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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended March 31, 1994
Commission file number 1-8867
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Biocraft Laboratories, Inc.
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(Exact name of registrant as specified in charter)
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Delaware 22-1734359
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(State or other jurisdiction (IRS employer
of incorporation or organization) identification no.)
18-01 River Road, Fair Lawn, New Jersey 07410
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (201) 703-0400
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Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of exchange on which registered
- - ---------------------------- ------------------------------------
Common Stock, par value $.01 New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ____
The aggregate market value of the voting stock of the registrant held by non-
affiliates was approximately $81,457,600 as of June 27, 1994. The computation
includes as affiliates Harold Snyder and Beatrice Snyder who are described in
Item 12, Security Ownership of Certain Beneficial Owners and Management, below,
without prejudice to a determination that such persons are non-affiliates of the
registrant for any other purpose under the Securities Act of 1933 or the
Securities Exchange of 1934.
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of June 27, 1994.
Common Stock, par value $.01 14,132,920 shares
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to Shareholders for the year ended March 31,
1994 are incorporated by reference in Part II. Portions of the proxy statement
for the Annual meeting of Shareholders to be held August 8, 1994 are
incorporated by reference in Part III.
Index to Exhibits - Page I-1
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FORM 10K ANNUAL REPORT
PART I
Item 1. Business
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General
Biocraft Laboratories, Inc. (the "Company") manufactures and markets various
dosages of generic drugs. Generic drugs are the chemical and therapeutic
equivalents of brand name drugs which generally have gained market acceptance
while under patent protection. Although subject to strict Food and Drug
Administration ("FDA") standards, generic drugs are sold under their chemical
(generic) names, typically at prices substantially below those of their brand
name equivalents.
Sales of generic drugs have increased significantly in recent years, due in
part to greater awareness and acceptance of generic drugs by physicians,
pharmacists and the public. Among the factors which have contributed to this
increased awareness and acceptance are the modification of state laws to permit
pharmacists to substitute generic drugs for brand name drugs (where authorized
or not expressly prohibited by the prescribing physician), and the publication
by the FDA of a list of therapeutic equivalent drugs which provides physicians
and pharmacists with the names of generic drug alternatives. In addition, since
generic drugs are typically sold at prices significantly below the price of
brand name drugs,
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the prescribing of generic drugs has been encouraged, and in many cases
required, by various government agencies and by many private health programs as
a cost-saving measure in the purchase of, or reimbursement for, prescription
drugs.
Products and Product Development
The Company presently manufactures various dosages of 25 prescription drugs,
and one prescription veterinary drug constituting an aggregate of 73 products.
Governmental approvals were required and obtained for each of these products.
The Company's products are sold in various oral dosage forms, including
compressed tablets, two-piece hard-shell capsules, powders for oral solution or
suspension and liquids. As of March 31, 1994, the Company was awaiting FDA
approvals to market 14 generic drugs constituting 26 products. The Company
intends to submit to the FDA applications to approve 11 new generic drugs
constituting a variety of products during fiscal 1995. See "Government
Regulations."
The 26 drugs manufactured by the Company can be divided into 11 categories.
The number of products in each category is shown in parentheses.
1. Penicillin and Semi-Synthetic Penicillin Drugs (23): These antibiotic drugs
include Penicillin V Potassium and the semi-synthetic penicillin drugs
Amoxicillin, Ampicillin, Cloxacillin, Dicloxacillin and Oxacillin.
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2. Cephalosporin Drugs (10): These antibiotic drugs are Cephradine and
Cephalexin.
3. Other Antibiotic Drugs (6): These drugs are Cinoxacin, Clindamycin,
Minocycline HCl, Neomycin and Nystatin.
4. Analgesic Drug (3): This drug is Ketoprofen.
5. Anti-Infective Drugs (5): These drugs are Trimethoprim and a combination of
Sulfamethoxazole and Trimethoprim.
6. Anti-Depressant Drugs (8): These drugs are Amitriptyline Hydrochloride and
Imipramine Hydrochloride.
7. Bronchial Dilator Drugs (5): These drugs are Albuterol and Metaproterenol.
8. Cardiovascular Drugs (3): These drugs are Disopyramide Phosphate and
Amiloride Hydrochloride with Hydrochlorothiazide.
9. Gastrointestinal Drug (3): This drug is Metoclopramide.
10. Anti-Spasmodic Drug (2): This drug is Baclofen.
11. Veterinary Drugs (5): The drug in this category is Amoxicillin, an
antibiotic sold under the registered trademark "Biomox."
The Company also manufactures the active ingredients it uses in its semi-
synthetic penicillin drugs at its Waldwick, New Jersey facility and bulk form
Cephalexin at its Mexico, Missouri facility. Such active ingredients are from
time to time sold in bulk form, generally in small amounts. Chemical
intermediates for antibiotic production are also manufactured in its Mexico,
Missouri
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facility. In March 1994, the Company received FDA approval to manufacture bulk
form Amoxicillin and Ampicillin in its plant in Missouri.
The Company's research and development activities generally consist of new
generic drug product development, clinical studies for generic and non-generic
drugs and research for developing new bulk manufacturing processes. In the
fiscal years ended March 31, 1992, 1993 and 1994, total research and development
expenditures were approximately $8,755,000, $8,662,000 and $9,923,000,
respectively.
The Company's primary product development strategies are to manufacture and
sell in generic form antibiotic drugs for which the Company can maintain certain
cost controls by manufacturing the chemical intermediates and/or active
ingredients in bulk. Generally, the Company also selects non-antibiotic drugs
for which the Company anticipates initially limited competition due to such
factors as extensive FDA approval requirements, complexity of manufacture or
limited availability of raw materials. In all cases, the Company seeks to obtain
FDA approval to market a new generic drug product by, or shortly after, the
patent expiration date of the equivalent brand name drug in order to be among
the first generic drug companies to offer a generic equivalent at a
substantially lower price. Since the development of a generic drug product,
including its formulation, testing and FDA approval,
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generally takes approximately three to four years, development activities for a
product may begin several years in advance of the patent expiration date of the
brand name drug equivalent. Consequently, the Company is presently selecting
drugs it expects to market several years in the future.
The Company is developing certain drugs which the FDA has determined require
clinical studies in order to obtain approval of a generic equivalent. Completion
of these clinical studies involves larger numbers of subjects and longer periods
of time and results in greater expenditures than do bioequivalency studies which
are required for most generic drugs. The Company is currently awaiting FDA
approval of one such drug, Sucralfate, an ulcer medication.
The Company is considering developing, manufacturing and selling drugs which
require New Drug Applications. The process of obtaining FDA approval of these
types of drugs typically requires greater expenditures by the Company than
approval of most generic drugs and often takes many years to complete. To market
these drugs, it will be necessary to familiarize physicians, pharmacists and the
public with the effects of such drugs. Since the Company has no experience in
this type of marketing, no assurance can be given that the Company will have the
ability itself, or that it will be able to make arrangements with others, to
market these drugs in such manner.
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Marketing and Customers
The Company sells its products primarily through 12 salaried employees. Sales
of drugs in dosage forms are made primarily to distributors, drug wholesalers,
drugstore chains, mass merchandisers, other drug manufacturers, health care
institutions and government agencies. More than half of the Company's gross
sales of drugs in dosage form is made under its own label and the balance is
made under customers' labels; however, in all cases the Company is named on the
label as the manufacturer.
The Company sells dosage form products to approximately 400 customers. No
single customer accounted for over 10% of total net sales in fiscal 1992, 1993
or 1994.
In fiscal 1992, 1993 and 1994, sales of cephalosporins constituted
approximately 27%, 24% and 27%, respectively, of total gross sales. For the
fiscal years ended March 31, 1992, 1993 and 1994, penicillin and semi-synthetic
penicillin drugs accounted for approximately 41%, 33% and 36%, respectively, of
total gross sales.
A key element of the Company's marketing strategy is to attempt to maintain
sufficient inventories of products in order to fill customer orders generally
within a one to four week period. This strategy requires a substantial amount of
working capital to
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maintain inventories at a level sufficient to meet anticipated demand.
Competition
The Company competes in varying degrees with numerous foreign and domestic
companies in the health care industry, including other manufacturers of generic
drugs (among which are several major pharmaceutical companies) and manufacturers
of brand name drugs. Many of the Company's competitors have greater financial
and other resources and are, therefore, able to expend more effort than the
Company in areas such as marketing and product development.
The principal competitive factors in the generic pharmaceutical market are the
ability to introduce generic versions of brand name drugs promptly after patent
expiration, price, quality and customer service.
Raw Materials
The principal raw materials of the Company's business are active ingredients
for non-penicillin drugs and bulk pharmaceutical chemicals. The bulk
pharmaceutical chemicals are used to
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manufacture bulk form antibiotics. Both types of raw materials are generally
available from multiple sources.
Because the FDA requires specification of raw material suppliers in
applications for approval of drug products, if raw materials from a specified
supplier were to become unavailable, the required FDA approval of a new supplier
could cause a delay in the manufacture of the drug involved. To date, the
Company has not experienced any significant delay and it does not expect any
such delays in the future.
Employees
As of April 1, 1994, the Company had approximately 750 full-time employees.
Approximately 115 administrative and professional personnel are engaged, at
least part of their time, in product development, including market research,
product selection and formulation, and in seeking FDA approvals of dosage form
products. Approximately 290 employees are represented by a local collective
bargaining unit whose agreement with the Company expires June 30, 1994. An
agreement in principle has been reached with the collective bargaining unit
concerning a new agreement. Management believes that its relations with
employees are satisfactory.
Government Regulation
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All pharmaceutical manufacturers are subject to extensive regulation by the
federal government, principally by the FDA, and to a lesser extent by state and
local governments. The Federal Food, Drug and Cosmetic Act, the Controlled
Substances Act and other federal statutes and regulations govern or influence
the testing, manufacture, safety, labeling, storage, record keeping, approval,
pricing, advertising and promotion of the Company's products. Noncompliance with
applicable requirements can result in fines, recall and seizure of product,
total or partial suspension of production, delays in receiving approval of new
drug applications, refusal to enter into government supply contracts and
criminal prosecution. The FDA also has the authority to revoke approvals of
drugs.
FDA approval is required before each dosage form of any new drug can be
marketed. All applications for FDA approval must contain information relating to
bioequivalency, product formulation, stability, manufacturing processes,
packaging, labeling and quality control. Validation of manufacturing processes
is also generally required before a Company may market new products. There are
generally two types of applications currently used to obtain FDA approval of a
new drug.
1. New Drug Application ("NDA"). Generally, with respect to drugs with active
ingredients not previously approved by the FDA, a
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prospective manufacturer must conduct and submit to the FDA complete clinical
studies to prove that drug's safety and efficacy. An NDA may also be submitted
for a drug with a previously approved active ingredient if the abbreviated
procedure discussed below is not available.
2. Abbreviated New Drug Application ("ANDA"). The Drug Price Competition and
Patent Term Restoration Act of 1984 (the "Drug Price Act") established an
abbreviated procedure for obtaining FDA approval for generic drugs already
approved for sale in the United States. Under the ANDA procedure, which applies
to most previously approved drugs, the FDA waives the requirement of conducting
complete clinical studies of safety and efficacy and instead requires data
illustrating that the generic drug formulation is bioequivalent to a previously
approved drug. "Bioequivalence" indicates that the rate of absorption and the
levels of concentration of a generic drug in the body needed to produce a
therapeutic effect are substantially equivalent to those of the previously
approved drug. In certain cases, however, the FDA may require clinical studies
in order to show generic equivalence to a previously approved drug.
Although antibiotic and veterinary drugs are classified separately for
purposes of FDA approval, the procedure for such drugs conforms substantially to
the NDA/ANDA procedures.
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None of the products currently marketed by the Company, other than veterinary
drugs, have required a full NDA or the equivalent application.
The Drug Price Act also created new statutory protections for brand name
drugs. Under certain circumstances the term of a product or use patent can be
extended for up to five years or provide an exclusivity period of two to ten
years.
Under the Drug Price Act, the effective date of approval of most generic drugs
will ordinarily be delayed until the expiration of patents covering the product
or until a court has determined the patent to be invalid or not infringed. If a
manufacturer files an ANDA certifying that it believes a patent is invalid or
not infringed and successfully defends itself in patent litigation, it may
receive exclusive marketing rights for the generic version of the product for a
period of 180 days. These provisions do not apply to antibiotics.
The Generic Drug Enforcement Act of 1992 was enacted in May 1992 as a result
of findings of corruption in the FDA's process of approving generic drugs. The
law establishes procedures to bar individuals who have been convicted of certain
crimes from working for companies that manufacture or distribute such products
and delays the review and approval of ANDAs submitted by or with the assistance
of debarred individuals. The law also provides, under certain circumstances, for
debarment of corporations and "high
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managerial agents" as defined in the Act, withdrawal of approvals of ANDAs and
civil penalties for both individuals and corporations. The Company does not
expect the law to have a material impact on the review or approval of the
Company's ANDAs.
Among the requirements for new drug approvals is the requirement that the
prospective manufacturer's methods conform to the FDA's current good
manufacturing practices standards ("cGMP Regulations"). The cGMP Regulations
must be followed at all times during which the approved drug is manufactured.
In complying with the standards set forth in these regulations, the Company must
continue to expend time, money and effort in the areas of production and quality
control in order to achieve compliance. Failure to so comply risks possible FDA
action such as the suspension of manufacturing, withdrawal of ANDAs or the
seizure of drug products. The Company is in discussions with the FDA over
issues arising from an inspection in May 1994. The FDA has requested that it
take additional steps to remedy alleged noncompliance with cGMP
Regulations primarily as they relate to some of the Company's products. The
Company believes that its marketed products meet appropriate standards and are
safe and effective, and that it is in substantial compliance with cGMP
Regulations. Although the Company cannot predict the outcome of these
discussions and no assurances can be made, it is hopeful that
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a mutually acceptable resolution can be reached with the FDA without litigation.
Pending resolution of such issues, new drug approvals may continue to be
delayed.
In November 1990, Congress passed, as part of the Omnibus Budget
Reconciliation Act of 1990, The Medicaid Prudent Purchasing Act (the "Medicaid
Rebate Act"). The Medicaid Rebate Act, with respect to generic pharmaceuticals,
requires all manufacturers whose products are covered by the Medicaid Program,
to rebate to each state a percentage (currently 11% in the case of products sold
by the Company) of the manufacturer's average net sales price, for all products
dispensed by pharmacists pursuant to Medicaid. Additional rules, which apply
with respect to nongeneric pharmaceuticals, are not currently applicable to the
Company. In addition, several states, including New Jersey, New York,
California, Pennsylvania and Connecticut, have enacted similar legislation with
respect to programs other than Medicaid.
The Company also is governed by federal, state and local laws of general
applicability, such as laws regulating working conditions. In addition, the
Company is subject, as are manufacturers generally, to various federal, state
and local environmental protection laws and regulations, including those
governing the discharge of materials into the environment.
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Compliance with such environmental provisions is not expected to have a
material effect on the earnings, cash requirements or competitive position of
the Company in the foreseeable future. See "Legal Proceedings" with respect to
pending environmental matters.
Item 2. Properties
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The executive offices and production, laboratory and warehouse facilities of
the Company occupy an aggregate of approximately 347,000 square feet in seven
facilities. The Company's principal executive offices, its 49,000 square foot
warehouse and distribution center are located in Fair Lawn, New Jersey.
Penicillin and semi-synthetic penicillin dosage form production operations and
a quality control laboratory are located in the Company's plant of approximately
37,000 square feet in Elmwood Park, New Jersey, approximately 4 miles from the
executive offices. The Company's plant in Paterson, New Jersey, one mile from
the Elmwood Park facility, is approximately 48,000 square feet and is used for
the manufacture of dosage form products other than penicillins and
cephalosporins. Dosage form cephalosporin drug products are produced at the
Company's 56,000 square foot facility
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located in Fairfield, New Jersey, approximately 15 miles from the executive
offices. It also contains a quality control laboratory.
The Company manufactures the active ingredients used in its semisynthetic
penicillin drugs at its plant of approximately 15,000 square feet in Waldwick,
New Jersey, approximately 5 miles from the executive offices. The Waldwick
plant also houses the Company's laboratories for microbiology, quality control
for bulk form penicillin manufacturing and research and development for bulk
form antibiotics. Raw materials and finished inventory for the Waldwick plant
are stored in a warehouse of approximately 17,000 square feet which is adjacent
to the Waldwick plant.
The Company completed construction of a facility to manufacture pharmaceutical
intermediates and bulk antibiotics in Mexico, Missouri in fiscal 1992. The
plant is approximately 125,000 square feet and contains manufacturing,
laboratory, office and warehouse facilities. In addition, the complex includes
a solvent recovery facility and a waste disposal plant.
All of the above property is owned by the Company. Management believes that
the Company's facilities are suitable for its requirements. These facilities
have additional capacity for expansion of production of existing and new
products. The Company owns substantially all of its manufacturing equipment and
believes that such equipment is well maintained and suitable for its
requirements.
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Item 3. Legal Proceedings
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Between November 23 and November 29, 1993, five separate actions were
commenced in the United States District Court for the District of New Jersey
against the Company and Harold Snyder, Beatrice Snyder, Beryl L. Snyder, Brian
S. Snyder and Jay T. Snyder, all of whom are officers and directors of the
Company, and Steven J. Sklar, who is an officer of the Company, purporting to
allege securities fraud and common law claims on behalf of purchasers of the
Company's stock. Thereafter, pursuant to an Order of the Court, the five actions
were consolidated under the caption In re Biocraft Laboratories, Inc. Securities
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Litigation, and a Consolidated and Amended Class Action Complaint (the
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"Complaint") was served on March 8, 1994. The Complaint purports to allege
securities fraud claims under Sections 10 (b) and 20 of the Securities Exchange
Act of 1934, 15 U.S.C. (S)(S) 78(b) and 78t, and SEC Rule 10b-5, 17 C.F.R.
(S)(S) 240.10b-5, as well as claims for common law fraud and negligent
misrepresentation, based on alleged misrepresentations and omissions in the
Company's publicly filed statements and press releases regarding the Company's
compliance with the FDA concerning the Company's manufacture of its products.
Plaintiffs seek compensatory and punitive damages in an unspecified amount, as
well as attorneys' fees and other costs of
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the lawsuit. On May 9, 1994, the Company moved to dismiss the Complaint on the
grounds that, among other things, it fails to state a claim upon which relief
can be granted.
In February 1986, Hoffmann-LaRoche, Inc. (Roche) obtained a declaratory
judgment that the Company was not entitled to withhold royalties under a license
for the right to manufacture and sell a patented drug, which patent expired in
June 1988. In February 1994 this matter was settled by the Company and the case
was dismissed. The Company paid Hoffmann-LaRoche, Inc. $250,000.
In September 1980, the Company entered into an administrative consent order
with the New Jersey Department of Environmental Protection (DEP) pursuant to
which the Company agreed to among other things, monitor and take certain action
to remediate contamination of the groundwater beneath the Company's Waldwick,
New Jersey plant by use of microbiological decontamination wells which were
installed in fiscal 1981. This order has been modified to include action to be
taken to monitor and, if necessary remediate, possible contamination of the
groundwater below the property adjacent to the Waldwick facility. The Company
does not expect the continued cost of this remediation to be material.
On June 8, 1989, the United States Environmental Protection Agency (EPA)
notified the Company that it was a potentially responsible party (PRP) along
with other generators of industrial
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waste, the site owners and operators, and transporters of wastes to the site,
for the alleged release of hazardous substances from a waste management site in
Elkton, Maryland, known as the "Spectron Site." The Company has participated
with other PRPs in investigating and remediating the site under a Consent Order
entered into with EPA in August 1989. As of March 31, 1994, the Company has paid
to the PRP group approximately $224,000, all of which was paid in previous
years, for its share of cleanup costs, based on volumetric allocation of waste
shipments to the Spectron Site. On March 19, 1990, EPA sent another letter to
the Company notifying it of potential liability for planned additional remedial
work at the Spectron Site. This additional remedial work arises from alleged
releases of hazardous substances at the Spectron Site during the period of 1968
to 1982, known as the Galaxy Period. The Company has decided to join with other
PRPs in the negotiation of a Consent Order with EPA for the additional remedial
work related to the Galaxy Period.
The Company is also one of more than 400 defendants in an action entitled
"Transtech Industries, Inc. et al v. A & Z Septic Clean, et al" pending in the
federal district court for New Jersey, regarding hazardous waste allegedly
shipped to the Kin-Buc Landfill in New Jersey; has been notified by the North
Carolina Department of Environment, Health and Natural Resources that it
believes that the Company was one of approximately 1,500 entities that caused
hazardous material to be shipped to a waste treatment facility
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previously operated by the Seaboard Chemical Corporation at Jamestown, North
Carolina; and is one of more than 900 entities notified that it has shipped
hazardous waste to a site in Caldwell County, North Carolina.
The Company is in discussions with the FDA over issues arising from an
inspection in May 1994. The FDA has requested that it take additional steps to
remedy alleged noncompliance with cGMP regulations primarily as they relate to
some of the Company's products. The Company believes that its marketed products
meet appropriate standards and are safe and effective, and that it is in
substantial compliance with cGMP regulations. Although the Company cannot
predict the outcome of these discussions and no assurances can be made, it is
hopeful that a mutually acceptable resolution can be reached with the FDA
without litigation.
See also Note 11 of "Notes to Consolidated Financial Statements".
Item 4. Submission of Matters to Vote of Security Holders
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Not applicable.
