UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from: ________________ to _______________
Commission file number: 0-5958
MERIDIAN MEDICAL TECHNOLOGIES, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 52-0898764
- ------------------------------- -------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
10240 Old Columbia Road, Columbia, Maryland 21046
- ------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 410-309-6830
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES [X] NO [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding as of December 14, 1998
- ---------------------------- -----------------------------------
Common Stock, $.10 par value 2,991,080 Shares
<PAGE>
MERIDIAN MEDICAL TECHNOLOGIES, INC.
FORM 10-Q
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. Consolidated Financial Statements (Unaudited except July 31, 1998 balance sheet)
Consolidated Balance Sheets as of
October 31, 1998 and July 31, 1998............................................................... 4
Consolidated Statements of Operations for
the Three Months Ended October 31, 1998 and 1997 ................................................ 5
Consolidated Statements of Cash Flows for
the Three Months Ended October 31, 1998 and 1997................................................. 6
Notes to Consolidated Financial Statements.......................................................... 7
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................................................. 8
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K................................................................... 10
SIGNATURES.......................................................................................................... 11
</TABLE>
2
<PAGE>
MERIDIAN MEDICAL TECHNOLOGIES, INC.
FORM 10-Q
MMT's business plan is to operate as a medical device company focusing on 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 group also
supplies customized drug delivery system design, pharmaceutical research and
development, and sterile product manufacturing to pharmaceutical and
biotechnology companies. The STI Government Systems business focuses on the
worldwide market for auto-injectors used by military personnel for
self-administration of nerve agent antidotes, morphine and diazepam. The
Cardiopulmonary Systems business focuses on non-invasive cardiac diagnostics and
telemedicine. It is proceeding on schedule with the research and development of
the PRIME ECG(TM) program, an 80-lead cardiac mapping system for rapid and
improved diagnostic accuracy of cardiac ischemia.
Certain statements in this Quarterly Report on Form 10-Q 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 generally herein, 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; (vi)
delays, costs and uncertainties associated with government approvals required to
market new drugs and medical devices; (vii) costs of the Company's EpiPen
voluntary recall and/or EpiEZPen voluntary product exchange associated with
differences from management's estimate of the number of returned units, total
costs or adverse impact on future sales; (vii) success and timing of cost
reduction programs; (ix) adequacy of product liability insurance; (x) factors
related to PRIME ECG including successful product completion, degree of market
acceptance and ability to obtain strategic alliances; (xi) ability of
competitors to design around the Company's patent protection; and (xii) factors
relating to Year 2000 issues.
3
<PAGE>
MERIDIAN MEDICAL TECHNOLOGIES, INC.
FORM 10-Q
PART I. FINANCIAL INFORMATION
- ------------------------------
ITEM 1. Financial Statements
MERIDIAN MEDICAL TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
October 31, July 31,
Assets 1998 1998
------ ---------- -------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 338 $ 284
Restricted cash 273 271
Receivables, less allowances of $335 and $325, respectively 7,709 6,787
Inventories 11,536 9,157
Deferred income taxes 1,661 1,661
Other current assets 654 681
---------- ----------
Total current assets 22,171 18,841
---------- ----------
Property, plant and equipment 20,179 19,914
Less - Accumulated depreciation 4,060 3,525
---------- ----------
Net property, plant and equipment 16,119 16,389
---------- ----------
Deferred financing fees 810 836
Excess of cost over net assets acquired, net 8,058 8,325
Other intangible assets, net 2,355 2,456
---------- ----------
Total assets $ 49,513 $ 46,847
========== ==========
Liabilities and Shareholders' Equity
------------------------------------
Current liabilities:
Accounts payable and other accrued liabilities $ 7,303 $ 7,255
Note payable to bank 6,291 3,988
Customer deposits 129 221
Current portion of long-term debt 1,036 786
---------- ----------
Total current liabilities 14,759 12,250
---------- ----------
Long-term debt - notes payable, net of discount 18,288 18,453
Long-term debt - other 314 397
Deferred income taxes 1,769 1,769
Other non-current liabilities 719 640
Shareholders' equity:
Common stock
Par value $.10 per share; 18,000,000 shares authorized;
2,991,080 and 2,990,930 shares issued and outstanding 299 299
Additional capital 32,083 32,083
Cumulative translation adjustment 45 (15)
Accumulated deficit (18,445) (18,711)
Unearned stock option compensation (105) (105)
Treasury stock, at cost (213) (213)
----------- -----------
Total shareholders' equity 13,664 13,338
---------- ----------
Total liabilities and shareholders' equity $ 49,513 $ 46,847
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
4
<PAGE>
MERIDIAN MEDICAL TECHNOLOGIES, INC.
