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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [FEE REQUIRED]
For the fiscal year ended July 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ____________ to ___________.
Commission File Number 0-5958
MERIDIAN MEDICAL TECHNOLOGIES, INC.
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(Exact name of registrant as specified in its charter)
Delaware 52-0898764
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(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
10240 Old Columbia Road, Columbia, Maryland 21046
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 410-309-6830
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section (12g) of the act: Common Stock,
$.10 par value
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Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES X NO
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K any amendment to this
Form 10-K. [ ]
As of (October 27, 1997), the aggregate market value of voting stock held by
non-affiliates of the Registrant, based on the average of the high and low sales
prices of such stock reported by the National Association of Securities Dealers,
Inc. on such date, was approximately $18.6 million.
There were 2,912,502 shares of Registrant's common stock outstanding as of
September 30, 1997
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Meridian Medical Technologies, Inc. definitive Proxy Statement
for the Annual Meeting of Shareholders for the fiscal year ended July 31, 1997
are incorporated by reference into Part III of this Form 10-K.
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(End of cover page)
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TABLE OF CONTENTS
PART I
Item 1. BUSINESS Page
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General ....................................................... 4
Products and Services ......................................... 5
Injectable Drug Delivery System ...................... 5
STI Military Systems ................................. 6
Cardiopulmonary Systems .............................. 7
Competition ................................................... 9
Backlog and Renegotiation ..................................... 9
Research and Development ...................................... 10
Patents, Trademarks, and Licenses ............................. 10
Product Liability Insurance ................................... 10
Cost Reduction Program ........................................ 11
Government Regulation ......................................... 11
Employees ..................................................... 12
Item 2. PROPERTIES .................................................... 13
Item 3. LEGAL PROCEEDINGS ............................................. 13
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS............ 14
EXECUTIVE OFFICERS OF THE REGISTRANT
(Unnumbered Item) ............................................ 14
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TABLE OF CONTENTS
PART II Page
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Item 5. MARKET FOR THE REGISTRANT'S COMMON STOCK
AND RELATED STOCKHOLDER MATTERS ............................. 15
Item 6. SELECTED FINANCIAL DATA...................................... 16
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS................ 17
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.................. 20
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE ....................................
PART III
Items 10
Through 13.
(Incorporated by reference from the definitive Proxy
Statement for the Annual Meeting of Shareholders for the
fiscal year ended July 31, 1997, which will be filed with the
Securities and Exchange Commission not later than 120 days
after the end of that fiscal year)...........................
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND
REPORTS ON FORM 8-K .........................................
Signatures ...........................................................
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Certain statements in this Annual Report on Form 10-K are forward-looking and
are identified by the use of forward-looking words or phrases such as "will be
positioned", "expects", is or are "expected", "anticipates", and "anticipated".
These forward-looking statements are based on the Company's current
expectations. Because forward-looking statements involve risks and
uncertainties, the Company's actual results could differ materially. In addition
to the factors discussed under "Business--Competition", "Business--Product
Liability Insurance" and "Business--Government Regulation", among the factors
that could cause results to differ materially from current expectations are: (i)
the general economic and competitive conditions in markets and countries where
the Company and its subsidiaries offer products and services; (ii) changes in
capital availability or costs; (iii) fluctuations in demand for certain of the
Company's products, including changes in government procurement policy; (iv)
technological challenges associated with the development and manufacture of
current and anticipated products; (v) commercial acceptance of auto-injectors
and competitive pressure from traditional and new drug delivery methods; and
(vi) delays, costs and uncertainties associated with government approvals
required to market new drugs and medical devices.
PART I
ITEM 1. BUSINESS
GENERAL
Meridian Medical Technologies, Inc. (hereinafter referred to as the "Company" or
"MMT" or "Meridian") was formed in November 1996 through the merger of Survival
Technology, Inc. ("STI") and Brunswick Biomedical Corporation ("Brunswick"). At
the time of the merger, Brunswick held approximately 61% of STI's outstanding
common stock, which Brunswick purchased from the estate of STI's late founder on
April 15, 1996. As a result, STI had been treated for financial accounting
purposes as a consolidated, majority-owed subsidiary of Brunswick from that
date. Upon completion of the merger, STI was the surviving corporation as a
legal matter but the merger was recorded as a purchase of STI by Brunswick for
financial accounting purposes.
This merger of STI and Brunswick brought together two companies with a long
standing historical relationship that had complimentary business synergies and
marketing strategies. Both companies were focused on the rapidly growing home
healthcare and emergency healthcare markets.
STI was a publicly traded company that primarily sold auto-injectors to
commercial and military markets. Brunswick was a privately held Company with
core technologies focused on enhancing the diagnosis of cardiac ischemia and
arrhythmias. Brunswick was primarily a research and development Company focused
on the development of the PRIME ECG(TM) cardiac analysis system.
MMT, through its predecessor company, STI, pioneered the development of
auto-injectors for the self-administration of injectable drugs. An auto-injector
is a spring-loaded, prefilled, pen-like device that allows a patient to
automatically inject a precise drug dosage quickly, safely, reliably and, with
the new TRUJECT(TM) platform, without seeing the needle. The auto-injector is a
convenient, disposable, one-time use device designed to improve the medical and
economic value of many drug therapies. The product is well-suited for the
administration of certain drugs, including epinephrine for the treatment of
allergic reactions, lidocaine for the treatment of cardiac arrhythmias, morphine
for the treatment of pain and antidotes and diazepam for the treatment of nerve
gas poisoning and other chemical and biological exposures in battlefield
conditions. MMT also supplies customized drug delivery system design,
pharmaceutical research and development and GMP-approved sterile product
manufacturing to pharmaceutical and biotechnology companies.
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The Company has three primary areas of business: Injectable Drug Delivery
Systems, STI Military Systems and Cardiopulmonary Systems. The Injectable Drug
Delivery and STI Military business both utilize the Company's auto-injector
technology, while the Cardiopulmonary business utilizes the Company's
electrocardiology and telemedicine technologies. The Company expects to realize
significant revenue growth from commercial applications of its auto-injector
products as a result of product development, expansion into new therapeutic
areas such as migrane, growth hormones and fertility, and the recently announced
alliances with Mylan Laboratories and Genpharm. Management also anticipates
growth in its telemedicine products and believes that the PRIME ECG(TM) cardiac
analysis system has the potential to become a significant source of revenue and
profitability for the Company. Military auto-injector revenues are expected to
increase at a more moderate pace through international market expansion, new
product development and expanding civil defense applications for the Company's
products.
PRODUCTS AND SERVICES
Injectable Drug Delivery Systems
Currently, the substantial majority of the Company's commercial (i.e.,
non-military) sales come from its epinephrine auto-injectors, the EpiPen(R) and
EpiE-Zpen(TM). The EpiPen(R) and EpiE-Zpen(TM) are prescribed to patients at
risk of anaphylaxis resulting from severe allergic reactions to bee stings,
insect bites, foods, drugs and exercise-induced anaphylaxis. These
auto-injectors permit the immediate self-injection of epinephrine, the drug of
choice for emergency treatment of such conditions. Each of these auto-injectors
has a junior version for children. The EpiPen(R), was the Company's first
commercial auto-injector. In fiscal 1996, the Company launched the
EpiE-Zpen(TM), which has a more streamlined design to better serve the consumer
market and additional safety features and product quality enhancements,
including push button activation. Demand for the EpiPen(R) and EpiE-Zpen(TM) has
grown at double-digit rates over the last several years.
The Company markets the EpiPen(R) and EpiE-Zpen(TM) through Dey Laboratories,
Inc. (formerly Center Laboratories), a subsidiary of E. Merck, a major
pharmaceutical Company based in Germany. Dey Laboratories has a co-marketing
agreement with ALK, Inc., a Danish Company, for international markets in 13
foreign countries. The Company also produces the LidoPen(R) auto-injector which
is the same delivery system as the EpiPen(R), except that it is prefilled with
lidocaine hydrochloride for self-injection by persons experiencing a serious
cardiac event. The LidoPen(R) is sold primarily in connection with the sale of
the CardioBeeper(R) ECG transmitter sold by the Cardiopulmonary Systems
business.
On October 8, 1997, the Company announced a product exchange program for all of
its EpiEZPen(R) product sold since March 1996 (approximately 500,000 units).
This exchange program was initiated after a minimal amount of units (less than
10 units) were returned for premature activation in the package. Management has
performed an analysis of potential costs of the exchange program and made their
best estimate regarding these costs. The estimated cost of the exchange program
is $1.5 million and is included in fiscal 1997 results of operations. Actual
costs could differ materially from management's estimates. The Company has not
included any anticipated cost sharing of this exchange with potentially
responsible parties as the benefit and probability of such an arrangement are
not determinable at this time. The Company believes the exchange will be
substantially complete by the end of fiscal 1998 and that the impact on future
business is anticipated to be minimal.
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Meridian is aggressively pursuing new products to further capitalize on its
auto-injector technologies. The Company launched its new TRUJECT(TM)
auto-injector in June 1997. TRUJECT(TM) is an innovative and low cost single use
disposable auto-injector utilizing a technology platform that could replace
existing auto-injector applications. TRUJECT(TM) incorporates the latest safety
features plus a needle cover which prevents contamination and shields the needle
from view during self-injection. TRUJECT(TM) utilizes dental cartridge
technology, which is the container of choice for many commercial drug delivery
systems due to its low cost and ease of manufacturing. The Company believes that
the new TRUJECT(TM) technology coupled with the Company's drug development and
manufacturing capabilities will fuel significant growth in the its Injectable
Drug Delivery business.
In April 1997, Meridian announced a long term strategic alliance with Mylan
Laboratories ("Mylan") in which Meridian will license, develop and manufacture a
line of generic injectable drugs to be marketed by Mylan. This alliance could
result in significant sales growth for its Injectable Drug Delivery business
over the next three to five years. In fiscal 1997, the Company filed abbreviated
new drug applications ("ANDA's") for its first generic products under the Mylan
alliance. Regulatory approval of these ANDA's is expected in late fiscal 1998 or
early fiscal 1999.
In June 1997, Meridian announced an alliance with Genpharm, Inc., a subsidiary
of E. Merck, for the marketing of a major generic injectable pharmaceutical drug
in Canada and Europe. The Company is also working with other pharmaceutical
companies under development contracts to identify other drugs suitable for
administration using Meridian's auto-injector technologies and injectable drug
manufacturing capabilities. The Injectable Drug Delivery business also has
complete sterile parenteral Contract Filling and Packaging services for a broad
range of sterile injectable dosage forms which includes vials, dental cartridges
and pre-filled ready-to-use syringes.
Further, the Injectable Drug Delivery business provides fully validated
formulation and aseptic filling services and regulatory assistance for those
pharmaceutical and biotechnology companies not currently possessing such
capabilities. The Company also supplies customized drug delivery system design,
GMP-approved sterile product manufacturing and pharmaceutical research and
development to a number of different companies. Development programs include
feasibility and stability studies as well as the manufacturing of clinical trial
materials in the Company's St. Louis pilot plant. If feasibility and stability
are successful and all regulatory approvals are received, the Company
anticipates contracts in the coming years to manufacture these products in
vials, prefilled syringes and proprietary auto-injector systems. Revenue from
customer-funded research and development activities, including amounts earned by
STI prior to being acquired by the Company, was $1.5 million and $2.3 million
during fiscal years 1997 and 1996, respectively. The Company expects fiscal 1998
revenue from funded R&D activities to be comparable with average historical
levels.
STI Military System
The Company's military auto-injectors are designed to be used by military
personnel under combat conditions for the self-administration of antidotes
against the effects of chemical warfare. Meridian is the sole supplier of
auto-injectors to the U.S. Department of Defense ("DoD") and is the only Federal
Food and Drug Administration "FDA" approved supplier to U.S. and NATO forces.
The business plans to build upon its strong relationship with the DoD and is
positioned as the source of first choice for military auto-injector products by
introducing new products into this market. These products include a
multi-chamber device specifically for military use and the development of
auto-injectors for additional drugs. The Company will also attempt to develop
new civilian markets for its injectors such as to the Federal Emergency
Management Authority ("FEMA") and other state agencies and to serve
international populations in high risk areas in response to potential terrorist
attacks and/or in conjunction with DE-MIL programs (disarming and destroying
chemical weapon stockpiles). The Company will also continue its strategy of
expanding its international military sales into new markets in Europe, the
Middle East and Central/South America. In fiscal 1997, the STI Military Systems
business was awarded two contracts with total value of $6 million to supply two
allied governments in Europe with military auto-injectors containing nerve gas
antidote.
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DoD procurements of auto-injectors are restricted to qualified producers and all
products must be approved by the FDA. The Company is currently the only
FDA-approved and the only qualified producer for all DoD military
auto-injectors. The Company's auto-injectors are considered so important by the
DoD that they are classified as critical "war stopper" items and are the subject
of an industrial base maintenance contract between the Company and the DoD. This
contract is part of a program by the DoD to ensure adequate supplies of critical
items in the event of war.
The industrial base maintenance contract between the Company and the DoD is a
three year contract, subject to annual renewal. The contract calls for the
retention by the Company of key personnel and facilities to assure expertise for
manufacturing auto-injectors containing nerve gas antidotes, the storage of
serviceable material from expired auto-injectors, the management of the U.S.
Army's Shelf Life Extension Program, and new product orders. A surge capability
provision allows for the coverage of defense mobilization requirements in the
event of rapid military deployment. The contract was expanded in fiscal 1996 to
include the pre-stocking of critical components to enhance readiness and
mobilization capability. Revenues under this contract have been approximately
$14 to $16 million over the last two years and are projected to remain
relatively stable over the next two to three years. All U.S. government
contracts provide that they may be terminated for the convenience of the
Government as well as for default but no such contract terminations are
anticipated by the Company. The Company has been a supplier to the DoD since
1970.
The U.S. Government, in conjunction with the Company, continues to investigate
new automatic injection delivery systems, as well as new drugs (including
Diazepam and morphine) and antidotes to be placed in new or existing automatic
injectors. In fiscal 1996, the Company began selling a Diazepam auto-injector to
the DoD. The Company currently markets a morphine injector to international
military customers and plans to introduce a similar product to the DoD in fiscal
1998. The Company has a program in conjunction with the DoD to develop a
multi-chamber auto-injector to accommodate the administration of two drugs
sequentially through a single injection. The Company has introduced
auto-injector systems that can store compounds in dry form and mix them in
solution prior to administration. Limited quantities of this product (BinaJect)
have been manufactured and sold to a foreign allied government. Many of the new
nerve agent antidotes require this technology because of their limited
shelf-life or instability in solution.
Cardiopulmonary Systems
The Cardiopulmonary Systems business is developing the PRIME ECG(TM) cardiac
analysis system, a non-invasive cardiac diagnostic system, and manufactures and
sells non-invasive monitoring devices for home telemedicine applications. The
Company's strategy with respect to the Cardiopulmonary business is to develop
and commercialize the PRIME ECG(TM) cardiac analysis system and to leverage the
Company's ten years of experience in transtelephonic physiologic monitoring to
penetrate the rapidly growing home telemedicine market. Because of the
significant size of the market and the potential demand for the PRIME ECG(TM)
product, the Company expects to market the product in conjunction with a larger,
more established marketing partner that can provide an existing sales and
distribution system. The Company is currently seeking such a marketing partner.
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PRIME ECG(TM) Cardiac Analysis System. The PRIME ECG(TM) system is a unique,
80-lead body surface mapping system being developed in collaboration with the
University of Ulster in Northern Ireland. The goal of this system is to
dramatically improve the diagnosis and treatment of coronary artery disease,
which affects over 13 million people in the U.S. alone, resulting in over 1.5
million heart attacks and almost 500,000 deaths each year. The PRIME ECG(TM)
system consists of an 80-lead patented, disposable electrode harness,
sophisticated ECG input amplifiers, a computer system and ECG analysis
algorithms. Initially, the system will be positioned for the rapid and accurate
detection of acute myocardial infarction ("AMI") or heart attack. The Company
believes the PRIME ECG(TM) system will provide superior diagnosis of AMI as
compared to a 12-lead electrocardiogram. Due to the low sensitivity and
specificity of the 12-lead electrocardiogram, subsequent tests for elevated
cardiac enzyme levels in the blood must be conducted. The results of these
tests, however, are often not available until after the window of opportunity
for optimum effectiveness of thrombolytic therapy or angioplasty has passed.
Rapid diagnosis and intervention in AMI is essential to reduce or minimize the
damage to a patient's heart. The Company expects the PRIME ECG(TM) system will
be used by the emergency room physician who needs a faster and more accurate
diagnostic tool to treat chest pain patients. The Company believes that the sale
of disposable vests will provide a recurring source of revenue and anticipates
that it will be the sole supplier of such vests. The Company is currently
pursuing a development/marketing partner with the objective of launching the
system in Europe in late 1998 and in the U.S. upon completion of clinical trials
and receipt of FDA regulatory clearance. The Company anticipates launching the
product in the U.S. by 1999. The Company believes that the product qualifies for
review under 510(k) notification, but there can be no assurance that the FDA
will not require a premarket application ("PMA"), which could delay the U.S.
launch.
Telemedicine Products
The Company is a leader in the development of devices that measure and transmit
medical physiological measurements by telephone. These telemedicine products
allow a patient's condition to be monitored while they remain at home, which
reduces expensive physician office visits, allows for earlier diagnosis and
minimizes emergency room and hospital visits during perceived emergencies.
Meridian's electronic heart monitoring device takes and transmits a patient's
electrocardiogram ("ECG") by telephone. Currently the CardioBeeper(R) product
line is sold by Shahal Medical Services, Ltd. ("Shahal"), which has exclusive
international marketing rights. Shahal, based in Israel, is a large home
healthcare monitoring company. In March 1997, the Company announced FDA approval
of the first patient-administered device capable of transmitting a complete
12-lead electrocardiogram over a standard telephone line. Other products
currently marketed measure and transmit blood pressure and peak respiratory
flow. Several new products are in development. The trend toward managed and home
healthcare in the U.S. will offer new marketing opportunities for
transtelephonic devices. The Company has also developed a CD-ROM product
focusing on teaching children CPR in a fun and entertaining way. This product is
due for release during fiscal 1998.
Sources and Availability of Raw Materials
The Company purchases, in the ordinary course of business, necessary raw
materials and supplies essential to the Company's operations from numerous
suppliers in the U.S. and overseas. During fiscal 1997, the Company experienced
no significant component supply availability problems and does not anticipate
availability problems or significant supply shortages in the future. The Company
procures inventory principally when supported by customer purchase orders.
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COMPETITION
In the commercial auto-injector market, the Company competes directly with
companies that manufacture drug injection devices, whether such devices are
automatic like the Company's products or non-automatic, variable dose pen-like
injection devices, reloadable injection devices and disposable needle-free
injection systems. The Company is the leading manufacturer of automatic
injectors in the world. Other companies that sell commercial auto-injectors
include Glaxo Wellcome who has a reloadable auto-injector kit (designed and
manufactured by Owen Mumford and several other contract manufacturers) for use
only with its Imitrex migraine drug. MediJect, BioJect and VitaJect are all
developers and manufacturers of reloadable needle free injection systems. These
systems are bulky, very expensive devices and currently are used to administer
insulin by a small percentage of diabetics. Smaller, more convenient needle-free
injection systems are currently under development by several of these companies.
There are only three known competitors that sell auto-injectors in military
markets served by the Company: Shalon, an Israeli-based Company that sells
auto-injectors to the Israeli military; Sam Yang Chemical Co., a Korean company
that sells auto-injectors to the Korean military; and Duphar, a Holland-based
Company and unit of Solvay BV of Belgium that sells auto-injectors in
international military markets also served by the Company.
The Company's contract filling and packaging services operate in an intensely
competitive field which is presently dominated by larger pharmaceutical
companies. There are numerous other disposable, prefilled syringe systems
presently available which can be less expensive than those offered by the
Company. A very small group of independent companies and a few pharmaceutical
companies offer contract syringe filling services similar to those that the
Company offers.
The Cardiopulmonary business operates in a highly competitive sector of the
healthcare industry. Meridian's telemedicine products compete against the
products of numerous other companies and joint ventures. The PRIME ECG(TM)
product will compete with existing diagnostic equipment and testing procedures
and potentially with products and technologies currently under development that
may be brought to market, including blood markers for detection of acute MI
(heart attack), enhanced 12-lead ECG algorithms, invasive cardiac mapping and
improved cardiac stress testing.
BACKLOG AND RENOGOTIATION
As of July 31, 1997, the backlog of orders was approximately $13.2 million, of
which $5.4 million related to production and delivery of commercial products and
services and $7.8 million related to military products. This compares with
commercial product sales backlog of $4.9 million and military auto-injector
sales backlog of $3.1 million at July 31, 1996.
The Company's supply contracts with the DoD are subject to post-award audit and
potential price redetermination. From time to time, the DoD makes claims for
pricing adjustments with respect to completed contracts. At present, no claims
are pending.
All U.S. Government contracts provide that they may be terminated for the
convenience of the Government as well as for default. Upon termination for
convenience of cost reimbursement type contracts, the Company would be entitled
to reimbursement of allowable costs plus a portion of the fixed or target fee
related to work accomplished. Upon termination for convenience of fixed-price
contracts, the Company normally would be entitled to receive the contract price
for items which have been delivered under the contract, as well as reimbursement
for allowable costs for undelivered items, plus an allowance for profit thereon
or adjustment for loss if completion of performance would have resulted in a
loss. No such contract terminations are anticipated by the Company.
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RESEARCH AND DEVELOPMENT
The Company expensed $2.8 million, $1.7 million and $.7 million on research and
development activities in fiscal 1997, proforma 1996 and 1995, respectively. The
Company expects research and development expenditures in fiscal 1998 to be
higher than the fiscal 1997 level.
MMT is currently developing a new family of auto-injectors to accommodate the
expanding variety of injectable drugs that demand safe and convenient patient
self-administration. These new auto-injectors are designed for use in emergency
situations and for any episodic treatment where an intramuscular or subcutaneous
injection is the preferred drug delivery method. The Company is currently
exploring certain applications of these new auto-injectors which will be subject
to regulations prior to the product reaching the marketplace. See "Government
Regulation" following:
The Company has patented auto-injector systems that can store compounds in dry
form and reconstitute them in solution prior to administration. An increasing
array of biotechnology products and many traditional therapies require this
technology because of their limited shelf-life or instability in solution. MMT
also has a single-chambered auto-injector for intramuscular and subcutaneous
injection which utilize a very thin (27 gauge) needle for potential new
applications.
In addition, MMT will continue to develop its Cardiac Analysis System and
Telemedicine Products with the key focus being on the PRIME ECG(TM).
PATENTS, TRADEMARKS, AND LICENSES
The Company considers its proprietary technology to be important in the
development, marketing and manufacture of its products and seeks to protect its
technology through a combination of patents and confidentiality agreements with
its employees and others. Patents covering important features of the Company's
current principal auto-injector products have expired. This loss of patent
protection could have an adverse effect on the Company's revenues and results of
operations. MMT is currently developing a new generation of auto-injector
products (see "Research and Development") for which a number of patents have
been granted to the Company. Over the last few years, the Company was granted
U.S. patent protection for several of its new auto-injector drug delivery
systems, designed for fast and reliable patient self-administration of the
expanding range of new pharmaceutical and biotechnology products that require
injection. Some of these patents cover the new TRUJECT(TM) technology which was
launched in June 1997. In addition, the Company holds patents and licenses on
the PRIME ECG(TM) 80-lead mapping system harness.
The Company intends to file for additional protection for all its new
auto-injector and cardiopulmonary products currently under development. The
auto-injector products are expected to replace or supplement the Company's
existing line of auto-injectors over time.
PRODUCT LIABILITY INSURANCE
The Company maintains product liability coverage for its products. The Company
will continue to maintain liability insurance as it relates to divested
operations to cover any potential claims incurred but not reported prior to
their disposition. Although, the Company's management is of the opinion that,
with respect to amounts, types and risks insured, the insurance coverage is
adequate for the business conducted by the Company, there can be no assurance
that such insurance will provide sufficient coverage against any or all
potential product liability claims.
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COST REDUCTION PROGRAM
Meridian implemented a cost reduction program in fiscal 1997, following the
completion of the merger of STI and Brunswick, to reduce both manufacturing and
overhead costs. Meridian's gross margin improved from 30% in fiscal 1996 (on a
pro forma basis) to 37% in fiscal 1997, even though the benefit of the cost
reductions was not realized for the full fiscal year.
The Company's cost reduction program is on-going, with additional initiatives
expected to be implemented in fiscal 1998 and beyond. The Company's new
generation products incorporate both enhanced features and lower manufacturing
costs. The Company expects to achieve significant future cost savings from the
consolidation of facilities in St. Louis. Currently the St. Louis manufacturing
operations utilize a total of nine buildings. The Company intends to consolidate
these operations into fewer buildings which should result in enhanced product
flow, increased product yield and reduced inventory and overhead costs.
GOVERNMENT REGULATION
The business of the Company is highly regulated by governmental entities,
including the FDA and corresponding agencies of states and foreign countries.