Executive Officers of the Company
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<TABLE>
<CAPTION>
Name Position Age
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<S> <C> <C>
Harold Snyder Chairman, Chief Executive Officer 71
and President
</TABLE>
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<TABLE>
<S> <C> <C>
Beatrice Snyder Senior Vice President and 70
Secretary
Harmon Aronson Vice President - 51
Non-Penicillin Dosage Operations
Melvin Kaufman Vice President - 55
Antibiotics Operations
Gerald Moskowitz Vice President - Sales 64
Steven J. Sklar Vice President, Treasurer and 37
Chief Financial Officer
Beryl L. Snyder Vice President, Assistant 37
Secretary and General Counsel
Brian S. Snyder Vice President and Controller 35
Jay T. Snyder Vice President - 35
Research and Product Development
Leonard E. Bustamante Vice President - 56
Quality Management
Joy Bloodsaw Associate Vice President of 48
Purchasing
Harvey Richards Associate Vice President of 61
Regulatory Affairs
McKee Moore Associate Vice President - Sales 41
</TABLE>
HAROLD SNYDER has been President of the Company since 1964 and in 1985 was
elected Chairman and Chief Executive Officer. Prior to founding the Company in
1964, Mr. Snyder held various managerial and technical positions in the
pharmaceutical industry.
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BEATRICE SNYDER has been Secretary of the Company since 1964, and was elected
to the office of Senior Vice President in 1985.
HARMON ARONSON has been Manager of the Company's non-penicillin production
since 1979. In 1985 he was elected the Company's Vice President - Non-Penicillin
Dosage Operations.
MELVIN KAUFMAN was Chief Operations Manager of the Company from July 1983 to
January 1985 and was subsequently elected the Company's Vice President -
Antibiotics Operations. From 1980 to July 1983 he served as Director of Bulk
Manufacturing of Wyeth Laboratories, Inc., a manufacturer of pharmaceuticals and
a subsidiary of American Home Products Corp.
GERALD MOSKOWITZ has been Sales Manager of the Company since 1965 and in 1985
was elected the Company's Vice President - Sales.
STEVEN J. SKLAR has been Chief Financial Officer since July, 1990. He was
elected the Company's Vice President and Treasurer in December 1989. Prior to
joining the Company he was a partner at Botein Hays & Sklar, and through that
firm, rendered professional services to the Company from 1984 through 1989. From
1985 to 1987 he was a full-time member of the faculty of New York University
School of Law and he continues to teach there periodically.
BERYL L. SNYDER was elected the Company's Assistant Secretary in August, 1993.
She has been Vice President since May 1990 and General Counsel to the Company
since 1984.
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BRIAN S. SNYDER was elected the Company's Vice President and Controller in May
1990. He has been the Company's Controller since 1983. From 1977 to 1983 he
held various sales and production positions with the Company.
JAY T. SNYDER was elected the Company's Vice President - Research and Product
Development in May 1990. He has been Director of Product Development since 1988.
From 1982 to 1988 he was plant manager of the Company's penicillin dosage form
facility and from 1977 to 1982 held various production positions with the
Company.
LEONARD E. BUSTAMANTE was elected the Company's Vice President of Quality
Management in August, 1993. From 1990 to 1993 he served as Director of Quality
Control for Barre-National, Inc.
JOY BLOODSAW has been with the Company since 1982 and has been Director of
Purchasing since 1985. On August 19, 1992 she was elected the Company's
Associate Vice President - Purchasing.
HARVEY RICHARDS has been responsible for Regulatory Affairs at the Company
since 1968 and on April 15, 1993 was elected the Company's Associate Vice
President - Regulatory Affairs.
MCKEE MOORE was elected Associate Vice President of Sales in April, 1994. He
had been employed with the Company as Chief Sales Representative since 1991.
Prior to this time, he was employed by Geneva Generics.
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Harold Snyder and Beatrice Snyder are husband and wife. Beryl L. Snyder, Brian
S. Snyder and Jay T. Snyder are the children of Harold and Beatrice Snyder.
Officers of the Company are elected by the directors for a term of one year and
hold office until their respective successors are elected and qualified.
PART II
Item 5. Market for the Registrant's Common Stock and Related
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Stockholder Matters
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The Company's Common Stock is traded on the New York Stock Exchange under the
symbol "BCL". The material under the caption "Market for the Registrant's Common
Stock, Dividends and Related Stockholder Matters" on page 6 of the Annual Report
is incorporated herein by reference.
Item 6. Selected Financial Data
-----------------------
The material under the caption "Selected Financial Highlights" on the inside
cover of the Annual Report is incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and
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Results of Operations
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The material under the caption "Management's Discussion and Analysis of
Financial Condition and Results of Operations" on pages 4 through 6 of the
Annual Report is incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
-------------------------------------------
The Financial Statements of the Company as of March 31, 1994 and 1993, for
each of the years in the three-year period ended March 31, 1994 and related
notes thereto are contained on pages 7 through 16 of the Annual Report and are
incorporated herein by reference. The financial statement schedules are included
herein at pages F-1 to F-3. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations", on page 4 of the Annual Report,
for selected quarterly financial data.
Item 9. Changes in and Disagreements with Accountants on Accounting and
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Financial Disclosure
--------------------
The information otherwise required by this item was previously reported in the
Company's Current Report on Form 8-K dated November 2, 1992.
PART III
Item 10. Directors and Executive Officers of the Registrant
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Item 11. Executive Compensation
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Item 12. Security Ownership of Certain Beneficial Owners and Management
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Item 13. Certain Relationships and Related Transactions
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Items 10, 11, 12 and 13 have been omitted because on or before July
29, 1994, Registrant will file with the Commission pursuant to Regulation 14A a
definitive proxy statement. The information called for by these items is set
forth in that proxy statement and is incorporated herein by reference.
The information called for by Item 10 with respect to executive
officers of the Registrant appears following Item 4 under Part I of this Report.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8K
--------------------------------------------------------------
(a) 1. Financial statements are contained on pages 7 through 16 of the
Annual Report and are incorporated herein by reference.
2. Financial statement schedules
25
<PAGE>
The following consolidated financial statement schedules of the
Company are included herein at the pages indicated in parentheses:
Schedule V - Property and Equipment (F-1)
Schedule VI - Accumulated Depreciation and Amortization of
Property and Equipment (F-2)
Schedule VIII - Valuation and Qualifying Accounts (F-3)
All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.
3. Exhibits - see index on page I-1, I-2 and I-3.
(b) Not applicable
26
<PAGE>
Schedule V
----------
BIOCRAFT LABORATORIES, INC.
Property and Equipment
Years ended March 31, 1994, 1993 and 1992
(In thousands)
<TABLE>
<CAPTION> Retire-
Balance at Additions ments Balance at
beginning at or Reclassi- end
Classification of period cost sales fications of period
- - -------------- ---------- --------- ------- --------- ----------
<S> <C> <C> <C> <C> <C>
Year ended March 31, 1994:
Land $ 1,508 - - - $ 1,508
Buildings and improvements 66,255 1,601 - 88 67,944
Machinery and equipment 47,152 4,815* 30 51,937
Construction in progress 88 33 - (88) 33
-------- ------- ---- ------- --------
$115,003 $ 6,449 $ 30 - $121,422
======== ======= ==== ======= ========
Year ended March 31, 1993:
Land $ 1,508 - - - $ 1,508
Buildings and improvements 59,968 1,068 - 5,219 66,255
Machinery and equipment 42,949 3,364 32 871 47,152
Construction in progress 3,511 2,667 - (6,090) 88
-------- ------- ---- ------- --------
$107,936 $ 7,099 $ 32 - $115,003
======== ======= ==== ======= ========
Year ended March 31, 1992:
Land $ 1,508 - - - $ 1,508
Buildings and improvements 28,849 4,110 - 27,009 59,968
Machinery and equipment 28,473 4,130 239 10,585 42,949
Construction in progress 37,895 3,210 - (37,594) 3,511
-------- ------- ---- ------- --------
$ 96,725 $11,450 $239 - $107,936
======== ======= ==== ======= ========
</TABLE>
*Includes equipment under capital leases amounting to $84.
F-1
<PAGE>
Schedule VI
-----------
BIOCRAFT LABORATORIES, INC.
Accumulated Depreciation and Amortization
of Property and Equipment
Years ended March 31, 1994, 1993 and 1992
(In thousands)
<TABLE>
<CAPTION>
Balance at Additions Deductions Balance at
beginning charged to and end
Classification of period operations Retirements of period
- - -------------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Year ended March 31, 1994:
Buildings and improvements $ 9,203 $2,150 - $11,353
Machinery and equipment 18,622 4,443 24 23,041
------- ------ ---- -------
$27,825 $6,593 $ 24 $34,394
======= ====== ==== =======
Year ended March 31, 1993:
Buildings and improvements $ 7,190 $2,013 - $ 9,203
Machinery and equipment 14,640 3,991 9 18,622
------- ------ ---- -------
$21,830 $6,004 $ 9 $27,825
======= ====== ==== =======
Year ended March 31, 1992:
Buildings and improvements $ 5,635 $1,555 - $ 7,190
Machinery and equipment 11,754 3,112 226 14,640
------- ------ ---- -------
$17,389 $4,667 $226 $21,830
======= ====== ==== =======
</TABLE>
F-2
<PAGE>
Schedule VIII
-------------
BIOCRAFT LABORATORIES, INC.
Valuation and Qualifying Accounts
Years ended March 31, 1994, 1993 and 1992
(In thousands)
<TABLE>
<CAPTION>
Balance at Additions Balance at
beginning charged to end
Description of period operations Deductions of period
----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Against trade receivables -
Year ended March 31, 1994:
Allowance for doubtful accounts $230 $ 48 $ 38(A) $240
Allowance for cash discounts 300 2,062 1,972 390
---- ------ ------ ----
$530 $2,110 $2,010 $630
==== ====== ====== ====
Year ended March 31, 1993:
Allowance for doubtful accounts $260 $ 44 $ 74(A) $230
Allowance for cash discounts 170 1,394 1,264 300
---- ------ ------ ----
$430 $1,438 $1,338 $530
==== ====== ====== ====
Year ended March 31, 1992:
Allowance for doubtful accounts $175 $ 87 $ 2(A) $260
Allowance for cash discounts 60 1,131 1,021 170
---- ------ ------ ----
$235 $1,218 $1,023 $430
==== ====== ====== ====
</TABLE>
- - ---------------
(A) Accounts written off.
F-3
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
BIOCRAFT LABORATORIES, INC.
Date: June 30, 1994 /s/ Harold Snyder
---------------------------
(Harold Snyder)
Chairman, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Harold Snyder Director, Chairman of June 30, 1994
- - --------------------- the Board, President
Harold Snyder and Chief Executive
Officer (principal
executive officer)
/s/ Beatrice Snyder Senior Vice President, June 30, 1994
- - --------------------- Secretary and Director
Beatrice Snyder
/s/ Beryl L. Snyder Vice President, June 30, 1994
- - --------------------- General Counsel,
Beryl L. Snyder Assistant Secretary and
Director
/s/ Brian S. Snyder Vice President, June 30, 1994
- - --------------------- Controller and Director
Brian S. Snyder
/s/ Jay T. Snyder Vice President, Research June 30, 1994
- - --------------------- & Product Development
Jay T. Snyder and Director
/s/ Steven J. Sklar Vice President, June 30, 1994
- - --------------------- Chief Financial Officer
Steven J. Sklar and Treasurer
<PAGE>
/s/ Gerard Klein
- - -------------------------- Director June 30, 1994
Gerard Klein
/s/ James J. Rahal, Jr.
- - -------------------------- Director June 30, 1994
James J. Rahal, Jr. M.D.
/s/ Madelon DeVoe Talley
- - -------------------------- Director June 30, 1994
Madelon DeVoe Talley
- - -------------------------- Director June , 1994
Marvin M. Thalenberg, M.D.
- - -------------------------- Director June , 1994
G. Harold Welch, Jr.
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Number Page
- - ------ ----
<S> <C> <C>
3.1 Certificate of Incorporation and Certificate of -
Amendment of Certificate of Incorporation filed
as Exhibit 3.1 to Annual Report on Form 10-K for
fiscal year ended March 31, 1987, which is incorporated
herein by reference.
3.2 By-Laws, as amended, filed as Exhibit 3.2 to Annual -
Report on Form 10-K for fiscal year ended March 31,
1987, which is incorporated herein by reference.
4 Specimen Certificate of Common Stock filed as -
Exhibit 4 to Annual Report on Form 10-K for fiscal
year ended March 31, 1985, which is incorporated
herein by reference.
10.1 Employees' Profit Sharing Plan filed as Exhibit 10.1 -
to Registration statement No. 2-95660 on Form S-1,
which is incorporated herein by reference.
10.2 Biocraft Laboratories, Inc. Money Purchase Plan, -
filed as Exhibit 10.2 to Annual Report on Form 10-K
for fiscal year ended March 31, 1988, which is
incorporated herein by reference.
10.3 Biocraft Laboratories, Inc. 401(K) Savings Plan, -
filed as Exhibit 10.3 to Annual Report on Form 10-K
for fiscal year ended March 31, 1985, which is
incorporated herein by reference.
10.4 1985 Incentive Stock Option Plan, as amended, which
is incorporated herein by reference. -
10.5 Restricted Stock Purchase Plan, as amended, which is
incorporated herein by reference. -
10.6 $3,650,000 New Jersey Economic Development Authority -
Bond Financing Agreement dated December 16, 1983 filed
as Exhibit 10.4 to Registration Statement No. 2-95660
on Form S-1, which is incorporated herein by reference.
10.7 Mortgages and related Note dated December 16, 1983 -
from Harold and Beatrice Snyder to the New Jersey
Economic Development Authority filed as Exhibit 10.5
to Registration Statement No. 2-95660 on Form S-1,
which is incorporated herein by reference.
10.8 Amendment to Bond Agreement and related Consent and -
Waiver filed as Exhibit 10.6 to Registration Statement
No. 33-5744 on Form S-1, which is incorporated herein
by reference.
10.9 Assumption Agreement dated April 30, 1985 between -
Biocraft Laboratories, Inc. and Harold Snyder and
Beatrice Snyder filed as Exhibit 10.7 to Registration
Statement No. 33-5744 on Form S-1, which is
incorporated herein by reference.
</TABLE>
I-1
<PAGE>
EXHIBIT INDEX (cont'd)
<TABLE>
<CAPTION>
Number Page
- - ------ ----
<S> <C> <C>
10.10 License Agreement dated January 31, 1985 between -
Biocraft Laboratories, Inc. and Groundwater
Decontamination Systems, Inc. filed as Exhibit 10.9
to Registration Statement No. 2-95660 on Form S-1,
which is incorporated herein by reference.
10.11 Indenture of Trust and Loan Agreement among Missouri -
Economic Development, Export and Infrastructure Board,
as Issuer, The Merchants Bank, as Trustee, and Biocraft
Laboratories, Inc. as Borrower, filed as Exhibit 1 to
Form 8K, dated September 28, 1989, which is incorporated
herein by reference.
10.12 Letter of Credit Agreement, dated as of September 1, 1989, -
by and between Biocraft Laboratories, Inc. and The Bank of
Tokyo, Ltd., New York Agency, filed as Exhibit 2 to Form
8-K, dated September 28, 1989, which is incorporated herein
by reference.
10.13 Pledge and Security Agreement, dated as of September 1, -
1989, between Biocraft Laboratories, Inc. and The Bank of
Tokyo, Ltd., New York Agency, filed as Exhibit 3 to Form
8-K, dated September 28, 1989, which is incorporated
herein by reference.
10.14 Remarketing Agreement, dated as of September 1, 1989, by -
and between Biocraft Laboratories, Inc., the Borrower, and
Prudential-Bache Securities, Inc., the Remarketing Agent,
filed as Exhibit 4 to Form 8-K, dated September 28, 1989,
which is incorporated herein by reference.
10.15 Missouri Economic Development, Export and Infrastructure -
Board Bond Purchase Agreement, dated September 14, 1989,
filed as Exhibit 5 to Form 8-K, dated September 28, 1989,
which is incorporated herein by reference.
10.16 Deed of Trust, Security Agreement and Assignment of Leases, -
dated as of September 1, 1989, from Biocraft Laboratories,
Inc., the Grantor, to Mark M. Budzinski, as trustee, and
The Bank of Tokyo, Ltd., New York Agency, as beneficiary,
filed as Exhibit 6 to Form 8-K, dated September 28, 1989,
which is incorporated herein by reference.
10.17 Employment Agreement dated March 26, 1990 between Biocraft -
Laboratories, Inc. and Harold Snyder, filed as Exhibit
10.21 to Form 10-K for the year ended March 31, 1990,
which is incorporated herein by reference.
10.18 Biocraft Laboratories, Inc. 1989 Directors' Stock Option -
Plan, filed as Exhibit 10.22 to Form 10-K for the year ended
March 31, 1990, which is incorporated herein by reference.
10.19 Revolving Credit and Term Loan Agreement, dated as of -
March 27, 1991 between Biocraft Laboratories, Inc. and
Commerce Bank of Kansas City, N.A., filed as Exhibit 10.22
to Form 10-K for the year ended March 31, 1991, which is
incorporated herein be reference.
</TABLE>
I-2
<PAGE>
EXHIBIT INDEX (cont'd)
<TABLE>
<CAPTION>
Number Page
- - ------ ----
<S> <C> <C>
10.20 Loan Agreement, dated as of March 20, 1992, between -
Biocraft Laboratories, Inc. and National Westminster Bank NJ,
which is incorporated herein by reference.
10.21 Mortgage and Secured Term Loan Agreement, dated November 16, -
1992, between Biocraft Laboratories, Inc. and National
Westminster Bank NJ, which is incorporated herein by reference.
10.22 Amended and Restated Revolving Credit and Term Loan Agreement, -
dated September 30, 1993, between Biocraft Laboratories, Inc.
and Commerce Bank of St.Louis, National Association.
13 Biocraft Laboratories, Inc. 1994 Annual Report to Shareholders -
24.1 Consent of Ernst & Young -
24.2 Consent of KPMG Peat Marwick -
24.3 Opinion of KPMG Peat Marwick -
</TABLE>
I-3
<PAGE>
GRAPHICS APPENDIX LIST
PAGE WHERE
GRAPHIC
APPEARS DESCRIPTION OF GRAPHIC OR CROSS REFERENCE
- - --------------------------------------------------------------------------------
Bar graph titled Net sales in millions of dollars,
indicates net sales of $84.3, $113.2 and $143.1
million in the year ended March 31, 1992, 1993 and
1994, respectively.
- - --------------------------------------------------------------------------------
Bar graph titled Net earnings (loss) in millions of
dollars, indicates a net loss of $6.7 million and
net earnings of $5.9 million and $6.1 million in the
year ended March 31, 1992, 1993 and 1994,
respectively.
- - --------------------------------------------------------------------------------
<PAGE>
EXHIBIT 10.22
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
SECTION 1 -- DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1. Defined Terms. . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2. Other Definitional Provisions. . . . . . . . . . . . . . . . . 10
SECTION 2 -- LENDING ARRANGEMENT. . . . . . . . . . . . . . . . . . . . . . . 10
2.1. Revolving Credit Advances. . . . . . . . . . . . . . . . . . . 10
2.2. Commitment Fee. . . . . . . . . . . . . . . . . . . . . . . . 11
2.3. Termination or Reduction of Commitment. . . . . . . . . . . . 11
2.4. Term Loan. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.5. Term Loan Fee. . . . . . . . . . . . . . . . . . . . . . . . . 12
2.6. Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.7. Interest Options. . . . . . . . . . . . . . . . . . . . . . . 13
2.8. Interest Rates. . . . . . . . . . . . . . . . . . . . . . . . 13
2.9. Requests for Loans and Conversions. . . . . . . . . .. . . . . 14
2.10. Interest Periods. . . . . . . . . . . . . . . . . . . . . . . 15
2.11 Prepayment. . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.12. Illegality; Indemnity; Additional Costs. . . . . . . . . . . . 16
SECTION 3 -- REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . 17
3.1. Financial Condition. . . . . . . . . . . . . . . . . . . . . . 17
3.2. No Change. . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.3. Corporate Existence; Compliance with Law. . . . . . . . . . . 18
3.4. Corporate Power and Authority. . . . . . . . . . . . . . . . . 18
3.5. Enforceable Obligations. . . . . . . . . . . . . . . . . . . . 18
3.6. No Legal Bar. . . . . . . . . . . . . . . . . . . . . . . . . 18
3.7. No Default, Proceedings or Litigation. . . . . . . . . . . . . 18
3.8. Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.9. Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . 19
3.10. ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.11. Investment Company Act. . . . . . . . . . . . . . . . . . . . 20
3.12. Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . 20
3.13. Access. . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 4 -- CONDITIONS PRECEDENT. . . . . . . . . . . . . . . . . . . . . . 20
4.1. Conditions to Initial Loan. . . . . . . . . . . . . . . . . 20
4.2. Conditions to All Loans. . . . . . . . . . . . . . . . . . . 20
SECTION 5 -- AFFIRMATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . . 21
5.1. Financial Statements . . . . . . . . . . . . . . . . . . . . 21
5.2. Certificates. . . . . . . . . . . . . . . . . . . . . . . . . 22
5.3. Other Reports. . . . . . . . . . . . . . . . . . . . . . . . 22
5.4. Payment of Obligations. . . . . . . . . . . . . . . . . . . . 22
</TABLE>
<PAGE>
<TABLE>
<S> <C>
5.5. Maintenance of Existence. . . . . . . . . . . . . . . . . . . 23
5.6 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.7. Books and Records. . . . . . . . . . . . . . . . . . . . . . 23
5.8. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.9. ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 6 -- NEGATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . . . . 25
6.1. Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.2. Fundamental Changes. . . . . . . . . . . . . . . . . . . . . 25
6.3 Leverage Ratio. . . . . . . . . . . . . . . . . . . . . . . . 26
6.4 Cash Flow Ratio. . . . . . . . . . . . . . . . . . . . . . . 26
6.5. Current Ratio. . . . . . . . . . . . . . . . . . . . . . . . 26
6.6. Tangible Net Worth. . . . . . . . . . . . . . . . . . . . . . 26
6.7. Net Quick Assets. . . . . . . . . . . . . . . . . . . . . . . 26
6.8. Working Capital. . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 7 -- DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.1. Events of Default. . . . . . . . . . . . . . . . . . . . . . . 26
7.2. Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 8 -- MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . 28
8.1. Amendment and Waiver. . . . . . . . . . . . . . . . . . . . . . 28
8.2. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
8.3. No Waiver: Cumulative Remedies. . . . . . . . . . . . . . . . . 29
8.4. Survival. . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
8.5. Payment of Expenses and Taxes. . . . . . . . . . . . . . . . . 29
8.6. Indemnity. . . . . . . . . . . . . . . . . . . . . . . . . . . 29
8.7. Right of Setoff. . . . . . . . . . . . . . . . . . . . . . . . 30
8.8. Successors and Assigns. . . . . . . . . . . . . . . . . . . . . 30
8.9. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.10. Severability. . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.11. Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . 31
8.12. Acknowledgements and Admissions. . . . . . . . . . . . . . . . 31
8.13. Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . 32
8.14. Waiver of Jury Trial; Punitive Damages. . . . . . . . . . . . . 32
</TABLE>
<PAGE>
AMENDED AND RESTATED REVOLVING CREDIT AND TERM LOAN AGREEMENT
This AMENDED AND RESTATED REVOLVING CREDIT AND TERM LOAN AGREEMENT
("Agreement"), dated as of the 30th day of September, 1993, is by and between
COMMERCE BANK OF ST. LOUIS, NATIONAL ASSOCIATION, (the "Bank") and BIOCRAFT
LABORATORIES, INC., a Delaware corporation (the "Company"), and amends and
replaces that certain Revolving Credit and Term Loan Agreement dated as of March
27, 1991, between Company and Commerce Bank of Kansas City, N.A., as assigned to
Bank on April 6, 1993, and as amended by Amendments dated July 1, 1992, March
26, 1993, August 1, 1993, and September 1, 1993, (the "Prior Agreement").
