SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [FEE REQUIRED] FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED] FOR THE TRANSITION PERIOD
FROM _____ to ______
Commission file number 0-25852
THE MED-DESIGN CORPORATION
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(Name of small business issuer in its charter)
Delaware 23-2771475
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
121 South Broad Street, Suite 310, Philadelphia, PA 19107
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (215) 735-2700
Securities registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, Par Value $0.01 Per Share
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(Title of Class)
Check whether issuer (1) filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act during the past 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
--- ---
Check if there is no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B contained herein, and no disclosure will 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-KSB or any amendment to
this Form 10-KSB [ ].
The Issuer's revenues for fiscal year ended December 31, 1996: None
The aggregate market value of voting stock held by non-affiliates of the
registrant (computed by reference to the last reported sale price of such stock
on March 14, 1997): $71,294,130.00.
The number of shares of common stock, par value $0.01 per share, outstanding as
of March 14, 1997: 7,921,570.
Documents incorporated by reference:
Certain portions of the registrant's definitive Proxy Statement for the Annual
Meeting of Stockholders (which is expected to be filed with the Commission not
later than 120 days after the end of the registrant's last fiscal year) are
incorporated by reference into Part III of this Report.
Total number of consecutively numbered pages is _____.
The Exhibit Index appears on page ___.
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FORWARD-LOOKING STATEMENTS
In addition to historical information, this Annual Report contains
forward-looking statements relating to such matters as anticipated business
performance, business prospects, technological developments, product
development, new products, research and development activities and similar
matters. The Private Securities Litigation Reform Act of 1995 provides a safe
harbor for forward-looking statements. In order to comply with the terms of the
safe harbor, The Med-Design Corporation (the "Company") notes that these
forward-looking statements are subject to certain risks and uncertainties that
could cause actual results to differ materially from those reflected in these
forward-looking statements. Factors that might cause such a difference include,
but are not limited to, those discussed in the sections of this Annual Report
entitled "Business - Products Under Development," "Business - Research and
Development," "Business - Marketing and Sales," "Business - Manufacturing,"
"Business - Patents and Proprietary Rights," "Business - Government Regulation,"
"Management's Discussion and Analysis or Plan of Operation - Results of
Operation," "Management's Discussion and Analysis or Plan of Operation - Plan of
Operation," "Management's Discussion and Analysis or Plan of Operation -
Liquidity and Capital Resources." Readers are cautioned not to place undue
reliance on these forward-looking statements, which reflect management's
analysis only as of the date hereof. The Company undertakes no obligation to
publicly revise these forward-looking statements, to reflect events or
circumstances that arise after the date hereof. Readers should carefully review
the risk factors described in other documents that the Company files from time
to time with the Securities and Exchange Commission and in public communications
made by the Company.
PART I
ITEM 1. BUSINESS
General Development of the Company
The Company was incorporated in Delaware on November 14, 1994. On February
28, 1995, The Med-Design Corporation, a Pennsylvania corporation, incorporated
on December 13, 1993, was merged with and into the Company.
The Company was formed to acquire Med-Design, Inc., a California
corporation ("MDI") incorporated on October 26, 1990, which owned patent and
proprietary rights to certain safety medical devices, including the Safety
Syringe, the Safety Phlebotomy Set and the Safety Catheter (as hereinafter
defined).
On March 14, 1995, the Company organized a wholly-owned subsidiary, MDC
Investment Holdings, Inc. ("MDC Holdings"), under the laws of the State of
Delaware. The Company entered into an Agreement of Merger on April 5, 1995 (the
"Merger Agreement") with MDC Holdings and MDI, pursuant to which MDI merged with
and into MDC Holdings, the surviving corporation (the "Merger"), and the Company
issued and delivered 1,219,742 shares of Common Stock to the MDI shareholders in
exchange for their shares of MDI common stock. In addition, the Company issued a
non-interest bearing promissory note in the principal amount of $1,000,000 (the
"Note") payable to the former MDI shareholders, which was collateralized by all
of the issued and outstanding shares of the common stock, $0.01 par value per
share, of MDC Holdings. In connection with the Merger, the Company issued and
delivered 3,572 shares of Common Stock to certain creditors of MDI to satisfy
$12,500 of outstanding obligations of MDI and 24,000 shares of Common Stock to a
former noteholder of MDI to satisfy an obligation of MDI. The Company paid the
Note in full from the net proceeds of the Company's Initial Public Offering (as
defined below).
As a result of the Merger, MDC Holdings became the sole owner of all of the
worldwide intellectual property rights of MDI including patents, patent
applications, trademarks and trademark applications relating to the Safety
Syringe, Safety Phlebotomy Set and Safety Catheter.
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Immediately following the consummation of the Merger, MDC Holdings
transferred all of the assets it acquired in the Merger, other than its patents
and other intellectual property, and all of its liabilities to MDC Research
Ltd., a California corporation and wholly-owned subsidiary of MDC Holdings.
In June 1995, the Company completed an initial public offering of 3,450,000
shares of Common Stock, par value $0.01 per share (the "Initial Public
Offering"). The net proceeds to the Company from the Initial Public Offering
were approximately $9,526,000.
Description of the Business of the Company
The Company designs and develops safety medical devices intended to reduce
the incidence of accidental needlesticks. The Company has three core products
under development: the Retractable Needle Hypodermic Syringe (the "Safety
Syringe"), the Retractable Needle Vacuum Tube Phlebotomy Set (the "Safety
Phlebotomy Set") and the Retractable Needle Intravenous Catheter Insertion
Device (the "Safety Catheter"). These products are similar in appearance and
size to the standard devices in use. Such products incorporate the Company's
novel proprietary retraction technology that enables a health care professional,
with no substantial change in operating technique and using one hand, to
permanently retract the needle into the body of the device which can then be
safely discarded.
The Company also has several new products which are in the beginning stages
of development. These new product developments include the In-Line Y Port
Injectable Access Needle, the Pre-Filled Ampule Injector, the MDC Closed
Injection System Injector, the Self-Contained Pre-Filled Syringe and the
Pre-Filled Vial Injector. These products also incorporate the Company's
proprietary retraction technology and are designed to reduce the incidence of
accidental needlesticks. The Company has developed various sizes and designs of
these products to accommodate the specific requirements of potential strategic
allies for medical and dental applications.
The Company believes that its safety medical devices can assist employers
in meeting standards promulgated by Occupational Safety and Health
Administration ("OSHA") to help eliminate or minimize occupational exposure to
bloodborne pathogens. The Company has patent rights and patents pending with
respect to certain of its products in the United States and certain foreign
countries.
The Company's headquarters are located at Suite 310, North American
Building, 121 South Broad Street, Philadelphia, Pennsylvania 19107. The
Company's telephone number is (215) 735-2700.
Industry
Accidental Needlesticks
Needles for hypodermic syringes, phlebotomy sets and intravenous catheters
are used for introducing drugs and other fluids into the body and drawing out
blood and other bodily fluids. Among the applications for needles are the
injection of drugs (hypodermic needles), the drawing of blood (phlebotomy sets)
and the infusion of drugs and nutrients (catheters). There is an increasing
awareness of the potential danger of infections and illness that result from
accidental needlesticks and of the need for safer needle devices which reduce
the number of accidental needlesticks that occur each year. Needles can be
broadly categorized as standard needles and safety needles. Safety needles are
designed to perform the same functions as standard needles and to reduce the
risk of accidental needlesticks and the potential danger of infections and
illnesses resulting therefrom.
Infections contracted as a result of accidental needlesticks are a major
concern to healthcare institutions, healthcare workers, sanitation and
environmental services workers and the regulatory agencies charged with the task
of making their working environment safe. Accidental needlesticks may result in
the spread of infectious
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diseases such as Hepatitis B, HIV, which may lead to AIDS, diphtheria,
gonorrhea, typhus, herpes, malaria, rocky mountain spotted fever, syphilis and
tuberculosis. According to a December 1992 report issued by the American
Hospital Association (the "AHA"), an estimated 800,000 occupational needlesticks
occur nationwide each year. The number of reported needlesticks, however, is
believed to be only a portion of the actual number of occurrences.
The possibility of healthcare workers becoming infected from contaminated
needles has caused, and continues to cause, a great deal of concern in the
healthcare field and the agencies regulating that area. OSHA has adopted
regulations requiring employers to institute universal precautions to prevent
contact with blood and other potentially infectious materials. OSHA's
regulations also require employers to establish engineering controls (e.g.,
sharps disposal containers and self-sheathing needles) and safe work practices
to ensure compliance with these universal precautions. OSHA does not mandate
specific technologies; rather, employers are permitted to choose the most
appropriate and effective safety control devices to meet their specific
institutional needs. According to OSHA guidelines, while employers do not have
to institute the most sophisticated engineering controls, they must evaluate the
effectiveness of existing controls and evaluate the feasibility of instituting
more advanced engineering controls. OSHA specifically prohibits the recapping,
bending or removal of needles, unless there is no feasible alternative or if
required for a specific medical procedure. If recapping, bending or removal is
necessary, workers must use either a mechanical device or a one-handed
technique.
In April 1992, the United States Food and Drug Administration ("FDA")
issued a safety alert to hospitals warning of the risks of needlestick injuries
from the use of hypodermic needles with intravenous equipment. Among other
things, the safety alert stated that although the FDA could not recommend
specific products, it urged the use of needleless systems or recessed needle
system devices with a fixed safety feature. According to the alert, (1) a fixed
safety feature should provide a barrier between the hands and needle after use;
(2) the safety feature should allow or require the worker's hand to remain
behind the needle at all times; (3) the safety feature should be an integral
part of the device, and not an accessory; (4) the safety feature should be in
effect before disassembly and remain in effect after disposal to protect the
users and trash haulers and for environmental safety; and (5) the safety feature
should be as simple as possible, and require little or no training to use
effectively.
In addition, the U.S. government's Centers for Disease Control and the
National Institute of Health have published guidelines that specify that needles
should not be re-sheathed, bent, broken, removed from disposable syringes or
otherwise manipulated by hand because of the potential for needle stick injury,
with the associated risk of blood-related infection.
As a result of the above mentioned regulations and guidelines, healthcare
institutions utilize equipment, including safety needles, and work practices
that offer greater protection for healthcare workers than previously provided.
Market for Needles and Safety Needles
Safety Needle Syringes. The Company's marketing strategy for its Safety
Syringe sales will be directed at the foreign markets, principally Western
Europe and Japan. The Company is also reassessing the possibilities for
marketing the Safety Syringe in United States. Based upon the limited data
available, the Company estimates the market for disposable syringes and needles
in Western Europe and Japan was approximately 5.2 billion units in 1995, and is
projected to increase to approximately 6.0 billion units in 1998. There is
presently no data available to the Company to determine what percentage safety
syringe and needle devices have or will have of the overall disposable syringe
and needle market in Western Europe and Japan.
Phlebotomy Sets. Based upon the limited data available, the Company
estimates that the annual United States market for vacuum tube phlebotomy sets
was approximately 1.5 billion units in 1995 and that the worldwide market for
phlebotomy sets is two times the size of the United States market, implying a
total annual
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worldwide market of approximately 3 billion units in 1995. The Company does not
have more current data. There is presently no data available to the Company to
determine what percentage safety phlebotomy sets have or will have of the
overall market for phlebotomy sets.
Intravenous Catheters. According to a Report on Catheters dated January
1996 by Theta Corporation, approximately 228 million catheters would be sold in
the United States in 1995, and approximately 620 million catheters would be sold
worldwide in 1995. The Company believes that its Safety Catheter will have a
broad application for catheter placement which requires insertion of the
catheter entry cannula using a steel needle. The types of catheters which
require a catheter insertion device include intravenous, central venous,
oximetry, thermodilution, radiology and angiographic catheters, which according
to a July 1993 Theta Corporation Report, constitute approximately 50% of the
total unit market for catheters. The January 1996 Theta Corporation Report
estimates that the unit market annual growth rate for I.V. catheter devices
worldwide to be approximately 10% through 2000. The January 1996 Theta
Corporation projects that the market for I.V. catheter devices in 1996 will be
approximately 679 million units worldwide. There is presently no data available
to the Company to determine what percentage safety catheter insertion devices
have or will have of the overall market for catheter insertion devices.
Products Under Development
The Company is completing the development and design of its three core
products: the Safety Syringe, Safety Phlebotomy Set and Safety Catheter
(collectively, "Core Products"). The Company continues to modify and enhance the
design of such products in order to improve manufacturability and to reduce
manufacturing costs. The Company has developed prototypes for such products, but
the additional modifications to their design will require the development of a
second generation of prototypes.
Safety Syringe. The Safety Syringe consists of a cylindrical syringe
barrel, holding an injection needle which with no substantial change in
operating technique and using one hand can be safely retracted automatically
within a specially designed syringe plunger. The Safety Syringe is similar in
appearance, size and performance to a standard disposable syringe. The operation
of the Safety Syringe is conventional up to the point where the plunger has
reached its full travel, and all the medication has been delivered. Then, when
the syringe device is actuated to have the plunger move beyond the normal stop,
the needle automatically and fully retracts into the body of the syringe. The
needle is held in place and is rendered harmless and inoperable. The syringe and
needle cannot thereafter be used again. The entire retraction procedure takes
only a fraction of a second to complete. The Safety Syringe then may be safely
handled so that disposal does not pose a health risk. The Safety Syringe is easy
to use and provides visual and audible confirmation that the needle has been
safely retracted after injection. The Safety Syringe can be manufactured with
needles of various gauges and sizes and with barrel sizes one through sixty
cubic centimeters.
Safety Phlebotomy Set. Phlebotomy sets are used to obtain a sufficient
volume of blood for a variety of diagnostic procedures. The Company's Safety
Phlebotomy Set is similar in appearance, size and performance to a standard
phlebotomy set and works with substantially all standard phlebotomy set
accessories. The Safety Phlebotomy Set consists of a barrel holding a
retractable phlebotomy needle, which can be safely and easily retracted within a
specially designed holder. The operation of the Safety Phlebotomy is
conventional up to the point where sufficient fluids have been extracted. Then,
when the phlebotomy device is actuated for the vacuum tube to be moved beyond
the normal stop, the needle automatically and fully retracts into the device.
The needle is held in place and is rendered harmless and inoperable. The Safety
Phlebotomy Set and needle cannot thereafter be used again. The entire retraction
procedure takes only a fraction of a second to complete. The Safety Phlebotomy
Set then may be safely handled so that disposal does not pose a health risk. The
Safety Phlebotomy Set is easy to use and provides visual and audible
confirmation that the needle has been safely retracted after use.
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Safety Catheter. An intravenous catheter insertion device includes a
flexible tube that is used to inject or continuously deliver fluids into a
patient. Intravenous catheters are inserted by catheter insertion devices into a
patient by a needle within the flexible catheter tube. The Safety Catheter
consists of a barrel, holding a retractable insertion needle that can be safely
and easily retracted within a specially designed plunger. The Safety Catheter is
similar in appearance, size and performance to a standard disposable device. The
operation of the Safety Catheter is conventional until after the insertion
needle is removed from the flexible catheter. Then, when the catheter device is
actuated to have the plunger move in the device, the needle automatically and
fully retracts into the body of the Safety Catheter. The needle is held in place
and is rendered harmless and inoperable. The Safety Catheter and needle cannot
thereafter be used again. The entire retraction procedure takes only a fraction
of a second to complete. The Safety Catheter then may be safely handled so that
disposal does not pose a health risk. The Safety Catheter is easy to use and
provides visual and audible confirmation that the needle has been safely
retracted after use.
In addition, the Company has several new products under development,
including the Inline Y-Port Injector Access Needle, the Pre-Filled Ampule
Injector, the MDC Closed Injection System Injector, the Self-Contained
Pre-Filled Syringes and the Pre-Filled Vial Injector System (collectively, the
"New Products"). The New Products are in the initial stages of development,
design and prototyping and will require further development and modification.
Inline Y-Port Injector Access Needle. Y-Ports are devices used in
intravenous therapy as a means to deliver secondary fluids into a primary
intravenous fluid line for delivery into a patient's vein. The Company's In Line
Y-Port Injector Access Needle consists of a cylindrical barrel, holding an
injection needle which can be safely retracted automatically within a specially
designed plunger. The barrel of the Inline Y-Port Injector Access Needle is
fitted with a barbed tube fitting, which protrudes from the barrel at an angle
for connection of a tubing line for delivery of the secondary fluid. A needle
assembly is fixed to the front end of the barrel, and is inserted into an
injection port on the primary intravenous line for delivery of the secondary
fluid. After completion of the delivery of the secondary fluid, the Y-Port
injector device is actuated to have the plunger move forward and the needle
automatically and fully retracts into the plunger. The needle is held in place
and is rendered harmless and inoperable, and the device cannot be used again.
The Inline Y-Port Injector Access Needle then may be safely handled so that
disposal does not pose a health risk. The Inline Y-Port Injector Access Needle
is easy to use and provides visual and audible confirmation that the needle has
been safely retracted after use.
Pre-Filled Ampule Injector. Pre-filled ampules are commonly used in the
dental profession for administering local anesthetics to a patient. The
retractable needle Pre-Filled Ampule Injector device provides a means for a
healthcare worker to inject medicinal fluids into a patient from a pre-filled
ampule using a conventional injector/holder, and also provides a means to
protect the healthcare worker from accidental needle stick injury when
withdrawing the needle from the patient. The Pre-Filled Ampule Injector consists
of a tubular barrel (glass or plastic) containing a medicinal fluid in an amount
sufficient for a single dose, with a sealing and sliding piston in the rear end
of the barrel for containing and delivering the fluid through a tubular needle
extending from the forward end of the barrel. The sliding piston is moved
forward for delivery of the medication by using a conventional (Tubex type)
injector/holder which is slip-fitted to the rear end of the barrel, with the
plunger rod threaded onto the rear end of the piston. A needle assembly is fixed
to the front end of the barrel, containing a spring to provide retracting force
on the needle when activated. The operation of the Pre-Filled Ampule Injector is
identical to the operation of a conventional syringe up the point where the
plunger rod has reached its full travel, and all the medication has been
delivered. When the ampule injector device is actuated to have the plunger rod
move further forward, the needle automatically and fully retracts into the body
of the ampule. The needle is held in place and is rendered harmless and
inoperable, and the Pre-Filled Ampule Injector cannot be used again. The
Pre-Filled Ampule Injector then may be safely handled so that disposal does not
pose a health risk. The Pre-Filled Ampule Injector is easy to use and provides
visual and audible confirmation that the needle has been safely retracted after
injection. The Pre-Filled Ampule Injector can be manufactured with barrels and
needles of various sizes.
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MDC Closed Injection System. Pre-filled ampules are commonly used in
the dental profession for administering local anesthetics to a patient. The
retractable needle MDC Closed Injection System device provides a means for a
healthcare worker to inject medicinal fluids into a patient from a pre-filled
ampule using a special injector/holder and also provides a means to protect the
healthcare worker from an accidental needle stick injury when withdrawing the
needle from the patient. The MDC Closed Injection System is similar to the
Pre-Filled Ampule Injector and consists of a tubular barrel (glass or plastic)
containing a medicinal fluid in an amount sufficient for a single dose, with a
sealing and sliding piston in the rear end of the barrel for containing and
delivering the fluid through a tubular needle extending from the forward end of
the barrel. The sliding piston is moved forward for delivery of the medication
by using a specially configured injector/holder which is threaded to the rear
end of the barrel, with the plunger rod slipped onto the rear end of the piston.
A needle assembly is fixed to the front end of the barrel, containing a spring
to provide retracting force on the needle when activated. The operation of the
MDC Closed Injection System is identical to the operation of a conventional
syringe up to the point where the plunger rod has reached its full travel, and
all the medication has been delivered. When the injection system device is
actuated to have the plunger rod move further forward, the needle automatically
and fully retracts into the body of the ampule. The needle is held in place and
is rendered harmless and inoperable, and the MDC Closed Injection System cannot
be used again. The MDC Closed Injection System then may be safely handled so
that disposal does not pose a health risk. The MDC Closed Injection System is
easy to use and provides visual and audible confirmation that the needle has
been safely retracted after injection. The MDC Closed Injection System can be
manufactured with barrels and needles of various sizes.
Self-Contained Pre-Filled Syringe. The Self-Contained Pre-Filled Syringe
consists of a tubular barrel (glass or plastic) containing a medicinal fluid in
an amount sufficient for a single dose, with a sealing and sliding piston in the
rear end of the barrel for containing and delivering the fluid through a tubular
needle extending from the forward end of the barrel. The Self-Contained
Pre-Filled Syringe is self-contained because a separate injector assembly is not
required for operation. The function of a plunger rod for pushing the piston is
provided by a special needle cap. The sliding piston is moved forward for
delivery of the medication by using the special needle cap (plunger rod)
threaded onto the rear end of the piston. A needle assembly is fixed to the
front end of the barrel, containing a spring to provide retracting force on the
needle when activated. The operation of the Self-Contained Pre-Filled Syringe
is identical to the operation of a conventional syringe up to the point where
the plunger rod has reached its full travel, and all the medication has been
delivered. When the syringe device is actuated to have the plunger rod move
further forward, the needle automatically and fully retracts into the body of
the Self-Contained Pre-Filled Syringe. The needle is held in place and is
rendered harmless and inoperable, and the Syringe cannot be used again. The
Self-Contained Pre-Filled Syringe then may be safely handled so that disposal
does not pose a health risk. The Self-Contained Pre-Filled Syringe is easy to
use and provides visual and audible confirmation that the needle has been safely
retracted after injection, The Self-Contained Pre-Filled Syringe can be
manufactured with barrels and needles of various sizes.
Pre-Filled Vial Injector System. The Pre-Filled Vial Injector System
consists of a main cylindrical housing with a stationary plunger for holding a
slidable piston in a fixed position as a glass pre-filled vial is pushed into
the main housing. The pre-filled vial is an existing product produced by several
pharmaceutical manufacturers and contains fluid medication with an elastomeric
piston comprising a slidable fluid seal within the forward end of the vial. The
slidable piston is threaded onto the rear end of the stationary plunger and is
moved rearward into the vial by pushing the vial forward into the main housing
and delivering the fluid through a tubular needle extending from the forward end
of the main housing. A needle assembly is fixed to the front end of the barrel,
containing a spring to provide retracting force on the needle when activated.
The operation of the Pre-Filled Vial Injector System is identical to the
operation of a conventional syringe up the point where the vial has reached its
full travel, and all the medication has been delivered. When the injector system
device is actuated to have the vial move further forward, the needle
automatically and fully retracts into the body of the vial. The needle is held
in place and is rendered harmless and inoperable, and the Pre-Filled Vial
Injector System cannot be used again. The Pre-Filled Vial Injector System may be
safely handled so that disposal does not pose a health risk. The Pre-Filled Vial
Injector System is easy to use and provides visual and audible confirmation that
the
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needle has been safely retracted after injection. The Pre-Filled Vial Injector
System can be manufactured for vials and needles of various sizes.
In addition to the Company's three core products and the New Products, the
Company has identified several additional product applications where its
proprietary retraction technology can be incorporated and plans to devote
research and development resources in 1997 to research and develop such
products.
Research and Development
The Company has devoted substantially all of its research and development
efforts since its formation to development related to safety needles and the
design and development of the equipment necessary to assemble the safety needle
devices. Research and development expenses amounted to $1,554,096 in 1996 and
$6,541,916 in 1995. Included in 1995 research and development expenses was
$5,932,770 for purchased research and development incurred in connection with
the acquisition of MDI.
