Document:

LOAN AGREEMENT WITH WACHOVIA BANK

 
Exhibit
10.31 
 
LOAN AGREEMENT 
 
Wachovia Bank, National Association 
123 South Broad Street 
Philadelphia,
Pennsylvania 19109 
(Hereinafter referred to as the “Bank”) 
 
Covalent Group, Inc. 
1275 Drummers Lane, Suite 100 
Wayne, Pennsylvania 19087 
(Individually and collectively “Borrower”) 
 
This Loan Agreement (“Agreement”) is entered into August 1, 2002, by and between Bank and Borrower. 
 
This Agreement amends and restates in its entirety that certain Loan Agreement dated September 26, 2001 and applies to the loan or loans (individually and
collectively, the “Loan”) evidenced by one or more promissory notes dated August 1, 2002 or other notes subject hereto, as modified from time to time (whether one or more, the “Note”) and all Loan Documents. The terms “Loan
Documents” and “Obligations,” as used in this Agreement, are defined in the Note. 
 
Relying upon the covenants, agreements, representations and warranties contained in this Agreement, Bank is willing to extend credit to Borrower upon the terms and subject to the conditions set forth
herein, and Bank and Borrower agree as follows: 
 
AVAILABILITY.
With respect to the line of credit Promissory Note in the amount of $2,500,00.00, dated August 1, 2002, notwithstanding anything to the contrary contained herein, the aggregate outstanding principal balance of Advances (as defined in the Note)
(the “Total Outstandings”) at any one time shall not exceed the lesser of $2,500,000.00 or the Borrowing Base (as hereinafter defined). In the event that the Total Outstandings at any time exceeds the Borrowing Base, Borrower shall pay to
Bank the amount of such excess immediately upon receipt by Borrower of written notice that the Borrowing Base has been exceeded. 
 
REPRESENTATIONS. Borrower represents that from the date of this Agreement and until final payment in full of the Obligations: Accurate
Information. All information now and hereafter furnished to Bank is and will be true, correct and complete. Any such information relating to Borrower’s financial condition will accurately reflect Borrower’s financial condition as of
the date(s) thereof, (including all contingent liabilities of every type), and Borrower further represents that its financial condition has not changed materially or adversely since the date(s) of such documents. Authorization; Non-Contravention.
The execution, delivery and performance by Borrower and any guarantor, as applicable, of this Agreement and other Loan Documents to which it is a party are within its power, have been duly authorized as may be required and, if necessary, by
making appropriate filings with any governmental agency or unit and are the legal, binding, valid and enforceable obligations of Borrower and any guarantors; and do not (i) contravene, or constitute (with or without the giving of notice or lapse of
time or both) a violation of any provision of applicable law, a violation of the organizational documents of Borrower or any guarantor, or a default under any agreement, judgment, injunction, order, decree or other instrument binding upon or
affecting Borrower or any guarantor, (ii) result in the creation or imposition of any lien (other than the lien(s) created by the Loan Documents) on any of Borrower’s or any guarantor’s assets, or (iii) give cause for the acceleration of
any obligations of Borrower or any guarantor to any other creditor. Asset Ownership. Borrower has good and marketable title to all of the properties and assets reflected on the balance sheets and financial statements supplied Bank by
Borrower, and all such properties and assets are free and clear of mortgages, security deeds, pledges, liens, charges, and all other encumbrances, except as otherwise disclosed to Bank by Borrower in writing and approved by Bank (“Permitted
Liens”). To Borrower’s knowledge, no default has occurred under any Permitted Liens and no claims or interests adverse to Borrower’s present rights in its properties and assets have arisen. Discharge of Liens and  

 
Taxes. Borrower has
duly filed, paid and/or discharged all taxes or other claims which may become a lien on any of its property or assets, except to the extent that such items are being appropriately contested in good faith and an adequate reserve for the payment
thereof is being maintained. Sufficiency of Capital. Borrower is not, and after consummation of this Agreement and after giving effect to all indebtedness incurred and liens created by Borrower in connection with the Note and any other Loan
Documents, will not be, insolvent within the meaning of 11 U.S.C. § 101(32). Compliance with Laws. Borrower is in compliance in all respects with all federal, state and local laws, rules and regulations applicable to its properties,
operations, business, and finances, including, without limitation, any federal or state laws relating to liquor (including 18 U.S.C. § 3617, et seq.) or narcotics (including 21 U.S.C. § 801, et seq.) and/or any commercial crimes; all
applicable federal, state and local laws and regulations intended to protect the environment; and the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), if applicable. Organization and Authority. Each corporate
or limited liability company Borrower and/or guarantor, as applicable, is duly created, validly existing and in good standing under the laws of the state of its organization, and has all powers, governmental licenses, authorizations, consents and
approvals required to operate its business as now conducted. Each corporate or limited liability company Borrower and/or guarantor, as applicable, is duly qualified, licensed and in good standing in each jurisdiction where qualification or licensing
is required by the nature of its business or the character and location of its property, business or customers, and in which the failure to so qualify or be licensed, as the case may be, in the aggregate, could have a material adverse effect on the
business, financial position, results of operations, properties or prospects of Borrower or any such guarantor. No Litigation. There are no pending or threatened suits, claims or demands against Borrower or any guarantor that have not been
disclosed to Bank by Borrower in writing, and approved by Bank. 
 
AFFIRMATIVE COVENANTS. Borrower agrees that from the date hereof and until final payment in full of the Obligations, unless Bank shall otherwise consent in writing, Borrower will: Access to Books and Records.
Allow Bank, or its agents, during normal business hours, access to the books, records and such other documents of Borrower as Bank shall reasonably require, and allow Bank, at Borrower’s expense, to inspect, audit and examine the same and to
make extracts therefrom and to make copies thereof. Accounts Receivable Aging. Deliver to Bank, from time to time hereafter but not less than monthly within 15 days of the end of each such period, a detailed receivables report including
totals, customer names and addresses, a reconciliation statement, and the original date of each invoice. Business Continuity. Conduct its business in substantially the same manner and locations as such business is now and has previously been
conducted. Compliance with Other Agreements. Comply with all terms and conditions contained in this Agreement, and any other Loan Documents, and swap agreements, if applicable, as defined in the 11 U.S.C. § 101. Estoppel
Certificate. Furnish, within 15 days after request by Bank, a written statement duly acknowledged of the amount due under the Loan and whether offsets or defenses exist against the Obligations. Insurance. Maintain adequate
insurance coverage with respect to its properties and business against loss or damage of the kinds and in the amounts customarily insured against by companies of established reputation engaged in the same or similar businesses including, without
limitation, commercial general liability insurance, workers compensation insurance, and business interruption insurance; all acquired in such amounts and from such companies as Bank may reasonably require. Maintain Properties. Maintain,
preserve and keep its property in good repair, working order and condition, making all needed replacements, additions and improvements thereto, to the extent allowed by this Agreement. Non-Default Certificate From Borrower. Deliver to Bank,
with the Financial Statements required below, a certificate signed by Borrower, in the form attached hereto as exhibit A, if Borrower is an individual, or by a principal financial officer of Borrower warranting that no “Default” as
specified in the Loan Documents nor any event which, upon the giving of notice or lapse of time or both, would constitute such a Default, has occurred and demonstrating Borrower’s compliance with the financial covenants contained herein.
Notice of Default and Other Notices. (a) Notice of Default. Furnish to Bank immediately upon becoming aware of the existence of any condition or event which constitutes a Default (as defined in the Loan Documents) or any event which, upon
the giving of notice or lapse of time or both, may become a Default, written notice specifying the nature and period of existence thereof and the action which Borrower is taking or proposes to take with respect thereto. (b) Other Notices.
Promptly notify Bank in writing of (i) any material adverse change in its financial condition or its business; (ii) any default under any material agreement, contract or other instrument to which it is a party or by which any of its properties
are bound, or any acceleration of the maturity of any indebtedness owing by Borrower; (iii) any material adverse claim against or affecting Borrower or any part of its properties; (iv) the commencement of, and any material 