SECTION 1 - DEFINITIONS
1.1. Defined Terms. As used in this Agreement, the following terms have
-------------
the following meanings:
"Accounts Receivable": any account of the Company or any Subsidiary and
-------------------
any other right of the Company or any Subsidiary to payment for goods
sold or leased or for services rendered, and whether or not yet earned by
performance, which would properly be classified as accounts receivable on
the consolidated balance sheet of the Company and its Subsidiaries.
"Adjusted CD Rate": a rate per annum (rounded upwards, if necessary, to
----------------
the nearest one-eighth of one percent (1/8 of 1%)) determined in
accordance with the following formula:
Adjusted CD Rate =
CD Rate + Assessment Rate
----------------------------
100% - CD Reserve Percentage
"Adjusted LIBOR": a rate per annum (rounded upwards, if necessary, to the
--------------
nearest one-eighth of one percent (1/8 of 1%)) determined in accordance
with the following formula:
Adjusted LIBOR =
LIBOR
-------------------------------
100% - LIBOR Reserve Percentage
"Advance": defined in Section 2.1.
-------
"Assessment Rate": the annual Assessment Rate (rounded upward, if
---------------
necessary, to the nearest one-hundredth of one percent (1/100 of 1%))
imposed by the Federal Deposit Insurance Corporation for insuring the
Bank's liability for
<PAGE>
time deposits, as in effect from time to time. The Bank agrees to give
the Company prompt notice of each change in the Assessment Rate.
"Bank": Commerce Bank of St. Louis, National Association and its
----
successors and assigns.
"Business Day": any day other than a Saturday, Sunday, or other day on
------------
which banking institutions in St. Louis, Missouri are authorized or
required by law to close.
"Cash and Cash Equivalents":
-------------------------
(i) cash and
(ii) any investment that satisfies the definition of
"cash equivalents" under GAAP.
"Cash Flow Ratio": the ratio of Operating Cash Flow to Required Cash
---------------
Uses.
"CD Rate": with respect to each Interest Period for a CD Rate Loan, the
-------
bid rate quoted in the secondary market at approximately 10:00 a.m. (St.
Louis, Missouri time) on the first day of such Interest Period as
determined by the Bank via transmission by computer network by Knight-
Ridder, Inc. or Telerate, Inc. (or such other service as the Bank shall
determine to be appropriate) for the purchase at face value of U.S.
dollar certificates of deposit in an amount equal to the CD Rate Loan to
be outstanding and having a maturity approximately equal to such Interest
Period. Each determination of the CD Rate made by the Bank in accordance
with this paragraph shall be conclusive and binding except in the case of
manifest error.
"CD Reserve Percentage": the rate (as determined by the Bank) of the
---------------------
maximum reserve requirement (including, without limitation, any
supplemental, marginal and emergency reserves) imposed by the Board of
Governors of the Federal Reserve System (or any successor) from time to
time on the Bank's non-personal time deposits having a maturity equal to
the applicable Interest Period and in an amount equal to the applicable
CD Rate Loan, subject to any amendments of such reserve requirement by
such Board or its successor, taking into account any transitional
adjustments thereto. The Adjusted CD Rate shall automatically be adjusted
as of the date of any change in the CD Reserve Percentage and the Bank
agrees to give the Company prompt notice of each change in the CD Reserve
Percentage and the corresponding adjustment to the Adjusted CD Rate.
2
<PAGE>
"Code": The Internal Revenue Code of 1986, as amended from time to time.
----
"Commitment": Defined in Section 2.1.
----------
"Commitment Fee": Defined in Section 2.2.
--------------
"Commitment Period": Defined in Section 2.1.
-----------------
"Company": Biocraft Laboratories, Inc. and its successors and assigns.
-------
"Consolidated Current Assets": the current assets of the Company and its
---------------------------
Subsidiaries determined on a consolidated basis in conformity with GAAP.
"Consolidated Current Liabilities": the current liabilities of the
--------------------------------
Company and its Subsidiaries plus those current liabilities of any person
which are guaranteed by the Company or any Subsidiary determined on a
consolidated basis in conformity with GAAP.
"Consolidated Total Liabilities": the aggregate of all items which would
------------------------------
properly be classified as liabilities on the consolidated balance sheet
of the Company and its Subsidiaries.
"Consolidated Quick Assets": the sum of Cash and Cash Equivalents plus
------------------------- ----
Marketable Securities plus Accounts Receivable of the Company and its
----
Subsidiaries determined on a consolidated basis in conformity with GAAP.
"Contractual Obligation": as to any Person, any provision of any security
----------------------
issued by such Person or of any agreement, instrument or undertaking to
which such Person is a party or by which it or any of its property is
bound.
"ERISA": The Employee Retirement Income Security Act of 1974, as amended
-----
from time to time.
"ERISA Affiliate": each trade or business (whether or not incorporated)
---------------
which together with the Company or a Subsidiary would be deemed to be a
"single employer" within the meaning of Section 4001 of ERISA.
"Event of Default": any of the events specified in Section 7, provided
----------------
that and requirement for the giving of notice, the lapse of time, or
both, or any other condition, has been satisfied.
3
<PAGE>
"GAAP": generally accepted accounting principles in the United States of
----
America in effect on the date of this Agreement and any amendments or
additions to which Bank may agree in writing, which agreement may not
unreasonably be withheld.
"Governmental Authority": any nation or government, any state or other
---------------------
political subdivision thereof, and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government, and any corporation or other entity owned or
controlled (through stock or capital ownership or otherwise) by any of
the foregoing.
"Indebtedness":
------------
(i) all indebtedness for borrowed money or for the deferred
purchase price of property or services;
(ii) all obligations evidenced by bonds, debentures, notes or
other similar instruments;
(iii) all direct or indirect guaranties in respect of, and all
obligations or undertakings otherwise to assure a credit against loss
in respect of, indebtedness of another for borrowed money or for the
deferred purchase price of property or services;
(iv) any obligation for borrowed money which is non-recourse but
which is secured by assets;
(v) all obligations under capital leases secured or unsecured;
and
(vi) all liabilities in respect of unfunded vested benefits under
plans covered by Title IV of ERISA; provided, however, that
"Indebtedness" shall not include the indebtedness or guaranties on
customary trade terms owing to trade creditors in the ordinary course
of business, and no amount shall be included more than once in the
aggregate of the above described amounts.
"Interest Payment Date": the last Business Day of each calendar month,
---------------------
commencing with the first such date to occur after the date of the
Revolving Credit Note.
"Interest Period":
---------------
(i) the period applicable to each CD Rate Loan, which shall be thirty
(30), sixty (60), ninety (90), or one hundred eighty (180) days, as
selected by the Company in accordance with Subsection 2.9, and
4
<PAGE>
(ii) the period applicable to each LIBOR Loan, which shall be one (1),
two (2), three (3), or six (6) months, as selected by the Company in
accordance with Subsection 2.9.
"LIBOR": with respect to each Interest Period for a LIBOR Loan, the rate
-----
per annum determined by the Bank to be the rate at which deposits in U.S.
Dollars are offered to the Bank by other leading banks in the London
interbank market at approximately 11:00 a.m. (London time) two Business
days prior to the first day of such Interest Period, in the approximate
amount of such LIBOR Loan and having a term approximately equal to such
Interest Period.
"LIBOR Reserve Percentage": the rate (as determined by the Bank) of the
------------------------
maximum reserve requirement (including, without limitation, any
supplemental, marginal and emergency reserves) imposed by the Board of
Governors of the Federal Reserve System (or any successor) from time to
time on "Eurocurrency liabilities," as such term is defined in Regulation
D of such Board of Governors or, if such regulation or definition of
Eurocurrency liabilities is modified, and as long as member banks may be
required to maintain reserves against a category of liabilities which
includes Eurodollar deposits or a category of assets which includes LIBOR
Loans, the rate at which reserves are required to be maintained on such
category. The Adjusted LIBOR shall automatically be adjusted as of the
date of any change in the LIBOR Reserve Percentage and the Bank agrees to
give the Company prompt notice of each such adjustment.
"Lien": any mortgage, deed of trust, pledge, hypothecation, assignment,
----
deposit arrangement, encumbrance, lien (statutory or other), or
preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever (including, without
limitation, any conditional sale or other title retention agreement, any
financing lease having substantially the same economic effect as any of
the foregoing, and the filing of any financing statement under the
Uniform Commercial Code or comparable law of any jurisdiction).
"Loans": Defined in Section 2.4.
-----
"Margin": The percentage (expressed in basis points) which, when added to
------
the CD Rate, LIBOR, Prime Rate, or Treasury Rate, will establish the rate
of interest on the Loans. The applicable Margin is a function of
Company's financial performance, and shall be determined in accordance
with the following grid:
5
<PAGE>
<TABLE>
<CAPTION>
LEVERAGE RATIO
1.0 to 1.14:1 .9 to .99:1 .75 to .89:1 .60 to .74:1 Less than .60:1
------------- ----------- ------------ ------------ ---------------
<S> <C> <C> <C> <C> <C>
MODIFIED CASH FLOW RATIO
1.4 to 2.0:1 A B D E F
2.01 to 2.75:1 B C D E G or F
GREATER THAN
2.75:1 C D E F G or F
</TABLE>
(All calculations to be rounded to nearest hundredth)
<TABLE>
<CAPTION>
Prime Plus CD Rate Plus LIBOR Plus Treasury Rate Plus
<S> <C> <C> <C> <C>
A= 50 b.p. 200 b.p. 200 b.p. 200 b.p.
B= 0 175 b.p. 175 b.p. 200 b.p.
C= 0 150 b.p. 150 b.p. 150 b.p.
D= 0 130 b.p. 130 b.p. 150 b.p.
E= 0 90 b.p. 90 b.p. 125 b.p.
F= 0 80 b.p. 80 b.p. 125 b.p.
G= 0 75 b.p. 75 b.p. 125 b.p.
</TABLE>
Margin "G" shall be applicable only during such period as Company's Tangible Net
Worth is equal to or greater than $120 Million, otherwise Margin "F" shall
apply.
The Margin shall be adjusted on the sixtieth (60th) day after the end of
the first three (3) quarterly periods of Company's fiscal year and the
one hundredth (lOOth) day after Company's fiscal year end, each an
"Adjustment Date." Changes in the Margin shall apply to all outstanding
Loans on the Adjustment Date until the next Adjustment Date.
"Marketable Securities": any stock, shares, voting trust certificates,
---------------------
bonds, debentures, notes or other evidences of indebtedness, secured or
unsecured, convertible, subordinated or otherwise, or in general any
instruments commonly known as "securities" or any certificates of
interest, shares or participations in temporary or interim certificates
for the purchase or acquisition of, or any right to subscribe to,
purchase or acquire, any of the foregoing which can readily be bought and
sold and would properly be classified as Marketable Securities on the
consolidated balance sheet of the Company and its Subsidiaries.
6
<PAGE>
"Modified Cash Flow Ratio": the ratio of Operating Cash Flow
------------------------
to Modified Required Cash Uses as determined at the end of
each fiscal quarter.
"Modified Required Cash Uses": Required Cash Uses minus:
---------------------------
(i) all cash dividends paid by the Company and its Subsidiaries
during such period which are not automatically reinvested in Company
common stock pursuant to a dividend reinvestment program; and
(ii) all cash paid in accordance with the settlement agreement
entered into in March, 1990, with respect to that certain patent
infringement lawsuit involving the drug Cefadroxil Monohydrate.
"Multiemployer Plan": a Plan which is a multiemployer plan as
------------------
defined in Section 4001(a)(3) of ERISA.
"Net Income": for a Person, for a particular period, the net
----------
income (deficit), if any, of such Person for such period as
determined in accordance with GAAP.
"Notes": the collective reference to the Revolving Credit
-----
Note and the Term Note; one of the Notes, a "Note".
----
"Operating Cash Flow": the consolidated net income of the Company and its
-------------------
Subsidiaries after all income taxes paid by the Company and its
Subsidiaries during such period without giving effect to any gain or loss
attributable to either the extinguishment of indebtedness or the sale,
exchange or other disposition of capital assets not made in the ordinary
course of business, plus, but only to the extent such items shall have
----
been deducted in determining such net income after all such taxes, the
sum of:
(i) all interest paid or accrued during such period on
Indebtedness, including, without limitation, interest
which is imputed under capital leases;
(ii) federal, state and local taxes; and
(iii) depreciation and amortization of assets and other
non-cash charges.
"PBGC": the Pension Benefit Guaranty Corporation established
----
pursuant to Subtitle A of Title IV of ERISA, or any successor thereto.
7
<PAGE>
"Person": an individual, partnership, corporation, business trust, joint
------
stock company, trust, unincorporated association, joint venture,
Governmental Authority or other entity of whatever nature.
"Plan": any pension plan which is covered by Title IV of ERISA and in
----
respect of which the Company or any of its Subsidiaries is an "employer"
as defined in Section 3(5) of ERISA.
"Prior Agreement": defined in preamble.
---------------
"Prime Rate": the rate of interest publicly announced by the Bank at its
----------
principal office from time to time as its prime rate, without any
representation being made that such rate is the lowest, the best or a
favored rate of interest.
"Reportable Event": any of the events set forth in Section
----------------
4043(b) of ERISA or the regulations thereunder.
"Required Cash Uses": for any period, the sum of:
------------------
(i) all current federal, state and local income tax expense for such
period; and
(ii) the aggregate of the payments actually made in respect of
principal and interest on outstanding Indebtedness of the Company
and its Subsidiaries during such period; and
(iii) all cash dividends paid by the Company and its Subsidiaries
during such period which are not reinvested in Company common stock
pursuant to a dividend reinvestment program; and
(iv) all cash paid in accordance with the settlement agreement
entered into in March, 1990, with respect to that certain patent
infringement lawsuit involving the drug Cefadroxil Monohydrate.
"Requirement of Law": as to any Person, the certificate of incorporation
------------------
and by-laws or other organizational or governing documents of such
Person, and any law, treaty, rule or regulation, or any interpretation
thereof, or any determination of an arbitrator or a court or other
Governmental Authority, in each case applicable to or binding upon such
Person or any of its properties or to which such Person or any of its
properties is subject.
"Revolving Credit Note": the Revolving Credit Note,
---------------------
substantially in the form of Exhibit "A," to be executed and
delivered by the Company to the Bank.
8
<PAGE>
"Single Employer Plan": any Plan which is not a Multiemployer
--------------------
Plan.
"Subsidiary":
----------
(i) any corporation more than fifty percent (50%) of whose stock of
any class or classes having by the terms thereof ordinary voting
power to elect a majority of the directors of such corporation
(irrespective of whether or not at the time stock of any class or
classes of such corporation shall have or might have voting power by
reason of the happening of any contingency) is at the time owned by
the Company and/or one or more Subsidiaries of the Company,
(ii) any partnership, association, joint venture, trust or other
entity in which the Company has more than a fifty percent (50%)
equity or beneficial interest at the time, or
(iii) any entity whose net earnings or portions thereof would
properly be included and consolidated with the net earnings of the
Company and are recorded on the books of the Company for financial
reporting purposes; provided, however, that the term "Subsidiary"
-------- -------
shall not include any entity that is not reflected on the balance
sheet of the Company due to inactivity and lack of material assets
and liabilities.
"Tangible Net Worth": at any time, the excess of
------------------
(i) the consolidated net book value of assets of the Company and its
Subsidiaries (other than patents, patent rights, trademarks, trade
names, franchises, copyrights, licenses, permits, goodwill and other
such intangible assets) after all appropriate deductions (including,
without limitation, reserves for doubtful receivables, obsolescence,
depreciation and amortization) over
(ii) the consolidated liabilities of the Company and its
Subsidiaries (including tax and other proper accruals).
"Term Loan": Defined in Section 2.4.
---------
"Term Loan Fee": Defined in Section 2.5.
-------------
"Term Note": any Term Note, substantially in the form of Exhibit "B," to
---------
be executed and delivered by the Company to the Bank.
9
<PAGE>
"Termination Date": Defined in Section 2.1.
----------------
"Treasury Rate": the per annum interest rate as of the date
-------------
of the Term Loan for the most recent auction of direct
obligations of the United States having a term to maturity
approximately equal to the Term Loan.
"Working Capital": Consolidated Current Assets less
--------------- ----
Consolidated Current Liabilities.
1.2. Other Definitional Provisions.
------------------------------
(a) Unless otherwise defined therein, all terms defined in this Agreement
shall have the defined meanings when used in the Notes or any certificate
or other document made or delivered pursuant hereto or thereto.
(b) As used herein and in the Notes, and any certificate or other
document made or delivered pursuant hereto, accounting terms relating to
the Company and its Subsidiaries not defined in Subsection 1.1, and
accounting terms partly defined in Subsection 1.1 to the extent not
defined, shall have the respective meanings given to them under GAAP.
(c) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and section,
subsection, schedule and exhibit references are to this Agreement unless
otherwise specified.
SECTION 2 - LENDING AGREEMENT
2.1. Revolving Credit Advances. The Bank agrees, on the terms and subject
-------------------------
to the conditions hereinafter set forth, to make revolving credit loans (each,
an "Advance") to the Company, from time to time during the period commencing on
-------
the date hereof to but not including September 2, 1995, (the "Termination Date";
----------------
such period, the "Commitment Period"), at such times and in such amounts, up to
-----------------
U.S. Ten Million Dollars ($10,000,000) less the sum of
(i) the principal balance payable to Commerce Bank, N.A. in conjunction
with the State of Missouri "MoBucks" program,
(ii) the aggregate of all outstanding Letters of Credit issued on behalf
of the Company by Bank, and
(iii) twenty percent (20%) times the U.S. Dollar equivalent of the
aggregate outstanding amount of foreign exchange contracts pending
settlement at any time outstanding
10
<PAGE>
(the "Commitment"), as the Company shall request. The Advances shall not exceed,
----------
in aggregate principal amount at any one time outstanding, the Commitment.
During the Commitment Period the Company may borrow, repay and reborrow
hereunder. Each Advance to the Company shall be in the amount of not less than
Five Hundred Thousand Dollars ($5OO,OOO). Advances made by the Bank shall be
evidenced by the Revolving Credit Note. The Advances shall be payable as to
principal on the Termination Date. The initial Advance(s) shall be used to
retire all loans existing under the Prior Agreement. Any prepayments resulting
therefrom shall be without penalty and the maturity(ies) of the initial
Advance(s) shall correspond to the remaining term of the interest periods of any
prepaid advance(s). This provision shall apply only to prepayments made on the
effective date of this Agreement and shall not alter the effect of Section 2.11
with respect to any subsequent prepayments.
2.2. Commitment Fee. The Company agrees to pay the Bank a commitment fee
--------------
(the "Commitment Fee") for the Commitment Period in an amount equal to one
fourth of one percent (1/4%) per annum on the average daily unused amount of the
Bank's Commitment for each calendar quarter. The Commitment Fee shall be payable
in arrears on the last Business Day of each March, June, September and December,
commencing with the first such date to occur after the date of this Agreement,
and on the Termination Date.