The summary below does not purport to be complete and is qualified in its
entirety by reference to the complete text of the statues and regulations cited
herein.
As a manufacturer of auto-injectors, cardiopulmonary products and pre-filled
syringes, the Company's products are subject to regulation by the FDA under the
Federal Food, Drug and Cosmetic Act ("Act"). All of the Company's auto-injectors
are "new drugs" and may be marketed only with the FDA's approval of a New Drug
Application "NDA" or a supplement to an existing NDA. The Company currently
holds approved NDAs for each of its existing auto-injector products. The use of
the Company's existing auto-injectors to administer FDA approved drugs generally
would require the filling of a NDA or supplement to an existing NDA. In
addition, the introduction of the Company's new generation auto-injectors will
require FDA approvals based on data demonstrating the safety and effectiveness
of the drug delivered by these auto-injectors. There is no assurance that the
NDAs will be processed in a timely manner or that FDA ultimately will approve
such NDAs.
The Company's Cartrix(TM) and other prefilled syringe systems are also regulated
as drugs; however, the requisite FDA approval is held by the supplier of the
drug that the Company fills into the syringe. To the extent the Company's
auto-injectors or Cartrix(TM) syringe system are expected to be used to
administer new drugs under development, FDA approval to market such drugs first
must be received by the pharmaceutical manufacturer. Obtaining the requisite FDA
approval is a time consuming and costly process through which the manufacturer
must demonstrate the safety and effectiveness of a new drug product.
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The Company's Cardiopulmonary Systems Products must have Underwriters
Laboratories "UL" and/or CE Marking. CE Marking is required for international
sales.
In connection with its manufacturing operations, the Company must comply with a
variety of regulations, including the FDA's Good Manufacturing Practice ("GMP")
regulations, and its manufacturing facilities are subject to periodic
inspections. The Company's St. Louis facility underwent an inspection by the FDA
during fiscal 1996 in which there were no material issues brought to
management's attention.
Suppliers of bulk drugs for filling into the Company's syringe systems, as well
as some subcontractors who manufacture components for the Company's medical
devices, also are subject to FDA regulation and inspection. The Company has only
limited control over these other companies' compliance with FDA regulations.
Failure of these companies to comply with FDA requirements could adversely
affect the Company's ability to procure component parts, market finished
products and may cause the Company's products made with non-compliant components
to be adulterated or misbranded in violation of the Act, subjecting the products
to a variety of FDA administrative and judicial actions.
The FDA is empowered with broad enforcement powers. The FDA may initiate
proceedings to withdraw its approval for marketing of the Company's product
should it find that the drugs are not manufactured in compliance with GMP
regulations, that they are no longer proven to be safe and effective or that
they are not truthfully labeled. Noncompliance with GMP regulations also can
justify nonpayment of an existing government procurement contract and, until the
deficiencies are corrected to FDA's satisfaction, can result in a nonsuitability
determination, precluding the award of future procurement contracts.
For any of the Company's auto-injectors and syringe systems, noncompliance with
FDA regulations could result in civil seizure of the drugs, an injunction
against the continued distribution of the drugs or criminal sanctions against
the Company. The Company's medical devices also are subject to seizure by the
FDA through administrative or judicial proceedings. In addition, the FDA may
impose civil money penalties for most violations of law and may order that
defective devices be recalled, repaired or replaced or that purchasers be
refunded the cost of the device.
The Company also is subject to regulation by other federal and state agencies
under various statues, regulations and ordinances, including environmental laws,
occupational health and safety laws, labor laws and laws regulating the
manufacturer and sale of narcotics.
EMPLOYEES
As of September 30, 1997, the Company employed a total of 275 employees; 218
employees work at the Company's plant and warehouse facilities in St. Louis,
Missouri; 7 employees work at the Company's facility in the United Kingdom; 24
employees work in facilities in N. Ireland and 26 employees work at the
Company's corporate headquarters in Columbia, Maryland (see "Properties").
Effective March 1, 1994, STI, now the Company, entered into a five-year
agreement with the Teamsters Local Union No. 688 ("Teamsters") which is
affiliated with the International Brotherhood of Teamsters, Chauffeurs,
Warehousemen and Helpers of America. Teamsters are the exclusive agent for all
production and maintenance employees of the Company at its St. Louis facility.
Approximately 118 employees are covered by this collective bargaining agreement.
The new labor union contract did not significantly change the mix of benefits
previously provided to such employees.
<PAGE>
13
ITEM 2. PROPERTIES
The Company's corporate headquarters are located in an 11,000 square foot
facility in Columbia, Maryland. The facility is leased through 2002. The
corporate headquarters facility houses the corporate administration, human
resources, finance, commercial business development and the product, design and
development functions. Meridian had entered into a ten year lease expiring in
2002 on a 17,000 square foot facility in Rockville, Maryland which previously
served as the Company's headquarters. The Rockville, Maryland facility has been
sub-leased to a third party through 2002.
The Company's primary pharmaceutical operations are located in St. Louis,
Missouri. These facilities are used primarily for formulation, aseptic filling,
assembly and final packaging of the Company's auto-injectors, vials and
pre-filled syringes. The St. Louis manufacturing facilities consist of nine
separate buildings occupying over 100,000 square feet.
The Company has a 4,200 square foot facility in Rochester, Kent in the United
Kingdom used primarily for aseptic assembly packaging of a morphine
auto-injector product under contracts with the United Kingdom and Canadian
defense departments. This facility is also used a as sales and marketing office
to promote the Company's commercial and military products in Europe and the
Middle East. The facility is leased pursuant to a lease which expires in 2010.
The Rochester facility may be consolidated into the Antrim, N. Ireland facility
in fiscal 1998.
The Company leases a 4,200 square foot facility in Antrim, N. Ireland for
assembly and engineering development of telemedicine products. The lease is
month to month and the facility may be vacated if the N. Ireland and
Rochester, England operations are consolidated during fiscal 1998.
ITEM 3. LEGAL PROCEEDINGS
Information required by this Item 3 is included in Note 10 "Commitments and
Contingencies -- Litigation," of the Notes to Consolidated Financial Statements
included herein pursuant to Part II of this Form 10-K.
<PAGE>
14
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted by the Company during the fourth quarter of
fiscal 1997 to a vote of security holders, through the solicitation of proxies
or otherwise.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table lists, as of September 30, 1997, the names and ages of all
executive officers of the Company, and their positions and offices held with the
Company, and their positions and offices held with the Company.
Name Age Present Positions with the Company
- ---- --- ----------------------------------
James H. Miller 59 Chairman, President and Chief Executive Officer
G. Troy Braswell 54 Vice President of Finance and Chief Financial Officer
Mark D. Ruby 43 Vice President of Sales and Marketing, Drug Delivery
Systems Group
Mr. Miller joined the Company as President of STI in June 1989, was elected
Chief Executive Officer in June 1990 and was elected Chairman of the Board in
April 1996. In November 1993, Mr. Miller assumed the additional post of chairman
and chief executive officer of Brunswick Biomedical Corporation while continuing
his position with STI. Prior to joining the Company, Mr. Miller served as
Executive Vice President of Beecham Laboratories from February 1987 to May 1989,
responsible for the Pharmaceutical and Animal Health Divisions. Prior to joining
Beecham, Mr. Miller spent ten years with Frank J. Corbet, Inc. (Advertising
Agency) as Executive Vice President and fourteen years in marketing management
with Abbott Laboratories.
Mr. Braswell joined Meridian in February 1997 and was appointed Chief Financial
Officer in May 1997. Prior to joining Meridian, he was Director and Treasurer of
Amoco/Enron in Frederick, Maryland, a solar energy joint venture partnership
between Amoco and Enron. From 1987 to 1995, Mr. Braswell served as Director of
Finance and Administration and the Chief Financial Officer of Solarex
Corporation, a unit of Amoco.
Mr. Ruby joined the Company as Vice President of Marketing and Sales in January
1996. Prior to joining the Company, Mr. Ruby served in the same capacity at
Jobts Institute, Inc. from March 1992 to December 1995 where he was responsible
for domestic and international marketing, sales and service. Prior to joining
Jobts, Mr. Ruby served in various capacities including Director of Business
Development and Director of Domestic Sales for Medisense, Inc. from July 1988 to
February 1991. Prior to joining Medisense, Mr. Ruby held various positions with
Baxter Healthcare, Inc. from July 1979 to June 1988.
<PAGE>
15
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
The Company's common stock is traded on the over-the-counter market and is
quoted in the NASDAQ National Market System under the symbol MTEC. It was
formerly traded under the name of Survival Technologies with the symbol of STIQ
until the November 1996 merger.
The following tables sets the high and low sales of the prices of the Company's
(and its predecessor STI's) common stock for each fiscal quarter during the two
year period ended July 31, 1997, as reported on the NASAQ National Market
system.
1997 1996
---------------- ------------------
Quarter High Low High Low
- ------- ---- --- ---- ---
First 8 6 1/2 9 1/2 6 1/2
Second 9 3/8 8 1/4 10 1/4 7 1/4
Third 7 5 3/8 10 1/8 7 1/2
Fourth 7 1/8 4 1/8 11 7/8 8 1/4
The Board of Directors has not declared any dividends on the Company's common
stock since its organization. As of September 30, 1997, the number of
shareholders of record was approximately 410.
<PAGE>
16
ITEM 6 SELECTED FINANCIAL DATA
Meridian Medical Technologies, Inc -- Five Year Summary of Operations and
Financial Information
(In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Year End One Month Year End Year End Year End Year End
July 31, July 31, June 30, June 30, June 30, June 30,
1997 1996 1996 1995 1994 1993
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Operations:
Net sales $ 40,665 $ 4,511 $ 10,375 $ 2,904 $ 2,427 $ 2,534
Gross profit 15,044 1,901 3,420 1,205 785 1,036
Operating (loss) income (1,699) 908 (6,212) (1,581) (1,627) (512)
Other expense, net (2,395) (140) (539) (19) (98) (324)
(Loss) income before income tax
and minority interest (4,094) 768 (6,751) (1,600) (1,725) (836)
Provision for income tax 45 440 27 -- -- --
Minority interest in
consolidated subsidiary 265 327 17 -- -- --
========= ========= ======== ======== ======= ========
Net (loss) income $ (4,404) $ 1 $ (6,795) $(1,600) $(1,725) $ (836)
========= ========= ======== ======= ======= ========
Net loss per share $ (2.16) $ 0.02 $ (99.32) $(23.39) $(24.69) $ (15.39)
========= ========= ======== ======= ======= ========
Average common shares and
common share equivalents
outstanding 2,040 68 68 68 70 54
========= ========= ======== ======= ======= ========
Financial position:
Current assets $ 16,032 $ 16,557 $ 16,351 $ 981 $ 3,930 $ 1,104
Working capital 845 4,230 4,144 (681) 2,719 (2,034)
Fixed assets, net 15,778 14,984 14,990 200 95 116
Total assets 44,082 41,568 41,694 3,188 4,284 1,429
Long-term debt 13,922 16,385 16,057 55 56 30
Shareholders' equity 12,293 3,844 4,387 1,472 3,017 (1,739)
</TABLE>
<PAGE>
17
ITEM 7 MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Introduction
The following discussion and analysis of financial condition and results of
operations cover the fiscal years ended July 31, 1997 and June 30, 1996.
On November 20, 1996, Brunswick was merged into STI to form MMT. At the time of
the merger, Brunswick held approximately 61% of STI's outstanding common stock,
which it had purchased from the estate of STI's late founder on April 15, 1996.
As a result, STI had been treated for financial accounting purposes as a
consolidated, majority-owned subsidiary of Brunswick from that date.
Although STI was the surviving corporation of the merger as a legal matter, the
merger was treated as a purchase of STI by Brunswick for financial accounting
purposes. As a result, Brunswick's historical financial statements became the
Company's financial statements, STI's assets and liabilities have been revalued
to their respective fair values and the Company's historical financial
statements reflect the combined operations of STI and Brunswick after April 15,
1996 (subject to minority interests). The minority interests were eliminated
upon completion of the merger on November 20, 1996.
For the reasons described above, the fiscal year 1997 financial statements of
the Company contained in this Form 10-K are not comparable to the financial
statements contained in reports previously filed by STI with the Commission,
and, due to substantial differences between the revenues and results of STI and
those of Brunswick, comparisons of results between periods before and after the
purchase of Brunswick's interest in STI are of limited utility. Therefore,
management's discussion and analysis includes comparisons to prior year STI and
Brunswick's combined proforma operating results to enhance the utility of the
information herein.
MMT's business plan following the merger is to operate as a medical device
company focusing on Early Intervention Home Healthcare and Emergency Medical
Technologies. The Company has three areas of business. The Drug Delivery Systems
business capitalizes on injectable drug delivery devices with an emphasis on
commercial auto-injectors. This business also supplies customized drug delivery
system design, pharmaceutical research and development, and sterile product
manufacturing to pharmaceutical and biotechnology companies. The Cardiopulmonary
Systems business focuses on non-invasive cardiac diagnostics and telemedicine.
The Cardiopulmonary Systems business is continuing the research and development
activities for the PRIME ECG(TM) program, an 80-lead cardiac mapping system for
rapid and improved diagnostic accuracy of cardiac ischemia and is planning a US
expansion of its telemedicine business. The STI Military Systems business
focuses on the world-wide market for auto-injectors used by military personnel
for self-administration of nerve gas antidotes, morphine and diazepam.
Financial Discussion
MMT's net loss after taxes for the year ended July 31, 1997 was $4.4 million
($2.16 per share) on revenues of $40.7 million compared to a fiscal 1996 net
loss of $6.8 million ($99.32 per share) on revenues of $10.4 million. Included
in the net loss for 1997 and 1996 were write-offs of in-process R&D and merger
related costs associated with the combination of STI and Brunswick. These
write-offs were $3.9 million and $4.5 million in 1997 and 1996, respectively.
Further, in 1997 there was a non-recurring charge of $1.5 million for the
EpiEZPen(TM) Product Exchange Program. (See Note 13 of financial statements).
<PAGE>
18
Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
The large disparity in revenues between 1997 and 1996 is a result of Brunswick's
prior year financial statements becoming those of the Company. Only 2.5 months
of STI results are included in 1996 revenues. Thus, a more meaningful financial
comparison of MMT results is against prior year proforma combined operating
results of STI and Brunswick. All comparisons against proforma combined results
exclude one-time, non-recurring merger related costs.
MERIDIAN MEDICAL TECHNOLOGIES, INC.
PROFORMA COMBINED STATEMENT OF OPERATIONS
$THOUSANDS
1997 1996 1995
---- ---- ----
Net Sales $40,665 $35,015 $28,390
Gross Margin 15,044 10,606 9,464
% of Sales 37.0% 30.3% 33.3%
Selling, general, and administrative expenses 5,330 5,378 6,015
Research and development expenses 2,783 2,154 1,641
Depreciation and amortization 3,142 3,104 3,022
Product exchange program 1,539 0 0
Restructuring charges 0 322 450
------- ------- -------
Total 12,794 10,958 11,128
------- ------- -------
Operating income $2,250 ($352) ($1,664)
======= ======= =======
EBITDA (1) $5,564 $2,754 $1,551
======= ======= =======
(1) EBITDA represents proforma operating income plus other income and
depreciation and amortization. EBITDA is not a measure of performance or
financial condition under generally accepted accounting principles, but is
presented to provide additional information related to debt service capability.
EBITDA should not be considered in isolation or as a substitute for other
measures of financial performance or liquidity under generally accepted
accounting principles. While EBITDA is frequently used as a measure of
operations and the ability to meet debt service requirements, it is not
necessarily comparable to other similarly titled captions of other companies due
to potential inconsistencies in the method of calculation.
The Proforma Combined Statement of Operations assumes the merger of Brunswick
and STI was in effect for the three years shown and excludes one-time, merger
related costs in 1996 totaling $4.5 million and STI in 1997 totaling $3.9
million. The merger costs consisted of excess purchase price over the book value
paid by Brunswick which was allocated to in-process R&D amounting to $4.5
million in 1996 and $2.7 million in 1997. A total of $1.2 million of transaction
costs were paid in 1997 by STI.
<PAGE>
19
Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Year in Review -- Proforma Basis
1997 financial results improved over 1996 and 1995 on a proforma basis. Sales
increased 16% to $40.7 million from $35.0 million in fiscal 1996 and increased
43% from $28.4 million in 1995. Operating income was $2.3 million compared to
losses in both fiscal 1996 and 1995. Gross margins were 37% in 1997 compared to
30% in 1996 and 33% in 1995. Operating expenses were $1.8 million higher in 1997
primarily because of the non-recurring charge for the EpiEZPen(TM) Product
Exchange Program amounting to $1.5 million. Results for 1997 benefited from
record sales of EpiPen(R) brand products and cost reduction and fixed cost
controls initiated after the merger. These improvements resulted in operating
income increasing by $2.6 million compared to 1996 and $3.9 million over 1995.
EBITDA was $5.6 million in 1997, double the 1996 EBITDA and 3.6 times the 1995
EBITDA.
Drug Delivery business sales were $20.1 million in 1997, 32% higher than 1996
primarily from record EpiPen(R) brand sales. STI Military business sales were
$17.8 million, 10% higher than 1996 as sales to foreign countries continued to
grow. Cardiopulmonary sales were $2.7 million in 1997, down from $3.6 million in
1996 primarily reflecting the absence of a significant one-time product sales
promotion which occurred in 1996 and the disposition of a non-strategic business
in late 1997.
Net sales were $35.0 million in 1996, $6.6 million or 23% higher than 1995. Most
of the increased 1996 sales was in STI Military business as the Diazepam
auto-injector and the base maintenance prestocking programs were introduced and
contributed a combined $4.6 million in higher sales. 1996 Drug Delivery sales
were $15.2 million, slightly higher than 1995 sales of $15.0 million. Higher
sales of the newly launched EpiEZPen(TM) of $1.7 million were nearly offset by
lower revenues, particularly for the Cytoguard aerosol protection device (which
has now been discontinued). Cardiopulmonary sales were $3.6 million, $0.7
million higher than 1995 mostly from a significant one-time CardioBeeper(R)
sales promotion.
Gross margins were 37% of sales in 1997 compared to 30% in 1996 and 33% in 1995.
The increased gross margins in 1997 resulted mostly from higher sales volume and
cost reduction programs initiated after the merger which lowered variable costs
and maintained fixed costs. Automation projects reduced labor and a full level
of management was eliminated at our St. Louis facility. Gross margins in 1996
were 30% of sales, down from 33% of sales in 1995. The lower gross margin
percentage reflected a product mix change where STI Military sales were a larger
proportion of total sales in 1996 than in 1995 and the St. Louis facility
experienced plant supply disruptions during the first quarter, 1996.
Operating costs were $12.8 million in 1997, an increase of $1.8 million over
1996. Most of the increased cost was from a non-recurring charge for the
voluntary EpiEZPen(TM) Product Exchange Program ($1.5 million), higher
development cost in 1997 for the TruJect(TM) platform auto-injector and
continued development of the PRIME ECG(TM) cardiac analysis system.
The combination of increasing revenues, lower costs of sales and higher
operating costs resulted in operating income growing to $2.3 million in 1997
from losses of $352,000 and $1.7 million in 1996 and 1995 respectively.
<PAGE>
20
Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Nonoperating Costs (Actual cost basis)
Nonoperating expenses in 1997 were $2.4 million, significantly higher than the
$539,400 and $18,600 in 1996 and 1995 respectively. The higher costs reflects a
full year of higher interest expense ($2.6 million) to finance the merger
compared to only 2.5 months in 1996 (whose fiscal year ended June 30, 1996). The
interest cost includes amortization of warrants issued to finance the debt
amounting to $458,900 in 1997 and $0 in 1996. Partially offsetting the 1997
interest cost were other income items amounting to $172,000. The income tax
provision in 1997 was $45,400, slightly higher than the $26,900 provision in
1996. Minority interest in 1997 was $265,000 compared to $16,700 in 1996
reflecting STI net income allocable to minority shareholders of STI prior to the
merger.
In October, 1997, the Company initiated a voluntary EpiEZPen(TM) Product
Exchange Program to replace all EpiEZPen(TM) sold since introduction in
1996 with EpiPens(R). The exchange program was in response to a very small
number of EpiEZPens(TM) (less than 0.001%) which had self activated in the
package. While the exchange was not required by the FDA, the Company took the
action to protect its customers and the quality reputation of the Meridian name.
The Company does not expect any significant sales impact from this action and is
planning reintroduction of the EpiEZPen(TM) after all corrective actions are
in place. The Company made its best estimate of the costs of the exchange
program and recorded a provision in 1997 amounting to $1.5 million. Although no
assurance can be given that the reserved amount is adequate, it is intended to
cover all cost of the product exchange.
Line of Business Discussion
Drug Delivery sales were $20.1 million in 1997, 32% higher than 1996 mostly from
record sales of $15.0 million for the EpiPen(R) family of products.
Additionally, higher development revenue was achieved, mostly for a migraine
auto-injector and licensing fees notably from strategic partners, Mylan
Laboratories and Genpharm Laboratories, to develop a line of generic injectable
drugs. Backlog at year-end was $5.4 million, an increase of 10% over July 31,
1996 reflecting strong demand for the EpiPen(R) brand products. EBITDA generated
from Drug Delivery products increased 38% in 1997 to $5.1 million reflecting the
higher EpiPen(R) revenues and increased margins from cost reduction programs
partially offset by the product exchange reserve.
STI Military revenues increased 10% in 1997 over the prior year to $17.8
million. The increase reflects higher sales particularly to foreign allied
governments and increased pre-stocking for the USDoD. At year end, the STI
Military backlog was $7.8 million, an increase of 150% from July 31, 1996
reflecting contract awards from an allied country and the third year of the US
DoD Base Maintenance Contract. EBITDA generated from STI Military Systems
products was $1.5 million reflecting higher revenues and a reduction of costs
compared to 1996.
Cardiopulmonary product revenues were $2.7 million, a decline from 1996 sales of
$3.6 million. The reduction was due to the absence of a special one-time
CardioBeeper(R) sales promotion in 1996 and from disposition of the assets of a
non-strategic business. EBITDA from Cardiopulmonary Systems strengthened after
the merger as cost reduction activities were implemented. Margins remained
steady and development costs, particularly for PRIME ECG(TM), continued.
<PAGE>
21
Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Liquidity and Capital Resources
Total cash balance at July 31, 1997 was $23,300, a reduction of $511,800 during
fiscal 1997. The Company generated $3.6 million of cash from operations in 1997.
Cash flow was positive despite the net loss for the year primarily because of
noncash expenses for depreciation and amortization and the write-off of
in-process R&D. Investing activities used $2.4 million of cash in fiscal 1997
with capital additions amounting to $3.3 million. The majority of capital was
for cost reduction projects, including molds for new lower cost products.
Financing activities required $1.7 million consisting of $1.0 million for
paydown on the bridge loan upon completion of the merger between Brunswick and
STI in November, 1996 and $838,400 for payments of debt principal. These uses
were partially offset by a net increase in borrowings of $112,600 to finance
equipment purchases and $40,200 from the working capital line.
In fiscal 1998, principal and interest payments on long-term debt will total
approximately $3.5 million. The Company recently increased its asset based
working capital credit line with ING CAPITAL to a maximum of $6.5 million from
$5.0 million and had $2.7 million available at July 31, 1997. Senior debt
financial covenants with ING CAPITAL have been adjusted and the Company believes
it can comply with such covenants at least through fiscal 1998. The Company is
in active discussion with ING CAPITAL to restructure the existing ING CAPITAL
term loan and to assist the Company in a broader refinancing of its long-term
debt. No assurances can be made that the Company will be successful in this
effort and a delay in such restructuring could have an adverse effect on the
Company's liquidity. Management believes that existing financing sources and
other actions available, such as reducing discretionary spending on research and
development, capital expenditures and other costs if necessary, will enable it
to meet its financing obligations through the end of fiscal 1998. However,
additional capital is needed to fund its long-term planned strategic initiatives
and growth objectives.
Working capital at July 31, 1997 was $844,700, down from $4.1 million at June
30, 1996. Most of the decrease resulted from higher accounts payable and accrued
liabilities of $2.1 million, increased current portions of long-term debt of
$1.8 million partially offset by increased inventories ($719,900). Accounts
receivable was $7.5 million representing 67 days-sales-outstanding and inventory
was $6.0 million and represented a 4.3 turnover ratio for the year. Accounts
payable at year end was $7.7 million, up $2.1 million from June 30, 1996
reflecting higher business levels and costs related to the merger. Borrowings
under working capital lines were $4.1 leaving $2.7 million available credit at
July 31, 1997.
Total debt at fiscal year-end 1997 was $21.9 million or 64% of total
capitalization of $34.2 million.
Recent Events-Sale of Non-Core Assets
The Company has entered into agreements to sell two non-core assets previously
included in the Cardiopulmonary business unit. The first asset being divested,
emergency care products generated revenues of approximately $1.5 million and
EBITDA of approximately $250,000 in the latest 12 months. The second asset being
divested is an esothoracic technology, which is still in the development stage.
