Solid Waste Disposal Act), 42 U.S.C. Section 6901 et seq.;
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, 42 U.S.C. Section 9601 et seq. ("CERCLA"), as amended by the Superfund
Amendments and Reauthorization Act of 1986 ("SARA"); the Hazardous Materials
Transportation Act, 49 U.S.C. Section 1801 et seq.; the Federal Water
Pollution Control Act, 33 U.S.C. Section 1251 et seq.; the Clean Air Act, 42
U.S.C. Section 7401 et seq.; the Toxic Substances Control Act, 15 U.S.C.
Section 2601 et seq.; and the Safe Drinking Water Act, 42 U.S.C. Section 300f
et seq.
"Expenses" means all costs and expenses of any nature whatsoever
incurred at any time and from time to time (whether before or after a
Default) by the Department in exercising or enforcing any rights, powers and
remedies provided in this Agreement or any of the other Loan Documents,
including, without limitation, attorney's fees, and court costs.
"Facilities" means collectively, the BioReliance Manufacturing
Facility, the Medical Drive Existing Facility, the Headquarters Facility and
the Blackwell Facility.
"Fifth Employee Date" means December 31, 2002.
<PAGE> 5
"Fifth Period" means January 1, 2002 to December 31, 2002.
"First Employee Date" means May 31, 1999.
"Fourth Employee Date" means December 31, 2001.
"Fourth Period" means January 1, 2001 to the Fourth Employee Date.
"Governmental Authority" means the United States, the State, or
any of their political subdivisions, agencies, departments, commissions,
boards, bureaus or instrumentalities, including any local authority having
jurisdiction over any aspect of the Project.
"Hazardous Materials" means any and all hazardous or toxic
substances, wastes or materials which, because of their quantity,
concentration, or physical, chemical or infectious characteristics, may cause
or pose a present or potential hazard or nuisance to human health, safety or
welfare or to the environment when used, treated, stored, disposed of,
generated, manufactured, transported or otherwise handled, including, without
limitation, any substance, waste or material which is or contains asbestos,
radon, polychlorinated biphenyls, urea formaldehyde, explosives, radioactive
materials or petroleum products.
"Hazardous Materials Contamination" means use, treatment,
storage, disposal, generation of, manufacturing, transportation or handling
of any Hazardous Materials in violation of any Laws, including, but not
limited to any Environmental Requirements, governing the use, treatment,
storage, disposal, generation of, manufacturing, transportation or handling
of Hazardous Materials.
"Headquarters" means the location of the offices of the executive
officers of the Borrower, where the executive officers conduct ninety-five
(95%) percent of their work for the Borrower, Borrower's Subsidiaries and
other subsidiaries of the Borrower.
"Headquarters Lease Agreement" means the Lease Agreement dated
October 16, 1997 between FP and BioReliance Testing for the Headquarters
Facility.
"Laws" means federal, state and local laws, statutes, rules,
ordinances, regulations, codes, licenses, authorizations, decisions,
injunctions, interpretations, orders or decrees of any court or Governmental
Authority having jurisdiction as may be in effect from time to time.
"Leases" means collectively, the Medical Drive Existing Facility
Lease, the Blackwell Facility Lease, the Headquarters Lease Agreement and the
BioReliance Manufacturing Lease.
<PAGE> 6
"Lien" means any mortgage, deed of trust, pledge, security
interest, assignment, judgment, lien or charge of any kind, including,
without limitation, any conditional sale or other title retention agreement,
any lease in the nature thereof, any liens or claims for liens for materials
supplied or for labor or services performed, and the filing of, or agreement
to give, any financing statement under the Uniform Commercial Code of any
jurisdiction.
"Life Sciences Center" means the Shady Grove Life Sciences Center
in Montgomery County, Maryland
"Loan Documents" means all documents executed and delivered in
connection with the Loan and the Obligations, including this Agreement, the
Note, and any other document, evidencing or securing the Loan, and any
amendments or modifications thereto.
"Local Government Grant" means the provision of a $200,000 grant
from the Local Government to the Borrower for the Project to be expended
generally as set forth in the Project Budget and more specifically as set
forth in the grant agreement executed in connection with the Local Government
Grant.
"Local Government" means Montgomery County, Maryland, a political
subdivision of the State.
"Maturity Date" means seven years after the date of initial
disbursement of the Loan proceeds.
"Medical Drive Existing Facility Lease" means the Lease dated
January 18, 1995 between Redgate III Limited Partnership and Microbiological
Associates covering the Medical Drive Existing Facility.
"MITP" means the Maryland Industrial Training Program.
"MITP Documents" means the documents to be entered into by the
Department and the Borrower in connection with the MITP Grant.
"MITP Grant" means the $160,000 MITP grant to the Borrower for
the Project.
"Ninth Period" means from July 1, 2005 to December 31, 2005.
"Obligations" means all duties of payment, performance and
completion owed by the Borrower to the Department, under the Loan Documents
and by law, including:
<PAGE> 7
(a) The payment of all sums of money secured hereby
including all funds and all sums of principal, interest and premium, if any,
due or to become due, now existing, and hereafter created, and past, present
and future advances under this Agreement, the Note and the other Loan
Documents, all money now or hereafter advanced or expended by the Department
as provided for herein and the other Loan Documents, and costs, Expenses, and
attorney's fees now or hereafter charged to, incurred by, or disbursed by the
Department as provided in the Loan Documents or by applicable law; and
(b) The strict observance and performance of all of the
provisions of the Loan Documents, time being of the essence, and under all
other related documents and instruments evidencing or giving rise to the
indebtedness of the Borrower to the Department, including the repayment of
all sums advanced, to be advanced, or which may be advanced by the Department
pursuant to or under authorizations contained in this Agreement, or in any
other Loan Document.
"Project Budget" means the budget for cost of completing the
Project attached hereto as Exhibit A and made a part hereof.
"Second Employee Date" means December 31, 1999.
"Second Period" means January 1, 1999 to the Second Employee Date.
"Sixth Employee Date" means December 31, 2003.
"Sixth Period" means from January 1, 2003 to the Sixth Employee
Date.
"Seventh Employee Date" means December 31, 2004.
"Seventh Period" means from January 1, 2004 to the Seventh
Employee Date.
"State" means the State of Maryland.
"Taxes" means all taxes, water rents, sewer rents, assessments,
utility charges (whether public or private), and other governmental or
municipal or public dues, charges, and levies.
"Third Employee Date" means December 31, 2000.
"Third Period" means January 1, 2000 to the Third Employee Date.
ARTICLE II
TERMS OF THE LOAN AND DISBURSEMENT
<PAGE> 8
Section 2.01. The Loan.
Subject to the terms and conditions of this Agreement and the Loan
Documents, the Department agrees to extend the Loan to the Borrower.
Section 2.02. Repayment and Interest.
All sums advanced under the Loan shall be evidenced by the Note and
shall be repaid with interest in accordance with the provisions of the Note,
the terms and conditions of which are incorporated herein by reference.
Section 2.03. Disbursements.
(a) In General. Subject to the continued compliance by the Borrower
with all of the terms and conditions of this Agreement and the Loan
Documents, the continued satisfaction of all conditions precedent to the
making of disbursements hereunder, and the continued non-existence of a
Default or any event, circumstance, act or omission which with the giving of
notice, the passage of time, or both, would constitute a Default, the
Department shall advance to the Borrower the sums requested by the Borrower
on a completed Request for Disbursement, the form of which is attached hereto
as Exhibit B.
(b) Disbursement. All Request for Disbursement are to be made to the
Department at the address specified in Section 6.01, or at any other place
that the Department designates. Requests for disbursement shall, at the
option of the Department, be submitted no later than 30 business days before
the date of the requested disbursement.
(c) Disbursements to the Borrower. All disbursements shall be made
directly from the Department to the Borrower pursuant to this Agreement by
check. The Department shall only disburse Loan proceeds upon presentation by
the Borrower of invoices, bills or other satisfactory proof of payments to
reimburse the Borrower for payments made for the items described on the
Project Budget.
(d) Conditions for Disbursements. The obligation of the Department
to make any disbursements of the Loan, including, without limitation, the
first through final disbursements, is subject to the satisfaction of the
following conditions as of the date the disbursement is made:
(i) Receipt of Request for Disbursement. The Department shall
have received a completed Request for Disbursement.
<PAGE> 9
(ii) Representations True. No representation or warranty of the
Borrower contained herein shall be or have become materially incorrect or
inaccurate.
(iii) No Defaults. There shall be no breach or default or event
of default under the terms of any of the Loan Documents, or any Default
hereunder, and no event, circumstance, act, or omission shall exist which
with the giving of notice, the passage of time, or both, would constitute an
event of default under any of the Loan Documents or a Default hereunder.
(iv) Solvency Certifications. If requested by the Department,
the Department shall have received evidence satisfactory to it that no (1)
petition in bankruptcy, voluntary or otherwise, (2) assignment for the
benefit of creditors, (3) petition seeking reorganization or arrangement
under bankruptcy laws of the United States or of any state, or (4) other
action brought under the aforesaid bankruptcy laws, is pending against the
Borrower or Borrower's Subsidiaries. The Department shall have the right to
request such certifications at any time during the Loan term.
(v) No Adverse Change. There shall have been no materially
adverse change in the Borrower's financial condition from that reflected in
the Borrower's financial statements most recently submitted to the Department
prior to the closing.
(vi) Time to Complete. There shall be sufficient time, in the
opinion of the Department, to complete the Project by the Completion Date.
(vii) Funds to Complete. In the opinion of the Department, the
Borrower has sufficient funds to pay all unpaid costs of completing the
Project specified in the Project Budget.
(e) The Borrower's right to borrow hereunder shall terminate July 31,
1999.
(f) Upon each disbursement, the Borrower shall be deemed to have
issued each of the representations and warranties contained in Section 4.01
of this Agreement.
(g) In no event shall the Department be obligated to make any advance
hereunder if a Default has occurred or if the advance would cause the total
principal amount of advances made and outstanding to exceed the amount of the
Loan.
Section 2.04. Conditions Precedent to Disbursement.