 
determination in, any
litigation with any third party or any proceeding before any governmental agency or unit affecting Borrower; and (v) at least 30 days prior thereto, any change in Borrower’s name or address as shown above, and/or any change in Borrower’s
structure. Other Financial Information. Deliver promptly such other information regarding the operation, business affairs, and financial condition of Borrower which Bank may reasonably request. Payment of Debts. Pay and discharge when
due, and before subject to penalty or further charge, and otherwise satisfy before maturity or delinquency, all obligations, debts, taxes, and liabilities of whatever nature or amount, except those which Borrower in good faith disputes. Reports
and Proxies. Deliver to Bank, promptly, a copy of all financial statements, reports, notices, and proxy statements, sent by Borrower to stockholders, and all regular or periodic reports required to be filed by Borrower with any governmental
agency or authority. 
 
NEGATIVE COVENANTS. Borrower agrees
that from the date of this Agreement and until final payment in full of the Obligations, unless Bank shall otherwise consent in writing, Borrower will not: Change in Fiscal Year. Change its fiscal year. Change of Control. Make or
suffer a change of ownership that effectively changes control of Borrower from current ownership. Encumbrances. Create, assume, or permit to exist any mortgage, security deed, deed of trust, pledge, lien, charge or other encumbrance on any of
its assets, whether now owned or hereafter acquired, other than: (i) security interests required by the Loan Documents; (ii) liens for taxes contested in good faith; (iii) liens accruing by law for employee benefits; or (iv) Permitted Liens.
Guarantees. Guarantee or otherwise become responsible for obligations of any other person or persons, other than the endorsement of checks and drafts for collection in the ordinary course of business. Investments. Purchase any stock,
securities, or evidence of indebtedness of any other person or entity except investments in direct obligations of the United States Government, certificates of deposit of United States commercial banks having a tier 1 capital ratio of not less than
6% and then in an amount not exceeding 10% of the issuing bank’s unimpaired capital and surplus, and investment accounts managed by Bank or Wachovia Securities, Inc. Default on Other Contracts or Obligations. Default on any material
contract with or obligation when due to a third party or default in the performance of any obligation to a third party incurred for money borrowed. Government Intervention. Permit the assertion or making of any seizure, vesting or
intervention by or under authority of any government by which the management of Borrower or any guarantor is displaced of its authority in the conduct of its respective business or its such business is curtailed or materially impaired. Judgment
Entered. Permit the entry of any monetary judgment or the assessment against, the filing of any tax lien against, or the issuance of any writ of garnishment or attachment against any property of or debts due. Retire or Repurchase Capital
Stock. Retire or otherwise acquire any of its capital stock. Notwithstanding the foregoing, Borrower may repurchase its shares during the period beginning August 1, 2002 and ending June 30, 2003 for an amount not to exceed $500,000.00 in the
aggregate for all shares repurchased. 
 
ANNUAL FINANCIAL
STATEMENTS. Borrower shall deliver to Bank, within 120 days after the close of each fiscal year, audited financial statements reflecting its operations during such fiscal year, including, without limitation, a balance sheet, profit and loss
statement and statement of cash flows, with supporting schedules and in reasonable detail, prepared in conformity with generally accepted accounting principles, applied on a basis consistent with that of the preceding year. If audited statements are
required, all such statements shall be examined by an independent certified public accountant acceptable to Bank. The opinion of such independent certified public accountant shall not be acceptable to Bank if qualified due to any limitations in
scope imposed by Borrower or any other person or entity. Any other qualification of the opinion by the accountant shall render the acceptability of the financial statements subject to Bank’s approval. 
 
PERIODIC FINANCIAL STATEMENTS. Borrower shall deliver to Bank unaudited
management-prepared quarterly financial statements including, without limitation, a balance sheet, profit and loss statement and statement of cash flows, with supporting schedules, as soon as available and in any event within 45 days after the close
of each such period; all in reasonable detail and prepared in conformity with generally accepted accounting principles, applied on a basis consistent with that of the preceding year. Such statements shall be certified as to their correctness by a
principal financial officer of Borrower and in each case, if audited statements are required, subject to audit and year-end adjustments. 
 
FINANCIAL COVENANTS. Borrower agrees to the following provisions from the date hereof until final 

 
payment in full of the
Obligations, unless Bank shall otherwise consent in writing, using the financial information for Borrower, its subsidiaries, affiliates and its holding or parent company, as applicable: Tangible Net Worth. Borrower shall, at all times,
maintain a Tangible Net Worth of not less than $ 9,000,000.00. “Tangible Net Worth” shall mean total assets minus Total Liabilities. For purposes of this computation, the aggregate amount of any intangible assets of Borrower including,
without limitation, goodwill, franchises, licenses, patents, trademarks, trade names, copyrights, service marks, and brand names, shall be subtracted from total assets. Total Liabilities to Tangible Net Worth Ratio. Borrower shall, at all
times, maintain a ratio of Total Liabilities to Tangible Net Worth of not more than 1.25 to 1.00. “Total Liabilities” shall mean all liabilities of Borrower, including capitalized leases and all reserves for deferred taxes, debt fully
subordinated to Bank on terms and conditions acceptable to Bank, and other deferred sums appearing on the liabilities side of a balance sheet of Borrower, in accordance with generally accepted accounting principles applied on a consistent basis.
“Tangible Net Worth” shall mean total assets minus Total Liabilities. For purposes of this computation, the aggregate amount of any intangible assets of Borrower including, without limitation, goodwill, franchises, licenses, patents,
trademarks, trade names, copyrights, service marks, and brand names, shall be subtracted from total assets. Deposit Relationship. Borrower shall maintain its primary depository account with Bank. Limitation on Debt. Borrower shall not,
directly or indirectly, create, incur, assume or become liable for any additional indebtedness, excluding obligations to Bank related to Permitted Liens. 
 