FORM 10-Q
MERIDIAN MEDICAL TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Three Months Ended
October 31,
1998 1997
---- ----
Net sales $ 10,850 $ 10,643
Cost of sales 6,673 6,508
--------- ---------
Gross profit 4,177 4,135
Selling, general, and administrative expenses 1,830 1,372
Research and development expenses 248 366
Depreciation and amortization 902 891
--------- ---------
2,980 2,629
--------- ---------
Operating income 1,197 1,506
Other (expense) income:
Interest expense (848) (713)
Other income 10 8
--------- ---------
(838) (705)
---------- ----------
Income before income taxes 359 801
Provision for income taxes 93 186
--------- ---------
Net income $ 266 $ 615
========= =========
Net income per share:
Basic $ .09 $ .21
========= =========
Diluted $ .08 $ .20
========= =========
Weighted average shares:
Basic 2,991 2,915
Diluted 3,281 3,138
The accompanying notes are an integral part of these consolidated
financial statements.
5
<PAGE>
MERIDIAN MEDICAL TECHNOLOGIES, INC.
FORM 10-Q
MERIDIAN MEDICAL TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended
October 31,
1998 1997
---- ----
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 266 $ 615
Adjustments to reconcile net income to net cash (used
for) provided by operating activities:
Depreciation and amortization 902 891
Amortization of notes payable discount and deferred
financing fees 111 292
Changes in assets and liabilities
Receivables (922) 2,180
Inventories (2,379) (984)
Other current assets 27 13
Accounts payable and other accrued liabilities 48 (1,796)
Other 48 4
---------- -----------
Net cash (used for) provided by operating activities (1,899) 1,215
INVESTING ACTIVITIES
Purchase of fixed assets (265) (456)
(Increase) decrease in restricted cash (2) -
----------- -----------
Net cash used for investing activities (267) (456)
FINANCING ACTIVITIES
Net proceeds from line of credit 2,303 99
Net (payment) on long-term debt - (250)
Net (payment) proceeds on other long-term debt (83) 9
Proceeds from issuance of common stock - 64
---------- -----------
Net cash provided by (used for) financing activities 2,220 (96)
---------- ------------
Net increase in cash 54 663
Cash at beginning of period 284 23
---------- -----------
Cash at end of period $ 338 $ 686
========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
6
<PAGE>
MERIDIAN MEDICAL TECHNOLOGIES, INC.
FORM 10-Q
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments (consisting of normal
recurring accruals) necessary to present fairly the Company's financial
position as of October 31, 1998 , and the results of its operations and
cash flows for the three month periods ended October 31, 1998 and 1997.
The results of operations for the three month period ended October 31,
1998 are not necessarily indicative of the results that may be expected
for the fiscal year ending July 31, 1999.
2. Inventories consisted of the following:
<TABLE>
<CAPTION>
October 31, July 31,
1998 1998
---- ----
<S> <C> <C>
Components and subassemblies $ 7,620 $ 6,616
Work in process 4,157 2,807
Finished goods 606 193
------------ ------------
12,383 9,616
Less: inventory valuation allowance (847) (459)
------------- -------------
$ 11,536 $ 9,157
============ ============
</TABLE>
During the quarter ended October 31, 1998, the Company capitalized
$373,000 of software development costs related to a product under
development, bringing the total capitalized to $918,000.
3. In June 1997, the Financial Accounting Standards Board issued Statement
No. 130, Reporting Comprehensive Income, which was adopted by the
Company in its October 1998 financial statements. This Statement
establishes standards for reporting and display of comprehensive income
and its components. In accordance with the Statement, a reconciliation
of net income to comprehensive income is as follows:
<TABLE>
<CAPTION>
Three Months Ended October 31,
1998 1997
---- ----
<S> <C> <C>
Net income $ 266 $ 615
Foreign exchange translation adjustment 60 50
------------ ------------
Comprehensive income $ 322 $ 665
============ ============
</TABLE>
7
<PAGE>
MERIDIAN MEDICAL TECHNOLOGIES, INC.