Before making the disbursement of Loan proceeds, the Department shall
receive all of the items set forth on the Pre-Closing and Closing Checklist
attached hereto as Exhibit D, in form and substance acceptable to the
Department.
Section 2.05. Final Certification.
<PAGE> 10
No later than 30 days after the Completion Date, the Borrower shall
submit to the Department a certification of the total costs of the Project in
the form attached hereto as Exhibit C, together with any additional
information required by the Department.
<PAGE> 11
ARTICLE III
PROJECT BUDGET AND EMPLOYMENT
Section 3.01. Project Budget.
The Borrower covenants that the Project Budget sets forth current
estimates of the costs for the Project. Without the prior written consent of
the Department, the Borrower will make no changes to the Project Budget
resulting in a reduction to the Borrower's Contribution.
Section 3.02. Maintenance of Employees.
(a) Representation and Warranty-Employees. The Borrower represents
and warrants that as of the date of this Agreement, the Borrower and
Borrower's Subsidiaries collectively employ at least 326 Employees.
(b) Calculation of Employees.
(i) The Department's determination of the number of Employees
as of the date of this Agreement, on the First Employee Date and on the Sixth
Employee Date shall be based on the actual number of Employees employed as of
those dates.
(ii) After the First Employee Date, for the annual periods
consisting of the Second Period, Third Period, Fourth Period, Fifth Period,
Sixth Period and Seventh Period, the Department shall determine the number of
Employees on average each calendar year by averaging the actual number of
Employees as of June 30 and December 31 of each year.
(iii) For the Eighth Period, the number of Employees shall be
determined by the Department by averaging the number of Employees as of March
31, 2005 and the Eighth Employee Date.
(iv) The Department's determination of whether the Borrower and
Borrower's Subsidiaries have collectively employed at least 326 Employees at
all times shall be determined each calendar year by averaging the actual
number of Employees as of June 30 and December 31 of each year.
Section 3.03. Determination of Interest Rate.
(a) During the Seventh Period, the interest rate on the Loan shall be
0% per annum if the Department has determined that on the Sixth Employee Date
at least 718 Employees were employed.
<PAGE> 12
(b) During the Seventh Period, the interest on the Loan shall be
3.75% per annum if the Department has determined that during the Sixth Period
on average at least 522 but not more than 717 Employees were employed.
(c) During the Seventh Period, the interest rate on the Loan shall be
7.5% per annum if the Department has determined that during the Sixth Period
on average at least 326 but not more than 521 Employees were employed.
(d) During the Eighth Period, the interest rate on the Loan shall be
0% per annum if the following conditions are satisfied: (i) Department
determined that on the Sixth Employee Date 718 Employees were employed; and
(ii) The Department has determined that during the Seventh Period on average
at least 718 Employees were employed.
(e) During the Eighth Period, the interest on the Loan shall be 3.75%
per annum if the following conditions are satisfied:
(i) The Department determined that during the Sixth Period, the
conditions set forth in Section 3.03(a) or (b) of this Agreement were
satisfied; and
(ii) The Department has determined that during the Seventh
Period on average at least 522 but not more than 717 Employees were employed.
(f) During the Eighth Period, the interest rate on the Loan shall be
7.5% per annum if the following conditions are satisfied:
(i) The Department has determined that the conditions set forth
in Section 3.03(a), (b) or (c) of this Agreement were satisfied; and
(ii) The Department has determined that during the Seventh
Period on average at least 326 but not more than 521 Employees were employed.
(g) During the Ninth Period, the interest rate on the Loan shall be
0% per annum if the following conditions are satisfied:
(i) The Department has determined that on the Sixth Employee
Date at least 718 Employees were employed; and
(ii) The Department has determined that during the Seventh
Period and the Eighth Period on average, at least 718 Employees were employed.
(h) During the Ninth Period, the interest on the Loan shall be 3.75%
per annum if the following conditions are satisfied:
<PAGE> 13
(i) The Department has determined that the conditions set forth
in Section 3.03(a) or (b) and Section 3.03(d) or (e) of this Agreement were
satisfied; and
(ii) The Department has determined that during the Eighth Period
on average at least 522 but not more than 717 Employees were employed.
(i) During the Ninth Period, the interest rate on the Loan shall be
7.5% per annum if the following conditions are satisfied:
(i) The Department has determined that the conditions set forth
in Section 3.03(a), (b) or (c) and Section 3.03(d), (e) or (f) of this
Agreement were satisfied; and
(ii) The Department has determined that during the Eighth Period
on average at least 326 but not more than 521 Employees were employed.
Section 3.04. Employee Reporting Requirement.
(a) At or prior to closing of the Loan, the Borrower shall submit to
the Department a list of the names of the Employees as of the First Employee
Date. The list shall contain the social security number, the average hours
worked, or expected to be worked, for the year, the hourly or annual pay
rate, and a general description of available benefits for each of the listed
Employees. An officer of the Borrower shall certify to the Department that:
the list is true and accurate as of the date of this Agreement; the Employees
are employed by the Borrower or one of the Borrower's Subsidiaries; and the
Employees work in the Life Sciences Center.
(b) On January 10 of each year beginning with January 10, 2000 and
ending on January 10, 2005, for the Second Period, Third Period, Fourth
Period, Fifth Period, Sixth Period and Seventh Period, the Borrower shall
submit to the Department a list of the names of the Employees The list shall
contain the social security number, the average hours worked for the prior
year, the hourly or annual pay rate, and a general description of available
benefits for each of the listed Employees. The report shall list all of the
required information as of June 30 and December 31 of the applicable year.
An officer of the Borrower shall certify to the Department that: the list is
true and accurate as of the applicable dates; the Employees are employed by
the Borrower or one of the Borrower's Subsidiaries; and the Employees work in
the Life Sciences Center.
(c) On or before July 10, 2005, for the Eighth Period, the Borrower
shall submit to the Department a list of the names of the Employees. The
list shall contain the social security number, the average hours worked for
the Eighth Period, the hourly or annual pay rate, and a general description
of available benefits for each of the listed Employees. The report shall
list all of the required information as of March 31, 2005 and June 30, 2005.
An officer of the Borrower shall certify to the Department that: the
<PAGE> 14
list is true and accurate as of the applicable dates: the Employees are
employed by the Borrower or one of the Borrower's Subsidiaries; and the
Employees work in the Life Sciences Center.
(d) Upon the request of the Department, the Borrower covenants to
provide the Department with any information and reports that the Department
determines, in its reasonable discretion, are needed to confirm or verify the
employment information submitted by the Borrower for the Employees. The
Borrower and BioReliance Testing shall permit the Department to inspect the
employee records of the Borrower and the Borrower's Subsidiaries to confirm
the employee information submitted by Borrower for the Employees.
(e) The Department shall have 30 days from the date the Borrower
submits the documentation required in subsection (a) through (e) to determine
the interest rate charged for the remaining term of the Loan.
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE BORROWER
Section 4.01. Representations and Warranties.
The Borrower represents and warrants as follows:
(a) Due Organization. The Borrower:
(i) Is a corporation duly organized and validly existing
under the laws of the State of Delaware;
(ii) Is in good standing and qualified to do business in
the State;
(iii) Has the power to own its property and to carry on its
business as now being conducted;
(iv) Is duly qualified to do business and is in good
standing in the State and in each jurisdiction in which the character of
properties owned by it or the transaction of its business makes such
qualification necessary; and
(v) Has delivered a true and complete copy of its
articles of incorporation and by-laws, together with all amendments, to the
Department.
(b) Due Organization. BioReliance Manufacturing:
(i) Is a corporation duly organized and validly existing
under the laws of the State of Delaware;
<PAGE> 15
(ii) Is in good standing and qualified to do business in
the State;
(iii) Has the power to own its property and to carry on its
business as now being conducted;
(iv) Is duly qualified to do business and is in good
standing in the State and in each jurisdiction in which the character of
properties owned by it or the transaction of its business makes such
qualification necessary;
(v) Has delivered a true and complete copy of its
articles of incorporation and by-laws, together with all amendments, to the
Department; and
(vi) Is a wholly-owned subsidiary of the Borrower.
(c) Due Organization. BioReliance Testing:
(i) Is a corporation duly organized and validly existing
under the laws of the State of Delaware;
(ii) Is in good standing and qualified to do business in
the State;
(iii) Has the power to own its property and to carry on its
business as now being conducted;
(iv) Is duly qualified to do business and is in good
standing in the State and in each jurisdiction in which the character of
properties owned by it or the transaction of its business makes such
qualification necessary;
(v) Has delivered a true and complete copy of its
articles of incorporation and by-laws, together with all amendments, to the
Department; and
(vi) Is a wholly-owned subsidiary of the Borrower.
(d) Due Authorization. The Borrower has the full corporate
power and authority to enter into this Agreement, to borrow the Loan as
contemplated hereby, to execute and deliver the Note and the other Loan
Documents to which it is a party, and to perform and comply with the terms,
conditions, and agreements set forth herein and therein, all of which have
been duly authorized by all proper and necessary corporate action of the
Borrower. No consent or approval of any other person or public authority or
regulatory body is required as a condition to the validity of this Agreement,
the Note, or the other Loan Documents, or, if required, the same has been
obtained.
<PAGE> 16
\
(e) Validity of Loan Documents. This Agreement and each of the
other Loan Documents have been properly executed by the Borrower and will:
(i) Not violate any provision of law, any order of any
court or agency of government, or any provision of the Borrower's articles of
incorporation or by-laws;
(ii) Not violate any provision, or result in a breach, of
any existing mortgage, deed of trust , indenture, contract, or agreement
binding on the Borrower or affecting its property; and
(iii) Constitute the valid and legal binding
obligations of the Borrower, and are fully enforceable against the Borrower,
in accordance with their respective terms.
(f) No Litigation. There is no controversy or litigation of
any nature now pending or, to the best of the Borrower's knowledge,
threatened in any court or before any governmental agency which:
(i) Questions the validity or enforceability of this
Agreement or the other Loan Documents, or any action taken or to be taken
under it;
(ii) Is likely to result in any material adverse change in
the authorities, properties, assets, liabilities, or conditions (financial or
otherwise) of the Borrower which would materially and substantially impair
the Borrower's ability to perform any of the obligations imposed upon the
Borrower by this Agreement or the other Loan Documents; or
(iii) Affects the Project or the Facilities.
