================================================================================
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
For the fiscal year ended July 31, 1999
-------------
OR
[ ] 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 (IRS Employer Identification No.)
of incorporation or organization)
10240 Old Columbia Road, Columbia, Maryland 21046
- ------------------------------------------- ----------
(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 12(g) of the Act:
Common Stock, $.10 par value
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K any amendment
to this Form 10-K. [X]
As of October 27, 1999, 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 $14.2 million.
There were 2,994,930 shares of Registrant's common stock outstanding as
of September 30, 1999
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, 1999
are incorporated by reference into Part III of this Form 10-K.
================================================================================
Page 1 of 57
<PAGE>
2
TABLE OF CONTENTS
Page
----
PART I
Item 1. BUSINESS
General 4
Products and Services 5
Injectable Drug Delivery System 5
Government Systems 7
Cardiopulmonary Systems 9
Sources and Availability of Raw Materials 10
Competition 11
Backlog and Renegotiation 11
Research and Development 12
Patents, Trademarks, and Licenses 12
Product Liability Insurance 13
Cost Reduction Program 13
Government Regulation 13
Employees 14
Item 2. PROPERTIES 15
Item 3. LEGAL PROCEEDINGS 15
Item 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS 16
EXECUTIVE OFFICERS OF THE REGISTRANT
(Unnumbered Item) 16
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON STOCK
AND RELATED STOCKHOLDER MATTERS 17
Item 6. SELECTED FINANCIAL DATA 18
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 19
<PAGE>
3
TABLE OF CONTENTS
Page
----
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK 26
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 27
Item 9. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE 47
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, 1999,
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 47
Signatures 53
Exhibit Index 54
FORWARD LOOKING STATEMENTS
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; (vi)
delays, costs and uncertainties associated with government approvals required to
market new drugs and medical devices; (vii) availability of raw materials in
adequate quantities at reasonable prices and sufficient quality; (viii) 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; (ix) success and timing of
cost reduction programs; (x) adequacy of product liability insurance; (xi)
factors related to PRIME ECG including successful product completion, degree of
market acceptance and ability to obtain strategic alliances; (xii) expiration of
patents and the ability of competitors to design around the Company's patent
protection; and (xiii) factors relating to Year 2000 issues.
<PAGE>
4
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 (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-owned
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.
The Merger 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 primarily a privately held
research and development company with core technologies focused on enhancing the
diagnosis of cardiac ischemia and arrhythmias, and was engaged principally in
the development of the PRIME ECG(TM) electrocardiac mapping system.
MMT, through STI, pioneered the development of auto-injectors for the
self-administration of injectable drugs. An auto-injector is a prefilled,
pen-like device that allows a patient to automatically inject a precise drug
dosage quickly, safely, and reliably. Meridian manufactures a spring-loaded,
needle applied auto-injector and has North American marketing rights to a
needleless auto-injector device using compressed gas. These auto-injectors are 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 and is currently marketed with 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 chemical exposures in battlefield conditions. MMT also supplies
customized drug delivery system design, pharmaceutical research and development
and FDA current Good Manufacturing Practice (cGMP)-approved sterile product
manufacturing to pharmaceutical and biotechnology companies.
The Company has three primary areas of business: Injectable Drug Delivery
Systems, Government Systems and Cardiopulmonary Systems. The Injectable Drug
Delivery and Government businesses both utilize the Company's auto-injector
technology, while the Cardiopulmonary business utilizes the Company's
electrocardiology and telemedicine technologies. The Company expects, over the
coming years, to realize significant revenue growth from new commercial
applications of its auto-injector products. Additionally, revenue growth is
anticipated from alliances that introduce new products for auto-injectors and
other drug delivery devices. Current new therapies under development or in
negotiations for delivery in auto-injectors include migraine, growth hormone and
seizure. Management believes that the PRIME ECG(TM) electrocardiac mapping
system has the potential to become the standard ECG system of the future and to
generate significant revenues and profits for the Company. Meridian also
anticipates a continued increase in revenue from its telemedicine products.
Government auto-injector revenues are also expected to increase through
international market expansion, new product development and expanding civil
defense applications for the Company's products.
<PAGE>
5
PRODUCTS AND SERVICES
---------------------
Revenues from MMT's three areas of business and gross profit for the years ended
July 31, 1999, 1998 and 1997 are as follows (in thousands):
Year Ended July 31,
1999 1998 1997
---- ---- ----
Injectable Drug Delivery Systems $14,405 $22,414 $20,079
Cardiopulmonary Systems 1,840 1,089 2,761
Government Systems 24,485 21,165 17,825
------- ------- -------
Total Revenues 40,730 44,668 40,665
Gross Profit 12,710 17,577 15,044
Gross Profit % 31.2% 39.4% 37.0%
Injectable Drug Delivery Systems revenues in fiscal 1999 above were adversely
impacted by the 1998 EpiPen recall. See Item 7 - Management's Discussion and
Analysis for further discussion.
Injectable Drug Delivery Systems
- --------------------------------
MMT currently markets the EpiPen family of products, Lidopen, and contract
filling products. Additional technologies under development for commercial
application include the TruJect and Weston "needleless" auto-injector.
Regulatory approvals have been received and are pending for a line of vial
filled generic injectable drugs to be sold through an alliance with Mylan
Laboratories.
a. Existing Products
- ---------------------
Currently, the substantial majority of the Company's commercial (i.e.,
non-government) sales come from its EpiPen(R) epinephrine auto-injectors, which
are prescribed to patients at risk of anaphylaxis resulting from severe allergic
reactions to bee stings, insect bites, foods and exercise-induced anaphylaxis.