2.3. Termination or Reduction of Commitment.
--------------------------------------
(a) Unless sooner terminated under Section 7 or paragraph (b) of this
Subsection 2.3, the Commitment shall terminate and the principal balance
outstanding and accrued interest under the Revolving Credit Note and all
other fees and sums owing thereunder shall be due and payable in full on
the Termination Date.
(b) The Company may request an extension of the Termination Date for one
(1) year by sending a written request to Bank not later than July 15,
1994, and each successive anniversary thereof, nor earlier than June 1,
1994, and each successive anniversary thereof. On or before August 15
next following Bank's receipt of such request, Bank shall advise Company
whether Bank has agreed, in its sole discretion, to extend the
Termination Date. If so agreed by Bank, the Termination Date shall mean
September 1, 1996, or each successive anniversary thereof, and the
Commitment Period shall be extended accordingly. If, after receipt of a
timely request for an extension, Bank fails to advise Company of Bank's
decision on or before August 15th next, the Termination Date shall be
automatically extended for three (3) calendar months. If Bank's failure
to respond continues beyond the 15th day of any third calendar month
thereafter, the Termination Date shall likewise be extended for
additional three (3) month periods
11
<PAGE>
for each such failure.
(c) The Company shall have the right at any time or from time to time to
terminate the unused Commitment or reduce the Commitment in the minimum
amount of Five Hundred Thousand Dollars ($500,000) upon three (3)
Business Days notice to the Bank.
2.4. Term Loan. The Bank agrees, on the terms and subject to the
---------
conditions hereinafter set forth, from time to time either during the Commitment
Period or on the Termination Date, to make not more than three (3) term loans
(each, a "Term Loan"; the Advances and the Term Loan(s), collectively, the
---------
"Loans") to the Company, each in an amount requested by the Company. If any Term
-----
Loan is made during the Commitment Period, the principal amount thereof shall
not exceed the Bank's Commitment, as then in effect, less the principal balance
----
of all Loans to remain outstanding immediately following the making of such Term
Loan. If any Term Loan is made on the Termination Date, then, concurrently with
and as a condition to making such Term Loan, the Company shall pay all
outstanding Advances in full, including accrued interest, and any Commitment Fee
and the principal amount of such Term Loan shall not exceed the Bank's
Commitment as in effect on the last day of the Commitment Period, less the
----
principal balance of all Term Loans to remain outstanding immediately following
the making of such Term Loan. Each Term Loan shall be evidenced by a respective
Term Note. Each Term Note shall be payable as to principal in equal consecutive
monthly installments commencing one month following the date of issuance, based
on a thirty-six (36) month amortization schedule but with a final payment of all
sums then outstanding due and payable on the second day of the fourth month next
following the Termination Date.
2.5. Term Loan Fee. The Company agrees to pay the Bank a Term Loan Fee in
-------------
the amount of $5,000 for each Term Loan made by Bank, payable on the date of
each Term Loan.
2.6. Payments. Except as otherwise specifically provided herein, all
--------
payments due under this Agreement or under the Notes shall be made to the Bank
not later than 12:00 noon (St. Louis, Missouri time) on the date when due and
shall be made in lawful money of the United States of America in immediately
available funds at the Bank's principal office. In addition to the foregoing,
the Bank shall be authorized from time to time to debit any account of the
Company maintained with the Bank in an amount equal to all or any part of any
amount due by the Company to the Bank hereunder or under any Note. Whenever any
payment to be made hereunder or under any Note shall be stated to be due on a
day which is not a Business Day, the due date thereof shall be extended to the
next succeeding Business Day (except as provided in Subsection 2.9) and, with
respect to payments of principal, interest shall be payable at the applicable
rate during such
12
<PAGE>
extension.
2.7. Interest options.
----------------
(a) Subject to the Company's right to convert pursuant to Subsection 2.8,
each Loan shall be made and bear interest from the date of the Loan to,
but not including (provided repayment is made before 12:00 noon, St.
Louis Missouri time) the date of repayment or maturity, whether by
acceleration or otherwise, under one of the following interest options
(an "Option") as a Prime Rate Loan, a CD Rate Loan or a LIBOR Loan, as
------
elected by the Company in its request pursuant to Subsection 2.8.
(b) Notwithstanding and in addition to the provisions of paragraph (a) of
this Subsection 2.6, at the election of the Company, any Term Loan shall
be made and bear interest from the date thereof to, but not including
(provided repayment is made before 12:00 noon, St. Louis, Missouri time)
the date of repayment or maturity, whether by acceleration or otherwise,
as a Treasury Rate Loan.
2.8. Interest Rates.
--------------
(a) Prime Rate Loans. The Company agrees to pay interest in respect of
----------------
the unpaid principal amount of each Prime Rate Loan from the date the
proceeds thereof are made available to the Company until repayment or
maturity (whether by acceleration or otherwise) at a rate per annum equal
to the Prime Rate plus the Margin. Such interest rate shall change with
each change in the Prime Rate. Any change in such interest rate resulting
from a change in the Prime Rate shall become effective as of the opening
of business on the day on which such change in the Prime Rate shall
become effective.
(b) CD Rate Loans. The Company agrees to pay interest in respect of the
-------------
unpaid principal amount of each CD Rate Loan from the date the proceeds
thereof are made available to the Company until repayment or maturity
(whether by acceleration or otherwise) at a rate per annum equal to the
Adjusted CD Rate Plus the Margin.
(c) LIBOR Loans. The Company agrees to pay interest in respect of the
-----------
unpaid principal amount of each LIBOR Loan from the date the proceeds
thereof are made available to the Company until repayment or maturity
(whether by acceleration or otherwise) at a rate per annum equal to the
Adjusted LIBOR Rate plus the Margin.
(d) Treasury Rate Loan. The Company agrees to pay interest in respect of
------------------
any Treasury Rate Loan, if made, from the date the proceeds thereof are
made available to the Company until
13
<PAGE>
repayment or maturity (whether by acceleration or otherwise)
at a rate per annum equal to the Treasury Rate plus the
Margin.
(e) Overdue Payments. Overdue principal, fees and, to the extent
----------------
permitted by law, overdue interest in respect of each Loan shall bear
interest at a rate per annum equal to three percent (3%) above the Prime
Rate in effect from time to time; provided, however, that no Loan shall
-------- -------
bear interest after maturity at a rate per annum less than the rate of
interest applicable thereto at maturity and, provided, further, that for
-------- -------
purposes of this Agreement, the Company's authorization of the Bank to
debit its account or accounts with the Bank having sufficient funds on
deposit shall constitute payment of the amount so authorized,
notwithstanding any failure by the Bank to debit such account(s).
(f) Accrual and Payment of Interest. Interest shall accrue from and
-------------------------------
including the date of any borrowing to but excluding the date of any
repayment thereof (provided repayment is made before 12:00 noon, St.
Louis, Missouri time) and shall be payable in arrears on each Interest
Payment Date, and on any prepayment or conversion (on the amount prepaid
or converted) and at maturity (whether by acceleration or otherwise).
(g) Notice of Rates. The Bank, upon determining the Adjusted CD Rate or
---------------
Adjusted LIBOR for any Interest Period shall promptly notify the Company
thereof by telephone or in writing.
(h) Basis of Calculations. All calculations hereunder shall be computed
---------------------
on the basis of the actual number of days elapsed divided by three
hundred sixty (360).
2.9. Requests for Loans and Conversions.
----------------------------------
(a) Whenever the Company desires to obtain a Prime Rate, CD Rate or LIBOR
borrowing hereunder, the Company shall give the Bank at least two (2)
Business Days' notice in the case of a LIBOR Loan and one (1) Business
Day's notice in the case of a Prime Rate Loan or CD Rate Loan. Such
notice shall specify the aggregate principal amount of the Loan to be
made pursuant to such borrowing, the date of borrowing (which shall be a
Business Day), whether the Loan being made pursuant to such borrowing is
to be initially maintained as a Prime Rate Loan, a CD Rate Loan or a
LIBOR Loan and, if to be maintained as a CD Rate Loan or LIBOR Loan, the
initial Interest Period to be applicable thereto.
(b) Provided that no Event of Default is then in existence, the Company
shall have the option, subject to the provisions of Subsection 2.11 and
this Subsection 2.8 to convert on any
14
<PAGE>
Business Day all, or any part, of the outstanding principal amount of the
Loans made pursuant to any Option into a Loan pursuant to any other
Option; provided that the outstanding principal amount of Loans being
--------
converted into any one (1) Option pursuant to this Subsection 2.8 shall
be at least Five Hundred Thousand Dollars ($500,000). Each such
conversion shall be effected by the Company by giving the Bank at least
two (2) Business Days' notice, specifying the Loans to be so converted,
the Option to be converted into and if to be converted into a CD Rate
Loan or LIBOR Loan, the Interest Period initially to be applicable
thereto. Upon any such conversion the proceeds thereof will be applied
directly on the day of such conversion to repay the outstanding principal
amount of the Loans being converted; provided, however, that such
-------- -------
repayment shall not be considered a prepayment under this Agreement.
(c) Whenever the Company desires to obtain any Term Loan hereunder, the
Company shall give the Bank at least two (2) Business Days' notice. Such
notice shall specify the aggregate amount of such Term Loan to be made
(which shall not exceed the applicable amount determined in accordance
with Subsection 2.4), the date of the Term Loan (which shall be a
Business Day), whether such Term Loan is to be maintained as a Treasury
Rate Loan, a Prime Rate Loan, a CD Rate Loan or a LIBOR Loan and, if to
be maintained as a CD Rate Loan or a LIBOR Loan, the initial Interest
Period to be applicable thereto.
2.10. Interest Periods. At the time it gives any notice of borrowing or
----------------
of conversion in respect of a CD Rate Loan or LIBOR Loan (in the case of the
initial Interest Period applicable thereto) or two (2) Business Days prior to
the expiration of an Interest Period applicable to such CD Rate Loan or LIBOR
Loan (in the case of subsequent Interest Periods), the Company shall have the
right to elect, upon notice to the Bank, the Interest Period applicable to each
borrowing of CD Rate Loans and LIBOR Loans. If any Interest Period would
otherwise expire on a day which is not a Business Day, such Interest Period
shall expire on the next succeeding Business Day with respect to a CD Rate Loan,
and the next preceding Business Day with respect to a LIBOR Loan; provided,
--------
however, that no Interest Period shall extend beyond the Termination Date. If
- - -------
upon the expiration of any Interest Period for any CD Rate Loan or LIBOR Loan,
the Company has failed to elect a new Interest Period to be applicable to such
CD Rate Loan or LIBOR Loan as provided above, the Company shall be deemed to
have elected to convert such CD Rate Loan or LIBOR Loan into a Prime Rate Loan
effective as of the expiration date of such Interest Period.
15
<PAGE>
2.11. Prepayment.
----------
(a) The Company shall have the right at any time and from time to time to
prepay without premium any Prime Rate Loan or Treasury Rate Loan and to
prepay any CD Rate Loan or LIBOR Loan with the consent of the Bank in
full or in part in the minimum amount of Five Hundred Thousand Dollars
($500,000) or multiples thereof; provided, that
--------
(i) the Company shall give the Bank irrevocable telephonic notice of
any prepayment on account of a Prime Rate Loan or Treasury Rate Loan
not later than one (1) Business Day prior to such prepayment,
(ii) the Company shall not make any prepayment on account of a CD
Rate Loan or LIBOR Loan except at the end of an Interest Period
therefor and shall give the Bank irrevocable telephonic notice of
any permitted prepayment on account of a CD Rate Loan or LIBOR Loan
not later than two (2) Business Days prior to such prepayment, and
(iii) if any partial prepayment of a CD Rate Loan or LIBOR Loan
would reduce the aggregate principal amount of all CD Rate Loans or
LIBOR Loans remaining outstanding to less than Five Hundred Thousand
Dollars ($500,000), then upon such prepayment all CD Rate Loans or
LIBOR Loans, as the case may be, remaining outstanding shall be
automatically converted into Prime Rate Loans.
(b) If the Bank should accept any prepayment on account of a CD Rate Loan
or LIBOR Loan not otherwise permitted under this Subsection 2.11 or if
the Company should fail to make any prepayment after having given notice
thereof, the Company shall reimburse the Bank upon demand for any costs,
losses (including loss of profit) or expenses incurred by the Bank (all
as reasonably determined by the Bank) as a result of such prepayment or
failure to make prepayment.
2.12. Illegality; Indemnity; Additional Costs.
----------------------------------------
(a) If at any time due to any new Requirement of Law, or for any other
reason arising subsequent to the date hereof, it shall become unlawful
for the Bank to fund any CD Rate Loan or LIBOR Loan which it is committed
to make hereunder, the obligation of the Bank to provide CD Rate Loans or
LIBOR Loans, as the case may be, shall, upon the happening of such event,
forthwith be suspended for the duration of such illegality. If any such
Requirement of Law or other reason shall make it unlawful for the Bank to
continue any CD Rate Loan, LIBOR Loan previously made by the Bank
hereunder, the Bank shall give the Company notice thereof, stating the
reasons therefor, and the Company shall, on the earlier of
16
<PAGE>
(i) the last day of the then current Interest Period, if applicable,
or
(ii) if required by such Requirement of Law or other reason on such
date as shall be specified in such notice, either convert each such
unlawful CD Rate Loan or LIBOR Loan to Prime Rate Loans or prepay
all such unlawful Loans, without penalty, except as provided in
paragraph (b) of this Subsection 2.12, to the Bank in full.
(b) The Company will indemnify the Bank against any loss or
expense which the Bank may sustain
(i) in employing deposits to effect, fund or maintain a CD Rate Loan
or LIBOR Loan, as a consequence of any failure by the Company to
make any payment when due of any amount due hereunder in connection
with such CD Rate Loan or LIBOR Loan,
(ii) due to any failure of the Company to borrow, continue or
convert a CD Rate Loan or LIBOR Loan on a date specified therefor in
a notice thereof, or
(iii) due to any payment, prepayment or conversion of any CD Rate
Loan or LIBOR Loan on a date other than the last day of the Interest
Period for such CD Rate Loan or LIBOR Loan
(c) If due to either
(i) any Requirement of Law or
(ii) compliance by the Bank with any request from any Governmental
Authority, there shall be any increase in the cost to the Bank of
agreeing to make or making, funding or maintaining any Loan, the
Company shall from time to time, upon demand by the Bank, pay to the
Bank additional amounts sufficient to indemnify the Bank against
such increased costs. The determination of such increased costs by
the Bank shall be conclusive if made reasonably and in good faith.
SECTION 3 - REPRESENTATIONS AND WARRANTIES
To induce the Bank to make the Loans, the Company hereby represents and
warrants to the Bank that:
3.1. Financial Condition. The Company has furnished the Bank with
-------------------
17
<PAGE>
(a) the audited balance sheet as at the end of the most recent fiscal
year of the Company, the related statement of earnings, and statement of
cash flows for the fiscal year then ended, and
(b) the unaudited balance sheet and statement of earnings as of June 30,
1993, which fairly present the financial position and results of
operations of the Company at the times and for the periods covered
thereby, all in accordance with GAAP.
3.2. No Change. Since the date of the unaudited balance sheet referred to
---------
in Subsection 3.1, there has been no material adverse change in the business,
operations, assets or financial or other condition of the Company and, if
applicable, its Subsidiaries.
3.3. Corpoate Existence: Compliance with Law. The Company and, if
---------------------------------------
applicable, each of its Subsidiaries is duly organized and validly existing
under applicable law, is qualified to do business and is in good standing in
each jurisdiction where such qualification is necessary and the failure to be so
qualified would materially adversely affect the business of the Company, and has
complied with all laws the failure to comply with which would materially
adversely affect the business of the Company.
3.4. Corporate Power and Authority. The Company has authority, and has
-----------------------------
completed all proceedings and obtained all approvals and consents necessary to
execute, deliver and perform this Agreement and the Notes and the transactions
contemplated hereby and thereby.
3.5. Enforceable Obligations. This Agreement and the Notes, when executed
-----------------------
by the Company and delivered to the Bank, constitute the legal, valid and
binding obligations of the Company, enforceable in accordance with their
respective terms, except as limited by bankruptcy, insolvency, reorganization or
other similar laws affecting the enforcement of creditors' rights generally and
the effect of rules of law governing specific performance, injunctive relief and
other equitable principles and remedies.
3.6. No Legal Bar. The execution, delivery and performance by the Company
------------
of this Agreement and the Notes, the borrowings by the Company hereunder and the
use of the proceeds thereof will not violate any Requirement of Law applicable
to the Company or any Contractual Obligation of the Company or, if applicable,
any of its Subsidiaries, and will not result in, or require, the creation or
imposition of any Lien on any of its or their properties or revenues pursuant to
any such Requirement of Law or Contractual Obligation.
3.7. No Defaults. Proceedings or Litiqation. Except as disclosed to the
--------------------------------------
Bank in writinq,
18
<PAGE>
(a) neither the Company nor any Subsidiary is in default under any
agreement for borrowed money (subject to any cure right provided therein)
to which it is a party or by which it may be bound;
(b) no investigation or proceeding of or before any arbitrator or
Governmental Authority is pending or, to the knowledge of the Company,
threatened by or against the Company or, if applicable, any of its
Subsidiaries or against any of its or their properties or revenues
(i) with respect to this Agreement, the Notes or any of the
transactions contemplated hereby or thereby, or
(ii) which, if adversely determined would have a material adverse
effect on the business, operations, assets or financial condition of
the Company and, if applicable, its Subsidiaries: and
(c) there is no other action, suit or proceeding pending or threatened
against the Company or, if applicable, any of its Subsidiaries, to the
knowledge of the Company, which, if adversely determined, would
materially adversely affect the Company and, if applicable, its
Subsidiaries or the Company's ability to perform and observe the
obligations binding upon it under this Agreement and the Notes.
3.8. Taxes. All material tax returns required of the Company and, if
-----
applicable, each of its Subsidiaries have been filed, there is no proposed tax
assessment or liability against the Company or, if applicable, any Subsidiary or
its or their properties which would be material to the Company and, if
applicable, its Subsidiaries, and no extension of time for the assessment of any
tax of the Company or if applicable, any Subsidiary is in effect or has been
requested, except as disclosed or disclaimed in writing to the Bank.
3.9. Use of Proceeds. All proceeds of the Loans shall be used by the
---------------
Company for, or advanced by the Company to one or more Subsidiaries for,
additional costs incurred on the Company's plant in Mexico, Missouri, working
capital, and general corporate purposes, and shall not be used for any purpose
which violates Federal Reserve Board Regulations U or X.
3.10. ERISA. Each Plan is in compliance in all material respects with
-----
ERISA, no Plan is insolvent or in reorganization, no Plan has an accumulated or
waived funding deficiency within the meaning of Section 412 of the Code, neither
the Company nor any Subsidiary nor any ERISA Affiliate has incurred any material
liability (including any material contingent liability) to or on account of a
Plan pursuant to Section 4062, 4063, 4064, 4201 or 4204 of ERISA, no proceedinqs
have been instituted to terminate any
19
<PAGE>
Plan, and no condition exists which presents a risk to the Company or a
Subsidiary of incurring a liability to or on account of a Plan pursuant to any
of the foregoing sections of ERISA, which condition would have a material
adverse effect on the Company and its Subsidiaries.
3.11. Investment Company Act. The Company is not an "investment company"
----------------------
within the meaning of the Investment Company Act of 1940, as amended.
3.12. Subsidiaries. The Company, as of the date of this Agreement, has
------------
one Subsidiary, i.e. Pacific American Insurance Company. The Company will notify
the Bank upon the creation of any Subsidiary.
3.13. Access. The Company will permit the Bank or any representative
------
thereof, at reasonable times and intervals, to visit the offices and other
premises of the Company and its Subsidiaries and discuss financial matters with
the Company's management.
SECTION 4 - CONDITIONS PRECEDENT
4.1. Conditions to Initial Loan. The Bank shall have no obligation to
--------------------------
make the initial Loan hereunder unless, on or prior to the date of the initial
Loan, the Bank shall have received (all in form satisfactory to the Bank and its
counsel):
(a) the Revolving Credit Note, duly executed by the Company;
(b) a resolution of the Company's Board of Directors duly authorizing the
execution and delivery of this Agreement and the Notes and the Company's
performance hereunder and thereunder, certified by an appropriate officer
of the Company;
(c) on or before the date of such Loan, a written description of all
defaults, proceedings
and litigation, as contemplated by Subsection 3.7, in form and substance
satisfactory to the Bank; and
4.2. Conditions to All Loans.
-----------------------
(a) In addition, no Loan shall be made by the Bank hereunder unless the
Bank shall have received from the Company prior thereto a written request
for such Loan, in accordance with Subsection 2.8, duly executed by the
Company and dated the date of such Loan and unless the following
conditions have been satisfied with the request constituting a
representation and warranty by the Company that the following conditions
are then satisfied:
20
<PAGE>
(i) no Event of Default has occurred and is then continuing;
(ii) there has been no material adverse change in the financial
condition of the Company and its Subsidiaries, if any, since the
date of this Agreement; and
(iii) the representations and warranties contained in Section 3 are
true and correct as of the date of such request, except as
previously disclosed to the Bank in writing (and which have been
accepted by the Bank in its reasonable judgment acting in good
faith), and except that the representations and warranties contained
in Subsection 3.1 shall be deemed to refer to the latest balance
sheet, statement of earnings, and statement of cash flows, all on a
consolidated basis, if applicable, furnished by the Company to the
Bank.
(b) In addition to all other requirements of this Section 4, the Bank
shall have no obligation to make any Term Loan unless, on or prior to the
date of such Term Loan, the Bank shall have received (in form
satisfactory to the Bank) a respective Term Note, duly executed by the
Company.