(g) Reserved.
(h) Loan Document Default. There is no Default on the part of
the Borrower under this Agreement, the Note, or the other Loan Documents, and
no event has occurred or is continuing which with notice, or the passage of
time, or both, would constitute a Default under this Agreement, the Note or
the other Loan Documents.
(i) Compliance with Laws. The Borrower, BioReliance Testing
and BioReliance Manufacturing have complied with all Laws.
(j) State Drug Policy. The Borrower, BioReliance Manufacturing
and BioReliance Testing are in compliance with the State's policy concerning
drug and alcohol free workplaces, as set forth in COMAR 01.01.1989.18 and
21.11.08, and shall remain in compliance throughout the term of this
Agreement.
<PAGE> 17
(k) Reserved.
(l) Reserved.
(m) Reserved.
(n) Zoning. The Borrower's or the Borrower's Subsidiaries'
uses of the Facilities for the uses set forth in this Agreement will not
violate any zoning or other ordinance, regulation or law, restrictive
covenant or agreement of the Borrower or Borrower's Subsidiaries (either now
in existence or known by the Borrower to be proposed) applicable to the
Facilities or their uses, and all requirements for such uses have been
satisfied.
(o) Approval Letters. The representations, statements, and
other matters in the Approval Letters were true and complete in all material
respects as of the date of the Approval Letters.
(p) Taxes. All Taxes imposed upon the Borrower and Borrower's
Subsidiaries and their properties, operations, and income have been paid and
discharged prior to the date when any interest or penalty would accrue for
the nonpayment thereof, except for those Taxes being contested in good faith
and by appropriate proceedings by the Borrower or Borrower's Subsidiaries.
(q) Environmental Conditions. Hazardous Materials
Contamination; Compliance With Environmental Requirements. To the best of
Borrower's knowledge and belief (a) no Hazardous Materials Contamination has
occurred on the Facilities or on the land on which the Facilities are
located, and (b) the Facilities or on the land on which the Facilities are
located have never been used as a manufacturing, storage, treatment,
processing, recycling or disposal site for Hazardous Materials. The Borrower
represents and warrants that the present condition and uses of, and
activities on, the Facilities or on the land on which the Facilities are
located do not violate any Environmental Requirement and the uses of the
property which Borrower or the Borrower's Subsidiaries intend in the future
to make of the Facilities comply and will comply with all applicable
Environmental Requirements. To the best of Borrower's knowledge and belief,
it has not received any notice, and is not aware, of any claim involving a
violation of any Environment Requirement with respect to the Facilities or
any operation conducted on the Facilities or on the land on which the
Facilities are located. To the best of Borrower's knowledge and belief,
there is no Environmental Requirement which requires any work, repair,
construction, capital expenditure, or other remedial work of any nature
whatsoever to be undertaken with respect to the land on which the Facilities
are located or on the Facilities other than those Environmental Requirements
applicable to Borrower in the ordinary course of its business.
<PAGE> 18
(r) Borrower's Financial Statements. The Borrower's March 1999
financial statements, copies of which have been furnished to the Department,
were prepared in accordance with generally accepted accounting principles
consistently applied and are complete and correct and fairly and accurately
present the financial condition of the Borrower as of their date and the
results of its operations for the period then ended. There has been no
material adverse change in the financial condition of the Borrower or the
results of its operations since the date of such financial statements.
(s) Reserved.
(t) The Leases.
(i) The Leases are in full force and effect, and true and
complete copies of the Leases, together with all amendments and supplements,
have been delivered to the Department.
(ii) There are no defaults under the terms of the Leases
which are uncured beyond the applicable grace period.
(iii) All rents (including additional rents) and
other charges due under the Leases have been paid to the extent they were due
beyond any applicable grace period payable prior to the date hereof.
Section 4.02. Borrower's Covenants.
The Borrower covenants as follows:
(a) Repayment and Performance. The Borrower shall:
(i) Promptly pay the Obligations, and the principal of
and the interest accruing on the Loan evidenced by the Note, at the date and
place and in the manner provided in the Note; and
(ii) Punctually keep and perform all of the Obligations.
(b) Use of Loan Proceeds. The Borrower will use the Loan
proceeds for the Project.
(c) Reserved.
(d) Reserved.
(e) State Drug Policy. The Borrower certifies and covenants
that it will comply with the State's policy concerning drug and alcohol free
workplaces, as set forth
<PAGE> 19
in COMAR 01.01.1989.18 and 21.11.08, for the term of this Agreement.
Specifically, the Borrower shall:
(i) Make a good faith effort to eliminate illegal drug
use and alcohol and drug abuse from its workplace during the term of this
Agreement;
(ii) Prohibit the unlawful manufacture, distribution,
dispensation, possession, or use of drugs in its workplace;
(iii) Prohibit its employees from working under the
influence of alcohol or drugs;
(iv) Not hire or assign to work on an activity funded in
whole or part with State funds, anyone whom either knows, or in the exercise
of due diligence should know, currently abuses alcohol or drugs and is not
actively engaged in a bona fide rehabilitation program;
(v) Promptly inform the appropriate law enforcement
agency of every drug related crime that occurs in its workplace if they or
their employee has observed the violation or otherwise has reliable
information that a violation has occurred; and
(vi) Notify employees that drugs and alcohol abuse are
banned in the workplace, impose sanctions on employees who abuse drugs and
alcohol in the work place, and institute steps to maintain a drug and alcohol
free workplace.
(f) Reserved.
(g) Insurance.
(i) The Borrower shall obtain and maintain, or cause to
be obtained or maintained, during the term of this Agreement, except as
provided below, the following insurance coverages:
(1) During any period of construction on the
Project or the Facilities, builders all-risk insurance of the type
customarily carried in the case of similar construction for the full
replacement cost of work in place and materials stored in connection with
such construction;
(2) General public liability and property damage
coverage in amounts usually carried by similar operations against claims for
bodily injury, death, or damage to property occurring on the Project and the
Facilities;
(3) "All risk" coverage in amounts necessary to
prevent the application of any co-insurance provisions up to the full
replacement value of the
<PAGE> 20
Facilities but in no event less than the aggregate amount of the Loan
outstanding from time to time;
(4) Workers' Compensation insurance for all
contractors involved in the construction of the Facilities and all employees
of the Borrower and the Borrower's Subsidiaries and other subsidiaries of the
Borrower employed in the State;
(5) If any of the Facilities are, or are later
found to be, in an area that has been identified by the Federal Insurance
Administration as having special flood hazards, and in which the sale of
flood insurance has been made available under the National Flood Insurance
Act of 1968, as amended, flood insurance policy satisfactory to the
Department. In the event that any of the Facilities are not in an area
having special flood hazards, the Borrower shall deliver to the Department on
or prior to the initial disbursement of the Loan proceeds and thereafter upon
request, a certificate or letter issued by its insurance company stating that
such Facility or Facilities are not in such a flood hazard area; and
(6) Any other insurance on the Project and the
Facilities, in amounts and against risks as is customarily maintained by
similar businesses operating in the same vicinity.
(ii) All insurance policies shall be with responsible
companies acceptable to the Department.
(iii) Each insurance policy shall bear an endorsement that
it shall not be canceled, terminated, endorsed, or amended without thirty
(30) days written notice to the Department.
(iv) Upon request, the Borrower shall file with the
Department a detailed list of the insurance then in effect covering the
Facilities, stating the names of the insurance companies, the amounts and
rates of insurance, dates of the expiration thereof and the properties and
risks covered thereby; and, within 30 days after notice from the Department,
obtain any additional insurance requested by the Department.
(v) The Borrower shall give the Department prompt notice
of any loss covered by the builders all-risk or the all-risk insurance
required under this Agreement.
(h) Zoning, Etc. Changes. Without the prior written consent of
the Department, the Borrower or the Borrower's Subsidiaries will not
initiate, join in, or consent to, any change in any restrictive covenant,
easement, zoning ordinance, or other public or private restriction, limiting
or defining the uses which may be made of the Facilities which would prohibit
the Borrower or the Borrower's Subsidiaries from bio-manufacturing or
maintaining the Headquarters at the Headquarters Facility.
<PAGE> 21
(i) Notification of Claims or Liens. The Borrower shall
promptly notify the Department of any (i) action or claims or litigation,
including tax deficiencies, for potential liability of $2,000,000 or more,
which are asserted against the Borrower, (ii) default in any lien, mortgage,
security interest or encumbrance on the Facilities, and (iii) foreclosure of
any lien, mortgage, security interest or encumbrance on the Facilities.
(j) Access. Any duly authorized representative of the
Department shall, at all reasonable times, have access to all portions of the
Project and the Facilities subject to such representative's compliance with
all Laws and the Borrower's safety and confidentiality policies.
(k) Books and Records. The Borrower shall keep and maintain
any books, records, and other documents that may be required under the
regulations, rules and procedures now or hereafter applicable to loans made
by the Department from the Fund, and as may be reasonably necessary to
reflect and disclose fully the amount and disposition of the Loan, the total
cost of the activities paid for, in whole or in part, with the proceeds of
the Loan, and the amount and nature of all investments related to such
activities which are supplied or to be supplied by other sources. All books,
records and other documents shall be maintained at the offices of Borrower
for inspection, copying, audit and examination at all reasonable times by any
duly authorized representative of the Department. All books, records and
other documents shall be maintained until the first to occur of (i) three
years after the Completion Date or (ii) the completion of an audit of the
Project by the State.
(l) Hazardous Materials.
(i) The Borrower and the Borrower's Subsidiaries shall
comply in all respects with all Environmental Requirements.
(ii) The Borrower agrees to (1) give written notice to the
Department immediately upon acquiring knowledge of the presence of any
Hazardous Materials Contamination, with a full description thereof and (2)
comply promptly with all Environmental Requirements requiring the removal,
treatment or disposal of such Hazardous Materials Contamination.