In 1995, the Company completed a research and development laboratory in its
facility in Ventura, California which is equipped with assembly and test
equipment for product development and creation of models of products to prove
their feasibility ("concept modeling"). In addition, the Company completed a
machine shop equipped with machine tools for fabrication of new product parts
for concept modeling and assembly and test fixtures. The Company also installed
a Class 100,000 clean room at the Ventura facility which is currently used for
the hand assembly of prototypes of the Company's products and will ultimately be
used in connection with the pilot manufacturing of various products of the
Company on a semi-automated assembly system or a fully automated robotic
assembly system, when the Company installs such a system.
The Company intends to complete any research and development on the Safety
Syringe, Safety Phlebotomy Set and Safety Catheter which is necessary to enable
the Company to improve their manufacturability and to reduce manufacturing
costs. The Company also intends to continue its research and development of the
New Products, which are in the initial stages of development, design and
prototyping. In addition, the Company intends to devote resources to the
research and development of additional safety needle devices and products which
incorporate the Company's proprietary retraction technology for use in the
healthcare industry.
Marketing and Sales
The Company currently intends to market and sell directly or through third
parties the Safety Phlebotomy Set and Safety Catheter in the United States and
all three of its core safety needle products in select foreign countries. To
avoid the possibility of a charge of patent infringement, the Company originally
elected to manufacture and market the Safety Syringe only outside the United
States. In 1996, however, the Company re-engineered certain aspects of the
Safety Syringe and eliminated a potential U.S. patent conflict identified in its
Initial Public Offering prospectus. As result, the Company is reassessing the
possibilities for marketing the Safety Syringe in the United States. See
"Patents and Proprietary Rights" below. The Company's plan for the distribution
and sales of the Safety Syringe, the Safety Phlebotomy Set, Safety Catheter, and
the New Products will target major segments of the respective markets for those
products, including, major hospital and institutional buying groups,
pharmaceutical companies, distributors and wholesalers, and government and
military agencies.
The Company is currently investigating opportunities with third parties in
the United States and abroad to market and distribute the Safety Syringe, the
Safety Phlebotomy Set and the Safety Catheter and certain of its other products
under licensing agreements or through other forms of joint ventures. The Company
has entered into several confidentiality agreements with other companies for the
purpose of exploring such opportunities. The Company anticipates that entering
into alliances and licensing arrangements with third parties would enable the
Company to increase the market penetration of its products more quickly than the
Company could achieve on its own.
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The Company is not permitted to sell any of its products for commercial use
in the United States until, and only if, such products are cleared for marketing
by the FDA. See "Government Regulation" below. From June 1995 to December 1996,
the Company focused its efforts on the preparation of a 510(k) pre-market
notification for submission to the FDA for the Safety Catheter, Safety
Phlebotomy Set and Safety Syringe. The Company filed the 510(k) pre-market
notification for the Safety Catheter and Safety Phlebotomy Set with the FDA on
December 28, 1995. On February 13, 1996, then the FDA notified the Company that
it may begin marketing the Safety Catheter. On March 15, 1996, the FDA notified
the Company that it was holding the 510(k) pre-market notification for the
Safety Phlebotomy Set for 30 days pending receipt of the additional information
requested by the Office of Device Evaluations ("ODE"). A written request for
additional information from the ODE was received by the Company on March 13,
1996. The Company responded by requesting a ninety day extension, which was
granted on April 18, 1996. The Company voluntarily withdrew the 510(k)
pre-market notification because of modifications and improvements made to the
original design of the Safety Phlebotomy Set. The Company presently intends to
file a new 510(k) pre-market notification for the modified Safety Phlebotomy Set
with the FDA during the second quarter of 1997. The Company also anticipates
that it will complete and file a 510(k) pre-market notification with the FDA
during the fourth quarter of 1997 for the Safety Syringe and/or several New
Products.
In addition to being subject to the U.S. government's Food, Drug and
Cosmetic Act (the "FD&C Act") and the regulations promulgated thereunder, the
Company must comply with the laws and regulations of the various foreign
countries in which the Company plans to sell the Safety Catheter, Safety
Phlebotomy, Safety Syringe and other products prior to selling such products in
such foreign countries. Certain foreign countries may only require the Company
to submit evidence of the FDA's pre-market clearance of the Company's products,
prior to selling in such countries. However, some foreign countries may have
more stringent requirements and require additional testing and approvals.
The Company currently plans to hire sales and marketing personnel. However,
the number of sales and marketing employees hired will vary depending on the
extent to which the Company undertakes to market and sell its products directly
and the extent to which it contracts with third parties or forms strategic
alliances with other parties to market and sell its products. The Company is
currently investigating opportunities with third parties to market and
distribute various products of the Company under development in the United
States and select foreign countries. To the extent the Company decides not to
market and distribute any one of its products directly, the Company will seek to
enter into contracts, licensing agreements and/or joint ventures with such third
parties whereby the Company would receive a licensing fee and/or royalty
payments based on the licensee's revenues. The Company would likely enter into
such distribution arrangements with several companies, possibly by country,
geographical regions and/or product types. The Company has not yet entered into
any such distribution arrangements and there can be no assurance that the
Company will, in the future, be able to enter into such distribution
arrangements on acceptable terms.
The Company intends to market its products by, among other things,
attending tradeshows and advertising in industry publications. The Company
intends to distribute limited quantities of the Safety Syringe, Safety
Phlebotomy Sets, Safety Catheters, and certain of the New Products free of
charge to various healthcare institutions and professionals in the United States
and in selected foreign countries to introduce and create a demand for the
Safety Syringe, Safety Phlebotomy Set, Safety Catheter, and certain of the New
Products in the marketplace. The Company has provided a limited quantity of its
Safety Syringes, Safety Catheters, Safety Phlebotomy Sets, and certain of the
New Products to third parties in the United States and selected foreign
countries under confidentiality agreements for market research purposes.
Manufacturing
In 1995, the Company leased approximately 26,000 square feet of space in
Ventura, California. In addition to administrative offices, the Ventura facility
contains a research and development laboratory equipped
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with assembly and test equipment for concept modeling and product development
and a machine shop equipped with machine tools for fabrication of new products
for concept modeling and assembly and test fixtures. The Company also installed
a 3,120 square foot Class 100,000 clean room at the Ventura facility, which is
currently being used for the assembly of prototypes and products. The Company
had originally planned to install in the clean room a fully automated robotic
assembly system to pilot manufacture its products. The Company, however, elected
not to install a fully automated robotic assembly system. Instead, it elected to
install a semi-automated assembly system to pilot manufacture its products.
The semi-automated assembly system, which will consist of a series of
manual and semi-automatic stations, will be capable of producing up to 3,000,000
units per year. The assembly system will produce one or more of the Company's
products at a time, and will have the capability of being converted at a
reasonable cost with minimal delay to manufacture a different product at such
time as the Company may devise. During the fourth quarter of 1996, the Company
partially completed the installation of the semi-automated assembly system for
the production of one of the Company's products. The Company intends to have the
system fully operational during the second quarter of 1997. In addition to
having the capability of manufacturing its product for sale, another objective
of the Company is installing the assembly system to demonstrate to potential
third party manufacturers the economic feasibility of the commercial production
of its products.
In 1996 and 1995, the Company hand assembled Safety Syringes, Safety
Phlebotomy Sets, Safety Catheters, and New Products in a quantity necessary to
conduct any testing required by the FDA, for internal engineering purposes, and
for market research purposes. The Company plans to continue hand assembling such
products and New Products, until such time as the Company has the capability of
manufacturing the products on its semi-automated assembly system, scheduled to
be fully operational during the second quarter of 1997, or a third party is
manufacturing such products.
Although the Company's plans may change as a result of future discussions
which it intends to have with third parties. The Company's current plan is to
produce on the semi-automated assembly system at least 50,000 units of the
Safety Catheter and 100,000 units of the Safety Phlebotomy Set in order to
demonstrate to potential third party manufacturers the economic feasibility of
the commercial production of its products and such number of its products
necessary for FDA clearance. Thereafter, the Company will determine whether it
will mass manufacture the Safety Phlebotomy Set or the Safety Catheter or any of
its other products or components of its products for commercial sale. Although
the Company originally planned to manufacture and distribute the Safety
Phlebotomy Set and Safety Catheter directly, the Company may ultimately contract
with third parties for all or a portion of the needed production of such
products on a contract manufacturing basis, licensing arrangement or other form
of joint venture. To the extent the Company decides to mass manufacture any of
its products or components, the Company may need to expand its current
facilities and/or lease or purchase additional manufacturing facilities and
equipment.
The Company may require that any third party manufacturer of its products
use the semi-automated assembly system designed by the Company in order to
maintain quality control over its products. In addition, the Company intends to
establish a quality control and quality assurance program designed to assure
that the Company's products are manufactured in accordance with the FDA's
regulations related to Good Manufacturing Practices and other applicable
domestic and foreign regulations; however, the Company will be dependent upon
any such third party manufacturers to comply with such procedures and
regulations.
To the extent the Company manufactures any of its products, it believes
there are a number of possible suppliers for most of the components and
subassemblies for its products. Although the Company intends to purchase the
component parts of the Company's products from various outside suppliers, the
Company may ultimately enter into agreements to purchase certain components from
a single source. The component parts of the Company's products will be made by
such suppliers according to drawings and specifications provided by the Company.
The materials used in the components are plastics and stainless steel and are
available from numerous
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sources. While alternative manufacturers of most component parts are available,
changes in the Company's suppliers could disrupt production schedules and could
materially and adversely affect the Company.
Patents and Proprietary Rights
The Company's success will depend in part on its ability to obtain and
maintain patent protection for its products, to preserve its trade secrets and
to operate without infringing the proprietary rights of third parties. The
Company's policy is to attempt to protect its intellectual property and maintain
the proprietary nature of its technology by, among other things, filing patent
applications for technology that it considers important to the development of
its business and requiring certain employees and key consultants to execute
non-disclosure and non-compete agreements.
The Company's U.S. patent rights currently consist of three United States
patents, one relating to the Safety Syringe, another relating to the Safety
Phlebotomy Set and the third relating to the Safety Catheter. The Company has
been granted a patent relating to the Safety Syringe in Japan, Australia and in
Romania. Corresponding regional and national patent applications relating to the
Safety Syringe are pending in the European Patent Office, designating twelve
countries, and in eight member countries of the Patent Cooperation Treaty.
In 1995, the Company filed an international patent application, and a
corresponding Taiwanese patent application which has been granted, directed to
its Safety Catheter, which incorporates several modifications and changes from
the original design on which it obtained a U.S. patent. Also in 1995, the
Company filed a U.S. patent application and a corresponding Taiwanese patent
application directed to its retractable needle Inline Y-Port Injector Access
Needle. In 1996, the Company filed a U.S. patent application directed to its
Self-Contained Pre-Filled Syringe and its MDC Closed Injection System. Also, in
1996, the Company filed a U.S. patent application relating to a new and improved
version of its Safety Phlebotomy Set and a U.S. provisional patent application
directed to its Pre-Filled Vial Injector System.
On March 25, 1996, the European Patent Office approved the Company's
European patent application for its Safety Syringe, which was based on an
international application filed November 20, 1990. The European application
designates the countries of Austria, Belgium, Switzerland, Liechtenstein,
Germany, Denmark, Spain, France, Great Britain, Greece, Italy, Netherlands, and
Sweden for protection, and the Company will undertake to register the allowed
European patent application in the designated European countries. The European
patent coverage will complement the patents that have already been allowed in
Romania and Bulgaria. The Company will continue to seek additional patent
protection for its products in related European patent applications.
There can be no assurance that the Company's current patent applications
and provisional patent applications will result in patents being issued.
As the Company proceeds toward final designs for its Safety Syringe, Safety
Phlebotomy Set and Safety Catheter devices, the Company is having searches
conducted in the United States for unexpired patents owned by others that may
conflict with any final product designs. The Company, however, has not conducted
any infringement searches in any foreign country for the purpose of finding
unexpired patents or pending patent applications that might raise a possibility
of infringement or conflict with the Company's planned activities. Furthermore,
the Company is considering appropriate modifications to the product designs to
optimize the final products and to avoid conflicts with patents of others. To
the extent that such final product designs may not be protected by the Company's
existing patents and patent applications, the Company will file new patent
applications relative to its final products. There can be no assurance that all
of the potentially relevant patents of others have been identified or that the
Company will be able to obtain patent protection for the designs for its
products.
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There can also be no assurance that any patents owned by or issued to the
Company, or that may issue to the Company in the future, will provide a
competitive advantage or will afford protection against competitors with similar
technology, or that competitors of the Company will not circumvent, or challenge
the validity of any patents issued to the Company. There also can be no
assurance that any patents issued to or licensed by the Company will not be
infringed upon or designed around by others, that others do not have or will not
obtain patents that the Company will need to license or design around, that the
Company's products will not inadvertently infringe upon the patents of others,
or that others will not make the Company's patented devices upon expiration of
such patents. There can be no assurance that existing or future patents of the
Company will not be invalidated. Moreover, although the Company utilizes
non-disclosure agreements and other safeguards to protect its proprietary
information and trade secrets, there can be no assurance that they will protect
such information or provide adequate remedies for the Company in the event of
unauthorized use or disclosure of such information, or that others will not be
able to independently develop such information. As is the case with the
Company's patent rights, the enforcement by the Company of its non-disclosure
agreements can be lengthy and costly, with no guarantee of success.
If the Company becomes involved with patent infringement litigation, either
to enforce the Company's patents or defend against patent infringement suits,
such litigation would be lengthy and expensive, and if it occurs, would divert
Company resources from planned uses. Further, any adverse outcome in such
litigation could have a material adverse effect on the Company. If any of the
Company's products are found to infringe upon the patents or proprietary rights
of another party, the Company may be required to obtain licenses under such
patents or proprietary rights. No assurance can be given that any such licenses
would be made available on terms acceptable to the Company, if at all. In
addition, patent applications filed in foreign countries and patents granted in
such countries are subject to laws, rules and procedures which differ from those
in the United States. Patent protection in such countries may be different from
patent protection provided by the United States laws and may not be as favorable
to the Company. There can be no assurance that the Company's program of patent
protection and non-disclosure agreements will be sufficient to protect the
Company's proprietary technology from competitors.
The Company has filed an intent to use trademark application for the marks
"IM Safe" and "Safe Step" with the United States Patent and Trademark Office.
The Company may apply for other trademarks in the future.
Competition
The needle market is highly competitive. The Company will compete in the
Unites States and abroad with medical product companies, including Becton
Dickinson and Company, Sherwood Medical, a division of American Home Products
Corporation, Terumo Medical, Johnson & Johnson, U.S. Medical Laboratories, and
Bio-Plexus, Inc. Two of these companies (Becton-Dickinson and Sherwood Medical)
also manufacture safety needles. The Company's Safety Syringe, Safety Phlebotomy
Set and Safety Catheter would compete with the standard and safety syringes,
phlebotomy sets and intravenous catheter devices manufactured by these and other
companies in the United States and in certain foreign countries. Many of the
Company's competitors have better name recognition in the market, longer
operating histories, and are substantially larger and better financed than the
Company. Such competitors may use their economic strength to influence the
market to continue to buy their existing products or new products developed by
them. One or more of these competitors also could use such resources to improve
their current products or develop additional products which may compete more
effectively with the Company's products. New competitors may arise and may
develop products which compete with the Company's products. In addition, new
technologies may arise which could lower or eliminate the demand for the
Company's products. The Company cannot predict the development of future
competitive products or companies.
Historically, the needle market has been price competitive with little
differentiation between products. In addition to price, safety needles compete
for market share based on operating features and safety. In recent years,
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the medical industry has adopted infection control practices which encourage the
use of safer medical devices due principally to the high cost of treating
infection and potential liability resulting from accidental needlesticks.
Safety needle devices are generally estimated to cost two to three times
the price of their counterpart standard needle devices. A major factor in the
introduction of new products designed to reduce the risk of accidental
needlesticks to healthcare workers is whether the increased expense of a safer
device is offset by the savings of preventing accidental needlesticks. According
to the AHA report dated December 1992, the direct costs for medical evaluation
and follow-up after a single needlestick injury ranges from $200 to $1,200. This
figure does not include indirect costs, such as time lost from work and other
administrative activities. Although it is difficult to estimate the total costs
associated with accidental needlestick injuries with any degree of confidence,
the Report on Medical Needles and Syringes dated January 1994 by Theta
Corporation estimates that the total cost associated with treating accidental
needlesticks in the United States averages $3 billion each year. The AHA report
and other authorities have stated that the benefit resulting from the prevention
of accidental needlesticks cannot be measured solely by savings in costs of
medical treatment, because of the costs of treating persons who contract an
illness or infection from an accidental needlestick, the time lost from work and
death. Although the Company cannot predict with certainty the prices of its
products, currently available safety needle devices are priced at approximately
two to three times that of standard devices. Notwithstanding the price
differential, the Company believes that, based upon the estimated costs
associated with accidental needlesticks, its products should be considered cost
effective by the marketplace.
Except for the Company's products, the Company believes that most of the
current safety needles use an external sheath design or require manual
retraction of the needle. The external sheath design generally requires the
operator to move a protective sheath over the needle after removing the needle
from the patient (a sliding sleeve) or manipulate the device to cover the used
needle tip (a disappearing needle). The methods of use and disposal of the
Safety Syringe, Safety Phlebotomy Set and Safety Catheter are virtually
identical to the present methods of use and disposal for standard syringes,
phlebotomy sets and intravenous catheter insertion devices.
Government Regulation
As medical devices, the Company's products are subject to regulation by the
FDA under the U.S. government's Food, Drug and Cosmetic Act ("FD&C Act") and
implementing regulations. Pursuant to the FD&C Act, the FDA regulates, among
other things, the manufacture, labeling, distribution, and promotion of the
Company's products in the United States. The FD&C Act requires that a medical
device must (unless exempted by regulations) be cleared or approved by the FDA
before being commercially distributed in the United States. The FD&C Act also
requires manufacturers of medical devices to, among other things, comply with
labeling and promotion requirements and to manufacture devices in accordance
with Good Manufacturing Practices ("GMPs"), which require that companies
manufacture their products and maintain related documentation in a prescribed
manner with respect to manufacturing, testing and quality control activities.
The FDA inspects medical device manufacturers and distributors, to enjoin and/or
impose civil penalties on manufacturers and distributors marketing noncomplying
medical devices, and to criminally prosecute violators.
Pursuant to the FD&C Act, the FDA classifies medical devices intended for
human use into three classes, Class I, Class II, and Class III. In general,
Class I devices are products the safety and effectiveness of which the FDA
determines can be reasonably assured by general controls under the FD&C Act
relating to such matters as adulteration, misbranding, registration,
notification, records and reports, and GMPs. Class II devices are products for
which FDA determines that these general controls are insufficient to provide
reasonable assurance of safety and effectiveness, and that require special
controls such as the promulgation of performance standards, post-market
surveillance, patient registries, or such other actions as FDA deems necessary.
Class III devices are devices for which FDA has insufficient information to
conclude that either general controls or special controls would be sufficient to
assure safety and effectiveness, and which are life-supporting, life-sustaining,
of substantial importance in preventing impairment of human health (e.g., a
diagnostic device to detect a life-threatening
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illness), or present a potential unreasonable risk of illness or injury. Devices
in this case require pre-market approval, as described below.
The FD&C Act further provides that, unless exempted by regulation, medical
devices may not be commercially distributed in the United States unless they
have been approved or cleared by the FDA. There are two review procedures by
which medical devices can receive such approval or clearance. Some products may
qualify for clearance under a Section 510(k) procedure, in which the
manufacturer submits to the FDA a pre-market notification that it intends to
begin marketing the product, and shows that the product is substantially
equivalent to another legally marketed product (i.e., that it has the same
intended use and that it is as safe and effective as a legally marketed device,
and does not raise different questions of safety and effectiveness than does a
legally marketed device). In some cases, the 510(k) notification must include
data from human clinical studies. In March 1995, the FDA issued a draft guidance
document on 510(k) notifications for medical devices with sharps injury
prevention features, a category that would cover all of the Company's existing
and new products. The draft guidance provisionally placed this category of
products into Tier 3 for purposes of 510(k) review, meaning that such products
will be subject to the FDA's most comprehensive and rigorous review for 510(k)
products. The draft guidance also states that in most cases, the FDA will
accept, in support of a 510(k) notification, data from tests involving simulated
use of such a product by health care professionals, although in some cases the
agency might require actual clinical data.
Marketing may commence when the FDA issues a clearance letter finding such
substantial equivalence. According to FDA regulations, the agency has 90 days to
respond to a 510(k) notification. There can be no assurance, however, that the
FDA will provide a response within that time, or that the agency will reach a
finding of substantial equivalence.
If a product does not qualify for the 510(k) procedure (either because it
is not substantially equivalent to a legally marketed device or because it is a
Class III device), the FDA must approve a pre-market approval ("PMA")
application before marketing can begin. PMA applications must demonstrate, among
other matters, that the medical device is safe and effective. A PMA application
is typically a complex submission, usually including the results of clinical
studies, and preparing an application is a detailed and time-consuming process.
Once a PMA application has been submitted, the FDA's review may be lengthy and
may include requests for additional data. By statute and regulation, the FDA may
take 180 days to review a PMA application although such time may be extended.
Furthermore, there can be no assurance that a PMA application will be reviewed
within 180 days or that a PMA application will be approved by the FDA.
The Company submitted a 510(k) pre-market notification for the Safety
Catheter and Safety Phlebotomy Set with the FDA on December 28, 1995. On
February 13, 1996, the FDA notified the Company that it may begin marketing the
Safety Catheter. On March 15, 1996, the FDA notified the Company that it was
holding the 510(k) pre-market notification for the Safety Phlebotomy Set for 30
days pending receipt of the additional information requested by the Office of
Device Evaluations ("ODE"). A written request for additional information from
the ODE was received by the Company on March 13, 1996. The Company responded by
requesting a ninety day extension, which was granted on April 18, 1996. The
Company voluntarily withdrew the 510(k) pre-market notification because of
modifications and improvements made to the original design of the Safety
Phlebotomy Set. The Company presently intends to file a new 510(k) pre-market
notification for the modified Safety Phlebotomy Set with the FDA during the
second quarter of 1997. The Company also anticipates that it will complete and
file a 510(k) pre-market notification with the FDA during the fourth quarter of
1997 for the Safety Syringe and/or several New Products. The Company believes
that the Safety Phlebotomy Set, Safety Syringe, and three non-core products (New
Products) will be classified as Class II devices, and that such products will
not require a PMA application but will be eligible for marketing clearance
through the 510(k) notification procedure based upon their substantial
equivalence to a previously marketed device or devices.
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Although the 510(k) pre-market clearance process is ordinarily simpler and
faster than the PMA application process, there can be no assurance that the
Company will obtain 510(k) pre-market clearance to market the Safety Phlebotomy
Set or Safety Syringe, or that such products will be classified as Class II
devices, or that, in order to obtain 510(k) clearance, the Company will not be
required to submit additional data or meet additional FDA requirements that may
substantially delay the 510(k) process and add to the Company's expenses.
Moreover, such 510(k) pre-market clearance, if obtained, may be subject to
conditions on the marketing or manufacturing of the corresponding products that
may impede the Company's ability to market and/or manufacture such products.