These auto-injectors, which are available in two dosage sizes, permit the
immediate self-injection of epinephrine, the drug of choice for emergency
treatment of such conditions. The EpiPen was the Company's first major
commercial auto-injector, and demand for the EpiPen continues to be strong due
to increased awareness of the health risks associated with allergic reactions.
The Company markets the EpiPen through Dey L.P., a subsidiary of E. Merck based
in Germany. Dey Laboratories has a marketing agreement with ALK, Inc., a Danish
company, for international markets in 13 foreign countries, and with Allerex in
Canada.
The Company also produces the LidoPen(R) auto-injector, which utilizes 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 product family sold by the Cardiopulmonary Systems business.
<PAGE>
6
On May 8, 1998, the Company announced a voluntary Class I recall of 47 lots of
its EpiPen and EpiPen Jr. auto-injectors (approximately 1,000,000 units) because
some may not provide effective doses of medication. During fiscal 1998, the
Company recorded provisions for recall costs totaling $2.7 million. Included in
this cost is the direct cost of the actual returned products as well as cash
costs incurred by the distributor. The Company supplied free units of product to
satisfy the reimbursement for cash costs at regular sales price, while the
provision provides for the Company's expense at its direct cost of the product.
This reimbursement of cash costs with free product reduced normal sales revenue
and gross margins in fiscal 1999 and 1998. Management recorded an additional
provision of $454,000 in the fourth quarter of fiscal 1999 for what it believes
to be the final costs of the recall.
b. Developmental Products
- --------------------------
Meridian continues to explore new products to further capitalize on its
auto-injector technologies. The Company's 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. Due to these
factors, the Company believes that the new TRUJECT(TM) technology coupled with
the Company's drug development and manufacturing capabilities have the potential
to fuel significant growth in its Injectable Drug Delivery business in future
years.
In March 1998, the Company announced an agreement with U.K.- based Weston
Medical Ltd., to acquire North American rights to co-market and manufacture
Weston's pre-filled, disposable needle free injector Intraject(R). Intraject is
about half the size of a fountain pen. Due to its low cost and ease of use, this
patented technology offers a strategic opportunity for Meridian and positions
this technology to potentially displace a significant portion of the pre-filled
conventional needle syringe market. Meridian and Weston began co-marketing
activities in March 1998.
Currently, no contracts have been signed by the Company for either TRUJECT(TM)
or IntraJect. Commercialization of either technology is dependent upon the
successful formulation of the drug product and further development of the
auto-injector.
c. Generic Products
- --------------------
In 1997, the Company formed a long term strategic alliance with Mylan
Laboratories ("Mylan") under which Meridian will license, develop and
manufacture a line of generic injectable drugs to be marketed by Mylan. In
fiscal 1999, the FDA granted clearance for two generic drugs and initial sales
were recognized in the fourth quarter of fiscal 1999. Regulatory clearance of a
third generic injectable drug is expected in fiscal 2000.
<PAGE>
7
d. Pharmaceutical Manufacturing and Packaging
- ----------------------------------------------
The Injectable Drug Delivery business also has complete sterile parenteral
pharmaceutical manufacturing and packaging services for a broad range of sterile
injectable dosage forms which includes vials, dental cartridges, pre-filled
ready-to-use syringes, and a line of autoinjectors. Further, the Injectable Drug
Delivery business provides fully validated formulation and aseptic filling
services and regulatory and clinical trial assistance for those pharmaceutical
and biotechnology companies not currently possessing such capabilities. The
Company also supplies customized drug delivery system design, cGMP-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 pilot plant. If feasibility and stability studies are successful
and all regulatory approvals are received, the Company anticipates licensing
fees and 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 was $1.3, $1.3 and $1.2
million during fiscal years 1999, 1998 and 1997, respectively. The Company
expects fiscal 2000 revenue from funded R&D activities and licensing fees to
continue.
Government Systems
- ------------------
The Government Systems business unit supplies auto-injectors for both military
and civil defense applications. Currently fielded products include: the AtroPen,
containing atropine, and the ComboPen, containing pralidoxime chloride, both
used as nerve agent antidotes, a morphine auto-injector for pain management, and
a diazapam auto-injector for seizure management. These auto-injectors are
intended for use by military personnel and first responders under attack
conditions, for the self-administration of nerve agent antidotes against the
effects of chemical warfare agents.
a. U.S. Department of Defense
- ------------------------------
U.S. Department of Defense (DoD) procurements of auto-injectors are restricted
to qualified producers and the FDA must approve all products. 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 classified as critical
"war stopper" items by the DoD and have been the subject of an Industrial Base
Maintenance Contract ("IBMC") between the Company and the DoD since 1992. This
contract is part of a program by the DoD to ensure adequate supplies of critical
items in the event of war. The Company has been the supplier of auto-injectors
to the DoD since 1970.
During fiscal 1999, MMT concluded negotiations with the DoD for its third IBMC
beginning August 1, 1999. This contract includes renewal options for two
additional years through July 31, 2002. This innovative contract, initially
awarded in 1992, calls for production of auto-injectors filled with nerve agent
antidotes, the retention by the Company of key personnel and facilities to
assure expertise for manufacturing auto-injectors containing nerve agent
antidotes, the storage of serviceable material from expired auto-injectors, the
management of the U.S. Army's Shelf Life Extension Program, and the pre-stocking
of critical components to enhance readiness and mobilization capability. A surge
capability provision allows for the coverage of defense mobilization
requirements in the event of rapid military deployment. Revenues under this
contract have ranged from $13 to $21 million over each of the last three years
and are expected to exceed $15 million per year for the new contract period.