(iii) The Borrower hereby agrees to indemnify and
hold the State and the Department harmless from and against any claim which
may now or hereafter be asserted against the State and the Department as a
result of the presence of any Hazardous Materials at the Project or the
Facilities or Hazardous Materials Contamination, and from and against all
losses, Expenses and charges whatsoever, including reasonable attorneys' fees
resulting therefrom. The provisions of this Section 4.02(l) shall survive
termination of this Agreement and repayment of the Loan and the Note in full.
<PAGE> 22
(m) Taxes. The Borrower will pay promptly in full and
discharge before delinquency and before any penalty for non-payment attaches
thereto, all Taxes and any prior liens for Taxes, except for those Taxes
being contested in good faith and by appropriate proceedings by the Borrower
or Borrower's Subsidiaries.
(n) Financial Information. The Borrower shall furnish to the
Department:
(i) As soon as available, but in no event more than 120
calendar days after the close of each the Borrower's fiscal years, a copy of
the Borrower's annual financial statements in reasonable detail satisfactory
to the Department, prepared in accordance with generally accepted accounting
principles and audited by an independent, certified public accountant, which
financial statements shall include a consolidated and consolidating balance
sheet as of the end of such fiscal year, and a consolidated and consolidating
statement of earnings and surplus for such fiscal year; and
(ii) Any additional information, reports or statements as
the Department may from time to time reasonably request.
(o) Condemnation. Immediately upon obtaining knowledge of the
commencement or threatened commencement of any Condemnation, the Borrower
shall immediately notify the Department in writing, describing in detail the
nature and extent of the proposed Condemnation.
(p) Expenditure of Funds in Project Budget. The Borrower
covenants that it will expend the Borrower's Contribution for the Project by
the Completion Date as set forth in the Project Budget.
(q) Further Assurances. At any time, and from time to time,
upon request by the Department, the Borrower, at its sole expense, will make,
execute and deliver or cause to be made, executed and delivered, any and all
further instruments, certificates, and other documents as may, in the
reasonable opinion of the Department, be necessary or desirable in order to
effectuate, complete, enlarge, or to continue and preserve the Obligations,
and all modifications, extensions, and other amendments of the same. Upon
any failure by the Borrower so to do, the Department may make and execute any
and all such instruments, certificates, and documents for and in the name of
the Borrower, and at the sole expense of the Borrower, and the Borrower
hereby irrevocably appoints the Department the agent and attorney-in-fact of
the Borrower so to do, this appointment being coupled with an interest. The
Department may, at its option, advance the expenses incurred in making and
executing any and all such instruments, certificates, and documents and the
Borrower shall reimburse the
<PAGE> 23
Department for any sums advanced with interest at a rate equal to twelve
percent (12%) per annum, and the same shall be part of the Obligations
secured by this Agreement.
(r) Indemnification. The Borrower releases the State and the
Department from, agrees that the State and the Department shall not have any
liability for, and agrees to protect, indemnify and save harmless the State
and the Department from and against, any and all liabilities, suits, actions,
claims, demands, losses, expenses and costs of every kind and nature incurred
by, or asserted or imposed against, the State and the Department, as a result
of or in connection with the Project and the Facilities. All money expended
by the Department as a result of such liabilities, suits, actions, claims,
demands, losses, Expenses or costs, together with interest at the rate
provided in the Note from the date of such payment, shall constitute an
additional indebtedness of the Borrower and shall be due and payable by the
Borrower to the Department within 5 days of request for reimbursement or
payment. Nothing contained in this Section 4.02(r) or in the Loan Documents
shall be construed as a limit on the Obligations. This Section 4.02(r) shall
survive the termination of this Agreement and the repayment of the Loan and
the Note in full. The Department agrees to give the Borrower prompt notice
of any claim to be indemnified by the Borrower under this Agreement.
(s) Compliance With Laws. The Borrower will comply with all
Laws and will cause the Borrower's Subsidiaries and other subsidiaries of the
Borrower to comply with all Laws.
(t) Good Standing of Borrower. The Borrower shall maintain its
existence as a Delaware corporation and its good standing and qualification
to do business in the State.
(u) Good Standing of Borrower's Subsidiaries. The Borrower
shall cause Borrower's Subsidiaries to maintain their good standing in the
state of their incorporation and maintain their qualification to do business
in the State.
(v) Amendment of Lease. The Borrower, BioReliance Testing and
BioReliance Manufacturing will not shorten the term of any of the Leases
without the prior written consent of the Department unless the Borrower or
Borrower's Subsidiaries purchases a facility it is currently leasing or moves
its operations to another site within the Life Sciences Center.
(w) Reserved.
(x) Project 1 Completion. The Borrower covenants that
BioReliance Manufacturing's bio-manufacturing operations will commence at the
BioReliance Manufacturing Facility by the Third Employee Date. No later than
February 10, 2001, the Borrower covenants to provide to the Department a
written certification stating that
<PAGE> 24
BioReliance Manufacturing has commenced bio-manufacturing operations, which
shall be accompanied by a copy of the use and occupancy permit.
(y) Project 2 Completion and Headquarters. The Borrower
covenants that Project 2 will be completed by the Second Employee Date. The
Borrower covenants that the Headquarters will continuously be located at the
Headquarters Facility. No later than ten (10) days after the Second Employee
Date, the Borrower covenants to provide the Department a written
certification that it has completed Project 2.
(z) Project 3 Completion. The Borrower covenants to complete
Project 3 by the Completion Date. No later than thirty (30) days after the
Completion Date, the Borrower covenants to provide the Department a written
certification that it has completed Project 3.
(aa) Mandatory Prepayment. Notwithstanding the schedule of
payments referred to in the Note, the Borrower covenants and agrees that upon
the sale, transfer or conveyance of all or any portion of Borrower's interest
in BioReliance Manufacturing or upon the sale, transfer or conveyance all or
substantially all of the assets of BioReliance Manufacturing, which in either
case is made, to any entity other than the Borrower or one of the Borrower's
Subsidiaries, the Borrower shall make an immediate mandatory prepayment of
all the interest then due and the principal balance of the Loan outstanding
under the Note, this Agreement, or the other Loan Documents, and any
Obligation.
(bb) Mandatory Prepayment. Notwithstanding the schedule of
payments referred to in the Note, the Borrower covenants and agrees that if
BioReliance Manufacturing ceases to operate in the ordinary course of
business as a bio-manufacturing facility at the BioReliance Manufacturing
Facility or relocates a substantial portion of its bio-manufacturing from the
BioReliance Manufacturing Facility to any site except one of the other
Facilities or a site located within the Life Sciences Center, the Borrower
shall make an immediate mandatory prepayment of all the interest then due and
the principal balance of the Loan outstanding under the Note, this Agreement,
or the other Loan Documents, and any Obligation.
(cc) Approvals. The Borrower covenants that it will:
(i) obtain all approvals from and reviews by all
Governmental Authorities of the Laws applicable to the Project; and
(ii) obtain all necessary permits for the Project.
ARTICLE V
DEFAULT AND REMEDIES
Section 5.01. Defaults.