In addition to the requirements described above, the FD&C Act requires that
all medical device manufacturers and distributors register with the FDA annually
and provide the FDA with a list of those medical devices which they distribute
commercially. The FD&C Act also requires that all manufacturers of medical
devices comply with labeling requirements and manufacture devices in accordance
with GMPs, which require that companies manufacture their products and maintain
their documents in a prescribed manner with respect to manufacturing, testing,
and quality control activities. The FDA's Medical Device Reporting regulation
requires that companies provide information to the FDA on death or serious
injuries alleged to have been associated with the use of their products, as well
as product malfunctions that would likely cause or contribute to death or
serious injury if the malfunction were to recur. The FDA further requires that
certain medical devices not cleared for marketing in the United States have FDA
approval before they are exported.
The FDA inspects medical device manufacturers and distributors, and has
broad authority to order recalls of medical devices, to seize noncomplying
medical devices, to enjoin and/or to impose civil penalties on manufacturers and
distributions marketing non-complying medical devices, and to criminally
prosecute violators.
The Company will be required under FDA regulations to register the pilot
manufacturing facility with the FDA before engaging in the commercial
distribution of any of its products. As such, the facilities will be subject to
inspection on a routine basis to assure compliance with the FDA's GMP
regulations.
In addition to laws and regulations enforced by the FDA, the Company is
subject to government regulations applicable to all businesses, including, among
others, regulations related to occupational health and safety, workers' benefits
and environmental protection.
Distribution of the Company's products in countries other than the United
States may be subject to regulation in those countries. There can be no
assurance that the Company will be able to obtain the approvals necessary to
market its needle devices or any other product outside of the United States.
Employees
As of March 15, 1997, the Company employed 26 people on a full-time basis
and one person on a part-time basis. The Company believes its employee relations
are satisfactory. The Company anticipates increasing the number of employees in
the areas of product development, manufacturing, sales and marketing. The number
of employees that the Company will need to hire will vary according to the
progress made in the development of the Company's pilot manufacturing plant and
the extent to which the Company undertakes the manufacture, marketing and
distribution of its products.
Environmental Matters
The Company believes its operations are currently in compliance in all
material respects with applicable Federal, state, and local laws, rules,
regulations and ordinances regarding the discharge of materials into the
environment. Such compliance has no material impact upon the Company's capital
expenditures, earnings or competitive position, and no capital expenditures for
environmental control facilities are planned.
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Subsequent Events
On January 23, 1997, the Company completed a sale ("Placement") of
1,000,000 shares of Common Stock at a price of $5.00 per share pursuant to a
Private Placement to certain "accredited investors" (pursuant to Regulation D of
the Securities Act of 1933, as amended). The Company received proceeds of
approximately $4,627,000, net of expenses incurred in connection with the
Placement.
In connection with the Placement, the Company agreed to sell, for nominal
consideration, warrants to purchase 100,000 shares of Common Stock ("Placement
Agent Warrants"). The Placement Agent Warrants are exercisable at a price of
$5.50 a share of Common Stock for a period of four years commencing January 22,
1998.
On February 21, 1997, the Company reduced debt outstanding under its Loan
Agreement by $2,000,000.
On March 19, 1997, the Company issued warrants to purchase 100,000 shares
of its Common Stock at $7.50 to a director. These warrants are exercisable on or
before March 19, 2000.
ITEM 2. PROPERTIES
The Company has leased approximately 3,236 square feet of office space for
its corporate headquarters in Philadelphia, Pennsylvania for a base rent of
approximately $3,932 per month. The lease expires on November 30, 2000.
The Company leases approximately 26,000 square feet of space in Ventura,
California ("Ventura Facility") for the Company's administrative offices, pilot
manufacturing plant, research and development facilities and offices for a base
rent of $11,708 per month. At the present time, approximately 8,700 square feet
of the space is being used by the Company for research and development,
engineering and administrative offices, approximately 2,200 square feet is being
used exclusively for research and development and approximately 3,120 square
feet is being used as a clean room for the assembly of prototypes of the
Company's products and ultimately will be used to pilot manufacture its
products. The remaining space is being used for shipping and handling, quality
control inspections and storage of parts, finished products and equipment. The
Company plans to install a semi-automated assembly system to pilot manufacture
certain of its products in the clean room. The lease expires on October 31,
2000, although the Company has the option to extend the term for two additional
36 month periods as well as the option to purchase this facility.
Earlier in 1997, the Company announced its intention to relocate its
corporate headquarters to the Ventura Facility. The Company has not yet
established a date for its corporate relocation.
The Company believes that its facilities are adequate for its current needs
and that suitable additional or substitute space will be available as needed.
ITEM 3. LEGAL PROCEEDINGS
There are no material legal proceedings pending or, to the knowledge of
management, threatened against the Company.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter ended December 31, 1996 through the solicitation of proxies or
otherwise.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's common stock has been approved for trading in the NASDAQ
SmallCap Market under the symbol ("MEDC") since the Company's Initial Public
Offering on June 7, 1995. The following table sets forth for the fiscal quarters
indicated since the date of the Initial Public Offering, the range of high and
low bid information for the Company's Common Stock in the NASADAQ SmallCap
Market:
Market Information
Fiscal year ended December 31, 1995 High Low
----------------------------------- ---- ---
Second Quarter (June 7, 1995 to June 30, 1995)............. $ 6 7/8 $ 3 3/16
Third Quarter (July 1, 1995 to September 30, 1995)......... 8 1/2 5 13/16
Fourth Quarter (October 1, 1995 to December 31, 1995)...... 8 1/4 6 3/4
Fiscal year ended December 31, 1996 High Low
----------------------------------- ---- ---
First Quarter (January 1, 1996 to March 31, 1996) $20 $ 9 1/2
Second Quarter (April 1, 1996 to June 30, 1996)............ 21 3/4 15 1/2
Third Quarter (July 1, 1996 to September 30, 1996)......... 15 3/4 9 1/2
Fourth Quarter (October 1, 1996 to December 31, 1996)...... 11 3/4 4 7/8
On January 31, 1996, the Company declared a 100% Common Stock dividend,
which was distributed on February 26, 1996 to stockholders of record as of
February 12, 1996. All share and per share data in this Annual Report have been
retroactively adjusted to reflect that stock dividend.
Holders
As of March 14, 1997, the Company had 128 holders of record of the Common
Stock. Since a portion of the Company's Common Stock is held in "street" or
nominee name, the Company is unable to determine the exact number of beneficial
holders.
Dividends
The Company has never declared or paid a cash dividend on its Common Stock.
The Company currently anticipates that it will retain all of its earnings to
finance the operation and expansion of its business, and therefore does not
intend to pay dividends on its Common Stock in the foreseeable future. Any
determination to pay dividends in the future is at the discretion of the
Company's Board of Directors and will depend upon the Company's financial
condition, results of operations, capital requirements, limitations contained in
loan agreements and such other factors as the Board of Directors deems relevant.
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ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion and analysis should be read in conjunction with
the consolidated financial statements and notes thereto of the Company which
appear elsewhere herein.
To date, the Company has received no revenues from product sales. The
Company does not anticipate any significant revenues from product sales during
the next twelve months. During the fourth quarter of 1996, the Company partially
completed the installation of the semi-automated assembly system for the
production of one of the Company's products. The Company intends to have the
system fully operational during the second quarter of 1997.
Results of Operations
Research and development expenses amounted to $1,554,096 in 1996 and
$6,541,916 in 1995. Included in 1995 research and development expenses was
$5,932,770 for purchased research and development incurred in connection with
the acquisition of MDI.
Plan of Operation
Although the Company's plans may change as a result of its discussions with
third parties for the manufacture and/or distribution of its products, the
Company's current plan is to produce at least 50,000 units of the Safety
Catheter and 100,000 units of the Safety Phlebotomy Set in order to demonstrate
to potential third party manufacturers the economic feasibility of the
commercial production of its products. Thereafter, the Company will determine
whether it will mass manufacture the Safety Phlebotomy Set or the Safety
Catheter or any of its other products or components of its products for
commercial sale. Although the Company originally planned to manufacture and
distribute the Safety Phlebotomy Set and Safety Catheter directly, the Company
may contract with third parties for all or a portion of the needed production of
such products on a contract manufacturing basis, licensing arrangement or other
form of joint venture. To the extent the Company decides to mass manufacture any
of its products or components, the Company may need to expand its current
facilities and/or lease or purchase additional manufacturing facilities and
equipment.
The Company intends to continue its research and development on the Safety
Syringe, Safety Phlebotomy Set and Safety Catheter to enable the Company to
improve their manufacturability and to reduce manufacturing costs. The Company
also intends to continue its research and development of the New Products, which
are in the initial stages of development, design and prototyping. In addition,
the Company intends to devote resources to the research and development of
additional safety needle devices and products which incorporate the Company's
proprietary retraction technology for use in the healthcare industry.
The FD&C Act provides that, unless exempted by regulation, medical devices
must be commercially distributed in the United States unless they have been
cleared by the FDA. From June 1995 to December 1996, the Company focused its
efforts on the preparation of a 510(k) pre-market notification for the Safety
Catheter, Safety Phlebotomy Set and Safety Syringe. The Company filed the 510(k)
pre-market notification for the Safety Catheter and Safety Phlebotomy Set with
the FDA on December 28, 1995. On February 13, 1996, the FDA notified the Company
that it may begin marketing the Safety Catheter. On March 15, 1996, the FDA
notified the Company that it was holding the pre-market notification (510(k))
for the Safety Phlebotomy Set for 30 days pending receipt of the additional
information requested by the Office of Device Evaluations ("ODE"). A written
request for additional information from the ODE was received by the Company on
March 13, 1996. The Company responded by requesting a ninety day extension,
which was granted on April 18, 1996. The Company voluntarily withdrew the 510(k)
pre-market notification because of modifications and improvements made to the
original design of the Safety Phlebotomy Set. The Company presently intends to
file a new 510(k) pre-market notification for the modified Safety Phlebotomy Set
with the FDA during the second quarter of 1997. The
-18-
<PAGE>
Company also anticipates that it will complete and file a 510(k) pre-market
notification with the FDA during the fourth quarter of 1997 for the Safety
Syringe and/or several New Products. The Company believes that the Safety
Syringe, Safety Phlebotomy Set, and other New Products will be classified as a
Class II device, and that such products will not require PMA application but
will be eligible for marketing clearance through the 510(k) notification
procedure based upon its substantial equivalent to a previously marketed device.
If any of the Company's products do not qualify for the 510(k) procedure, the
Company will be required to submit a PMA application with the FDA which is
typically a more complex submission, usually including results of clinical
studies. By statute and regulation, the FDA may take 180 days to review a PMA
application, however, such time may be extended. There can be no assurance that
a PMA application will be reviewed within 180 days or that a PMA application
will be approved.
The Ventura Facility contains a research and development laboratory
equipped with assembly and test equipment for concept modeling and product
development and a machine shop equipped with machine tools for fabrication of
new product parts for concept modeling and assembly and test fixtures. The
Company also installed a 3,120 square foot Class 100,000 clean room at the
Ventura facility, which is currently being used for the assembly of prototypes
and products. The Company had originally planned to install in the clean room a
fully automated robotic assembly system to pilot manufacture its products. The
Company, however, elected not to install the fully automated robotic assembly
system at this time because it is currently investigating opportunities with
third parties in the United States and abroad to manufacture the Safety Syringe,
the Safety Phlebotomy Set and the Safety Catheter and certain of its other
products under development either on a contract manufacturing basis, under
licensing agreements or through other forms of joint ventures. The Company has
entered into several confidentiality agreements with other companies for the
purpose of exploring such opportunities. The Company is also investigating
opportunities with third parties to market and distribute the Company's
products. The Company anticipates that entering into alliances and licensing
arrangements with third parties would enable the Company to increase the market
penetration of its products more quickly than the Company could achieve on its
own. The Company has not to date entered into any such arrangements and there
can be no assurance the Company will be able to enter into any such arrangements
on acceptable terms.
Pending the outcome of such discussions with third parties, the Company has
decided to install a semi-automated assembly system at the Ventura facility to
pilot manufacture its products, which is estimated to cost approximately
$300,000. The semi-automated assembly system, which will consist of a series of
manual and semi-automatic stations, will be capable of producing up to 3,000,000
units per year. The assembly system will produce one or more of the Company's
products at a time, and will have the capability of being converted at a
reasonable cost with minimal delay to manufacture a different product at such
time as the Company may devise. During the fourth quarter of 1996, the Company
partially completed the installation of the semi-automated assembly system for
the production of one of the Company's products. The Company intends to have the
system fully operational during the second quarter of 1997. In addition to
having the capability of manufacturing its products for sale, another objective
of the Company is installing the assembly system to demonstrate to potential
third party manufacturers the economic feasibility of the commercial production
of its products.
In 1997, the Company plans to hand assemble the Safety Syringes, Safety
Phlebotomy Sets, Safety Catheters, and other New Products in quantities
necessary to conduct any testing required by the FDA, for internal engineering
purposes, and for market research purposes. This hand assembly process will
continue until such time as the Company has the capability of manufacturing the
products on its semi-automated assembly system, scheduled to be fully
operational during the second quarter of 1997, or a third party is manufacturing
such products.
Although the Company's plans may change as a result of its discussions with
potential strategic allies as described above, the Company's current plan is to
produce on the semi-automated assembly system at least 50,000 units of the
Safety Catheter and 100,000 units of the Safety Phlebotomy Set in order to
demonstrate to potential third party manufacturers the economic feasibility of
the commercial production of its products and such number
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<PAGE>
of its products necessary for FDA clearance. Thereafter the Company will
determine whether it will mass manufacture the Safety Phlebotomy Sets or the
Safety Catheter or any of its other products or components of its products for
commercial sale. Although the Company originally planned to manufacture and
distribute the Safety Phlebotomy Set and Safety Catheter directly, the Company
may contract with third parties for all or a portion of the need production of
such products on a contract manufacturing basis, licensing arrangement or other
form of joint venture. To the extent the Company decides to mass manufacture any
of its products or components, the Company may need to expand its current
facilities and/or lease or purchase additional manufacturing facilities and
equipment.
The Company does not expect to manufacture any significant quantity of its
Safety Phlebotomy Set or any other of its products itself for commercial sale
nor to produce any significant revenue from product sales in 1997. The Company
may earn revenues in 1997 through a licensing or contract manufacturing
arrangement or other form of joint venture with a third party, but the Company
has not to date entered into any such arrangements and there can be no assurance
that the Company will be able to enter into such arrangements on acceptable
terms.
As of March 15, 1997, the Company employed 26 people on a full-time basis
and one person on a part-time basis. The Company anticipates increasing the
number of employees in the areas of product development, manufacturing, sales
and marketing. The number of employees that the Company will need to hire will
vary according to the progress made in the development of the Company's pilot
manufacturing plant and the extent to which the Company undertakes the
manufacture, marketing, and distribution of its products.
Liquidity and Capital Resources
At December 31, 1996, the Company had an accumulated deficit during the
development stage of $13,747,408, which includes a one-time, nonrecurring
write-off of $5,932,770 for purchase research and development incurred in
connection with the acquisition of MDI by the Company. The Company has financed
its activities through December 31, 1996 principally through debt, the private
placement of equity securities, and the Initial Public Offering. The Company
received approximately $9,526,000 in proceeds, net of costs, in the Initial
Public Offering.
As of December 31, 1996, the Company's working capital was $934,634,
including cash and cash equivalents of $1,648,639, short-term investments of
$535,248, and available-for-sale securities of $5,638,498, as compared to
working capital of $5,115,320, including cash and cash equivalents of $221,229
short-term investments of $511,908, and available-for-sale securities of
$7,112,286 at December 31, 1995, a decrease of $4,180,686.
The current ratio of current assets to current liabilities was 1.13 to 1 at
December 31, 1996, as compared to 2.8 to 1 at the end of 1995. The Company's
primary source of cash in 1996 consisted of (1) proceeds from short-term
borrowings, $4,318,000; (2) net reduction in investment in short-term financial
instruments $1,447,173; (3) proceeds from long-term borrowings, $280,187; and
(4) funds received from the issuance of Common Stock in connection with exercise
of stock options and warrants, $578,900. The Company's primary uses of cash in
1996 consisted of cash used for operations, $4,429,517; (2) payments on debt
obligations, $168,030; (3) other financial activities, $14,136; and (4) capital
expenditures, $585,117.
Of the $7,822,385 in cash and cash equivalents, short-term investments, and
available-for-sale securities at December 31, 1996, $6,964,061 was restricted to
collateralize borrowings the Company made under its line of credit and equipment
financing agreements. At December 31, 1996 and 1995, all borrowings made under
the line of credit and equipment financing agreements were fully collateralized.
At December 31, 1996, the Company had a $6,750,000 revolving line of credit
("Loan Agreement") with its principal lending institution and a $535,000
equipment financing facility with a second commercial bank
-20-
<PAGE>
("Equipment Facility"). The Loan Agreement provides for a credit facility which
can be used to (1) fund working capital needs and (2) finance capital equipment
purchases; provided, however, that advances for capital equipment financing
cannot exceed $600,000 of the $6,750,000. Borrowings to meet working capital
needs bear interest at LIBOR plus 250 basis points (8.09% at December 31, 1996),
while borrowings to finance capital equipment purchases bear interest at prime
plus 2.5%. Pursuant to the terms of the Loan Agreement, all borrowings must be
fully collateralized by available-for-sale securities, cash equivalents,
equipment financed, and general intangibles of the Company. Under the terms of
the Equipment Facility, all borrowings must be fully collateralized by a
short-term investment in the form of a certificate of deposit and applicable
equipment financed. The Loan Agreement expires on June 30, 1997. There is no
assurance that the Company will be successful in negotiating a continuation of
the availability of the Loan Agreement and what terms will be made available to
the Company.
The Company's debt to equity ratio was 3.47:1 and .49:1 at December 31,
1996 and 1995, respectively. At December 31, 1996, the Company had borrowed
$6,563,036 against its $6,750,000 Loan Agreement and $401,005 against its
$535,000 Equipment Financing Facility. As indicated above, all borrowings
against these credit facilities were fully collateralized.
Net capital expenditures were $541,642 and $837,895 for the year ended
December 31, 1996 and 1995, respectively. In 1996, capital expenditures amounted
to approximately $157,000 for leasehold improvements to the Company's facility
located in Ventura, California; $74,000 for machinery and equipment; and
$310,642 for furniture and other office and communications equipment.
The Company expects its capital expenditures in 1997 to approximate
$296,000. This amount includes approximately $134,000 to complete installation
of the semi-automated assembly system; $85,000 for machinery and equipment
needed to support research and development; and $76,500 for computer equipment,
software, and office equipment.
In 1995, the Company issued warrants (including warrants discussed in Item
1. Business and Other Business Matters) to purchase 400,000 shares of Common
Stock , of which warrants to purchase 133,000 and 111,000 shares have been
exercised as of March 15, 1997 and December 31, 1996, respectively. As of March
15, 1997, the Company has received an aggregate of $651,700 upon the exercise of
said warrants. If the remainder of the warrants (267,000) are exercised, the
Company will receive approximately an additional $1,506,000, net of registration
and other costs to be paid by the Company as required under the terms of such
warrants.
The Company believes that it will have sufficient funds to support its
planned operations and capital expenditures for the next twelve months, but
thereafter the Company believes that it will need to raise additional funds
through public or private financings to support its planned operations and
capital expenditures. In addition to those monies that would be received upon
the exercise of the warrants issued in 1995 and discussed above, the Company
believes that it will require additional capital before it reaches profitability
and positive cash flow, if at all. No assurance can be given that the
outstanding warrants will be fully exercised or that additional financing will
be available or that, if available, it will be available on terms favorable to
the Company or its stockholders. If adequate funds are not available to satisfy
short-term or long-term capital requirements, the Company may be required to
reduce substantially, or eliminate, certain areas of its product development
activities, limit its operations significantly, or otherwise modify its business
strategy. The Company's capital requirements will depend on many factors,
including but not limited, to the progress of its research and development
programs, the development of regulatory submissions and approvals, manufacturing
capability, the costs associated with protecting its patents and other
proprietary rights, the rate of which the Company is able to manufacture and
introduce its products, and the levels of promotion and advertising required to
launch and market such products.
-21-
<PAGE>
ITEM 7. FINANCIAL STATEMENTS
Incorporated by reference from the consolidated financial statements and
notes thereto of the Company which are attached hereto beginning on page F-1.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 9 through 12. Incorporated by Reference
The information called for by Item 9 "Directors, Executive Officers,
Promoters and Control Persons; Compliance with Section 16(a) of the Exchange
Act"; Item 10 "Executive Compensation"; Item 11 "Security Ownership of Certain
Beneficial Owners and Management"; and Item 12 "Certain Relationships and
Related Transactions" is incorporated herein by reference to the Company's
definitive proxy statement for its Annual Meeting of Stockholders, which
definitive proxy statement is expected to be filed with the Commission not later
than 120 days after the end of the fiscal year to which this report relates.
-22-
<PAGE>
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Documents filed as part of this Report:
1. List of Consolidated Financial Statements. The following financial
statements and notes thereto of the Company which are attached hereto beginning
on page F-1, have been incorporated by reference into Item 8 of this Report on
Form 10-KSB:
Page
Report of Independent Accountants F-2
Consolidated Balance Sheets as of December 31, 1996 and 1995 F-3
Consolidated Statement of Operations for years ended December 31, F-4
1996 and 1995 and Cumulative During Development Stage
Consolidated Statements of Stockholders' Equity for the years F-5
ended December 31, 1996 and 1995 and Cumulative During
Development Stage
Consolidated Statement of Cash Flows for the years ended December F-6
31, 1996 and 1995 and Cumulative During Development Stage
Notes to Consolidated Financial Statements F-7
2. List of Exhibits. The following exhibits are listed in the
Exhibits appearing below and are followed herewith or are incorporated
by reference to exhibits previously filed to the Commission.
Exhibit
Number Description
------- -----------
2.1 (1) Agreement of Merger dated as of April 5, 1995 by and
among the Company, MDC Investment Holdings, Inc.
("Holdings") and Med-Design, Inc. ("MDI").
2.2 (1) Joinder dated April 5, 1995 by John A. Botich, Michael J.
Botich, Thor R. Halseth and Rita F. Botich.
2.3 (1) Secured Promissory Note dated April 5, 1995 from the
Company to Anker & Hymes, a Law Corporation ("Anker &
Hymes"), Client Trust Account for the benefit of all of
the former shareholders of MDI.
2.4 (1) Security and Pledge Agreement dated April 5, 1995 between
the Corporation and Anker & Hymes for the benefit of all
of the former shareholders of MDI.
3.1 (1) Certificate of Incorporation of the Company.
3.2 (1) Amendment to Certificate of Incorporation of the Company.
3.3 (1) Bylaws of the Company.
4.1 (1) Specimen of Common Stock Certificate of the Company.
-23-
<PAGE>
Exhibit
Number Description
------- -----------
10.1 (1) Employment Agreement dated as of April 5, 1995 between
the Company and James M. Donegan.
10.2 (1) Employment Agreement dated as of April 5, 1995 between
the Company and John A. Botich.
10.3 (1) Employment Agreement dated as of April 5, 1995 between
the Company and Michael J. Botich.
10.4 (1) Employment Agreement dated as of April 5, 1995 between
the Company and Thor R. Halseth.
10.5 (2) Non-Qualified Stock Option Plan.
10.6 (2) Warrant dated August 15, 1995 from the Company and J.E.
Sheehan & Company.