SECTION 5 - AFFIRMATIVE COVENANTS
So long as any part of the indebtedness contemplated hereby shall remain
unpaid, the Company hereby covenants and agrees that:
5.1. Financial Statements.
--------------------
(a) The Company will furnish to the Bank, as soon as available and in any
event within one hundred (100) days after the end of each fiscal year of
the Company, a copy of each annual (consolidated) balance sheet of the
Company and its Subsidiaries, if any, and related statements of earnings,
and statement of cash flows for such fiscal year, all as certified by
independent certified public accountants of recognized standing
reasonably acceptable to the Bank;
(b) The Company will furnish to the Bank, as soon as available and in any
event within sixty (60) days after the end of each of the first three (3)
quarterly periods of each fiscal year of the Company, a copy of the
unaudited (consolidated) balance sheet of the Company and its
Subsidiaries, if any, as at the end of each such quarter and the related
unaudited (consolidated) statements of earnings and of cash flows for
such quarterly period and the portion of the fiscal year through such
date, setting forth in each case in comparative form the figures for the
previous year, certified by a senior financial officer of the Company
21
<PAGE>
(subject to normal year-end audit adjustments).
(c) All such financial statements shall fairly present the financial
position and results of operations of the Company and its Subsidiaries,
if any, in accordance with GAAP.
5.2. Certificates. The Company will furnish to the Bank, within sixty
------------
(60) days after the end of each of the first three (3) quarters of each fiscal
year of the Company and within one hundred (100) days after the end of each
fiscal year of the Company, a certificate of the Company executed by a senior
financial officer of the Company, stating that
(a) there does not exist any Event of Default under this Agreement,
(b) the Company is not in default of any Note,
(c) in respect of the applicable reporting period, the Company is in
compliance with each of the covenants set forth in Subsections 6.3
through 6.8 (setting forth in reasonable detail the calculations
demonstrating such compliance), and
(d) the Company is not aware of any event or condition which with notice
or passage of time or both would constitute an Event of Default under
this Agreement, and, where appropriate, containing the necessary
statistical data and calculations to support such statements.
5.3. Other Reports.
-------------
(a) The Company will furnish to the Bank a copy of each registration
statement and periodic and current report of the Company filed with or
furnished to the Securities and Exchange Commission within five (5)
Business Days after such statement or report has been so filed or
furnished.
(b) The Company will furnish to the Bank, promptly after becoming
available, a copy of all financial statements, reports, proxy statements,
notices and other communications which the Company shall have sent to the
holders of its shares or other securities generally.
(c) The Company will promptly, from time to time, furnish to the Bank
such information regarding the business, operations and financial
condition of the Company and its Subsidiaries, if any, as the Bank may
reasonably request.
5.4. Payment of Obligations. The Company will pay, discharge or otherwise
----------------------
satisfy at or before maturity or before they become delinquent, as the case may
be, all its Indebtedness and other obligations of whatever nature, except any
such indebtedness or
22
<PAGE>
obligation that is then being diligently contested by the Company in good faith.
5.5. Maintenance of Existence.
------------------------
(a) The Company will preserve and maintain its corporate existence,
franchises and privileges in its jurisdiction of incorporation, and
qualify and remain qualified as a foreign corporation in New Jersey,
Missouri, and each other jurisdiction where such qualification is
necessary and the failure to be so qualified would materially adversely
affect the business of the Company and its Subsidiaries, if any.
(b) The Company will preserve and maintain its corporate status as the
parent and owner of at least fifty percent (50%) of the capital stock and
beneficial interest of each of its Subsidiaries, if any, except as
otherwise permitted in Subsection 6.2.
5.6. Insurance. Except for such coverage plans as are disclosed to the
---------
Bank in writing, and provided that there is no material negative change in
coverages following implementation of such plans, the Company will maintain
insurance with insurance companies or associations the Company believes in good
faith to be responsible and reputable in such amounts and covering such risks as
is reasonably comparable to that carried by companies engaged in similar
businesses and owning similar properties in the same general areas in which the
Company and its Subsidiaries, if any, operate.
5.7. Books and Records. The Company will maintain books of record and
-----------------
account as shall enable it to prepare financial statements in accordance with
GAAP.
5.8. Notices.
-------
(a) The Company will promptly notify the Bank in writing of the
occurrence of any event which is likely to materially adversely affect
the Company or any of its Subsidiaries, if any, or which constitutes an
Event of Default hereunder.
(b) The Company will, promptly after obtaining knowledge thereof, notify
the Bank in writing of
(i) any action, suit or proceeding at law or in equity or by or
before any Governmental Authority involving a claim not covered by
insurance involving the Company or any of its Subsidiaries which
(A) has remained unsettled for a period of one hundred eighty
(180) days from the commencement thereof and involves claims
for damages or relief
23
<PAGE>
in an amount greater than One Million Dollars ($1,000,000), or
(B) has resulted in a final judgment or judgments for the
payment of money in an amount greater than One Million Dollars
($l,000,000), or
(C) has resulted in a Lien on assets or holdings of the Company
or any of its Subsidiaries for an amount exceeding One Million
Dollars ($1,000,000), or
(ii) any material labor dispute resulting in or threatening to
result in a strike against the Company or any Subsidiary and which
might have a material adverse effect on the operations or financial
condition of the Company and its Subsidiaries.
5.9. ERISA. As soon as possible and, in any event, within ten (10) days
-----
after the Company or any Subsidiary knows or has reason to know that
(a) a Reportable Event has occurred,
(b) an accumulated funding deficiency has been incurred or an application
may be or has been made to the Secretary of the Treasury for a waiver of
the minimum funding standard under Section 412 of the Code with respect
to a Plan,
(c) a Plan has been or may be terminated, that proceedings may be or have
been instituted to terminate a Plan, or
(d) the Company, a Subsidiary or an ERISA Affiliate will or may incur any
liability to or on account of a Plan under Section 4062, 4063, 4064, 4201
or 4202 of ERISA if such Reportable Event, deficiency, termination or
liability would have a material adverse effect on the Company and its
Subsidiaries, the Company will deliver to the Bank a certificate of a
senior financial officer of the Company setting forth details as to such
occurrence and action, if any, which the Company or the Subsidiary is
required or proposes to take, together with any notices required or
proposed to be filed with or by the Company, the Subsidiary, the ERISA
Affiliate, the PBGC or the Plan administrator with respect thereto.
Copies of any notices required to be delivered to the Bank hereunder
shall be delivered no later than ten (10) days after the later of the
date such notice has been filed with the Internal Revenue Service or the
PBGC or received by the Company or the Subsidiary.
24
<PAGE>
SECTION 6 - NEGATIVE COVENANTS
So long as any part of the indebtedness contemplated hereby shall remain
unpaid, the Company hereby covenants and agrees that:
6.1. Liens. Except for Liens referred to in the audited financial
-----
statements, including the financial statement notes thereto, as at, and for the
fiscal year ended March 31, 1993, the Company will not hereafter create, incur
or permit to exist against any of its or any Subsidiary's properties or assets,
real or personal, now or hereafter acquired, any Lien, except
(a) purchase money Liens arising in the ordinary course of business,
(b) other similar Liens arising in the ordinary course of business
securing obligations which are not overdue or are being contested in good
faith by appropriate legal proceedings diligently conducted, provided the
amount of such obligations shall not exceed in the aggregate, during any
fiscal year of the Company, the sum of Two Hundred Thousand Dollars
($200,000) and
(c) the refinancing, extension or other modification of any Indebtedness
secured by any Lien referred to in such financial statements
6.2. Fundamental Changes. The Company will not, without the consent of
-------------------
the Bank, such consent not to be arbitrarily withheld,
(a) merge or consolidate into or with any other person,
(b) sell, lease or otherwise transfer all or substantially all of its
assets to any other person or
(c) permit any of its Subsidiaries, if any, to merge or consolidate into
or with, or to transfer all or substantially all of its assets to, any
person other than a wholly-owned Subsidiary of the Company; provided,
--------
that this Subsection 6.2 shall not prohibit any merger or consolidation
(A) with a party whose principal business is developing,
manufacturing, marketing or distributing pharmaceutical products or
devices or otherwise reasonably related to or in support of any
thereof; and
(B) after which, if the Company is a party to such merger or
consolidation, the Company is the surviving entity; and
(C) if the completion of such merger or consolidation would not
violate at the time the requirements of
25
<PAGE>
Subsections 6.3 through 6.8 and no Events of Default would occur as
a result of giving effect thereto; provided, further, Company shall
give Bank prior written notice of its intent to merge or consolidate
with another party under the provisions hereof.
6.3. Leverage Ratio. The Company will not permit the ratio of
--------------
Consolidated Total Liabilities to Tangible Net Worth to be more than 1.15:1
determined as at the end of each fiscal quarter.
6.4. Cash Flow Ratio. The Company will not permit its Cash Flow Ratio for
---------------
any fiscal year to be less than 1.4:1.
6.5. Current Ratio. The Company will not permit the ratio of Consolidated
-------------
Current Assets to Consolidated Current Liabilities to be less than 2.0:1
determined as at the end of each fiscal year.
6.6. Tangible Net Worth. The Company will not permit its Tangible Net
------------------
Worth to be less than Eighty-eight Million Dollars ($88,000,000) determined as
at the end of each fiscal quarter.
6.7. Net Quick Assets. The Company will not permit the level of
----------------
Consolidated Quick Assets less Current Maturities of all indebtedness for
borrowed money to be less than Seventeen Million Dollars ($17,000,000) as at the
end of each fiscal year.
6.8. Working Capital. The Company will not permit its Working Capital to
---------------
be less than Forty Million Dollars ($40,000,000) determined as at the end of
each fiscal quarter.
SECTION 7 - DEFAULT
7.1. Events of Default. Each of the following events shall constitute an
-----------------
"Event of Default" under this Agreement:
(a) failure by the Company to pay in full when due any amount of
principal on the Notes; or
(b) failure by the Company to pay in full any amount of interest on any
Note or any fee contemplated hereunder or thereunder within five (5)
Business Days after written notice of nonreceipt of such amount to the
Company by the Bank: or
(c) failure by the Company to perform or observe any of its other
obligations hereunder or under the Notes and such failure continues for
fifteen (15) Business Days after written notice thereof to the Company by
the Bank; or
(d) any representation or warranty made herein shall be false or
misleading in any material respect; or
26
<PAGE>
(e) the Company or any Subsidiary shall default in the payment when due
(subject to any applicable grace period), whether by acceleration or
otherwise, of any other material Indebtedness for borrowed money of, or
guaranteed by, the Company or such Subsidiary, as the case may be, or the
Company or any Subsidiary shall default in the performance or observance
of any obligation or condition with respect to any such other material
Indebtedness if the effect of such default (after giving effect to any
applicable grace period) is to accelerate the maturity of any such
material Indebtedness or to permit the holder or holders thereof, or any
trustee or agent for such holders, to cause such material Indebtedness to
become due and payable prior to its expressed maturity or any such
material Indebtedness shall become due prior to its maturity. For
purposes of this Subsection 7.1(e) only, the term "material Indebtedness"
shall mean any Indebtedness which, taken alone or in the aggregate, shall
exceed Two Hundred Thousand Dollars ($200,000); or
(f) any admission by the Company or any Subsidiary of its inability to
pay its debts as they mature, the commencement of any bankruptcy,
insolvency, arrangement, reorganization or other debt-relief proceedings
by, or the dissolution, termination of existence or insolvency (however
evidenced) of, the Company or any Subsidiary or any action authorized,
taken or suffered by the Company or any Subsidiary with a view toward any
of the same; or
(g) failure by the Company or any Subsidiary within thirty (30) days
after the institution of any proceedings against the Company or such
Subsidiary under any law relating to bankruptcy, insolvency, arrangement,
reorganizatiOn or relief of debtors or similar law to have such
proceeding dismissed; or
(h) a Plan shall fail to maintain the minimum funding standard required
by Section 412 of the Code for any plan year or a waiver of such standard
is sought or granted under Section 412(d), or a Plan is, shall have been
or is likely to be terminated or the subject of termination proceedings
under ERISA, or the Company or a Subsidiary or an ERISA Affiliate has
incurred or is likely to incur a liability to or on account of a Plan
under Section 4062, 4063, 4064, 4201 or 4204 of ERISA, and there shall
result from any such event or events either a liability or a material
risk of incurring a liability to the PBGC or a Plan, which will have a
material adverse effect upon the business, operations or the financial
condition of the Company and its Subsidiaries, if any.
7.2. Remedies. Upon the occurrence of an Event of Default, the Bank may,
--------
but shall not be obligated to, exercise the following remedies, in its sole
discretion and without demand or notice of
27
<PAGE>
any kind, which are hereby expressly waived:
(a) terminate the Commitment and refuse to make further Loans hereunder;
(b) declare the unpaid balance of any outstanding Note and accrued
interest thereon, immediately due and payable and proceed to collect
same;
(c) exercise all or any of its rights, powers and remedies given it by
this Agreement or the Notes; and
(d) exercise all or any of its rights and remedies as it may otherwise
have under law.
The Bank may apply all moneys recovered through the exercise of its respective
remedies to the payment of the repayment and other payment obligations of the
Company under this Agreement in such order of priority as determined by the Bank
in its sole judgment.
SECTION 8 - MISCELLANEOUS
8.1. Amendment and Waiver. Neither this Agreement nor any provisions
--------------------
hereof may be changed, waived, discharged or terminated orally, but only by an
instrument in writing signed by an authorized officer of the Company and the
Bank, respectively.
8.2. Notices. All notices, demands or other communications hereunder
-------
shall be given or made in writing and shall be delivered personally, or sent by
telex, telecopier or certified mail, postage prepaid, return receipt requested,
to the party or parties to whom they are directed at the following addresses, or
at such other addresses as may be designated by notice from such party to all
other parties; provided, however, any request by Company or response by Bank
referred to in Section 2.3(b) shall be sent both by certified mail return
receipt requested and telecopier.
To the Company
Biocraft Laboratories, Inc.
18-01 River Road
Fair Lawn, New Jersey 07410
Attention: Mr. Brian S. Snyder
Telecopy: (201) 797-0015
with copy to Beryl Snyder at the same address
28
<PAGE>
To the Bank:
------------
Commerce Bank of St. Louis, N.A.
8000 Forsyth
St. Louis, Missouri 63105
Attention: Mr. Joseph T. Henderson
Telecopy: (314) 746-3650
with copy to: Legal Department
Telecopy: (314) 746-8710
Any notice, demand or other communication given in a manner prescribed in this
paragraph shall be deemed to have been delivered on receipt.
8.3. No Waiver; Cumulative Remedies. Any forbearance, failure, or delay
------------------------------
by Bank in exercising any right, power or remedy shall not preclude the further
exercise thereof, and all of Bank's rights, powers and remedies shall continue
in full force and effect until specifically waived in writing by the Bank. The
rights, remedies, powers and privileges herein or therein are cumulative and not
exclusive of any rights, remedies, powers and privileges provided by law. The
Company shall pay all reasonable and necessary expenses (including attorney's
fees and disbursements) incurred in connection with the collection or
enforcement of this Agreement and the Notes.
8.4. Survival. The representations and warranties of the Company
--------
contained herein shall survive the making of Loans and shall remain effective
until all indebtedness contemplated hereby shall have been paid by the Company
in full.
8.5. Payment of Expenses and Taxes. The Company shall:
-----------------------------
(i) pay all reasonable out-of-pocket costs and expenses in connection
with the enforcement of this Agreement, the Notes, the documents and
instruments referred to herein and any amendment, waiver or consent
relating hereto or thereto (including, without limitation, the fees and
disbursements of outside legal counsel for the Bank, if any) and
(ii) pay and hold the Bank harmless from and against any and all current
and future stamp and other similar taxes with respect to the foregoing
matters and to save the Bank harmless from and against any and all
liabilities with respect to or resulting from any delay or omission
(other than to the extent attributable to the Bank) to pay such taxes.
8.6. Indemnity. The Company shall indemnify the Bank, upon demand, from
---------
and against all liabilities, obligations, claims, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements whatsoever which may
be imposed on,
29
<PAGE>
incurred by or asserted against the Bank (whether or not caused by the Bank's
negligence) growing out of or resulting from this Agreement and the Notes and
any other document or instrument delivered hereunder or thereunder and all
transactions and events at any time associated therewith (including the
enforcement of any right of the Bank or the defense of any action or inaction by
the Bank in connection therewith), except to the limited extent such
liabilities, obligations, claims, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements are proximately caused by the
Bank's gross negligence or willful misconduct. If any person (including, without
limitation, the Company or any of its Subsidiaries) ever alleges such gross
negligence of willful misconduct, the indemnification provided for in this
Subsection 8.6 shall nonetheless be paid upon demand, subject to later
adjustment or reimbursement, until such time as a court of competent
jurisdiction enters a final judgment as to the extent and effect of the alleged
gross negligence or willful misconduct.
8.7. Right of Setoff. In addition to any rights now or hereafter granted
---------------
under applicable law or otherwise and not by way of limitation of any such
rights, upon the occurrence of an Event of Default, the Bank is hereby
authorized at any time or from time to time, without presentment, demand,
protest or other notice of any kind to the Company or to any other person, any
such notice being hereby expressly waived, to setoff and to appropriate and
apply any and all deposits (general or special) and any other indebtedness at
any time held or owing by the Bank to or for the credit or the account of the
Company against and on account of the obligations and liabilities of the Company
to the Bank under this Agreement and the Notes, including (without limitation)
all claims of any nature or description arising out of or connected with this
Agreement and the Notes, irrespective of whether or not the Bank shall have made
any demand hereunder and although such obligations, liabilities or claims, or
any of them, shall be contingent or unmatured.
8.8. Successors and Assigns. This Agreement shall be binding upon and
----------------------
inure to the benefit of the Company, the Bank and their respective successors
and assigns; provided, however, that the Company may not transfer any of its
-------- -------
interest under this Agreement without prior written consent of the Bank.
8.9. Counterparts. This Agreement may be executed in any number of
------------
counterparts, all of which taken together shall constitute one agreement, and
any party hereto may execute this Agreement by signing any such counterpart.
8.10. Severability. In case any one or more of the provisions contained
------------
in this Agreement should be invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability if the remaining provisions contained
herein shall
30
<PAGE>
not in any way be affected or impaired thereby.
8.11. Governing Law. This Agreement and all rights hereunder shall be
-------------
governed by and construed in accordance with the laws of the State of Missouri.
8.12. Acknowledgements and Admissions. The Company hereby represents,
-------------------------------
warrants, acknowledges and admits that
(a) it has been advised by counsel on the negotiation, execution and
delivery of this Agreement, the Note and any other instrument or document
entered into in connection herewith,
(b) the Company has made an independent decision to enter into this
Agreement and such other instruments and documents, without reliance on
any representation, warranty, covenant or undertaking by the Bank,
whether written, oral or implicit, other than as expressly set forth in
this Agreement,
(c) the Bank has not made any representation, covenant or undertaking to
the Company in connection with the rights and obligations of the Company
pursuant to this Agreement or any such instruments and documents,
(d) there are no representations, warranties, covenants or undertakings
or agreements by the Bank as to this Agreement or such instruments and
documents except as expressly set forth herein or therein,
(e) the Bank has no fiduciary obligations toward the Company with respect
to this Agreement, any such instruments and documents or the transactions
contemplated hereby or thereby,
(f) the relationship between the Bank and the Company, pursuant to this
Agreement and such instruments and documents, is and shall be solely that
of creditor and debtor, respectively,
(g) no joint venture exists between the Bank and the Company,
(h) without limiting any of the foregoing, the Company is not relying
upon any representation by the Bank, or any representative thereof, and
no such representation has been made, that the Bank will at the time of
an Event of Default or at any other time, waive, negotiate, discuss or
refrain from taking any action with respect to any such Event of Default
or any other term of this Agreement or such instruments or documents, and
(i) the Bank has relied upon the truthfulness of the foregoing
acknowledgements and of the statements contained in the
31
<PAGE>
Request for Loan referred to in Subsection 4.2 in deciding to execute and
deliver this Agreement and to accept the Notes.
8.13. Entire Agreement.
----------------
(a) This Agreement, the Exhibits and the Schedules embody the entire
agreement and understanding between the parties hereto and supersedes all
prior agreements and understandings relating to the subject matter
hereof.
(b) Oral agreements or commitments to loan money, extend credit or to
forbear from enforcing repayment of a debt including promises to extend
or renew such debt are not enforceable. To protect you (borrower(s)) and
us (creditor) from misunderstanding or disappointment, any agreements we
reach covering such matters are contained in this writing, which is the
complete and exclusive statement of the agreement between us, except as
we may later agree in writing to modify it.
8.14. Waiver of Jury Trial; Punitive Damages. All parties to this
--------------------------------------
Agreement hereby irrevocably waive
(a) all right to a trial by jury in any action or proceeding
relating to transactions under this Agreement, and
(b) all right to claim or recover in any such action or proceeding any
special, exemplary, punitive or consequential damages, or damages other
than, or in addition to, actual damages.
32
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their duly authorized
officers to execute and deliver this Agreement as of the date first above
written.
COMMERCE BANK OF ST. LOUIS, N.A.
By: /s/ Seth M. Leadbeater
-----------------------------
Title: President
---------------------------
BIOCRAFT LABORATORIES, INC.