BORROWING BASE. “Borrowing Base” means 75.00% of the net amount of Eligible Accounts, less the amount of any Reserves required by Bank.
“Eligible Account” means an account receivable not more than 90 days from the date of the original invoice that arises in the ordinary course of Borrower’s business and meets the following eligibility requirements: (a) the sale of
goods or services reflected in such account is final and such goods and services have been delivered or provided and accepted by the account debtor and payment for such is owing; (b) the invoices comprising an account are not subject to any claims,
returns or disputes of any kind; (c) the account debtor is not insolvent; (d) the account debtor has its principal place of business in the United States; (e) the account debtor is not an Affiliate of Borrower and is not a supplier to Borrower and
the account is not otherwise exposed to risk of set-off; (f) not more than 30% of the original invoices owing Borrower by the account debtor are more than 90 days from the date of the original invoice; and (g) the account is not subject to any lien
prior to the lien of Bank. “Reserves” means such amounts as may be required by Bank, at any time and from time to time without prior notice to Borrower, which Bank deems to be adequate to reserve against outstanding letters of credit,
outstanding banker’s acceptances, Borrower’s obligations to Bank or its affiliates or any guaranties or other contingent debts of Borrower. 
 
Required Reports. Borrower shall certify to Bank, at any time Advances exceed $1,000,000.00 in the aggregate, by the 15th day of each month or as
requested by Bank, the amount of Eligible Accounts as of the last day of each preceding month, on forms required by Bank, together with all detail and supporting documents requested by Bank. Bank may at any time and from time to time, during
Borrower’s normal business hours, enter upon any business premises of Borrower and audit Borrower’s accounts. Bank’s determination of the amount of Eligible Accounts shall at all times be indisputable and deemed correct. Borrower, at
all times, shall cooperate with Bank by providing Bank information and access to Borrower’s premises and business records and shall be courteous to Bank’s agents. 
 
CONDITIONS PRECEDENT. The obligations of Bank to make the loan and any advances pursuant to this Agreement are subject
to the following conditions precedent: Additional Documents. Receipt by Bank of such additional supporting documents as Bank or its counsel may reasonably request. 

IN WITNESS WHEREOF, Borrower and Bank, on the day and year first written above, have caused this
Agreement to be executed under seal. 
 

	  Covalent Group, Inc.
	  	  
	
	  By:
	  	  /s/  Jorge A. Leon    

	  	  (SEAL)

	  	  	  Jorge A. Leon, CFO/EVP
	  	  

 
 

	  Wachovia Bank, National Association
	  	  
	
	  By:
	  	  /s/    Linda M.
Douglas        

	  	  (SEAL)

	  	  	  Linda M. Douglas, Vice President
	  	  

 
 

 
EXHIBIT A

 
NON-DEFAULT CERTIFICATE 
 
In accordance with the terms of the Loan Documents dated August 1, 2002 by and
between Wachovia Bank, National Association and Covalent Group, Inc. (“Borrower”), I hereby certify that: 
 

	 1.	  	 I am a principal financial officer of Borrower; 

 

	 2.	  	 The enclosed financial statements are prepared in accordance with generally accepted accounting principles; 

 

	 3.	  	 No Default (as defined in the Loan Documents) or any event which, upon the giving of notice or lapse of time or both, would constitute such a Default, has occurred.

 

	
	

	  Name: Jorge A. Leon
 
Title: CFO/EVPEMPLOYMENT AGREEMENT

EMPLOYMENT AGREEMENT 
 
THIS AGREEMENT (the “Agreement”), made as of the 31st day of March, 2003 (the “Effective Date”), by and between Covalent Group, Inc., a Delaware corporation (the
“Company”), and Kenneth Borow, M.D. (“Executive”). 
 
WHEREAS, Executive has served as the Company’s President and Chief Executive Officer pursuant to the terms and conditions of an Employment Agreement dated November 1, 1999 (“Prior Employment
Agreement”). 
 
WHEREAS, the Company and
Executive wish to replace the Prior Employment Agreement with this Agreement. 
 
NOW THEREFORE, in consideration of these premises and the mutual promises contained herein, and intending to be legally bound hereby, the parties agree as follows: 
 
SECTION 1. Definitions. Capitalized terms used herein will have the
meanings set forth in the preamble of this Agreement, or as set forth below: 
 
1.1. “Base Salary” means the annual salary to be paid to Executive in a given year. 
 
1.2. “Benefits” means the employee benefits described in Section 4.2. 
 
1.3. “Board” means the Board of Directors of
the Company. 
 
1.4. “Cause”
exists when the Board determines that the Executive has: (a) engaged in any type of disloyalty to, or gross negligence or willful misconduct with respect to, the Company or any of its affiliates or subsidiaries, including (without limitation) fraud,
embezzlement, theft, or dishonesty in the course of his employment or engagement; (b) committed a felony; (c) materially breached any agreement with or fiduciary duty owed to the Company and has not cured that breach within fifteen (15) days after
delivery of notice thereof; (d) refused to follow the lawful and reasonable directives of the Board and has not cured such refusal within fifteen (15) days after delivery of notice thereof; (e) engaged or in any matter participated in any activity
which is directly competitive with or intentionally injurious to the Company or any of its affiliates or which violates any material provisions of Section 5 hereof, without authorization from the Company; or (f) engaged in alcohol abuse or use of
controlled drugs (other than in accordance with a physician’s prescription). 
 
1.5. “Change in Control” means the occurrence of any of the following: (a) the sale, transfer, assignment or other disposition by stockholders of the Company, in one transaction or a
series of related transactions, of more than 25% of the voting power represented by the then outstanding capital stock of the Company to one or more persons (other than to persons who are shareholders of the Company on the date hereof, or to
affiliates of any such shareholders); (b) a reorganization, merger or consolidation of the Company that results in the persons who were stockholders of Company immediately prior to such reorganization, merger or consolidation ceasing to own more
than 50% of the voting power represented by the surviving company’s outstanding securities immediately following such reorganization, merger or consolidation; or (c) a sale of all or substantially all of the Company’s assets (a sale of
substantially all of the assets of the Company shall mean a sale or other disposition, whether in a single transaction or a series 

of related transactions, other than in the ordinary course of business). The effective date of a Change in
Control shall be, for a Change in Control as described in Section 1.5 (a), on the date on which the Company becomes aware that change in voting power exceeds 25%, and for a Change in Control as described in Section 1.5 (b) or (c), the
date the transaction is completed. 
 