10.7 (2) Warrant dated August 15, 1995 from the Company to
Dominque A. Bodevin.
10.8 (2) Warrant dated August 15, 1995 from the Company to Roger
Favale.
10.9 (1) Underwriters Warrant Agreement dated June 6, 1995 between
the Company and Gilford Securities Incorporated.
10.10 (3) Placement Agent Agreement dated as of January 8, 1997 by
and between the Company and Fine Equities, Inc. ("Fine").
10.11 (3) Form of Subscription Agreement between the Company and
each of the purchasers of the 1,000,000 shares of Common
Stock.
10.12 (3) Placement Agent's Warrant Agreement dated as of January
23, 1997 by and between the Company and Fine.
10.13 Warrant dated January 23, 1997 from the Company for N.
Scott Fine.
10.14 Warrant dated January 23, 1997 from the Company for M.
Troy Duncan.
10.15 Warrant dated January 23, 1997 from the Company to Sharon
Bronte.
10.16 Warrant dated January 23, 1997 from the Company to
William A. Jolly.
10.17 (2) Business Loan Agreement dated July 26, 1995 between MDC
Investment Holdings, Inc. ("MDC Holdings") and Meridian
Bank.
10.18 (2) Demand Promissory Note dated July 26, 1995 from MDC
Holdings in favor of Meridian Bank.
-24-
<PAGE>
Exhibit
Number Description
------- -----------
10.19 (2) Security Agreement dated July 26, 1995 between MDC
Holdings and Meridian Bank.
10.20 (2) Surety Agreement dated July 26, 1995 between the Company
and Meridian Bank.
10.21 (2) Security Agreement dated July 26, 1995 between the Company
and Meridian Bank.
10.22 (2) Pledge Agreement dated July 26, 1995 between MDC Holdings
and Meridian Bank.
10.23 (2) Judgment Note dated July 26, 1995 from the Company in
favor of MDC Holdings.
10.24 (2) Business Loan Agreement dated December 29, 1995 between
MDC Research Ltd. and Meridian Bank.
10.25 (2) Business Loan Agreement dated December 29, 1995 between
MDC Holdings and Meridian Bank.
10.26 (2) Demand Promissory Note dated December 29, 1995 from
MDC Research Ltd. in favor of Meridian Bank.
10.27 (2) Demand Promissory Note dated December 29, 1995 from
MDC Holdings in favor of Meridian Bank.
10.28 (2) Security Agreement dated December 29, 1995 between
MDC Research Ltd. and Meridian Bank.
10.29 (2) Pledge Agreement dated December 29, 1995 between
MDC Holdings and Meridian Bank.
10.30 (2) Assignment of Agency or Fiduciary Account dated
December 29, 1995 from MDC Holdings to Meridian Bank.
10.31 (2) Surety Agreement dated December 29, 1995 between the
Company and Meridian Bank.
10.32 (2) Surety Agreement dated December 29, 1995 between
MDC Holdings and Meridian Bank.
10.33 (2) Amendment to Loan Agreement dated February 16, 1996 among
Meridian Bank, MDC Holdings and MDC Research Ltd.
10.34 (4) Second Amendment to Loan Agreement dated April 4, 1996
among Meridian Bank, MDC Holdings, The Med-Design
Corporation, and MDC Research Ltd.
10.35 (4) Judgement Note dated April 12, 1996 from the Company
in favor of MDC Holdings
10.36 (4) Amendment to Security Agreement dated April 4, 1996
between the Company and Meridian Bank.
-25-
<PAGE>
Exhibit
Number Description
------- -----------
10.37 (4) Demand Promissory Note dated April 4, 1996 from
MDC Holdings in favor of Meridian Bank.
10.38 (5) Third Amendment to Loan Agreement dated July 11, 1996
among Meridian Bank, MDC Holdings, The Med-Design
Corporation, and MDC Research Ltd.
10.39 (5) Judgement Note dated July 11, 1996 from the Company
in favor of MDC Holdings.
10.40 (5) Demand Promissory Note dated July 11, 1996 from
MDC Holdings in favor of Meridian Bank.
10.41 Fourth Amendment to Loan Agreement dated November 14, 1996
among CoreStates Bank, N.A. ("CoreStates") successor by
merger to Meridian Bank, MDC Holdings, The Med-Design
Corporation, and MDC Research Ltd.
10.42 Judgement Note dated November 14, 1996 from the Company
in favor of MDC Holdings.
10.43 Demand Promissory Note dated November 14, 1996 from
MDC Holdings in favor of CoreStates.
10.44 (2) Form of Business Loan Agreement dated July 12, 1995
between the Company and Eagle National Bank
("Eagle Bank").
10.45 (2) Form of Promissory Note dated July 12, 1995 from the
Company in favor of Eagle Bank.
10.46 (2) Form of Security Agreement dated July 12, 1995 between
the Company and Eagle Bank.
10.47 (2) Form of Assignment of Deposit Account dated July 12, 1995
from the Company to Eagle Bank.
10.48 (2) Lease Agreement dated June 15, 1995 between
Moen Development and MDC Research Ltd. and guaranteed
by the Company.
10.49 (2) Lease Agreement dated October 1, 1993 between
Arden North American Partners, L.P. and the Company,
as amended by the First Amendment dated November 2, 1995.
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<PAGE>
Exhibit
Number Description
------- -----------
10.50 (2) Employment Agreement dated as of August 1, 1995 between
the Company and Donald Shea.
10.51 (2) Employment Agreement between the Company and
Patrick E. Rodgers.
10.52 (2) Employment Agreement between the Company and John Osborne.
10.53 (2) Employment Agreement between the Company and
Gilbert White.
10.54 Warrant dated March 19, 1997 from the Company to
John F. Kelley.
21 (1) List of Subsidiaries of the Company.
23 Consent of Independent Accountants.
27 (6) Financial Data Schedule.
(b) No reports on Form 8-K were filed in the quarter ended December 31, 1996.
- -------------------
(1) Incorporated by reference to Form SB-2 filed April 7, 1995 and Amendment
Nos. 1, 2 and 3 thereto (File No. 33-901014).
(2) Incorporated by reference to Form 10-KSB filed on March 29, 1996.
(3) Incorporated by reference to Form 8-K filed on February 7, 1997.
(4) Incorporated by reference to Form 10-QSB filed on May 13, 1996.
(5) Incorporated by reference to Form 10-QSB filed on August 7, 1996.
(6) Electronic filing only.
-27-
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, the Registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
THE MED-DESIGN CORPORATION
Date: March 27, 1996 By: /s/ James M. Donegan
-------------------------------------
James M. Donegan
President and Chief Executive Officer
In accordance with 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.
<TABLE>
<S> <C> <C>
Signature Title Date
- --------- ----- ----
/s/ James M. Donegan Chairman of the Board, President and Chief March 27, 1996
- ---------------------------------- Executive Officer (Principal Executive Officer)
James M. Donegan
/s/ Patrick E. Rodgers Executive Vice President, Finance and Chief March 27, 1996
- ---------------------------------- Financial Officer (Principal Financial Officer
Patrick E. Rodgers and Principal Accounting Officer)
/s/ Joseph N. Bongiovanni, III Director March 27, 1996
- ----------------------------------
Joseph N. Bongiovanni, III
/s/ John A. Botich Director March 27, 1996
- ----------------------------------
John A. Botich
/s/ John F. Kelley Director March 27, 1996
- ----------------------------------
John F. Kelley
/s/ John S. Marr, M.D. Director March 27, 1996
- ----------------------------------
John S. Marr, M.D.
/s/ Gilbert M. White Director March 27, 1996
- ----------------------------------
Gilbert M. White
-28-
</TABLE>
<PAGE>
Index to Consolidated Financial Statements
Page
Report of Independent Accountants.........................................F-2
Consolidated Balance Sheets as of
December 31, 1996
and as of December 31, 1995...........................................F-3
Consolidated Statements of Operations for the
years ended December 31, 1996 and
December 31, 1995 and Cumulative during
the development stage.................................................F-4
Consolidated Statements of Stockholders'
Equity for the years ended December 31, 1996
and December 31, 1995..................................................F-5
Consolidated Statements of Cash Flows for the
years ended December 31, 1996 and
December 31, 1995 and Cumulative
during the development stage..........................................F-6
Notes to Consolidated Financial Statements........................F-7 to F-18
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors and Stockholders
The Med-Design Corporation:
We have audited the accompanying consolidated balance sheets of The
Med-Design Corporation and subsidiaries (a development stage company) as of
December 31, 1996 and 1995, and the related consolidated statements of
operation, stockholders' equity and cash flows for each of the two years in the
period ending December 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits 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 statement. 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 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
The Med-Design Corporation and subsidiaries as of December 31, 1996 and 1995,
and the consolidated results of their operations and their cash flows for each
of the two years in the period ended December 31, 1996 in conformity with
generally accepted accounting principles.
/s/ Coopers & Lybrand L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
March 19, 1997
F-2
<PAGE>
THE MED-DESIGN CORPORATION AND SUBSIDIARIES
(a development stage company)
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
December 31, December 31,
1996 1995
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,648,639 $ 221,229
Short-term investment 535,248 511,908
Available-for-sale securities 5,638,498 7,112,286
Prepaid expenses and other current assets 97,461 65,185
------------ ------------
Total current assets 7,919,846 7,910,608
Property, plant, and equipment, net of accumulated
depreciation and amortization of $183,510 in 1996
and $42,773 in 1995 1,240,557 831,955
Patents, net of accumulated amortization of $34,324 in 1996
and $24,724 in 1995 174,623 140,748
Other assets 14,136 --
------------ ------------
$ 9,349,162 $ 8,883,311
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $ 6,446,500 $ 2,128,500
Accounts payable 172,911 289,914
Accrued expenses 128,146 200,819
Due to officer -- 35,374
Current maturities of long-term debt and capital lease obligations 237,652 140,681
------------ ------------
Total current liabilities 6,985,209 2,795,288
------------ ------------
Long-term debt and capital lease obligations, less current maturities 300,366 277,483
------------ ------------
Total liabilities 7,285,575 3,072,771
------------ ------------
Commitments and Contingencies
Stockholders' equity:
Preferred stock, $.01 par value, 5,000,000 shares authorized;
no shares outstanding
Common stock, $.01 par value, 20,000,000 shares authorized; 6,899,570 and
6,778,570 shares issued and outstanding
at December 31, 1996 and 1995, respectively 68,996 67,786
Additional paid-in capital 15,718,504 15,140,814
Deficit accumulated during the development stage (13,747,408) (9,424,539)
Unrealized gain on available-for-sale securities 23,495 26,479
------------ ------------
Total stockholders' equity 2,063,587 5,810,540
------------ ------------
$ 9,349,162 $ 8,883,311
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
THE MED-DESIGN CORPORATION AND SUBSIDIARIES
(a development stage company)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Cumulative
From Inception, Year Ended December 31,
December 13, 1993 ------------------------------------
to December 31, 1996 1996 1995
------------------------ --------------- -----------------
<S> <C> <C> <C>
Operating expense:
Marketing $378,368 $219,191 $159,177
General and administrative 4,655,251 2,592,727 1,413,374
Research and development 2,163,242 1,554,096 609,146
Purchased research and development 5,932,770 -- 5,932,770
------------------------ --------------- -----------------
Total operating expenses 13,129,631 4,366,014 8,114,467
------------------------ --------------- -----------------
Loss from operations (13,129,631) (4,366,014) (8,114,467)
Interest expense (1,208,138) (400,649) (524,587)
Interest income 590,361 443,794 146,567
------------------------ --------------- -----------------
Net loss ($13,747,408) ($4,322,869) ($8,492,487)
======================== =============== =================
Net loss per common share ($0.63) ($1.71)
=============== =================
Weighted average common
shares outstanding 6,830,802 4,961,666
=============== =================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
THE MED-DESIGN CORPORATION AND SUBSIDIARIES
(a development stage company)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Deficit Unrealized
Accumulated Gain On
Additional During the Available-
Common Stock Paid-in Development For-Sale Stockholders'
Shares Amount Capital Stage Securities Equity
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 13, 1993 (inception) - - - - - -
Issuance of shares in exchange
for contributed assets 1,541,824 $15,418 $84,582 $100,000
Issuance of shares common stock for cash 54,520 545 66,705 67,250
Issuance of shares of common stock with debt 182,056 1,821 528,164 529,985
Issuance of shares of common stock
for services rendered 240,000 2,400 416,400 418,800
Net loss ($932,052) (932,052)
----------------------------------------------------------------------------
Balance, December 31, 1994 2,018,400 20,184 1,095,851 (932,052) 183,983
Issuance of shares of common stock with debt 42,856 429 150,000
Expiration of option to convert shares of
common stock into $30,000 of senior debt 20,000 200 29,800 30,000
Issuance of shares of common stock in
exchange for outstanding shares of MDI 1,247,314 12,473 4,353,126 4,365,599
Issuance of shares of common stock in
initial public offering 3,450,000 34,500 9,491,466 9,525,966
Issuance of warrants in connection with
consulting agreement 21,000 21,000
Change in unrealized gains on
available-for-sale securities $26,479 26,479
Net loss (8,492,487) (8,492,487)
----------------------------------------------------------------------------
Balance, December 31,1995 6,778,570 67,786 15,140,814 (9,424,539) 26,479 5,810,540
Issuance of shares of common stock related to
the exercise of stock options 10,000 100 34,900 35,000
Issuance of shares of common stock in
connection with exercise of warrants 111,000 1,110 542,790 543,900
Change in unrealized gains on
available-for-sale securities (2,984) (2,984)
Net loss (4,322,869) (4,322,869)
----------------------------------------------------------------------------
Balance, December 31,1996 6,899,570 $68,996 $15,718,504 ($13,747,408) $23,495 $2,063,587
============================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
THE MED-DESIGN CORPORATION AND SUBSIDIARIES
(a development stage company)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Cumulative December 31,
From Inception, --------------------------------
December 13, 1993
to December 31, 1996 1996 1995
----------------------- -------------- --------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss ($13,747,408) ($4,322,869) ($8,492,487)
Adjustments to reconcile net loss to operating
cash flows (net of acquisition):
Depreciation and amortization 199,238 150,337 48,901
Issuance of common stock for services 418,800
Purchased research and development 5,932,770 5,932,770
Issuance of common stock for interest 29,985
Issuance of warrants for services 21,000 21,000
Amortization of original issued discount 650,000 407,143
(Gain) Loss on sale of available-for-sale securities (4,084) 341 (4,425)
Changes in operating assets and liabilities:
Prepaid expenses and other current assets (94,953) (32,276) (42,356)
Accounts payable 65,190 (117,003) 160,658
Accrued expenses (162,347) (108,047) (70,490)
----------------------- -------------- --------------
Net cash used by operating activities (6,691,809) (4,429,517) (2,039,286)
----------------------- -------------- --------------
Cash flows from investing activities:
Purchases of property and equipment (1,379,537) (541,642) (837,895)
Additions to patents (52,543) (43,475) (9,068)
Payments for purchase of option to acquire
Med-Design Incorporated (125,000)
Investments in available-for-sale securities, net (5,610,919) 1,470,463 (7,081,382)
Notes receivable funded (92,500) (2,500)
Purchase of short-term investment (535,248) (23,340) (511,908)
----------------------- -------------- --------------
Net cash used by investing activities (7,795,747) 862,006 (8,442,753)
----------------------- -------------- --------------
Cash flows from financing activities:
(Repayment of) advances from related parties (144,302)
(Repayment of) proceeds from short-term borrowing (500,000)
Capital lease payments (15,846) (9,813) (6,033)
Proceeds from long-term borrowings 691,685 280,187 411,498
Repayment of long-term borrowings (174,124) (158,217) (15,907)
Proceeds from issuance of common stock, prior to
initial public offering 97,250
Proceeds from exercise of options 35,000 35,000
Proceeds from issuance of common stock in connection
with exercise of warrants 543,900 543,900
Proceeds from short-term borrowing 6,446,500 4,318,000 2,128,500
Other (14,136) (14,136)
Repayment of acquisition note (1,000,000) (1,000,000)
Proceeds of initial public offering, net of offering costs 9,525,966 9,729,453
----------------------- -------------- --------------
Net cash provided by financing activities 16,136,195 4,994,921 10,603,209
----------------------- -------------- --------------
Increase in cash 1,648,639 1,427,410 121,170
Cash and cash equivalents, beginning of period 221,229 100,059
----------------------- -------------- --------------
Cash and cash equivalents, end of period $1,648,639 $1,648,639 $221,229
======================= ============== ==============
Cash paid during the period:
Interest $525,538 $378,469 $117,084
======================= ============== ==============
Noncash financing activities:
Issuance of common stock for rights under option
to acquire Med-Design, Inc. $100,000 --
----------------------- -------------- --------------
Issuance of common stock in connection with
short-term borrowing $650,000 $150,000
----------------------- -------------- --------------
Capital lease obligation incurred $36,303 $7,697 $28,606
----------------------- -------------- --------------
Change in unrealized gain $23,495 ($2,984) $26,479
----------------------- -------------- --------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
THE MED-DESIGN CORPORATION AND SUBSIDIARIES
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Nature of Business
The Med-Design Corporation (the "Company") designs, develops, manufactures
and markets safety medical devices intended to reduce the incidence of
accidental needlesticks. Accordingly, the Company and its products are subject
to various regulatory processes and approvals. The Company has three core
products under development and several new products which are in the beginning
stages of development. The Company is a development stage enterprise, as defined
by Financial Accounting Standards ("FAS") No. 7, "Accounting and Reporting by
Development Stage Enterprise."
2. Significant Accounting Policies
Principals of consolidation:
The accompanying consolidated financial statements include the accounts of
The Med-Design Corporation ("MDC") and its wholly-owned subsidiaries, MDC
Investment Holdings, Inc. and MDC Research Ltd. All intercompany accounts and
transactions have been eliminated in consolidation.
Cash and cash equivalents:
The Company considers all investments with original maturities of three
months or less to be cash equivalents. Financial instruments which potentially
subject the Company to concentrations of credit risk consist principally of
cash. At December 31, 1996, none of the Company's balances exceeded FDIC
insurance limits.
Short-term investments:
Short-term investments represent investments in a certificate of deposit
with a maturity greater than three months. These investments are stated at cost
plus accrued interest which equals market value. The short-term investment is
restricted as collateral for an equipment financing facility.
Investments in marketable securities:
The Company adopted FAS No. 115, "Accounting for Certain Investments in
Debt and Equity Securities," in 1995. The Company's investments are classified
as available-for-sale securities under provisions of FAS No. 115 and accordingly
any unrealized holding gains or losses, net of taxes, are excluded from income
and recognized as a separate component of shareholders' equity until realized.
Investments in marketable securities are made consistent with the Company's
investment guidelines as developed by management and approved by the investment
committee of the Board of Directors.
(Continued)
F-7
<PAGE>
THE MED-DESIGN CORPORATION AND SUBSIDIARIES
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
2. Significant Accounting Policies, continued
Property, plant and equipment:
Property, plant and equipment are carried at cost. The cost of properties
held under capital leases is equal to the lower of the net present value of the
minimum lease payments or the fair value of the leased property at the inception
of the lease. Significant additions or improvements extending the assets useful
lives are capitalized. Normal maintenance and repair costs are expensed as
incurred. When property, plant and equipment are sold, retired or otherwise
disposed of, the applicable costs and accumulated depreciation are removed from
the accounts and the resulting gain or loss recognized.
Depreciation is computed by the straight-line method at rates based upon
the estimated service life of the various classes of assets (5 to 10 years).
Leasehold improvements are depreciated over the remaining lease term or asset
life if shorter.
Recoverability of Long-Lived Assets:
The Company adopted SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed of" (SFAS 121) in
1996. SFAS 121 establishes accounting standards for the impairment of long-lived
assets, certain identifiable intangibles, and goodwill related to those assets
to be held and used and for long-lived assets and certain identifiable
intangibles to be disposed of. The adoption of FAS 121 did not impact the
Company's 1996 results of operations of financial condition.
Patents:
Patents, patent applications, and rights are stated at acquisition costs.
Amortization of patents is recorded using the straight-line method over the
legal lives of the patents, generally for periods ranging up to 17 years.
Amortization expense from the years ended December 31, 1996 and 1995 was $9,600
and $7,200, respectively.
Income taxes:
The Company accounts for income taxes under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled.
Research and development:
Expenditures relating to the development of new products and processes,
including significant improvements and refinements to existing products, are
expensed as incurred. Research and development expenses amounted to $1,554,096
in 1996 and $6,541,916 in 1995. Included in 1995 research and development
expenses was $5,932,770 for purchased research and development incurred in
connection with the acquisition of MDI (Note 12).
Net loss per share:
Net loss per common share is based on the weighted average number of common
shares outstanding during the respective periods. All Common Stock equivalents
are not considered in the net loss per share as they are antidilutive.
(Continued)
F-8
<PAGE>
THE MED-DESIGN CORPORATION AND SUBSIDIARIES
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
2. Significant Accounting Policies, continued
Estimates utilized in the preparation of financial statements:
The preparation of financial statements in conformity with general accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent liabilities at the date of the financial statements and the reported
amounts of expenses during the reporting period. Actual results could differ
from those estimates.
Recently Issued Pronouncement
In March 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 128 "Earning Per Share." This
Statement establishes standards for computing and presenting earnings per share
(EPS) and applies to entities with publicly held common stock or potential
common stock. This Statement is effective for financial statements issued for
periods ending after December 15, 1997, earlier application is not permitted.
This Statement requires restatement of all prior-period EPS data presented. The
Company us currently evaluating the impact, if any, adoption of SFAS No. 128
will have on its financial statements.
3. Available-for-Sale Securities
The Company has recorded investments in available-for-sale securities at
fair value and gross unrealized gains and losses as a separate component of
shareholders' equity. Realized gains and losses on the sale of investment
securities are recognized using the specific identification method.
Gross unrealized gains and losses for the years ended December 31, 1996 and
1995 are as follows:
Gross
Unrealized
Gains
Cost (Losses) Fair Value
---- -------- ----------
At December 31, 1996:
U.S. Government Obligations $3,010,309 $31,228 $3,041,537
Corporate Debt Securities 2,604,694 (7,733) 2,596,961
--------- ------- ---------
Total $5,615,003 $23,495 $5,638,498
========== ======= ==========
At December 31, 1995:
U.S. Government Obligations $5,071,045 $17,241 $5,088,286
Corporate Debt Securities 2,014,762 9,238 2,024,000
--------- ------ ---------
Total $7,085,807 $26,479 $7,112,286
========== ======= ==========
(Continued)
F-9
<PAGE>
THE MED-DESIGN CORPORATION AND SUBSIDIARIES
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
3. Available-for-Sale Securities, continued
Investment income for the years ended December 31, 1996 and 1995 consisted
of the following:
1996 1995
---- ----
Realized gain on sale of $15,035 $4,683
available-for-sale securities
Realized loss on sale of (15,376) (258)
available-for-sale securities
Interest income 416,413 146,567
Dividend income 6,148 2,183
-------- --------
Total $422,220 $153,175
======== ========
4. Property, Plant And Equipment
Balances of major classes of assets and accumulated depreciation and
amortization at December 31, 1996 and 1995 are as follows:
1996 1995
---- ----
Leasehold improvements $ 160,127 $ 63,358
Machinery and equipment 433,863 360,264
Office furniture & fixtures 413,178 207,236
Computer equipment & software 320,788 215,264
Equipment under capital lease 36,303 28,606
Construction in progress 59,808 --
---------- --------
$1,424,067 $874,728
Less:
Accumulated depreciation 174,319 39,912
Accumulated amortization of
equipment held under capital
lease 9,191 2,861
---------- --------
$1,240,557 $831,955
========== ========
Depreciation and amortization expense was $140,737 and $48,901 for the
years ended December 31, 1996 and 1995, respectively.