It is currently generating no revenue and negative cash flow. The Company has
closed on the sale of emergency care product's assets and anticipates closing on
the sale of esothoracic technology during the second quarter of fiscal 1998.
The Company expects to realize gross proceeds of not more than $0.5 million.
There was no impairment of related assets at July 31, 1997.
<PAGE>
22
Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Inflation
In the view of management, the low levels of inflation in recent years and
changing prices have had no significant effect on the Company's financial
condition and results of operations. Generally, the Company is able to mitigate
the effects of inflation on operating costs and expenses through price increases
and productivity gains.
<PAGE>
23
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
CONSOLIDATED BALANCE SHEETS
MERIDIAN MEDICAL TECHNOLOGIES
<TABLE>
<CAPTION>
July 31, June 30,
1997 1996
- --------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 23,300 $ 511,800
Restricted cash 264,400 958,200
Receivables, less allowance for doubtful
accounts of $247,800 and $45,000 July 31, 1997
and June 30, 1996 respectively 7,507,600 7,536,700
Inventories 6,046,600 5,326,700
Prepaid expenses and other assets 531,000 800,200
Deferred income taxes 1,658,600 1,217,500
---------------- ---------------
Total Current Assets 16,031,500 16,351,100
---------------- ---------------
Fixed assets 17,246,300 27,016,100
Less accumulated depreciation 1,468,400 12,025,800
---------------- ---------------
Total fixed assets (net) 15,777,900 14,990,300
---------------- ---------------
Excess of cost over net assets acquired, net 9,168,000 6,849,300
Other intangible assets, net 3,104,800 3,503,100
---------------- ---------------
$ 44,082,200 $ 41,693,800
================ ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and other accrued liabilities 7,733,000 $ 5,652,900
Note payable to bank 4,112,800 4,072,600
Note payable to Syntex -- 588,400
Current portion of long-term debt 2,299,400 516,800
Customer deposits 917,800 736,000
Restructuring reserve 123,800 640,400
---------------- ---------------
Total Current Liabilities 15,186,800 12,207,100
Long-term debt:
Notes payable 13,062,600 14,872,300
Other long-term debt 859,000 1,184,300
Deferred revenue 314,900 --
Other noncurrent liabilities 625,000 616,500
Deferred income taxes 1,741,100 1,605,500
Long-term capital lease obligations -- 32,800
---------------- --------------
Total Liabilities 31,789,400 30,518,500
---------------- ---------------
Minority interest in consolidated subsidiary -- 6,788,500
Shareholders' equity:
Common Stock $.10 par, 18,000,000 shares authorized,
2,912,502 and 68,417 issued and outstanding 291,300 700
Additional capital 28,659,900 15,866,100
Preferred stock, Series A-F -- 7,500
Warrants 2,072,900 2,072,900
Accumulated deficit (18,311,800) (13,393,300)
Unearned stock option compensation (139,600) (181,800)
Foreign currency translation adjustment (67,000) 26,200
Treasury stock, at cost (212,900) (11,500)
---------------- ---------------
Total shareholder's equity 12,292,800 4,386,800
---------------- ---------------
$ 44,082,200 $ 41,693,800
================ ===============
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
24
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
CONSOLIDATED STATEMENTS OF OPERATIONS
MERIDIAN MEDICAL TECHNOLOGIES
<TABLE>
<CAPTION>
Year Ended Month Ended Year Ended Year Ended
July 31 July 31 June 30 June 30
1997 1996 1996 1995
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Sales $40,664,700 $ 4,510,600 $10,375,300 $ 2,903,500
Cost of Goods 25,620,900 2,609,200 6,955,200 1,698,400
------------ ----------- ----------- -----------
Gross Profit 15,043,800 1,901,400 3,420,100 1,205,100
Selling, general, and administrative
expense 5,330,200 429,400 2,414,000 1,844,400
Research and development expenses 2,782,600 295,000 1,724,900 698,000
Depreciation and amortization 3,142,100 268,700 803,400 244,200
Write off in-process R&D 2,702,200 -- 4,464,000 --
Write off merger transaction costs 1,246,300 -- -- --
Product exchange program 1,539,400 -- -- --
Restructuring charges -- -- 225,800 --
----------- ----------- ----------- -----------
16,742,800 993,100 9,632,100 2,786,600
Operating (loss) income (1,699,000) 908,300 (6,212,000) (1,581,500)
Other (expense) income:
Interest expense (2,567,000) (153,800) (550,700) (18,600)
Other income 172,000 14,000 11,300 --
------------ ----------- ----------- -----------
(2,395,000) (139,800) (539,400) (18,600)
------------ ----------- ----------- -----------
(Loss) income before provision for
income and minority interest (4,094,000) 768,500 (6,751,400) (1,600,100)
Provision for income taxes 45,400 439,800 26,900 --
Minority interest in income of
consolidated subsidiary 265,200 327,400 16,700 --
------------ ---------- ----------- -----------
Net (loss) income $(4,404,600) $ 1,300 $(6,795,000) $(1,600,100)
============ ========== =========== ===========
Weighted average shares outstanding: 2,040,000 68,417 68,417 68,417
============ ========== ========== ===========
Net (loss) income per share $ (2.16) $ 0.02 $ (99.32) $ (23.39)
============ ========== =========== ===========
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
25
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
MERIDIAN MEDICAL TECHNOLOGIES
<TABLE>
<CAPTION>
Number Number Additional
of Shares Par Value of Shares Par Value Capital Warrants
--------- --------- --------- --------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance at June 30, 1994 468,300 $ 4,700 68,400 $ 700 $8,098,200 $ --
Issuance of nonqualified
stock options 209,700
Amortization of stock
option compensation
Issuance of treasury stock in
exchange for services 3,500
Cummulative translation
adjustment
Net loss
---------------------------------------------------------------------------
Balance at June 30, 1995 468,300 4,700 68,400 700 8,311,400 --
Sales of Series D preferred stock
net of issuance costs of $19,929 45,700 500 1,238,600
Sales of Series E preferred stock
net of issuance costs of $10,607 24,300 200 659,200
Sales of Series F preferred stock
net of issuance costs $91,019 208,700 2,100 5,656,900
Warrants issued with notes payable 2,072,900
Amortization of stock
option compensation
Cummulative translation
adjustment
Net loss
---------------------------------------------------------------------------
Balance June 30, 1996 747,000 7,500 68,400 700 15,866,100 2,072,900
Cummulative translation
adjustment
Amortization of stock
option compensation
Adjust for STI earnings previously
recorded
Net income
---------------------------------------------------------------------------
Balance July 31, 1996 747,000 7,500 68,400 700 15,866,100 2,072,900
Merger with STI (747,000) (7,500) 2,843,900 290,600 12,793,800
Exchange of treasury stock for assets
Amortization of stock
option compensation
Cummulative translation
adjustment
Net loss
---------------------------------------------------------------------------
Balance July 31, 1997 -- $ -- 2,912,300 $291,300 $28,659,900 $2,072,900
===========================================================================
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
26
<TABLE>
<CAPTION>
Treasury Stock Unearned
Foreign ---------------- Stock
Accumulate Currency Number Option Shareholders'
Deficit Adjustment of Shares Cost Compensation Equity
---------- ---------- --------- ---- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Balance at June 30, 1994 $(4,998,300) $ 29,400 1,900 $(13,000) $(104,900) $ 3,016,800
Issuance of nonqualified (209,700) --
stock options
Amortization of stock
option compensation 59,400 59,400
Issuance of treasury stock in
exchange for services (200) 1,500 5,000
Cummulative translation
adjustment (9,800) (9,800)
Net loss (1,600,100) (1,600,100)
----------------------------------------------------------------------------------
Balance at June 30, 1995 (6,598,400) 19,600 1,700 (11,500) (255,200) 1,471,300
Sales of Series D preferred stock 1,239,100
net of issuance costs of $19,929
Sales of Series E preferred stock
net of issuance costs of $10,607 659,400
Sales of Series F preferred stock
net of issuance costs $91,019 5,659,000
Warrants issued with notes payable 2,072,900
Amortization of stock
option compensation 73,400 73,400
Cummulative translation
adjustment 6,600 6,600
Net loss (6,749,900) (6,794,900)
----------------------------------------------------------------------------------
(13,393,300) 26,200 1,700 (11,500) (181,800) (4,386,800)
Balance June 30, 1996
Cummulative translation
adjustment (35,200) (35,200)
Amortization of stock
option compensation 6,200 6,200
Adjust for STI earnings previously
recorded (515,200) (515,200)
Net income 1,300 1,300
----------------------------------------------------------------------------------
Balance July 31, 1996 (13,907,200) (9,000) 1,700 (11,500) (175,600) 3,843,900
Merger with STI 13,076,900
Exchange of treasury stock for assets (201,400) (201,400)
Amortization of stock
option compensation 36,000 36,000
Cummulative translation
adjustment (58,000) (58,000)
Net loss (4,404,600) (4,404,600)
-----------------------------------------------------------------------------------
$(18,311,800) (67,000) 1,700 $(212,900) $(139,600) $12,292,800
Balance July 31, 1997 ====================================================================================
</TABLE>
<PAGE>
27
CONSOLIDATED STATEMENT OF CASH FLOWS
MERIDIAN MEDICAL TECHNOLOGIES
<TABLE>
<CAPTION>
Year ended Month ended Year ended Year ended
July 31, July 31, June 30, June 30,
1997 1996 1996 1995
----------------------------------------------------
<S> <C> <C> <C> <C>
Operating activities:
Net (loss) income $ (4,404,600) $ 1,300 (6,795,000) $(1,600,100)
Adjustments to reconcile net (loss) income
to net cash provided by (used for)
operating activities -- -- -- --
Depreciation and amortization 3,142,100 268,700 803,400 244,200
Amortization of deferred compensation 36,000 6,200 73,400 59,400
Amortization of notes payable discount 458,900 -- -- --
Issuance of treasury stock for payment
of services -- -- -- 5,100
Loss on fixed asset disposals 347,000 -- -- --
Deferred income taxes (305,000) (36,100) -- --
Write off of in-process R&D 2,702,200 -- 4,464,000 --
Write off of patents and other intangibles 340,000 -- -- --
Minority interest 265,200 327,400 16,700 --
Changes in assets and liabilities
Receivables (68,300) (1,911,700) 929,400 (264,200)
Inventories (716,200) 153,900 (998,800) 150,300
Prepaid expenses and other assets 203,000 (72,900) -- 22,900
Accounts payable 1,959,800 530,100 500 365,500
Restructuring reserve (516,600) -- 185,400 --
Other liabilities and accrued expenses (647,900) (69,800) 572,500 (4,400)
Deferred revenue 314,900 -- -- --
Other noncurrent assets 489,100 -- (356,000) --
Other noncurrent liabilities (30,500) -- 56,000 (109,400)
------------------------------------------------------
Net cash provided by (used for)
operating activities 3,569,100 (802,900) (1,048,500) (1,130,700)
------------------------------------------------------
Investing activities:
Purchases of fixed assets (3,286,500) (548,300) (463,300) (34,800)
Purchases of patents and licenses (58,600) -- (800) --
Decrease (increase) in restricted cash 696,800 (3,000) (958,200) --
Purchase of STI -- -- (21,589,400) --
Purchase of Telemedicine division -- -- -- (2,063,000)
Sale (purchase) of short - term investments 257,500 (257,500) -- --
Proceeds from sale of fixed assets 2,900 -- -- --
------------------------------------------------------
Net cash used for
investing activities (2,387,900) (808,800) (23,011,700) (2,097,800)
------------------------------------------------------
Financing activities:
Proceeds from line of credit 40,200 1,660,200 361,300 7,900
(Net payment) proceeds on note payable
(long-term) (1,838,400) -- 14,672,200 200,000
(Net payment) proceeds on other long-term debt 112,600 65,200 (86,200) (35,900)
Payment under noncompete agreement -- -- (57,500) (180,000)
Proceeds from issuance of warrants -- -- 2,072,900 --
Proceeds from issuance of preferred stock -- -- 7,557,600 --
----------------------------------------------------
Net cash (used for) provided by
financing activities (1,685,600) 1,725,400 24,520,300 (8,000)
----------------------------------------------------
Ajustment for STI cash flows previously recorded -- (97,800) -- --
----------------------------------------------------
Net (decrease) increase in cash (504,400) 15,900 460,100 (3,236,500)
Cash at beginning of period 527,700 511,800 51,700 3,288,200
----------------------------------------------------
Cash at end of period $ 23,300 $ 527,700 $ 511,800 $ 51,700
====================================================
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
28
ITEM 8. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Meridian Medical Technologies, Inc.
1. Business and Summary of Significant Accounting Policies
Meridian Medical Technologies, Inc. ("Company") is a technology-based health
care company that designs, develops and produces a broad range of automatic
injectors, prefilled syringes, cardiopulmonary products, and other innovative
health care devices, with a major focus on safe and convenient participation by
the patient in injection therapy and cardiac monitoring. The Company also
supplies customized drug delivery system design, pharmaceutical research and
development and Good Manufacturing Practices GMP-approved sterile product
manufacturing to pharmaceutical and biotechnology companies.
On November 20, 1996, Brunswick Biomedical Corporation ("Brunswick") was merged
into Survival Technology, Inc. ("STI") to form the Company. At the time of the
merger, Brunswick held approximately 61% of STI's outstanding common stock,
which it had purchased from the estate of STI's late founder on April 15, 1996.
Upon completion of the merger, the Company's fiscal year end was changed from
June 30 to July 31.
Although STI was the surviving corporation of the merger as a legal matter, the
merger was treated as a purchase of STI by Brunswick for financial accounting
purposes. As a result, Brunswick's historical financial statements became the
Company's financial statements, STI's assets and liabilities have been revalued
to their respective fair values and the Company's historical financial
statements reflect the combined operations of STI and Brunswick after April 15,
1996 (subject to minority interests). The minority interests were eliminated
upon completion of the merger on November 20, 1996.
Liquidity
The Company's liquidity at July 31, 1997 and for the first quarter of 1998 has
been adversely impacted by the Company's current obligations under its senior
debt and the voluntary exchange program (see note 13). The Company expects its
liquidity to improve substantially in 1998 upon the completion of an anticipated
restructuring of its debt. The restructuring is anticipated to extend principal
payments and/or increase the Company's borrowing capacity. A delay in the
restructuring of the Company's debt could have an adverse effect on the
Company's liquidity.
The Company and International Nederlanden (U.S.) Capital Corporation ("ING"),
its primary lender, have agreed to modifications of certain debt covenants
through the maturity of the term loan. Management believes that these
modifications will enable the Company to operate in compliance with all
covenants through at least July 31,1998. The Company believes it has a good
working relationship with ING and that ING will continue to work with the
Company.
The Company is pursuing the restructuring of its debt structure, and, if
necessary, would consider other alternatives such as reductions in discretionary
spending. Management believes that debt restructuring and additional capital is
needed to continue with its planned strategic initiatives and growth objectives.
<PAGE>
29
Principles of Consolidation
All intercompany balances and transactions have been eliminated in
consolidation.
Inventories
Inventories relating to commercial and military products are stated at the lower
of cost (first-in, first-out) or market.
Fixed Assets
Fixed assets are stated at cost. The Company computes depreciation and
amortization under straight-line and accelerated methods using the following
estimated useful lives:
Furniture and equipment 2 to 15 years
Capital leases and leasehold improvements 4 to 20 years
The Company uses either the units of production method or the straight line
method over a 10-year life (whichever period is shorter) to depreciate
production molds and tooling over their estimated production life cycle.
Intangible Assets
Intangible assets consist of the following:
July 31, 1997 June 30, 1996
------------- -------------
Excess of cost over net assets acquired $10,350,700 $ 7,017,900
Patents and licenses 2,417,600 2,523,500
Other 1,479,200 1,654,700
----------- -----------
14,247,500 11,196,100
Less: accumulated amortization (1,974,700) (843,700)
----------- -----------
$12,272,800 $10,352,400
=========== ===========
Excess of cost over net assets acquired and other intangible assets are
amortized over 10 years. Legal costs incurred in connection with patent
applications and costs of acquiring patents and licenses are capitalized and
amortized on a straight-line basis over the shorter of the patent life (not to
exceed seventeen years) or the period of expected benefit.
<PAGE>
30
Revenue Recognition
Sales of medical products are recorded when shipments are made to customers.
Revenues from the U.S. Department of Defense ("DoD") industrial base maintenance
contract are recorded ratably throughout the contract term with the exception of
revenue from the component prestocking program that is recorded upon component
receipt in MMT's warehouse and product sales which are recorded upon acceptance
by the customer. Revenues from license fees are recorded when the fees are due
and non-refundable. Revenues from research and development arrangements are
recognized in the period related work has been substantially completed.
Foreign Currency
Assets and liabilities of foreign operations are translated at the exchange rate
in effect at the balance sheet date. Revenue and expense accounts are translated
using a weighted average of exchange rates in effect during the year. Cumulative
translation adjustments are shown in the accompanying consolidated balance
sheets as a separate component of shareholders' equity.
Research and Development
Research and development expenses are charged to operations in the period
incurred.
Income Taxes
The Company accounts for income taxes using the asset and liability approach as
prescribed by Statement of Financial Accounting Standards No. 109 ("SFAS 109"),
"Accounting for Income Taxes". The asset and liability approach requires the
recognition of deferred tax assets and liabilities for expected future tax
consequences of temporary differences between carrying amounts and the tax basis
of assets and liabilities.
Value of Financial Instruments
Other than described below, the Company considers the recorded value of its
financial assets and liabilities, which consist primarily of cash, accounts
receivable, accounts payable and other accrued liabilities to approximate the
fair value of the respective assets and liabilities at July 31, 1997 and June
30, 1996. Management believes the principal balance of its term note payable
with ING, which is $1.6 million higher than the carrying value, is a better
estimate of the fair value of that note.
Use of Estimates and Assumptions
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates and assumptions.
<PAGE>
31
Net Income (Loss) Per Common Share
Net income (loss) per common share is computed on the weighted average number of
common and common equivalent shares outstanding which were as follows: 2,040,000
for the year ended July 31, 1997 , 68,417 for the one month ended July 31, 1996,
and 68,417 for the years ended June 30 1996 and 1995. Stock options and warrants
are considered to be common equivalent shares when dilutive.
Reclassification
Certain reclassifications have been made to prior year financial statements in
order to conform with the current year presentation.
Accounting Standards Not Adopted
In February 1997, the Financial Accounting Standards Board issued (FASB)
Statement No. 128, "Earnings per Share" which is required to be adopted in the
Company's quarter ending January 31, 1998. At that time, the Company will be
required to change the method currently used to compute earnings per share and
to restate all prior periods. Under the new requirements for calculating primary
basic per share, the dilutive effect of stock options will be excluded. The
Company does not expect the impact of adopting this new accounting standard to
be significant.
In June 1997, the FASB issued Statement No. 130, "Reporting Comprehensive
Income" which establishes standards for reporting and display of comprehensive
income and its components (revenues, expenses, gains and losses) in a full set
of general-purpose financial statements. This statement requires that an
enterprise classify items of other comprehensive income by their nature in a
financial statement and display the accumulated balance of other comprehensive
income separately from retained earnings and additional paid-in capital in the
equity section of the balance sheet. This statement is effective for fiscal
years beginning after December 15, 1997.
In June 1997, the FASB issued Statement No. 131, "Disclosure about Segments of
an Enterprise and Related Information" which establishes standards for public
business enterprises to report information about operating segments in annual
financial statements and requires those enterprises to report selected
information about operating segments in interim financial reports issued to
shareholders. It also establishes the standards for related disclosures about
products and services, geographic areas and major customers. This Statement
requires that a public business enterprise report financial and descriptive
information about its reportable operating segments. The financial information
is required to be reported on the basis that it is used internally for
evaluating segment performance and deciding how to allocate resources to
segments. Operating segments are components of an enterprise about which
separate financial information is available that is evaluated regularly by the
chief operating decision maker in deciding how to allocate resources and in
assessing performance. This statement is effective for financial statements for
periods beginning after December 15, 1997.
Management is currently evaluating the requirements of Statements No. 130 and
No. 131, respectively.
<PAGE>
32
2. Inventories
Inventories as of July 31, 1997 and June 30, 1996 consist of the following:
July 31, June 30
1997 1996
---- ----
Components and subassemblies $4,788,000 $3,217,200
Work in process 1,459,500 1,436,900
Finished goods 345,400 966,100
---------- ----------
6,592,900 5,620,200
Inventory valuation allowance (546,300) (293,500)
---------- ----------
$6,046,600 $5,326,700
========== ==========
3. Fixed Assets
Fixed assets as of July 31, 1997 and June 30,1996 consist of the following:
July 31, June 30
1997 1996
---- ----
Furniture and equipment $10,676,100 $18,191,000
Leasehold improvements 3,957,900 6,707,200
Construction in progress 2,612,300 2,117,900
----------- -----------
17,246,300 27,016,100
Less: accumulated depreciation (1,468,400) (12,025,800)
----------- -----------
$15,777,900 $14,990,300
=========== ===========
The Company capitalized interest costs of $153,200 and $90,300 on internally
constructed fixed assets in years ended July 31, 1997 and June 30, 1996,
respectively.
4. Restructuring Charge
In fiscal 1995, STI's Board of Directors approved a restructuring plan which
resulted in a $450,000 charge against earnings for the relocation of the
corporate headquarters. As part of this plan, STI initiated certain
organizational changes during 1996 and 1997 resulting in additional charges
related to employee severance benefits provided to certain employees terminated
during fiscal 1996 and 1997. The Company's fiscal 1996 consolidated financial
statements include a charge of $225,800 related to restructuring charges
incurred subsequent to the acquisition of STI. The restructuring reserve was
$123,800 and $640,400 as of July 31, 1997 and June 30, 1996, respectively.
Reductions were related to cash payments for severance, moving costs and the
differential on the lease cost of STI's former headquarters office and the
income from the sublease of the facility.
<PAGE>
33
5. Merger of STI and Brunswick Biomedical Corporation
The acquisition of 61% of STI's common stock and subsequent merger of Brunswick
and STI to form the Company were accounted for as a purchase. The purchase price
was allocated first to tangible assets and identifiable intangible assets and
liabilities of STI based on an independent assessment of their fair market
values with the remainder allocated to the excess of cost over the fair value of
net assets acquired. The purchase price and the purchase price allocation are as
follows:
<TABLE>
<CAPTION>
61% Interest 39% Interest Total
------------ ------------ -----
<S> <C> <C> <C>
Cash consideration paid $16,069,386 $ 0 $16,069,386
Promissory note to the founder's estate 4,700,000 0 4,700,000
Stock exchanged 11,885,000 11,885,000
Transaction expenses 820,019 1,200,000 2,020,019
----------- ------------ -----------
Purchase price 21,589,405 13,085,000 34,674,405
Historical book value of net assets acquired 10,680,600 6,788,500 17,469,100
----------- ------------ -----------
Excess of purchase price over historical
book value of net assets acquired $10,908,805 $ 6,296,500 $17,205,305
=========== ============ ===========
The excess purchase price was allocated as follows:
Property, plant and equipment $ (2,689) $ (308,991) $ (311,680)
In-process research and development 4,464,007 2,702,234 7,166,241
Other intangible assets 942,230 570,387 1,512,617
Excess of cost over fair value of
net assets acquired 5,505,257 3,332,870 8,838,127
----------- ------------ -----------
$10,908,805 $ 6,296,500 $17,205,305
=========== ============ ===========
</TABLE>
The intangible assets are amortized on a straight-line basis over their
estimated life of 10 years. The allocation of excess purchase price to
in-process research and development represents the independent assessment of the
fair value of a number of research and development projects whose technological
feasibility has not yet been established. These research and development
projects have no alternative future use and, therefore, have been charged to
expense as of the date of consummation of the transactions.
<PAGE>
34
Pursuant to the Merger Agreement, each outstanding share of Brunswick's common
stock was exchanged for 2.1 shares of STI's common stock and STI's common stock
remained outstanding and unchanged. Each of Brunswick's outstanding shares of
preferred stock was converted into 2.1 shares of STI's common stock and the
preferred shareholders received a warrant to purchase 0.4 of a share of STI's
common stock at an exercise price of $11.00 per share for each preferred share
owned, exercisable for a period of five years following the merger. In addition,
STI assumed Brunswick's obligations under outstanding option and warrant
agreements.
Prior to the merger, there were 3,091,700 shares of STI common stock issued and
outstanding. In connection with the merger, STI issued 1,708,928 shares of
common stock in exchange for all of the outstanding common and preferred stock
of Brunswick. In addition, each of the 1,888,126 shares of STI common stock
previously owned by Brunswick were retired. Following the merger, the Company
(previously STI) had 2,912,502 shares outstanding.
Upon completion of the merger, the Company assumed Brunswick's indebtedness
under a senior bridge loan of $11 million, a subordinated promissory note
("Note") of $4.7 million, and a subordinated loan ("Subordinated Loan") of $1
million. Upon completion of the merger the senior bridge loan converted into a
$10 million Term Loan ("Term Loan") and $1 million of the outstanding principal
amount was repaid. In addition, the lenders of the senior bridge loan made
available to the Company a $5 million revolving credit loan, a portion of which
was used to discharge the Company's existing debt under its previous line of
credit. (See Note 6).