FORM 10-Q
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The Quarter in Review
MMT reported net income of $266,000, $.09 basic and $.08 diluted earnings per
share on sales of $10.9 million for the quarter ended October 31, 1998, the
first quarter of fiscal 1999. This compares with net income of $615,000, $0.21
basic and $.20 diluted earnings per share, on sales of $10.6 million in the same
period of fiscal 1998.
Revenues of MMT's three areas of business and total gross profit for the
quarters ended October 31, 1998 and 1997 are as follows:
Three months ended October 31,
($thousands) 1998 1997
---- ----
Drug Delivery Systems $ 6,021 $ 5,066
STI Government Systems 4,676 5,340
Cardiopulmonary Systems 153 237
----------------- -----------------
Total Revenues 10,850 10,643
================= =================
Gross Profit $ 4,177 $ 4,135
================= =================
Gross Profit % 38.5% 38.9%
Drug Delivery Systems business revenue in the fiscal first quarter ended October
31, 1998 was $6.0 million, $1.0 million higher than in the comparable prior year
period. The 19% increase in revenue resulted from a 22% increase in EpiPen sales
partially offset by lower R&D revenues. First quarter activities of the Drug
Delivery Systems business included a continuation of the FDA approval process
for generic drugs under the alliance with Mylan Laboratories with revenues
anticipated to start during fiscal 1999. The Company continued its program to
strengthen its quality processes with the assistance of consulting firms
specializing in biotechnology and medical device manufacturing. The involvement
of outside consultants is expected to be completed in December 1998.
The Company continued to supply EpiPens to satisfy obligations from the May 8,
1998 recall. A total of $3.3 million of EpiPens were supplied during the first
quarter to compensate for product returns and to reimburse for cash costs.The
October 31, 1998 product recall reserve balance was $636,000. The reserve
balance is based on management's estimates of the cash costs and the number of
returned units. The Company assesses the adequacy of this reserve on a quarterly
basis, and any necessary adjustments are reflected in income. Second quarter
1999 EpiPen sales will be significantly lower than the prior year second quarter
due to the continued shipment of free product.
STI Government Systems revenues were $4.7 million in the first quarter of fiscal
1999 compared to $5.3 million in the prior year comparable period. The lower
revenues resulted primarily from the absence of the $2.5 million UKMoD project,
which shipped mostly in the first quarter of 1998. This was partially offset by
$1.4 million of higher sales to the US DoD, reflecting their procurements for
military readiness. Additionally, civil defense revenues of $73,000 were
achieved in the current quarter compared to no revenues in last year's fiscal
first quarter.
The Company continued contract negotiations with the US DoD for renewal of its
Base Maintenance contract. Similar to the last renewal in 1995, the contract was
extended for six months to allow continuation of procurements while the
three-year renewal contract is being finalized. Progress continued toward
implementation of the MA project which will provide for production of a
two-chambered auto-injector. Construction on clean
8
<PAGE>
MERIDIAN MEDICAL TECHNOLOGIES, INC.
FORM 10-Q
room facilities for this project is scheduled to start in the fiscal third
quarter. Inquiries and orders continued to build momentum in the Civil Defense
area, with orders received from Philadelphia and San Francisco for second
quarter shipments.
Cardiopulmonary Systems revenues were $153,000 in the current year fiscal first
quarter compared to $237,000 in the prior year fiscal first quarter. The lower
revenues reflected continued slower sales of the CardioBeeper. Expansion of the
CardioBeeper product line into Europe continued, with orders received for
delivery starting in second quarter of 1999. In late fiscal 1998, the
Cardiopulmonary Systems business announced a new ECG monitor called the
CardioPocket. The product has received 510(k) approval from the US FDA and
revenues are expected to start in Europe in the second quarter of 1999.
Development continues on the PRIME ECG cardiac mapping system. The Company
expects to obtain a CE Mark during the first calendar quarter of 1999 and
discussions continue with several potential alliance partners.