<PAGE> 25
A Default shall have occurred if:
(a) The Borrower fails to pay the principal amount of the Loan
and interest thereon according to the terms and conditions of the Note or any
other payment required by this Agreement or the other Loan Documents,
including all Obligations, within seven business days after the date such
payment is due ; or
(b) Any Loan proceeds are used for any purpose other than for
the Project; or
(c) Except for the obligations of the Borrower to repay the
amounts due under the terms of the Note and the obligations as specified in
subsection (a) above, the breaches of the covenants, conditions or agreements
specified in subsections (d) and (e) below and the other Defaults enumerated
under this Section 5.01, the Borrower fails to duly and promptly perform,
comply with or observe any of the terms, covenants, conditions or agreements
contained in this Agreement, which failure remains unremedied for 15 days,
provided, however, if such failure be such that, in the sole discretion of
the Department, it cannot be corrected within 15 days, it shall not be a
Default hereunder if, in the sole discretion of the Department, the Borrower
is taking appropriate corrective action to cure such failure and if such
failure will not impair the ability of the Borrower to pay or perform the
Obligations; or
(d) Except for the obligations of the Borrower to repay the
amounts due under the terms of the Note and the obligations as specified in
subsection (a) above, the breaches of the covenants, conditions or agreements
specified in subsection (c) above and subsection (e) below and the other
Defaults enumerated under this Section 5.01, the Borrower fails to duly and
promptly perform, comply with or observe any of the terms, covenants,
conditions or agreements contained in Sections 3.04 and 4.02(n) of this
Agreement, which failure remains unremedied for 15 days after written notice
thereof shall have been given to the Borrower by the Department, provided,
however, if such failure be such that, in the sole discretion of the
Department, it cannot be corrected within 15 days, it shall not be a Default
hereunder if, in the sole discretion of the Department, the Borrower is
taking appropriate corrective action to cure such failure and if such failure
will not impair the ability of the Borrower to pay or perform the
Obligations; or
(e) The Borrower fails to duly and promptly perform, comply
with or observe any of the terms, covenants, conditions or agreements
contained in Sections 4.02, (i), (l), (p), (r), (s), (v), (aa) and (bb) of
this Agreement; or
(f) Any representation or warranty made herein or any statement
or representation made in any certificate, report or opinion (including legal
opinions),
<PAGE> 26
financial statement or other instrument furnished in connection with this
Agreement (including Requests for Disbursement submitted under Article II
hereof), or any of the other Loan Documents, proves to be incorrect in any
material respect; or
(g) Without the prior written consent of the Department, any of
the Leases are terminated as a result of the Borrower's or the Borrower's
Subsidiaries' breach, or any of the Leases are assigned or conveyed by the
Borrower, BioReliance Testing or BioReliance Manufacturing to a
non-affiliate; or
(h) The Borrower or one of the Borrower's Subsidiaries fails to
comply with any requirement of any Governmental Authority within 30 days
after written notice of the requirement is given to the Borrower or one of
the Borrower's Subsidiaries (or such longer period of time as the Borrower or
one of the Borrower's Subsidiaries has to comply with such requirement, as
set forth in such notice or as may be allowed by Law, including any period of
time that may be available to the Borrower to contest in good faith any
asserted failure to comply); or
(i) An event of default exists under the MITP Documents or the
documents executed in connection with the Local Grant or any other mortgage,
deed of trust, or other instrument encumbering all or any portion of the
Facilities, and such event of default remains uncured under any applicable
grace period; or
(j) Any bond, debenture, note, or other evidence of
indebtedness of the Borrower, the Borrower's Subsidiaries or the other
subsidiaries of the Borrower with a principal balance in excess of $2,000,000
(i) becomes due before stated maturity, by acceleration of the maturity
thereof by reason of default, (ii) becomes due by its terms and is not
promptly paid or extended, or is in payment default, which payment default
remains uncured beyond any applicable grace period; or
(k) Final judgment for the payment of money in excess of
$2,000,000 is rendered against the Borrower or subsidiaries of the Borrower
and the judgment is not discharged or a stay of execution thereon or a
supersedeas bond is not procured within thirty (30) days from the date of
entry thereof, or if thereafter the judgment remains unsatisfied for a period
of thirty (30) days after the termination of any such stay of execution
thereon or supersedeas bond; or
(l) Any court of competent jurisdiction makes a final order (i)
adjudicating the Borrower, BioReliance Testing or BioReliance Manufacturing a
bankrupt, (ii) appointing a trustee or receiver of the Project or the
Facilities or substantial part of the property of the Borrower, BioReliance
Testing or BioReliance Manufacturing, (iii) approving a petition for, or
affecting an arrangement in, bankruptcy, a reorganization pursuant to federal
bankruptcy law, or any other judicial
<PAGE> 27
\
modification or alterations of the rights of the Department or of other
creditors of the Borrower, BioReliance Testing or BioReliance Manufacturing,
(iv) assuming custody or sequestering any substantial part of the property of
the Borrower, BioReliance Testing or BioReliance Manufacturing, or (v)
attaching or garnishing any substantial part of the property of the Borrower,
BioReliance Testing or BioReliance Manufacturing; or if the Borrower,
BioReliance Testing or BioReliance Manufacturing (A) files such petition, or
(B) takes or consents to any other actions seeking any such judicial order,
or (C) makes an assignment for the benefit of creditors, or (D) fails to pay
debts generally as they become due, (E) makes an admission in writing of
inability to pay debts generally as they become due; or
(m) Either a permanent injunction or a preliminary injunction
is issued which lasts for more than one hundred twenty (120) days, which
prohibits the Borrower or any of the Borrower's Subsidiaries from using the
BioReliance Manufacturing Facility for bio-manufacturing; or
(n) Unless the written consent of the Department is previously
obtained, which consent shall not be unreasonably withheld, the Borrower (i)
sells or transfers all or substantially all of its business assets, (ii)
commences any proceeding to dissolve or liquidate, (iii) changes the form of
business entity through which the Borrower presently conducts its business,
(iv) transfers any interest in BioReliance Manufacturing, or (v) merges or
consolidates, unless the Borrower is the surviving entity and the net worth
of the Borrower immediately after the merger or consolidation is not
materially less than the net worth of the Borrower immediately prior to the
merger or consolidation, as determined by the Department; or
(o) Reserved; or
(p) BioReliance Manufacturing sells or transfers all or
substantially all of its business assets to an entity other than the Borrower
or one of the Borrower's Subsidiaries; or
(q) Unless the written consent of the Department is previously
obtained, which consent shall not be unreasonably withheld, BioReliance
Manufacturing (i) dissolves by operation of law or commences any proceeding
to dissolve or liquidate unless the assets of BioReliance Manufacturing are
transferred by operation of law or otherwise to the Borrower, (ii) changes
the form of business entity through which BioReliance Manufacturing presently
conducts its business, or (iii) merges or consolidates, unless BioReliance
Manufacturing, Borrower or a wholly-owned subsidiary of the Borrower is the
surviving entity; or
(r) Without the Department's prior express written consent,
which consent shall not be unreasonably withheld, the Borrower, is dissolved,
by operation of law, or in any other manner, voluntarily or otherwise; or
<PAGE> 28
(s) The Department made a reasonable good faith determination
that the prospect of payment of any of the Obligations is impaired for any
reason; or
(t) The Borrower and Borrower's Subsidiaries collectively fail
to maintain at least 326 Employees at all times at the Life Sciences Center.
Section 5.02 Remedies.
(a) Upon the occurrence of any Default, the Department may:
(i) Notwithstanding the schedule of payments referred to in the
Note, require immediate prepayment of the entire outstanding principal
indebtedness and accrued interest under the Note and any Obligations; and
(ii) At any time or from time to time proceed to protect and
enforce all rights and remedies available to the Department under this
Agreement by suit or by any other appropriate proceedings, whether for
specific performance of any covenant or agreement contained in the Agreement,
or damages, or other relief, or proceed to take any action authorized or
permitted under applicable law or regulations; and
(iii) Suspend or terminate the Borrower's authority to receive
any undisbursed Loan proceeds at any time by notice to the Borrower. If
termination occurs, the Borrower's authority to receive Loan proceeds shall
terminate as of the date of the notice of termination and the Borrower shall
have no right, title or interest in or to any remaining Loan proceed.
(b) All remedies provided for in this Agreement are cumulative and
shall be in addition to any and all other rights and remedies available to
the Department at law or in equity. The exercise of any right or remedy by
the Department shall not in any way constitute a cure or waiver of any
default by the Borrower, nor invalidate any act done pursuant to any notice
of Default, nor prejudice the Department in the exercise of those rights.
(c) The failure of the Department to insist upon performance of any
term of this Agreement shall not be deemed to be a waiver of any term of this
Agreement. No act of the Department shall be construed as an election to
proceed under any one provision in this Agreement to the exclusion of any
other provision.
(d) If the Department suspends or terminates this Agreement, the
rights and remedies available to the Department shall survive such suspension
or termination.
ARTICLE VI
MISCELLANEOUS
<PAGE> 29
Section 6.01. Notices.
(a) All amendments, notices, requests, objections, waivers,
rejections, agreements, approvals, disclosures and consents of any kind made
pursuant to this Agreement shall be in writing.
(b) Any such communication shall be deemed effective for all purposes
as of the date the communication is mailed, postage prepaid, by registered or
certified mail, return receipt requested, to be delivered only to the office
of the addressee, addressed as follows:
(i) Communications to the Department shall be mailed to:
Director, Community Financing Group
Department of Business and Economic Development
217 East Redwood Street, 22nd Floor
Baltimore, Maryland 21202
With a copy to the Counsel to the Department, on the 11th
Floor at the same address.
(ii) Communications to Borrower shall be mailed to:
BioReliance Corporation
14920 Broschart Road
Rockville, Maryland 20850
Attention: Vice President, General Counsel
<PAGE> 30
With a copy to:
Lawrence A. Shulman, Esquire
Shulman, Rogers, Gandal, Pordy & Ecker, P.A.
11921 Rockville Pike, Suite 300
Rockville, Maryland 20852
(c) The Borrower and the Department may each change their respective
addresses specified in (b) above by sending written notice to the other party.
Section 6.02. Assignment.
No right, benefit, or advantage inuring to the Borrower under this
Agreement and no burden imposed on the Borrower hereunder may be assigned
without the prior written consent of the Department.
Section 6.03. Successors Bound.
This Agreement shall inure to the benefit of, and shall be binding upon
each of, the parties and their respective successors and permitted assigns.
Section 6.04. Severability.
The invalidity of any article, section, subsection, clause or provision
of this Agreement shall not affect the validity of the remaining articles,
sections, subsections, clauses or provisions hereof.
Section 6.05. Entire Agreement.
This Agreement constitutes the entire agreement between the parties and
supersedes all prior oral and written agreements, representations, and
negotiations between the parties hereto with respect to the Loan and the
Obligations.
Section 6.06. Amendment of this Agreement.
This Agreement, or any part hereof, may be amended from time to time
hereafter only in writing executed by the Department and the Borrower.
<PAGE> 31
Section 6.07. Headings; Section References.
The headings of each Section of this Agreement are for convenience only
and do not constitute a part of this Agreement. All references in this
Agreement to particular sections refer to sections of this Agreement, unless
otherwise noted.
Section 6.08. Disclaimer of Relationships.
The Borrower acknowledges that the obligation of the Department is
limited to making the Loan in the manner and on the terms set forth in this
Agreement. Nothing in this Agreement, nor any act of either the Department
or of the Borrower, shall be deemed or construed by either of them, or by
third persons, to create any relationship of third-party beneficiary,
principal and agent, limited or general partnership, or joint venture, or of
any association or relationship whatsoever involving the Borrower and the
Department.
Section 6.09. Governing Law.
The Borrower acknowledges and agrees that the Department is a principal
department of the State, that final credit decisions with respect to the
making of the Loan are made in Maryland and that those credit decisions
assume and require that the substantive laws of Maryland apply. As a
material inducement to the Department to enter into this Agreement, the
Borrower acknowledges and agrees that this Agreement and all the other Loan
Documents shall be governed by the laws of the State, as if each of the Loan
Documents and this Agreement had each been executed, delivered, administered
and performed solely within the State, even though for the convenience and at
the request of the Borrower, one or more of the Loan Documents may be
executed by the Borrower elsewhere.
Section 6.10. Term of This Agreement.
Except as otherwise provided in this Agreement, unless sooner
terminated by the mutual consent of the Borrower and the Department, this
Agreement shall continue and remain in full force and effect until the Loan
and Obligations, together with interest and all other sums due and owing in
connection with this Agreement, the Obligations or the Loan, have been paid
in full to the satisfaction of the Department.
Section 6.11. Illegality.