A total of $2,446,332 in transaction expenses were incurred by Brunswick and STI
to complete the merger. Of these costs, $1,200,000 was included as transaction
expenses in the determination of the purchase price. The remaining costs,
amounting to $1,246,332 and consisting primarily of costs incurred by STI, were
expensed during fiscal 1997.
The following unaudited pro forma information adjusts the operating results as
shown in the consolidated financial statements of operations to give the effect
to the merger as if the transaction had occurred at the beginning of each of the
years presented. The unaudited information below is not necessarily indicative
of the results which would have occurred had the companies been actually merged
during the periods presented.
Year ended Year ended
July 31, 1997 June 30, 1996
------------- -------------
Net Sales $40,665,000 $35,015,000
Pro forma net loss (5,978,900) (6,900,600)
Pro forma loss per share (2.05) (2.37)
<PAGE>
35
6. Debt
Line of Credit
Prior to the merger, STI had a revolving credit agreement with Merrill Lynch
Business Financial Services, Inc. ("MLBFS") for a maximum commitment of $5
million. Upon completion of the merger (see Note 5), the Company terminated the
agreement with MLBFS and entered into a credit agreement with International
Nederlanden (U.S.) Capital Corporation ("ING") for a new $5 million line of
credit and a $10 million long- term loan. The Company increased its available
line of credit with ING, subject to certain limitations, to $6.5 million as of
September 2, 1997.
An additional line of credit exists for the operation in N. Ireland. The line of
credit is for 145,000 pounds and is secured by an irrevocable standby Letter of
Credit. The line of credit matures annually each December and bears interest at
the banks published rate approximately 8% at July 31, 1997.
The MLBFS line of credit had an interest rate equal to the 30 day commercial
paper rate plus 265 basis points (8.04% at July 31, 1996). The MLBFS line of
credit was secured by substantially all of STI's assets and general intangibles.
The ING line of credit accrues interest at either the greater of the Prime Rate
plus 1.25% (9.75% at July 31, 1997) or the federal funds rate plus 1.75%; or the
eurodollar loan rate plus 3.25%. The ING line is secured by certain accounts
receivable and inventory. The outstanding borrowings on the Company's lines of
credit were $4.1 million at both July 31, 1997 and June 30,1996. The Company
pays a commitment fee to ING of .0025% per month on the average unused portion
of the line of credit.
Long-Term Debt (ING)
In April 1996, in order to finance a portion of the acquisition of STI,
Brunswick entered into a credit agreement with ING for a $11 million bridge
loan, of which $1 million was held in escrow. Upon completion of the merger (See
Note 5), the Company assumed Brunswick's obligation, repaid the $1 million held
in escrow and converted the remaining balance into a $10 million term loan. The
term loan accrues interest at either the Eurodollar loan rate plus 3.5%; or the
greater of the prime rate plus 1.5% or the federal funds rate plus 2.00%, (10.0%
at July 31, 1997) with quarterly principal payments of $250,000 beginning in
June 1997 increasing to $500,000 in December 1997 and maturing on October 31,
2001. The outstanding balance on the term debt was $9,750,000 at July 31, 1997.
Warrants were issued to ING in the financing described above. The Company
allocated $2,072,900 of the note proceeds to the warrants based on the relative
fair value of the warrants and the note at the agreement date. Accordingly, the
note is carried at a discount from its maturity value. The Company is amortizing
the discount over the term of the debt using the effective interest rate method.
This resulted in a charge against operations of $458,900 in fiscal 1997. Any
extinguishment of this debt will result in a charge against earnings for the
unamortized amount remaining when extinguishment occurs. The Company is required
to maintain certain financial covenants and is restricted from paying cash
dividends.
<PAGE>
36
Subordinated Promissory Note Payable to Sarnoff Estate
In April 1996, in order to finance the initial phase of the STI acquisition,
Brunswick signed a $4.7 million promissory note to the founder's estate. The
promissory note matures on the fifth anniversary of the merger with STI
(November 2001). The loan is unsecured and has an interest rate of 12% through
April 1998 and 13% thereafter. Prior to April 1998, accrued interest on the note
will be added to the principal balance, and as of April 1998, interest will be
payable monthly. Accrued interest added to principal as of July 31, 1997 and
June 30, 1996 was $809,600 and $169,100, respectively, resulting in an
outstanding balance as of July 31, 1997 and June 30, 1996 of $5,509,600 and
$4,869,100, respectively.
EM Industries, Inc. Subordinated Loan
In April 1996, in order to finance a portion of the STI acquisition, Brunswick
obtained a $1 million loan from EM Industries, Inc. The loan matures in November
2001. Seven consecutive quarterly installment payments of $125,000 commence
April 1999 and the remaining loan balance is due upon maturity. The loan is
unsecured and has an interest rate of 12% through April 1998 and 13% thereafter.
Accrued interest is to be added to the principal through April 1998 and is to be
paid monthly thereafter. The balance at July 31, 1997 and June 30, 1996 was
$1,167,400 and $1,025,500, respectively.
Other Long-Term Debt
In April 1991, STI borrowed $5.4 million from Syntex Laboratories, Inc.
("Syntex"). Principal repayments commenced August 1, 1991 through credits
against amounts invoiced to Syntex for products delivered under a Manufacturing
and Packaging Agreement between the parties. Outstanding principal as of July
31, 1997 and June 30, 1996 was $0 and, $588,400, respectively.
In May 1995, the Company entered into a loan agreement with the CIT
Group/Equipment Financing, Inc. ("CIT") to assist in financing the Company's
capital investment programs. This arrangement consists of a series of loans for
the acquisition of production molds, high-speed component preparation and
filling equipment and facility renovations. Loan principal outstanding was $1.1
million and $1.2 million as of July 31, 1997 and June 30, 1996, respectively.
The interest rate in both years was approximately 8.8%. Repayment of each loan
is due in sixty (60) equal monthly installments. The agreement with CIT is
collateralized by the asset financed with the loan.
In January 1996, the Company received a non-interest bearing loan in the amount
of $375,000 from Center Laboratories, Inc. -- Center, now Dey Laboratories,
(Dey) STI's exclusive distributor for the EpiPen(R) and EpiE-ZPen(TM). The
proceeds from this loan assisted the Company in purchasing high-speed filling
and automated packaging equipment which will reduce the cost of manufacturing
the EpiE-Zpen(TM). Repayment of this loan commenced during the first quarter of
fiscal 1997 with an agreed upon credit per unit of product shipments to Dey. The
Company anticipates loan repayment to be completed by fiscal 1999. The balance
at July 31, 1997 and June 30, 1996 was $281,200 and $375,000, respectively.
<PAGE>
37
Maturities of all long term-debt are as follows:
1998 - $2,299,400
1999 - 2,845,300
2000 - 3,132,300
2001 - 8,808,000
2002 - 750,000
Thereafter - 0
----------
Sub-total $17,835,000
Discount on term loans (1,614,000)
----------
Total debt per balance sheet $16,221,000
===========
Interest paid for the year ended July 31, 1997 and the month ended July 31, 1996
was $2,466,700 and $26,100.
7. Shareholders Equity
Common Stock
The average number of common shares outstanding for the year ended July 31, 1997
reflects the weighted average of Brunswick shares through the merger date and
the Company's shares thereafter. The number of Brunswick common shares
outstanding as of June 30, 1996 was 68,417. The number of the Company's weighted
average shares outstanding for year ended July 31, 1997 was 2,040,000.
Stock Options
In November 1993, Brunswick adopted the 1993 Stock Option Plan ("the 1993
Plan"). As of June 30, 1996, 124,720 Brunswick options were outstanding. At the
merger date, the Company assumed Brunswick's obligations with respect to such
options, and all Brunswick options were converted to stock options of the
Company at a rate of 2.1 to 1 resulting in 258,100 options.
Pursuant to the merger, the Company assumed STI's 293,800 outstanding options.
The Company has adopted two Stock Option Plans ("the Plans") which reserve
500,000 shares for granting of options through 2001 and 500,000 shares, subject
to shareholder approval, for granting of options through 2007. The Plans provide
for issuance of non-qualified stock options, incentive stock options, stock
appreciation rights, incentive shares and restricted stock.
Options granted to employees, officers and directors pursuant the Company's
stock option plans generally have been exercisable in varying amounts in
cumulative annual installments up to ten years from the date of grant. The
exercise price on all options granted during year ended July 31, 1997 was
equivalent to the market value of the Company's stock on the date of grant.
<PAGE>
38
In October 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based
Compensation," which recommends a fair value based methodology of accounting for
all stock option plans. Under SFAS No. 123, companies may account for stock
options under Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees" (APB 25) and related Interpretations and provide pro forma
disclosure of net income, as if the fair value based method of accounting
defined in SFAS No. 123 had been applied. The Company has elected to follow APB
25 and related Interpretations in accounting for its employee stock options and
provide pro forma fair value disclosure under SFAS 123. The Company recognized
$36,000, $73,400 and $59,400 of expense in fiscal 1997, 1996 and 1995,
respectively, as a result of options issued in prior years with exercise prices
less than fair market value at the date of grant.
For SFAS 123, the fair value of options was estimated at the date of grant using
a Black-Scholes option pricing model with the following weighted-average
assumptions for 1997: Risk-free interest rate of 6.5%; no dividends; a
volatility factor of the expected market price of the Company's common stock of
.53 and a weighted-average expected life of the options of approximately 4
years. Options assumed in the merger have been included in the fair value
estimates assuming the original grant date and adjusted exercise price.
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
For the purpose of pro forma disclosures, the estimated fair value of the stock
options is amortized to expense over the options' vesting periods. The Company's
pro forma net loss and net loss per share calculated using the provisions of FAS
123 were as follows:
Year ended
July 31, 1997
-------------
Net (loss) $(4,404,600)
Pro Forma FAS 123 expense (153,400)
-----------
Pro forma net (loss) income $(4,558,000)
===========
Weighted average shares
outstanding 2,040,000
Pro forma net loss per share ($2.23)
===========
<PAGE>
39
The following table summarizes stock options activity for the year ended July
31, 1997. Amounts presented reflect the combined option plans of Brunswick and
STI with the adjustments as necessary to reflect the exchange ratio in
connection with the November 1996 merger of Brunswick and STI.
Year ended
Number of Shares 1997
- ---------------- ----
Options outstanding
at beginning of year 551,900
Granted during the year 57,600
Exercised during the year (8,800)
Expired or terminated (47,400)
-------
Options outstanding at
end of year 553,300
At July 31, 1997 the price range of options outstanding are as follows:
Less than $1.00 148,512
$1.00-$5.00 111,000
$5.00-9.00 120,475
$9.00 + 173,313
-------
553,300
Options exercisable at July 31, 1997 were 380,200. The average contractual life
of the Company's options is approximately 6 years.
The weighted average fair value of options granted during 1997 was $5.85.
Common Stock Warrants
Outstanding warrants to acquire the Company's common stock as of July 31, 1997
are as follows:
Number of
Exercise Price Shares
- -------------- ---------
Less than $1.00 153,655
At $11.00 534,635
At $27.55 76,226
-------
764,516
=======
The warrants outstanding begin to expire in 2000 with the majority expiring in
2001.
<PAGE>
40
Convertible Redeemable Preferred Stock
In April 1996, Brunswick issued 208,710 shares of Series F preferred stock for
$27.55 per share, resulting in net proceeds of $5,568,950. In connection with
the series F preferred stock financing, all shares of Series D and E preferred
stock automatically converted into an equal number of shares of Series F
preferred stock.
In March 1996, Brunswick issued 45,695 shares of Series D preferred stock and
24,319 shares of Series E preferred stock for $27.55 per share, resulting in net
proceeds of $1,239,059 and $659,492, respectively.
In November 1993, Brunswick issued 374,462 shares of Series C preferred stock in
exchange for cash and the conversion of certain notes payable.
In connection with the merger of Brunswick and STI in November 1996, each share
of preferred stock was converted into shares of the Company's common stock(See
Note 5).
8. Income Taxes
As a result of net operating losses incurred by Brunswick in fiscal 1995, there
was no provision for income taxes. In fiscal 1996, a provision for income taxes
of $26,900 was recorded to provide for the earnings of STI subsequent to the
acquisition of 61% of STI's common stock by Brunswick.
The provision for federal and state income taxes consist of the following:
Year ended Month ended
July 31, July 31,
1997 1996
---------- -----------
Current:
Federal $482,400 $374,800
State 71,000 65,000
Other 22,000 -
NOL utilization (225,000) -
--------- --------
350,400 $439,800
Deferred:
Federal (259,000) -
State (35,000) -
Other (11,000) -
-------- --------
(305,000) -
--------- --------
$ 45,400 $439,800
======== ========
<PAGE>
41
The following is a reconciliation of the provision for income taxes to provision
calculated at the statutory rate:
<TABLE>
<CAPTION>
Year ended Month ended
July 31, 1997 July 31, 1996
------------- --------------
<S> <C> <C>
Provision for income taxes at federal statutory rate ($1,498,000) $261,000
State taxes, net of federal income tax benefit (265,000) 46,000
Write off non-deductible in process R&D 1,024,607 -
Taxable income provided by STI not
available for Brunswick NOL's - 195,000
Non deductible merger costs 473,606 -
Non-deductible amortization costs 345,787 93,000
Other (35,600) (155,200)
----------- --------
$ 45,400 $439,800
=========== ========
</TABLE>
The Company paid income taxes of $551,900, $0, $0 and $0 for the year ended July
31, 1997, month ended July 31, 1996 and years ended June 30, 1996 and 1995,
respectively.
The Company provides deferred income taxes for temporary differences between the
book basis of assets and liabilities for financial purposes and the book basis
assets and liabilities for tax return purposes. Deferred tax assets and
liabilities were as follows at July 31, 1997 and June 30, 1996:
July 31, June 30,
1997 1996
---- ----
Net operating loss and tax
credits carryforward $ 2,123,000 $ 2,378,000
Inventory valuation 90,600 255,600
Uniform inventory capitalization 373,400 322,300
Postretirement benefits 241,300 173,700
Deferred lease income - 64,200
Vacation expense 57,900 57,900
Restructuring charge 47,800 247,200
Product exchange reserve 594,900 -
Other 252,700 418,600
Valuation allowance (2,123,000) (2,700,000)
----------- -----------
Deferred tax asset $ 1,658,600 $ 1,217,500
=========== ===========
Depreciation $(1,601,900) $(1,492,700)
Patent costs (135,500) (112,800)
Other (3,700) -
----------- -----------
Deferred tax liability $(1,741,100) $(1,605,500)
At July 31, 1997, the Company has net operating losses (NOLs) available for
future use of approximately $6 million. These NOL's begin to expire in 2005.
<PAGE>
42
9. Employee Retirement Plans
Pension and Savings Plans
The Company maintains a profit sharing thrift plan covering all full-time
employees not covered by a collective bargaining agreement. Annual contributions
under the plan may be made up to 6.6% of the base annual salary of all plan
participants. Plan benefit allocations are based on the participants' annual
compensation. The Company made no contributions in fiscal 1996 or 1997. As part
of this profit sharing thrift plan, eligible employees may elect to contribute
up to 12% of their base salary to the plan. The Company matches a portion of the
employee contributions which amounted $35,800 in fiscal 1996 and $152,000 in
fiscal 1997.
The Company also made payments to a pension plan for its full-time employees in
St. Louis, Missouri covered by a collective bargaining agreement. Contributions
to this plan resulted in expense of $16,400 (after the initial purchase of STI
common stock) in fiscal 1996 and $92,000 in fiscal 1997.
Other Postretirement Benefits
The Company sponsors a postretirement benefit plan (the "Plan") to provide
certain medical and life insurance benefits to retirees, their spouses and
dependents. Employees who terminated from active service after March 1992 and
are at least 60 years of age, but no more than age 65, with 20 years service,
are eligible for medical coverage. Employees who terminated from active service
prior to April 1, 1992 and were at least 55 years of age, but no more than age
65, with 10 years service, are eligible for medical and life insurance coverage.
The Plan is contributory for medical benefits based on the retiree's years of
service and is noncontributory for life insurance benefits. The Company funds
its obligations under the Plan as incurred.
The following table sets forth the Plan's funded status:
1997 1996
---- ----
Accumulated postretirement benefit obligation:
Retirees $448,000 $ 877,000
Fully eligible and other Plan participants 380,000 502,000
-------- ---------
828,000 1,379,000
Unrecognized prior service cost (51,000) (60,000)
Unrecognized net gain (loss) 544,000 (106,000)
Unrecognized transition obligation (718,000) (763,000)
-------- --------
Accrued postretirement benefit cost $603,000 $450,000
======== =========
<PAGE>
43
In fiscal 1997, the Company recognized net periodic postretirement expense of
$153,000 as follows:
1997
----
Service cost-benefits attributed to service
during periods $ 48,000
Interest cost on accumulated postretirement
benefit obligation 112,000
Amortization of prior service 9,000
Amortization of net gain (61,000)
Amortization of transition obligation 45,000
--------
Net periodic postretirement benefit cost $153,000
========
The cost for fiscal 1996 (after the initial purchase of STI common stock) was $
42,700. For measurement purposes, a 9.0% annual rate of increase in cost of
health care was assumed for fiscal 1997; the rate was assumed to decrease
gradually to 5% by 2005 and remain at that level thereafter. The health care
cost trend rate assumption has a significant effect on the amounts reported. To
illustrate, increasing assumed health care cost by 1% in each year would
increase the accumulated postretirement benefit obligation as of July 31, 1997
by $183,000 and the aggregate of the service and interest cost component of net
periodic postretirement benefit cost by $47,000 for the year ended July 31,
1997. The weighted average discount rate used in determining the accumulated
postretirement benefit obligation was 8% for 1997 and 1996.
10. Commitments and Contingencies
Leases
The Company has various commitments under operating leases through 2009 relating
to computer hardware and software, its pharmaceutical manufacturing facility and
warehouses in St. Louis, Missouri, its facility in the United Kingdom and
administrative offices in Columbia, Maryland and St. Louis, Missouri.
Future minimum rentals as of July 31, 1997 under noncancellable leases are as
follows:
Operating Sublease
Year Ending July 31 Leases Revenue
------------------- ------ -------
1998 $1,131,000 $ 330,100
1999 1,064,000 330,100
2000 1,000,000 330,100
2001 860,000 330,100
2002 534,000 165,100
Thereafter 1,426,000 -
---------- ----------
$6,015,000 $1,485,500
========== ==========
The Company incurred rental expense of $825,400 in 1997 and $ 63,600 in July
1996.
<PAGE>
44
Sales/Leaseback of Corporate Headquarters Building
In connection with the December 1988 sale of the Company's former headquarters
building in Bethesda, Maryland, the Company's obligations under the Leasehold
Deed of Trust ("Ground Lease") were assigned to and assumed by the purchaser of
the building. The Company remains contingently liable under the Ground Lease.
The annual commitment under the Ground Lease aggregated $147,000 in 1997
(adjusted for increases in the Consumer Price Index) and extends until the year
2042.
Litigation
Lawsuits and claims are filed from time to time against the Company and its
subsidiaries in the ordinary course of business. Management of the Company,
after reviewing developments to date with legal counsel, is of the opinion that
the outcome of such matters will not have a material adverse effect on the
Company's consolidated financial position or results of operations.
Government Contract Revenue
The Company's supply contracts with the Department of Defense ("DoD) are subject
to post-award audit and potential price redetermination. In the opinion of
management, adjustments, if any, on completed contracts would not have a
material adverse effect on the Company's consolidated financial position or
results of operations.
Employee Contracts
The Company entered into agreements with certain key employees which provide for
certain benefits should the employee be terminated within the term of the
agreement for other than specified reasons. The Company also entered into
agreements with certain other key employees which provide for certain benefits
should the employee be terminated within a two year period subsequent to a
change of control (as defined by the agreements) for other than specified
reasons. Benefits to be provided under these agreements include continued life,
disability, accident and health insurance coverage for a period of two years and
a severance payment up to 200% of the employee's annual base compensation.
Additionally, all stock options held by the employee become immediately
exercisable and any restrictions on transfer of the Company's stock held by the
employee shall lapse. These arrangements renew for one-year periods unless
timely notice of non-renewal is given. The maximum contingent liability under
these agreements at July 31, 1997 aggregates $1.1 million.
11. Industry Segment Information
The Company operates in one industry segment which includes the design,
development, manufacture and sale of medical products and related services, with
a major focus on safe and convenient participation by the patient in injection
therapy and in Cardiopulmonary Analysis Systems. The Cardiopulmonary business
unit operates in N. Ireland with most of its revenue generated overseas.
<PAGE>
45
12. Significant Customers
Financial information relating to major customers and export sales follows:
1997 1996 1995
---- ---- ----
Sales to major U.S. customers
U.S. Department of Defense $13,115,800 $2,535,700 $ -
Dey Laboratories, Inc. 15,027,900 2,515,800 -
Other 5,051,100 4,556,900 2,903,500
----------- ---------- ----------
Total $33,194,800 $9,608,400 $2,903,500
Export Sales:
Contract sales to the
Governments of foreign countries 4,709,400 680,600 -
Other 2,760,500 86,300 -
----------- ---------- ----------
Total export sales 7,469,900 766,900 -
----------- ---------- ----------
Total net sales $40,664,700 10,375,300 $2,903,500
=========== ========== ==========
The Company extends credit to domestic customers and generally requires a letter
of credit for export sales.
At July 31, 1997 the Company had 68% of its accounts receivable from two
customers, Dey and the U.S. government. Dey's parent is a shareholder of the
Company.
13. Subsequent Events
On October 8, 1997, the Company announced a product exchange program for all of
its EpiEZPen(R) product sold since March 1996 (approximately 500,000 units).
This exchange program was initiated after a minimal amount of units (less than
10 units) were returned for premature activation in the package. The estimated
cost of the exchange program is $1.5 million and is included in fiscal 1997
results of operations. Management has performed an analysis of potential costs
of the exchange program and made their best estimate regarding these costs.
Actual costs could differ materially from management's estimates. The Company
has not included any anticipated cost sharing of this exchange with potentially
responsible parties as the benefit and probability of such an arrangement are
not determinable at this time. The Company believes the exchange will be
substantially complete by the end of fiscal 1998.
<PAGE>
14. Quarterly Operating Results (unaudited)
(in Thousands, except per share data)
Quarter Ended
--------------------------------------
Fiscal year 1997 Oct 31 Jan 31 Apr 30 July 31
- ----------------------- --------------------------------------
Net sales $10,197 $ 8,787 $10,680 $11,001
Cost of sales 6,416 5,552 6,875 6,778
--------------------------------------
Gross profit 3,781 3,235 3,805 4,223
Operating expenses 3,289 6,638 2,843 3,973
--------------------------------------
Operating Income 492 (3,403) 962 250
Other (expense) income, net (400) (1,082) (373) (540)
--------------------------------------
Income (loss) before income tax 92 (4,485) 589 (290)
Provision for income tax 415 (48) -- (321)
Minority interest 256 9 -- --
--------------------------------------
Net (loss) $ (579) (4,446) 589 $ 31
======================================
Net (loss) per share $ (8.51) (2.24) 0.2 $ 0.01
======================================
Fiscal year 1996 Sep 30 Dec 31 Mar 30 Jun 30
- ----------------------- --------------------------------------
Net sales $ 819 $ 664 $ 1,422 $ 7,470
Cost of sales 439 360 875 5,281
--------------------------------------
Gross profit 380 304 547 2,189
Operating expenses 657 737 607 7,631
--------------------------------------
Operating Income (277) (433) (60) (5,442)
Other (expense) income, net (56) (49) (49) (385)
-------------------------------------
Income (loss) before income tax (333) (482) (109) (5,827)
Provision for income tax -- -- -- 27
Minority interest -- -- -- 17
-------------------------------------
Net income (loss) $ (333) $ (482) $ (109) $(5,871)
=====================================
Net (loss) per share $ (4.90) $ (7.09) $ (1.60) $(86.34)
=====================================
During the quarters ended June 30, 1996 and January 31, 1997, the Company
recorded nonrecurring charges of $4.5 million and $3.9 million , respectively,
for the write off of in-process R&D and merger transaction costs related to the
acquisition of 61% of STI's common stock and subsequent merger of Brunswick and
STI.
During the quarter ended July 31, 1997, the Company recorded a charge of $1.5
million for the estimated cost of a product exchange program related to the
Company's EpiEZPen product. The Company's results from April 15, 1996 reflect
the inclusion of STI in the consolidated operating results. Shares used in net
income (loss) per share calculations are based on the outstanding shares of
Brunswick and STI on November 20, 1996. Subsequent to the merger of Brunswick
and STI on November 20, 1996, per share calculations are based on the
outstanding shares of the Company.
During the quarter ended January 31, 1997, the Company recorded an adjustment to
interest expense (included in other (expense) income net) to provide for the
cumulative amortization of debt discount related to debt incurred by Brunswick
in April 1996.
<PAGE>
46
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors and Shareholders
Meridian Medical Technologies, Inc.