<PAGE>
8
The Government Systems business unit plans to build upon its strong relationship
with the DoD and remain the source of first choice for military auto-injector
products. To that end, the Company continues to maintain leadership by
introducing new products into this market. New products include the
Multi-chambered Auto-injector ("MA") delivery system specifically developed for
the U.S. Army. This system will allow military personnel to use a single
auto-injector to sequentially administer the required antidotes, quickly and
effectively, under battlefield conditions. The MA is expected to be available in
December 2000. Other recent developments include the anticonvulsant Diazepam
auto-injector manufactured by MMT in 1997 and the pain management Morphine
auto-injector introduced in 1998.
b. International
- -----------------
The Company will continue its strategy to expand its international military
sales into new markets worldwide as a principal supplier of critical life saving
antidotes for chemical warfare defense. The foreign government customer base
includes many allied countries in Europe, the Middle East and the Far East.
Sales for fiscal 1999 were $2.5 million.
During fiscal 1999, the Company was granted a Product License - Marketing
Authorization by the German Federal Institute for Medicinal Drugs and Medicinal
Products for its atropine-filled auto-injectors ("AtroPen"). This approval also
allows MMT to expand the marketing of the AtroPen under the European Mutual
Recognition Procedures to supply allied armed forces throughout Europe.
c. Civil Defense - Domestic Preparedness
- ----------------------------------------
The Company's life-saving medical technology can be used in a variety of
emergency situations before trained medical professionals can intervene. Because
of this advantage, the demand for nerve agent antidote auto-injectors has
recently expanded to include growing numbers of state agencies and local
communities, for civil defense purposes in response to potential terrorist
attacks and as protection for populations in high risk areas, in conjunction
with DE-MIL programs (disarming and destroying chemical weapon stockpiles). The
Government Systems business unit now encompasses not only the sales and
marketing activities for the military markets but also the marketing activities
geared toward city and state Emergency First Responders. This is essentially an
untapped market with a significant growth potential. Sales were $1.3 and $0.5
million for fiscal years 1999 and 1998, respectively.
d. Development
- --------------
Under a program in conjunction with the DoD, the Company completed the
development of its next generation of auto-injectors for the U.S. Army - Ft.
Detrick, and recently delivered a complete NDA [505(b)(2)] for Government
sponsored submission to the FDA. This new automatic injection system is a single
unit, multi-chambered auto-injector referred to as the "MA". This new delivery
system houses two drugs separately in a single injector, atropine and
pralidoxime chloride, delivering the two nerve agent antidotes in succession
through a single needle.
Feasibility studies are underway to evaluate the use of other antidote
formulations in the MA configuration. Funding to support this development work
is in negotiation with several European countries.
The Company is continuing to explore the feasibility of a delivery system
capable of storing compounds in dry and liquid form in separate chambers and
capable of automatically, upon activation, mixing them into solution prior to
self-injection by trained personnel.
<PAGE>
9
Cardiopulmonary Systems
- -----------------------
The Cardiopulmonary Systems business develops, manufactures, and sells medical
systems and disposable products that are used for diagnosis and management of
heart attack and other cardiac conditions. The Company recently completed
development of the PRIME ECG(TM) electrocardiac mapping system, which provides a
more complete non-invasive analysis of the electrophysiology of the heart than
is possible with conventional 12-lead ECG technology. This more comprehensive
view of the electrical activity of the heart offers the clinician the
opportunity to more quickly and accurately detect heart attack through an easy
to interpret graphic display that depicts both size and location of the affected
area. Early research indicates this more comprehensive view of the electrical
activity of the heart can be applied to a broad range of applications where the
smaller 12-lead sample is inadequate for diagnosis and management.
The PRIME ECG system received the CE Mark from European authorities during
fiscal 1999 and the company is actively recruiting specialty distributors in
selected markets. Initial system orders are expected in the third quarter of
fiscal 2000. In the United States, a large clinical study designed to
demonstrate superior performance compared to the 12-lead ECG, will be initiated
in the second quarter of fiscal 2000. A 510(k) filing with the FDA is
anticipated during calendar 2000. Subject to prior receipt of FDA approval, the
Company will introduce the PRIME ECG system in this country.
The Company also participates in the telemedicine market, providing a range of
easy to use devices that record and transmit various diagnostic information from
the home to a monitoring center or physician's office. These products are sold
through a large telemedicine service provider based in Israel. The Company
anticipates moderate growth in this area through the introduction of several new
monitoring products and by expansion to other countries including the United
States.
a. PRIME ECG(TM) Electrocardiac Mapping System. - The PRIME ECG system is a
unique electrocardiac mapping system developed in collaboration with university
and medical school researchers. This system offers the potential to
significantly improve the diagnosis and treatment of heart disease, which
affects over 13 million people in the U.S. alone, including 1.5 million heart
attacks each year.
The PRIME ECG system consists of a patented 80-lead disposable electrode vest,
80-channel recording module, computer assisted analysis and a full color graphic
display. The system will initially be introduced for the early detection of
acute myocardial infarction ("AMI") or heart attack. Clinical tests at the
University of Ulster in Belfast conclude that the PRIME ECG system allows
earlier and more accurate diagnosis of AMI for significantly more patients than
the standard 12-lead ECG. Further, the PRIME ECG system displays results in a
manner that allows the clinician to identify the nature of the infarct, which
can be invaluable in determining the most effective course of treatment.
Without early and accurate diagnosis of AMI, potentially life-saving treatment
is delayed for AMI victims. For non-AMI chest pain patients, unnecessary tests
and hospital admissions to rule-out AMI are estimated to cost health care
systems and individuals billions of dollars each year. The Company anticipates
that the clinical and economic benefits of this new system can create the
opportunity for the Cardiopulmonary Systems business to become a prominent
participant in the electrocardiography market in future years.