1.6.
“Competing Business” means the business of providing, on a contract basis, pharmaceutical research development and research management, the design and management of clinical trials for pharmaceutical, biotechnology and medical
device businesses, the design and writing of clinical development reports and programs and/or the management of the global regulatory submission process for pharmaceutical, biotechnology and medical device products. A pharmaceutical, biotechnology
or medical device company is not a Competing Business for purposes of this Agreement, provided that it does not engage in the above-described activities on a contract basis for others. 
 
1.7. “CPI” means the Consumer Price Index for
All Urban Consumers (CPI-U) for the Philadephia-Wilmington-Atlantic City area, as published by the U.S. Department of Labor, Bureau of Labor Statistics. 
 
1.8. “Disability” means the Executive’s inability with or without reasonable accommodation (as determined by a
licensed physician) to satisfactorily perform his duties by reason of physical or mental illness or incapacity for a period of at least 120 days during any 12 month period (whether or not consecutive). 
 
1.9. “Good Reason” means any of the
following, unless made with the prior written consent of Executive: (a) a material, adverse change in Executive’s title, authority or duties, (b) any decrease in Executive’s Base Salary except for decreases that are in conjunction with
decreases in other executive salaries, (c) a failure by the Company to pay to Executive any amount due to him under this Agreement for more than 10 days after written notice of such non-payment has been delivered to the Company; or (d) any other
material breach by the Company of this Agreement or any other agreement between Executive and the Company, which breach has not been cured within 10 days following the delivery of written notice thereof to the Company. 
 
1.10. “Intellectual Property” means (a) all
inventions (whether patentable or unpatentable and whether or not reduced to practice), all improvements thereto, and all patents, (b) all trademarks, service marks, trade dress, logos, trade names, fictitious names, brand names, brand marks and
corporate names, together with all translations, adaptations, derivations, and combinations thereof and including all goodwill associated therewith, and all applications, registrations, and renewals in connection therewith, (c) all copyrightable
works, all copyrights, and all applications, registrations, and renewals in connection therewith, (d) all mask works and all applications, registrations, and renewals in connection therewith, (e) all trade secrets and confidential business
information (including ideas, research and development, know-how, formulas, compositions, manufacturing and production processes and techniques, technical data, designs, drawings, specifications, customer and supplier lists, pricing and cost
information, and business and marketing plans and proposals), (f) all computer software (including data, source codes and related documentation), (g) all other proprietary rights, (h) all copies and tangible embodiments thereof (in whatever form or
medium), or similar intangible personal property which have been or are developed or created in whole or in part by Executive (1) at any time and at any place while Executive is employed by Company and which, in the case of any or all of the

 
1.11 “Per Share Value” means an
amount equal to the Stock Price immediately preceding the effective date of a Change in Control, provided that, if the Change in Control event is a tender, merger or other transaction in which all of the outstanding shares of the Company’s
common stock are to be exchanged for all or any combination of cash, securities of another entity or other form of consideration, the Stock Price means an amount equal to the per share price paid or to be paid in cash to the holders of the
Company’s common stock in such tender, merger or other transaction (or, if there is more than one per share price, the weighted per share price paid or to be paid); and further provided that, if the consideration in such tender, merger or other
transaction is not paid in cash or is paid only partly in cash, the Board in its reasonable discretion shall determine the fair market value of such non-cash consideration, valuing publicly-traded securities, if any, by the same method used in
determining Stock Price pursuant to Section 1.16. 
 

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foregoing, are related to and useful in connection with the business of the Company, or (2) as a result of
tasks assigned to Executive by the Company. 
 
1.12. “Proprietary Information” means confidential, proprietary, business and technical information or trade secrets of the Company or of any subsidiary or affiliate of the Company. Such Proprietary Information shall
include, but shall not be limited to, the following items and information relating to the following items: (a) computer codes or instructions (including source and object code listings, program logic algorithms, subroutines, modules or other
subparts of computer programs and related documentation, including program notation), computer processing systems and techniques, all computer inputs and outputs (regardless of the media on which stored or located), hardware and software
configurations, designs, architecture and interfaces, (b) business research, studies, procedures and costs, (c) financial data, (d) distribution methods, (e) marketing data, methods, plans and efforts, (f) the identities of the Company’s
relationship(s) with actual and prospective customers, contractors and suppliers, (g) the terms of contracts and agreements with customers, contractors and suppliers, (h) the needs and requirements of, and the Company’s course of dealing with,
actual or prospective customers, contractors and suppliers, (i) personnel information, and (j) customer and vendor credit information. Failure by the Company to mark any of the Proprietary Information as confidential or proprietary shall not affect
its status as Proprietary Information under the terms of this Agreement. 
 
1.13. “Restricted Period” means the Term plus the two year period following the Term. 
 
1.14. “Restrictive Covenants” means the provisions contained in Section 5.1 of this Agreement. 
 
1.15. “Severance Period” means the period
from the date that Executive’s employment is terminated until the first anniversary of such date. 
 
1.16. “Stock Price” means, with respect to any particular date: (a) the average closing price of the shares of common
stock of the Company as reported on the principal national securities exchange on which such shares are traded for the five (5) trading days immediately preceding such date; or (b) if the shares are not listed or admitted to unlisted trading
privileges on a national securities exchange, the average closing price of the shares as reported by The Nasdaq Stock Market for the five (5) trading days immediately preceding such date; or (c) if the shares are not listed or admitted to unlisted
trading privileges on a national securities exchange or traded on The Nasdaq Stock Market, then the Stock Price shall be determined by the Board in its reasonable discretion. 
 
1.17. “Term” means the period beginning on the date hereof and ending on the earlier of: (a)
the third anniversary of the date hereof, or (b) the date that Executive’s employment with the Company is terminated for any reason. 
 
SECTION 2. Duration of Agreement; Duties. Subject to the terms of this Agreement; Executive’s employment by the Company may be terminated at any
time; provided, however, that during the Term, the terms and conditions of Executive’s employment by the Company shall be as herein set forth. During the Term, Executive shall serve as the Company’s President and Chief Executive
Officer and shall devote his best efforts and full business time, abilities and services to the Company to perform such 
 

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duties as may be customarily incident to such position and as may reasonably be assigned from time to time
by the Board. Executive shall report to the Board. Executive will render his services hereunder to the Company and its affiliates and shall use his best efforts, judgment and energy in the performance of the duties assigned to him. Executive will
perform his duties primarily at the Company’s principal administrative headquarters; provided, however, that Executive will travel for business purposes at such times and to such places as reasonably requested by the Company. Executive
shall not, without the prior written consent of the Board, directly or indirectly engage in any other business activities or pursuits, except activities in connection with charitable activities or passive personal investments, provided that such
activities do not interfere with his performance of responsibilities under this Agreement and the obligations in Section 5. The Board has approved Executive’s participation in the activities listed in Exhibit A hereto.