By: /s/ Brian S. Snyder
------------------------------
Title: Vice President-Controller
---------------------------
33
<PAGE>
REVOLVING CREDIT NOTE
---------------------
$10,000,000 St. Louis, Missouri
September 30, 1993
FOR VALUE RECEIVED, the undersigned BIOCRAFT LABORATORIES, INC., a
Delaware corporation (the "Company"), hereby unconditionally promises to pay to
the order of COMMERCE BANK OF ST. LOUIS, NATIONAL ASSOCIATION (the "Bank"), at
its principal office, in lawful money of the United States of America and in
immediately available funds on the Termination Date, the principal sum of the
lesser of (a) TEN MILLION DOLLARS ($10,000,000) and (b) the aggregate unpaid
principal amount of all Advances made by the Bank to the Company pursuant to
Subsection 2.1 of the Amended and Restated Revolving Credit and Term Loan
Agreement, dated the 3Oth day of September, 1993, between the Bank and the
Company, as the same may be amended from time to time (the "Credit Agreement").
The Company further agrees to pay interest in like money at such office on the
unpaid principal amount hereof from time to time from the date hereof until such
amount shall become due and payable (whether at the stated maturity, by
acceleration or otherwise) at the interest rates determined in accordance with
the terms of the Credit Agreement. Interest shall be paid on the days provided
therefor in the Credit Agreement and upon the due date and payment (including
prepayment) in full of the unpaid principal amount hereof. The holder of this
Note is authorized to endorse the date and amount of each Advance pursuant to
Subsection 2.1 of the Credit Agreement and each payment of principal with
respect thereto on the schedule annexed hereto and made a part hereof, or on a
continuation thereof, which endorsement shall constitute prima facie evidence of
the accuracy of the information endorsed.
If any installment of this Note shall become due and payable on a day
which is not a Business Day, payment shall be made on the next preceding or
succeeding Business Day as provided in the Credit Agreement and, with respect to
payments of principal, interest shall be payable thereon at the applicable rate
during any extension.
This Note is the Revolving Credit Note referred to in the Credit
Agreement and is entitled to the benefits thereof and is subject to optional
prepayment in whole or in part as provided therein. All capitalized terms not
otherwise defined herein shall have the respective meanings ascribed thereto in
the Credit Agreement.
Upon the occurrence of any one or more of the Events of Default specified
in the Credit Agreement, all amounts then remaining unpaid on this Note shall
become, or may be declared to be, immediately due and payable all as provided
therein.
34
<PAGE>
This Note shall be governed by and construed and enforced in accordance
with the laws of the State of Missouri.
IN WITNESS WHEREOF, the undersigned has duly caused this Revolving Credit
Note to be executed and delivered at the place specified above and as of the
date first written above.
BIOCRAFT LABORATORIES, INC.
By: /s/ Brian S. Snyder
------------------------------
Title: Vice President-Controller
---------------------------
35
<PAGE>
Schedule to Revolving Credit Note ______________________
LOANS AND PAYMENTS OF PRINCIPAL
-------------------------------
<TABLE>
<CAPTION>
Amount Amount Unpaid
of of Principal Notation
Date Loan Principal Paid Balance Made by
- - ---- ------ -------------- --------- --------
<S> <C> <C> <C> <C>
- - --------- ------------ ----------------- ------------ -----------
- - --------- ------------ ----------------- ------------ -----------
- - --------- ------------ ----------------- ------------ -----------
- - --------- ------------ ----------------- ------------ -----------
- - --------- ------------ ----------------- ------------ -----------
- - --------- ------------ ----------------- ------------ -----------
- - --------- ------------ ----------------- ------------ -----------
- - --------- ------------ ----------------- ------------ -----------
- - --------- ------------ ----------------- ------------ -----------
- - --------- ------------ ----------------- ------------ -----------
- - --------- ------------ ----------------- ------------ -----------
- - --------- ------------ ----------------- ------------ -----------
- - --------- ------------ ----------------- ------------ -----------
- - --------- ------------ ----------------- ------------ -----------
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</TABLE>
36
<PAGE>
biocraft LOGO
Selected Financial Highlights
<TABLE>
<CAPTION>
INCOME STATEMENT DATA
(In thousands, except
per share data)
Years ended March 31,
1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Operating revenue.......... $143,356 $126,148 $ 92,268 $ 83,505 $112,772
Total revenue.............. 143,886 126,638 92,774 85,084 114,911
Research and development... 9,923 8,662 8,755 6,056 5,506
Net earnings (loss)........ 6,105* 5,856 (6,740) 3,708 3,166
Net earnings (loss) per
share..................... 0.43* 0.42 (0.48) 0.27 0.23
Cash dividends per share... 0.10 0.10 0.10 0.10 0.10
Weighted average number of
shares outstanding..... 14,160 14,086 14,018 13,983 13,957
</TABLE>
* Includes $30 (less than $.01 per share) cumulative effect of change in method
of accounting for income taxes.
<TABLE>
<CAPTION>
BALANCE SHEET DATA
(In thousands, at year end)
<S> <C> <C> <C> <C> <C>
Working capital............ $ 63,256 $ 60,642 $ 60,032 $ 62,919 $ 70,262
Total assets............... 168,073 170,147 164,252 157,378 155,960
Long-term obligations
less current portion..... 48,582 52,255 56,405 45,109 41,514
Stockholders' equity....... 97,292 91,867 86,320 93,286 90,861
</TABLE>
Corporate Profile
Biocraft Laboratories, Inc. is a major manufacturer of generic drugs with
total revenue in fiscal 1994 of over $143 million. The Company has facilities in
Northern New Jersey and Missouri which produce over 70 dosage form products and
certain bulk form antibiotics. Throughout its 30 years, Biocraft has been
dedicated to providing safe and effective drugs at a reasonable cost to the
consumers.
<PAGE>
30 Years Of Service
To Our Shareholders
[PHOTO APPEARS HERE] In fiscal 1994 Biocraft sales set record
levels, generating substantial earnings.
Net sales climbed to $143 million, an
increase of $30 million over fiscal
1993, while earnings of $6.1 million
($.43 per share) surpassed the fiscal
1993 results of $5.9 million ($.42 per
share). For the fifth consecutive year,
the Company paid a dividend of $.10 per
share.
Product Review
Leading the way in fiscal 1994 was our Amoxicillin chewable tablets,
introduced in fiscal 1993. In June 1993, Biocraft also commenced sales of a 5 mg
version of our gastrointestinal product, Metoclopramide.
Our Mexico, Missouri facility was a bright spot in the year. In March 1994 the
facility received FDA approval to manufacture bulk form Amoxicillin and
Ampicillin, which is currently manufactured solely in our Waldwick, New Jersey
facility. We expect to begin to manufacture bulk form Cephradine by the end of
this year, subject to FDA approval. Because of process improvements, the cost of
manufacturing bulk form Cephalexin began to drop in the fourth quarter. Over the
mid-term (both alone and working with other companies) we expect to accelerate
entry into the manufacture of new bulk form products.
Results of Operations
A net sales increase of $30 million or 26% over fiscal 1993, compensated for
the absence of $11.5 million that was contributed to fiscal 1993 revenue by the
Cefixime production arrangement with American Cyanamid that terminated in late
fiscal 1993.
Moreover, gross profits improved to 23% of net sales in fiscal 1994 from 21%
in the prior year, primarily as a result of higher gross profit margins
associated with Biocraft's Amoxicillin chewable tablets, as
1
<PAGE>
biocraft LOGO
[PHOTO APPEARS HERE] Quality At The Forefront...The Company's four
Analytical Laboratories are equipped with state
of the art instrumentation such as High
Performance Liquid Chromotography (HPLC) and
computer technology to test the raw materials
and components used in the manufacturing of
Biocraft's bulk and finished products.
well as cost savings achieved in bulk manufacturing at Biocraft's Mexico,
Missouri plant.
Quality Products
At this writing, the Company is working to resolve regulatory issues with the
FDA. Regardless of how this matter is resolved, I want to underscore for
shareholders, customers and employees that throughout our thirty years in the
generic drug business we have lived by our commitment to the manufacture of safe
and effective products at reasonable prices. This has not been just a slogan at
Biocraft. We take very seriously our responsibilities and are proud of the fact
that Biocraft has made safe and effective medication available to many consumers
where the cost of an alternative product might have been prohibitive.
Industry Outlook
As you know, the past year saw significant strategic transactions by some of
the drug industry's largest players. Manufacturers acquired distributors,
brand-name companies acquired or made significant investments in generic
companies, as the industry generally consolidated. Reportedly, these moves were
fueled, at least in part, by concern over the future of an industry that has
become the focal point of public scrutiny and government proposals intended,
among other things, to contain the spiralling costs of healthcare in this
country.
Those transactions involving generic drug companies reflected several
important acknowledgments. First, the consumer demand for safe and effective
drugs at low
2
<PAGE>
30 Years Of Service
[PHOTO APPEARS HERE] The Microbiology Laboratory at Biocraft's
Waldwick, NJ plant performs tests to
determine the microbiological purity of the
water and ingredients used in the
production of the Company's bulk and
finished dosage products.
cost is continuing to gain increased support from third party payers, individual
states, municipalities and the federal government, as well as elected officials.
Second, the knowledge and skill required to manufacture generic drugs profitably
is indeed specialized and not easily duplicated. Third, the channels of
distribution will become increasingly important as drug companies strive to
offer broad product lines. Antibiotics will be essential to complete any full
line, affording Biocraft, a leading independent generic manufacturer of
antibiotics, additional opportunity for growth.
Against the background of industry developments, these factors clearly signify
an important role for Biocraft and a broad range of opportunities in the times
ahead.
/s/ Harold Snyder
Harold Snyder
Chairman, Chief Executive Officer
and President
3
<PAGE>
biocraft LOGO
Management's Discussion And Analysis Of Financial Condition And Results Of
Operations
The following table sets forth the Company's unaudited quarterly operating
results for the fiscal years ended March 31, 1993 and 1994.
<TABLE>
<CAPTION>
(In thousands, except per share data)
Three Months Ended
-----------------------------------------------------------------------------
June 30, Sept.30, Dec.31, Mar.31, June 30, Sept.30, Dec.31, Mar.31,
1992 1992 1992 1993 1993 1993 1993 1994
-------- -------- ------- ------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $22,201 $23,288 $28,816 $38,871 $35,823 $36,235 $36,605 $34,486
Gross profit 3,093 2,742 5,315 12,855 8,082 9,091 8,656 7,680
Net earnings 673 115 1,291 3,777 1,943* 2,017 1,438 707
Earnings 0.05 0.01 0.09 0.27 0.14* 0.14 0.10 0.05
per share
</TABLE>
*Includes $30 (less than $.01 per share) cumulative effect of change in method
of accounting for income taxes. Net earnings for the quarter before the
cumulative effect of this accounting change were $1,913 ($.14 per share).
The following table sets forth as a percentage of net sales certain items
appearing in the Company's consolidated statements of operations as well as the
percentage change in the dollar amount of these items as compared to the prior
period.
<TABLE>
<CAPTION>
Period to Period
Increase (Decrease)
-------------------
Percentage of Sales 1993 1994
Years Ended March 31, vs. vs.
1992 1993 1994 1992 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 34.3% 26.5%
Other operating income 9.5 11.5 0.1 62.0 (98.4)
Interest, dividend and other
income 0.6 0.4 0.4 (3.2) 8.2
----- ----- -----
Total revenue 110.1 111.9 100.5 36.5 13.6
----- ----- -----
Cost of sales 88.8 78.8 76.6 19.2 23.0
Research and development 10.4 7.7 6.9 (1.1) 14.6
Selling, general and
administrative 19.9 13.0 7.9 (12.0) (22.7)
Interest expense 4.3 4.4 3.2 36.3 (9.0)
----- ----- -----
Total costs and expenses 123.4 103.9 94.6 13.1 15.3
----- ----- -----
Earnings (loss) before income
taxes (benefit) and cumulative
effect of accounting change (13.3) 8.0 5.9 N/A (7.6)
Income taxes (benefit) (5.3) 2.8 1.6 N/A (28.0)
----- ----- -----
Net earnings (loss) before
cumulative effect of
accounting change (8.0) 5.2 4.3 N/A 3.7
Cumulative effect of
change in method of
accounting for income
taxes -- -- 0.0 N/A N/A
----- ----- -----
Net earnings (loss) (8.0) 5.2 4.3 N/A 4.3
===== ===== =====
</TABLE>
[CHART APPEARS HERE]
Net Sales
Net sales rose to a record level for the Company in fiscal 1994, increasing by
$30 million (26%) and $28.9 million (34%)in the fiscal year ended March 31, 1994
and 1993, respectively, from the corresponding prior periods. The increase in
fiscal 1994 resulted primarily from increased sales volume of Amoxicillin and
Cephalexin products including Amoxicillin chewable tablets introduced by the
Company in fiscal 1993. The increase in fiscal 1993 was primarily attributable
to the introduction by the Company of six new products, especially Ketoprofen
capsules and Amoxicillin chewable tablets. The increases would not have been
achieved without the introduction of new products. Continued increases of this
magnitude are unlikely without further product approvals from the Food and Drug
Administration (FDA) and new drug approvals may be delayed pending resolution of
inspection issues under discussion with the FDA (see Note 11 of notes to
consolidated financial statements).
Gross Profit
Gross profit margins were 23.4% in fiscal 1994, 21.2% in fiscal 1993 and 11.2%
in fiscal 1992. The large increase in fiscal 1993, as well as the smaller
increase in fiscal 1994, resulted primarily from higher gross profit margins
associated with the Company's newly introduced products. Although the Company
initially obtains higher sales prices for new products, intensified competition
typically forces the Company to lower its sales price and reduce its profit
margin.
Research and Development Expenses
Research and development expenditures increased by approximately $1.3 million
in fiscal 1994 after decreasing by approximately $100,000 in fiscal 1993
compared to the corresponding prior periods. The increase in fiscal 1994
resulted primarily from increased activity and costs in connection with the
development and approval process for new generic drugs.
Selling, General and Administrative Expenses
Selling, general and administrative expenses decreased by approximately $3.3
million in fiscal 1994 and $2 million in fiscal 1993 compared to the
corresponding prior periods. The decreases were primarily due to decreased
costs in connection with the manufacture of Cefixime (see Other Operating
Income). Litigation settlements of approximately $400,000 and $800,000 in
fiscal 1994 and 1992, respectively, are included in this item.
4
<PAGE>
30 Years Of Service
Other Operating Income
Other operating income decreased by approximately $12.8 million in fiscal 1994
after increasing by $5 million in fiscal 1993, compared to the corresponding
prior periods. The changes in both years were due primarily to changes in the
amount of revenues and other reimbursements from American Cyanamid Company
(Cyanamid) under an agreement which provided for the Company's exclusive
manufacturing of Cefixime for Cyanamid at the Company's Fairfield facility. The
agreement expired on January 31, 1993. Other operating income in fiscal 1993
included a $1.3 million litigation settlement with Merck & Co. (see Note 9 of
notes to consolidated financial statements).
Non-Operating Income and Interest Expense
Interest, dividend and other non-operating income was approximately the same
in fiscal 1994, 1993 and 1992.
Interest expense decreased by approximately $500,000 in fiscal 1994 after
increasing by $1.3 million in fiscal 1993 compared to the corresponding prior
periods. Most of the Company's interest expense is attributable to the
Company's $30 million bond issued in connection with the Company's facility in
Mexico, Missouri. The increase in fiscal 1993 over 1992 resulted primarily from
the absence of capitalized interest with respect to the bond as a result of the
substantial completion of the Company's facility in Mexico, Missouri. The
decrease in fiscal 1994 was due to reduced rates, during most of the fiscal
year, on the Company's credit facilities, as well as reduced long-term debt. The
Company anticipates a further reduction in its interest expense in the second
half of fiscal 1995 as a result of the refinancing or remarketing of its $30
million bond, scheduled for September 1994.
Provision for Income Taxes
The Company's effective tax rate/benefit fell to 28% in fiscal 1994, after
falling to 36% in fiscal 1993 from 40% in fiscal 1992. The lower tax rate in
fiscal 1994 resulted primarily from increased research and development credits
as a result of the retroactive reinstatement by Congress of this tax credit. In
addition, adjustments relating to the recent conclusion of tax examinations for
the fiscal years ended in 1987 through 1990 contributed to the lower rate. These
items more than offset the increase in deferred tax liability as a result of the
increase in the statutory tax rate to 35%. In fiscal 1992, the Company incurred
a loss for income tax as well as financial accounting purposes and the Company's
tax exempt income therefore increased rather than decreased its income tax
rate/benefit. In April 1993, the Company adopted FASB Statement No. 109,
"Accounting for Income Taxes." The cumulative effect of the change in accounting
method increased net earnings by $30,000 or less than $.01 per share for the
1994 fiscal year.
[CHART APPEARS HERE]
Net Earnings (Loss)
For the various reasons noted above, the ratios of net earnings to net sales and
net earnings to operating revenue, decreased from 5.2% and 4.6%, respectively,
in fiscal 1993 to 4.3% (for both ratios) in fiscal 1994. In fiscal 1992 the
Company had a net loss.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by earnings before interest, depreciation and taxes was
approximately $20 million in fiscal 1994. Funds were primarily used to finance
increased inventories ($8 million), capital expenditures ($6 million), income
tax payments ($4 million), interest payments ($4 million) and net long-term debt
repayment ($4 million). The Company was a net user of cash from operations
primarily because of the large increase in inventories. Although inventory
levels increased, inventory turnover improved to 2.4 in fiscal 1994 from 2.0 in
fiscal 1993. The increase in inventories was also due in large part to an
increase in products for which the Company is awaiting FDA approval and such
approval may be delayed pending resolution of inspection issues under discussion
with the FDA (see Note 11 of notes to consolidated financial statements). In
addition, the Company paid a $1.4 million dividend and reduced its accounts
payable by $3 million. As a result, cash and cash equivalents decreased by
approximately $11 million during fiscal 1994. The Company maintained $63 million
of working capital and a current ratio of 4.7:1 as of March 31, 1994, compared
to $61 million of working capital and a current ratio of 3.8:1 as of March 31,
1993.
The Company had total long-term obligations at March 31, 1994 of $54 million
compared to $57 million at March 31, 1993, and its long-term obligations as a
percentage of total capitalization decreased to 36% at March 31, 1994 compared
to 38% at March 31, 1993.
Most of the Company's long-term obligations is its 9.125% $30 million bond
issued in September 1989 in connection with the construction of its facility in
Mexico, Missouri. The bonds, due September 1, 2004, were issued by the Missouri
Economic Development, Export and Infrastructure Board and secured by a Letter of
Credit issued by the Bank of Tokyo, Ltd., New York Agency. The Letter of Credit
agreement provides for a mortgage on the Mexico, Missouri facility. Principal
amortization installments are in varying amounts, with an initial payment of
$2.2 million in fiscal 1995. The Company plans to remarket or refinance the
bonds in September 1994 and anticipates reducing its interest expense in the
second half of fiscal 1995 as a result thereof.
-5-
<PAGE>
biocraft LOGO
Management's Discussion And Analysis Of Financial Condition And Results Of
Operations (Continued)
In addition to the bonds, the Company has a $10 million revolving credit line
($7 million outstanding as of March 31, 1994) with National Westminster Bank NJ
(NatWest), as well as a $3 million unsecured term loan and a $2.7 million
mortgage. The Company also has a $10 million revolving credit line with Commerce
Bank of St. Louis, N.A. (Commerce Bank) of which $3.25 million was outstanding
as of March 31, 1994. Both credit lines are automatically extended for
successive one-year periods unless the bank otherwise notifies the Company at
least two months before the maturity date. In the event a bank elects not to
renew, the Company may convert the revolving credit line into a term loan.
The credit facilities with NatWest and Commerce Bank, as well as the Letter of
Credit Agreement with Bank of Tokyo require, among other matters, that the
Company meet certain financial covenants. The Company is in compliance with all
required financial covenants.
The Company's other outstanding long-term obligations include (i) $459,000 in
connection with 15-year New Jersey Economic Development Authority Revenue bonds
issued in December 1983, used to finance the Company's Paterson, New Jersey
plant and which is secured by a mortgage on that plant and the Company's Elmwood
Park plant; (ii) a $250,000 term loan agreement with the Missouri Department of
Economic Development (MODED) and the City of Mexico, payable in 40 equal
quarterly installments of $10,000 beginning September 1, 1990; and (iii) $9
million ($7.4 million present value) due pursuant to a 1990 litigation
settlement agreement. (See Note 5 of notes to consolidated financial
statements).
The Company currently has no other significant long-term commitments and
anticipates that it can satisfy its operating requirements and capital
expenditure needs from its existing credit facilities as well as from internally
generated funds.
Other
In May 1993 the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards No. 115, "Accounting for Certain Investments
in Debt and Equity Securities," effective for fiscal years beginning after
December 15, 1993. Under the new rules, debt securities that the Company has
both the positive intent and ability to hold to maturity are carried at
amortized cost. Debt securities that the Company does not have the positive
intent and ability to hold to maturity and all marketable equity securities are
classified as available-for-sale or trading and carried at fair value.
Unrealized holding gains and losses on securities classified as available-for-
sale are carried as a separate component of stockholders' equity. Unrealized
holding gains and losses on securities classified as trading are reported in
earnings.
Presently, the Company classifies debt securities as held-for-investment and
carries them at amortized cost. Other securities are reported at the lower of
cost or market (LOCOM) and net unrealized losses are reported in earnings. The
Company will apply the new rules starting in the first quarter of fiscal 1995.
Application of the new rules will result in an immaterial increase in
stockholders' equity as of April 1,1994, representing the recognition in
stockholders' equity of unrealized appreciation, net of taxes, on the Company's
investment in debt and equity securities determined to be available-for-sale,
previously carried at amortized cost or at LOCOM.