Gross profits were $4.2 million or 38.5% of revenues during the first quarter of
1999, which was comparable with the prior year.
Operating costs were $3.0 million in the fiscal 1999 first quarter, $351,000
higher than in the first quarter of last year. Selling, general and
administrative expenses (SG&A) were $458,000 higher primarily due to consulting
expenses associated with the quality systems review, and higher business
promotion and professional fees. Partially offsetting the higher SG&A costs were
lower R&D costs. During the fiscal 1999 first quarter, the Company capitalized
PRIME software development costs amounting to $373,000, since technological
feasibility was established in December 1997.
Interest expense was $848,000 in the first quarter of fiscal 1999, an increase
of $135,000 over the comparable prior year period. The increased cost reflects
higher long-term debt and increased borrowings on the working capital line of
credit. Increased interest costs should continue until obligations from the
EpiPen recall are completed.
The provision for income taxes in the first quarter of fiscal 1999 was $93,000
reflecting an estimated effective tax rate of 26% for the year. The tax
provision incorporates estimated benefits from utilization of operating loss
carryforwards.
Liquidity and Capital Resources
Total cash as of October 31, 1998 was $338,000, an increase of $54,000 from the
prior year ended July 31, 1998. The Company used $1.9 million of cash for
operations in the first quarter of fiscal 1999 attributable mostly to the
building of inventory to continue to replace returned EpiPens and to fill
current USDoD orders. Investing activities in the three months of fiscal 1999
used $267,000 of cash for capital additions. Financing activities generated $2.2
million, primarily from borrowings on the asset based working capital line of
credit from ING CAPITAL. During the first quarter, the Company increased its
asset based working capital line of credit maximum availability to $8.5 million
from $6.5 million. In connection with the increased working capital line of
credit with ING CAPITAL, capital expenditures in fiscal 1999 have been limited
to $3.0 million. Availability under the working capital lines of credit was $2.5
million at October 31, 1998.
Working capital at October 31, 1998 was $7.4 million, up from $6.6 million at
July 31, 1998. The increase was primarily attributable to higher inventories
($2.4 million) and higher receivables ($922,000) partially offset by higher
current liabilities ($2.5 million) mostly from increased borrowings on the
credit lines. At October 31, 1998, accounts receivable were $7.7 million,
representing 64 days-sales-outstanding, and inventories were $11.5 million
representing a turn-over rate of 2.3 times per year. The inventory increase was
due primarily to preparation for delivery of STI Government orders during clean
room construction for the MA project at the Company's St. Louis manufacturing
site.
9
<PAGE>
MERIDIAN MEDICAL TECHNOLOGIES, INC.
FORM 10-Q
PART II - OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K:
(a) Exhibits
Exhibit 10.1 Form of Change of Control Agreements dated October 26,
1998 between Meridian Medical Technologies, Inc. and
each of J. Donald Ferry, Gerald L. Wannarka and
Peter A. Garbis
Exhibit 10.2 Sixth Amendment to the Credit Agreement dated
November 6, 1998, between Meridian Medical
Technologies, Inc. and Internationale Nederlanden
(U.S.) Capital Corporation.
Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the three months ended October
31, 1998.
10
<PAGE>
MERIDIAN MEDICAL TECHNOLOGIES, INC.
FORM 10-Q
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MERIDIAN MEDICAL TECHNOLOGIES, INC.
-----------------------------------
Registrant
December 14, 1998 By: /S/ James H. Miller
----------------- ---------------------------------
Date James H. Miller
President and
Chief Executive Officer
(Principal Executive Officer)
December 14, 1998 By: /S/ G. Troy Braswell
----------------- ---------------------------------
Date G. Troy Braswell
Vice President-Finance
and Chief Financial Officer
(Principal Financial and
Accounting Officer)
11
Exhibit 10.1
CHANGE OF CONTROL AGREEMENT
AGREEMENT made as of this 26th day of October, 1998, between Meridian
Medical Technologies, Inc., a Delaware corporation (hereinafter "Company"), and
_________________ (hereinafter "Executive").
WHEREAS, the Company wishes to assure the continued availability of the
Executive's services and to create an environment which will promote the
Executive's giving impartial and objective advice in circumstances resulting
from the possibility of a Change of Control (as herein defined) of the Company;
and
WHEREAS, the Company and the Executive wish to provide the Executive
with financial protection in the event significant changes in the Executive's
employment status occur following a Change of Control of the Company.