If fulfillment of any provision hereof or any transaction related
hereto, the Note, this Agreement or any of the other Loan Documents at the
time performance of such provisions shall be due shall involve transcending
the limit of validity prescribed by law, then ipso facto, the obligation to
be fulfilled shall be reduced to the limit of such validity; and if any
clause or provision herein contained, other than the provisions
<PAGE> 32
requiring the Borrower to pay interest, principal, principal and interest, or
any other of the Obligations secured by this Agreement, operates or would
prospectively operate to invalidate this Agreement in whole or in part, then
such clause or provision only shall be void as though not herein contained,
and the remainder of this Agreement shall remain operative and in full force
and effect; and if such clause or provision requires the Borrower to pay
interest, principal, principal and interest, or any other of the Obligations
secured by this Agreement, then at the option of the Department, the entire
unpaid sum under the Loan, with all unpaid interest accrued thereon, and all
other unpaid Obligations secured by this Agreement shall become due and
payable.
SECTION 6.12. WAIVER OF JURY TRIAL.
THE BORROWER HEREBY VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT IT
MAY HAVE TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR LITIGATION DIRECTLY
OR INDIRECTLY ARISING OUT, UNDER AND IN CONNECTION WITH THE LOAN, THIS
AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS.
SECTION 6.13. CONFESSION OF JUDGMENT.
UPON A DEFAULT, THE BORROWER AUTHORIZES THE CLERK OR ANY ATTORNEY OF
ANY COURT OF RECORD TO APPEAR FOR IT AND ENTER JUDGMENT BY CONFESSION WITHOUT
PRIOR NOTICE OR OPPORTUNITY FOR PRIOR HEARING FOR THE OBLIGATIONS THEN
OUTSTANDING, TOGETHER WITH INTEREST, COURT COSTS AND ATTORNEY'S FEES EQUAL TO
15% OF THE SUM OF THE OBLIGATIONS THEN OUTSTANDING AND INTERST THEN DUE
HEREUNDER (THE "AWARDED ATTORNEYS' FEES"). NOTWITHSTANDING THE FACT THAT THE
AMOUNT OF THE JUDGMENT WHICH MAY BE CONFESSED AGAINST THE BORROWER MAY
INCLUDE THE AWARDED ATTORNEYS' FEES, (A) IF THE ACTUAL ATTORNEYS' FEES
INCURRED BY THE DEPARTMENT ARE LESS THAN THE AWARDED ATTORNEYS' FEES AND THE
OBLIGATIONS HAVE BEEN PAID, THE DEPARTMENT WILL REFUND (BUT ONLY TO THE
EXTENT ACTUALLY COLLECTED UNDER SUCH CONFESSED JUDGMENT) TO THE BORROWER AN
AMOUNT EQUAL TO THE DIFFERENCE BETWEEN THE AWARDED ATTORNEYS' FEES AND THE
AMOUNT OF SUCH ACTUAL ATTORNEYS' FEES, OR (B) IF THE ACTUAL ATTORNEYS' FEES
INCURRED BY THE DEPARTMENT EXCEED THE AWARDED ATTORNEYS' FEES, THE BORROWER
WILL PAY TO THE DEPARTMENT ON DEMAND THE AMOUNT OF ANY SUCH EXCESS. THE
BORROWER HEREBY WAIVES AND RELEASES, TO THE EXTENT PERMITTED BY LAW, ALL
ERRORS AND ALL RIGHTS OF EXEMPTION, APPEAL, STAY OF EXECUTION, INQUISITION,
AND EXTENSION UPON ANY LEVY ON REAL ESTATE OR PERSONAL PROPERTY TO WHICH THE
BORROWER MAY OTHERWISE BE ENTITLED UNDER THE LAWS OF THE UNITED STATES OF
<PAGE> 33
AMERICA OR OF ANY STATE OR POSSESSION OF THE UNITED STATES OF AMERICA NOW IN
FORCE OR WHICH MAY HEREAFTER BE PASSED. THE AUTHORITY AND POWER TO APPEAR FOR
AND ENTER JUDGMENT AGAINST THE BORROWER SHALL NOT BE EXHAUSTED BY ONE OR MORE
EXERCISES THEREOF, OR BY ANY IMPERFECT EXERCISE THEREOF, AND SHALL NOT
EXTINGUISHED BY ANY JUDGMENT ENTERED PURSUANT THERETO. SUCH AUTHORITY AND
POWER MAY BE EXERCISED ON ONE OR MORE OCCASIONS, FROM TIME TO TIME, IN THE
SAME OR DIFFERENT JURISDICTIONS, AS OFTEN AS THE DEPARTMENT SHALL DEEM
NECESSARY OR DESIRABLE, FOR ALL OF WHICH THIS AGREEMENT SHALL BE A SUFFICIENT
WARRANT.
Section 6.14. Counterparts.
This Agreement may be executed in one or more counterparts, each of
which shall be an original, but all of which, when taken together, shall
constitute one and the same instrument.
[SIGNATURES APPEAR ON THE NEXT PAGE]
<PAGE> 34
IN WITNESS WHEREOF, the Borrower and the Department have caused this
Agreement to be executed, sealed and delivered as of the day and year first
above written.
WITNESS: DEPARTMENT OF BUSINESS AND
ECONOMIC DEVELOPMENT
By: /s/ David S. Iannucci (SEAL)
- ------------------------ -----------------------------------
David S. Iannucci
Deputy Secretary
WITNESS: BIORELIANCE CORPORATION
By: /s/ Patrick J. Spratt (SEAL)
- ------------------------ -----------------------------------
Name: Name: Patrick J. Spratt
------------------------
Title: Title: Chief Financial Officer
------------------------
Approved for form and legal sufficiency
this day of , 199 .
---- ----------- ---
By:
------------------------
Name:
-------------------------
Assistant Attorney General
STATE OF MARYLAND, CITY/COUNTY OF , TO WIT:
------------------
I HEREBY CERTIFY that on this ___ day of _____________, 19__, before
me, a Notary Public of the State of Maryland, in and for the State and
City/County aforesaid, personally appeared David S. Iannucci, who
acknowledged himself to be the Deputy Secretary of Business and Economic
Development of the State of Maryland, a principal department of the State of
Maryland, known or satisfactorily proven to me to be the person whose name is
subscribed to the within instrument, and acknowledged that he executed the
foregoing Agreement on behalf of the Department of Business and Economic
Development for the purposes therein contained as the duly authorized Deputy
Secretary of Business and Economic Development of the State of Maryland.
AS WITNESS my hand and Notarial Seal.
<PAGE> 35
-----------------------------------
Notary Public
My Commission expires:
------------
STATE OF MARYLAND, CITY/COUNTY OF , TO WIT:
----------------
I HEREBY CERTIFY that on this ___ day of _____________, 19__, before
me, a Notary Public in and for the State of Maryland, personally appeared
_________________, who acknowledged himself/herself to be the __________ of
the BioReliance Corporation, known or satisfactorily proven to me to be the
person whose name is subscribed to the within instrument, and acknowledged
that he/she executed the foregoing Agreement on behalf of the BioReliance
Corporation as for the purposes therein contained as its duly authorized
- -------------.
AS WITNESS my hand and Notarial Seal.
-----------------------------------
Notary Public
My Commission expires:
------------
<PAGE> 36
PROMISSORY NOTE
$3,000,000 JUNE 28, 1999
--------
(FINANCED AMOUNT)
FOR VALUE RECEIVED, BIORELIANCE CORPORATION, a Delaware corporation
(the "Borrower"), promises to pay to the order of the DEPARTMENT OF BUSINESS
AND ECONOMIC DEVELOPMENT, a principal department of the State of Maryland
(the "Department"), the principal sum of THREE MILLION DOLLARS ($3,000,000)
(the "Loan"), or so much as has been disbursed to the Borrower under the
terms of a Loan Agreement of even date herewith between the Borrower and the
Department (the "Loan Agreement"), together with interest thereon at the rate
or rates hereafter specified and any and all other sums which may be owing to
the Department by the Borrower pursuant to this Promissory Note (the
"Note"). All terms used herein that are defined in the Loan Agreement have
the meanings given those terms in the Loan Agreement, unless the context
clearly indicates a contrary meaning. The following terms shall apply to
this Note.
1. Interest.
(a) For the period from the date of this Note through the Sixth
Employee Date, the unpaid principal balance outstanding
from time to time pursuant to this Note shall bear interest
at the rate of 0% percent per annum.
(b) The unpaid principal balance outstanding from time to time
pursuant to this Note shall bear interest at the rate of 0%
percent per annum during the: (i) Seventh Period, if the
condition set forth in Section 3.03(a) of the Loan
Agreement is satisfied; (ii) Eighth Period, if the
conditions set forth in Section 3.03(d) of the Loan
Agreement are satisfied; and (iii) Ninth Period, if the
conditions set forth in Section 3.03(g) of the Loan
Agreement are satisfied.
(c) The unpaid principal balance outstanding from time to time
pursuant to this Note shall bear interest at the rate of
3.75% percent per annum during the (i) Seventh Period, if
the condition set forth in Section 3.03(b) of the Loan
Agreement is satisfied; (ii) Eighth Period, if the
conditions set forth in Section 3.03(e) of the Loan
Agreement are satisfied; and (iii) Ninth Period, if the
conditions set forth in Section 3.03(h) of the Loan
Agreement are satisfied.
(d) The unpaid principal balance outstanding from time to time
pursuant to this Note shall bear interest at the rate of
7.5% percent
<PAGE> 37
per annum during the: (i) Seventh Period if the condition
set forth in Section 3.03(c) of the Loan Agreement is
satisfied (ii) Eighth Period, if the conditions set forth
in Section 3.03(f) of the Loan Agreement are satisfied; and
(iii) Ninth Period, if the conditions set forth in Section
3.03(i) of the Loan Agreement are satisfied.
2. Calculation of Interest. Interest shall be calculated on the
basis of three hundred sixty (360) days per year based upon the
actual number of days on which there exists an unpaid balance
hereunder.