(Continued)
F-10
<PAGE>
THE MED-DESIGN CORPORATION AND SUBSIDIARIES
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
5. Short-Term Borrowings
In July 1995, the Company entered into a $3,000,000 revolving line of
credit ("Loan Agreement") with its principal lending institution (the "Bank").
In 1996, The Loan Agreement was amended to $6,750,000, and the Company's
equipment financing facility ("Equipment Loans") with the Bank was consolidated
into the Loan Agreement. The amended Loan Agreement provides that advances under
Equipment Loans will not exceed $600,000 of the $6,750,000. Borrowings to meet
working capital needs bear interest at LIBOR plus 250 basis points (8.091% at
December 31, 1996). Under the terms of the Loan Agreement, all borrowings must
be fully collateralized by available-for-sale securities, cash equivalents,
equipment financed, and general intangibles of the Company. The line of credit
is due on June 30, 1997. At December 31, 1996 and 1995, including Equipment
Loans, the Company had $6,563,056 and $2,300,000 outstanding under the Loan
Agreement, respectively (Note 14).
Equipment Loans are classified as long-term debt (See Note 6).
6. Long-Term Debt
Long-term debt at December 31, 1996 and 1995 consisted of the following:
December 31,
-----------
1996 1995
---- ----
Bank term note, under
equipment financing facility,
interest at prime plus .25%;
fully collateralized, payable
in monthly installments
through December 1998 (See
Note 5). $116,556 $171,500
Bank term note, under
financing facility, interest
at the Bank's prime rate,
payable in equal monthly
installments through 1999;
fully collateralized by
applicable equipment and the
short-term investment. At
December 31, 1996,
approximately $134,000 was
available for additional
equipment financing. 401,005 224,091
Capital lease obligations, at
interest rates ranging from
4.4% to 9.3%, with monthly
payments ranging from $182 to
$549; lease obligations are
due through 2000. 20,457 22,573
-------- --------
538,018 418,164
Less: current maturities 237,652 140,681
-------- --------
$300,366 $277,483
======== ========
(Continued)
F-11
<PAGE>
THE MED-DESIGN CORPORATION AND SUBSIDIARIES
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
6. Long-Term Debt, continued
The aggregated amount of debt and capital lease obligations maturing in
each of the next three years after 1996 us as follows:
1997 $237,652
1998 227,714
1999 70,732
2000 1,920
Thereafter --
--------
$538,018
========
7. Commitments and Contingencies
The Company leases a building, office space, and other office equipment
under noncancellable operating leases expiring at various times through December
31, 2000. The building lease provides an option to renew the lease for two
additional thirty-six month periods.
The following is a schedule of future minimum payments, by year and in
the aggregate, of noncancellable operating leases with initial or remaining
terms of greater than one year at December 31, 1996:
1997 $192,000
1998 192,000
1999 191,000
2000 163,000
--------
Total minimum
lease payments $738,000
========
Total rent expense under all operating leases for year ended December 31,
1996 and 1995 was $189,774 and $88,862, respectively.
The Company has employment agreements, renewable annually, with the
Chairman of the Board, President and Chief Executive Officer, and certain other
executives providing for salary to be paid over the term of their agreements
which expire in the year 2000 and 1998, respectively. At December 31, 1996,
payments due under employment contracts in 1997 total approximately $889,500.
(Continued)
F-12
<PAGE>
THE MED-DESIGN CORPORATION AND SUBSIDIARIES
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
8. Stockholder's Equity
Common Stock
On January 31, 1996, the Board of Directors authorized a two-for-one stock
split in the form of a stock dividend payable to shareholders of record as of
February 12, 1996. All references in the consolidated financial statements to
average number of shares outstanding and related prices, per share amounts, and
stock plan data have been restated to reflect this split.
The Company was originally capitalized by the contribution of a $100,000
option to acquire MDI in exchange for 1,541,824 shares of the company.
During the years ended December 31, 1995 and 1994 the Company issued three
notes totaling $650,000 with 185,716 shares of Common Stock in the aggregate.
The value of the stock represents $650,000 of original issue discount on the
debt which was charged to income through the first quarter of fiscal year 1995.
The debt along with accrued interest of 10% was paid upon the consummation of
the Company's initial public offering. Two of these notes aggregating $400,000
and 114,286 shares were issued to shareholders of the Company.
In addition to shares purchased for cash or in connection with debt
issuances during the year ended December 31, 1994, the Company issued 240,000
shares to various individuals in exchange for services rendered. The fair market
value of the shares has been recorded as compensation expense of $418,800.
In accordance with an agreement between the Company and a shareholder,
based on the outcome of the Company's initial public offering, the shareholder
had the option to convert 20,000 shares of stock into $30,000 of senior
corporate debt bearing interest at 10%. Based on the outcome of the initial
public offering this option expired unexercised.
Stock Option Plan
In 1995, the Company created a Non-Qualified Stock Option Plan ("Stock
Option Plan") which provides for the granting of 500,000 options to directors,
officers, and other employees of the Company. Under the Stock Option Plan, the
exercise price of each option may not be less than the fair market value (as of
the date of grant) of Common Stock subject thereto and the term of each option
may be no more than 10 years from the date of grant. Additionally, the Stock
Option Plan provides for the issuance of options for the purchase of 16,000
shares of Common Stock annually to each non-employee director.
(Continued)
F-13
<PAGE>
THE MED-DESIGN CORPORATION AND SUBSIDIARIES
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
8. Stockholder's Equity, continued
Stock Option Plan, continued
Activity under the Stock Option Plan during the years ended December 31,
1996 and 1995 is as follows:
<TABLE>
<CAPTION>
1996 1995
------------------------------------------- ---------------------------------------
Weighted- Weighted-
Average Average
Exercise Exercise
Fixed Options Shares Price Shares Price
- ------------------------------- --------------------- --------------- ------------------ ---------------
<S> <C> <C> <C> <C>
Outstanding at beginning
of year 123,000 $4.80 -- --
Granted 176,000 $10.77 123,000 $4.80
Exercised (10,000) $3.50 -- --
Canceled -- -- -- --
--------------------- --------------- ------------------ ---------------
Outstanding at end of year 289,000 $8.48 123,000 $4.80
===================== =============== ================== ===============
Options exercisable at
year-end 81,000 58,000
===================== ==================
Option price range at end
of year $3.50 to $20.50 $3.50 to $7.38
===================== ==================
Weighted-average fair
value of options granted
during year $5.94 $2.35
===================== ==================
</TABLE>
The following table summarizes information about fixed stock options
outstanding at December 31, 1996:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------------------------------------- --------------------------------------
Weighted-
Average Weighted- Weighted-
Number Remaining Average Number Average
Range of Outstanding Contractual Exercise Exercisable Exercise
Exercise Prices at 12/31/96 Life Price at 12/31/96 Price
- ------------------- ------------------ ---------------- --------------- ----------------- ---------------
<C> <C> <C> <C> <C> <C>
$3.50 68,000 4.7 $3.50 68,000 $3.50
$6.875 to $7.380 173,000 6.5 $7.10 13,000 $6.99
$20.50 48,000 5.4 $20.50 -- --
------------------ ---------------- --------------- ----------------- ---------------
$3.50 to $20.50 289,000 6.4 $8.48 81,000 $4.06
================== ================ =============== ================= ===============
</TABLE>
(Continued)
F-14
<PAGE>
THE MED-DESIGN CORPORATION AND SUBSIDIARIES
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
8. Stockholder's Equity, continued
Stock Option Plan, continued
The company has adopted the disclosure only provisions of FAS No. 123,
"Accounting for Stock-based Compensation." Accordingly, no compensation cost
has been recognized for the Company's Stock Option Plan. Had compensation cost
for the Company's Stock Option Plan been determined based on the fair value at
the grant date for awards in 1996 and 1995 consistent with the provisions of FAS
No. 123, the Company's net loss and net loss per share would have been increased
to the pro forma amounts indicated below:
1996 1995
---- ----
Net loss - as reported ($4,322,869) ($8,492,487)
Net loss - pro forma ($4,919,601) ($8,664,319)
Net loss per share - as reported ($0.63) ($1.71)
Net loss per share - pro forma ($0.72) ($1.75)
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted-average
assumption used for grants in 1996 and 1995: dividend yield of 0.00%; expected
volatility of .74%; risk free interest rate of 6.29%; and expected lives based
on actual terms of options granted.
Warrants
In connection with the initial public offering (Note 13), the Company
issued warrants to the Underwriter to purchase 300,000 shares of Common Stock,
of which warrants to purchase 111,000 shares were exercised in 1996. In
addition, on August 15, 1995 the Company issued warrants to purchase from the
Company 100,000 shares of Common Stock at $7.50 per share, in consideration for
the execution of an agreement for consulting services. The warrants are
exercisable upon issuance and expire on August 15, 1998. In connection with the
issuance of these warrants, the Company recorded consulting expense in the
amount of $21,000 for the year ended December 31, 1995.
(Continued)
F-15
<PAGE>
THE MED-DESIGN CORPORATION AND SUBSIDIARIES
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
9. Income Taxes
On December 31, 1996 and 1995, the Company had a net operating loss carry
forward for federal income tax purposes of approximately $6,091,621 and
$3,175,000, respectively, and for state tax purposes of approximately $5,966,000
and $1,636,000, respectively. These net operating losses are available to offset
future taxable income, if any, through 2011 and 2001 for federal and state tax
purposes, respectively. A valuation allowance has been provided for the deferred
tax asset resulting from the net operating loss carry forward. Other temporary
differences are insignificant. The utilization of net operating loss
carryforward may be limited by Section 382 of the Internal Revenue Code.
10. Related Party Transactions
During 1996, an officer of the Company was paid $35,374 for wages accrued
under an employment agreement with MDI, prior to the acquisition of MDI by MDC.
During 1996 and 1995, the Company paid $33,182 and $121,803, respectively,
for legal services to a firm, of which a partner is a director, officer and
shareholder of the Company.
11. Fair Value of Financial Statements
The fair value of financial instruments approximates carrying value. The
following methods and assumptions were considered by the Company in determining
its fair value disclosures for financial instruments:
Cash and cash equivalents: The carrying amount reported in the balance
sheet approximates fair value.
Marketable securities: Available-for-sale securities consist of
corporate bonds and U.S. Government obligations. Fair value is based
on quoted market prices.
Debt: The Company's debt is primarily variable in nature and based on
LIBOR or the prime rate. As a whole the carrying amount of debt
instruments approximates fair value.
(Continued)
F-16
<PAGE>
THE MED-DESIGN CORPORATION AND SUBSIDIARIES
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
12. Acquisition of MDI
On April 5, 1995 the Company acquired the outstanding stock of MDI in
exchange for 1,247,314 (valued at $4,365,599) shares of the Company, of which
3,572 shares were delivered to certain creditors of MDI to satisfy $12,500 of
outstanding obligations of MDI, 24,000 shares to a former noteholder of MDI to
satisfy an obligation of MDI, and a $1,000,000 non-interest bearing promissory
note. The Note was satisfied on June 12, 1995 utilizing the net proceeds of the
Company's initial public offering.
This acquisition was accounted for in accordance with the purchase method,
under which the purchase price was allocated to the assets of MDI based on the
fair market value of such assets. The excess of the purchase price over the fair
market value of the net assets acquired was treated as purchased research and
development as follows:
Value of 1,247,314 shares of stock
granted at a price of $3.50 a share $4,365,599
Issuance of note to former
shareholders of MDI 1,000,000
Payments in connection with
option to acquire MDI 225,000
Negative net book valued acquired 342,171
------------
$5,932,770
============
13. Initial Public Offering
In June 1995, the Company consummated an initial public offering (the
"Offering") of 3,000,000 shares of Common Stock at a price of $3.50 per share
(1,500,000 shares at $7.00 per share prior to stock split - Note 11). An
additional 450,000 shares were issued at $3.50 per share to the Underwriter of
the initial public offering. The Company received $9,525,966 in proceeds, net of
costs incurred in connection with the Offering.
Additionally, in connection with the Offering, the Company agreed to sell
to the Underwriter, for nominal consideration, warrants to purchase 300,000
shares of Common Stock ("the Underwriter's Warrants"). The Underwriter's
Warrants are exercisable at a price of $4.90 per share of Common Stock for a
period of four years commencing one year from the effective date of the
Offering.
(Continued)
F-17
<PAGE>
THE MED-DESIGN CORPORATION AND SUBSIDIARIES
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
14. Subsequent Events
On January 23, 1997, the Company completed a Private Placement
("Placement") of 1,000,000 new shares of Common Stock at a price of $5.00 per
share. The Company received approximately $4,627,000, net of expenses incurred
in connection with the Placement.
In connection with the Placement, the Company agreed to sell, for nominal
consideration, warrants to purchase 100,000 shares of Common Stock ("Placement
Agent Warrants"). The Placement Agent Warrants are exercisable at a price of
$5.50 a share of Common Stock for a period of four years commencing January 22,
1998.
On February 21, 1997, the Company reduced debt outstanding under its Loan
Agreement by $2,000,000.
On March 19, 1997, the Company issued warrants to purchase 100,000 shares
of its Common Stock at $7.50 to a director. These warrants are exercisable on or
before March 19, 2000.
F-18
EXHIBIT 10.13
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND OTHER SECURITIES ISSUABLE UPON
EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES STATUTE AND MAY NOT BE OFFERED SOLD, PLEDGED,
HYPOTHECATED, ASSIGNED OR TRANSFERRED EXCEPT PURSUANT TO: (i) AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
(ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER THE ACT (OR ANY SIMILAR RULE UNDER
THE ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF
COUNSEL, IF THE OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL FOR THE
ISSUER, THAT AN EXEMPTION FROM REGISTRATION UNDER THE ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN.
EXERCISABLE ON OR BEFORE
5:00 P.M., NEW YORK TIME, January 23, 2002
No. W-01 80,000 Warrants
WARRANT CERTIFICATE
This Warrant Certificate certifies that N. Scott Fine, or registered
assigns, is the registered holder of 80,000 Warrants to purchase initially, at
any time from January 23, 1998 [12 months from date Warrant is issued] until
5:00 p.m. New York time on January 23, 2002 [five years from the date hereof]
("Expiration Date"), up to 80,000 fully-paid and non-assessable shares (the
"Shares") of common stock, $.01 par value per share ("Common Stock") of THE
MED-DESIGN CORPORATION, a Delaware corporation (the "Company"), at the initial
exercise price, subject to adjustment in certain events (the "Exercise Price"),
of $5.50 per Share upon surrender of this Warrant Certificate and payment of the
Exercise Price at an office or agency of the Company, or by surrender of this
Warrant Certificate in lieu of cash payment, but subject to the conditions set
forth herein and in the Placement Agent's Warrant Agreement dated as of January
23, 1997 between the Company and Fine Equities, Inc. (the "Warrant Agreement").
Payment of the Exercise Price shall be made by certified or official bank check
in New York Clearing House Funds payable to the order of the Company or by
surrender of this Warrant Certificate.
No Warrant may be exercised after 5:00 p.m., New York time, on the
Expiration Date, at which time all Warrants evidenced hereby, unless exercised
prior thereto, hereby shall thereafter be void.
<PAGE>
EXHIBIT 10.13
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants issued pursuant to the Warrant Agreement, which
Warrant Agreement is hereby incorporated by reference in and made a part of this
instrument and is hereby referred to for a description of the rights, limitation
of rights, obligations, duties and immunities thereunder of the Company and the
holders (the words "holders" or "holder" meaning the registered holders or
registered holder) of the Warrants.
The Warrant Agreement provides that upon the occurrence of certain
events the Exercise Price and the type and/or number of the Company's securities
issuable thereupon may, subject to certain conditions, be adjusted. In such
event, the Company will, at the request of the holder, issue a new Warrant
Certificate evidencing the adjustment in the Exercise Price and the number
and/or type of securities issuable upon the exercise of the Warrants; provided,
however, that the failure of the Company to issue such new Warrant Certificates
shall not in any way change, alter, or otherwise impair, the rights of the
holder as set forth in the Warrant Agreement.
Upon due presentment for registration of transfer of this Warrant
Certificate at an office or agency of the Company, a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like number
of Warrants shall be issued to the transferee(s) in exchange for this Warrant
Certificate, subject to the limitations provided herein and in the Warrant
Agreement, without any charge except for any tax or other governmental charge
imposed in connection with such transfer.
Upon the exercise of less than all of the Warrants evidenced by this
Certificate, the Company shall forthwith issue to the holder hereof a new
Warrant Certificate representing such number of unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, and of any distribution to the holder(s) hereof, and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined in the
Warrant Agreement shall have the meanings assigned to them in the Warrant
Agreement.
2
<PAGE>
EXHIBIT 10.13
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed under its corporate seal.
Dated as of January 23, 1997
THE MED-DESIGN CORPORATION
[SEAL] By: /s/ James M. Donegan
-------------------------------
Name:
Title:
Attest:
/s/ Joseph M. Bongiovanni, III
- ------------------------------
Name:
Title: Secretary
3
<PAGE>
EXHIBIT 10.13
[FORM OF ELECTION TO PURCHASE PURSUANT TO SECTION 3.1]
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase _____________ Shares
and herewith tenders in payment for such securities a certified or official bank
check payable in New York Clearing House Funds to the order of The Med-Design
Corporation in the amount of $_______, all in accordance with the terms of
Section 3.1 of the Placement Agent's Warrant Agreement by and between The
Med-Design Corporation and Fine Equities, Inc. The undersigned requests that
certificates for such securities be registered in the name of ___________ whose
address is ____________________and that such certificates be delivered
to_______________ whose address is_________________________.
Dated: ________________
Signature__________________________
(Signature must conform in all
respects to name of holder as
specified on the face of the Warrant
Certificate.)
-----------------------------------
(Insert Social Security or Other
Identifying Number of Holder)
4
<PAGE>
EXHIBIT 10.13
[FORM OF ELECTION TO PURCHASE PURSUANT TO SECTION 3.2]
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase ________ Shares all in
accordance with the terms of Section 3.2 of the Placement Agent's Warrant
Agreement between The Med- Design Corporation and Fine Equities, Inc. The
undersigned requests that certificates for such securities be registered in the
name of ______________ whose address is __________________________________ and
that such certificates be delivered to ________________________ whose address is
___________________.
Dated: ________________
Signature_________________________
(Signature must conform in all
respects to name of holder as
specified on the face of the Warrant
Certificate.)
--------------------------------
(Insert Social Security or Other
Identifying Number of Holder)
5
<PAGE>
EXHIBIT 10.13
[FORM OF ASSIGNMENT]
(To be executed by the registered holder if such holder
desires to transfer the Warrant Certificate.)
FOR VALUE RECEIVED ______________ hereby sells, assigns and transfers
unto
--------------------------------------------------------------------------
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint ____________ Attorney, to
transfer the within Warrant Certificate on the books of the within-named
Company, with full power of substitution.
Dated: _________________
Signature: _____________________
(Signature must conform in all
respects to name of holder as
specified on the face of the Warrant
Certificate.)
-------------------------------
(Insert Social Security or other
Identifying Number of Assignee)
6
EXHIBIT 10.14
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND OTHER SECURITIES ISSUABLE UPON
EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES STATUTE AND MAY NOT BE OFFERED SOLD, PLEDGED,
HYPOTHECATED, ASSIGNED OR TRANSFERRED EXCEPT PURSUANT TO: (i) AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
(ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER THE ACT (OR ANY SIMILAR RULE UNDER
THE ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF
COUNSEL, IF THE OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL FOR THE
ISSUER, THAT AN EXEMPTION FROM REGISTRATION UNDER THE ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN.
EXERCISABLE ON OR BEFORE
5:00 P.M., NEW YORK TIME, January 23, 2002
No. W-02 10,000 Warrants
WARRANT CERTIFICATE
This Warrant Certificate certifies that M. Troy Duncan, or registered
assigns, is the registered holder of 10,000 Warrants to purchase initially, at
any time from January 23, 1998 [12 months from date Warrant is issued] until
5:00 p.m. New York time on January 23, 2002 [five years from the date hereof]
("Expiration Date"), up to 10,000 fully-paid and non-assessable shares (the
"Shares") of common stock, $.01 par value per share ("Common Stock") of THE
MED-DESIGN CORPORATION, a Delaware corporation (the "Company"), at the initial
exercise price, subject to adjustment in certain events (the "Exercise Price"),
of $5.50 per Share upon surrender of this Warrant Certificate and payment of the
Exercise Price at an office or agency of the Company, or by surrender of this
Warrant Certificate in lieu of cash payment, but subject to the conditions set
forth herein and in the Placement Agent's Warrant Agreement dated as of January
23, 1997 between the Company and Fine Equities, Inc. (the "Warrant Agreement").
Payment of the Exercise Price shall be made by certified or official bank check
in New York Clearing House Funds payable to the order of the Company or by
surrender of this Warrant Certificate.
No Warrant may be exercised after 5:00 p.m., New York time, on the
Expiration Date, at which time all Warrants evidenced hereby, unless exercised
prior thereto, hereby shall thereafter be void.
<PAGE>
EXHIBIT 10.14
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants issued pursuant to the Warrant Agreement, which
Warrant Agreement is hereby incorporated by reference in and made a part of this
instrument and is hereby referred to for a description of the rights, limitation
of rights, obligations, duties and immunities thereunder of the Company and the
holders (the words "holders" or "holder" meaning the registered holders or
registered holder) of the Warrants.
The Warrant Agreement provides that upon the occurrence of certain
events the Exercise Price and the type and/or number of the Company's securities
issuable thereupon may, subject to certain conditions, be adjusted. In such
event, the Company will, at the request of the holder, issue a new Warrant
Certificate evidencing the adjustment in the Exercise Price and the number
and/or type of securities issuable upon the exercise of the Warrants; provided,
however, that the failure of the Company to issue such new Warrant Certificates
shall not in any way change, alter, or otherwise impair, the rights of the
holder as set forth in the Warrant Agreement.
Upon due presentment for registration of transfer of this Warrant
Certificate at an office or agency of the Company, a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like number
of Warrants shall be issued to the transferee(s) in exchange for this Warrant
Certificate, subject to the limitations provided herein and in the Warrant
Agreement, without any charge except for any tax or other governmental charge
imposed in connection with such transfer.
Upon the exercise of less than all of the Warrants evidenced by this
Certificate, the Company shall forthwith issue to the holder hereof a new
Warrant Certificate representing such number of unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, and of any distribution to the holder(s) hereof, and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined in the
Warrant Agreement shall have the meanings assigned to them in the Warrant
Agreement.
2
<PAGE>
EXHIBIT 10.14
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed under its corporate seal.
Dated as of January 23, 1997
THE MED-DESIGN CORPORATION
[SEAL] By: /s/ James M. Donegan
------------------------------
Name:
Title:
Attest:
/s/ Joseph M. Bongiovanni, III
- ------------------------------
Name:
Title: Secretary
3
<PAGE>
EXHIBIT 10.14
[FORM OF ELECTION TO PURCHASE PURSUANT TO SECTION 3.1]
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase __________ Shares and
herewith tenders in payment for such securities a certified or official bank
check payable in New York Clearing House Funds to the order of The Med-Design
Corporation in the amount of $_______, all in accordance with the terms of
Section 3.1 of the Placement Agent's Warrant Agreement by and between The
Med-Design Corporation and Fine Equities, Inc. The undersigned requests that
certificates for such securities be registered in the name of ___________ whose
address is ____________________and that such certificates be delivered
to_______________ whose address is_________________________.