 
SECTION 3. Annual Salary. Executive
hereby agrees to accept, as compensation for all services rendered by Executive in any capacity hereunder and for the Restrictive Covenants made by Executive in Section 5 hereof, an initial Base Salary at an annual rate of $325,000 for the
period from February 1, 2003 through the end of the Term (and the Company shall, on or before April 30, 2003, pay to Executive an amount equal to the difference between the Base Salary the Company actually paid him for the period February 1, 2002
through January 31, 2003 and the Base Salary he would have been paid had his compensation been at the rate of $300,000 for that time period); provided, however, that the annual rate of Base Salary for each 12 month period beginning on
or after February 1, 2004 will increase, from the annual rate of Base Salary in effect for the immediately preceding 12 month period, by an amount equal to the annual percentage increase in the CPI for the immediately preceding calendar year. The
Base Salary shall be inclusive of all applicable income, social security and other taxes and charges which are required by law to be withheld from Executive’s wages by the Company, and which shall be withheld and paid in accordance with the
Company’s normal payroll practices for its similarly situated employees from time to time in effect. 
 
SECTION 4. Bonuses; Benefits; Change in Control Payment. 
 
4.1. Annual Bonus. For each fiscal year of the Company ending during the Term, Executive will be eligible to receive an annual
bonus upon the achievement of specified corporate and personal performance goals, as described in Exhibit B hereto. 
 
4.2. Benefits. Executive will be entitled to participate in any benefit plans or arrangements sponsored or maintained by the
Company from time to time for its senior executives, subject to the terms and conditions of such plans or arrangements. Executive shall be entitled to the same number of weeks of paid vacation per year as provided to other senior executives of the
Company. Company shall also obtain for Executive term life insurance providing death benefits to Executive’s designee(s) in the amount of two years of Executive’s then-current Base Salary. 
 
4.3. Equity Incentives. From time to time, the Board
will review the performance of the Company and Executive and, in its sole discretion, may grant stock options, shares of restricted stock or other equity-based incentives to Executive to reward extraordinary performance and/or to encourage
Executive’s future efforts on behalf of the Company. 
 

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4.4.
Change: In Control Payment. If a Change in Control occurs during the Term (or, with respect to a Change in Control contemplated by Section 1.5(b) or (c) or a Board approved tender offer within one (1) year following the Term if
substantive discussions between the Company and the other party or parties concerning such transaction had commenced during the Term but only if Executive’s employment with the Company was terminated, prior to such Change in Control, by the
Company without cause or by Executive with good reason), the Company shall pay to Executive a Change in Control payment determined as follows: (a) if the Per Share Value is at least $3.50 but less than $5.00, Executive will receive an amount equal
to one times his Base Salary; (b) if the Per Share Value is at least $5.00 but less than $6.50, Executive will receive an amount equal to two times his Base Salary; (c) if the Per Share Value is at least $6.50 but less than $8.00, Executive will
receive an amount equal to three times his Base Salary; (d) if the Per Share Value is at least $8.00 but less than $11.00, Executive will receive an amount equal to four times his Base Salary; or (e) if the Per Share Value is at least $11.00 or
more, Executive will receive an amount equal to five times his Base Salary. The dollar amounts set forth in this Section 4.4 shall be deemed automatically adjusted in the event the Company effects a stock split, stock dividend, reverse stock
split or other similar recapitalization as may be determined in the reasonable discretion of the Board, and such adjusted amounts shall be set forth in a notice from the Company to Executive. Such payment shall be made by the Company to the
Executive not later than the effective date of the Change in Control. Executive shall be entitled to only one payment pursuant to this Section 4.4, if applicable, during the Term notwithstanding that more than one Change in Control may occur
during the Term. 
 
4.5. Possible Reduction in
Payments and Benefits. Following any Change in Control, to the extent that any amount of payments or benefits provided to Executive under this Agreement would cause Executive to be subject to excise tax or would fail to be tax deductible to the
Company under Sections 280G and 4999 of the Internal Revenue Code of 1986, as amended (“the Code”), and after taking into consideration all other amounts payable to Executive under other Company plans, programs, policies and arrangements,
then the amount of payments and benefits provided under this Agreement shall be reduced (first by any payments, and then, to the extent necessary, by any benefits), to the extent necessary to avoid imposition of any such excise taxes and to ensure
that no portion of the payments made to Executive will fail to be tax deductible to the Company by reason of 280G. The determination of whether any payment or benefit would be subject to excise tax will be made in the sole discretion of the Board
based on the advice of the Company’s auditors. 
 
SECTION 5.
Non-Compete; Confidentiality; Non-Solicitation. In consideration for entering this Agreement and the amounts which Executive has, shall or may receive from the Company pursuant to Sections 3, 4 and 6 hereof, and except as otherwise
provided in Section 6.2 hereof, Executive agrees to be bound by the Restrictive Covenants set forth in this Section 5. 
 
5.1. Restrictive Covenants. 
 
(a) Non-Compete. Executive shall not, during the Restricted Period, in the United States or any other place where the Company, its
subsidiaries or affiliates conduct business, directly or indirectly (except in Executive’s capacity as an employee of the Company, and in the best interests of the Company) do any of the following without the prior written consent of the Board:

 
(i) engage or participate in any Competing
Business; 
 
(ii) become interested in (as owner,
stockholder, lender, partner, co-venturer, director, officer, employee, agent or consultant) any person, firm, corporation, association or other entity engaged in any Competing Business. Notwithstanding the foregoing, Executive may hold up to 2% of
the outstanding securities of any class of any publicly-traded securities of any company; 
 
(iii) solicit or call on, either directly or indirectly, for purposes of selling services competitive with services sold by the Company, any customer with whom the Company shall have dealt or any
prospective customer that the Company shall have identified and solicited at any time during Executive’s employment by the Company; 
 

-5- 

 
(iv)
influence or attempt to influence any supplier, customer or potential customer of the Company to terminate or modify any written or oral agreement or course of dealing with the Company; or 
 
(v) influence or attempt to influence any person to either (A) terminate or modify any employment,
consulting, agency, distributorship or other arrangement with the Company, or (B) employ or retain, or arrange to have any other person or entity employ or retain, any person who has been employed or retained by the Company as an employee,
consultant, agent or distributor of the Company at any time during the Restricted Period until the expiration of twelve (12) months from the date such person ceases to have been employed or retained by the Company. 
 
(b) Confidentiality. Executive recognizes and
acknowledges that the Proprietary Information is a valuable, special and unique asset of the business of the Company. As a result, both during the Term and thereafter, Executive shall not, without the prior written consent of the Company, for any
reason either directly or indirectly divulge to any third party or use for his own benefit, or for any purpose other than the exclusive benefit of the Company, any Proprietary Information revealed, obtained or developed in the course of his
employment by the Company; provided, however, that nothing herein contained shall restrict Executive’s ability to make such disclosures during the Term as may be necessary or appropriate to the effective and efficient discharge of his
duties as an employee hereunder or as such disclosures may be required by law. If Executive or any of his representatives become legally compelled to disclose any of the Proprietary Information, Executive will provide the Company with prompt written
notice so that the Company may seek a protective order or other appropriate remedy. 
 