In November 1992, the FASB issued Statement No. 112, requiring accrual
accounting for certain post employment benefits, such as disabilitiy benefits.
The Company does not provide such post employment benefits.
MARKET FOR THE COMPANY'S COMMON STOCK,
DIVIDENDS AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is traded on the New York Stock Exchange under the
symbol "BCL". Set forth, for the periods indicated, are the high and low sale
prices for the Common Stock on the New York Stock Exchange.
<TABLE>
<CAPTION>
1993 FISCAL YEAR High Low
<S> <C> <C>
First Quarter.............................................. $25.88 $18.38
Second Quarter............................................. 20.25 16.63
Third Quarter.............................................. 24.50 17.00
Fourth Quarter............................................. 24.50 18.38
<CAPTION>
1994 FISCAL YEAR
<S> <C> <C>
High Low
First Quarter.............................................. $26.50 $15.75
Second Quarter............................................. 35.00 26.13
Third Quarter.............................................. 37.63 18.88
Fourth Quarter............................................. 21.75 14.75
</TABLE>
There were 908 holders of record of the Company's Common Stock on June 10,
1994.
On August 16, 1993 the Company declared its fifth consecutive annual cash
dividend of $.10 per share on its Common Stock, which was paid on November 18,
1993. The Company's fourth annual dividend of $.10 per share on its common stock
was paid on November 18, 1992. The payment of cash dividends is subject to the
discretion of the Board of Directors and will be dependent upon many factors,
including the Company's earnings, its capital needs and its general financial
condition.
6
<PAGE>
30 Years Of Service
BIOCRAFT LABORATORIES, INC.
Consolidated Balance Sheets
March 31, 1994 and 1993
<TABLE>
<CAPTION>
1994 1993
-------- --------
(In thousands)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 6,020 $ 17,286
Marketable securities, at cost which is less than
market 733 739
Receivables
Trade 21,094 20,794
Income taxes 214 -
Other 159 211
Inventories 50,407 42,487
Other current assets 1,557 539
-------- --------
Total current assets 80,184 82,056
Property and equipment, net 87,028 87,178
Other assets and deferred charges 861 913
-------- --------
$168,073 $170,147
======== ========
Liabilities and Stockholders' Equity
Current liabilities:
Current installments of long-term obligations $ 5,566 $ 4,818
Accounts payable-trade 8,369 11,444
Income taxes payable - 1,565
Accrued expenses 2,993 3,587
-------- --------
Total current liabilities 16,928 21,414
-------- --------
Long-term obligations, excluding current installments 48,582 52,255
Deferred income taxes 5,271 4,611
Stockholders' equity:
Preferred stock, $1.00 par value. Authorized
2,000,000 shares;
none issued - -
Common stock, $.01 par value. Authorized 30,000,000
shares;
issued 14,189,365 in 1994 and 14,154,415 in 1993 142 142
Additional paid-in capital 42,242 41,468
Retained earnings 55,910 51,217
Less deductions for treasury stock and employee (1,002) (960)
stock plans -------- --------
Net stockholders' equity 97,292 91,867
-------- --------
Commitments and contingencies
$168,073 $170,147
======== ========
</TABLE>
7
<PAGE>
BIOCRAFT LABORATORIES, INC.
Consolidated Statements Of Operations
Years ended March 31, 1994, 1993 and 1992
<TABLE>
<CAPTION>
1994 1933 1992
-------- -------- -------
(In thousands, except per
share data)
- - ----------------------------------------------------------------------------
<S> <C> <C> <C>
Revenue:
Net sales $143,149 $113,176 $84,259
Other operating income 207 12,972 8,009
Interest, dividend and other income 530 490 506
-------- -------- -------
Total revenue 143,886 126,638 92,774
-------- -------- -------
Costs and expenses:
Cost of sales 109,640 89,171 74,825
Research and development 9,923 8,662 8,755
Selling, general and administrative 11,362 14,702 16,710
Interest expense 4,546 4,997 3,665
-------- -------- -------
Total costs and expenses 135,471 117,532 103,955
-------- -------- -------
Earnings (loss) before income taxes (benefit)
and cumulative effect of change in method of
accounting for income taxes 8,415 9,106 (11,181)
Income taxes (benefit) 2,340 3,250 (4,441)
-------- -------- -------
Earnings (loss) before cumulative effect of
accounting change 6,075 5,856 (6,740)
Cumulative effect as of April 1, 1993 of change
in method of accounting for income taxes 30 -- --
-------- -------- -------
Net earnings (loss) $ 6,105 $ 5,856 ($6,740)
======== ======== =======
Earnings (loss) per share:
Earnings (loss) before cumulative effect of
accounting change $0.43 $0.42 ($0.48)
Cumulative effect of accounting change -- -- --
-------- -------- -------
Net earnings (loss) $0.43 $0.42 ($0.48)
======== ======== =======
Weighted average number of shares outstanding 14,160 14,086 14,018
======== ======== =======
</TABLE>
BIOCRAFT LABORATORIES, INC.
Consolidated Statements Of Stockholders' Equity
Years ended March 31, 1994, 1993 and 1992
<TABLE>
<CAPTION>
(In thousands, except per share data)
Treasury
Common stock stock Stock Purchase Plans
------------- ------------- -----------------------
Total
Additional Retained Deferred Notes stockholders'
Shares Amount Shares Amount paid-in capital earnings compensation receivable equity
- - ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at April 1, 1991 14,027 $140 (57) ($818) $39,212 $54,904 ($140) ($12) $93,286
Transactions related to
employee stock plans 26 196 88 6 290
Shares issued under
stockholder purchase
plan 51 1 881 882
Net loss (6,740) (6,740)
Dividends ($.10 per
share) (1,398) (1,398)
------ ---- --- ----- ------- ------- ----- ---- -------
Balance at March 31,
1992 14,104 141 (57) (818) 40,289 46,766 (52) (6) 86,320
Transactions related to
employee stock plans,
including tax benefits 5 311 (88) 4 227
Shares issued under
stockholder purchase
plan 45 1 868 869
Net earnings 5,856 5,856
Dividends ($.10 per
share) (1,405) (1,405)
------ ---- --- ----- ------- ------- ----- ---- -------
Balance at March 31,
1993 14,154 142 (57) (818) 41,468 51,217 (140) (2) 91,867
Transactions related to
employee and director
stock plans, including
tax benefits 35 (1) 772 (43) 2 730
Shares issued under
stockholder purchase
plan 2 2
Net earnings 6,105 6,105
Dividends ($.10 per
share) (1,412) (1,412)
------ ---- --- ----- ------- ------- ----- ---- -------
Balance at March 31,
1994 14,189 $142 (57) ($819) $42,242 $55,910 ($183) $ -- $97,292
====== ==== === ===== ======= ======= ===== ==== =======
</TABLE>
See accompanying notes to financial statements
8
<PAGE>
30 Years Of Service
BIOCRAFT LABORATORIES, INC.
Consolidatd Statement Of Cash Flows
Years ended March 31, 1994, 1993 and 1992
<TABLE>
<CAPTION>
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
(In thousands)
Cash flows from operating activities:
Net earnings (loss) $ 6,105 $ 5,856 ($6,740)
Adjustments to reconcile net earnings (loss)
to net cash provided by (used in) operating
activities:
Depreciation and amortization 6,647 6,030 4,781
Imputed and non-cash interest expense 832 850 839
Non-cash compensation 403 137 88
Equity in net (earnings) loss of affiliate (39) 23 (16)
Deferred income taxes (399) 406 (419)
Cumulative effect of accounting change (30) - -
Loss (gain) on sale of fixed assets 1 19 (5)
Gain on sale of marketable securities - - (4)
Changes in assets and liabilities:
Trade receivables (300) (9,084) 58
Income taxes receivable/payable (1,779) 5,697 (3,022)
Inventories (7,920) 3,955 3,864
Accounts payable-trade (3,075) 542 56
Accrued expenses (594) (249) 891
Other assets 104 (412) 94
------- ------- -------
Net cash (used in) provided by operating
activities (44) 13,770 465
------- ------- -------
Cash flows provided by (used in) investing
activities:
Capital expenditures (6,365) (7,099) (11,450)
Proceeds form sale of fixed assets 6 4 18
Additions to marketable securities - (366) -
Reductions in marketable securities - - 200
------- ------- -------
Net cash used in investing activities (6,359) (7,461) (11,232)
------- ------- -------
Cash flows provided by (used in) financing
activities:
Proceeds from long-term obligations 8,750 8,600 13,000
Payments of long-term obligations (12,529) (11,246) (503)
Dividends paid ($.10 per share) (1,412) (1,405) (1,398)
Issuance of common stock 126 869 882
Transactions related to stock plans 202 27 202
------- ------- -------
Net cash (used in) provided by financing
activities (4,863) (3,155) 12,183
------- ------- -------
Net (decrease) increase in cash and cash
equivalents (11,266) 3,154 1,416
Cash and cash equivalents at beginning of year 17,286 14,132 12,716
------- ------- -------
Cash and cash equivalents at tend of year $ 6,020 $17,286 $14,132
======= ======= =======
Supplemental cash flow information:
Noncash financial and investing activities:
Increase in marketable securities - ($72) -
Decrease in trade receivables - 72 -
</TABLE>
See accompanying notes to financial statements
9
<PAGE>
biocraft LOGO
Notes To Consolidated Financial Statements
1) Summary of Significant Accounting Policies
(a) Principles of Consolidation
The consolidated financial statements include the accounts of Biocraft
Laboratories, Inc. (the Company) and its wholly owned subsidiary, Pacific
American Insurance Company (PAIC).
The equity method of accounting is used for the Company's investment in
Delmarva Laboratories, Inc. (Delmarva), a distributor of veterinary
pharmaceutical products, including products produced by the Company. The Company
owns a 25% interest in Delmarva, which is included in other assets in the
accompanying consolidated balance sheets.
(b) Inventories
Inventories are stated at the lower of cost (last-in, first-out (LIFO)) or
market and include appropriate elements of material, labor and manufacturing
overhead.
(c) Depreciation and Amortization
Depreciation and amortization of property and equipment are provided for under
the straight-line method based on estimated useful lives as follows:
<TABLE>
<S> <C>
Buildings and improvements.................. 15 to 40 years
Machinery and equipment..................... 3 to 10 years
-------------
</TABLE>
Expenditures for major renewals and betterments to property and equipment are
capitalized and expenditures for maintenance and repairs are charged to
operations as incurred. When assets are retired or otherwise disposed of, their
cost and related accumulated depreciation are eliminated from the accounts. Any
resulting gain or loss is reflected in operations.
(d) Income Taxes
Effective April 1, 1993, the Company adopted FASB Statement No.109,
"Accounting for Income Taxes" (Statement 109). Under Statement 109, deferred tax
assets and liabilities are determined based on differences between financial
reporting and tax bases of assets and liabilities and are measured using the
enacted tax rates and laws that will be in effect when the differences are
expected to reverse. As permitted by Statement 109, the Company elected not to
restate the financial statements of any prior years. The cumulative effect of
the change in accounting method increased net earnings by $30,000 or less than
$.01 per share for the 1994 fiscal year.
(e) Trade Receivables
Trade Receivables for the fiscal years ended March 31, 1994 and 1993 are shown
net of an allowance for bad debts of $240,000 and $230,000, respectively.
(f) Concentration of Credit Risk
The Company is engaged in the manufacture and sale of generic pharmaceutical
products. The Company's manufacturing plants are located in New Jersey and
Missouri. Its products are sold throughout the United States. The Company
performs ongoing credit evaluation of its customers' financial condition and,
generally, requires no collateral from its customers.
(g) Earnings (Loss) Per Share
Earnings (loss) per share is based on the weighted average number of common
shares, as well as common share equivalents (stock options) to the extent
dilutive, outstanding during the year.
(h) Reclassifications
Certain 1993 and 1992 items have been reclassified to conform with 1994
classifications.
2) Cash Equivalents and Marketable Securities
Cash equivalents consist of those securities with maturities of three months
or less when purchased. Marketable securities are stated at the lower of cost or
market value. Interest and dividend income realized from the aggregate of such
investments was approximately $500,000 during each of fiscal 1994, 1993 and
1992.
In May 1993 the FASB issued Statement No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." This Statement, which is required
to be adopted in fiscal 1995 and reflected prospectively, requires that, except
for debt securities classified as "held to maturity," investments in debt and
equity securities be reported at fair value. Changes in unrealized gains and
losses for securities classified as "available for sale" are recorded directly
to stockholders' equity, net of applicable income taxes. The adoption of this
Statement is expected to result in an immaterial increase in stockholder's
equity as of April 1, 1994.
3) Inventories
Inventories at March 31 consisted of:
<TABLE>
<CAPTION>
1994 1993
(In thousands)
<S> <C> <C>
Finished goods $ 9,478 $ 9,110
Work in process 19,498 16,797
Raw materials and supplies 18,821 15,370
------- -------
47,797 41,277
Excess of LIFO over FIFO 2,610 1,210
------- -------
$50,407 $42,487
======= =======
</TABLE>
10
<PAGE>
Celebrating 30 Years Of Service
As noted above, at March 31, 1994 and 1993, the LIFO cost of inventories
exceeded current cost by approximately $2.6 million and $1.2 million,
respectively. Allocation of the LIFO reserve among the components of inventory
is impractical. As of March 31, 1994 and 1993, inventories include
approximately $4.6 million and $2.3 million, respectively, of inventory costs,
principally raw materials, relating to products for which the Company is
awaiting regulatory approval.
4) Property and Equipment
A summary of property and equipment, at cost, follows:
<TABLE>
<CAPTION>
March 31,
---------
1994 1993
---- ----
(In thousands)
<S> <C> <C>
Land $ 1,508 $ 1,508
Buildings and improvements 67,944 66,255
Machinery and equipment 51,937 47,152
Construction in progress 33 88
-------- --------
121,422 115,003
Less accumulated depreciation 34,394 27,825
-------- --------
$ 87,028 $ 87,178
======== ========
</TABLE>
5) Long-term Obligations
A summary of long-term obligations follows:
<TABLE>
<CAPTION>
March 31,
--------
1994 1993
-------- --------
(In thousands)
<S> <C> <C>
NatWest mortgage due in 1997 $ 2,700 $ 3,420
Unsecured NatWest term loan
and credit line 10,000 7,000
Unsecured Commerce Bank
credit line 3,250 8,000
Bonds due in 2004 30,000 30,000
MODED loan due in 2000 250 290
Mortgage due in 1999 459 721
Other 7,489 7,642
-------- --------
54,148 57,073
Less current installments 5,566 4,818
-------- --------
$ 48,582 $ 52,255
======== ========
</TABLE>
In November 1992, the Company secured a $3.6 million five year term loan from
National Westminster Bank NJ (NatWest), which is secured by a mortgage on the
Company's Fair Lawn, New Jersey property and its warehouse in Waldwick, New
Jersey. Principal on the mortgage is payable in 20 equal quarterly installments
of $180,000 which commenced in February, 1993.
In March 1992, the Company secured a $10 million revolving credit line and a
$5 million five year term loan from NatWest. Under the credit line, as amended
and extended, NatWest agreed to advance up to $10 million through September
1995, which period, at the option of the Company provided it is then in
compliance with the terms of the credit agreement, is automatically extended for
successive one-year periods unless NatWest otherwise notifies the Company at
least two months before the maturity date. In the event NatWest elects not to
renew, the Company may, provided it is then in compliance with the terms of the
credit agreement, convert the revolving credit line into a two year term loan
payable in eight equal quarterly installments beginning on the first day of the
fourth succeeding month. Principal on the term loan is payable in 20 equal
quarterly installments of $250,000 which began on May 15, 1992.
Interest on the NatWest credit line as well as the term loans is based on
market indices selected by the Company. As of March 31, 1994, the Company had
outstanding $7 million under the credit line at a rate of 4.46%, the rate on the
mortgage was 4.34%, and the rate on the term loan was 4.40% (all of which are
.9% above NatWest's cost of funds at the time of borrowing).
The Company also has a revolving credit line from Commerce Bank of St. Louis,
N.A. (Commerce Bank). Under the credit line, as amended and extended, Commerce
Bank agreed to advance up to $10 million through September 1995. Interest on the
loan is based on market indices selected by the Company when it borrows under
the credit line. As of March, 31, 1994, the Company had outstanding $3.25
million at an interest rate of 3.50% with respect to $1.75 million and 4.43%
(.8% above LIBOR) with respect to $1.5 million.
Both unused lines of credit are subject to a bank commitment fee in an amount
equal to .25% per annum.
In September 1989, the Company completed a $30 million financing for its
Mexico, Missouri facility. The project was funded primarily from the proceeds of
bonds due in September 2004 issued by the Missouri Economic Development, Export
and Infrastructure Board and secured by a Letter of Credit issued by the Bank of
Tokyo, Ltd., New York Agency. The Letter of Credit agreement provides for a
mortgage on the Mexico, Missouri facility. The bonds bear interest at a rate
equal to 9.125% per annum for a five-year period and thereafter at the Company's
election, from time to time, at a variable or fixed rate. In addition, the
Company pays an annual fee of approximately .80% per annum for the letter of
credit. Principal amortization installments are in varying amounts commencing in
fiscal 1995.
11
<PAGE>
biocraft LOGO
Notes To Consolidated Financial Statements (Continued)
The credit facilities with NatWest and Commerce Bank, as well as the Letter of
Credit Agreement with Bank of Tokyo require, among other matters, that the
Company meet certain financial covenants. The Company is in compliance with all
such covenants.
In May 1990, the Company entered into a $400,000 term loan agreement with the
Missouri Department of Economic Development (MODED) and the City of Mexico.
This loan is payable in 40 equal quarterly installments of $10,000 beginning
September 1, 1990. Such term loan bears simple interest equal to $20,000 in the
aggregate over the term of the loan, payable in 10 equal installments. The loan
requires the Company to create a certain number of new jobs with at least 51% of
all new jobs from families classified as "low and moderate income" in Missouri,
within 24 months of commencement of the operations at the Company's Mexico,
Missouri plant and is collateralized by certain machinery and equipment subject
to the senior security interest in favor of the Bank of Tokyo, Ltd.
The mortgage obligation due in 1999 relates to proceeds realized from New
Jersey Economic Development Authority Revenue bonds used to finance the
Company's Paterson, New Jersey plant facility which was purchased from its
principal officers/stockholders. Such mortgage is payable in monthly principal
installments of approximately $8,000 to January 1999, plus interest at a rate of
75% of Valley National Bank's prime rate (an interest rate of 4.69% at March 31,
1994). The mortgage obligation is secured by the Company's Elmwood Park and
Paterson facilities. Among other matters, this obligation requires the Company
to satisfy certain financial covenants.
The net book value of property and equipment pledged at March 31, 1994 under
the aforementioned bond and mortgage obligations aggregated approximately $64
million.
Long-term bond and bank principal payments, assuming conversion into a term
loan, at maturity, of each revolving credit line, in each of the next five years
ending March 31, 1998, are as follows: 1995-$4,066,000; 1996-$8,467,000; 1997-
$7,068,000; 1998-$4,373,000; and 1999-$2,113,000.
The Company believes that the fair value of its long-term bond and bank
obligations approximates the carrying value included in the financial
statements.
Other long-term obligations represent the present value of the remaining
payments due in connection with a litigation settlement reached in March 1990
concerning a patent on a particular form of Cefadroxil Monohydrate. Required
annual payments are $1.5 million in both fiscal 1995 and 1996, and $3 million in
both fiscal 1997 and 1998.
Interest paid, net of capitalized interest, in the years ended March 31, 1994,
1993 and 1992 aggregated $3.7 million, $4.1 million and $2.8 million,
respectively. Capitalized interest amounted to approximately $1 million in
fiscal 1992.
6) Transactions with Related Parties
Certain officers/stockholders of the Company are also principal stockholders
of Groundwater Decontamination Systems, Inc. (GDS). GDS has granted the Company
a non-exclusive license to use certain of GDS's patented processes presently
employed in the Company's decontamination efforts at its Waldwick plant. The
license (terminable by the Company on 45 days' notice) provides for a royalty of
$120,000 increasing annually by the percentage increase in the consumer price
index during the preceding year.
Royalties paid to GDS and charged to operations for the years ended March 31,
1994, 1993 and 1992 amounted to $12,000 , $9,000 and $14,000, respectively.
The balance of royalties under this license have been waived by GDS for each of
these years.
Certain officers/stockholders are the principal stockholders of HS Realty
Company, Inc. (HS Realty), a company that owns property adjacent to the
Company's Waldwick plant. The Company has agreed with HS Realty to extend to
such property the groundwater decontamination work currently being done at the
Waldwick plant. The agreement also provides that the Company will be entitled
to recover its expenses of performing such work from the profits, if any, from
the future sale or lease of the property.
The Company has a five-year employment agreement with its President, who is
also a principal stockholder, which expires in March 1995. The agreement
provides for annual compensation at the rate of $500,000 per annum during the
first year of the term, increasing annually thereafter by the greater of 10% or
the percentage increase in the consumer price index during the preceding year.
The President agreed to waive any increase in compensation for each year of his
employment agreement.
The Company owns a 25% interest in Delmarva, a distributor of veterinary
pharmaceutical products (see Note 1). During fiscal 1994, 1993 and 1992, the
Company recognized income of $39,000, a loss of $23,000 and income of $16,000,
respectively, its proportionate share of Delmarva's net income or loss. The
Company also had approximately $4.5 million, $2.3 million and $1.8 million of
sales to Delmarva and earned exclusive distribution fees from Delmarva of
approximately $121,000, $111,000 and $113,000 in fiscal 1994, 1993 and 1992,
respectively.