Dated: ________________
Signature__________________________
(Signature must conform in all
respects to name of holder as
specified on the face of the Warrant
Certificate.)
-----------------------------------
(Insert Social Security or Other
Identifying Number of Holder)
4
<PAGE>
EXHIBIT 10.14
[FORM OF ELECTION TO PURCHASE PURSUANT TO SECTION 3.2]
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase ________ Shares all in
accordance with the terms of Section 3.2 of the Placement Agent's Warrant
Agreement between The Med-Design Corporation and Fine Equities, Inc. The
undersigned requests that certificates for such securities be registered in the
name of ______________ whose address is __________________________________ and
that such certificates be delivered to ________________________ whose address is
___________________.
Dated: ________________
Signature_________________________
(Signature must conform in all
respects to name of holder as
specified on the face of the Warrant
Certificate.)
--------------------------------
(Insert Social Security or Other
Identifying Number of Holder)
5
<PAGE>
EXHIBIT 10.14
[FORM OF ASSIGNMENT]
(To be executed by the registered holder if such holder
desires to transfer the Warrant Certificate.)
FOR VALUE RECEIVED ______________ hereby sells, assigns and transfers
unto
-------------------------------------------------------------------------
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint ____________ Attorney, to
transfer the within Warrant Certificate on the books of the within-named
Company, with full power of substitution.
Dated: _________________
Signature: _____________________
(Signature must conform in all
respects to name of holder as
specified on the face of the Warrant
Certificate.)
-------------------------------
(Insert Social Security or other
Identifying Number of Assignee)
6
EXHIBIT 10.15
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND OTHER SECURITIES ISSUABLE UPON
EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES STATUTE AND MAY NOT BE OFFERED SOLD, PLEDGED,
HYPOTHECATED, ASSIGNED OR TRANSFERRED EXCEPT PURSUANT TO: (i) AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
(ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER THE ACT (OR ANY SIMILAR RULE UNDER
THE ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF
COUNSEL, IF THE OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL FOR THE
ISSUER, THAT AN EXEMPTION FROM REGISTRATION UNDER THE ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN.
EXERCISABLE ON OR BEFORE
5:00 P.M., NEW YORK TIME, January 23, 2002
No. W-03 5,000 Warrants
WARRANT CERTIFICATE
This Warrant Certificate certifies that Sharon Bronte, or registered
assigns, is the registered holder of 5,000 Warrants to purchase initially, at
any time from January 23, 1998 [12 months from date Warrant is issued] until
5:00 p.m. New York time on January 23, 2002 [five years from the date hereof]
("Expiration Date"), up to 5,000 fully-paid and non-assessable shares (the
"Shares") of common stock, $.01 par value per share ("Common Stock") of THE
MED-DESIGN CORPORATION, a Delaware corporation (the "Company"), at the initial
exercise price, subject to adjustment in certain events (the "Exercise Price"),
of $5.50 per Share upon surrender of this Warrant Certificate and payment of the
Exercise Price at an office or agency of the Company, or by surrender of this
Warrant Certificate in lieu of cash payment, but subject to the conditions set
forth herein and in the Placement Agent's Warrant Agreement dated as of January
23, 1997 between the Company and Fine Equities, Inc. (the "Warrant Agreement").
Payment of the Exercise Price shall be made by certified or official bank check
in New York Clearing House Funds payable to the order of the Company or by
surrender of this Warrant Certificate.
No Warrant may be exercised after 5:00 p.m., New York time, on the
Expiration Date, at which time all Warrants evidenced hereby, unless exercised
prior thereto, hereby shall thereafter be void.
<PAGE>
EXHIBIT 10.15
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants issued pursuant to the Warrant Agreement, which
Warrant Agreement is hereby incorporated by reference in and made a part of this
instrument and is hereby referred to for a description of the rights, limitation
of rights, obligations, duties and immunities thereunder of the Company and the
holders (the words "holders" or "holder" meaning the registered holders or
registered holder) of the Warrants.
The Warrant Agreement provides that upon the occurrence of certain
events the Exercise Price and the type and/or number of the Company's securities
issuable thereupon may, subject to certain conditions, be adjusted. In such
event, the Company will, at the request of the holder, issue a new Warrant
Certificate evidencing the adjustment in the Exercise Price and the number
and/or type of securities issuable upon the exercise of the Warrants; provided,
however, that the failure of the Company to issue such new Warrant Certificates
shall not in any way change, alter, or otherwise impair, the rights of the
holder as set forth in the Warrant Agreement.
Upon due presentment for registration of transfer of this Warrant
Certificate at an office or agency of the Company, a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like number
of Warrants shall be issued to the transferee(s) in exchange for this Warrant
Certificate, subject to the limitations provided herein and in the Warrant
Agreement, without any charge except for any tax or other governmental charge
imposed in connection with such transfer.
Upon the exercise of less than all of the Warrants evidenced by this
Certificate, the Company shall forthwith issue to the holder hereof a new
Warrant Certificate representing such number of unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, and of any distribution to the holder(s) hereof, and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined in the
Warrant Agreement shall have the meanings assigned to them in the Warrant
Agreement.
2
<PAGE>
EXHIBIT 10.15
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed under its corporate seal.
Dated as of January 23, 1997
THE MED-DESIGN CORPORATION
[SEAL] By: /s/ James M. Donegan
------------------------------
Name:
Title:
Attest:
/s/ Joseph M. Bongiovanni, III
- ------------------------------
Name:
Title: Secretary
3
<PAGE>
EXHIBIT 10.15
[FORM OF ELECTION TO PURCHASE PURSUANT TO SECTION 3.1]
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase __________ Shares and
herewith tenders in payment for such securities a certified or official bank
check payable in New York Clearing House Funds to the order of The Med-Design
Corporation in the amount of $_______, all in accordance with the terms of
Section 3.1 of the Placement Agent's Warrant Agreement by and between The
Med-Design Corporation and Fine Equities, Inc. The undersigned requests that
certificates for such securities be registered in the name of ___________ whose
address is ____________________and that such certificates be delivered
to______________ whose address is_________________________.
Dated: ________________
Signature__________________________
(Signature must conform in all
respects to name of holder as
specified on the face of the Warrant
Certificate.)
-----------------------------------
(Insert Social Security or Other
Identifying Number of Holder)
4
<PAGE>
EXHIBIT 10.15
[FORM OF ELECTION TO PURCHASE PURSUANT TO SECTION 3.2]
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase ________ Shares all in
accordance with the terms of Section 3.2 of the Placement Agent's Warrant
Agreement between The Med-Design Corporation and Fine Equities, Inc. The
undersigned requests that certificates for such securities be registered in the
name of ______________ whose address is __________________________________ and
that such certificates be delivered to ________________________ whose address is
___________________.
Dated: ________________
Signature_________________________
(Signature must conform in all
respects to name of holder as
specified on the face of the Warrant
Certificate.)
--------------------------------
(Insert Social Security or Other
Identifying Number of Holder)
5
<PAGE>
EXHIBIT 10.15
[FORM OF ASSIGNMENT]
(To be executed by the registered holder if such holder
desires to transfer the Warrant Certificate.)
FOR VALUE RECEIVED ______________ hereby sells, assigns and transfers
unto
-------------------------------------------------------------------------
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint ____________ Attorney, to
transfer the within Warrant Certificate on the books of the within-named
Company, with full power of substitution.
Dated: _________________
Signature: _____________________
(Signature must conform in all
respects to name of holder as
specified on the face of the Warrant
Certificate.)
-------------------------------
(Insert Social Security or other
Identifying Number of Assignee)
6
EXHIBIT 10.16
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND OTHER SECURITIES ISSUABLE UPON
EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES STATUTE AND MAY NOT BE OFFERED SOLD, PLEDGED,
HYPOTHECATED, ASSIGNED OR TRANSFERRED EXCEPT PURSUANT TO: (i) AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
(ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER THE ACT (OR ANY SIMILAR RULE UNDER
THE ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF
COUNSEL, IF THE OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL FOR THE
ISSUER, THAT AN EXEMPTION FROM REGISTRATION UNDER THE ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN.
EXERCISABLE ON OR BEFORE
5:00 P.M., NEW YORK TIME, January 23, 2002
No. W-04 5,000 Warrants
WARRANT CERTIFICATE
This Warrant Certificate certifies that William A. Jolly, or registered
assigns, is the registered holder of 5,000 Warrants to purchase initially, at
any time from January 23, 1998 [12 months from date Warrant is issued] until
5:00 p.m. New York time on January 23, 2002 [five years from the date hereof]
("Expiration Date"), up to 5,000 fully-paid and non-assessable shares (the
"Shares") of common stock, $.01 par value per share ("Common Stock") of THE
MED-DESIGN CORPORATION, a Delaware corporation (the "Company"), at the initial
exercise price, subject to adjustment in certain events (the "Exercise Price"),
of $5.50 per Share upon surrender of this Warrant Certificate and payment of the
Exercise Price at an office or agency of the Company, or by surrender of this
Warrant Certificate in lieu of cash payment, but subject to the conditions set
forth herein and in the Placement Agent's Warrant Agreement dated as of January
23, 1997 between the Company and Fine Equities, Inc. (the "Warrant Agreement").
Payment of the Exercise Price shall be made by certified or official bank check
in New York Clearing House Funds payable to the order of the Company or by
surrender of this Warrant Certificate.
No Warrant may be exercised after 5:00 p.m., New York time, on the
Expiration Date, at which time all Warrants evidenced hereby, unless exercised
prior thereto, hereby shall thereafter be void.
<PAGE>
EXHIBIT 10.16
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants issued pursuant to the Warrant Agreement, which
Warrant Agreement is hereby incorporated by reference in and made a part of this
instrument and is hereby referred to for a description of the rights, limitation
of rights, obligations, duties and immunities thereunder of the Company and the
holders (the words "holders" or "holder" meaning the registered holders or
registered holder) of the Warrants.
The Warrant Agreement provides that upon the occurrence of certain
events the Exercise Price and the type and/or number of the Company's securities
issuable thereupon may, subject to certain conditions, be adjusted. In such
event, the Company will, at the request of the holder, issue a new Warrant
Certificate evidencing the adjustment in the Exercise Price and the number
and/or type of securities issuable upon the exercise of the Warrants; provided,
however, that the failure of the Company to issue such new Warrant Certificates
shall not in any way change, alter, or otherwise impair, the rights of the
holder as set forth in the Warrant Agreement.
Upon due presentment for registration of transfer of this Warrant
Certificate at an office or agency of the Company, a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like number
of Warrants shall be issued to the transferee(s) in exchange for this Warrant
Certificate, subject to the limitations provided herein and in the Warrant
Agreement, without any charge except for any tax or other governmental charge
imposed in connection with such transfer.
Upon the exercise of less than all of the Warrants evidenced by this
Certificate, the Company shall forthwith issue to the holder hereof a new
Warrant Certificate representing such number of unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, and of any distribution to the holder(s) hereof, and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined in the
Warrant Agreement shall have the meanings assigned to them in the Warrant
Agreement.
2
<PAGE>
EXHIBIT 10.16
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed under its corporate seal.
Dated as of January 23, 1997
THE MED-DESIGN CORPORATION
[SEAL] By: /s/ James M. Donegan
-------------------------------
Name:
Title:
Attest:
/s/ Joseph M. Bongiovanni, III
- ------------------------------
Name:
Title: Secretary
3
<PAGE>
EXHIBIT 10.16
[FORM OF ELECTION TO PURCHASE PURSUANT TO SECTION 3.1]
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase ____________ Shares
and herewith tenders in payment for such securities a certified or official bank
check payable in New York Clearing House Funds to the order of The Med-Design
Corporation in the amount of $_______, all in accordance with the terms of
Section 3.1 of the Placement Agent's Warrant Agreement by and between The
Med-Design Corporation and Fine Equities, Inc. The undersigned requests that
certificates for such securities be registered in the name of ___________ whose
address is ____________________and that such certificates be delivered
to_______________ whose address is_________________________.
Dated: ________________
Signature__________________________
(Signature must conform in all
respects to name of holder as
specified on the face of the Warrant
Certificate.)
-----------------------------------
(Insert Social Security or Other
Identifying Number of Holder)
4
<PAGE>
EXHIBIT 10.16
[FORM OF ELECTION TO PURCHASE PURSUANT TO SECTION 3.2]
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase ________ Shares all in
accordance with the terms of Section 3.2 of the Placement Agent's Warrant
Agreement between The Med-Design Corporation and Fine Equities, Inc. The
undersigned requests that certificates for such securities be registered in the
name of ______________ whose address is __________________________________ and
that such certificates be delivered to ________________________ whose address is
___________________.
Dated: ________________
Signature_________________________
(Signature must conform in all
respects to name of holder as
specified on the face of the Warrant
Certificate.)
--------------------------------
(Insert Social Security or Other
Identifying Number of Holder)
5
<PAGE>
EXHIBIT 10.16
[FORM OF ASSIGNMENT]
(To be executed by the registered holder if such holder
desires to transfer the Warrant Certificate.)
FOR VALUE RECEIVED ______________ hereby sells, assigns and transfers
unto
-------------------------------------------------------------------------
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint ____________ Attorney, to
transfer the within Warrant Certificate on the books of the within-named
Company, with full power of substitution.
Dated: _________________
Signature: _____________________
(Signature must conform in all
respects to name of holder as
specified on the face of the Warrant
Certificate.)
-------------------------------
(Insert Social Security or other
Identifying Number of Assignee)
6
EXHIBIT 10.41
FOURTH AMENDMENT TO LOAN AGREEMENTS
This Amendment to certain Business Loan Agreements is executed this
14th day of November, 1996 by and among MDC Investment Holdings, Inc. ("MDC"),
The Med-Design Corporation ("Med-Design") and MDC Research Ltd. ("Research" -
collectively, MDC, Med-Design and Research are herein called the "Borrowers")
and CoreStates Bank, N.A., successor by merger to Meridian Bank ("Bank").
BACKGROUND
A. On July 26, 1995, MDC executed and delivered to the Bank a Business
Loan Agreement (as amended from time to time the "MDC Loan Agreement"), pursuant
to which the Bank established a credit facility for MDC (the "MDC Loan") in the
amount of up to $3,000,000. This credit facility was evidenced by a Promissory
Note, dated July 26, 1995, in that amount (the "MDC Note"), was secured by MDC's
grant to the Bank of a security interest in its accounts, inventory, equipment
and general intangibles ("General Collateral"), and by a pledge of certain
securities held at Delaware Trust Capital Management, Inc. ("Pledged
Securities") and a certain Promissory Note in the amount of the MDC Loan from
Med-Design to MDC ("Related Party Note") and by a Surety Agreement executed by
Med-Design dated July 26, 1995 (the "Med-Design Surety Agreement"), which
Surety Agreement was secured by Med-Design's grant to the Bank of a security
interest in its accounts, inventory, equipment and general intangibles (the
"Med-Design Collateral") The General Collateral, Pledged Securities and Related
Party Note are hereinafter collectively referred to as the "MDC Collateral".
<PAGE>
EXHIBIT 10.41
B. On December 29, 1995, the Bank entered into Business Loan Agreements
with (i) MDC (the "MDC Equipment Loan Agreement"), and (ii) Research (the
"Research Equipment Loan Agreement"), pursuant to which the Bank agreed to make
equipment loans to such entities (the "Equipment Loans"), in an aggregate amount
not exceeding $750,000 (as amended from time to time, collectively, the
"Equipment Loan Agreements"). Advances under the Equipment Loan Agreements were
evidenced by promissory notes, dated December 29, 1995, in the amount of $30,500
(with respect to MDC) (the "MDC Equipment Note") and $141,000 (with respect to
Research) (collectively, the "Equipment Notes"). The indebtedness to be created
under the Equipment Loan Agreements was secured by the MDC Collateral, by the
Med-Design Collateral and by Research's grant to the Bank of a security interest
in its accounts, inventory, equipment and general intangibles (the "Research
Collateral"). In addition, MDC and Med-Design executed Surety Agreements with
respect to the obligations of Research to the Bank. The Surety Agreements and
the Promissory Notes executed by MDC, Med-Design and Research each contain
provisions entitling the Bank to enter a judgment against MDC, Med-Design or
Research upon the occurrence of an Event of Default or Default under such
documents. MDC, Med-Design and Research each executed Acknowledgments of
Confession of Judgment, relating to these provisions.
C. On February 16, 1996 Bank and Borrowers entered into an Amendment to
Loan Agreements (the "First Amendment") wherein Bank and Borrowers agreed to (1)
amend the MDC Loan Agreement by increasing the amount of the credit facility
thereunder to $3,500,000, which obligations were evidenced by a Promissory Note
dated February 16, 1996 in the amount of $3,500,000 (the "Second MDC Note")
which re-evidenced and replaced the indebtedness evidenced by the MDC Note, and
(2) amend the Equipment Loan Agreements by reducing the aggregate amount of the
loans available thereunder to $250,000.
D. On April 4, 1996 Bank and Borrowers entered into a Second Amendment
to Loan Agreements (the "Second Amendment") wherein Bank and Borrowers agreed
inter alia to (1) amend the MDC Loan Agreement by increasing the amount of the
credit facility thereunder to $4,700,000, which obligations were evidenced by a
Promissory Note dated April 4, 1996 in the amount of $4,700,000 (the "Third MDC
Note") which re-evidenced and replaced the indebtedness evidenced by the Second
MDC Note, and (2) amend the Equipment Loan Agreements by increasing the
aggregate amount of the loans available thereunder to $600,000.
E. On July 11, 1996 Bank and Borrower entered into a Third Amendment to
Loan Agreements (the "Third Amendment") wherein Bank and Borrowers agreed, inter
alia, to (1) amend the MDC Loan Agreement by increasing the maximum amount of
the credit facility thereunder to $6,000,000, which obligations were evidenced
by a Promissory Note dated July 11, 1996 in the amount of $6,000,000 (the
"Fourth MDC Note") which re-evidenced and replaced the indebtedness evidenced by
the Third MDC Note and (2) the Equipment Loan Agreements by adding Med-Design as
a co-borrower thereunder, which was evidenced by a Promissory Note dated July
11, 1996 in the amount of $30,500 which re-evidenced and replaced the
indebtedness evidenced by the MDC Equipment Note (the "Second MDC Equipment
Note").
2
<PAGE>
EXHIBIT 10.41
F. The MDC Collateral, the Med-Design Collateral and the Research
Collateral is herein collectively referred to as the "Collateral". The MDC Loan
Agreements, the Equipment Loan Agreements (collectively the "Loan Agreements"),
all promissory notes executed by the Borrowers, or any of them, all Surety
Agreements executed by the Borrowers, or any of them, all Security Agreements,
Pledge Agreements, Assignment Agreements or notification letters executed by the
Borrowers, or any of them, and all other documents, instruments or agreements
executed in connection with the Loan Agreements are herein collectively referred
to as the "Loan Documents".
G. The Borrowers have requested that the Bank modify the terms of the
Loan Agreements to (1) increase the maximum amount available under the MDC Loan
Agreement to $6,750,000 and (2) modify the lending formula and extend the date
to which advances may be made under the Loan Agreements. Bank is willing to
amend the Loan Agreements as described above, all on the terms and subject to
the conditions, set forth herein.
AGREEMENTS
The parties hereto, intending to be legally bound, hereby agree:
1. The MDC Loan Agreement shall be amended as follows:
(a) The reference to the sum $6,000,000 set forth therein shall be
deleted, and the sum $6,750,000 shall be substituted in its place, subject to
the provisions of Section 15 of the MDC Loan Agreement. In connection with such
increased availability under the MDC Loan Agreement, MDC shall execute and
deliver to the Bank a Commercial Promissory Note, in the form of Exhibit "A".
All references to the note or to the promissory note in the MDC Loan Agreement,
or in any other Loan Documents, shall be deemed to be references to such new
note. The indebtedness evidenced by the Third MDC Note remains outstanding as of
the date hereof, and continues to be secured by the Collateral. All Loan
Documents shall, to the extent necessary, be amended and modified to provide
that the amount of the indebtedness owing under the Business Loan Agreement
shall be $6,750,0000, so that any reference to the sum $6,000,000 shall, from
and after the date hereof, be deemed a reference to the sum $6,750,000. The
parties hereto expressly acknowledge and agree that the replacement MDC Note
merely re-evidences the indebtedness evidenced by the Third MDC Note, while
increasing the principal amount thereof, and is given in substitution of, and
not as payment of, the Third MDC Note.
(b) Section 15 of the MDC Loan Agreement is amended by amending and
restating subsections (ii) and (iii) as follows:
(ii) Lending Formula. All advances under the MDC Loan will be
limited to 95% of the fair market value as determined by Bank from time to time
of short term, high grade, interest bearing securities issued by the United
States government, any agency thereof, or domestic corporations, acceptable to
Bank and pledged to Bank pursuant to the Pledge Agreement (the "Qualified
Securities") less a reserve of Qualified Securities with a Pledge Value (as
defined below) and
3
<PAGE>
EXHIBIT 10.41
determined by Bank at the time of such advance equal to the aggregate amount
then outstanding under the Equipment Loans. The value of the Qualified
Securities determined in accordance with the preceding sentence is hereinafter
referred to as the "Pledge Value."
(iii) Final Advance Date. Bank shall not make advances under the MDC
Loan after June 30, 1997 unless such date is extended by Bank in its sole and
absolute discretion.
2. The Equipment Loan Agreements each shall be amended as follows:
(a) Section 15 of each of the Equipment Loan Agreements is amended
amending and restating subsections (ii) and (iii) thereof as follows:
(ii) Lending Formula. All advances under the Equipment Loan shall
be limited to 80% of the new equipment purchase price and will be further
limited to 95% of the fair market value as determined by Bank from time to time
of short term, high grade, interest bearing securities issued by the United
States government, any agency thereof, or domestic corporations, acceptable to
Bank and pledged to Bank pursuant to the Pledge Agreement (the "Qualified
Securities") less a reserve of Qualified Securities with a Pledge Value (as
defined below) and determined by the Bank at the time of such advance equal to
the aggregate amount then outstanding under the MDC Loan. The sum of the value
of the Qualified Securities determined in accordance with the preceding sentence
is hereinafter referred to as the "Pledge Value." Advances under the Equipment
Loans to MDC and Research will be aggregated for the purpose of this advance
formula and in no event shall the aggregate of such advances exceed $600,000.
(iii) Final Advance Date. Bank shall not make advances on the
Equipment Loans after June 30, 1997, unless such date is extended by Bank in its
sole and absolute discretion.