(c) Property. 
 
(i) All right, title and interest in and to Proprietary Information shall be and remain the sole and exclusive property of the Company. During the Term, Executive shall not remove from the Company’s offices or premises
any documents, records, notebooks, files, correspondence, reports, memoranda or similar materials of or containing Proprietary Information, or other materials or property of any kind belonging to the Company unless necessary or appropriate in
accordance with the duties and responsibilities required by or appropriate for his position and, in the event that such materials or property are removed, all of the foregoing shall be returned to their proper files or places of safekeeping as
promptly as possible after the removal shall serve its specific purpose. Executive shall not make, retain, remove and/or distribute any copies of any of the foregoing for any reason whatsoever except as may be necessary in the discharge of his
assigned duties and shall not divulge to any third person the nature of and/or contents of any of the foregoing or of any other oral or written information to which he may have access or with which for any reason he may become familiar, except as
disclosure shall be necessary in the performance of his duties; and upon the termination of his employment with the Company, he shall leave with or return to the Company all originals and copies of the foregoing then in his possession, whether
prepared by Executive or by others. 
 
(ii)
Executive agrees that all the Intellectual Property will be considered “works made for hire” as that term is defined in Sections 101 and 201 of the Copyright Act (17 U.S.C. §§ 101 and 201) and that all right, title and interest
in such Intellectual 
 

-6- 

 
Property will be the sole and
exclusive property of the Company. To the extent that any of the Intellectual Property may not by law be considered a work made for hire, or to the extent that, notwithstanding the foregoing, Executive retains any interest in the Intellectual
Property, Executive hereby irrevocably assigns and transfers to the Company any and all right, title, or interest that Executive may have in the Intellectual Property under patent, copyright, trade secret and trademark law, in perpetuity or for the
longest period otherwise permitted by law, without the necessity of further consideration. The Company will be entitled to obtain and hold in its own name all copyrights, patents, trade secrets, and trademarks with respect to such Intellectual
Property. Executive further agrees to execute any and all documents and provide any further cooperation or assistance reasonably required by the Company to perfect, maintain or otherwise protect its rights in the Intellectual Property. If the
Company is unable after reasonable efforts to secure Executive’s signature, cooperation or assistance in accordance with the preceding sentence, whether because of Executive’s incapacity or any other reason whatsoever, Executive hereby
designates and appoints the Company or its designee as Executive’s agent and attorney-in-fact, to act on his behalf, to execute and file documents and to do all other lawfully permitted acts necessary or desirable to perfect, maintain or
otherwise protect the Company’s rights in the Intellectual Property. Executive acknowledges and agrees that such appointment is coupled with an interest and is therefore irrevocable. 
 
5.2. Rights and Remedies Upon Breach. 
 
(a) Specific Enforcement. Executive acknowledges that the Restrictive Covenants are reasonable and
necessary to protect the legitimate interests of the Company and its affiliates and that the Company would not have entered into this Agreement in the absence of such restrictions. Executive also acknowledges that any breach by him, willfully or
otherwise, of the Restrictive Covenants will cause continuing and irreparable injury to the Company for which monetary damages would not be an adequate remedy. Executive shall not, in any action or proceeding to enforce any of the provisions of this
Agreement, assert the claim or defense that such an adequate remedy at law exists. In the event of any such breach by Executive, the Company shall have the right to enforce the Restrictive Covenants by seeking injunctive or other relief in any
court, without any requirement that a bond or other security be posted, and this Agreement shall not in any way limit remedies of law or in equity otherwise available to the Company. If an action at law or in equity is necessary to enforce or
interpret the terms of this agreement, the prevailing party shall be entitled to recover, in addition to any other relief, reasonable attorneys’ fees, costs and disbursements. 
 
(b) Extension of Restrictive Period. In the event that Executive breaches any of the Restrictive
Covenants contained in Section 5.1(a), then the Restricted Period shall be extended for a period of time equal to the period of time that Executive is in breach of such restriction. 
 
(c) Accounting. If Executive willfully breaches, or threatens to commit a breach of any of the
Restrictive Covenants, the Company will have the right and remedy to require Executive to disclose all compensation, profits, monies, accruals, increments or other benefits derived or received by Executive as the result of any action constituting a
breach of the Restrictive Covenants. This right and remedy will be in addition to, and not in lieu of, any other rights and remedies available to the Company under law or in equity. 
 

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5.3.
Judicial Modification. If any court determines that any of the Restrictive Covenants, or any part thereof, is unenforceable because of the duration or scope of such provision, such court shall have the power to modify such provision and, in
its modified form, such provision shall then be enforceable. 
 
5.4. Disclosure of Restrictive Covenants. Executive agrees to disclose the existence and terms of the restrictive covenants set forth in this Section 5 to any employer that Executive may work for during the Restricted
Period and to allow the Company to do the same. 
 
5.5. Acknowledgments. Executive acknowledges that the Restrictive Covenants contained in Section 5.1(a) are included herein in order to induce the Company to employ Executive pursuant to the other terms of this
Agreement and to agree to the provisions of Section 6.2. Executive further acknowledges that the duration and geographic scope of Section 5.1(a) are reasonable given the nature of this Agreement. 
 
5.6. Enforceability. If any court holds the Restrictive
Covenants unenforceable by reason of their breadth or scope or otherwise, it is the intention of the parties hereto that such determination not bar or in any way affect the right of the Company to the relief provided above in the courts of any other
jurisdiction within the geographical scope of such Restrictive Covenants. 
 
SECTION 6. Termination. Subject to the terms of this Agreement, Executive’s employment hereunder may be terminated at any time. Immediately and automatically upon any termination, Executive agrees that he will be deemed
to have resigned as a member of the Board without any further action required on the part of Executive, the Board or the Company. Furthermore, upon termination, Executive shall be entitled only to such compensation and benefits as described in this
Section 6. 
 
6.1. Generally. If
Executive’s employment with the Company is terminated during the Term for any reason other than as specified in Section 6.2 (including termination by the Company for Cause, as a result of Executive’s death, as a result of
Executive’s Disability, or by Executive without Good Reason), then the Company’s obligation to Executive will be limited solely to the payment of (a) all accrued but unpaid Base Salary and Benefits through the date of such termination, and
(b) the payment of any accrued but unpaid bonus payable under Section 4.1 with respect to a fiscal year of the Company ending prior to such termination. All Base Salary and Benefits shall cease at the time of such termination, subject to the
terms of any benefits or compensation plans then in force and applicable to Executive, and the Company shall have no further liability or obligation hereunder by reason of such termination. 
 