3. Repayment.
(a) Commencing on the day which is 3 months after disbursement
of the Loan proceeds under the Loan Agreement
("Disbursement"), and continuing on the same day of each
succeeding third month to and including the day which is 7
years after Disbursement (the "Maturity Date"), the
Borrower shall make quarterly installments each consisting
of a payment of principal together with payment of the
accrued interest on the outstanding principal balance under
this Note in an amount as set forth in the amortization
schedule to be provided to Borrower by the Department and
which may be revised from time to time in accordance with
the provisions of this Note based on the interest rate
charged pursuant to Section 2 of this Note; and
(b) The Borrower shall pay any remaining principal balance,
accrued and unpaid interest and any other amounts
outstanding under the Loan Documents on the Maturity Date,
on which date this Note shall mature, and the entire unpaid
principal balance and accrued and unpaid interest thereon
shall be due and payable.
4. Late Payment Charge. If any payment due hereunder is not
received by the Department within 15 calendar days after its due
date, the Borrower shall pay a late payment charge equal to five
percent (5%) of the amount then due.
5. Application of Payments. All payments made pursuant to this Note
shall be applied first to accrued interest, then to principal,
and then to late payments, charges or other sums owed to the
Department, or in such other order or proportion as the
Department, in the Department's sole discretion, may elect from
time to time.
6. Prepayment. The Borrower may prepay this Note in whole or in
part at any time or from time to time without premium or
penalty. The Department shall apply any voluntary prepayment
first to late charges
2
<PAGE> 38
and fees, then to accrued interest and default interest, and then
to principal in the inverse order of scheduled maturities.
7. Place of Payment. All payments due under this Note shall be made
during regular business hours, without notice, to the Department
of Business and Economic Development, 217 East Redwood Street,
22nd Floor, Baltimore, Maryland 21202, Attention: Loan
Administration Unit, or to any other place that the Lender may
designate in writing, and shall be made in coin or currency of
the United States of America which at the time of payment is
legal tender for the payment of public or private debts.
Prepayments shall be sent to the Department of Business and
Economic Development, 217 East Redwood Street, 22nd Floor,
Baltimore, Maryland 21202, Attention: Loan Administration Unit,
or to such other address as directed by the Lender.
8. Default. The occurrence of any one or more of the following
events shall constitute a default (a "Default") under the terms
of this Note:
(a) The failure of the Borrower to pay the Department when due
any and all amounts payable by the Borrower to the
Department under the terms of this Note or the Loan
Documents within seven (7) days of the date such payment is
due; or
(b) The occurrence of a default under the terms and conditions
of the Loan Agreement.
9. Acceleration. Upon a Default, the Department, in the
Department's sole and absolute discretion and without further
notice or demand, may declare the entire unpaid principal balance
of this Note plus accrued interest and all other sums due under
this Note to be immediately due and payable and may exercise any
and all rights and remedies available under any of the Loan
Documents. Reference is made to the Loan Documents, for further
and additional rights of the Department to declare the entire
unpaid principal balance plus accrued interest and all other sums
due under this Note to be immediately due and payable.
10. Confession of Judgment. UPON A DEFAULT, THE BORROWER AUTHORIZES
THE CLERK OR ANY ATTORNEY OF ANY COURT OF RECORD TO APPEAR FOR IT
AND ENTER JUDGMENT BY CONFESSION WITHOUT PRIOR NOTICE OR
OPPORTUNITY FOR PRIOR HEARING FOR THE PRINCIPAL BALANCE THEN
OUTSTANDING UNDER THIS NOTE, TOGETHER WITH INTEREST, COURT COSTS
AND AN ATTORNEY'S FEE EQUAL TO 15% OF THE SUM OF THE PRINCIPAL
BALANCE THEN OUTSTANDING AND INTEREST THEN DUE HEREUNDER (THE
3
<PAGE> 39
"AWARDED ATTORNEYS' FEES"). NOTWITHSTANDING THE FACT THAT THE
AMOUNT OF THE JUDGMENT WHICH MAY BE CONFESSED AGAINST THE
BORROWER MAY INCLUDE THE AWARDED ATTORNEYS' FEES, (A) IF THE
ACTUAL ATTORNEYS' FEES INCURRED BY THE DEPARTMENT ARE LESS THAN
THE AWARDED ATTORNEYS' FEES AND THE OBLIGATIONS HAVE BEEN PAID,
THE DEPARTMENT WILL REFUND (BUT ONLY TO THE EXTENT ACTUALLY
COLLECTED UNDER SUCH CONFESSED JUDGMENT) TO THE BORROWER AN
AMOUNT EQUAL TO THE DIFFERENCE BETWEEN THE AWARDED ATTORNEYS'
FEES AND THE AMOUNT OF SUCH ACTUAL ATTORNEYS' FEES, OR (B) IF THE
ACTUAL ATTORNEYS' FEES INCURRED BY THE DEPARTMENT EXCEED THE
AWARDED ATTORNEYS' FEES, THE BORROWER WILL PAY TO THE DEPARTMENT
ON DEMAND THE AMOUNT OF ANY SUCH EXCESS. THE BORROWER HEREBY
WAIVES AND RELEASES, TO THE EXTENT PERMITTED BY LAW, ALL ERRORS
AND ALL RIGHTS OF EXEMPTION, APPEAL, STAY OF EXECUTION,
INQUISITION, AND EXTENSION UPON ANY LEVY ON REAL ESTATE OR
PERSONAL PROPERTY TO WHICH THE BORROWER MAY OTHERWISE BE ENTITLED
UNDER THE LAWS OF THE UNITED STATES OF AMERICA OR OF ANY STATE OR
POSSESSION OF THE UNITED STATES OF AMERICA NOW IN FORCE OR WHICH
MAY HEREAFTER BE PASSED. THE AUTHORITY AND POWER TO APPEAR FOR
AND ENTER JUDGMENT AGAINST THE BORROWER SHALL NOT BE EXHAUSTED BY
ONE OR MORE EXERCISES THEREOF, OR BY ANY IMPERFECT EXERCISE
THEREOF, AND SHALL NOT BE EXTINGUISHED BY ANY JUDGMENT ENTERED
PURSUANT THERETO. SUCH AUTHORITY AND POWER MAY BE EXERCISED ON
ONE OR MORE OCCASIONS, FROM TIME TO TIME, IN THE SAME OR
DIFFERENT JURISDICTIONS, AS OFTEN AS THE DEPARTMENT SHALL DEEM
NECESSARY OR DESIRABLE, FOR ALL OF WHICH THIS NOTE SHALL BE A
SUFFICIENT WARRANT.
11. Consent to Jurisdiction. The Borrower irrevocably submits to the
jurisdiction of any state or federal court sitting in the State
of Maryland over any suit, action, or proceeding arising out of,
or relating to, this Note. The Borrower irrevocably waives, to
the fullest extent permitted by law, any objection that the
Borrower may now or hereafter have to the setting of venue of any
suit, action, or proceeding brought in any such court and any
claim that any suit, action, or proceeding brought in any such
court was brought in an inconvenient forum.
4
<PAGE> 40
12. Service of Process. The Borrower hereby consents to process
being served in any suit, action, or proceeding instituted in
connection with this Note by (i) the mailing of a copy thereof by
certified mail, postage prepaid, return receipt requested, to the
Borrower at the address listed in Section 6.01 of the Loan
Agreement and (ii) serving a copy thereof upon Vice President and
General Counsel of the Borrower, the agent designated and
appointed by the Borrower as the Borrower's agent for service of
process. The Borrower irrevocably agrees that the service
specified herein shall be deemed to be service of process upon
the Borrower in any suit, action, or proceeding. Nothing in this
Note shall affect the Department's right to serve process in any
other manner otherwise permitted by law.
13. Notices. Any notice, request, or demand to, or upon, the
Borrower or the Department under this Note shall be deemed to
have been properly given or made when delivered in accordance
with Section 6.01 of the Loan Agreement.
14. Expenses of Collection. If this Note is referred to an attorney
for collection after a Default, the Borrower shall pay all costs
of collection, including reasonable attorneys' fees.
15. Subsequent Holder. The Department may pledge, transfer, or
assign this Note and its rights under the Loan Documents. Any
pledging, transferring or assigning of rights shall also apply to
any renewals, extensions or modifications. A transferee,
pledgee, or assignee shall have the same rights as the Department
hereunder with respect to this Note.
16. Waiver of Protest. The Borrower, and all parties to this Note,
whether maker, endorser, or guarantor waive presentment, notice
of dishonor and protest.
17. Choice of Law; Modifications; Cumulative Rights; Extensions of
Maturity.
(a) The Borrower acknowledges and agrees that the Department is
a principal department of the State of Maryland, that final
credit decisions with respect to the making of the Loan are
made in Maryland and that those credit decisions assume and
require that the substantive laws of Maryland apply. As a
material inducement to the Department to enter into this
Note, the Borrower acknowledges and agrees that this Note
shall be governed by the laws of the State of Maryland.
(b) No modification or amendment of this Note shall be
effective unless in writing signed by the Department and
the Borrower, and
5
<PAGE> 41
each modification or amendment, if any, shall apply only
with respect to the specific instance involved.
(c) No waiver of any provision of this Note shall be deemed to
be made by the Department unless in writing signed by the
Department. Any waiver shall apply only with respect to
the specific instance involved.
(d) By accepting partial payment of any amount due and payable
under this Note, the Department shall not be deemed to
waive the right either to require prompt payment when due
of all other amounts due and payable under this Note or to
exercise any rights and remedies available to it in order
to collect all other amounts due and payable under this
Note.
(e) Each right, power and remedy of the Department hereunder or
under applicable law shall be cumulative and concurrent and
the exercise of any one or more of them shall not preclude
the simultaneous or later exercise by the Department of any
or all other rights, power, or remedies.
(f) No failure or delay by the Department to insist upon the
strict performance of any one or more provisions of this
Note or to exercise any right, power, or remedy consequent
upon a breach thereof shall constitute a waiver thereof, or
preclude the Department from exercising any such right,
power or remedy.
18. Illegality. In case any provision (or any part of any
provision) contained in this Note shall for any reason be held to
be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any
other provision (or remaining part of the affected provision) of
this Note, but this Note shall be construed as if such invalid,
illegal or unenforceable provision (or any part thereof) had
never been contained herein, but only to the extent it is
invalid, illegal or unenforceable.