3. The Borrowers hereby:
(a) ratify and confirm all the representations, warranties and
covenants contained in each of the Loan Agreements;
(b) ratify, confirm and acknowledge that, as amended hereby, the
Loan Agreements and the Loan Documents continue to be valid, binding and in full
force and effect;
(c) confirm and acknowledge that the credit facility established
under the MDC Loan Agreement, as increased and amended hereby, and that the
credit facilities established under the Equipment Loan Agreements, as amended
hereby, (collectively, the "Loans") are secured by all of the Collateral
described in any of the Loan Documents
4
<PAGE>
EXHIBIT 10.41
(d) confirm and agree that all Surety Agreements previously executed
by any of the Borrowers securing the Loans or the obligations of each other
Borrower shall continue to secure the Loans, and the obligations of each other
Borrower, as modified herein;
(e) covenant and agree to perform all of their respective
obligations under each of the Loan Agreements and the Loan Documents, as amended
hereby;
(f) acknowledge and agree that they have no defense, set-off,
counterclaim or challenge against the payment of any sums owing under any of the
Loan Agreements or the Loan Documents, or the enforcement of any of the terms of
the Loan Agreements or the Loan Documents, as amended hereby;
(g) acknowledge and agree that all of their representations,
warranties and covenants contained in the Loan Agreements and/or the Loan
Documents, as amended hereby, are true, accurate and correct on and as of the
date hereof as if made on and as of the date hereof;
(h) represent and covenant that the Acknowledgments of Confession of
Judgment, executed by each of the Borrowers, was voluntarily and intentionally
executed, consented to, and agreed to by such Borrower, and that those
Acknowledgments remain in full force and effect, as if set forth in full herein;
(i) consent and re-affirm the confession of judgment clauses
contained in the Loan Documents, or any of them, and acknowledge that the Bank
is relying on this representation, and each other representation contained
herein, in connection with executing this Amendment to Loan Agreements, and in
continuing the credit facilities established for the Borrowers; and
(j) represent and warrant that no Default, as defined in the
Business Loan Agreements or any of the promissory notes or the surety
agreements, now exist, or will exist upon the delivery of notice, passage of
time or both, and all information described in the Background to this Agreement
is true, accurate and complete.
4. As a condition to the execution and delivery of this Amendment to
Loan Agreements, the Borrower shall deliver to the Bank, in form and content
satisfactory to the Bank and its counsel, a certified copy of resolutions
adopted by the Board of Directors of each of the Borrowers authorizing the
execution, delivery and performance of this Amendment to Loan Agreements, and
all of the documents and instruments required by the Bank for the implementation
of this Agreement.
5. The Borrowers will pay to Bank (a) a commitment fee of $1,000 in
connection with the modification of the MDC Loan Agreement and (b) all of Bank's
out-of-pocket costs and expenses incurred in connection with the review,
preparation, negotiation, documentation and closing of this Amendment to Loan
Agreements, and the consummation of transactions contemplated hereunder,
including, but without limitation, all fees, expenses and disbursements
5
<PAGE>
EXHIBIT 10.41
of counsel retained by Bank and all fees relating to filings, recording of
documents and searches, and appraisal costs, whether or not the transaction is
consummated hereunder. In addition, the Borrower shall pay all Bank's costs and
expenses incurred in connection with the enforcement of the Loan Agreements and
the Loan Documents, including, but not limited to, those incurred in connection
with (a) the protection, exercise or enforcement of the Bank's rights with
respect to the Collateral, including, without limitation, the Bank's rights to
(i) collect or take possession of the Collateral and the proceeds thereof, (ii)
hold the Collateral, (iii) prepare the Collateral for sale or other disposition,
and (iv) sell or otherwise dispose of the Collateral, and (b) the assertion,
protection or exercise or enforcement of the Bank's rights in any proceeding
under the United States Bankruptcy Code, including (without limitation) the
preparation, filing and prosecution of (i) proofs of claim, (ii) motions for
relief from the automatic stay, (iii) motions for adequate protection, and (iv)
complaints, answers and other pleadings in adversary proceedings by or against
the Bank or relating in any way to any of the Collateral, all of which
obligations shall be secured by the Collateral.
6. To the extent of any inconsistency between the terms of this
Amendment to Loan Agreements and the terms of any of the Loan Agreements or the
other Loan Documents, the terms and conditions of this Amendment shall prevail.
All terms and conditions of the Loan Agreements and the Loan Documents not
inconsistent herewith shall remain in full force and effect and are hereby
ratified and confirmed by each of the Borrowers.
7. Any capitalized term used in this Amendment to Loan Agreements not
otherwise defined herein shall have the meanings ascribed to them in the Loan
Agreements. This Amendment to Loan Agreements shall be binding upon and inure to
the benefit of the parties hereto and each of their respective successors and
assigns.
8. This Amendment Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania.
6
<PAGE>
EXHIBIT 10.41
IN WITNESS WHEREOF, the Borrowers and the Bank have caused this
Amendment to Loan Agreements to be executed by their respective authorized
officers as of the day and year first above written.
ATTEST: MDC INVESTMENT HOLDINGS, INC.
/s/ Gilbert M. White By: /s/ Patrick E. Rodgers
- ----------------------------- ------------------------------
Patrick E. Rodgers
Treasurer
ATTEST: MDC RESEARCH LTD.
/s/ Gilbert M. White By: /s/ Patrick E. Rodgers
- ----------------------------- ------------------------------
Patrick E. Rodgers
Executive Vice President-
Finance
ATTEST: THE MED-DESIGN CORPORATION
/s/ Gilbert M. White By: /s/ Patrick E. Rodgers
- ----------------------------- ------------------------------
Patrick E. Rodgers
Executive Vice President-
Finance
CORESTATES BANK, N.A.
By: /s/ John H. Van Dusen
-------------------------------
Vice President
7
Exhibit 10.42
PAY TO THE ORDER OF CORESTATES BANK, N.A.
MDC INVESTMENT HOLDINGS, INC.
By: /s/ Patrick E. Rodgers
-------------------------
Title: Treasurer
JUDGMENT NOTE
$6,750,000 November 14 , 1996
Upon demand or upon such terms as the parties may subsequently agree
The Med-Design Corporation hereby promises to pay to the order of MDC Investment
Holdings, Inc. up to Six Million Seven Hundred Fifty Thousand Dollars without
defalcation, for value received, with interest at the rate of eight (8%) percent
per annum for money loaned for which payment remains due.
The payee has arranged on even date to borrow additional funds and/or
secure an increased line of credit from the Meridian Bank pursuant to certain
terms and conditions. Payee agrees to lend said proceeds when utilized to maker
upon request for legitimate corporate purpose. Repayment terms will be set by
agreement of the parties when such a loan is made.
And further, upon the filing of an affidavit of a default by the payee,
The Med-Design Corporation, Inc. hereby authorizes and empowers the
Prothonotary, Clerk of Court or any attorney of any court of record of
Pennsylvania, or elsewhere, to appear for and to confess judgment against them
for the above sum, with our without declaration, with the cost of suit, release
of errors, without stay of execution; and also waives the right of inquisition
on any real estate that may be levied upon to collect this note, and does hereby
voluntarily condemn the same, and authorizes the Prothonotary to enter upon the
Writ of Execution their said voluntary condemnation, and further agree that said
real estate may be sold on a Writ of Execution and hereby waive and release all
relief from any and all appraisement, stay or exemption laws of any State, now
in force, or hereafter to be passed.
This Note re-evidences a certain indebtedness previously evidenced by
that certain $6,000,000 Judgment Note dated July , 1996, and has been given in
substitution thereof and not as payment of such prior note and is not intended
as a novation thereof, nor an extinguishment of the liabilities evidenced
thereby.
ATTEST: THE MED-DESIGN CORPORATION
/s/ Gilbert M. White By: /s/ Patrick E. Rodgers
- ------------------------ ------------------------------------
(corporate seal) Title: Executive Vice President, CFO
EXHIBIT 10.43
COMMERCIAL PROMISSORY NOTE
$6,750,000 CoreStates November 14, 1996
FOR VALUE RECEIVED, each of the undersigned, jointly and severally if
more than one (hereinafter collectively referred to as "Borrower"), promises to
pay to the order of CORESTATES BANK, N.A.*, a national banking association (the
"Bank"), at any of its banking offices in Pennsylvania, the principal amount of
Six Million Seven Hundred Fifty Thousand DOLLARS in lawful money of the United
States, plus interest, to be paid as follows:
Interest hereunder shall accrue at the adjusted 30 Day LIBOR Rate, as such term
is defined in the Business Loan Agreement dated July 26, 1995, as amended from
time to time, between the Borrower and Bank, plus 250 basis points. The rate of
interest payable hereunder shall change simultaneously and automatically upon
any change in the 30 Day LIBOR Rate. Principal is payable ON DEMAND.
ADDITIONAL TERMS OF THIS NOTE - Each of the following provision shall apply to
this Note, to any extension or modification hereof and to the indebtedness
evidenced hereby, except as otherwise expressly stated above or in a separate
writing signed by Bank and Borrrower.
INTEREST - Interest shall be calculated on the basis of a 360 day year and shall
be charged for the actual number of days elapsed. Accrued interest shall be
payable monthly. Accrued interest shall also be payable when the entire
principal balance of this Note becomes due and payable (whether by demand,
stated maturity or acceleration) or, if earlier, when such principal balance is
actually paid to Bank. If the rate at which interest accrues is based on the
"Prime Rate", that term is defined as the rate of interest for loans established
by Bank from time to time as its prime rate. Said per annum rate of interest
shall change each tithe Bank's prime rate shall change, effective on and as of
the date of the change. Interest shall accrue on each disbursement hereunder
from the date such disbursement is made by Bank, provided, however, that to the
extent this Note represents a replacement, substitution, renewal or refinancing
of existing indebtedness, interest shall accrue from the date hereof, interest
shall accrue on the unpaid balance hereof at the rate provided for in this Note
until the entire unpaid balance has been paid in full, notwithstanding the entry
of any judgment against Borrower.
PREPAYMENT - If this Note bears interest at a floating or variable rate and no
floor or minimum rate is specified, Borrower may prepay all or any portion of
the principal balance of this Note at any time, without premium or penalty. If
not permitted under the preceding sentence, any prepayment of principal
(including any principal repayment as a result of acceleration by Bank of this
Note) shall require immediate payment to Bank of a prepayment fee equal to the
amount, if any, by which the aggregate present value of scheduled principal and
interest payments eliminated by the prepayment exceeds the principal amount
being prepaid. Said present value shall be calculated by application of a
discount rate determined by Bank in its reasonable judgment to be the
yield-to-maturity at the time of prepayment on U.S. Treasury securities having a
maturity which most closely approximates the final maturity date of the
principal balance then outstanding. Whether or not a prepayment fee is required
hereunder, prepayments shall be applied to scheduled installments of principal
in the inverse order of their maturity, shall be accompanied by payment of
accrued interest on the principal amount being prepaid and, unless this Note has
been accelerated by Bank, shall not be permitted in an amount less than the
scheduled principal installment immediately prior to final maturity of the
outstanding principal balance.
<PAGE>
EXHIBIT 10.43
COLLATERAL - As security for all indebtedness to Bank now or hereafter incurred
by Borrower, under this Note or otherwise. Borrower grants Bank a lien upon and
security interest in any securities, instruments or other personal property of
Borrower now or hereafter in Bank's possession and in any deposit balances now
or hereafter held by Bank for Borrower's account, and in all proceeds of any
such personal property or deposit balances. Such liens and security interest
shall be independent of Bank's right of setoff. This Note and the indebtedness
evidenced hereby shall be additionally secured by any lien or security interest
evidenced by a writing (whether now existing or hereafter executed) which
contains a provision to the effect that such lien or security interest is
intended to secure (a) this Note or the indebtedness evidenced hereby or (b) any
category of liabilities, obligations or indebtedness of Borrower to Bank which
includes this Note or the indebtedness evidenced hereby, and all property
subject to any such lien or security interest shall be collateral for this Note.
EVENTS OF DEFAULT - Each of the following shall be an Event of Default
hereunder; (a) the nonpayment when due of any amount payable under this Note or
under any obligation or indebtedness to Bank of Borrower or any person liable,
either absolutely or contingently, for payment of any indebtedness evidenced
hereby, including endorsers, guarantors and sureties (each such person is
referred to as an "Obligor"); (b) if Borrower or any Obligor has failed to
observe or perform any other existing or future agreement with Bank of any
nature whatsoever; (c) if any representation, warranty, certificate, financial
statement or other information made or given by Borrower or any Obligor to Bank
is materially incorrect or misleading; (d) if Borrower or any Obligor shall
become insolvent or make an assignment for the benefit of creditors or if any
petition shall be filed by or against Borrower or any Obligor under any
bankruptcy or insolvency law; (e) the entry of any judgment against Borrower or
any Obligor which remains unsatisfied for 15 days or the issuance of any
attachment, tax lien, levy or garnishment against any property of material value
in which Borrower or any Obligor has an interest; (f) if any attachment, levy,
garnishment or similar legal process is served upon Bank as a result of any
claim against Borrower or any Obligor or against any property of Borrower or any
Obligor; (g) the dissolution, merger, consolidation. or the sale or change in
control (as control is defined in Rule 12b-2 under the Securities Exchange Act
of 1934) of any Borrower which is a corporation or partnership, or transfer of
any substantial portion of any of Borrower's assets, or if any agreement for
such dissolution, merger, consolidation, change in control.,sale or transfer is
entered into by Borrower, without the written consent of Bank; (h) the death of
any Borrower or Obligor who is a natural person; (i) if Bank determines
reasonably and in good faith that an event has occurred or a condition exists
which has had, or is likely to have, a material adverse effect on the financial
condition or creditworthiness of Borrower or any Obligor, or on the ability of
Borrower or any Obligor to perform its obligation evidenced by this Note; (j) if
Borrower shall fail to remit promptly when due to the appropriate government
agency or authorized depository, any amount collected or withheld from any
employee of Borrower for payroll taxes, Social Security payments or similar
payroll deductions; (k) if any Obligor shall attempt to terminate or disclaim
such Obligor's liability for the indebtedness evidenced by this Note; (l) if
Bank shall reasonably and in good faith determine and notify Borrower that any
collateral for this Note or for the indebtedness evidenced hereby is
insufficient as to quality or quantity; (m) if Borrower shall fail to pay when
due any material indebtedness for borrowed money other than to Bank; or (n) if
Borrower shall be notified of the failure of Borrower or any Obligor to provide
such financial and other information promptly when reasonably requested by Bank.
If this Note is payable on demand, Bank's right to demand payment hereof shall
not be restricted or impaired by the absence, non-occurrence or waiver of an
Event of Default, and it is understood that if this Note is payable on demand,
Bank may demand payment at any time.
BANK'S REMEDIES - Upon the occurrence of any one or more Events of Default
(including if this Note is payable on demand any Event of Default resulting from
Borrower's failure to make any payment hereunder when demanded), unless Bank
elects otherwise, the entire unpaid balance of this Note and all accrued
interest shall be immediately due and payable without notice to Borrower or any
Obligor, and Bank may, immediately or at any time thereafter, exercise any or
all of its rights and remedies hereunder or under any agreement or otherwise
under applicable law against Borrower, any Obligor and any collateral. Bank may
exercise its rights and remedies in any order and may, at its option, delay in
or refrain from exercising some or all of its rights and remedies without
prejudice thereto.
<PAGE>
EXHIBIT 10.43
Upon the occurrence of any such Event of Default or at any time thereafter, Bank
may, at its option, and upon five days' written notice to Borrower, begin
accruing interest on this Note, at a rate not to exceed five percent (5% ) per
annum in excess of the greater of (a) the rate of interest provided for above,
or (b) the Prime Rate in effect from time to time on the unpaid principal
balance hereof; provided, however, that no interest shall accrue hereunder in
excess of the maximum rate permitted by law. All such additional interest shall
be payable on demand.
CONFESSION OF JUDGMENT - Borrower irrevocably authorizes and empowers any
attorney or any clerk of any court of record, to appear for and confess judgment
against Borrower for such sums as are due and owing on this Note, with or
without declaration, with costs of suit, without stay of execution and with an
amount not to exceed the greater of fifteen percent (15%) of the principal
amount of such judgment or $5,000 added for collection fees. If a copy of this
Note, verified by affidavit by or on behalf of Bank, shall have been filed in
such action, it shall not be necessary to file the original of this Note. The
authority granted hereby shall not be exhausted by the initial exercise thereof
and may be exercised by Bank from time to time. There shall be excluded from the
lien of any judgment obtained solely pursuant to this paragraph all improved
real estate in any area identified as having special flood hazards under
regulations promulgated under the Flood Disaster Protection Act of 1973, if the
community in which such area is located is participating in the National Flood
Insurance Program. Any such exclusion shall not affect any lien upon property
not so excluded.
NOTICE TO BORROWER - Any notice required to be given by Bank under the
provisions of this Note shall be effective as to each Borrower and each Obligor
when addressed to Borrower and deposited in the mail, postage prepaid, for
delivery by first class mail at Borrower's mailing address as it appears on
Bank's records.
DISBURSEMENT AND PAYMENTS - The proceeds of this Note, or any portion thereof,
may be credited by Bank to the deposit account of Borrower, or disbursed in any
other manner requested by Borrower and approved by Bank. If Borrower so
requests, Bank may, at its option, disburse the proceeds of this Note in more
than one disbursement on the same or different dates, but except as otherwise
agreed by Bank in writing, no action taken by Bank in response to any such
request shall be deemed to create or shall imply the existence of any commitment
or obligation to pay or credit the undisbursed portion of this Note. All
payments due under this Note are to be made in immediately available funds. If
Bank accepts payment in any other form, such payment shall not be deemed to have
been made until the funds comprising such payment have actually been received by
or made available to Bank. If Borrower is not an individual, Borrower authorizes
Bank (but Bank shall have no obligation) to charge any deposit account in
Borrower's name for any and all payments of principal, interest, or any other
amounts due under this Note.
PAYMENT OF COSTS - In addition to the principal and interest payable hereunder,
Borrower agrees to pay Bank, on demand, all costs and expenses (including
reasonable attorneys' fees and disbursements) which may be incurred by Bank in
the collection of this Note or the enforcement of Bank's rights and remedies
hereunder.
REPRESENTATIONS BY BORROWER - If Borrower is a corporation or a general or
limited partnership, Borrower represents and warrants that it is validly
existing and in good standing in the jurisdiction under whose laws it was
organized. If Borrower is a corporation, Borrower represents and warrants that
the execution. delivery and performance of this Note are within Borrower's
corporate powers, have been duly authorized by all necessary action by
Borrower's Board of Directors, and are not in contravention of the terms of
Borrower's charter, by-laws, or any resolution of its Board of Directors. If
Borrower is a general or limited partnership, Borrower represents and warrants
that the execution, delivery and performance of this Note have been duly
authorized and are not in conflict with any provision of Borrower's partnership
agreement or certificate of limited partnership. Borrower further represents and
<PAGE>
EXHIBIT 10.43
warrants that this Note has been validly executed and is enforceable in
accordance with its terms, that the execution, delivery and performance by
Borrower of this Note are not in contravention of law and do not conflict with
any indenture, agreement or undertaking to which Borrower is a party or is
otherwise bound, and that no consent or approval of any governmental authority
or any third party is required in connection with the execution,delivery and
performance of this Note.
WAIVERS, ETC. - Borrower and each Obligor waive presentment, dishonor, notice of
dishonor, protest and notice of protest. Neither the failure nor any delay on
the part of Bank to exercise any right, remedy, power or privilege hereunder
shall operate as a waiver or modification thereof. No consent, waiver or
modification of the terms of this Note shall be effective unless set forth in a
writing signed by Bank. All rights and remedies of Bank are cumulative and
concurrent and no single or partial exercise of any power or privilege shall
preclude any other or further exercise of any right, power, or privilege.
MISCELLANEOUS - This Note is the unconditional obligation of Borrower, and
Borrower agrees that Bank shall not be required to exercise any of its rights or
remedies against any collateral in which it holds a lien or security interest or
against which it has a right of setoff or against any particular Obligor. All
representations, warranties and agreements herein are made jointly and severally
by each Borrower. If any provision of this Note shall be held invalid or
unenforceable, such invalidity or unenforceability shall not affect any other
provision hereof. To the extent that this Note represents a replacement,
substitution, renewal or refinancing of a pre-existing note or other evidence of
indebtedness, the indebtedness represented by such pre-existing note or other
instrument shall not be deemed to have been extinguished hereby. In the event
that any due date specified or otherwise provided for in this Note shall fall on
a day on which Bank is not open for business, such due date shall be postponed
until the next banking day, and interest and any fees or similar charges shall
continue to accrue during such period of postponement. This Note has been
delivered in and shall be governed by and construed in accordance with the laws
of the Commonwealth of Pennsylvania without regard to the law of conflicts. This
Note shall be binding upon each Borrower and each Obligor and upon their
personal representatives, heirs, successors and assigns, and shall benefit Bank
and its successors and assigns.
CONSENT TO JURISDICTION AND VENUE -- IN ANY LEGAL PROCEEDING INVOLVING, DIRECTLY
OR INDIRECTLY, ANY MATTER ARISING OUT OF OR RELATED TO THIS NOTE OR THE
RELATIONSHIP EVIDENCED HEREBY, EACH UNDERSIGNED PARTY HEREBY IRREVOCABLY SUBMITS
TO THE NONEXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED IN ANY
COUNTY IN THE COMMONWEALTH OF PENNSYLVANIA WHERE BANK MAINTAINS AN OFFICE AND
AGREES NOT TO RAISE ANY OBJECTION TO SUCH JURISDICTION OR TO THE LAYING OR
MAINTAINING OF THE VENUE OF ANY SUCH PROCEEDING IN SUCH COUNTY. EACH UNDERSIGNED
PARTY AGREES THAT SERVICE OF PROCESS IN ANY SUCH PROCEEDING MAY BE DULY EFFECTED
UPON IT BY MAILING A COPY THEREOF, BY REGISTERED MAIL, POSTAGE PREPAID, TO EACH
UNDERSIGNED PARTY.
WAIVER OF JURY TRIAL -- EACH UNDERSIGNED PARTY HEREBY WAIVES, AND BANK BY ITS
ACCEPTANCE HEREOF THEREBY WAIVES TRIAL BY JURY IN ANY LEGAL PROCEEDING
INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT,
CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF OR RELATED TO THIS NOTE OR THE
RELATIONSHIP EVIDENCED HEREBY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR BANK
TO ENTER INTO, ACCEPT OR RELY IN THIS NOTE.
<PAGE>
EXHIBIT 10.43
IN WITNESS WHEREOF, Borrower intending this to be a sealed instrument and
intending to be legally bound hereby, has executed and delivered this Note as of
the day and year first above written. The Note re-evidences certain indebtedness
previously evidenced by that certain $6,000,000 Note dated July 11, 1996, and
has been given in substitution thereof and not as payment of such prior Note and
is not intended as a novation thereof.
Name of Corporation or Partnership
MDC Investment Holdings, Inc.
By: \s\ Patrick E. Rodgers
- ---------------------------------
(Signature of Authorized Signer)
By: Patrick E. Rodgers, Treasurer
- ---------------------------------
(Print or Type Name and Title of Signer Above)
EXHIBIT 10.54
Warrant No. _________
NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK UNDERLYING THIS WARRANT
OF THE MED-DESIGN CORPORATION (THE "COMPANY") HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), NOR UNDER ANY
SECURITIES LAW AND MAY NOT BE PLEDGED, SOLD, ASSIGNED OR TRANSFERRED UNTIL (i) A
REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE SECURITIES
ACT AND ANY APPLICABLE STATE SECURITIES LAW OR (ii) THE COMPANY RECEIVES AN
OPINION OF COUNSEL IN A FORM REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH
WARRANT OR SHARES MAY BE PLEDGED, SOLD, ASSIGNED OR TRANSFERRED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR APPLICABLE STATE SECURITIES
LAWS.
Warrant to Purchase up to 100,000 Shares of Common Stock.