<PAGE>
10
The Company expects the PRIME ECG(TM) system will be used initially by the
emergency room physician who needs faster and more accurate diagnosis for more
than 15 million chest pain patients each year. The Company is pursuing
additional applications in areas where a more complete knowledge of the
electrical condition of the heart would enhance detection and/or treatment of
related conditions. Based on early research, this might include, but is not
limited to confirmation of reperfusion following thrombolysis, identification of
accessory pathways found in atrial arrhythmia and vulnerability to sudden
cardiac death.
The use of the PRIME ECG system requires purchase of a disposable electrode
array or vest. This patented, simple to use device is expected to provide a
recurring source of revenue to the Company, which anticipates that it will be
the sole manufacturer. The Company anticipates that the disposable electrode
vest design can be modified to meet a range of applications, allowing lower cost
and even greater convenience if this technology is adapted to even routine ECG
applications.
b. Telemedicine Products - The Company is a leader in the development of devices
that measure and transmit diagnostic information by telephone. These products
allow a patient's condition to be monitored while at home, which can reduce
expensive office visits, allow for earlier diagnosis and minimize emergency room
and hospital admissions. Meridian's CB-12L CardioBeeper(R) electronic heart
monitor transmits a standard 12-lead electrocardiogram ("ECG") by telephone. A
new heart monitor, the CardioPocket(TM) was introduced in 1999, providing
unprecedented convenience by incorporating a miniaturized single-lead version
into a wallet. The CardioPocket was awarded a Millenium Product Award for
innovation and creativity in the U.K. from the Design Council of Britain, and
has already been purchased by more than 15,000 users.
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 home healthcare monitoring company serving more than 60,000
subscribers. Last year, Shahal formed SHL International for the purpose of
accelerating its program to expand its business to other countries with a focus
in Europe and the United States. In addition, several new product development
programs have been initiated which are intended to result in new opportunities
for growth in this business area over the next several years.
SOURCES AND AVAILABILITY OF RAW MATERIALS
-----------------------------------------
The Company purchases, in the ordinary course of business, necessary raw
materials, components and supplies essential to the Company's operations from
numerous suppliers in the U.S. and overseas. Several of the ingredients used in
the antidote regimens are unique and require specialized synthesis facilities,
consequently, limited amounts of these ingredients are available from time to
time. The Company monitors this situation carefully to ensure a continued supply
of these ingredients. The Company procures inventory principally when supported
by customer purchase orders.
<PAGE>
11
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. The Company expects competition to intensify in the
coming years.
Meridian is the sole supplier of auto-injectors to the U.S. Government for
military use, and effective August 1, 1999, has renewed its three-year base
maintenance contract (an initial base year and two option years) with the U.S.
Department of Defense. The Company competes with a small number of companies
selling to foreign military markets.
The Company's pharmaceutical manufacturing and packaging services operate in an
intensely competitive field that 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 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
such as blood markers for detection of AMI, and potentially with products and
technologies currently under development that may be brought to market, such as
enhanced 12-lead ECG algorithms, invasive cardiac mapping and improved cardiac
stress testing.
BACKLOG AND RENEGOTIATION
-------------------------
As of July 31, 1999, the backlog of orders was approximately $19.7 million, of
which $6.2 million related to production and delivery of commercial products and
services, and $13.5 million related to military products and the IBMC contract.
This favorably compares with commercial product sales backlog of $8.2 million,
some of which were for recall returns, and a military backlog of $9.6 million,
for a total of $17.8 million at July 31, 1998.
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. The Company anticipates no such contract terminations.
<PAGE>
12
RESEARCH AND DEVELOPMENT
------------------------
The Company expensed $1.2 million, $1.3 million and $2.8 million on research and
development activities in fiscal 1999, 1998, and 1997, respectively. The Company
expects research and development expenditures in fiscal 2000 to be higher than
the fiscal 1999 level.
MMT is in the final development phase of the MA, a multi-chambered auto-injector
for intramuscular use to contain pharmacalogical or chemically incompatible
medications in respective chambers, dispensing them sequentially through a
single needle. Production of this auto-injector is scheduled to begin in the
second quarter of fiscal 2001.
MMT also has Truject, a single-chambered auto-injector for subcutaneous
injection which utilizes a very thin (27 gauge) needle, under development for
potential new applications. This new auto-injector is designed for use in
emergency situations and for any episodic treatment where a subcutaneous
injection is the preferred drug delivery route. Such applications may include
migraine, seizures and pain management. These new auto-injectors will be subject
to regulations prior to the product reaching the marketplace. See "Government
Regulation" below.
In addition, MMT expects to develop and introduce additional applications for
its Electrocardiac Mapping 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 multi-chambered auto-injector (MA)
expected to be launched in the first half of fiscal 2001. The MA patents cover
various components running through 2010. In addition, the Company holds several
patents and licenses on the PRIME ECG(TM) electrocardiac mapping system,
including the patent on the PRIME ECG algorythm. Most of the other patents are
licensed from the Northern Ireland Bioengineering Center at the University of
Ulster in Northern Ireland for a minimum remaining term of 18 years.
The Company intends to file for additional protection for its new auto-injector
and cardiopulmonary products currently under development. The new auto-injector
products are expected to replace or supplement the Company's existing line of
auto-injectors over time.
<PAGE>
13
PRODUCT LIABILITY INSURANCE
---------------------------
The Company maintains product liability coverage for its products aggregating
$35 million. The Company will continue to maintain liability insurance as it
relates to divested operations to cover 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.