19. This Note is subject to the mandatory prepayment provisions set
forth in the Loan Agreement.
6
<PAGE> 42
IN WITNESS WHEREOF, and intending to be legally bound hereby, the
undersigned executes this Note under seal as Borrower on the above written
date.
ATTEST: BORROWER:
BIORELIANCE CORPORATION
By: /s/ Patrick J. Spratt (SEAL)
- --------------------- ------------------------------------
Name: Name: Patrick J. Spratt
----------------------
Title: Title: Chief Financial Officer
----------------------
STATE OF MARYLAND, CITY/COUNTY OF , TO WIT:
------------------
I HEREBY CERTIFY that on this ___ day of _____________, 1999, before
me, a Notary Public in and for the State and City/County aforesaid,
personally appeared _________________, who acknowledged himself/herself to be
the ____________ of BioReliance Corporation, known or satisfactorily proven
to me to be the person whose name is subscribed to the within instrument, and
acknowledged that she/he executed the same for the purposes therein contained
as its duly authorized ___________.
AS WITNESS my hand and Notarial Seal.
-----------------------------------
Notary Public
My Commission expires:
------------
7
<PAGE> 1
EXHIBIT 10.36
NOTE MODIFICATION AGREEMENT
BY AND BETWEEN NATIONSBANK, N.A.
("BANK"/"LENDER") AND
BioReliance Corporation, BioReliance Testing and Development, Inc.,
BioReliance Manufacturing, Inc. and Magenta Viral Production, Inc.
("BORROWER")
EFFECTIVE AS OF: May 31, 1999
On or about May 31, 1998, (Note Date), Borrower executed a Promissory Note 356
(Note Number) ("Note") in favor of Bank/Lender. This note was in the original
principal face amount of $1,000,000.00 bearing interest at the Libor Rate plus
the Applicable Margin % per annum with a stated final maturity date (including
all prior renewals, if any) of May 31, 1999. Bank/Lender remains the owner and
holder of the Note and has agreed with Borrower to modify certain provisions of
the Note. Now, therefore, in consideration of these premises and the exchange of
other good and valuable consideration, the receipt of which is hereby
acknowledged, Bank/Lender and Borrower agree to modify the Note as follows:
The maturity date is changed to: May 31, 2001
The payment terms are changed to: SINGLE PRINCIPAL PAYMENT. Principal
shall be paid in full in a single payment on May 31, 2001. Interest thereon
shall be paid monthly, commencing on June 30, 1999, and continuing on the last
day of each successive month, quarter or other period (as applicable)
thereafter, with a final payment of all unpaid interest at the stated maturity
of this Note.
The term Borrower as used in this Agreement shall be construed as singular or
plural to correspond with the number of persons executing this Agreement as
Borrower.
All other terms, conditions and covenants in the Note shall be and remain in
full force and effect. When executed by Bank/Lender and Borrower, this Agreement
shall be attached to and become a part of the Note.
NOTICE OF FINAL AGREEMENT.
THIS WRITTEN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN BORROWER AND
BANK/LENDER AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS BETWEEN BORROWER AND BANK/LENDER. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN BORROWER AND BANK/LENDER.
IN WITNESS WHEREOF, AND INTENDING TO CREATE AN INSTRUMENT EXECUTED UNDER SEAL,
the undersigned has caused this Note Modification Agreement to be executed under
seal by Borrower on this _____ day of June, 1999.
NATIONSBANK, N.A.
By /s/ Elizabeth Shore
------------------------------------
Name: Elizabeth Shore
Title: Senior Vice President
CORPORATE OR PARTNERSHIP BORROWER
1
<PAGE> 2
EXHIBIT 10.36
BIORELIANCE CORPORATION
By: /s/ Patrick J. Spratt (Seal)
-------------------------------------------
Name: Patrick J. Spratt
-----------------------------------------
Title: Vice President & Chief Financial Officer
----------------------------------------
- -----------------------------------------------
Attest (If Applicable)
[Corporate Seal]
BIORELIANCE TESTING AND DEVELOPMENT, INC.
By: /s/ Patrick J. Spratt (Seal)
-------------------------------------------
Name: Patrick J. Spratt
-----------------------------------------
Title: Vice President & Chief Financial Officer
----------------------------------------
- -----------------------------------------------
Attest (If Applicable)
[Corporate Seal]
BIORELIANCE MANUFACTURING, INC.
By: /s/ Patrick J. Spratt (Seal)
-------------------------------------------
Name: Patrick J. Spratt
-----------------------------------------
Title: Vice President & Chief Financial Officer
----------------------------------------
- -----------------------------------------------
Attest (If Applicable)
[Corporate Seal]
MAGENTA VIRAL PRODUCTION, INC.
By: /s/ Patrick J. Spratt (Seal)
-------------------------------------------
Name: Patrick J. Spratt
-----------------------------------------
Title: Vice President & Chief Financial Officer
----------------------------------------
- -----------------------------------------------
Attest (If Applicable)
[Corporate Seal]
2
<PAGE> 1
EXHIBIT 10.37
NOTE MODIFICATION AGREEMENT
BY AND BETWEEN NATIONSBANK, N.A.
("BANK"/"LENDER") AND
BioReliance Corporation, BioReliance Testing and
Development f/k/a Ma Bioservices, Inc.,
BioReliance Manufacturing, Inc. f/k/a Magenta Corporation,
and Magenta Viral Production, Inc.
("BORROWER")
EFFECTIVE AS OF: June 30, 1999
On or about September 19, 1996, (Note Date), Borrower, acting jointly and
severally, executed an Amended and Restated Promissory Note 372 (Note Number)
("Note") in favor of Bank/Lender. This note was in the original principal face
amount of $1,800,000.00 bearing interest at the option of LIBOR plus 3.50% or
Prime plus 1.25% per annum which was modified to LIBOR plus the Applicable
Margin % per annum on October 31, 1997 by a Note Modification Agreement, all as
therein defined, with a stated final maturity date of June 30, 1999. Bank/Lender
remains the owner and holder of the Note and has agreed with Borrower to modify
certain provisions of the Note. Now, therefore, in consideration of these
premises and the exchange of other good and valuable consideration, the receipt
of which is hereby acknowledged, Bank/Lender and Borrower agree to modify the
Note as follows:
The maturity date is changed to: June 30, 2001
The repayment terms are changed to: PRINCIPAL PLUS ACCRUED INTEREST.
Principal shall be paid in consecutive equal installments of $30,000.00, plus
accrued interest, payable monthly, commencing on July 31, 1999, and continuing
on the last day of each successive month, quarter or other period (as
applicable) thereafter, with a final payment of all unpaid principal and accrued
interest due on June 30, 2001.
The term Borrower as used in this Agreement shall be construed as singular or
plural to correspond with the number of persons executing this Agreement as
Borrower.
All other terms, conditions and covenants in the Note shall be and remain in
full force and effect. When executed by Bank/Lender and Borrower, this Agreement
shall be attached to and become a part of the Note.
NOTICE OF FINAL AGREEMENT.
THIS WRITTEN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN BORROWER AND
BANK/LENDER AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS BETWEEN BORROWER AND BANK/LENDER. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN BORROWER AND BANK/LENDER.
IN WITNESS WHEREOF, AND INTENDING TO CREATE AN INSTRUMENT EXECUTED UNDER SEAL,
the undersigned has caused this Note Modification Agreement to be executed under
seal by Borrower on this _____ day of July, 1999.
NATIONSBANK, N.A.
By /s/ Elizabeth Shore
--------------------------------------------
Name: Elizabeth Shore
Title: Senior Vice President
CORPORATE OR PARTNERSHIP BORROWER
1
<PAGE> 2
EXHIBIT 10.37
BIORELIANCE CORPORATION
By: /s/ Patrick J. Spratt (Seal)
-------------------------------------------
Name: Patrick J. Spratt
-----------------------------------------
Title: Vice President & Chief Financial Officer
----------------------------------------
- -----------------------------------------------
Attest (If Applicable)
[Corporate Seal]
BIORELIANCE TESTING AND DEVELOPMENT f/k/a MA BIOSERVICES, INC.
By: /s/ Patrick J. Spratt (Seal)
-------------------------------------------
Name: Patrick J. Spratt
-----------------------------------------
Title: Vice President & Chief Financial Officer
----------------------------------------
- -----------------------------------------------
Attest (If Applicable)
[Corporate Seal]
BIORELIANCE MANUFACTURING, INC. f/k/a MAGENTA CORPORATION
By: /s/ Patrick J. Spratt (Seal)
-------------------------------------------
Name: Patrick J. Spratt
-----------------------------------------
Title: Vice President & Chief Financial Officer
----------------------------------------
- -----------------------------------------------
Attest (If Applicable)
[Corporate Seal]
MAGENTA VIRAL PRODUCTION, INC.
By: /s/ Patrick J. Spratt (Seal)
-------------------------------------------
Name: Patrick J. Spratt
-----------------------------------------
Title: Vice President & Chief Financial Officer
----------------------------------------
- -----------------------------------------------
Attest (If Applicable)
[Corporate Seal]
2
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) 2ND
QUARTER 1999 FORM 10-Q UNAUDITED CONSOLIDATED BALANCE SHEETS AND UNAUDITED
CONSOLIDATED STATEMENTS OF INCOME AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH (B) FORM 10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 12,626
<SECURITIES> 9,911
<RECEIVABLES> 20,555
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 44,976
<PP&E> 28,069
<DEPRECIATION> 0
<TOTAL-ASSETS> 74,035
<CURRENT-LIABILITIES> 12,550
<BONDS> 0
0
0
<COMMON> 79
<OTHER-SE> 51,725
<TOTAL-LIABILITY-AND-EQUITY> 74,035
<SALES> 22,132
<TOTAL-REVENUES> 22,132
<CGS> 15,175
<TOTAL-COSTS> 15,175
<OTHER-EXPENSES> 9,086
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 384
<INCOME-PRETAX> (1,970)
<INCOME-TAX> (496)
<INCOME-CONTINUING> (1,474)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,474)
<EPS-BASIC> (.19)
<EPS-DILUTED> (.19)
</TABLE>