WARRANT TO PURCHASE COMMON STOCK
OF
THE MED-DESIGN CORPORATION
This is to certify that, FOR VALUE RECEIVED, John F. Kelley, (the
"Warrantholder") is entitled to purchase, subject to the provisions of this
Warrant, from The Med-Design Corporation, a Delaware Corporation (the
"Company"), one hundred thousand (100,000) fully paid, validly issued and
nonassessable shares of Common Stock, $.01 par value per share (the "Common
Stock"), of the Company (the "Warrant Shares") at a price equal to $7.50 per
share (the "Exercise Price").
1. EXERCISE OF WARRANT
A. This Warrant may be exercised in whole or in part at any time or from
time to time on or after the date hereof and until March 19, 2000 (the
"Expiration Date"), provided, however, that if any such day is a day on which
banking institutions in the State of New York are authorized by law to close,
then on the next succeeding day. This Warrant may be exercised by presentation
and surrender hereof to the Company at its principal office, or at the office of
its stock transfer agent, if any, with the Purchase Form annexed hereto duly
executed and accompanied by payment of the Exercise Price of the number of
Warrant Shares specified in such form. As soon as practicable after each such
exercise of the Warrant, but not later than
1
<PAGE>
EXHIBIT 10.54
seven (7) days from the date of such exercise, the Company shall issue and
deliver to the Warrantholder a certificate or certificates for the Warrant
Shares issuable upon such exercise, registered in the name of the Warrantholder.
If this Warrant should be exercised in part only, the Company shall, upon
surrender of this Warrant for cancellation, execute and deliver a new Warrant
evidencing the rights of the Warrantholder thereof to purchase the balance of
the Warrant Shares purchasable thereunder. Upon receipt by the Company of this
Warrant at its office or by the stock transfer agent of the Company at its
office, in proper form for exercise, the Warrantholder shall be deemed to be the
holder of record of the shares of Common Stock issuable upon such exercise,
notwithstanding that the stock transfer books of the Company shall then be
closed or that certificates representing such shares of Common Stock shall not
then be physically delivered to the Warrantholder.
B. In the event the Company shall at any time subdivide, combine or
reclassify the outstanding shares of Common Stock, the number of Warrant Shares
subject to this Warrant shall be adjusted accordingly and the Exercise Price
shall forthwith be proportionately decreased in the case of a subdivision or
increased in the case of a combination.
2. RESERVATION OF SHARES. The Company shall at all times reserve for
issuance and/or delivery upon exercise of this Warrant such number of shares of
its Common Stock as shall be required for issuance and delivery upon exercise of
the Warrant.
3. FRACTIONAL SHARES. No fractional shares or script representing
fractional shares shall be issued upon the exercise of this Warrant.
4. EXCHANGE, TRANSFER, ASSIGNMENT OR LOSS OF WARRANT. This warrant is
exchangeable, without expense, at the option of the Warrantholder, upon
presentation and surrender hereof to the Company or at the office of its stock
transfer agent, if any, for other warrants of different denominations entitling
the Warrantholder thereof to purchase in the aggregate the same number of shares
of Common Stock purchasable hereunder. Upon surrender of this Warrant to the
Company at its principal office or at the office of its stock transfer agent, if
any, with the Assignment Form annexed hereto duly executed and funds sufficient
to pay any transfer tax the Company shall, with out charge, subject to the
restrictions set forth in Section (5), execute and deliver a new Warrant in the
name of the assignee named in such instrument of assignment and this Warrant
shall promptly be canceled. This Warrant may be divided or combined with other
warrants which carry the same rights upon presentation hereof at the principal
office of the Company or at the office of its stock transfer agent, if any,
together with a written notice specifying the names and denominations in which
new Warrants are to be issued and signed by the Warrantholder hereof. The term
"Warrant" as used herein includes any Warrants into which this Warrant may be
divided or exchanged. Upon receipt by the Company of evidence satisfactory to it
of the loss, theft, destruction or mutilation of this Warrant, and (in the case
of loss, theft or destruction) of reasonably satisfactory indemnification, and
upon
2
<PAGE>
EXHIBIT 10.54
surrender and cancellation of this Warrant, if mutilated, the Company will
execute and deliver a new Warrant of like tenor and date.
5. RESTRICTIONS ON TRANSFER. This Warrant and all rights hereunder are
transferrable, in whole or in part, only to the Company by the Warrantholder in
person or by a duly authorized attorney except as set forth in Subparagraph A.
A. Restrictions in General. Prior to any Transfer (as defined below) of
this Warrant or the Warrant Shares, the Warrantholder will give ten (10) days
written notice to the Company of such Warrantholder's intention to effect such
Transfer. Each such notice shall describe the manner and circumstances of the
proposed Transfer and shall be accompanied by an opinion, addressed to the
Company and reasonably satisfactory in form and substance to it, of counsel for
such Warrantholder, stating whether, in the opinion of counsel, such Transfer
will be a transaction exempt from registration under the Securities Act and
applicable state securities laws. If such Transfer may in the opinion of such
counsel be effected without registration under the Securities Act and applicable
state securities laws, such Warrantholder shall thereupon be entitled to
Transfer this Warrant and the Warrant Shares in accordance with the terms of the
notice delivered by such Warrantholder to the Company. If in the opinion of such
counsel such Transfer may not be effected without registration under the
Securities Act, such Warrantholder shall not be entitled to so Transfer this
Warrant or the Warrant Shares unless the Company elects or is obligated under
Section (7) to file a registration statement relating to such proposed Transfer
and such registration statement has become effective under the Securities Act
and applicable state securities laws.
B. "Transfer" means, with respect to the Warrants, the Warrant Shares,
or any interest therein, any disposition which would constitute a sale
thereof within the meaning of the Securities Act.
6. RIGHTS OF THE WARRANTHOLDER. The Warrantholder shall not, by virtue
hereof, be entitled to any rights of a shareholder in the Company, either at law
or equity, and the rights of the Warrantholder are limited to those expressed in
the Warrant and are not enforceable against the Company except to the extend set
forth herein.
7. REGISTRATION UNDER THE SECURITIES ACT OF 1933. The Company shall, for a
period of three (3) years from the date of the Warrant herein granted, advise
the Warrantholder or any then holder of Warrant Shares (such persons being
collectively referred to herein as "Warrantholders") by written notice at least
thirty (30) days prior to the filing of any registration statement (other than a
registration effected solely to implement a transaction of the type for which
form S-4 or form S-8 or any successor form is available) with the Securities and
Exchange Commission (the "Commission") under the Securities Act covering
securities of the Company. Each filing notice shall offer to the Warrantholder
the opportunity to include such
3
<PAGE>
EXHIBIT 10.54
number of shares as it may request in the registration statement to which the
filing notice relates and shall advise the Warrantholder whether or not such
registration statement is intended to cover an underwritten public offering (an
"Underwritten Offering"). If the Warrantholder desires to have his shares
included in a registration statement, he shall so advise the Company in writing
(a "Registration Request") within ten (10) days after the date of receipt of the
related filing notice, which Registration Request shall set forth the number of
shares for which registration is requested. Subject to the provisions of Section
(8) of this Agreement, the Company shall include in a registration statement all
shares for which it has timely received a Registration Request.
Notwithstanding anything to the contrary herein, the Company shall have the
right at any time (irrespective of whether a written Registration Request shall
have been made) to elect not to file any such proposed registration statement,
or to withdraw the same after the filing but prior to the effective date
thereof.
8. UNDERWRITTEN OFFERINGS.
A. Participation and Limitations. If a registration statement is for an
Underwritten Offering, the right of Warrantholder to registration pursuant to
Section 7 hereof shall be conditioned upon (1) the Warrentholder's participation
in such Underwritten Offering and the inclusion of Warrantholder's Warrant
Shares in the Underwritten Offering to the extent provided herein and (2) the
execution and delivery by Warrantholder of an underwriting agreement in
customary form with the underwriter or underwriters selected by the Company to
manage such Underwritten Offering (individually or collectively, the
"Underwriter"). If the Underwriter determines that the inclusion of Warrant
Shares in such Underwritten Offering would adversely affect the success of such
offering, then the amount of securities to be included in the Underwritten
Offering shall, subject to then existing agreements to which the Company is
presently a party concerning the registration of Common Stock, be as follows:
(1) first, the number of shares of Common Stock to be offered and sold for the
account of the Company (up to the maximum number of shares of Common Stock as
determined by the Underwriter) and (2) second, if additional shares of Common
Stock may then be included in such Underwritten Offering, such additional number
of shares of Common Stock to be offered and sold for the account of the
Warrantholders, which (a) together with the shares of common Stock to be offered
and sold for the account of the Company shall not exceed the maximum number of
shares of Common Stock as determined by the Underwriter and (b) shall be
allocated among the Warrantholders pro rata based upon the aggregate number of
Warrant Shares requested by each such Warrantholder to be included in such
Underwritten Offering. In addition, the number of Shares to be included in any
Underwritten Offering may, in the discretion of the Company or the Underwriter,
be rounded to the nearest one hundred (100) shares. If a Warrantholder
disapproves of the terms of such Underwritten Offering, then he may elect to
withdraw therefrom by written notice to the Company and the Underwriter at any
time prior to the date on which the registration statement therefore is declared
effective by the Commission (a "Withdrawal Notice"). Any Shares subject to the
Withdrawal Notice shall be withdrawn and excluded from the registration
statement for the Underwritten Offering to which the Withdrawal Notice relates.
4
<PAGE>
EXHIBIT 10.54
B. Restrictions on Sales of Shares. If Warrant Shares are covered by a
registration statement for an Underwritten Offering, Warrantholder agrees, if
requested by the Underwriter and timely notified in writing by the Company or
the Underwriter, not to effect any public sale or distribution of Shares
(including a sale pursuant to Rule 144 under the Securities Act) except as part
of such Underwritten Offering during the period commencing on the tenth day
prior to the closing date for such Underwritten Offering and ending on the
forty-sixth day after such closing date.
9. REGISTRATION PROCEDURES. In the case of each registration of securities
covered by Section 7 hereof (each a "Registration") for which Warrantholder has
timely delivered a Registration Request and has not delivered a Withdrawal
Notice, the Company will keep Warrantholder advised in writing of the initiation
and completion of such registration and will take the following actions at its
own expense:
A. prepare and file with the Commission a registration statement for
such Shares as are entitled to be included therein, use its best efforts to
cause such registration statement to become effective, and, upon the request of
Warrantholder, keep such registration statement effective for not less than
ninety (90) days;
B. prepare and file with the Commission such amendments and supplements
to such registration statement and the prospectus used in connection with
such registration statement as may be necessary to comply with the provisions of
the Securities Act with respect to the disposition of all securities covered by
such registration statement;
C. furnish to Warrant holder at least one (1) copy of the registration
statement and any post-effective amendments thereto and such number of copies of
a prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, as he may reasonably request;
D. use its best efforts to register and qualify the securities covered
by such registration statement under such other securities or Blue Sky laws
of such jurisdictions as shall be reasonably requested by Warrantholder,
provided that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such jurisdiction;
E. in any Underwritten Offering, enter into and perform its obligations
under an underwriting agreement, in usual and customary form, with the
Underwriter;
F. promptly notify Warrantholder at any time when a prospectus relating
to such registration statement is required to be delivered under the
Securities Act because of the happening of any event as a result of which the
prospectus included in such registration statement, as then in effect, includes
an untrue statement of a material fact or omits to state a
5
<PAGE>
EXHIBIT 10.54
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing; and
G. bear the entire cost and expense of any registration of securities
initiated by it under Section 9A notwithstanding that Warrant Shares subject to
this Warrant may be included in any such registration statement pursuant to this
Section 9 Warrantholder shall, however, bear the fees of his own counsel and any
registration fees, transfer taxes or underwriting discounts or commissions
applicable to the Warrant Shares sold by it pursuant thereto.
The Company's agreements with respect to Warrants or Warrant Shares in
Section 7, 8 and 9 shall continue in effect as provided therein regardless of
the exercise and surrender of this Warrant.
10. WARRANTHOLDER NOT OBLIGATED. Neither the giving of any notice by any
Warrantholder nor the making of any request for prospectuses shall impose any
obligation to sell any Warrant Shares, or exercise any Warrants upon such
Warrantholder or owner making such request.
11. INDEMNIFICATION.
A. The Company shall indemnify and hold harmless each such Warrantholder
and each Underwriter, within the meaning of the Securities Act, who may purchase
from or sell for any such Warrantholder any Warrant Shares from and against any
and all losses, claims, damages and liabilities caused by any untrue statement
or alleged untrue statement of a material fact contained in the registration
statement or any post-effective amendment thereto or any registration statement
under the Securities Act or any prospectus included therein required to be filed
or furnished by reason of Section 7 or caused by any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as such
losses, claims, damages or liabilities are caused by any such untrue statement
or alleged untrue statement or omission or alleged omission based upon
information furnished or required to be furnished in writing to the Company by
such Warrantholder or Underwriter expressly for use therein, which
indemnification shall include each person, if any, who controls any such person
within the meaning of the Securities Act; provided however, that the Company
shall not be obliged so to indemnify any such Underwriter or controlling person
unless such Underwriter shall at the same time indemnify the Company, its
directors, each officer signing the related registration statement and each
person, if any, who controls the Company within the meaning of the Securities
Act, from and against any and all losses, claims, damages and liabilities caused
by any untrue statement or alleged untrue statement of a material fact contained
in the registration statement or amendments thereto or any prospectus required
to be filed or furnished by reason of Section 7 or caused by any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statement therein not misleading, insofar as such
losses, claims, damages or liabilities are caused by any untrue statement or
alleged untrue statement or omission based upon information
6
<PAGE>
EXHIBIT 10.54
furnished in writing to the Company by any such Underwriter expressly for
use therein.
B. Warrantholder will, if Shares are included in the securities as to
which such Registration is being effected, indemnify the Company, each of
its directors and officers, each Underwriter of securities covered by such a
registration statement, and each person who controls the Company or such
Underwriter within the meaning of Section 15 of the Securities Act against all
expenses, claims, losses, damages and liabilities (or actions in respect
thereof), including any of the foregoing incurred in settlement of any
litigation, whether commenced or threatened, arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any such registration statement, any prospectus, offering circular or other
document related thereto, or any amendment or supplement to any of the
foregoing, or any omission (or alleged omission) to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, and will reimburse the Company and such directors, officers,
persons, Underwriter or control persons for any legal or any other expenses
reasonably incurred in connection with investigating or defending any such
claim, loss, damage, liability or action, in each case to the extent, but only
to the extent, that such untrue statement (or alleged untrue statement) or
omission (or alleged omission) is made in such registration statement,
prospectus, offering circular or other document in reliance upon and in
conformity with written information furnished to the Company by an instrument
duly executed by Warrantholder and stated to be specifically for use therein;
C. Each party entitled to indemnification or contribution under this
Section 11 (an "Indemnified Party") shall give notice to the party required to
provide indemnification (an "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought, and shall permit the Indemnifying Party to assume the defense of any
such claim or any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be approved by the Indemnified Party (whose approval shall not reasonably
be withheld), and the Indemnified Party may participate in such defense at such
party's expense, and provided further that the failure of any Indemnified Party
to give notice as provided herein shall not relieve the Indemnifying Party of
its obligations under this Section (11), unless such failure is prejudicial to
the Indemnifying Party's ability to defend such action. An Indemnifying Party,
in the defense of any such claim or litigation, shall not except with the
consent of each Indemnified Party, consent to entry of any judgement or enter
into any settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnified Party of a release from
all liability in respect to such claim or litigation.
D. If the indemnification provided herein is unavailable to an
Indemnified Party in respect of any losses, claims, damages or liabilities
referred to herein, then the Indemnifying Party, in lieu of indemnifying such
Indemnified Party hereunder, shall contribute to the amount paid or payable by
such Indemnified Party as a result of such losses, claims, damages or
liabilities (i) in such proportion as is appropriate to reflect the relative
benefits received by the company and Warranttholder from the offering or (ii) if
the allocation provided by clause (i) is
7
<PAGE>
EXHIBIT 10.54
not permitted by applicable law, in such proportion as is appropriate to reflect
not only the benefits referred to in clause (i), but also the relative fault of
the company and Warrantholder in connection with the statements or omissions
which resulted in such losses, claims, damages or liabilities, as well as any
other relevant equitable considerations. The relative benefits received by the
Company and Warrantholder shall be deemed to be in the same respective
proportions as the net proceeds from the offering (before deducting expenses)
received by each of the company and Warrantholder. The relative fault of
Warrantholder shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by
Warrantholder and the Parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.
12. NO LIMITATION ON CORPORATE ACTION. No provisions of this Warrant and no
right or option granted or conferred hereunder shall in any way limit, affect,
or abridge the exercise by the Company of its corporate rights or powers to
recapitalize, amend its articles or incorporation or bylaws, reorganize,
consolidate or merge with or into any corporation, or transfer all or any part
of its property or assets or the exercise of any other of its corporate rights
and powers.
13. REPRESENTATION OF WARRANTHOLDER. Warrantholder, by the acceptance
hereof, represents that it is acquiring this Warrant for its own account for
investment and not with a view to, or sale in connection with, any distribution
hereof or of any of the Warrant Shares issuable upon the exercise hereof, nor
with the present intention of distributing any of such securities.
14. RESTRICTIVE LEGEND. Each certificate representing Warrant Shares
initially issued upon exercise of this Warrant, unless at the time of exercise
such Warrant Shares are registered under the Securities Act, shall bear the
following legend (and any additional legend required by any applicable state
securities laws) on the face thereof:
The securities represented hereby have not been registered under
the Securities Act of 1933 and the transfer of such securities is
subject to the restrictions set forth in Section (5) of Warrant
No. 1, dated as of March 19, 1997, and delivered to the
registered Warrantholder thereof, a copy of which is available
for inspection at the principal office and no transfer of such
securities shall be valid or effective unless and until the terms
and conditions of such Section (5) shall have been in satisfied.
Any certificate issued at any time upon transfer or, in exchange for or
replacement of, any certificate bearing such legend (except a new certificate
issued upon completion of a public distribution pursuant to a registration under
the Securities Act) shall also bear such legend unless, in the opinion of
counsel for the Warrantholder, addressed and delivered to the Company, which
opinion shall be in a form reasonable satisfactory and acceptable to the Company
and such
8
<PAGE>
EXHIBIT 10.54
Warrantholder, the securities represented thereby need no longer be subject to
the restrictions contained in Section (5). The provisions of this Warrant shall
be binding upon all subsequent Warrantholders of certificates bearing the legend
hereinbefore described and shall also be applicable to all subsequent
Warrantholders.
15. GOVERNING LAW. This Warrant shall be governed by, construed and
enforced in accordance with the laws of the State of Delaware, without giving
effect to principles of conflicts of laws.
16. NOTICE. All notices and other communications under this Warrant shall
(a) be in writing (which shall include communications by telex and telecopy),
(b) be (i) send by registered or certified mail, postage prepaid, or by a
reputable overnight courier (ii) delivered by hand or (iii) transmitted by telex
or telecopier (c) be given at the following respective addresses and telex,
telecopier and telephone numbers and to the attention of the following persons:
If the Company, to it at:
The Med-Design Corporation
121 South Broad Street., Suite 310
Philadelphia, PA 19107
Telecopier: 215-735-2701
Telephone: 215-735-2700
Attention: James M. Donegan
If the Warrantholder, to it at:
John F. Kelley
6 Hathaway Drive
Princeton Junction, NJ 08550-1606
Telephone: 609-275-9163
or at such other addresses or telex, telecopier or telephone number or to the
attention of such other person as the party to whom such information pertains
may hereafter specify for the purpose in a notice to the other specifically
captioned "Notice of Change of Address", and (d) be effective or deemed
delivered or furnished (i) if given by mail, on the fifth (5th) Business Day
after such communication is deposited in the mail, addressed as above provided,
(ii) if given by telex or telecopier, when such communication is transmitted to
the appropriate number determined as above provided in this Section and the
appropriate answer back is received or receipt is otherwise acknowledged, (iii)
if given by hand delivery, when left at the address of the addressee addressed
as above provided, and (iv) if sent by overnight courier, the day after the
communication is delivered to such carrier except that notices of a change of
address, telex, telecopier or telephone number, shall not be deemed furnished,
until received.
9
<PAGE>
EXHIBIT 10.54
17. MISCELLANEOUS. This Warrant and any term hereof may be changed, waived,
discharged, or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought. The headings in this Warrant are for purposes of reference only and
shall not limit or otherwise affect the meaning hereof.
18. DATE AND EFFECTIVENESS. The date of this Warrant is March 19, 1995.
This Warrant, in all events, shall be wholly void and of no effect after the
close of business on the Expiration Date, unless the Warrant shall have been
exercised, in which case this Agreement shall terminate on the third anniversary
of the date of the exercise or partial exercise of the Warrant herein granted
except as provided in Sections (7) and (9).
The undersigned hereby set their hands and seals to this Warrant Agreement
with full knowledge of its contents and intending thereby to be legally bound.
ATTEST: THE MED-DESIGN CORPORATION
By: /s/ Joe Bongiovanni By: /s/ James M. Donegan
- ------------------------------- -------------------------------
Secretary James M. Donegan, President, CEO
ATTEST:
By: /s/ Joe Bongiovanni By: /s/ John F. Kelley
- ------------------------------- -------------------------------
John F. Kelley
Dated: March 19, 1997
10
<PAGE>
EXHIBIT 10.54
PURCHASE FORM
Dated________
The undersigned hereby irrevocably elects to exercise the within Warrant to
the extent of purchasing _______ shares of Common Stock and hereby makes payment
of ____________ in payment of the actual exercise price thereof.
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name __________________________________________________________
(Please typewrite or print in block letters)
Address _______________________________________________________
Signature _____________________________________________________
ASSIGNMENT FORM
FOR VALUE RECEIVED,____________________________________________ hereby
sells, assigns and transfers unto
Name __________________________________________________________
(Please typewrite or print in block letters)
Address _______________________________________________________
the right to purchase Common Stock represented by this Warrant to the extent of
________ shares as to which such right is exercisable and does hereby
irrevocably constitute and appoint __________ Attorney, to transfer the same on
the books of the Company with full power of substitution in the premises.
Date: __________________
Signature ______________________
11
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement of
The Med-Design Corporation on Form S-3 (File No. 333-22201) of our report dated
March 19, 1997, on our audits of the consolidated financial statements of The
Med-Design Corporation as of December 31, 1996 and 1995, and for each of the two
years in the period ending December 31, 1996, which report is included in this
Annual Report on Form 10-KSB.
Coopers & Lybrand L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
March 26, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> 1
This schedule contains summary financial information extracted from The
Med-Design Corporation and subsidiaries Consolidated Statement of Operations for
the year ended December 31, 1996 and balance sheet as at December 31, 1996 and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 1,648,639
<SECURITIES> 6,173,746
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 7,919,846
<PP&E> 1,424,067
<DEPRECIATION> 183,510
<TOTAL-ASSETS> 9,349,162
<CURRENT-LIABILITIES> 6,985,209
<BONDS> 300,366
0
0
<COMMON> 68,996
<OTHER-SE> 1,994,591
<TOTAL-LIABILITY-AND-EQUITY> 9,349,162
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 400,649
<INCOME-PRETAX> (4,322,869)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,322,869)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,322,869)
<EPS-PRIMARY> (0.63)
<EPS-DILUTED> (0.63)
</TABLE>