12
<PAGE>
Celebrating 30 Years Of Service
As of March 31,1994 and 1993, accounts receivable from Delmarva totalled
$662,000 and $775,000, respectively.
A member of the Company's Board of Directors serves as President of B.V.
Chemie Pharmacie Holland (C.P.H.). The Company purchased from or through such
firm bulk pharmaceutical chemicals for approximately $8.4 million, $10.6 million
and $4.0 million in the fiscal years ended March 31, 1994, 1993 and 1992,
respectively. In addition, in the year ended March 31, 1992, the Company sold
approximately $200,000 of bulk pharmaceuticals to Chemie.
7) Income Taxes
The Company adopted Statement 109, "Accounting for Income Taxes," as of April
1, 1993, which changes its method of accounting for income taxes from the
deferred method (Accounting Principles Board Opinion No. 11 - APB 11) to an
asset and liability approach. The cumulative effect of this change in accounting
method on net income was a credit of $30,000 (less than $.01 per share) and was
reflected as of April 1, 1993. Income taxes for fiscal 1993 and 1992 are
measured under APB 11.
Statement 109 requires recognition of deferred tax liabilities and assets for
the estimated future tax consequences attributable to temporary differences.
Such temporary differences exist when the tax basis differs from the financial
reporting amount of assets or liabilities. All tax liabilities and tax assets
are measured using current tax law and applicable rates.
Statement 109 further requires adjustment of tax balances to reflect enacted
changes in tax law or rates in the period of enactment. Accordingly, fiscal
1994 results include increased tax expense resulting from the enactment of the
Omnibus Budget Reconciliation Act of 1993 (the Tax Act) in August. The Tax Act
increased the statutory corporate income tax rate one percent (to 35 percent)
and made other changes including a retroactive reinstatement of the research and
development credit.
The components of income tax expense (benefit) follow:
<TABLE>
<CAPTION>
Years ended March 31,
-------------------------
1994 1993 1992
------- ------- -------
(In thousands)
<S> <C> <C> <C>
Federal:
Current $ 1,498 $ 1,965 $(3,907)
Deferred 542 895 74
State (substantially all deferred) 300 390 (608)
------- ------- -------
$ 2,340 $ 3,250 $(4,441)
======= ======= =======
</TABLE>
The computed "expected" tax expense (benefit) is based upon Federal statutory
rates of 35% in fiscal 1994 and 34% in fiscal 1993 and 1992. Items that
determine the effective rate of the provision for income taxes follow:
<TABLE>
<CAPTION>
Years ended March 31,
--------------------------
1994 1993 1992
------ ------ -------
(In thousands)
<S> <C> <C> <C>
Computed "expected"
tax expense (benefit) $2,945 $3,096 $(3,801)
State taxes (benefit), net of
Federal income tax benefit 200 258 (401)
Credit related to research
activities (639) (70) (237)
Tax free investment income (49) (34) (64)
Change in enacted tax rate 190 - -
Tax settlement (293) - -
Other, net (14) 62
------ ------ -------
$2,340 $3,250 $(4,441)
====== ====== =======
Effective tax rate 28% 36% 40%
</TABLE>
Temporary differences which give rise to the net deferred tax liability as of
March 31, 1994 are as follows:
<TABLE>
<S> <C> <C>
Deferred tax liabilities:
Property and equipment $10,300
Other 1,118
-------
Total deferred tax liabilities 11,418
Deferred tax assets:
AMT credit carryforward $4,393
Research and development credit
carryforward 295
Charitable contribution carryforward 406
State tax loss carryforwards, net of
Federal tax benefit 354
Inventory related adjustments 843
Other 945
------
Total deferred tax assets 7,236
-------
Net deferred tax liabilities 4,182
Amounts included in other current assets 1,089
-------
Deferred income taxes $ 5,271
=======
</TABLE>
The alternative minimum tax (AMT) credit carryforwards do not expire, the
research and development credit carryforward expires in 2009 and the charitable
contribution deduction carryforwards expire in 1995 through 1998. The principal
sources of deferred taxes for the years ended March 31, 1993 and 1992 were:
litigation settlements (additional taxable income of $800,000 in 1993 and $1
million in 1992); depreciation (lower taxable income of $7 million in 1993 and
$4 million in 1992); a $3 million net operating loss arising in 1992 and used to
reduce deferred taxes in 1992, which deferred taxes were substantially restored
in 1993; a tax
13
<PAGE>
biocraft LOGO
Notes To Consolidated Financial Statements (Continued)
credit carryforward of $70,000 in 1993 and $200,000 in 1992; and
an alternative minimum tax liability of $2 million in 1993. In addition, a
state tax benefit of approximately $600,000 was applied as a reduction of
deferred taxes in 1992. Income tax benefits related to employee and director
stock plans credited directly to stockholders' equity totalled $105,000 and
$63,000 in fiscal 1994 and 1993, respectively.
Income taxes paid in the years ended March 31, 1994, 1993 and 1992 aggregated
approximately $4.4 million, $950,000 and $325,000, respectively.
8) Common Stock, Profit-sharing and Pension Plans
In January 1985, the Company adopted an incentive stock option plan (option
plan) and a restricted stock purchase plan (purchase plan) pursuant to which
300,000 shares of common stock under each plan have been reserved for issuance
to eligible employees. The exercise price of a stock option under the option
plan shall not be less than the fair market value of the common stock at the
date of grant, unless designated as a non-qualified stock option by the Board of
Directors; the purchase price under the purchase plan may not be less than 10%
of the fair market value of the common stock at the date of grant.
Option transactions during the fiscal years ended March 31, 1994, 1993 and
1992 are shown below:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Outstanding at
beginning of year 24,300 13,000 38,700
Granted 33,350 18,000
Exercised (17,775) (5,300) (25,700)
Forfeited ( 2,300) (1,400)
------ ------ ------
Outstanding at
end of year 37,575 24,300 13,000
====== ====== ======
Exercisable at
end of year 9,200 2,900 4,300
====== ====== ======
Average Exercise
Price $4.96 $4.57 $3.77
====== ====== ======
</TABLE>
During fiscal 1994 and 1993, options were granted at an exercise price of
$5.00 per share. Options were exercised in fiscal 1994, 1993 and 1992 at an
average exercise price of $4.50, $4.26 and $7.65 per share, respectively. The
options forfeited had an average per share exercise price of $5.00 and $3.86 in
fiscal 1994 and 1993, respectively.
Amortization of deferred compensation related to such options charged to
operations in the years ended March 31, 1994, 1993 and 1992 was $ 325,000,
$137,000 and $54,000, respectively.
At March 31, 1994, an aggregate of approximately 112,000 shares of the
Company's common stock was issued under the purchase plan, including
approximately 9,000 shares issued during 1994, at a price of $2.00 per share.
The Company subsequently repurchased 375 shares at a cost of $ 2.00 per share in
fiscal 1994. The difference between the fair market value and the purchase price
of shares purchased under the purchase plan is charged to operations over the
vesting periods. Amortization of such deferred compensation charged to
operations in the years ended March 31, 1994 and 1992 was $78,000 and $34,000,
respectively.
In fiscal 1990, the Company adopted the Directors' Stock Option Plan
(directors' plan) pursuant to which 150,000 shares of common stock have been
reserved for issuance to directors of the Company who are not Company employees
at an option price equal to the value of such shares on the date of grant.
During fiscal 1994, a total of 8,000 options were exercised by directors at an
exercise price of $15.50 per share. As of March 31, 1994, options to purchase
17,000 shares under the directors' plan were outstanding, of which options to
purchase 10,000 shares were currently exercisable at option prices ranging from
approximately $15 to $18 per share.
The Company has a qualified profit-sharing plan covering eligible non-union
employees except certain employees hired in Missouri. The plan provides for an
annual contribution as determined by the Company; such contribution is not to
exceed the amount deductible as expense in accordance with the Internal Revenue
Code. Profit-sharing plan contributions charged to operations for the years
ended March 31, 1994, 1993 and 1992 amounted to approximately $1.3 million, $1.1
million and $1.0 million, respectively.
In October 1987, the Company adopted the Employee Money Purchase Pension Plan
which provides for a mandatory employer contribution of 3% of annual
compensation, excluding bonuses and overtime. Contributions to such plan
charged to operations for the years ended March 31, 1994, 1993 and 1992 amounted
to approximately $ 384,000, $316,000, and $280,000, respectively. At the same
time, the Company also adopted the 401(k) Savings Plan which provides for
voluntary employee salary deferrals. Employer matching of $.50 for each dollar
contributed up to a maximum match of 2% of compensation is provided for those
employees who do not participate in the profit-sharing plan. Matching
contributions to the 401(k) Plan charged to operations amounted to $34,000,
$20,000 and $18,000 in fiscal 1994, 1993 and 1992, respectively. Both plans are
provided for non-union employees.
14
<PAGE>
Celebrating 30 Years of Service
Pension contributions to a multi-employer plan in accordance with various
union agreements were $351,000, $370,000 and $393,000 in 1994, 1993 and 1992,
respectively.
In November 1992, the FASB issued Statement No. 112, requiring accrual
accounting for certain post-employment benefits, such as disability benefits.
The Company does not provide such post-employment benefits.
9) Litigation Settlement
In February 1986, Hoffmann-LaRoche, Inc. (Roche) obtained a declaratory
judgment that the Company was not entitled to withhold royalties under a license
for the right to manufacture and sell a patented drug, which patent expired in
June 1988. In February 1994 this matter was settled by the Company and the case
was dismissed. The Company paid Roche $250,000.
In May 1992, the Company settled a litigation with two former sales
representatives. Without any admission of liability, the Company agreed to pay
$175,000, which amount, together with related legal fees, was expensed in the
fiscal year ended March 31,1992.
In May 1992 the Company settled its litigation with Merck & Co., Inc. (Merck)
regarding Merck's patent for Amiloride Hydrochloride with Hydrochlorothiazide,
which patent was found invalid. The parties agreed to the dismissal of the
Company's claim for damages and to release each other from all claims arising
from the litigation and Merck paid the Company $1.3 million, which amount was
included in the Company's other operating income in fiscal 1993. There was no
admission of liability by Merck.
10) Segment Information and Other Matters
The Company operates in one industry segment (generic pharmaceutical
products). Although the Company's net sales included both finished dosage form
products and bulk material, sales of bulk material constituted less than 1% of
the Company's total sales for each of the fiscal years ended March 31, 1994,
1993 and 1992. No one customer accounted for 10% or more of net sales for the
fiscal years ended in 1994, 1993 and 1992.
11) Contingencies
At March 31, 1994, the Company was involved in certain litigation and other
claims related to its operations.
In September 1980, the Company entered into an administrative consent order
with the New Jersey Department of Environmental Protection (DEP) pursuant to
which the Company agreed to among other things, monitor and take certain action
to remediate contamination of the groundwater beneath the Company's Waldwick,
New Jersey plant by use of microbiological decontamination wells which were
installed in fiscal 1981. This order has been modified to include action to be
taken to monitor and, if necessary, remediate possible contamination of the
groundwater below the property adjacent to the Waldwick facility. The Company
does not expect the continued cost of this remediation to be material.
On June 8, 1989, the United States Environmental Protection Agency (EPA)
notified the company that it was a potentially responsible party (PRP) along
with other generators of industrial waste, the site owners and operators, and
transporters of wastes to the site, for the alleged releases of hazardous
substances from a waste management site in Elkton, Maryland, known as the
"Spectron Site." The Company has participated with other PRPs in investigating
and remediating the site under a Consent Order entered into with EPA in August
1989. As of March 31, 1994, the Company has paid approximately $224,000 to the
PRP group, all of which was paid prior to fiscal 1994, for its share of clean-up
costs, based on volumetric allocation of waste shipments to the Spectron Site.
On March 19, 1990, EPA sent another letter to the Company notifying it of
potential liability for planned additional remedial work at the Spectron site.
The additional remedial work arises from alleged releases of hazardous
substances at the Spectron site during the period of 1968 to 1982, known as the
Galaxy period. The Company has decided to join with other PRPs in the
negotiation of a Consent Order with EPA for the additional remedial work related
to the Galaxy period.
The Company is one of over 400 defendants in an action entitled "Transtech
Industries, Inc. et al v. A & Z Septic Clean, et al" pending in the federal
district court for New Jersey, regarding hazardous waste allegedly shipped to
the Kin-Buc Landfill in New Jersey; has been notified by the North Carolina
Department of Environment, Health and Natural Resources that it believes that
the Company was one of approximately 1,500 entities that caused hazardous
material to be shipped to a waste treatment facility previously operated by the
Seaboard Chemical Corporation at Jamestown, North Carolina; and is one of more
than 900 entities notified that it has shipped hazardous waste to a site in
Caldwell County, North Carolina. It is not possible to predict with any level
of certainty the Company's potential exposure with respect to the aforementioned
matters. However, considering the number of potentially responsible parties,
many of which are substantial corporations, and the Company's small proportion
of the total volume of waste sent to the sites in question, the
15
<PAGE>
biocraft LOGO
Notes To Consolidated Financial Statements (Continued)
Company believes that its portion of such liability, if any (including any site
clean-up costs), is not likely to be material to the Company.
In November 1993, a class action was commenced in the United States District
Court for the District of New Jersey against the Company and certain officers of
the Company. The action purports to allege securities fraud and common law
claims on behalf of purchasers of the Company's stock, based on alleged
misrepresentations and omissions in the Company's publicly filed statements and
press releases regarding the Company's compliance with FDA concerning the
Company's manufacture of its products. Plaintiffs seek compensatory and
punitive damages in an unspecified amount, as well as attorney's fees and other
costs of the lawsuit. On May 9, 1994, the Company moved to dismiss the
complaint on the grounds that, among other things, it fails to state a claim
upon which relief can be granted.
The Company is in discussions with the FDA over issues arising from an
inspection in May 1994. The FDA has requested that the Company take additional
steps to remedy alleged noncompliance with current Good Manufacturing Practices
(cGMPs), primarily as they relate to certain of the Company's products. The
Company believes that its marketed products meet appropriate standards and are
safe and effective, and that it is in substantial compliance with current cGMPs.
Although the Company cannot predict the outcome of these discussions and no
assurances can be made, it is hopeful that a mutually acceptable resolution can
be reached with the FDA without litigation.
In addition, the Company is also a party to other litigation incidental to its
business. In management's opinion, after consulting legal counsel, it is
unlikely that the ultimate resolution of such litigation and the matters
discussed above will have a material adverse effect on the Company's
consolidated financial position.
- - --------------------------------------------------------------------------------
Independent Auditors' Report
Ernst & Young
The Board of Directors and Stockholders
Biocraft Laboratories, Inc.
We have audited the accompanying consolidated balance sheets of Biocraft
Laboratories, Inc. and subsidiary as of March 31, 1994 and 1993, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
the years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits. The financial statements
of Biocraft Laboratories, Inc. for the year ended March 31, 1992, were audited
by other auditors whose report dated June 15, 1992 (except as to note 5, which
was as of June 22, 1992) expressed an unqualified opinion on those statements.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the 1994 and 1993 financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Biocraft Laboratories, Inc. and subsidiary at March 31, 1994 and 1993, and the
consolidated results of their operations and their cash flows for the years then
ended in conformity with generally accepted accounting principles.
As discussed in Note 1 to the financial statements, effective April 1, 1993,
the Company changed its method of accounting for income taxes.
Hackensack, New Jersey /s/ Ernst & Young
June 28, 1994
16
<PAGE>
30 Years Of Service
Directors and Executive Officers
[PHOTO APPEARS HERE] BOARD OF DIRECTORS
Seated Left To right
1. Beryl L. Snyder, 2. Jay T. Snyder
3. Beatrice Snyder.
Standing Left To right:
4. Gerard Klein, 5. Marvin Thalenberg, M.D.
6. G. Harold Welch, Jr., 7. Harold Snyder
8. James J. Rahal, Jr.,M.D., 9. Madelon
Devoe Talley, 10. Brian S. Snyder
DIRECTORS AND EXECUTIVE OFFICERS
HAROLD SNYDER
Chairman, Chief Executive Officer, President and Director
BEATRICE SNYDER
Senior Vice President, Secretary and Director
BERYL L. SNYDER
Senior Vice President, General Counsel and Director
BRIAN S. SNYDER
Vice President, Controller and Director
JAY T. SNYDER
Vice President - Research & Product Development and Director
HARMON ARONSON, PH.D
Vice President - Non-Antibiotic Operations
LEONARD E. BUSTAMANTE
Vice President - Quality Management
MELVIN KAUFMAN
Vice President - Antibiotic Operations
GERALD MOSKOWITZ
Vice President - Sales
STEVEN J. SKLAR
Vice President, Treasurer and Chief Financial Officer
JOY BLOODSAW
Associate Vice President - Purchasing
HARVEY RICHARDS
Associate Vice President - Regulatory Affairs
GERARD KLEIN
Director, President of B.V. Chemie Pharmacie, Holland (C.P.H.) (Pharmaceutical
Suppliers)
JAMES J. RAHAL, JR., M.D.
Director, Infectious Disease Section, The New York Hospital Medical Center of
Queens; Clinical Professor of Medicine, Albert Einstein College of Medicine
MADELON DEVOE TALLEY
Director, Writer, Investment Consultant, Governor, National Association of
Security Dealers, Vice Chairman of Board, W.P. Carey & Company, Trustee, Smith
Barney Shearson Special Funds
MARVIN M. THALENBERG, M.D.
Director, Specialist and Instructor in Internal Medicine, Commissioner of Health
Rockland County, NY
G. HAROLD WELCH, JR.
Director, Former President of Yale-New Haven Medical Center, Inc.; Chairman
South Central Connecticut Regional Water Authority, Chairman, Radkowsky Thorium
Power Corporation
CORPORATE INFORMATION
INDEPENDENT AUDITORS
Ernst & Young
433 Hackensack Avenue,
Hackensack, NJ 07601
SPECIAL COUNSEL
Proskauer Rose Goetz & Mendelsohn
1585 Broadway, New York, NY 10036
REGISTRAR AND TRANSFER AGENT
American Stock Transfer and Trust Co.
99 Wall Street, New York, NY 10005
STOCK LISTING
The Company's Common Stock is traded on the New York Stock Exchange under the
symbol "BCL."
FORMS 10-K AND 10-Q AVAILABILITY
The Company's Annual Report filed with the SEC on Form 10-K and Quarterly
Reports filed with the SEC on Form 10-Q are available without charge upon
written request to:
Ethyl Andersen,
Biocraft Laboratories, Inc.
18-01 River Road,
Fair Lawn, NJ 07410
<PAGE>
EXHIBIT 24.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of Biocraft Laboratories, Inc. of our report dated June 28, 1994, included in
the 1994 Annual Report to Shareholders of Biocraft Laboratories, Inc.
Our audits also included the 1994 and 1993 financial statement schedules of
Biocraft Laboratories, Inc. listed in Item 14(a). These schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion based on our audits. In our opinion, the financial statement schedules
referred to above, when considered in relation to the basic financial statements
taken as a whole, present fairly in all material respects the information set
forth therein.
We also consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 33-67060) pertaining to the Biocraft Laboratories, Inc. 1985
Incentive Stock Option Plan, 1989 Directors' Stock Option Plan and Restricted
Stock Purchase Plan and in the Registration Statement (Form S-3 No. 33-42706)
pertaining to the Dividend Reinvestment and Stock Purchase Plan of our report
dated June 28, 1994, with respect to the financial statements incorporated
herein by reference, and our report included in the preceding paragraph with
respect to the financial statement schedules included in this Annual Report
(Form 10-K) of Biocraft Laboratories, Inc.
/s/ Ernst & Young
Hackensack, New Jersey
June 28, 1994
<PAGE>
EXHIBIT 24.2
Independent Auditors' Consent
-----------------------------
The Board of Directors
Biocraft Laboratories, Inc.:
We consent to incorporation by reference in the (1) Registration Statement (No.
33-67060) on Form S-8, (2) Registration Statement on Form S-3 (No. 33-42706), of
Biocraft Laboratories, Inc. of our report dated June 15, 1992, except as to note
5, which is as of June 22, 1992, relating to the consolidated statements of
operations, stockholders' equity, and cash flows of Biocraft Laboratories, Inc.
and subsidiary for the year ended March 31, 1992, and related schedules for the
year ended March 31, 1992, which report appears in the March 31, 1994 Annual
Report on Form 10-K of Biocraft Laboratories, Inc.
/s/ KPMG Peat Marwick
Short Hills, New Jersey
June 28, 1994
<PAGE>
EXHIBIT 24.3
Independent Auditors' Report
----------------------------
The Board of Directors and Stockholders
Biocraft Laboratories, Inc.:
We have audited the accompanying consolidated statements of operations,
stockholders' equity, and cash flows of Biocraft Laboratories, Inc. and
subsidiary for the year ended March 31, 1992. In connection with our audit of
the consolidated financial statements, we have also audited the financial
statement Schedules V, VI and VIII for the year ended March 31, 1992. These
consolidated financial statements and financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statement and financial statement
schedules based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the results of the operations and the cash
flows of Biocraft Laboratories, Inc. and subsidiary for the year ended March 31,
1992 in conformity with generally accepted accounting principles. Also in our
opinion, the related 1992 financial statement schedules, when considered in
relation to the basic consolidated financial statements taken as a whole,
present fairly, in all material respects, the information set forth therein.
/s/ KPMG Peat Marwick
Short Hills, New Jersey
June 15, 1992, except as to
note 5, which is as of
June 22, 1992