COST REDUCTION PROGRAM
----------------------
The Company's cost reduction program is on-going, with additional initiatives
which were implemented in fiscal 1999 and 1998, and more expected in the future.
The Company seeks to incorporate both enhanced features and lower manufacturing
costs in its next generation products. 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 eight
buildings, a reduction of one from 1998. The Company intends to continue 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 statutes and regulations cited
herein.
As a manufacturer of auto-injectors, cardiopulmonary products, vials 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 another FDA
approved drug generally would require the filing of a NDA, supplement to an
existing NDA or an Abbreviated New Drug Application ("ANDA"). In addition, the
introduction of the Company's new generation auto-injectors will require FDA
approvals based on data demonstrating the safety, effectiveness, and/or
bioequivalence 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 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-injector and syringe
systems 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. Once acquired, this approval is specific to
company and manufacturing sites.
The Company's Cardiopulmonary Systems Products must have FDA Registration for
U.S. sales and CE Marking for European sales.
<PAGE>
14
In connection with its manufacturing operations, the Company must comply with
cGMP regulations, and its manufacturing facilities are subject to periodic
inspections. The Company's St Louis facility has undergone multiple routine,
satisfactory inspections of both the facilities as well as individual drug
products manufactured there in 1999 and 1998.
Suppliers of bulk drugs for filling into the Company's drug delivery systems, as
well as subcontractors that 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 cGMP
regulations, that they are no longer proven to be safe and effective or that
they are not truthfully labeled. Noncompliance with cGMP 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
manufacture and sale of narcotics.
EMPLOYEES
---------
As of September 30, 1999, the Company employed a total of 275 employees: 219
employees work at the Company's plant and warehouse facilities in St. Louis,
Missouri; 30 employees work at the new facility in Belfast, Northern Ireland,
and 26 employees work at the Company's corporate headquarters in Columbia,
Maryland (see "Properties"). Effective March 1, 1999, the Company successfully
renegotiated and entered into a three-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 122 employees are
covered by this collective bargaining agreement.
<PAGE>
15
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, government programs,
regulatory affairs 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 R&D and pharmaceutical operations are located in St.
Louis, Missouri. These facilities are used primarily for formulation, stability
testing, aseptic filling, assembly and final packaging of the Company's
auto-injectors, vials and pre-filled syringes. The St. Louis manufacturing
facilities consist of eight separate buildings occupying over 100,000 square
feet. See Cost Reduction Program above.
In fiscal 1999, the Company opened a new facility in Belfast, Northern Ireland,
and consolidated the operations previously performed at the Antrim, N. Ireland
and Rochester, Kent England facilities. The new, 28,000 square foot facility is
designed to develop and produce innovative technology products for its
Cardiopulmonary Systems Group, including the PRIME ECG(TM) system, and supply
auto-injectors for the Government Systems Group for sale to international
markets. The Company is leasing the new facility under a lease expiring in 2014.
The Company has a 4,200 square foot facility in Rochester, Kent in the United
Kingdom previously used for aseptic assembly and packaging of auto-injector
product under contracts with foreign countries. This facility was also used as a
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 that expires in 2010, and the Company is currently pursuing sub-lease
tenants. The operations of the Rochester facility were consolidated with the
Antrim, N. Ireland facility into the new Belfast facility in fiscal 1999.
ITEM 3. LEGAL PROCEEDINGS
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.
<PAGE>
16
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 1999 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, 1999, the names and ages of all
executive officers of the Company, and their positions and offices held with the
Company
<TABLE>
<CAPTION>
Name Age Present Positions with the Company
- ---- --- ----------------------------------
<S> <C> <C>
James H. Miller 61 Chairman, President and Chief Executive Officer
Gerald L. Wannarka 60 Senior Vice President, Technology and Government Systems
Dennis P. O'Brien 41 Vice President, Finance and Chief Financial Officer
Peter A. Garbis 58 Vice President, Organization Development
</TABLE>
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. (Healthcare
Advertising Agency) as Executive Vice President and fourteen years in marketing
management with Abbott Laboratories.
Dr. Wannarka joined Meridian in December 1997 as Vice President, Technology and
Government Systems and was promoted to Senior Vice President in September 1998.
Dr. Wannarka is a former US Army Medical Service Corps Officer retiring in 1992
at the rank of Colonel. While on active duty, Dr. Wannarka had responsibilities
in research, research management and FDA regulatory affairs, and served in
positions of gradually increasing responsibility such as: Project Manager,
Pharmaceutical Systems, Deputy Director, USA Medical Research Institute of
Chemical Defense, and Director, Clinical Investigation Program, US Army Health
Services Command. Since retiring from the military, he has held positions as
Vice President, Research and Development, for DPT Laboratories and Coloplast
Corporation. He has conducted research with therapeutics for high-hazard virus
infections, medical chemical defense, topical therapeutics and drug delivery to
include auto-injectors, transdermal, inhalation, sustained release oral and
parenteral systems.
Mr. O'Brien joined Meridian in March 1999 as Vice President, Finance and Chief
Financial Officer. Prior to joining Meridian, he was Vice President of Finance
and Chief Financial Officer of Ogden Environmental & Energy Services Co., Inc.
Previous positions held by Mr. O'Brien include Vice President of Finance/Chief
Financial Officer positions of After Six, Ltd. and Tate Global Corporation from
1990 through 1996. Prior to joining Tate, Mr. O'Brien was with Flow
Laboratories, Inc., a biomedical products supply company, and KPMG Peat Marwick.
Mr. O'Brien is a Certified Public Accountant and a Certified Management
Accountant.