6.2. Termination Without Cause or With Good Reason. If
Executive’s employment by the Company is terminated during the Term by the Company without Cause or by Executive with Good Reason, Executive will be entitled to (a) the payment of all accrued but unpaid Base Salary and Benefits through the date
of such termination, (b) the payment of any accrued but unpaid bonus payable under Section 4.1 with respect to a fiscal year of the Company ending prior to such termination, (c) a continuation of group health coverage for Executive for the
Severance Period (and, to the extent covered immediately prior to the date of Executive’s termination, his dependents) with the contributions paid by the Company and the Executive continuing on the same basis as in effect on the date of
Executive’s termination (as such 
 

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contributions may be changed in accordance with changes for similarly situated employees during the
relevant time period); (d) the payment for the Severance Period of monthly severance payments equal to one-twelfth of his Base Salary as of the date of such termination, and (e) vesting of all of Executive’s stock options, to the extent not
already vested. The benefits described in this Section 6.2 (c), (d) and (e) shall be paid only if Executive executes a release agreement in a form acceptable to the Company (as set forth in Exhibit C hereto), shall be in lieu of
and not in addition to any other severance arrangement maintained by the Company, and shall be offset by any monies Executive may owe to the Company. Upon the end of the Severance Period, all benefits described in this Section 6.2 (c), (d) and
(e) will cease and the Company shall have no further liability or obligation by reason of such termination. Notwithstanding the foregoing, the Company may elect to waive the application of Section 5.1(a) of this Agreement by written
notice delivered to the Executive within 15 days of his termination and, in that case, Executive will not be entitled to any benefits described in Section 6.2(c), (d) and (e), above. If Executive violates the provisions of Section
5.1(a), the Company’s obligations to provide the benefits described in Section 6.2(c), (d) and (e) shall cease and be rendered a nullity. 
 
6.3. Termination Procedures. Any termination of Executive’s employment by the Company or by Executive during the Term (other
than termination pursuant to death) shall be communicated by written notice of termination to the other party and shall set forth the circumstances that provide the basis for Executive’s termination. The date of termination shall be (a) the
date of death, if Executive’s employment is terminated by death or (b) the date of the notice of termination or the expiration of any applicable remedy period, whichever is later. 
 
SECTION 7. Expenses. The Company will pay or reimburse Executive for reasonable and necessary expenses directly
incurred in the course of his employment by the Company in accordance with the standard policies and practices of the Company. 
 
SECTION 8. Other Agreements. Executive represents, warrants and, where applicable, covenants to the Company that: 
 
8.1. There are no restrictions, agreements or understandings
whatsoever to which Executive is a party which would prevent or make unlawful Executive’s execution of this Agreement or Executive’s employment hereunder, or which are or would be inconsistent or in conflict with this Agreement or
Executive’s employment hereunder, or would prevent, limit or impair in any way the performance by Executive of his obligations hereunder; 
 
8.2. Executive’s execution of this Agreement and Executive’s employment hereunder shall not constitute a breach of any contract,
agreement or understanding, oral or written, to which Executive is a party or by which Executive is bound; and 
 
8.3. Executive is free to execute this Agreement and to be employed by the Company as an employee pursuant to the provisions set forth
herein. 
 
SECTION 9. Miscellaneous. 
 
9.1. Arbitration. To ensure rapid and economical
resolution of any disputes which may arise under this Agreement, the Executive and the Company agree that any and all disputes or controversies of any nature whatsoever, arising from or regarding the interpretation, 
 

-9- 

performance, enforcement or breach of this Agreement shall be resolved by confidential, final and binding
arbitration (rather than trial by jury or court or resolution in some other forum) to the fullest extent permitted by law. Each party will be responsible for his or its own attorneys’ fees. Any arbitration proceeding pursuant to this Agreement
shall be conducted in Pennsylvania by the American Arbitration Association (“AAA”), JAMS or any other mutually agreeable provider, under the then existing employment-related arbitration rules of the applicable provider. If for any reason
all or part of this arbitration provision is held to be invalid, illegal, or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other portion of this
arbitration provision or any other jurisdiction, but this provision will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable part or parts of this provision had never been contained herein,
consistent with the general intent of the parties insofar as possible. 
 
9.2. Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the Company and Executive and their respective successors, executors, administrators, heirs and/or permitted assigns;
provided, however, that neither Executive nor the Company may make any assignments of this Agreement or any interest herein, by operation of law or otherwise, without the prior written consent of the other party, except that, without such
consent, the Company may assign this Agreement to any successor to all or substantially all of its assets and business by means of liquidation, dissolution, merger, consolidation, transfer of assets, or otherwise. 
 
9.3. Notice. Any notice or communication required or
permitted under this Agreement shall be made in writing and (a) sent by overnight courier, (b) mailed by certified or registered mail, return receipt requested or (c) sent by telecopier, addressed as follows: 
 
If to Executive: 
 
Kenneth Borow, M.D. 
407 Wyntre Lea Drive 
Bryn Mawr, PA 19010 
 
If to Company: 
 
Covalent Group, Inc. 
One Glenhardie Corporate Center 
1275 Drummers Lane 
Wayne, PA 19087 
Attention: Jorge Leon 
 
with a copy to: 
 
Pepper Hamilton LLP 
400 Berwyn Park 
899 Cassatt Road 
Berwyn, PA 19312-1183 
 

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Attention: Steven J. Feder, Esquire 
Fax: 610-640-7835 
 
or to such other address as either party may from time to time duly specify by
notice given to the other party in the manner specified above. 
 
9.4. Entire Agreement; Amendments. This Agreement contains the entire agreement and understanding of the parties hereto relating to the subject matter hereof, and merges and supersedes all prior and contemporaneous
discussions, agreements and understandings of every nature, whether written or oral, relating to the employment of Executive by the Company including but not limited to the Prior Employment Agreement. This Agreement may not be changed or modified,
except by an Agreement in writing signed by each of the parties hereto. 
 
9.5. Waiver. Any waiver by either party of any breach of any term or condition in this Agreement shall not operate as a waiver of any other breach of such term or condition or of any other term or condition, nor shall
any failure to enforce any provision hereof operate as a waiver of such provision or of any other provision hereof or constitute or be deemed a waiver or release of any other rights, in law or in equity. 
 
9.6. Governing Law. This Agreement shall be governed
by, and enforced in accordance with, the laws of the Commonwealth of Pennsylvania without regard to the application of the principles of conflicts of laws. 
 
9.7. Survival of Provisions. The provisions of this Agreement set forth in Sections 5, 6, 7 and 9 hereof (and the
definitions set forth in Section 1 applicable to such sections) shall survive the expiration of the Term. 
 