We have audited the accompanying consolidated balance sheet of Meridian Medical
Technologies, Inc. and subsidiaries as of July 31, 1997 and the related
consolidated statements of operations, stockholders' equity, and cash flows for
the year ended July 31, 1997 and the month ended July 31, 1996. Our audits also
included the financial statement schedule listed in the Index at Item 14(a).
These financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule 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 statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Meridian Medical
Technologies, Inc. and subsidiaries at July 31, 1997, and the results of their
operations and their cash flows for the year ended July 31, 1997 and the month
ended July 31, 1996, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
/s/ Ernst & Young LLP
Washington DC
September 4, 1997, except for Note 13, as to which the date is October 21, 1997
<PAGE>
47
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Stockholders of Brunswick Biomedical Corporation
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, of stockholders' equity and of cash flows
present fairly, in all material respects, the financial position of Brunswick
Biomedical Corporation and its subsidiaries at June 30, 1996 and the results of
their operations and their cash flows for the year in conformity with generally
accepted accounting principles. 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 audit. We conducted our audit
of these statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above. The financial statements of
the Company for the years ended June 30, 1995 and 1994 were audited by other
independent accountants whose report dated August 24, 1995 expressed an
unqualified opinion on those statements.
PRICE WATERHOUSE LLP
Washington, DC
October 29, 1997
<PAGE>
48
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors of
Brunswick Biomedical Corporation:
We have audited the consolidated statements of operations, stockholders' equity
(deficit) and cash flows of Brunswick Biomedical Corporation (a Massachusetts
Corporation) and subsidiaries for the year ended June 30, 1995. 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 did not audit the financial statements of Brunswick Biomedical
Limited, a subsidiary, which reflect total assets and total revenues of 11% and
3% in 1995 of the consolidated totals. Those statements were audited by other
audits whose reports has been furnished to us, and our opinion, insofar as it
relates to the amounts included for Brunswick Biomedical Limited, is based
solely on the report of the other auditors.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audits to obtain reasonable
assurance about whether statements of operations, stockholders' equity (deficit)
and cash flows are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
statements of operations, stockholders' equity (deficit) and cash flows. 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 and the report of other
auditors provide a reasonable basis for our opinion.
In our opinion, based on our audit and the report of other auditors, the
statements of operations, stockholders' equity (deficit) and cash flows referred
to above present fairly, in all material respects, the results of operations,
cash flows and changes in stockholders' equity (deficit) of Brunswick Biomedical
Corporation and subsidiaries for the year ended June 30, 1995, in conformity
with generally accepted accounting principles.
/s/ ARTHUR ANDERSEN LLP
Boston, Massachusetts
August 24, 1995
<PAGE>
49
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEMS 10. through 13.
Information required by Part III (Items 10 through 13) of this form 10-K is
incorporated by reference to the Company's definitive Proxy Statement for the
Annual Meeting of Shareholders for the fiscal year ended July 31, 1997, which
will be filed with the Securities and Exchange Commission not later than 120
days after the end of the fiscal year to which this report relates.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS FORM 8-K
(a) The following documents are included under Item 8 in this report:
1. Financial Statements:
Consolidated Balance Sheets at July 31, 1997 and June 30, 1996
Consolidated Statements of Operations for the year ended July
31, 1997, month ended July 31, 1996, and years ended June 30,
1996 and June 30,1995.
Consolidated Statements of Shareholders Equity for the year
ended July 31, 1997, month ended July 31, 1996 and years ended
June 30, 1996 and June 30, 1995.
Consolidated Statements of Cash Flows for the year ended July
31, 1997, month ended July 31, 1996 and years ended June 30,
1996 and June 30, 1995.
Notes to Consolidated Financial Statements
Reports of Independent Accountants
The above-listed financial statements are included in Item 8 to this
Form 10-K.
2. Financial Statement Schedule:
The following financial statement schedule immediately follow the
signatures to this report:
Schedule II -- Valuation and Qualifying Accounts and Reserves
All other schedules are omitted because they are immaterial, not
applicable or the required information is shown in the consolidated
financial statements or the notes thereto.
<PAGE>
50
3. Exhibits:
Exhibit No. Description of Exhibit
- ----------- ----------------------
(2.1) Agreement and Plan of Merger dated September 11, 1996 (incorporated
by reference herein from Exhibit 6(a) to Amendment No. 1 to Schedule
13D filed by Brunswick dated September 13, 1996).
(2.2) Agreement and Plan of Merger dated September 11, 1996 between
Survival Technology, Inc. and Brunswick Biomedical Corporation.
Incorporated by reference to Exhibit 6(a) to amendment No. 1 to
Schedule 13D filed by Brunswick Biomedical Corporation dated
September 13, 1996.
(3.1) The Company's Bylaws (As Amended). Filed herewith.
(3.2) First Amended and Restated Certificate of Incorporation and
certification of the amendment of first amended and restated
Certificate of Incorporation. Filed herewith.
(3.3) Amendment to First Amended and Restated Certificate of Incorporation,
dated November 20, 1996. Incorporated by Reference 8K filed by
Meridian on December 5, 1996.
(4.1) Form of warrant to be issued by the Registrant to former holders of
Brunswick preferred stock. Incorporated by reference herein from
Exhibit 4.1 to Form 8-K filed by the Registrant dated December 5,
1996.
(4.2) Forms of warrants assumed and to be issued by the Registrant in
connection with the merger with Brunswick. Incorporated by reference
herein from Exhibit 4.1 to Form 8-K filed by the Registrant dated
December 5, 1996.
(4.3) Form of warrant issued to the Estate of Stanley J. Sarnoff, assumed
by the Registrant. Incorporated by reference herein from Exhibit 4b
to Schedule 13D filed by Brunswick dated April 15, 1996.
(10.1) Indenture of Lease, dated January 1, 1982, between Survival
Technology, Inc. and Abraham M. Morrison, Incorporated by reference
to Exhibit (10.1) to the Company's Annual Report on Form 10-K for the
year ended July 31, 1988 (File No. 0-5958).
(10.4) Survival Technology, Inc., 1982 Stock Option Plan. Incorporated by
reference to Exhibit (4.4) to Registration Statement No. 2-80908 on
Form S-8.*
(10.5) Survival Technology, Inc. 1986 Stock Option Plan (As Amended).
Incorporated by reference to Exhibit (4.2) to Registration Statement
No. 33-46981 on Form S-8.*
(10.6) Contract SP0200-96-D-001 dated October 27, 1995 between the U.S.
Government (Defense Personnel Support Center) and the Company.
Incorporated by reference to Exhibit (10.6) to the Company's Annual
Report on Form 10-K for the year ended July 31, 1996 (File No.
0-5958).
(10.6.1) Contract SP0200-96-D-0001 modification No. 8004 dated October 15,
1996 between the U.S. Government (Defense Personnel Support Center)
and the Company. Incorporated by reference to Exhibit (10.6) to the
Company's Annual Report on Form 10-K for the year ended July 31, 1996
(File No. 0-5958).
<PAGE>
51
(10.7) Agreement dated as of January 1, 1987 between Center Laboratories, a
division of EM Industries, Inc. and the Company. Incorporated by
reference to Exhibit (10.11) to the Company's Annual Report on Form
10-K for the year ended July 31, 1988 (File No. 0-5958).
(10.7.1) Letter Agreement dated as of January 31, 1990 between Center
Laboratories, a division of EM Industries, Inc. and the
Company. Incorporated by reference to Exhibit (10.10.1) to the
Company's Annual Report on Form 10-K for the year ended July
31, 1990.
(10.8) Agreement dated June 23, 1981 between Survival Technology, Inc, and
American Home Products Corporation. Incorporated by reference to
Exhibit (10.12) to the Company's Annual Report on Form 10-K for the
year ended July 31, 1988 (File No. 0-5958).
(10.8.1) License Agreement dated April 20, 1982 between Survival Technology,
Inc. and American Home Products Corporation. Incorporated by
reference to Exhibit (10.12.1) to the Company's Annual Report on Form
10-K for the year ended July 31, 1988 (File No. 0-5958).
(10.8.2) Supply Agreement dated August 3, 1993 between Survival Technology,
Inc. and Wyeth-Ayerst Laboratories (A Division of American Home
Products Corporation). Incorporated by reference to Exhibit (10.7.2)
to the Company's Annual Report on Form 10-K for the year ended July
31, 1993 (File No. 0-5948).
(10.9) Loan Agreement dated April 16, 1991 between Syntex Laboratories, Inc.
and the Company. Incorporated by reference to Exhibit (10.11.1) to
the Company's Current Report on Form 8-K dated April 16, 1991 (File
No. 0-5958).
(10.9.1) Agreement dated November 25, 1993 between Survival Technology, Inc.
and Syntex Laboratories, Inc. with respect to the termination of the
March 1, 1989 Manufacturing and Packaging Agreement. Incorporated by
reference to Exhibit (10.9.2) to the Company's Annual Report on Form
10-K for the year ended July 31, 1993.
(10.10) Development, Manufacturing and Supply Agreement between Mylan
Laboratories, Inc. and Survival Technology, Inc. dated August 31,
1993. Incorporated by reference to Exhibit (10.11) to the Company's
Annual Report on Form 10-K for the year ended July 31, 1993 (File No.
0-5958).
(10.10.1) Development, Manufacturing and Supply Amendment Agreement dated July
28, 1994 between Mylan Laboratories, Inc. and Survival Technology,
Inc. Incorporated by reference to Exhibit (10.12.1) to the Company's
Annual Report on Form 10-K for the year ended July 31, 1994.
(10.11) Lease Agreement dated August 26, 1991 between Pru Beta 2 and the
Company. Incorporated by reference to Exhibit (10.12) the Company's
Annual Report on Form 10-K for the year ended July 31, 1991 (File No.
0-5958).
<PAGE>
52
(10.12.3) Change in Control Agreement dated January 10, 1996 between Mark D.
Ruby and the Company. Incorporated by reference to Exhibit (10.12.3)
to the Company's Annual Report on Form 10-K for the year ended July
31, 1996 (File No. 0-5958).
(10.13) Commitment letter dated May 4, 1995 between the CIT Group/Equipment,
Financing Inc., and the Company. Incorporated by reference to Exhibit
(10.15) to the Company's Annual Report on Form 10-K for the year
ended July 31, 1995 (File No. 0-5958).
(10.14) Letter dated March 15, 1996 from Brunswick Biomedical Corporation.
Incorporated by reference to Exhibit (10) to Form 8-K dated March 19,
1996.
(10.15) Credit Agreement, dated as of April 15, 1996, among Brunswick, as the
Borrower, Various Lenders and Internationale Nederlanden (U.S.)
Capital Corporation as the Agent for the Lenders (incorporated by
reference herein Exhibit 1 to Schedule 13D filed by ING (U.S.)
Investment Corporation dated December 2, 1996).
(10.16) Warrant Purchase Agreement, dated as of April 15, 1996, between
Brunswick and Internationale Nederlanden (U.S.) Capital Corporation
(incorporated by reference herein from Exhibit 2 to Schedule 13D
filed by ING (U.S.) Investment Corporation dated December 2, 1996)
(10.17) Registration Rights Agreement, dated as of April 15, 1996, between
Brunswick and Internationale Nederlanden (U.S.) Capital Corporation
(incorporation by reference herein from Exhibit 3 to Schedule 13D
filed by ING (U.S.) Investment Corporation dated December 2, 1996).
(10.18) First Amendment to Credit Agreement, dated as October 25, 1996,
between Brunswick and Internationale Nederlanden (U.S.) Capital
Corporation (incorporation by reference herein from Exhibit 4 to
Schedule 13D filed by ING (U.S.) Investment Corporation dated
December 2, 1996).
(10.18.1) Second Amendment to Credit Agreement, date September 2, 1997 between
Meridian Medical Technologies, Inc. and Internationale Nederlanden
(U.S.) Capital Corporation (filed herewith).
(10.19) First Amendment to warrant Purchase Agreement, dated as of October
25, 1996, between Brunswick and Internationale Nederlanden (U.S.)
Capital Corporation (incorporated by reference herein from Exhibit 5
to Schedule 13D filed by ING (U.S.) Investment Corporation dated
December 2, 1996).
(10.20) Assumption Agreement to the Credit Agreement, dated as of November
20, 1996, between Meridian Medical Technologies, Inc. and
Internationale Nederlanden (U.S.) Capital Corporation (incorporated
by reference herein from Exhibit 6 to Schedule 13D filed by ING
(U.S.) Investment Corporation dated December 2, 1996).
(10.21) Assumption Agreement to the Warrant Purchase Agreement, dated as of
November 20, 1996, between Meridian Medical Technologies, Inc. and
Internationale Nederlanden (U.S.) Capital Corporation (incorporated
by reference herein from Exhibit 7 to Schedule 13D filed by ING
(U.S.) Investment Corporation dated December 2, 1996).
(10.22) $10,000,000 Term Note of Meridian Medical Technologies, Inc. dated
November 20, 1996 (incorporated by reference herein from Exhibit 9 to
Schedule 13D filed by ING (U.S.) Investment Corporation dated
December 2, 1996).
<PAGE>
53
(10.23) $15,000,000 Revolving Note of Meridian Medical Technologies, Inc.
dated November 20, 1996 (incorporated by reference herein from
Exhibit 10 to Schedule 13D filed by ING (U.S.) Investment Corporation
dated December 2, 1996).
(10.24) Warrant Certificate for 90,912 Warrants of Meridian Medical
Technologies, Inc. Certificate No. 1 (incorporated by reference
herein from Exhibit 10 to Schedule 13D filed by ING (U.S.) Investment
Corporation dated December 2, 1996).
(10.25) Warrant Certificate for 83,579 Warrants of Meridian Medical
Technologies, Inc. -- Certificate No. 1 (incorporated by reference
herein from Exhibit 11 to Schedule 13D filed by ING (U.S.) Investment
Corporation dated December 2, 1996).
(10.26) Employment agreement with James H. Miller, dated November 20, 1996.
Incorporated by reference to the Company's Form 10K for the year
ended July 31, 1996 (File No. 0-5958).
(10.27) Form of Registration Rights Agreement with former Brunswick
stockholders (Incorporated by reference to the Company's Form 10K for
the year ended July 31, 1996. (File No. 0-5958).
(22) A list of the Company's subsidiaries is not provided because they,
considered in the aggregate as a single subsidiary, would not
constitute a significant subsidiary as of the end of the year covered
by this report.
(24.1) Consent of Independent Accountant -- Ernst and Young LLP. Filed
herewith.
(24.2) Consent of Independent Accountant -- Price Waterhouse LLP. Filed
herewith
(24.3) Consent of Independent Accountant -- Arthur Anderson LLP. Filed
herewith
________________
*Management contract, compensatory plan or arrangement.
(b) Reports on Form 8-K:
There was no Current Reports on Form 8-K filed by Registrant during
the three months ended July 31, 1996.
<PAGE>
54
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
MERIDIAN MEDICAL TECHNOLOGIES, INC.
(Registrant)
By /S/JAMES H. MILLER
James H. Miller
Chairman of the Board
President & CEO
Dated: October 22, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated:
/s/ JAMES H. MILLER Chairman of the Board October 27, 1997
- ------------------- President and Director
James H. Miller (Principal Executive Officer)
/s/ G. TROY BRASWELL Vice President of Finance October 27, 1997
- -------------------- (Principal Financial and
G. Troy Braswell Accounting Officer)
/s/ MARK D. RUBY Vice President of Marketing October 27, 1997
- ---------------- and Sales
Mark D. Ruby
/s/ BRUCE M. DRESNER Director October 27, 1997
- --------------------
Bruce M. Dresner
/s/ ROBERT G. FOSTER Director October 27, 1997
- --------------------
Robert G. Foster
/s/ DAVID L. LOUGEE Director October 27, 1997
- -------------------
David L. Lougee
/s/ E. ANDREWS GRINSTEAD, III Director October 27, 1997
- -----------------------------
E. Andrews Grinstead, III
<PAGE>
55
MERIDIAN MEDICAL TECHNOLOGIES
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
SCHEDULE II
<TABLE>
<CAPTION>
Additions Additions
Balance at Charged to Charged to Balance
Beginning other Costs and Write-off at End
of Period Accounts(1) Expenses Deductions of Period
--------------------------------------------------------------
For the year ended
June 30, 1995
- -------------------------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts $ 17,000 $ -- $ 49,000 $ -- $ 66,000
Inventory reserves $ -- $ -- $ -- $ -- $ --
Restructuring reserves $ -- $ -- $ -- $ -- $ --
========= ========== ========= ========== ========
For the year ended
June 30, 1996
- -------------------------
Allowance for doubtful accounts $ 66,000 $ 24,500 $ 20,600 $ 66,100 $ 45,000
Inventory reserves $ -- $ 640,400 $ 209,700 $ 556,600 $293,500
Restructuring reserves $ -- $ 481,600 $ 225,800 $ 67,000 $640,400
========= ========== ========= ========== ========
For the one month ended
July 31, 1996
- -------------------------
Allowance for doubtful accounts $ 45,000 $ -- $ -- $ -- $ 45,000
Inventory reserves $ 293,500 $ -- $ -- $ -- $293,500
Restructuring reserves $ 640,400 $ -- $ -- $ -- $640,400
========= =========== ========= ========== ========
For the year ended
July 31, 1997
- -------------------------
Allowance for doubtful accounts $ 45,000 $ -- $ 292,000 $ 89,200 $247,800
Inventory reserves $ 293,500 $ -- $ 695,200 $ 442,400 $546,300
Restructuring reserves $ 640,400 $ -- $ 64,300 $ 580,900 $123,800
========= =========== ========= ========== ========
</TABLE>
(1) Additions resulting from the acquisition of STI by Brunswick
Exhibit 3.1
MERIDIAN MEDICAL TECHOLOGIES, INC.
BY-LAWS
(As of November 20, 1996)
ARTICLE 1.
OFFICES
1.1. The registered office of the Corporation shall be in the City of
Wilmington, County of New Castle, State of Delaware.
1.2. The Corporation may also have offices at such other places both
within and without the State of Delaware as the Board of Directors may from time
to time determine or the business of the Corporation may require.
ARTICLE 2.
MEETINGS OF STOCKHOLDERS
2.1. All meetings of the Stockholders shall be held at such place,
within or without the State of Delaware, as shall be fixed from time to time by
the Board of Directors and stated in the notice of the meeting or in a duly
executed waiver of notice thereof.
2.2. An annual meeting of Stockholders shall be held on the first day
of November, if not a legal holiday, and if a legal holiday then on the next
secular day following, at 10:00 a.m., local time, or at such other date and time
as shall be designated from time to time by the Board of Directors and stated in
the notice of the meeting, at which meeting the Stockholders shall elect a Board
of Directors and transact such other business as may properly be brought before
the meeting.
2.3. Special meetings of the Stockholders for any purpose or purposes
may be called at any time only by the Board of Directors pursuant to a
resolution adopted by a majority of the members of the Board of Directors then
in office. Business transacted at any special meeting of Stockholders, other
than procedural matters and matters relating to the conduct of the meeting,
shall be limited to the purpose or purposes stated in the notice of the meeting
pursuant to Section 2.4 of these By-Laws.
<PAGE>
- 2 -
2.4. Written notice of the annual or any special meeting of the
Stockholders shall be given to each Stockholder entitled to vote at such meeting
not less than ten nor more than sixty days before the date of the meeting
(unless a different time is specified by law). The notice shall state the place,
date and hour of the meeting and, in the case of a special meeting, the purpose
or purposes for which such meeting has been called. If mailed, notice is given
when deposited in the United States mail, postage prepaid, directed to the
Stockholder at his address as it appears on the records of the Corporation. Any
such notice may be waived and shall be deemed waived by any Stockholder who
signs a written waiver of such notice before or after the time stated therein,
or by any Stockholder who attends the meeting unless at the beginning of the
meeting or promptly upon arrival, the Stockholder objects to the holding of the
meeting or the transacting of specified business at the meeting.
2.5. At all meetings of the Stockholders, the holders of stock having a
majority in voting power of the stock issued and outstanding and entitled to
vote thereat, present in person or represented by proxy, shall constitute a
quorum for the transaction of business. If, however, such quorum shall not be
present or represented at any meeting of the Stockholders, the chairman of the
meeting or the holders of stock having a majority of the voting power of the
stock entitled to vote thereat who are present in person or represented by proxy
shall have the power to adjourn the meeting from time to time, without notice
other than announcement at the meeting or as may be required under the Delaware
General Corporation Law, until a quorum shall be present or represented. At such
adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally notified. If after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
Stockholder of record entitled to vote at the meeting.
2.6. When a quorum is present at any meeting, all elections for the
Board of Directors shall be decided by a plurality of the votes cast and all
other questions shall be decided by a majority of the votes cast, except as
otherwise required by statute or as provided for in the Certificate of
Incorporation or
<PAGE>
- 3 -
these By-Laws. Abstentions shall not be considered to be votes cast.
2.7. The officer who has charge of the stock ledger of the Corporation
shall prepare and make, at least ten days before every meeting of Stockholders,
a complete list of the Stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each such Stockholder and the
number of shares registered in the name of each such Stockholder. Such list
shall be open to the examination of any Stockholder, for any purpose germane to
the meeting, during ordinary business hours, for a period of at least ten days
prior to the meeting, either at a place within the city where the meeting is to
be held, which place shall be specified in the notice of the meeting, or, if not
so specified, at the place where the meeting is to be held. The list shall also
be produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any Stockholder who is present.
2.8. Except as provided in the Certificate of Incorporation, any action
required by statute to be taken at any annual or special meeting of Stockholders
of the Corporation, or any action which may be taken at any annual or special
meeting of such Stockholders, may be taken without a meeting, without prior
notice and without a vote, if consents in writing have been signed by the
holders of all of the outstanding stock entitled to vote thereon at a meeting at
which all shares entitled to vote thereon were present and voted.
2.9. Votes by written ballot at any meeting of Stockholders may be
conducted by one or more inspectors, appointed for that purpose, either by the
Board of Directors or by the chairman of the meeting. The inspector or
inspectors may decide upon the qualifications of voters and the validity of
proxies, and may count the votes and declare the result.
STOCKHOLDER PROPOSALS AND NOMINATIONS
2.10. (a) No proposal for a Stockholder vote shall be submitted by a
Stockholder (a "Stockholder Proposal") to the Corporation's Stockholders unless
the Stockholder submitting such proposal (the "Proponent") shall have filed a
written notice setting forth with particularity (i) the names and business
addresses of the Proponent and all Persons (as such term is defined in Section
3(a)(9) of the Securities Exchange Act of
<PAGE>
- 4 -
1934, as amended through the date of adoption of these By-Laws) acting in
concert with the Proponent; (ii) the names and addresses of the Proponent and
the Persons identified in clause (i), as they appear on the Corporation's books
(if they so appear); (iii) the class and number of shares of the Corporation
beneficially owned by the Proponent and the Persons identified in clause (i);
(iv) a description of the Stockholder Proposal containing all material
information relating thereto; and (v) such other information as the Board of
Directors reasonably determines is necessary or appropriate to enable the Board
of Directors and Stockholders of the Corporation to consider the Stockholder
Proposal. Upon receipt of the Stockholder Proposal and prior to the Stockholder
meeting at which such Stockholder Proposal will be considered, if the Board of
Directors or a designated committee or the officer who will preside at the
Stockholders meeting determines that the information provided in a Stockholder
Proposal does not satisfy the informational requirements of these By-Laws or is
otherwise not in accordance with law, the Secretary of the Corporation shall
promptly notify such Proponent of the deficiency in the notice. Such Proponent
shall have an opportunity to cure the deficiency by providing additional
information to the Secretary within the period of time, not to exceed five days
from the date such deficiency notice is given to the Proponent, determined by
the Board of Directors, such committee or such officer. If the deficiency is not
cured within such period, or if the Board of Directors, such committee or such
officer determines that the additional information provided by the Proponent,
together with the information previously provided, does not satisfy the
requirements of this Section 2.10, then such proposal shall not be presented for
action at the meeting in question.