Mr. Garbis joined Meridian in May 1996 as Executive Director, Organization
Development and was promoted to Vice President in April 1998. Mr. Garbis' prior
experience in the field of human resources and organizational management has
been with such major companies as Solorex Corp., a Division of Amoco/Enron,
Lockheed Martin, ITT Telecommunications, and Nuclear-Chicago, a Division of G.D.
Searle.
<PAGE>
17
PART II
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.
The following table shows the high and low sales price of the Company's common
stock for each fiscal quarter during the two year period ended July 31, 1999, as
reported on the NASDAQ National Market System.
1999 1998
---- ----
Quarter High Low High Low
---- --- ---- ---
First $ 11.625 $ 6.500 $ 9.750 $ 6.125
Second 8.000 4.625 12.000 6.875
Third 7.000 4.000 14.625 11.125
Fourth 7.125 5.000 14.750 9.500
The Board of Directors has not declared any dividends on the Company's common
stock since its organization. As of October 29, 1999, the number of shareholders
of record was approximately 400.
<PAGE>
18
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Year End Year End Year End Month End Year End Year End
July 31, July 31, July 31, July 31, June 30, June 30,
(in thousands, except per share data) 1999 1998 1997 1996 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Operations:
Net sales $ 40,730 $ 44,668 $ 40,665 $ 4,511 $ 10,375 $ 2,903
Gross profit 12,710 17,577 15,044 1,901 3,420 1,205
Operating income (loss) 1,287 3,067 (1,699) 908 (6,212) (1,582)
Other expense, net (3,027) (2,629) (2,395) (140) (539) (18)
Income (loss) before income tax, minority
interest, and extraordinary loss (1,740) 438 (4,094) 768 (6,751) (1,600)
Provision for income tax - 343 45 440 27 -
Minority interest in consolidated subsidiary - - 266 327 17 -
Income (loss) before extraordinary loss (1,740) 95 (4,405) 1 (6,795) (1,600)
Extraordinary loss on debt refinancing - (494) - - - -
-------------------------------------------------------------------------------------
Net income (loss) $ (1,740) $ (399) $ (4,405) $ 1 $ (6,795) $ (2,903)
Basic income(loss) per share $ (0.58) $ (0.13) $ (2.16) $ 0.02 $ (99.32) $ (23.39)
Diluted income(loss) per share $ (0.58) $ (0.12) $ (2.16) $ 0.02 $ (99.32) $ (23.39)
Weighted average shares:
Basic 2,993 2,971 2,040 68 68 68
Diluted 2,993 3,328 2,040 68 68 68
Financial Position:
Current assets $ 20,233 $ 18,296 $ 16,031 $ 16,557 $ 16,352 $ 981
Working capital 4,373 6,046 844 4,230 4,145 (681)
Fixed assets, net 15,826 16,389 15,778 14,984 14,990 200
Total assets 47,751 46,847 44,082 41,568 41,694 3,188
Long-term debt 17,639 18,850 13,921 16,385 16,056 55
Shareholders' equity 11,738 13,338 12,293 3,844 4,387 1,472
</TABLE>
Through April 15, 1996, only Brunswick's revenues and other financial data are
included in the amounts reflected in the table above. STI revenues and other
financial data are included from April 15, 1996, the date when Brunswick
acquired a majority interest in STI.
<PAGE>
19
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Introduction
- ------------
MMT is a medical device and drug delivery system company focusing on Early
Intervention Healthcare and Emergency Medical Technologies. The Company has
three areas of business. The Injectable Drug Delivery Systems business focuses
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 beginning the European distribution
phase for the PRIME ECG system, an 80-lead cardiac mapping system designed for
rapid and improved diagnostic accuracy of cardiac ischemia. Multiple
distributors in major western European markets are being targeted and, subject
to the completion of negotiations and execution of distribution agreements, will
become distributors of the system over the coming months. A U.S. based FDA
clinical study of the PRIME ECG system will begin in November 1999. Meridian
intends to complete the U.S. clinical study by the fourth quarter of fiscal
2000. Subject to a successful completion of the clinical, a 510(k) application
will be made to the FDA for approval to market the product in the U.S. The
Company, through Shahal, is also planning a US expansion of its telemedicine
business. The Government Systems business focuses on the world-wide market for
auto-injectors used for self-administration of nerve agent antidotes, morphine
and diazepam, and markets to the U.S. and allied governments, as well as local
governments for civil defense applications.
Results of Operations
- ---------------------
1999 compared with 1998
- -----------------------
MMT's net loss after taxes for the year ended July 31, 1999 was $1,740,000
($0.58 per share) on revenues of $40.7 million compared to a fiscal 1998 net
loss of $399,000 ($0.13 per share) on revenues of $44.7 million. Included in the
net loss for 1999 was a fourth quarter charge of $454,000 for the EpiPen recall,
and included in the net loss for 1998 were charges of $2.7 million for the
EpiPen recall and $494,000 for the extraordinary loss on debt extinguishment.
Gross margins decreased to 31% in 1999 compared to 39% in 1998. This decrease
reflects the impact of supplying free units of EpiPen as a result of the 1998
EpiPen recall. Operating expenses decreased by 6.8% from 1998 to 1999, excluding
the recall charges from 1999 and 1998. This reduction reflects planned cost
reductions in selling, general and administrative expenses. Operating income and
EBITDA were $1.3 and $5.1 million, respectively, in 1999, down from $3.1 and
$6.9 million in 1998 due to the gross margin decline associated with the recall.