9.8. Severability. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or the effectiveness or validity of any provision in any other jurisdiction, and this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been
contained herein. 
 
9.9. Section Headings.
The section headings in this Agreement are for convenience only; they form no part of this Agreement and shall not affect its interpretation. 
 
9.10. Shareholder Approval. The Company represents that no shareholder approval is required for the Company to enter into this
Agreement and provide the benefits contemplated herein, or that such shareholder approval has been obtained. 
 
9.11. Noncontravention. The Company represents that, to its knowledge, it is not prevented from entering into or performing this
Agreement by the terms of any law, order, rule or regulation, its bylaws or certificate of incorporation, or any agreement to which it is a party, other than which would not have a material adverse effect on the Company’s abilities to enter
into or perform this Agreement. 
 

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9.12.
Counterparts and Facsimiles. This Agreement may be executed, including execution by facsimile signature, in one or more counterparts, each of which shall be deemed an original, and all of which together shall be deemed to be one and the same
instrument. 
 
[This space intentionally left blank;
signature page follows] 
 

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IN WITNESS
WHEREOF, the Company has caused this Agreement to be executed by its duly authorized officer, and Executive has executed this Agreement, in each case as of the date first above written. 
 

	 COVALENT GROUP, INC.

	
	 By:
	 	  

	
	 Name & Title:
	 	  

 
 
 
 

	 EXECUTIVE

	
	  

	 Kenneth Borow, M.D.

 
 

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EXHIBIT A

 
The Board has approved the Executive’s
participation in the following activities: 
 

	 	1.	 	manage Executive personal, financial and legal affairs; 

 

	 	2.	 	work as an expert witness or, with the consent of the majority of the Board of Directors, as a medical consultant; 

 

	 	3.	 	serve on civic, charitable, governmental or professional boards; 

 

	 	4.	 	with the consent of a majority of the Board of Directors, serve on advisory boards of business corporations; provided that no further consent of the Board shall be
needed for Executive to serve on advisory boards of business clients of the company in connection with clinical trials or other Company business; and further provided that no further Board consent shall be needed for Executive to continue serving on
the advisory boards Mera Pharmaceuticals and Mylan Laboratories/Bertek; 

 

	 	5.	 	with the consent of a majority of the Board of Directors, serve as a member of the board of directors of business corporations; and 

 

	 	6.	 	ongoing activities to support the Executive’s medical education and expertise. 

 

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EXHIBIT B

 
Executive’s Annual Bonus will be based
on two components: (a) one component, to be awarded in the sole discretion of the Compensation Committee of the Board (or, if no such Committee exists, the Board), will be based on whether Executive has achieved the personal performance goals set by
the Board; (b) the second component will be based on Executive’s achievement of budget goals. 
 
Executive’s Annual Bonus will be calculated in the following manner: 
 

	 	1.	 	Commencing in fiscal 2003, the potential bonus in any fiscal year will be 50% of Executive’s Base Salary. 

 

	 	2.	 	Each fiscal year, the bonus will be equal to the sum of the following: 

 

	 	a.	 	Executive can earn up to one-half of his maximum potential bonus (i.e., 1⁄2 of 50% of Base Salary) based on the extent to which the Company meets the annual
budget set by the Board for that fiscal year. Executive shall receive the percentage of potential bonus correlated with the following benchmarks: 

 

	 Actual Net Income as % of Budgeted Net Income

	 100% + above
	 	 90—99%
	 	 80 – 89%
	 	 Less Than 80%

	 Bonus    100%
	 	 75%
	 	 50%
	 	 0%

 

	 	b.	 	Executive can earn up to one-half of his maximum potential bonus based on his achievement of performance goals, as determined in the sole discretion of the
Compensation Committee or, if no such Committee exists, the Board. The performance goals will be communicated by the Board to Executive at the beginning of each fiscal year. 

 

	 	3.	 	Executive’s Bonus will be paid as soon as feasible after the close of the applicable fiscal year and the completion of the audit of the Company’s financial
statements. 

 

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EXHIBIT C

 
Executive hereby generally releases and
discharges the Company, together with each and every of its predecessors, successors (by merger or otherwise), parents, subsidiaries, affiliates, divisions and related entities, directors, officers, executives and agents, whether present or former
(collectively the “Releasees”), from any and all suits, causes of action, complaints, obligations, demands, or claims of any kind, whether in law or in equity, direct or indirect, known or unknown, suspected or unsuspected (hereinafter
“claims”), which the Executive ever had or now has arising out of or relating to any matter, thing or event occurring up to and including the date of this Release. Except as otherwise expressly provided herein or in Executive’s
Employment Agreement, Executive’s release specifically includes, but is not limited to: 
 

	 	a.	 	any and all claims for wages and benefits including, without limitation, salary, stock, options, commissions, royalties, license fees, health and welfare benefits,
severance pay, vacation pay, incentives, and bonuses; 

 

	 	b.	 	any and all claims for wrongful discharge, breach of contract (whether express or implied), or for breach of the implied covenant of good faith and fair dealing;

 

	 	c.	 	any and all claims for alleged employment discrimination on the basis of age, race, color, religion, sex, national origin, veteran status, disability and/or
handicap, or any other protected status, and any and all other claims in violation of any federal, state or local statute, ordinance, judicial precedent or executive order, including but not limited to claims under the following statutes: Title VII
of the Civil Rights Act of 1964, as amended, 42 U.S.C. §2000e et seq., the Civil Rights Act of 1866, 42 U.S.C. §1981, the Age Discrimination in Employment Act, 29 U.S.C. §621 et seq., the Older Workers Benefit Protection
Act, 29 U.S.C. §626(f), the Americans with Disabilities Act, 42 U.S.C. §12101 et seq., the Family and Medical Leave Act of 1993, the Fair Labor Standards Act, the Employee Retirement Income Security Act of 1974, or any comparable
statute of any other state, country, or locality except as required by law, but excluding claims for vested benefits under the Company’s pension plans; 

 

	 	d.	 	any and all claims under any federal, state or local statute or law; 

 

	 	e.	 	any and all claims in tort (including but not limited to any claims for misrepresentation, defamation, interference with contract or prospective economic advantage,
intentional or negligent infliction of emotional distress, duress, loss of consortium, invasion of privacy and negligence); 

 

-16- 

 

	 	f.	 	any and all claims for attorneys’ fees and costs; 

 

	 	g.	 	any and all other claims for damages of any kind; and 

 

	 	h.	 	any and all claims relating to or arising out of the Employment Agreement, except as set forth in the following sentence. 

 
This Release does not include claims to enforce any of the obligations of the
Company under and pursuant to (i) the Employment Agreement which, by its express terms, survive the expiration of the Term of the Employment Agreement; or (b) the Indemnification Agreement between the Company and Executive. 
 

-17-

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