NOW, THEREFORE, the Company and the Executive, in consideration of the
terms and conditions set forth herein and other valuable consideration, receipt
and sufficiency of which are hereby acknowledged, mutually covenant and agree as
follows:
1. Term.
The term of this Agreement shall commence on the date hereof and
terminate on October 1, 2001 unless the Executive's employment with the Company
or a subsidiary is sooner terminated prior to a Change of Control in which case
it will terminate upon the termination of the Executive's employment (the
"Term"), provided, however, if a Change of Control occurs prior to October 1,
2001, then this Agreement will terminate on the second anniversary of the Change
of Control.
2. Payments Upon Change of Control and Termination Event.
The Company shall make payments to the Executive as provided for in
paragraph 4 hereof upon the occurrence of both a Change of Control of the
Company and a Termination Event, as such terms are defined in paragraph 3.
3. Definitions.
(a) "Base Salary" shall mean an amount equal to the Executive's highest
annual base salary after the date hereof and preceding a Termination Event.
(b) "Cause" means (i) the Executive's failure or refusal to perform
satisfactorily any duties reasonably required of the Executive by the Company
(other than by reason of disability), after reasonable demand for substantial
performance is delivered by the Company specifically identifying the manner in
which the Company believes the Executive has not performed his duties; (ii) the
commission by the Executive of a felony or the perpetration by the Executive of
a dishonest act against or breach of fiduciary duty toward the Company or any of
its customers, employees, or vendors; or (iii) any willful act or omission by
the Executive which is injurious in any material respect to the financial
<PAGE>
condition or business reputation of the Company. For purposes of this
definition, no act, or failure to act, on the Executive's part shall be
considered "willful" unless done, or omitted to be done, by him not in good
faith and without reasonable belief that his act or omission was in the best
interests of the Company.
(c) A "Change of Control" shall be deemed to have occurred if any of
the following have occurred prior to the expiration of the Term:
(i) any person or group of persons (as defined in Section
13(d) and 14(d) of the Securities Exchange Act of 1934, as amended ("1934 Act"))
together with its affiliates, excluding employee benefit plans of the Company,
is or becomes, directly or indirectly, the "beneficial owner" (as defined in
Rule 13d-3 promulgated under the 1934 Act) of securities of the Company
representing 30% or more of the combined voting power of the Company's then
outstanding securities;
(ii) as a result of a proxy contest, individuals who prior to
the conclusion thereof constituted the Board of Directors of the Company (the
"Board") (including for this purpose any new director whose election or
nomination for election by the Company's shareholders in connection with such
proxy contest was approved by a vote of at least two-thirds (2/3) of the
directors then still in office who were directors prior to such proxy contest)
cease to constitute at least a majority of the Board (excluding any Board seat
that is vacant or otherwise unoccupied);
(iii) during any period of twenty-four consecutive months,
individuals who at the beginning of such period constituted the Board (including
for this purpose any new director whose election or nomination for election by
the Company's shareholders was approved by a vote of at least two-thirds (2/3)
of the directors then still in office who were directors at the beginning of
such period) cease for any reason to constitute at least a majority of the Board
(excluding any Board seat that is vacant or otherwise unoccupied);
(iv) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation or entity regardless of
which entity is the survivor, other than a merger or consolidation which would
result in the voting securities of the Company outstanding immediately prior to
continuing to represent (either by remaining outstanding or being converted into
voting securities of the surviving entity) at least 60% of the combined voting
power of the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation;
(v) the stockholders of the Company approve a plan of complete
liquidation or winding-up of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the Company's assets;
or
(vi) any other event which the Board of Directors determines
should constitute a Change of Control.