(b) Only persons who are selected and recommended by the Board of
Directors or a committee thereof, or who are nominated by Stockholders in
accordance with the procedures set forth in this Section 2.10, shall be eligible
for election, or qualified to serve, as Directors. Nominations of individuals
for election to the Board of Directors of the Corporation at any annual meeting
or any special meeting of Stockholders at which Directors are to be elected may
be made by any Stockholder of the Corporation entitled to vote for the election
of Directors at that meeting by compliance with the procedures set forth in this
Section 2.10. Nominations by Stockholders (the "Nominating Stockholders") shall
be
<PAGE>
- 5 -
made by written notice (a "Nomination Notice"), which shall set forth (i) as to
each individual nominated, (A) the name, date of birth, business address and
residence address of such individual; (B) the business experience during the
past five years of such nominee, including his principal occupations and
employment during such period, the name and principal business of any
corporation or other organization in which such occupations and employment were
carried on and such other information as to the nature of his responsibilities
and level of professional competence as may be sufficient to permit assessment
of his prior business experience; (C) whether the nominee is or has ever been at
any time a Director, officer or owner of five percent (5%) or more of any class
of capital stock, partnership interests or other equity interest of any
corporation, partnership or other entity; (D) any directorships held by such
nominee in any company with a class of securities registered pursuant to Section
12 of the Securities Exchange Act of 1934, as amended, or subject to the
requirements of Section 15(d) of such Act or any company registered as an
investment company under the Investment Company Act of 1940, as amended; and (E)
whether, in the last five years, such nominee has been convicted in a criminal
proceeding or has been subject to a judgment, order, finding or decree of any
federal, state or other governmental entity, concerning any violation of
federal, state or other law, or any proceeding in bankruptcy, which conviction,
judgment, order, finding, decree or proceeding may be material to an evaluation
of the ability or integrity of the nominee; and (ii) as to the Nominating
Stockholder and any Persons acting in concert with such Nominating Stockholder
(x) the names and business addresses of such Nominating Stockholder and Persons,
(y) the names and addresses of such Nominating Stockholder and Persons as they
appear on the Corporation's books (if they so appear) and (z) the class and
number of shares of the Corporation which are beneficially owned by such
Nominating Stockholder and Persons. A written consent to being named in a proxy
statement as a nominee, and to serve as a Director if elected, signed by the
nominee, shall be filed with any Nomination Notice. If the presiding officer at
any Stockholders meeting determines that a nomination was not made in accordance
with the procedures prescribed by these By-Laws, such officer shall so declare
to the meeting and the defective nomination shall be disregarded.
(c) Nomination Notices and Stockholder Proposals for an annual
Stockholders meeting shall be delivered to
<PAGE>
- 6 -
the Secretary at the principal executive offices of the Corporation not later
than the time permitted for submission of a stockholder proposal for inclusion
in the Corporation's proxy statement for the corresponding meeting of
stockholders pursuant to Rule 14a-8(a)(3) of the Securities Exchange Act of
1934, as amended or any successor thereto. Nomination Notices and Stockholder
Proposals shall be delivered to the Secretary at either of the principal
executive offices of the Corporation no later than the close of business on the
tenth day following the day on which notice of the date of a special meeting of
Stockholders was given if the Nomination Notices or Stockholder Proposals are to
be submitted at a special Stockholders meeting.
ARTICLE 3.
BOARD OF DIRECTORS
3.1. The business of the Corporation shall be managed by its Board of
Directors, which may exercise all such powers of the Corporation and all such
lawful acts and things as are not by statute or by the Certificate of
Incorporation or by these By-Laws directed or required to be exercised or done
by the Stockholders.
3.2. The number of Directors that shall constitute the whole Board
shall be the number from time to time fixed exclusively by a vote of a majority
of the Board of Directors then in office, which number shall not be less than
one. The Board by resolution may from time to time increase or decrease the
number of Directors to any number not less than one, provided that any reduction
in the number of Directors shall not have the effect of shortening the term of
any Director in office at the time such resolution becomes effective and
provided that the number of directors shall not be increased by fifty percent
(50%) or more in any twelve-month period without the approval of at least
sixty-six and two-thirds percent (66-2/3%) of the members of the Board of
Directors then in office. The phrase "the whole Board," as used in these
By-Laws, shall refer to the total number of Directors which the Corporation
would have if there were no vacancies. The Directors shall be elected at the
Annual Meeting of the Stockholders as provided in Section 6.4 of the Certificate
of Incorporation, except as provided in Section 3.3 of these By-Laws, and each
Director elected shall hold office until removal or resignation or until his
successor is elected and qualified. A director may resign at any time by giving
written notice to the
<PAGE>
- 7 -
Chairman of the Board, to the Chief Executive Officer or to the Secretary.
Unless otherwise stated in such notice of resignation, the acceptance thereof
shall not be necessary to make it effective; and such resignation shall take
effect at the time specified therein or, in the absence of such specification,
it shall take effect upon the receipt thereof.
3.3. Any or all of the Directors may be removed only for cause by the
Stockholders, as provided for in the Certificate of Incorporation.
3.4. Vacancies and newly created directorships resulting from any
increase in the authorized number of Directors may be filled by a majority of
the remaining Directors then in office, though less than a quorum, or by a sole
remaining Director, and the Directors so chosen shall hold office until the next
election of the class for which such Directors have been chosen and until their
successors are duly elected and qualified. If at any time there are no Directors
in office, by reason of death, resignation or other cause, then any Stockholders
or any executor or administrator or other fiduciary entrusted with like
responsibility for the estate of a Stockholder may call a special meeting of the
Stockholders to elect a Board of Directors. If at the time of filling any
vacancy or any newly created directorship, the Directors then in office shall
constitute less than a majority of the whole Board (as constituted immediately
prior to any such increase), the Court of Chancery may, upon application of any
Stockholder or Stockholders holding at least ten percent of the total number of
the shares outstanding at the time and having the right to vote for such
Directors, summarily order an election to be held to fill any such vacancies or
newly created directorships, or to replace the Directors chosen by the Directors
then in office.
MEETINGS OF THE BOARD OF DIRECTORS
3.5. The Board of Directors of the Corporation may hold meetings, both
regular and special, either within or without the State of Delaware.
3.6. Regular meetings of the Board of Directors may be held without
notice at such time and at such place as shall from time to time be determined
by the Board. A meeting of the Board of Directors for the election of officers
and the transaction of such other business as may come before it may be held
without
<PAGE>
- 8 -
notice immediately following the annual meeting of Stockholders.
3.7. Special meetings of the Board may be called by the Chairman of the
Board, the Chief Executive Officer or upon the written request of a majority of
the whole Board on two days' notice to each Director, either personally or by
telephone, or on four days' notice by mail (computed from the date of mailing).
Any such notice may be waived and shall be deemed waived by any Director who
signs a written waiver of such notice before or after the time stated therein or
who is present at a meeting of the Board of Directors when a vote on any matter
is taken unless at the beginning of the meeting or promptly upon arrival, the
Director objects to the holding of the meeting or the transacting of specified
business at the meeting.
3.8. At all meetings of the Board, a majority of the Directors
constituting the whole Board shall constitute a quorum for the transaction of
business, and the vote of a majority of the Directors present at any meeting at
which there is a quorum shall be the act of the Board of Directors, except as
may be otherwise specifically provided by statute, the Certificate of
Incorporation or these By-Laws. If a quorum shall not be present at any meeting
of the Board of Directors, the Directors present thereat may adjourn the meeting
from time to time, without notice other than announcement at the meeting, until
a quorum shall be present.
3.9. Unless otherwise restricted by the Certificate of Incorporation or
these By-Laws, any action required or permitted to be taken at any meeting of
the Board of Directors or of any committee thereof may be taken without a
meeting, if all members of the Board or committee, as the case may be, consent
thereto in writing, and the writing or writings are filed with the minutes of
the proceedings of the Board or committee.
3.10. A Director of the Corporation who is present at a meeting of the
Board of Directors when a vote on any matter is taken is deemed to have assented
to the action taken unless he votes against or abstains from the action taken,
or unless at the beginning of the meeting or promptly upon arrival, the Director
objects to the holding of the meeting or the transacting of specified business
at the meeting. Any such dissenting votes, abstentions or objections shall be
entered in the minutes of the meeting.
<PAGE>
- 9 -
THE CHAIRMAN OF THE BOARD AND THE
VICE-CHAIRMAN OF THE BOARD
3.11. The Board of Directors, at its first meeting following the annual
meeting of Stockholders in each year, or at such other time when there shall be
a vacancy, shall elect one of its members as Chairman of the Board, and may
elect one of its members as Vice- Chairman of the Board; each to serve for one
year or until his successor is elected and qualified. The Chairman of the Board
shall preside at all meetings of the Stockholders, except as the Board may
otherwise determine, and of the Board of Directors and shall perform such other
duties as may be required of him by the Board of Directors and by these By-Laws.
The Vice- Chairman of the Board, if one is elected, shall, in the absence of the
Chairman of the Board, preside at the meetings of the Stockholders and of the
Board of Directors and shall perform such other duties as may be required of him
by the Board of Directors. In the absence of the Chairman of the Board and the
Vice- Chairman, if any, those members of the Board who are present shall choose
from among themselves a person to preside at the meeting of the Board.
COMMITTEES OF DIRECTORS
3.12. The Board of Directors may, by resolution passed by a majority of
the whole Board, designate one or more committees, each committee to consist of
one or more of the Directors of the Corporation. The Board may, by resolution
passed by a majority of the whole Board, designate one or more Directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of the committee. Any such committee, to the extent
provided in the resolution and as limited by the Delaware General Corporation
Law, shall have and may exercise the powers of the Board of Directors in the
management of the business and affairs of the Corporation, and may authorize the
seal of the Corporation to be affixed to all papers which may require it. In the
absence or disqualification of any member of such committee or committees,
except as otherwise provided to the extent that there shall have been designated
alternate members who shall be present, the member or members thereof present at
any meeting and not disqualified from voting, whether or not he or they
constitute a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in the place of any such
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absent or disqualified member. Such committee or committees shall have such name
or names as may be determined from time to time by resolution adopted by the
Board of Directors. Each committee shall keep regular minutes of its meetings
and report the same to the Board of Directors as requested by the Board of
Directors.
COMPENSATION OF DIRECTORS
3.13. The Board of Directors shall have the authority to fix the
compensation to be paid to Directors. The Directors may be paid their expenses,
if any, of attendance at each meeting of the Board of Directors, or of any
committee of the Board of Directors, in addition to a fixed sum for attendance
at each such meeting and/or a stated salary as Director or committee member.
Unless otherwise provided by the Board of Directors, no such payment shall
preclude any Director from serving the Corporation in any other capacity and
receiving compensation therefor.
ARTICLE 4.
OFFICERS
4.1. The Board of Directors shall elect the officers of the
Corporation, which shall be a Chief Executive Officer, a President, a Secretary
and a Treasurer, at the first meeting of the Board following each annual meeting
of the Stockholders. The Board may from time to time also elect one or more
Vice-Presidents in such gradations as the Board of Directors may determine,
Assistant Vice-Presidents, Assistant Secretaries, Assistant Treasurers and such
other officers and agents as it shall deem necessary, or it may delegate the
authority to appoint such officers and agents to an officer subject to the
control of the Board of Directors. Any number of offices may be held by the same
person.
4.2. Unless otherwise provided in the resolution of election or
appointment, the officers of the Corporation shall hold office until their
successors are chosen and qualified or until their earlier resignation or
removal. Any officer may resign at any time by giving written notice to the
Chief Executive Officer or the Secretary. Unless otherwise stated in such notice
of resignation, the acceptance thereof shall not be necessary to make it
effective; and such resignation shall take effect at the time specified therein
or, in
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the absence of such specification, it shall take effect upon the receipt
thereof. Any officer, servant or agent of the Corporation may be removed at any
time with or without cause by the Board of Directors or by the officer having
power to appoint the successor of the person being removed. Any vacancy
occurring in any office of the Corporation may be filled by the Board of
Directors or otherwise as provided in this Article.
4.3. The officers of the Corporation shall receive such compensation
for their services as the Board of Directors may determine. The Board of
Directors may delegate its authority to determine compensation to a committee or
designated officers of the Corporation.
4.4. The duties and powers of the officers of the Corporation shall be
as provided in these By-Laws or as defined in the resolutions appointing them,
or shall be those duties and powers customarily exercised by corporate officers
holding such offices.
4.5. The Chief Executive Officer of the Corporation shall have general
charge and supervision of its business. He shall preside at all meetings of the
Stockholders and at meetings of the Board of Directors in the absence of the
Chairman and the Vice-Chairman of the Board, if any, if they were to preside;
shall see that all orders and resolutions of the Board of Directors are carried
into effect; and shall have such other powers and duties as normally pertain to
his office or as shall be prescribed by the Board of Directors.
4.6. Unless otherwise specified by the Board of Directors, the
President of the Corporation shall be the Chief Executive Officer of the
Corporation. If a person other than the Chief Executive Officer, the President
shall have such powers and perform such duties as may be assigned from
time-to-time by the Board of Directors or by the Chief Executive Officer,
subject to the powers and control of the Board of Directors.
4.7. The Vice-Presidents, if any, shall perform such duties and have
such powers as the Board of Directors may from time to time prescribe by
standing or special resolution, or the Chief Executive Officer may from time to
time provide, subject to the powers and the control of the Board of Directors.
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4.8. The Secretary of the Corporation or an Assistant Secretary, as
designated by the Chairman of the Board or other presiding officer, or another
person so designated, shall act as secretary and record the minutes of meetings
of the Board of Directors and committees thereof and of the Stockholders. Unless
given by another authorized officer, the Secretary shall give, or cause to be
given, notices of all meetings of Stockholders and Directors and of such
committees as directed by the Board of Directors. The Secretary shall have
charge of such books and papers as the Board of Directors may require. The
Secretary or any Assistant Secretary is authorized to certify copies of extracts
from minutes and of documents in the Secretary's charge and anyone may rely on
such certified copies to the same effect as if such copies were originals and
may rely upon any statement of fact concerning the Corporation certified by the
Secretary (or any Assistant Secretary). The Secretary shall have custody of the
corporate seal of the Corporation and shall have authority to affix the same to
any instrument requiring it and, when so affixed, it may be attested by the
Secretary's signature. The Board of Directors may give general or special
authority to any other officer to affix the seal of the Corporation and to
attest the affixing by his signature. The Secretary shall perform all acts
incident to the office of Secretary, subject to the control of the Board of
Directors, the Chairman of the Board or the Chief Executive Officer, under whose
supervision the Secretary shall be.
4.9. The Assistant Secretary, if there be any, or, if there be more
than one, the Assistant Secretaries in the order determined by the Board of
Directors (or if there be no such determination, then in the order of their
election), shall, in the absence of the Secretary or in the event of his
inability or refusal to act, perform the duties and exercise the powers of the
Secretary and shall perform such other duties and have such other powers as the
Board of Directors, the Chairman of the Board, the Chief Executive Officer or
the Secretary may from time to time prescribe.
4.10. Unless the Board of Directors shall designate another officer,
the Treasurer shall have the custody of the corporate funds and securities and
shall keep full and accurate accounts of receipts and disbursements in books
belonging to the Corporation, and may deposit all moneys and other valuable
effects in the name and to the credit of the Corporation in such banks, trust
companies or other depositories, as the Board of
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Directors may select or as may be selected by an officer, employee or agent of
the Corporation to whom such power may from time to time be delegated by the
Board of Directors. He shall perform such other duties and have such other
powers as may be prescribed by the Board of Directors or the Chief Executive
Officer, under whose supervision he shall be. The Treasurer may act with the
assistance of such Assistant Treasurers, if any, or such other employees of the
Company as he may reasonably designate.
4.11. The Assistant Treasurer, if there be any, or, if there be more
than one, the Assistant Treasurers in the order determined by the Board of
Directors (or if there be no such determination, then in the order of their
election), shall, in the absence of the Treasurer or in the event of his
inability or refusal to act, perform the duties and exercise the powers of the
Treasurer, and shall perform such other duties and have such other powers as the
Board of Directors, the Chief Executive Officer, or the Treasurer may from time
to time prescribe.
4.12. Checks, notes, drafts, other commercial instruments, assignments,
guarantees of signatures and contracts (except as otherwise provided herein or
by law) shall be executed by the Chief Executive Officer, the President, any
Vice President or such officers or employees or agents as the Board of Directors
or any of such designated officers may direct.
4.13. The Chief Executive Officer, the President, any Vice President or
the Secretary may authorize any endorsement on behalf of the Corporation to be
made by such mechanical means or stamps as any of such officers may deem
appropriate.
ARTICLE 5.
CERTIFICATES OF STOCK
5.1. Every holder of stock in the Corporation shall be entitled to have
a certificate signed by, or in the name of the Corporation by the Chairman or
Vice-Chairman of the Board of Directors, or the President or a Vice-President,
and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant
Secretary of the Corporation certifying the number of shares owned by him in the
Corporation. Where a certificate is countersigned (1) by a transfer agent other
than the Corporation or its employee, or (2) by a registrar other than the
Corporation or its employee, any other
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signature on the certificate may be a facsimile. In case any officer, transfer
agent or registrar who has signed or whose facsimile signature has been placed
upon a certificate shall have ceased to be such officer, transfer agent or
registrar before such certificate is issued, it may be issued by the Corporation
with the same effect as if he or it were such officer, transfer agent or
registrar at the date of issue.
LOST CERTIFICATES
5.2. The Board of Directors may in its discretion direct, or vest in
the officers of the Corporation the power to direct, that a new certificate or
certificates be issued in place of any certificate or certificates theretofore
issued by the Corporation and alleged to have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the person claiming the
certificate of stock to be lost, stolen or destroyed. When authorizing such
issue of a new certificate or certificates, the Board of Directors may, in its
discretion and as a condition precedent to the issuance thereof, require, or
vest in the officers of the Corporation the power to require, that the owner of
such lost, stolen or destroyed certificate or certificates, or his legal
representative, give the Corporation a bond in such sum as it may direct as
indemnity against any claim that may be made against the Corporation with
respect to the certificate alleged to have been lost, stolen or destroyed. The
Corporation may refuse to issue a new certificate except as ordered by the Court
of Chancery of Delaware.
TRANSFERS OF STOCK
5.3. The Board of Directors may appoint, or authorize any officer or
officers to appoint, one or more transfer agents and one or more registrars. The
Board of Directors may make such further rules and regulations as it may deem
expedient concerning the issue, transfer and registration of stock certificates
of the Corporation.
5.4. Upon surrender to the Corporation or the transfer agent of the
Corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignment or authority to transfer, it shall be the
duty of the Corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
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FIXING RECORD DATE
5.5. In order that the Corporation may determine the Stockholders
entitled to notice of or to vote at any meeting of Stockholders or any
adjournment thereof, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a record date,
which date shall be a permitted record date under the Delaware General
Corporation Law with respect to such meeting or action. A determination of
Stockholders of record entitled to notice of or to vote at a meeting of
Stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.
REGISTERED STOCKHOLDERS
5.6. The Corporation shall be entitled to recognize a person registered
as the owner of shares on its books as being the owner of such shares for the
purpose of receiving dividends, voting those shares, and being accorded all
other rights and liabilities of an owner of shares, and the Corporation shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware. Every Stockholder shall furnish to the Corporation his address, and
the Corporation may rely for all purposes upon the address of such Stockholder
so furnished to it. If any Stockholder shall not furnish the Corporation with
his address, his address shall be presumed to be at the registered office of the
Corporation, in its care.
ARTICLE 6.
GENERAL PROVISIONS
DIVIDENDS
6.1. Dividends upon the capital stock of the Corporation, subject to
the provisions of the Certificate of Incorporation, may be declared by the Board
of Directors at any regular or special meeting, pursuant to law. Dividends may
be paid in cash, in
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property, or in shares of the capital stock, subject to the provisions of the
Certificate of Incorporation.
6.2. Before payment of any dividend, there may be set aside out of any
funds of the Corporation available for dividends such sum or sums as the
Directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation, or for such other
purpose as the Directors shall think conducive to the interest of the
Corporation, and the Directors may modify or abolish any such reserve in the
manner in which it was created.
FISCAL YEAR
6.3. The fiscal year of the Corporation shall be fixed by resolution of
the Board of Directors.
CORPORATE SEAL
6.4. The corporate seal shall be in such form as the Board of Directors
may prescribe.
VOTING OF STOCK IN OTHER CORPORATIONS
6.5. Any shares of stock or other securities in any other corporation
or organization, with respect to which the Corporation may from time to time
have the right to vote or to give approvals, ratifications or consents may be
represented and voted at any meeting of security holders of such other
corporation or organization, or approvals, ratifications or consents may be
given with respect thereto, by the Chief Executive Officer of the Corporation or
by the proxy or proxies appointed by the Chief Executive Officer, or by any
other person appointed by resolution of the Board of Directors, of which
resolution a certified copy under the seal of the Corporation shall be
conclusive evidence.
POSITION WITH CORPORATION
NOT TO IMPOSE DUTY TO REFRAIN
FROM EXERCISING RIGHTS
6.6. No person who is an officer, Director or controlling Stockholder
of the Corporation shall be deemed to be under any disability, by reason of his
status as such officer, Director or controlling Stockholder, from exercising as
against the Corporation
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any rights or privileges whatsoever which he may enjoy under the terms of any
provision of any certificate of incorporation, by-law, resolution or contract,
in his personal capacity (including his capacity as a fiduciary for another
person or persons); and any such officer, Director or controlling Stockholder
may exercise any such rights or privileges as fully as if such person were not
such officer, Director or controlling Stockholder.
ARTICLE 7.
AMENDMENTS
These By-Laws of the Corporation may be amended, altered, changed,
adopted and repealed by a vote of the majority of the Board of Directors then in
office at any regular or special meeting. The Stockholders also shall have the
power to amend, alter, change, adopt and repeal the By-Laws of the Corporation
at any annual or special meeting pursuant to the requirements of the Certificate
of Incorporation.
Exhibit 3.2
FIRST AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
SURVIVAL TECHNOLOGY, INC.
Survival Technology, Inc., a corporation organized and existing under
and by virtue of the Delaware General Corporation Law (the "Corporation"),
hereby certifies as follows:
1. The name of the Corporation is Survival Technology, Inc.; the
original certificate of incorporation was filed on August 18, 1969 with the
Secretary of State of the State of Delaware.
2. This First Amended and Restated Certificate of Incorporation, the
entirety of which is set forth below, has been duly adopted in accordance with
Sections 242 and 245 of the Delaware General Corporation Law.
* * *
ARTICLE I
NAME
The name of the Corporation is Survival Technology, Inc. (the
"Corporation").
ARTICLE II
ADDRESS OF REGISTERED OFFICE;
NAME OF REGISTERED AGENT
The address of the Corporation's registered office in the State of
Delaware is 1209 Orange Street, in the City of Wilmington, County of New Castle,
Delaware 19801. The name of its registered agent at such address is The
Corporation Trust Company.
ARTICLE III
PURPOSE
The Corporation may engage in any lawful act or activity for which
corporations may be organized under the Delaware General Corporation Law.
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ARTICLE IV
CAPITAL STOCK
Section 4.1. Total Number of Shares of Capital Stock. The total number
of shares of stock of all classes that the Corporation shall have authority to
issue is 20,000,000 shares. The authorized capital stock is divided into
2,000,000 shares of Preferred Stock, $.01 par value per share (the "Preferred
Stock"), 17,800,000 shares of Common Stock, $.10 par value per share (the
"Voting Common Stock"), and 200,000 shares of Class A Common Stock, $.10 par
value per share (the "Non-Voting Common Stock"). The Voting Common Stock and the
Non-Voting Common Stock shall be identical in all respects except as set forth
in Sections 4.3 and 4.4 below and shall, except as otherwise required by law, be
treated as a single class.
Section 4.2. Preferred Stock.
(a) The shares of Preferred Stock of the Corporation may be issued from
time to time in one or more classes or series thereof, the shares of each class
or series thereof to have such voting powers, full or limited, or no voting
powers, and such designations, preferences and relative, participating, optional
or other special rights, and qualifications, limitations or restrictions
thereof, as are stated and expressed herein or in the resolution or resolutions
providing for the issue of such class or series, adopted by the Board of
Directors as hereinafter provided.
(b) Authority is hereby expressly granted to the Board of Directors of
the Corporation, subject to the provisions of this Article IV and to the
limitations prescribed by the Delaware General Corporation Law, to authorize the
issue of one or more classes, or series thereof, of Preferred Stock and with
respect to each such class or series to fix by resolution or resolutions
providing for the issue of such class or series the voting powers, full or
limited, if any, of the shares of such class or series and the designations,
preferences and relative, participating, optional or other special rights, and
qualifications, limitations or restrictions thereof. The authority of the Board
of Directors with respect to each class or series thereof shall include, but not
be limited to, the determination or fixing of the following:
(i) the designation of such class or series;
(ii) the number of shares to compose such class, which number the
Board of Directors may thereafter (except where otherwise provided in a
resolution
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designating a particular class) increase (but not above the total
number of authorized shares of the class) or decrease (but not below
the number of shares thereof then outstanding);
(iii) the dividend rate of such class or series, the conditions and
dates upon which such dividends shall be payable, the relation which
such dividends shall bear to the dividends payable on any other class
or classes of stock or any other series of any class of stock of the
Corporation, and whether such dividends shall be cumulative or
noncumulative;
(iv) whether the shares of such class or series shall be subject to
redemption by the Corporation and, if made subject to such redemption,
the times, prices and other terms and conditions of such redemption;
(v) the terms and amount of any sinking fund provided for the
purchase or redemption of the shares of such class or series;
(vi) whether or not the shares of such class or series shall be
convertible into or exchangeable for shares of any other class or
classes of any stock or any other series of any class of stock of the
Corporation, and, if provision is made for conversion or exchange, the
times, prices, rates, adjustments, and other terms and conditions of
such conversion or exchange;
(vii) the extent, if any, to which the holders of shares of such
class or series shall be entitled to vote with respect to the election
of Directors or otherwise;
(viii) the restrictions, if any, on the issue or reissue of any
additional Preferred Stock;
(ix) the rights of the holders of the shares of such class or series
upon the dissolution of, or upon the distribution of assets of, the
Corporation; and
(x) the manner in which any facts ascertainable outside the
resolution or resolutions providing for the issue of such class or
series shall operate upon the voting powers, designations, preferences,
rights and qualifications, limitations or restrictions of such class or
series.