<PAGE>
20
The Company has estimated results excluding the impact of the 1998 EpiPen recall
and the 1997 EpiEZPen voluntary exchange program for the years ended July 31,
1999 and 1998 as follows:
<TABLE>
<CAPTION>
(In thousands) Impact of the 1998 EpiPen
recall and the 1997
EpiEZPen voluntary
Reported results exchange program Estimated results
---------------- ---------------- -----------------
<S> <C> <C> <C>
The year ended July 31, 1999
Net sales $ 40,730 $ 3,187 $ 43,917
Operating income 1,287 2,842 4,129
(Loss) income before income taxes $ (1,740) $ 2,842 $ 1,102
========== =========== ==========
The year ended July 31, 1998
Net sales $ 44,668 1,294 $ 45,962
Operating income 3,067 3,713 6,780
Income before income taxes and extraordinary loss $ 438 $ 3,713 $ 4,151
========== =========== ==========
</TABLE>
The table above removes the estimated impact of the 1998 EpiPen recall and the
1997 EpiEZPen voluntary exchange program from actual reported results. The
impact includes lost sales and gross margins due to free units supplied to
reimburse for cash costs, as well as the actual expense provided. The above
analysis does not quantify the impact that the free units supplied for
replacement purposes had on sales and gross margins.
Drug Delivery business sales were $14.4 million in 1999, 36% lower than 1998
resulting from free units of EpiPen supplied to satisfy replacement units and
cash costs relating to the EpiPen recall. Government business sales were $24.5
million, 16% higher than 1998 as sales to the U.S. Department of Defense (DoD)
and civilian defense customers continued to grow. Cardiopulmonary sales were
$1.8 million in 1999, 69% higher than 1998 reflecting increased telemedicine
sales, primarily the CardioBeeper product.
Gross margins were 31% of sales in 1999 compared to 39% in 1998. The decreased
gross margins from 1998 to 1999 resulted primarily from recall obligations. The
Company shipped 771,000 free EpiPens in fiscal 1999, both for actual units
returned and to reimburse the distributor for cash costs. While the direct cost
of these free units was fully reserved in 1998, the lost revenue from those
units caused the gross margin to decline. The Company has provided $454,000 in
the fourth quarter of fiscal 1999 for what it believes to be the final costs of
the recall. Management expects EpiPen sales for fiscal 2000 to exceed pre-recall
levels.
Operating costs were $11.4 million in 1999, a decrease of $3.1 million from
1998. Most of the decreased cost was from reserve provisions for the EpiPen
recall totaling $2.7 million which was expensed in 1998. Additionally,
administrative costs were lower by 10% due to cost reduction programs initiated
by the Company.
Nonoperating expenses in 1999 were $3.0 million, 15% higher than in 1998. The
higher costs in 1999 result from increased interest cost on debt. Interest cost
includes a full year of the Senior Subordinated Debt compared to only 3 months
in 1998, following the April 30, 1998 refinancing. Additionally, borrowings on
the Revolving Line of Credit were higher in 1999 due to working capital
requirements relating to production for recall obligations. The Company
generated other income items amounting to $340,000 in 1999 and $256,000 in 1998,
mostly from grant income in 1999 and sales of nonstrategic technology in 1998.
The income tax provision was $0 in 1999 and $26,000 in 1998 for Alternative
Minimum Tax. The Company continues to have significant operating loss
carryforwards as explained in Note 7 to the financial statements.
<PAGE>
21
Line of Business Discussion
Drug Delivery sales were $14.4 million in 1999, 36% lower than in 1998 due to
free units of EpiPen supplied to satisfy obligations from the May 8, 1998
product recall. The Company produced and shipped in excess of 1.6 million
EpiPens in fiscal 1999, 771,000 of which were for recall obligations and were
non-revenue generating. Of the 771,000 units, a portion were to replace actual
units returned, and the remainder were to reimburse for cash costs incurred by
the distributor. The reserve provisions exclude any impact from lower sales
revenue and resulting lower margins because the Company is reimbursing recall
costs with free EpiPen units instead of cash reimbursement. It is estimated that
the delivery of EpiPen units to reimburse recall cash costs depressed 1999
revenues by $3.2 million. R&D services and contract filling both had an increase
in revenues from 1998 to 1999, including the initial shipment to Mylan
Laboratories of Acyclovir, contributing toward this business unit's results.
Government revenues increased by 16% in 1999 over the prior year to $24.5
million. The increase resulted from higher sales to the DoD under the IBMC
contract, as well as sales to local municipalities for civil defense - domestic
preparedness applications. Sales to foreign governments were 58% higher in 1999
than 1998 reflecting a favorable timing of orders and an expanding international
market for the Company's products.
In 1999, the Company successfully renegotiated its industrial base maintenance
contract with the DoD. The contract calls for the retention by the Company of
key personnel and facilities to assure expertise for manufacturing
auto-injectors containing nerve agent antidotes, the storage of serviceable
material from expired auto-injectors, the management of the U.S. Army's Shelf
Life Extension Program, the pre-stocking of critical components to enhance
readiness and mobilization capability, and new product orders. This contract is
expected to generate at least $15 million in revenues in fiscal 2000.
Cardiopulmonary product revenues in 1999 were $1.8 million, an increase from
1998 sales of $1.1 million. The increase was due to higher telemedicine sales,
specifically the CardioBeeper and CardioPocket products.
Significant activities in the Cardiopulmonary business is focused on moving the
PRIME ECG system from the development phase towards market introduction.
Sensitivity and specificity results continue to improve and are currently above
expectations. A CE Mark was received in 1999, approving the product for sale in
Europe, and a distribution network in western Europe is presently being
developed. US clinical trials will begin in November 1999 and, subject to the
successful completion, FDA approval is expected in late fiscal 2000. The Company
capitalized $1,043,000 in 1999 for software development costs relating to PRIME.
The Company opened a plant in 1999 in Belfast, Northern Ireland to support the
production of the PRIME ECG system, among other uses. The new 28,000 square foot
facility is expected to provide the production capacity necessary for the
product launch.