-2-
<PAGE>
(d) A "Termination Event" shall be deemed to have occurred if, within
the twenty-four (24) month period following a Change of Control, (1) the
Executive's employment with Company is terminated by the Company without Cause,
other than by reason of death, disability or retirement; or (2) the Executive
voluntarily terminates his employment with the Company within 30 days after the
occurrence of any of the following events:
(i) the assignment to the Executive of any duties inconsistent
in any material respect with the Executive's position (including status,
offices, titles and reporting requirements), authority, duties or
responsibilities immediately prior to the Change of Control, or any other action
by the Company which results in a diminution in any material respect in such
position, authority, duties or responsibilities, excluding for this purpose an
isolated, insubstantial and inadvertent action not taken in bad faith that is
remedied by the Company promptly after receipt of notice thereof given by the
Executive;
(ii) a reduction by the Company in the Executive's annual base
salary as in effect on the date hereof, as the same may be increased from time
to time;
(iii) the Company's requiring the Executive to be based at any
office or location that is more than fifty (50) miles from the Executive's
office or location immediately prior to the Change of Control;
(iv) the failure by the Company (i) to continue in effect any
bonus, stock option, or other cash or equity-based incentive plan in which the
Executive participates immediately prior to a Change in Control that is material
to the Executive's total compensation, unless an arrangement not materially less
favorable to the Executive (embodied in an ongoing substitute or alternative
plan) has been made with respect to such plan, or (ii) to continue the
Executive's participation in such plan (or in such substitute or alternative
plan) on a basis at least as favorable, both in terms of the amount of benefits
provided and the level of the Executive's participation relative to other
participants, as existed immediately prior to the Change of Control; or
(v) the failure by the Company to continue to provide the
Executive with benefits that in the aggregate are not materially less favorable
to the Executive than those received by the Executive under the Company's
pension (including, but not limited to, tax-qualified plans), life insurance,
health, accident, disability or other welfare plans in which the Executive was
participating, at costs not materially greater than to those paid by the
Executive, immediately prior to the Change of Control.
-3-
<PAGE>
4. Cash Payments.
In the event of a Termination Event, the Company agrees to continue to
pay to the Executive, the Executive's Base Salary for a period of twelve (12)
months.
5. Death of Executive.
If the Executive dies before receiving all payments payable to him
under paragraph 4 of this Agreement, the Company shall continue to make payments
pursuant to paragraph 4 hereof to the Executive's spouse, or if the Executive
leaves no spouse, to the estate of the Executive.
6. Health and Life Insurance Benefits.
The Company agrees to maintain, for a period of twelve (12) months
following the date of the occurrence of a Termination Event, the Executive's
eligibility for and participation in any health and life insurance plans
("Insurance Benefits"), in which the Executive was eligible to participate prior
to the Termination Event and upon the same basis and cost as prior to the
Termination Event, provided however, that if, for any reason, the Company is
unable to continue the Executive's participation in any such plan, the Company
shall cause the Executive to be eligible to participate in a substantially
equivalent arrangement upon substantially the same basis and cost as prior to
the Termination Event. Notwithstanding any other provision of this Agreement to
the contrary, if in connection with the termination of the Executive's
employment for any reason the Company is obligated by law or by contract
(including any employment or severance agreement other than this Agreement) or
by Company plan or policy to provide the Executive with life or health insurance
after the Executive's termination (or a cash payment in lieu thereof), then any
Insurance Benefits hereunder shall be reduced by the amount of any payments and
similar benefits described above, as applicable.
7. No Duty to Seek Other Employment.
Amounts payable to the Executive under this Agreement shall not be
reduced by the amount of any compensation received by the Executive from any
other employer or source, and the Executive shall not be under any obligation to
seek other employment or gainful pursuit as a result of this Agreement.
8. Reduction of Payments.
Notwithstanding any other provision of this Agreement, in the event
that any payment or benefit received or to be received by the Executive in
connection with a Change of Control or the termination of the Executive's
employment (whether pursuant to the terms of this Agreement or any other plan,
arrangement or agreement (all such payments and benefits, including the payments
and benefits provided for hereunder, being hereinafter called "Total Payments")
would not be deductible (in whole or part), by the Company, an affiliate or
other person or entity making such payment or providing such benefit as a result
of section 280G of the Internal Revenue Code of 1986, as amended,
-4-
<PAGE>
then, to the extent necessary to make such portion of the Total Payments
deductible, (A) the cash payments provided for by paragraph 4 hereof shall first
be reduced (if necessary, to zero), and (B) the benefits provided for by
paragraph 7 hereof shall next be reduced. For purposes of this limitation, no
portion of the Total Payments the receipt or enjoyment of which the Executive
shall have waived by written notice to the Company prior to the date of payment
shall be taken into account. All determinations required to be made under the
provisions of this paragraph 8 hereof shall be made by tax counsel selected by
the Company's independent auditors and reasonably acceptable to the Executive.