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Section 4.3. Voting Common Stock. (a) Subject to all of the powers,
rights and preferences of the holders of Preferred Stock provided by resolution
or resolutions of the Board of Directors pursuant to this Article IV or by the
Delaware General Corporation Law, the holders of the shares of the Voting Common
Stock shall be entitled to one vote for each share so held with respect to all
matters voted on by the Stockholders of the Corporation.
(b) Subject to the powers, rights and preferences of any other class of
stock, the holders of the Common Stock, consisting of the Voting Common Stock
and the Non-Voting Common Stock, shall have the right (i) to receive dividends
when, as and if properly declared by the Board of Directors in its sole
discretion and (ii) to receive ratably all the assets of the Corporation
remaining after providing for the payment of the creditors of the Corporation
upon the liquidation, dissolution or winding up of the Corporation.
Section 4.4. Non-Voting Common Stock.
(a) Voting Rights. Except as specifically required by law, the holders
of the shares of Non-Voting Common Stock shall not be entitled to any vote
whatsoever, but shall be entitled to notice of, and participation in, the
meetings of the Stockholders of the Corporation. To the extent that the
Non-Voting Common Stock is entitled to vote on the increase in the number of
authorized shares of Non-Voting Common Stock, it shall vote together with the
Voting Common Stock as a single class.
(b) Conversion of Non-Voting Common Stock.
(i) At any time and from time to time, each record holder of
Non-Voting Common Stock will be entitled to convert any and all of the
shares of such holder's Non-Voting Common Stock into the same number of
shares of Voting Common Stock at such holder's election; provided,
however, that shares of Non-Voting Common Stock may be converted into
shares of Voting Common Stock only after the record holder of such
shares of Non-Voting Common Stock shall have certified to the
Corporation that it is not a "bank holding company" or a "subsidiary"
of a "bank holding company" within the meaning of Section 4 of the Bank
Holding Company Act of 1956, as amended, and Regulation Y promulgated
thereunder, or one of the following shall have occurred: (1) the bona
fide sale to any purchaser (including, without
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limitation, an underwriter) of such shares of NonVoting Common Stock
(x) pursuant to a registration statement declared effective by the
United States Securities and Exchange Commission under the Securities
Act of 1933, as amended (the "Act"), covering the offer and sale of the
Corporation's Common Stock in a bona fide public offering, or (y)
pursuant to Rules 144 and 144A promulgated under the Act, or in a
public distribution pursuant to Regulation A of the General Rules and
Regulations under the Act; (2) the bona fide sale to any purchaser of
such shares of Non-Voting Common Stock in a transaction not involving a
sale of the Corporation's Common Stock to the public, provided that
such purchaser does not immediately after such transaction hold shares
of Voting Common Stock (including any shares converting to Voting
Common Stock in accordance herewith) equaling two percent (2%) or more
of the then outstanding shares of Voting Common Stock; or (3) the
receipt by the Corporation of (x) a staff opinion, ruling or other
written advice from the Board of Governors of the Federal Reserve
System, or from the appropriate Federal Reserve Bank, or (y) an opinion
of counsel experienced in bank regulatory matters, in each case to the
effect that such shares of Non-Voting Common Stock may be converted
into shares of Voting Common Stock without violation of Section 4 of
the Bank Holding Company Act of 1954, as amended, and Regulation Y
promulgated thereunder.
(ii) Each conversion of shares of NonVoting Common Stock into shares
of Voting Common Stock shall be effected by the surrender of the
certificate or certificates representing the shares to be converted at
the principal office of the Corporation (or such other office or agency
of the Corporation as the Corporation may designate by notice in
writing to the holder or holders of the Non-Voting Common Stock) at any
time during normal business hours, together with a written notice by
the holder of such Non-Voting Common Stock stating that such holder
desires to convert the shares, or a stated number of the shares, of
Non-Voting Common Stock represented by such certificate or certificates
into Voting Common Stock and that such conversion is permitted in
accordance herewith. Upon receipt of such statement, the Corporation
shall be obligated to issue such Voting Common Stock without further
inquiry. Such conversion shall be deemed to have been effected as of
the close of
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business on the date on which such certificate or certificates have
been surrendered and such notice has been received, and at such time
the rights of the holder of the converted Non-Voting Common Stock shall
cease and the person or persons in whose name or names the certificate
or certificates for shares of Voting Common Stock are to be issued upon
such conversion shall be deemed to have become the holder or holders of
record of the shares of Voting Common Stock represented thereby.
(iii) Promptly after such surrender and the receipt of such written
notice, the Corporation shall issue and deliver in accordance with the
surrendering holder's instructions (1) the certificate or certificates
for the Voting Common Stock issuable upon such conversion and (2) a
certificate representing any Non-Voting Common Stock which was
represented by the certificate or certificates delivered to the
Corporation in connection with such conversion but which was not
converted.
(iv) The issuance of certificates for Voting Common Stock upon
conversion of Non-Voting Common Stock shall be made without charge to
the holders of such shares for any stamp, transfer or issuance tax in
respect thereof or other cost incurred by the Corporation in connection
with such conversion and the related issuance of Voting Common Stock.
The Corporation shall not close its books against the transfer of
Non-Voting Common Stock or of Voting Common Stock issued or issuable
upon conversion of Non-Voting Common Stock in any manner which would
interfere with the timely conversion of Non-Voting Common Stock.
ARTICLE V
STOCKHOLDER ACTIONS
Section 5.1. Written Consent. Except as may be provided in a resolution
or resolutions providing for any class or series of Preferred Stock pursuant to
Article IV hereof, any action required or permitted to be taken by the
Stockholders of the Corporation at any annual or special meeting may be taken
without a meeting, without prior notice and without a vote, but only if consents
in writing, setting forth the action so taken, have been signed by the holders
of all of the outstanding stock entitled to vote thereon at a meeting at which
all shares entitled to vote thereon were present and voted.
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Section 5.2. Stockholder Meetings. Meetings of Stockholders may be held
within or without the State of Delaware, as the By-Laws may provide.
Section 5.3. Special Stockholder Meetings. Special Meetings of
Stockholders of the Corporation may be called only by the Board of Directors
pursuant to a resolution adopted by a majority of the members of the Board of
Directors then in office.
Section 5.4. Form of Ballot. Elections of Directors need not be by
written ballot unless the By-Laws of the Corporation so provide.
ARTICLE VI
BOARD OF DIRECTORS
Section 6.1. Management of the Corporation. The business and affairs of
the Corporation shall be managed by or under the direction of the Board of
Directors.
Section 6.2. Meetings of the Board. Meetings of the Board of Directors
may be held within or without the State of Delaware, as the By-Laws may provide.
Section 6.3. Number of Directors. The number of Directors constituting
the Board of Directors shall be as specified in or determined pursuant to the
By-Laws of the Corporation.
Section 6.4. Classes, Election and Term. The Board of Directors shall
be divided into three classes, with each class to be as nearly equal in number
as reasonably possible, and with the initial term of office of the first class
of Directors to expire at the Annual Meeting of Stockholders to be held after
the end of the Corporation's 1997 fiscal year, the initial term of office of the
second class of Directors to expire at the Annual Meeting of Stockholders to be
held after the end of the Corporation's 1998 fiscal year and the initial term of
office of the third class of Directors to expire at the Annual Meeting of
Stockholders to be held after the end of the Corporation's 1999 fiscal year.
Commencing with the Annual Meeting of Stockholders to be held after the end of
the Corporation's 1997 fiscal year, Directors elected to succeed those Directors
whose terms have thereupon expired shall be elected for a term of office to
expire at the third succeeding Annual Meeting of Stockholders after their
election, and upon the election and qualification of their successors. If the
number of Directors is changed, any
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increase or decrease shall be apportioned among the classes so as to maintain or
attain, if possible, the number of Directors in each class as nearly equal as
reasonably possible, but in no case will a decrease in the number of Directors
shorten the term of any incumbent Director.
Section 6.5. Vacancies. Any vacancies in the Board of Directors for any
reason and any newly created directorships resulting by reason of any increase
in the number of Directors may be filled only by the Board of Directors, acting
by a majority of the remaining Directors then in office, although less than a
quorum, or by a sole remaining Director, and any Directors so appointed shall
hold office until the next election of the class for which such Directors have
been chosen and until their successors are elected and qualified.
Section 6.6. Removal. Except as may be provided in a resolution or
resolutions providing for any class or series of Preferred Stock pursuant to
Article IV hereof with respect to any Directors elected by the holders of such
class or series, any Director, or the entire Board of Directors, may be removed
from office at any time, but only for cause by the affirmative vote of the
holders of at least 75% of the voting power of all of the shares of capital
stock of the Corporation then entitled to vote generally in the election of
Directors, voting together as a single class.
Section 6.7. Constituencies. In connection with the exercise of its or
their judgment in determining what is in the best interests of the Corporation
and its Stockholders, the Board of Directors of the Corporation, any committee
of the Board of Directors or any individual Director may, but shall not be
required to, in addition to considering the long-term and short-term interests
of the Stockholders, consider all of the following factors and any other factors
which it or they deem relevant: (i) the social and economic effects of the
matter to be considered on the Corporation and its subsidiaries, its and their
employees, customers, and creditors and the communities in which the Corporation
and its subsidiaries operate or are located; and (ii) when evaluating a business
combination or a proposal by another Person or Persons to make a business
combination or a tender or exchange offer or any other proposal relating to a
potential change of control of the Corporation, (x) the business and financial
condition and earnings prospects of the acquiring Person or Persons, including,
but not limited to, debt service and other existing financial obligations,
financial obligations to be incurred in connection with the acquisition, and
other likely financial obligations of the
<PAGE>
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acquiring Person or Persons, and the possible effect of such conditions upon the
Corporation and its subsidiaries and the communities in which the Corporation
and its subsidiaries operate or are located, (y) the competence, experience, and
integrity of the acquiring Person or Persons and its or their management, and
(z) the prospects for successful conclusion of the business combination, offer
or proposal. The provisions of this Section 6.7 shall be deemed solely to grant
discretionary authority to the Directors and shall not be deemed to provide to
any constituency the right to be considered. The term "Person" means any
individual, partnership, firm, corporation, association, trust, unincorporated
organization or other entity; when two or more Persons act as a partnership,
limited partnership, syndicate, or other group acting in concert for the purpose
of acquiring, holding, voting or disposing of securities of the Corporation,
such partnership, limited partnership, syndicate or group shall also be deemed a
"Person."
ARTICLE VII
INDEMNIFICATION
Section 7.1. Right to Indemnification. Each person who was or is made a
party or is threatened to be made a party to or is otherwise involved in any
action, suit or proceeding, whether civil, criminal, administrative or
investigative (hereinafter a "proceeding"), by reason of the fact:
(a) that he or she is or was a director or officer of the
Corporation, or
(b) that he or she, being at the time a director or officer of the
Corporation, is or was serving at the request of the Corporation as a
director, trustee, officer, employee or agent of another corporation or
of a partnership, joint venture, trust or other enterprise, including
service with respect to an employee benefit plan (collectively,
"another enterprise" or "other enterprise"),
whether either in case (a) or in case (b) the basis of such proceeding is
alleged action or inaction (x) in an official capacity as a director or officer
of the Corporation, or as a director, trustee, officer, employee or agent of
such other enterprise, or (y) in any other capacity related to the Corporation
or such other enterprise while so serving as a director, trustee, officer,
employee or agent, shall be indemnified and held harmless by the Corporation to
the fullest extent not prohibited by Section 145 of the Delaware
<PAGE>
- 10 -
General Corporation Law (or any successor provision or provisions) as the same
exists or may hereafter be amended (but, in the case of any such amendment, with
respect to actions taken prior to such amendment, only to the extent that such
amendment permits the Corporation to provide broader indemnification rights than
permitted prior thereto), against all expense, liability and loss (including,
without limitation, attorneys' fees, judgments, fines, ERISA excise taxes or
penalties and amounts paid in settlement) reasonably incurred or suffered by
such person in connection therewith if such person satisfied the applicable
level of care to permit such indemnification under the Delaware General
Corporation Law. The persons indemnified by this Article VII are hereinafter
referred to as "indemnitees." Such indemnification as to such alleged action or
inaction shall continue as to an indemnitee who has after such alleged action or
inaction ceased to be a director or officer of the Corporation, or director,
officer, employee or agent of another enterprise; and shall inure to the benefit
of the indemnitee's heirs, executors and administrators. The right to
indemnification conferred in this Article VII: (i) shall be a contract right;
(ii) shall not be affected adversely as to any indemnitee by any amendment of
this Certificate with respect to any action or inaction occurring prior to such
amendment; and (iii) shall, subject to any requirements imposed by law, this
Article VII, and the By-laws, include the right to have paid by the Corporation
the expenses incurred in defending any such proceeding in advance of its final
disposition.
Section 7.2. Agents and Employees. The Corporation may, to the extent
authorized from time to time by the Board of Directors, grant rights to
indemnification, and to the advancement of expenses, to any employee or agent of
the Corporation (or any person serving at the Corporation's request as a
director, trustee, officer, employee or agent of another enterprise) or to
persons who are or were a director, officer, employee or agent of any of the
Corporation's affiliates, predecessor or subsidiary corporations or of a
constituent corporation absorbed by the Corporation in a consolidation or merger
or who is or was serving at the request of such affiliate, predecessor or
subsidiary corporation or of such constituent corporation as a director,
officer, employee or agent of another enterprise, in each case as determined by
the Board of Directors to the fullest extent of the provisions of this Article
VII in cases of the indemnification and advancement of expenses of directors and
officers of the Corporation, or to any lesser extent (or greater extent, if
permitted by law) determined by the Board of Directors.
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Section 7.3. Undertakings for Advances of Expenses. An advancement by
the Corporation of expenses incurred by an indemnitee pursuant to clause (iii)
of the last sentence of Section 7.1 (hereinafter an "advancement of expenses")
shall be made only upon delivery to the Corporation of an undertaking
(hereinafter an "undertaking"), by or on behalf of such indemnitee, to repay all
amounts so advanced if it shall ultimately be determined by final judicial
decision from which there is no further right to appeal (hereinafter a "final
adjudication") that such indemnitee is not entitled to be indemnified for such
expenses under this Article VII or otherwise; provided, however, that no such
advance need be made in any particular case in which the Board of Directors
determines, at any time, that based on the information then known, the Director
or officer is not entitled to indemnification.
Section 7.4. Partial Indemnification. If the indemnitee is entitled
under any provision of this Article VII to indemnification by the Corporation
for some or a portion of the expenses, liabilities, losses, judgments, fines,
penalties or ERISA excise taxes actually and reasonably incurred by him or her
in the investigation, defense, appeal or settlement of any proceeding but not,
however, for the total amount thereof, the Corporation shall nevertheless
indemnify the indemnitee for the portion of such expenses, liabilities, losses,
judgments, fines, penalties or ERISA excise taxes to which the indemnitee is
entitled.
Section 7.5. Indemnification Procedure; Determination of Right to
Indemnification. (a) Promptly after receipt by the indemnitee of written notice
of the commencement of any proceeding, the indemnitee will, if a claim in
respect thereof is to be made against the Corporation in accordance herewith,
notify the Corporation of the commencement thereof. The omission so to notify
the Corporation (i) will relieve it from any liability which it may have to the
indemnitee hereunder only to the extent that the Corporation is able to
establish that its ability to avoid such liability was materially prejudiced by
such omission and (ii) will not relieve it from any liability which it may
otherwise have to the indemnitee.
(b) If a claim for indemnification under this Article VII is not paid
in full by the Corporation within sixty days after it has been received in
writing by the Corporation, except in the case of a claim for an advancement of
expenses, in which case the applicable period shall be twenty days, the
indemnitee may at any time thereafter bring suit against the Corporation to
recover the
<PAGE>
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unpaid amount of the claim. If successful in whole or in part in any such suit,
or in a suit brought by the Corporation to recover an advancement of expenses
pursuant to the terms of an undertaking, the indemnitee shall be entitled to be
paid also the expense of prosecuting or defending such suit. In any suit brought
by the indemnitee to enforce a right to indemnification hereunder (but not in a
suit brought by the indemnitee to enforce a right to an advancement of
expenses), it shall be a defense that, and in any suit by the Corporation to
recover an advancement of expenses pursuant to the terms of an undertaking, the
Corporation shall be entitled to recover such expenses only upon a final
adjudication that the indemnitee has not met the applicable standard of conduct
set forth in Section 145 of the Delaware General Corporation Law (or any
successor provision or provisions). Neither the failure of the Corporation
(including the Board of Directors, independent legal counsel or its
stockholders) to have made a determination prior to the commencement of such
suit that indemnification of the indemnitee is proper in the circumstances
because the indemnitee has met the applicable standard of conduct set forth in
Section 145 of the Delaware General Corporation Law (or any successor provision
or provisions), nor an actual determination by the Corporation (including the
Board of Directors, independent legal counsel, or its stockholders) that the
indemnitee has not met such applicable standard of conduct, shall create a
presumption that the indemnitee has not met the applicable standard of conduct
or, in the case of such a suit brought by the indemnitee, be a defense to such
suit. In any suit brought by the indemnitee to enforce a right to
indemnification or to an advancement of expenses hereunder, or by the
Corporation to recover an advancement of expenses pursuant to the terms of an
undertaking, the burden of proving that the indemnitee is not entitled to be
indemnified, or to have or retain such advancement of expenses, under this
Article VII or otherwise, shall be on the Corporation.
(c) The Corporation shall not be obligated to indemnify or advance
expenses to the indemnitee under this Article VII in connection with a
proceeding (or part thereof) initiated or brought voluntarily by the indemnitee
(other than to enforce the rights to indemnification hereunder) unless the
initiation thereof was approved by the Board of Directors of the Corporation.
(d) In the case of a settlement of a proceeding by an indemnitee, the
payment of amounts and indemnification thereof shall be approved, in advance, by
the Corporation,
<PAGE>
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which approval shall not be unreasonably withheld, or by a court of competent
jurisdiction.
Section 7.6. Insurance. The Corporation may maintain insurance, at its
expense, to protect itself and any director, trustee, officer, employee or agent
of the Corporation or another enterprise against any expense, liability or loss,
whether or not the Corporation would have the power to indemnify such person
against such expense, liability or loss under the Delaware General Corporation
Law.
Section 7.7. Binding Effect; Successors and Assigns. The
indemnification and advance of expenses provided by or granted pursuant to this
Article VII shall continue as to a person who has ceased to be a Director or
officer, and shall inure to the benefit of the heirs, executors and
administrators of such Director or officer.
Section 7.8. Severability. In the event that any of the provisions of
this Article VII (including any provision within a single section, paragraph or
sentence) is held by a court of competent jurisdiction to be invalid, void or
otherwise unenforceable, the remaining provisions are severable and shall remain
enforceable to the full extent permitted by law.
Section 7.9. Relationship to Other Rights and Provisions Concerning
Indemnification. The rights to indemnification and to the advancement of
expenses conferred in this Article VII shall not be exclusive of any other right
which any person may have or hereafter acquire under any statute, this
Certificate, By-laws, agreement, vote of stockholders or disinterested directors
or otherwise. The By-laws may contain such other provisions concerning
indemnification, including provisions specifying reasonable procedures relating
to and conditions to the receipt by indemnitees of indemnification, provided
that such provisions are not inconsistent with the provisions of this Article
VII.
ARTICLE VIII
LIMITATION ON LIABILITY OF DIRECTORS
As to any act or omission occurring after this provision becomes
effective, a Director of the Corporation shall, to the maximum extent permitted
by the laws of Delaware, have no personal liability to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
provided that this Article
<PAGE>
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VIII shall not eliminate or reduce the liability of a director in any case where
such elimination or reduction is not permitted by law.
ARTICLE IX
BOOKS OF THE CORPORATION
The books of the Corporation may be kept (subject to any provision
contained in the statutes) outside the State of Delaware at such place or places
as may be designated from time to time by the Board of Directors or in the
ByLaws of the Corporation.
ARTICLE X
COMPROMISE
Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its Stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or Stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of section 291 of Title 8 of the Delaware Code, as that section
may read from time to time, or any successor provision, or on the application of
trustees in dissolution or of any receiver or receivers appointed for this
Corporation under the provisions of section 279 of Title 8 of the Delaware Code,
as that section may read from time to time, or any successor provision, order a
meeting of the creditors or class of creditors, and/or of the Stockholders or
class of Stockholders of this Corporation, as the case may be, to be summoned in
such manner as the said court directs. If a majority in number representing
three-fourths in value of the creditors or class of creditors, and/or of the
Stockholders or class of Stockholders of this Corporation, as the case may be,
agree to any compromise or arrangement and to any reorganization of this
Corporation as consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the Stockholders or class of
Stockholders, of this Corporation, as the case may be, and also on this
Corporation.
<PAGE>
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ARTICLE XI
AMENDMENT OF BY-LAWS
The Board of Directors shall have power to adopt, amend, alter, change
and repeal any By-Laws of the Corporation by vote of the majority of the Board
of Directors then in office. In addition to any requirements of the Delaware
General Corporation Law (and notwithstanding the fact that a lesser percentage
may be specified by the Delaware General Corporation Law), any adoption,
amendment, alteration, change or repeal of any By-Laws by the holders of capital
stock of the Corporation shall require the affirmative vote of either: (a) the
holders of at least 75% of the voting power of all of the shares of capital
stock of the Corporation then entitled to vote generally in the election of
Directors, voting together as a single class, or (b) the holders of a majority
of the voting power of all of the shares of capital stock of the Corporation
then entitled to vote generally in the election of Directors, voting as a single
class, if such adoption, amendment, alteration, change or repeal has been
previously recommended by a vote of the Continuing Directors. For the purposes
of this Certificate of Incorporation, Continuing Director shall mean either (x)
an individual who was a member of the Board of Directors prior to the time any
Person after November 20, 1996 acquired 25% or more of the voting power of any
voting securities of the Corporation or (y) an individual designated (before his
or her initial election as a Director) as a Continuing Director by a majority of
the then Continuing Directors.
ARTICLE XII
AMENDMENT OF CERTIFICATE OF INCORPORATION
The Corporation hereby reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
Stockholders are granted subject to this reservation. Except as may be provided
in a resolution or resolutions providing for any class or series of Preferred
Stock pursuant to Article IV hereof and which relate to such class or series of
Preferred Stock, any amendment, alteration, change or repeal of Articles IV, V,
VI, XI and XII hereof shall require the affirmative vote of either: (a) the
holders of at least 75% of the voting power of all of the shares of capital
stock of the Corporation then entitled to vote generally in the election of
Directors, voting together as a single class, or (b) the holders of a majority
of the voting power of all of the shares of capital stock of the Corporation
then entitled to vote generally in the election
<PAGE>
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of Directors, voting as a single class, if such amendment, alteration, change or
repeal has been previously recommended by a vote of the Continuing Directors.
Except as may be provided in a resolution or resolutions providing for any class
or series of Preferred Stock pursuant to Article IV hereof and which relate to
such class or series of Preferred Stock, any other amendment, alteration, change
or repeal of any other provision of this Certificate of Incorporation shall
require the affirmative vote of both (a) a majority of the members of the Board
of Directors then in office and (b) a majority of the voting power of all of the
shares of capital stock of the Corporation entitled to vote generally in the
election of Directors, voting together as a single class.
ARTICLE XIII
SEVERABILITY
In the event that any of the provisions of this Certificate of
Incorporation (including any provision within a single section, paragraph or
sentence) is held by a court of competent jurisdiction to be invalid, void or
otherwise unenforceable, the remaining provisions are severable and shall remain
enforceable to the full extent permitted by law.
* * *
I, THE UNDERSIGNED, being the duly elected Chief Executive Officer of
the Corporation, do on behalf of the Corporation make this First Amended and
Restated Certificate of Incorporation of the Corporation, hereby declaring and
certifying, under penalties of perjury, that this is the act and deed of the
Corporation and that the facts herein stated are true, and accordingly have
hereunto set my hand this ___ day of ___, 1996.
By:
------------------------
James H. Miller
Chief Executive Officer
4
<PAGE>
SURVIVAL TECHNOLOGY, INC.
CERTIFICATE OF AMENDMENT
OF
FIRST AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
SURVIVAL TECHNOLOGY, INC., a corporation duly organized and existing
under the General Corporation Law of the State of Delaware (the "Corporation"),
DOES HEREBY CERTIFY AS FOLLOWS:
FIRST: The Board of Directors of the Corporation, by unanimous
written consent, in accordance with Section 141(f) of the
General Corporation Law of the State of Delaware, duly
adopted a resolution in accordance with Section 242 of the
General Corporation Law of the State of Delaware proposing,
declaring advisable and recommending an amendment to the
First Amended and Restated Certificate of Incorporation of
the Corporation. The resolution setting forth the proposed
amendment is as follows:
NOW THEREFORE
BE IT
RESOLVED: That the Board of Directors of the Corporation hereby
proposes and declares advisable that, assuming Brunswick
Biomedical Corporation merges with and into the Corporation,
then immediately after the effective time of such merger
Article I of the First Amended and Restated Certificate of
Incorporation of the Corporation be amended so that it shall
read:
ARTICLE I
NAME
The name of the Corporation is Meridian Medical Technologies,
Inc. (the "Corporation").