9. Payment of Compensation to Termination Date.
In addition to any other payments payable to the Executive hereunder,
the Company shall pay the Executive full compensation and all other amounts and
benefits to which the Executive is entitled through the termination of his
employment.
10. No Right to Continued Employment.
This Agreement shall not confer upon the Executive any right with
respect to continuance of employment by the Company or any subsidiary, nor shall
it interfere in any way with the right of his employer to terminate his
employment at any time. No payments hereunder shall be required except upon the
occurrence of both a Change of Control of the Company and a Termination Event.
Thus, except as specifically provided herein, no payments hereunder shall be
made on account of termination of the Executive's employment (i) upon the
Executive's death, disability or retirement, (ii) by the Company with or without
cause or (iii) upon the Executive's voluntary termination.
11. Waiver of Breach.
Waiver by any party of a breach of any provision of this Agreement
shall not operate as or be construed as a waiver by such party of any subsequent
breach hereof.
12. Invalidity.
The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision, which
shall remain in full force and effect.
13. Entire Agreement; Written Modification; Termination.
This Agreement contains the entire agreement between the parties
concerning the matters covered hereby. No modification, amendment or waiver of
any provision hereof shall be effective unless in writing specifically referring
hereto and signed by the party against whom such provision as modified or
amended or such waiver is sought to be enforced. This Agreement shall terminate
as of the time the Company makes the final payment which it
-5-
<PAGE>
may be obligated to pay hereunder or provide the final benefit which it may be
obligated to provide hereunder. This Agreement supersedes and replaces any
earlier agreement on the subject matter hereof.
14. Counterparts.
This Agreement may be made and executed in counterparts, each of which
may be considered an original for all purposes.
15. Governing Law.
This Agreement is governed by and is to be construed and enforced in
accordance with the laws of the State of Delaware.
IN WITNESS WHEREOF, the undersigned parties have executed or caused to
be executed this Agreement as of the day and year first above written.
MERIDIAN MEDICAL TECHNOLOGIES, INC.
By:
-------------------------------------
James H. Miller
President and Chief Executive Officer
"EXECUTIVE"
-------------------------------------
Exhibit 10.2
SIXTH AMENDMENT TO CREDIT AGREEMENT
THIS SIXTH AMENDMENT TO CREDIT AGREEMENT (the "Amendment"), dated as of
November 6,1998, among MERIDIAN MEDICAL TECHNOLOGIES, INC. (as successor by
merger to Brunswick Biomedical Corporation) a Delaware corporation (the
"Borrower"), and ING (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 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 Credit Commitment from $6,500,000 to $8,500,000 and to
reflect a change in the financial covenants, 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 1.1 of the Credit Agreement
is hereby amended by replacing the definition of "Revolving Loan Commitment
Amount" in its entirety with the following:
"Revolving Loan Commitment Amount" means (i) for the period commencing
November 6,1998 and ending October 31, 1999, $8,500,000, and (ii) for the
period commencing November 1, 1999 and ending on the Revolving Loan
Commitment Termination Date, $6,500,000.
SECTION 2. Amendment to Section 1. 1. Section 1.1 of the Credit Agreement
is hereby amended by replacing the definition of "Eligible Inventory" in its
entirety with the following:
<PAGE>
"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
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;
- 2 -
<PAGE>
(e) (intentionally omitted);
(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;
(j) 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.
SECTION 3. Amendment to Section 6.2.5. Section 6.2.5 of the Credit
Agreement is hereby amended by replacing said Section in its entirety with the
following:
SECTION 6.2.5 Capital Expenditures. The Borrower will not, and will
not permit any Subsidiary to, make or commit to make any Consolidated
Capital Expenditures, except the Borrower and its Subsidiaries may make
Consolidated Capital Expenditures during any fiscal year Provided (x) no
Default or Event of Default has occurred and is continuing, and (y) the
aggregate amount of Consolidated Capital Expenditures made during such
fiscal year (including the amount of Capital Lease Liabilities incurred
during such Fiscal Year that in accordance to GAAP is attributable to
principal) does not exceed the amount set forth below opposite such fiscal
year;
Fiscal Year Amount
----------- ------
1998 $3,800,000
-3 -
<PAGE>
1999 $3,000,000
2000 $5,000,000
2001 $5,000,000
2002 $5,000,000
2003 $5,000,000
provided further, however, that expenditures from insurance proceeds
received upon the occurrence of a Loss which are made to replace or repair
damaged or destroyed assets will not be included in the foregoing
calculation.
SECTION 4. Continuinig 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 5. Cost and Expenses. The Borrower agrees to pay all out-of-pocket
expenses of the Agent for The negotiations preparation, execution and delivery
of this Amendment (including fees and expenses of counsel to the Agent).
SECTION 6. Effectiveness. This Amendment shall become effective upon the
prior or concurrent receipt by the Agent of each of the following:
(a) a copy of this Amendment, duly executed by each of the Borrower,
the Agent and the Lenders;
(b) an original Revolving Note, dated as of the date of this
Amendment, in the principal amount of $8,500,000 (the "New Revolving
Note"), issued as a substitution for the existing Revolving Note in the
principal amount of $6,500,000 (the "Old Revolving Note"). Upon receipt of
the New Revolving Note, Lender agrees to promptly return the Old Revolving
Note to the Borrower for cancellation;
(c) a certificate, dated as of the date of this Amendment, of the
Secretary of the Borrower 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
-4 -
<PAGE>
referenced in Section 6 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 the Borrower
canceling or amending such prior certificate;
(iii) absence of changes to the Organic Documents of the Borrower
since April 30, 1998;
(d) a so-called "good standing" certificate with respect to the
Borrower as of a recent date from the appropriate Governmental Authority of
the State of its incorporation;
(e) evidence of qualification of the Borrower 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;
(f) 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;
(g) 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 6 of this Amendment, the
transactions contemplated hereby or thereby, or any Organic Document,
Contractual Obligation or Regulatory Approval; and
(h) payment of the amount of all costs and expenses which have been
invoiced and are payable on or prior to the date of this Amendment Pursuant
to Section 9.3 of the Credit Agreement.
-5-
<PAGE>
SECTION 7. 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 8. 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 to the Borrower and each Lender.
SECTION 9. 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 10. 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 hereunder or under the Credit Agreement
except in accordance with the terms of the Credit Agreement.
-6 -
<PAGE>
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, INC.
By: /S/ JAMES H. MILLER
--------------------------
James H. Miller
President
[CORPORATE SEAL]
ING (U.S.) CAPITAL CORPORATION, in its
capacity as Agent and Lender
By: /S/ MICHAEL P. GARVIN
--------------------------
Michael P. Garvin, Jr.
Vice President
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000095676
<NAME> Meridian Medical Technologies, Inc.
<MULTIPLIER> 1,000
<CURRENCY> US Dollars
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-1999
<PERIOD-START> AUG-1-1997
<PERIOD-END> OCT-31-1998
<EXCHANGE-RATE> 1
<CASH> 611
<SECURITIES> 0
<RECEIVABLES> 8,044
<ALLOWANCES> (335)
<INVENTORY> 11,536
<CURRENT-ASSETS> 22,171
<PP&E> 20,179
<DEPRECIATION> (4,060)
<TOTAL-ASSETS> 49,513
<CURRENT-LIABILITIES> 14,759
<BONDS> 18,288
0
0
<COMMON> 299
<OTHER-SE> 13,365
<TOTAL-LIABILITY-AND-EQUITY> 49,513
<SALES> 10,850
<TOTAL-REVENUES> 10,850
<CGS> (6,673)
<TOTAL-COSTS> (6,673)
<OTHER-EXPENSES> (2,980)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (838)
<INCOME-PRETAX> 359
<INCOME-TAX> (93)
<INCOME-CONTINUING> 266
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 266
<EPS-PRIMARY> 0.09
<EPS-DILUTED> 0.08
</TABLE>