SECOND: That the annual meeting of the stockholders of the
Corporation was duly called and held, upon notice in
accordance with Section 222 of the General Corporation Law of
the State of Delaware at which meeting the necessary number
of shares were voted in favor of said amendment.
<PAGE>
THIRD: The aforesaid amendment was duly adopted in accordance with
the applicable provisions of Section 242 of the General
Corporation Law of the State of Delaware.
FOURTH: This certificate of amendment is to become effective at 4:00
p.m. on November 20, 1996.
IN WITNESS WHEREOF, the undersigned, SURVIVAL TECHNOLOGY,
INC., has caused this Certificate of Amendment of First Amended and
Restated Certificate of Incorporation to be executed on its behalf by
its Chief Financial Officer and Senior Vice President - Finance and
attested by its Assistant Secretary as of this ___ day of November,
1996.
SURVIVAL TECHNOLOGY, INC.
By: /s/ Jeffrey W. Church
---------------------------
Jeffrey W. Church
Chief Financial Officer
and Senior Vice President -
Finance
Attest: /s/ J. Chontelle Woodward
-------------------------
J. Chontelle Woodward
Assistant Secretary
SECOND AMENDMENT TO CREDIT AGREEMENT
THIS SECOND AMENDMENT TO CREDIT AGREEMENT (the "Amendment"), dated as of
September 2,1997, among MERIDIAN MEDICAL TECHNOLOGIES, INC. (as successor by
merger to Brunswick Biomedical Corporation), a Delaware corporation (the
"Borrower"), and ING (U.S.) CAPITAL CORPORATION (formerly known as
Internationale Nederlanden (U.S.) Capital Corporation), a Delaware corporation
("ING"), constituting the sole Lender under the Credit Agreement referenced
below (together with its successors and assigns, the "Lenders"), and ING in its
capacity as Agent for the Lenders.
WITNESSETH:
RECITALS:
A. The Borrower, the Lenders and the Agent have entered into a certain
Credit Agreement, dated as of April 15, 1996 (as amended, supplemented or
otherwise modified prior to the date hereof, the "Credit Agreement");
capitalized terms used herein and not otherwise defined shall have the meanings
ascribed to such terms in the Credit Agreement.
B. The Borrower has requested an amendment to the Credit Agreement to
increase the Revolving Loan Commitment from $5,000,000 to $6,500,000, and the
Lenders have agreed to so amend the Credit Agreement on the terms and conditions
set forth herein.
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. Amendment to Section 1. 1. Section 1. I of the Credit Agreement
is hereby amended by adding thereto, in alphabetical order the following
additional defined terms:
"Account" means any "Account" (as such term is defined in Section
9-106 of the UCC) of the Borrower or any of its Subsidiaries arising from
the sale or lease of goods or the providing of services.
"Account Debtor" means any Person who is or becomes obligated to the
Borrower or any of its Subsidiaries under, with respect to, or on account
of, an Account.
"Borrowing Base" means an amount in Dollars equal to eighty percent
(80%) of Eligible Accounts plus thirty percent (30%) of Eligible
Inventory, in each case as such percentages may be decreased pursuant to
Section 2.2.4. To the extent that, in
<PAGE>
order to determine the amount of the Borrowing Base in Dollars, the amount of
any Eligible Account or Eligible Inventory is required to be converted into
Dollars from any foreign currency amount, such Dollar amount shall be computed
using the Dollar Equivalent of the amount of such foreign currency as of the
date of calculation of the Borrowing Base. As used herein, "Dollar Equivalent"
means, at any time with respect to any amount denominated in a foreign currency,
the amount of Dollars for which such foreign currency could be exchanged as
determined by (i) the New York foreign exchange selling rates as of the date of
determination (or, if such day is not a Business Day, as of the immediately
preceding Business Day), as quoted in The Wall Street Journal (Eastern Edition)
under "Currency Trading -- Exchange Rates", or (ii) in the event such report
shall no longer appear, the rate of exchange set forth for such date on the
relevant Reuters currency page, or (iii) in the event such rate of exchange
shall not be so set forth, the rate of exchange set forth in such other
nationally recognized publication as the Agent may, from time to time, designate
to the Borrower in writing.
"Borrowing Base Certificate" means a certificate of the chief executive,
accounting or financial officer of the Borrower in the form of Exhibit 1.
"Eligible Account" means the net outstanding balance, excluding all
finance charges, late fees and other fees, of all Accounts of the Borrower and
its Subsidiaries, provided that no Account shall be deemed eligible if-
(a) a representation or warranty contained in this Agreement, the
Security Agreement or any other Loan Document applicable to such Account
or Accounts or to Accounts generally has been breached in any material
respect with respect to such Account;
(b) more than forty percent (40%) of the Accounts outstanding from
the Account Debtor are ineligible by reason of clause (c), (e), (h), (i),
0), (q), (r), or (s) of this definition;
(c) if the Account Debtor has (1) become insolvent or general fail
to pay, or admitted in writing its inability to pay, its debts as they
become due, (ii) applied for, consented to, or acquiesced in, the
appointment of a trustee, receiver, sequestrator or other custodian for
such Account Debtor or any property thereof or made a general assignment
for the benefit of creditors, (iii) in the absence of such application,
consent or acquiescence, permitted or suffered to exist the appointment of
a trustee, receiver, sequestrator or other custodian for such Account
Debtor or for a substantial part of its property, or (iv)
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<PAGE>
commence or permit or suffer to exist the commencement of, any
bankruptcy, reorganization, debt arrangement or other case or proceeding
under any bankruptcy or insolvency law or any dissolution, winding up or
liquidation proceeding in respect of such Account Debtor;
(d) such Account is billed other than on standard terms of payment
(but in no event longer payment terms than 67 days after invoice date);
(e) such Account has remained unpaid for a period exceeding 60 days
after the due date therefor;
(f) the Account is denominated in other than Dollars, British Pounds
Sterling or Irish Pounds or is payable outside the United States, the
United Kingdom or the Republic of Ireland or the Account Debtor for such
Account is located outside the United States, the United Kingdom or the
Republic of Ireland (unless the Agent shall have approved such Account
Debtor in writing) unless the payment of such Account is backed by a
letter of credit denominated in Dollars issued or confirmed by an
Eligible Lending Institution, and the Agent has received an assignment of
rights under such Letter of Credit or has been irrevocably designated the
payee of such Letter of Credit;
(g) the Account Debtor for such Account is an affiliate or employee
of the Borrower or any of its Subsidiaries;
(h) the Account is subject to any setoff by the Account Debtor, in
which event such Account will be deemed ineligible to the extent of such
setoff,
(i) the Agent has determined by its own credit analysis exercised in
good faith, or the Borrower has reason to know, that there is a
reasonable probability that such Account may not be paid;
(j) the Account is subject to a material claim or dispute by the
Account Debtor, but only to the extent of the amount of such claim or
dispute;
- 3 -
<PAGE>
(k) the Account is subject to any Lien whatsoever, other than Liens
in favor of the Agent, for its benefit and the benefit of the Lenders and
Permitted Liens;
(1) the Account is not evidenced by an invoicewriting;r
(m) the Account is evidenced by chattel paper or any instrument
unless such chattel paper or instrument is pledged to the Agent as
security for the Obligations;
(n) the Account Debtor of such Account is not the U.S. Department of
Defense or Dey Laboratories/E. Merck and such Account, individually or
when aggregate with all other outstanding Accounts having the same
Account Debtor, exceeds ten percent (20%) of the amount of all Eligible
Accounts of the Borrower and its Subsidiaries, in which case such Account
or Accounts will be deemed ineligible to the extent of such excess;
(o) in order to be entitled to collect such Account, the Borrower or
any of its Subsidiaries is required to perform additional services for,
or perform or incur additional obligations to, the Account Debtor in
respect of such Account;
(p) on and after October 31, 1997, the Account Debtor with respect
to such Account is the United States Government or an agency or
instrumentality of the United States, unless the Borrower or its
Subsidiary has complied with the requirements of the Federal Assignment
of Claims Act (32 U.S.C. 3727), or the government of any state of the
United States or agency or instrumentality of such state, unless the
Borrower or its Subsidiary has complied with any state assignment of
claims or similar laws relative to the assignment of such Account and the
right to receive payment thereof by the Agent for its benefit and the
benefit of the Lenders;
(q) the Borrower or its Subsidiary, as the case may be, has not
submitted or supplied to the Account Debtor all necessary documentation
or information for payment of such Account or has not fulfilled all other
obligations in respect thereof,
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<PAGE>
(r) there are procedures or investigations pending or overtly
threatened by or before any Governmental Authority (i) asserting the
invalidity of such Account or the underlying contract related thereto, or
(ii) seeking any determination or ruling that might materially and
adversely affect the validity or enforceability of such Account or the
underlying contract related thereto;
(s) the Account contravenes in any material respect any laws, rules
or regulations applicable thereto (including laws, rules and regulations
relating to usury, consumer protection, truth in lending, fair credit
billing, fair credit reporting, equal credit opportunity, fair debt
collection practices and privacy);
(t) the Account Debtor for such Account is located in any state
imposing conditions on the right of a foreign (out-of-state) creditor to
collect account receivables from Account Debtors located in such state,
and the Borrower or such Subsidiary that is the creditor has not satisfied
such condition; or
(u) the Account arose pursuant to a contract that is not, or was not
at the time of delivery of goods or services giving rise to such Account,
in full force and effect, such contract does not constitute the legal,
valid and binding obligations of the Account Debtor or such Account was
not created in all material respects in accordance with such contract and
all applicable Requirements of Law.
"Eligible Inventory" means the lower of cost or market value of the
Inventory of the Borrower and its Subsidiaries, provided that no Inventory shall
be deemed eligible if-
(a) any warranty or representation contained in this Agreement or
any of the other Loan Documents applicable either to Inventory in general
or to any specific Inventory has been breached in any material respect
with respect to such Inventory;
(b) it is neither (i) located at one of the places of business of
the Borrower or its Subsidiary listed in the Perfection Certificate
delivered to the Agent on November 20, 1996 by the Borrower in connection
with the Security Agreement or in a Jurisdiction where, if such location
is in the United States, all necessary UCC filings have
- 5 -
<PAGE>
been made to perfect the security interest of the Agent under the Security
Agreement in such Inventory and, if located in the United Kingdom or the
Republic of Ireland, all actions and filings shall have been taken or made such
that the Agent and the Lenders shall have a perfected, first-priority security
interest (or the equivalent thereof) in such Inventory under the laws of such
jurisdiction, nor (ii) located at such other place of business which is reported
to the Agent pursuant to Section 4(a) of the Security Agreement, which the Agent
agrees in writing is an acceptable location for Eligible Inventory and which is
located in a jurisdiction where, if such location is in the United States, all
necessary UCC filings have been made to perfect the security interest of the
Agent under the Security Agreement in such Inventory and, if located in the
United Kingdom or the Republic of Ireland, all actions and filings shall have
been taken or made such that the Agent and the Lenders shall have a perfected,
first-priority security interest (or the equivalent thereof) in such Inventory
under the laws of such jurisdiction, nor (iii) in transit from one place of
business to another;
(c) with respect to Inventory located in a public warehouse or at a leased
location, the Agent has not received a bailee letter or landlord's lien waiver,
in form and substance reasonably satisfactory to the Agent;
(d) it is located at any outside processing location;
(e) it does not consist of finished goods or raw materials Inventory
(i.e., it consists of work-in-process);
(f) it consists of returned goods;
(g) it is under consignment to or from any Person;
(h) it is not of good and merchantable quality, free from defects which
would materially and adversely affect the market value thereof,
(i) it does not meet in all material respects all standards in all
material respects imposed by any governmental authority, or any agency,
department or division thereof, having regulatory authority over such Inventory;
- 6 -
<PAGE>
it is obsolete or is otherwise currently not usable or saleable in the ordinary
course of business of the Borrower and its Subsidiaries; or
(k) it consists of Inventory located outside of the United
States, the United Kingdom or the Republic of Ireland.
"Inventory" means any "inventory" (as such term is defined in Section
9-109(4) of the UCC) of the Borrower or any of its Subsidiaries.
SECTION 2. Amendment to Section 1. 1. Section 1. I of the Credit Agreement
is hereby amended by replacing the definition of Revolving Loan Commitment
Amount in its entirety with the following:
"Revolving Credit Commitment Amount" means $6,500,000.
SECTION 3. Amendment to Section 2.2.3. Section 2.2.3 is hereby amended by
replacing said Section in its entirety with the following:
"SECTION 2.2.3. Limitations on Revolving Credit Commitment. No Lender
shall be required to make any Revolving Loan if, after giving effect thereto:
(a) the then aggregate outstanding principal amount
of all Revolving Loans would exceed the Borrowing Base; or
(b) the then aggregate outstanding principal amount
of all Revolving Loans would exceed the Revolving Loan
Commitment Amount less the amount of reserves established
by the Agent pursuant
to Section 2.3; or
(c) the then aggregate outstanding principal amount of such
Lender's Revolving Loans would exceed its Revolving Percentage of an
amount equal to the Revolving Loan Commitment Amount less the amount of
reserves established by the Agent pursuant to Section 2.3.
Subject to the terms hereof, the Borrower may from time to time borrow,
prepay and reborrow Revolving-Loans, in all cases pursuant to the
Revolving Loan Commitment."
-7-
<PAGE>
SECTION 4. Amendment to Article 2. Article 2 of the Credit Agreement is hereby
amended by adding thereto a new Section 2.2.4 as follows:
"SECTION 2.2.4. Advance Ratios. The Borrower acknowledges that the advance
ratios against Eligible Accounts and Eligible Inventory provided in the
definition of "Borrowing Base" included in Section 1. I hereof have been
established based upon the Agent's determination of the loan value of the
Borrower's and its Subsidiaries' Eligible Accounts and Eligible Inventory as of
the date of this Agreement. The Agent may, upon the occurrence of change, event
or other development which the Agent determines, in its good faith discretion,
reasonably likely to have a Material Adverse Change, decrease the advance ratios
against Eligible Accounts and Eligible Inventory, and any such decrease shall
become effective immediately upon the Agent's giving notice thereof to the
Borrower."
SECTION 5. Amendment to Section 6. 1. 1. Section 6. 1.1 of the Credit
Agreement is hereby amended by deleting the "and" appearing immediately after
clause (i) thereof, by deleting the period appearing immediately after clause 0)
thereof and inserting in lieu thereof and" and by inserting the following new
clause (k):
(k) within fifteen (I 5) days after the close of each calendar
month, a Borrowing Base Certificate as of the last day of the preceding
calendar month and, if the Borrower shall elect or the Agent shall request
in writing, a Borrowing Base Certificate as of a more recent date (any
such Borrowing Base Certificate as of a more recent date requested by the
Agent shall be delivered no later than the Business Day immediately
following such date).
SECTION 6. Amendment to Exhibits. The Credit Agreement is hereby amended
by adding thereto a new Exhibit I in the form of Exhibit I attached to this
Amendment.
SECTION 7. Continuing Effectiveness of Credit Agreement. The Credit
Agreement and each of the other Loan Documents shall remain in full force and
effect in accordance with their respective terms, except as expressly amended or
modified by this Amendment.
SECTION 8. Cost and Expenses. The Borrower agrees to pay all out-of-pocket
expenses reasonably incurred the Agent for the negotiation, preparation,
execution and delivery of this Amendment (including reasonable fees and expenses
of counsel to the Agent).
- 8 -
<PAGE>
SECTION 9. Effectiveness. This Amendment shall become effective upon
receipt by the Agent of (a) a copy of this Amendment, duly executed by each of
the Borrower and the Agent, and duly acknowledged and consented to by Brunswick
Biomedical Technologies, Inc. in the form attached to this Amendment, (b) an
original Revolving Note, dated as of the date of this Amendment, in the
principal amount of $6,500,000, and (c) a Borrowing Base Certificate, in the
form of Exhibit I to this Amendment, as of the last day of July, 1997. Upon
delivery of the Revolving Note referred to in clause (b) above, the Borrower's
existing Revolving Note shall be marked "cancelled" and returned to the
Borrower.
SECTION 10. Additional Obligations. In order to induce the Lenders to
enter into this Amendment and to increase the Revolving Credit Commitment Amount
as set forth herein, the Borrower hereby agrees that, on or before September 30,
1997, it shall deliver to the Agent the following:
(a) a certificate, dated as of the date of this Amendment, of
the Secretary of each Loan Party as of such date as to:
(i) resolutions of its Board of Directors, then in full
force and effect authorizing the execution, delivery and
performance of this Amendment and the other documents
referenced in Section 9 of this Amendment and the related
transactions contemplated hereby and thereby, and
(ii) the incumbency and signatures of those of its
officers authorized to act with respect to such documents,
upon which certificate each Lender may conclusively rely until
it shall have received further certificates of the Secretary
of such Loan Party canceling or amending such prior
certificate;
(b) copies of the Organic Documents of each Loan Party as of a
recent date, certified by, in the case of charters, the appropriate
Governmental Authority of the State of such Loan Party's
incorporation and, in the case of its other Organic Documents, such
Loan Party's Secretary, which documents shall be satisfactory to the
Agent;
(c) a so-called "good standing" certificate with respect to
each Loan Party as of a recent date from the appropriate
Governmental Authority of the State of its incorporation;
- 9 -
<PAGE>
(d) evidence of qualification of each Loan Party as of a
recent date to do business in each other jurisdiction in which the
failure to so qualify could result in a Material Adverse Change;
(e) an opinion letter, dated as of the date of this
Amendment, addressed to the Agent and all Lenders, from counsel to
the Borrower and its Subsidiaries in form and substance reasonably
satisfactory to the Agent covering such matters as the Agent may
reasonably request regarding this Amendment and the transactions
contemplated hereby; and
(f) such other documents (certified if requested) as the
Agent or the Required Lenders may reasonably request with respect
to this Amendment and the other documents referenced in Section 9
of this Amendment, the transactions contemplated hereby or thereby,
or any Organic Document, Contractual Obligation or Regulatory
Approval.
The Borrower hereby further agrees that the failure to deliver any of the above
items on or prior to September 30, 1997 shall constitute and Event of Default
under the Credit Agreement.
SECTION 11. Headings. The various headings of this Amendment are inserted
for convenience only and shall not affect the meaning or interpretation of this
Amendment or any provision hereof.
SECTION 12. Counterparts. This Amendment may be executed by the parties
hereto in several counterparts, each of which shall be deemed to be an original
and all of which shall constitute together but one and the same agreement. This
Amendment shall become effective when counterparts hereof executed on behalf of
the Borrower and each Lender (or notice thereof satisfactory to the Agent) shall
have been received by the Agent and notice thereof shall have been given by the
Agent to the Borrower and each Lender.
SECTION 13. Governing Law. THIS AMENDMENT SHALL BE DEEMED TO BE A CONTRACT
MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK.
SECTION 14. Successors and Assigns. This Amendment shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors and assigns; provided, however, that the Borrower may not assign or
transfer its rights or obligations
- 10-
<PAGE>
hereunder or under the Credit Agreement except in accordance with the terms of
the Credit Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
MERIDIAN MEDICAL TECHNOLOGIES
(as successor by merger to Brunswick
Biomedical Corporation)
By:
-----------------------------------
James H. Miller
President
[CORPORATESEAL]
ING (U.S.) CAPITAL CORPORATION,
(formerly known as Internationale
Nederlanden (U.S.) Capital
Corporation) in its capacity as lender
By:
-----------------------------------
Darren J. Wells
Managing Director
[SIGNATURE PAGE TO SECOND AMENDMENT]
<PAGE>
ACKNOWLEDGMENT AND CONSENT
The undersigned hereby acknowledges receipt of a copy of the foregoing
Amendment, consents to the terms and provisions set forth therein, and agrees
that the Subsidiary Guaranty dated as of April 15, 1996 as amended and
supplemented to the date hereof (the "Subsidiary Guaranty") made by the
undersigned, in favor of Internationale Nederlanden (U.S.) Capital Corporation
("ING") and such other Lenders as are, or may from time to time become, parties
to the Credit Agreement, and ING as Agent for such Lenders, will continue in
full force and effect without diminution or impairment notwithstanding the
execution and delivery of the amendment. The undersigned further acknowledges
and agrees that, upon effectiveness of the amendment and from and after the date
thereof, each reference to the Credit Agreement in the Subsidiary Guaranty and
each other Loan Document (as such term is defined in the Credit Agreement) to
which any of the undersigned is a party shall mean and be a reference to the
Credit Agreement as amended by the foregoing amendment.
BRUNSWICK BIOMIEDICAL TECHNOLOGIES, INC.
By:
-------------------------------
James H. Miller
President
[SIGNATURE PAGE TO SECOND AMENDMENTI
<PAGE>
BORROWING BASE CERTIFICATE
In accordance with that certain Credit Agreement, dated as of April 15,
1996. as amended by that certain First Amendment to Credit Agreement, dated as
of October 25, 1996., that certain Assumption Agreement, dated as of November
20, 1996, and that certain Second Amendment to Credit Agreement, dated as of
September 2, 1997 (and as amended, restated, supplemented, extended or otherwise
modified from time to time, the "Credit Agreement"; capitalized terms used
herein and not defined herein shall have the meaning ascribed to them in the
Credit Agreement), among MERIDIAN MEDICAL TECHNOLOGIES, INC. (as successor by
merger to Brunswick Biomedical Corporation) (the "Borrower"), the Lenders which
are, or may from time to time become, party thereto (the "Lenders") and ING
(U.S.) CAPITAL CORPORATION (formerly known as Internationale Nederlanden (U.S.)
Capital Corporation), as Agent for the Lenders (in such capacity, the "Agent"),
the undersigned hereby certifies that as of the date indicated below (the
"Borrowing Base Calculation Date") the amounts and representations set forth
below are true and correct.
Borrowing Base Calculation Date: 7/31/97
The calculations contained herein are based upon Eligible Accounts and Eligible
Inventory that meet the criteria set forth in the Credit Agreement for Eligible
Accounts and
Eligible Inventory:
1. Amount of Eligible Accounts: (detailed listing attached) $7,483,784
2. Item I multiplied by 80%: $5,987,027
3. Amount of Eligible Inventory: (detailed listing attached) $4,240,249
4. Item 3 multiplied by 30%: $1,272,075
5. Borrowing Base: [Item 2 plus Item 4] $7,259,102
The information contained in this Borrowing Base Certificate is true and
correct in all material respects as of the Borrowing Base Calculation Date.
IN WITNESS WHEREOF, the Borrower has caused this Certificate to be
executed and delivered and the certification and warranties contained herein to
be made by an authorized officer of the Borrower authorized to execute and
deliver this Certificate.
Dated this 2nd day of September, 1997.
MERIDIAN MEDICAL TECHNOLOGIES, INC.
By:
------------------------------
Name:
Title:
Exhibit 24.1
CONSENT OF INDEPENDENT ACCOUNTANTS
Consent of Ernst & Young LLP, Independent Auditors
We consent to the incorporation by reference in the Registration Statements
(Form S-3 No. 333-18279; Form S-8 Nos. 33-46981, 33-34045, 33-26681 and 2-80908)
and in the related prospectus of Meridian Medical Technologies, Inc. or its
predecessor, Survival Technologies, Inc. of our report dated September 4, 1997,
except for note 13, as to which the date is October 21, 1997, with respect to
the consolidated financial statements and schedule of Meridian Medical
Technologies, Inc. included in this Annual Report (Form 10-K) for the year ended
July 31, 1997.
/s/ Ernst & Young LLP
Washington, D.C.
October 27, 1997
Exhibit 24.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (File Nos. 33-18279, 33-46981, 33-34045, 33-26681 and
2-80908) of Meridian Medical Technologies, Inc. of our report date October 27,
1997 appearing under Item 8 of the Annual Report of Form 10-K of Meridian
Medical Technologies, Inc. for year ended July 31, 1997.
/s/ PRICE WATERHOUSE LLP
Washington, DC
October 28, 1997
Exhibit 24.3
CONSENT OF INDEPENDENT ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
report included in this form 10-K into the Company's previously filed
registration Statements (File Nos. 33-46981, 33-34045, 33-26681 and 2-80908)on
Form S-8 and registration statement (File No. 333-18279) on Form S-3.
/s/ ARTHUR ANDERSON LLP
Boston Massachusetts
October 29, 1997
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<COMMON> 291,300
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<TOTAL-LIABILITY-AND-EQUITY> 44,082,200
<SALES> 40,664,700
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<CGS> 25,620,900
<TOTAL-COSTS> 16,742,800
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<INTEREST-EXPENSE> 2,567,000
<INCOME-PRETAX> (4,094,000)
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