Fourth Quarter 1999 compared with Fourth Quarter 1998
- -----------------------------------------------------
The Company's net income was $99,000 on revenues of $10.4 million during the
quarter ended July 31, 1999, compared to a net loss of ($441,000) on revenues of
$9.9 million during the same period in fiscal 1998. Gross margin was 42.6% for
the fourth quarter, compared to 40.5% for the same quarter last year. This
represents an improvement from the prior quarters of fiscal 1999, and reflects
the declining impact of the recall.
<PAGE>
22
1998 compared with 1997
- -----------------------
1998 financial results improved over 1997 as the net loss after taxes for the
year ended July 31, 1998 was $399,000 ($0.13 per share), compared with a
$4,405,000 net loss ($2.16 per share) in 1997. Sales increased 10% to $44.7
million in 1998 from $40.7 million in fiscal 1997. Operating income was $3.1
million compared to $2.2 million in 1997, excluding merger costs. Gross margins
increased to 39% in 1998 compared to 37% in 1997. The increased gross margins
from 1997 to 1998 resulted primarily from higher sales volume, including record
sales of EpiPen brand products, product mix, as well as cost reductions and
fixed cost controls initiated after the Merger. Operating expenses were higher
in 1998 primarily because of the charges for the EpiPen recall amounting to $2.7
million. EBITDA was $6.9 million in 1998, $1.3 million higher than the 1997
EBITDA, excluding merger costs.
Drug Delivery business sales were $22.4 million in 1998, 12% higher than 1997
resulting from record EpiPen brand sales. STI Government business sales were
$21.2 million, 19% higher than 1997 as sales to the US Department of Defense
(DoD) continued to grow. Cardiopulmonary sales were $1.1 million in 1998, down
from $2.8 million in 1997 reflecting slower sales of the CardioBeeper and the
disposition of a non-strategic business in late 1997.
Operating costs were $14.5 million in 1998, an increase of $1.7 million over
1997, excluding merger costs. Most of the increased cost was from reserve
provisions for the EpiPen recall totaling $2.7 million. Additionally,
administrative costs were higher due to increased marketing and investor
relations activities, but were partially offset by lower research and
development costs and the 1997 product exchange expense.
The combination of increasing revenues, lower costs of sales and higher
operating costs resulted in operating income growing to $3.1 million in 1998
from $2.2 million in 1997, excluding merger costs.
Nonoperating expenses in 1998 were $2.6 million, $234,000 higher than 1997. The
higher costs in 1998 result from increased interest cost on debt. Interest cost
includes amortization of warrants issued to finance the debt relating to the
Merger amounting to $295,000 in 1998 and $458,900 in 1997. Additionally, the
Company recorded an interest charge amounting to $166,000 in its fourth quarter
to reflect the revaluation of warrants issued to Nomura during the 1998
refinancing of the Company's debt. The Company generated other income items
amounting to $256,000 in 1998 and $172,000 in 1997 mostly from sales of
nonstrategic technology in 1998 and the assets of a nonstrategic business in
1997. The income tax provision was $26,000 in 1998 for Alternative Minimum Tax
compared to tax provisions of $45,400 in 1997. The Company continues to have
significant operating loss carryforwards as explained in Note 7 to the financial
statements.
Extraordinary Loss
The Company refinanced its term debt on April 30, 1998 and took a $494,000
after-tax charge to write-off unamortized debt discount associated with warrants
issued in conjunction with the original debt.
<PAGE>
23
Liquidity and Capital Resources
The Company used $125,000 of cash from operations in 1999. Cash flow
approximated break-even despite the net loss for the year primarily because of
non-cash expenses for depreciation and amortization, which were partially offset
by an increase in year-end accounts receivable, which were higher due to strong
July 1999 sales. Investing activities used $2.5 million of cash in fiscal 1999
for capital additions and software development costs. Financing activities
generated $2.6 million primarily resulting from net borrowings on the Company's
line of credit.
The Company increased its asset based working capital credit line with ING
CAPITAL to a maximum of $8.5 million from $6.5 million in fiscal 1999. The
amount outstanding under this working capital line at July 31, 1999 was $7.2
million. (See Note 5 to the consolidated financial statements for discussion
about the Company's debt). The Company obtained waivers of financial covenants
from its lenders for the fourth quarter fiscal 1999. The Company also obtained
amendments to the loan agreements from its lenders to reset the financial
covenants for fiscal 2000 to levels consistent with the Company's operating
plan.
Working capital at July 31, 1999 was $4.4 million, down from $6.0 million at
July 31, 1998. The decrease is primarily attributable to the loss for the year
and higher current maturities on long-term debt. At July 31, 1999, accounts
receivable were $9.6 million, representing 74 days-sales-outstanding, and
inventories were $6.9 million reflecting a turn-over rate of 4.1 times per year.
Borrowings under the working capital line were $7.2 million leaving $1.3 million
available credit at July 31, 1999.
The Company is exploring financing options to provide additional sources of
capital and/or potentially refinancing all or a portion of its existing
long-term debt.
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>
24
Year 2000
- ---------
The Company's Program - The Company has undertaken a program to address the Year
2000 issue ("Y2K") with respect to the following: (i) the Company's information
technology and operating systems (including its billing, accounting and
financial reporting systems); (ii) the Company's non-information technology
systems (such as buildings, plant, equipment and other infrastructure systems
that may contain embedded micro-controller technology); (iii) certain systems of
the Company's major suppliers and material service providers (insofar as such
systems relate to the Company's business activities with such parties); and (iv)
the Company's major distributors (insofar as the Year 2000 issue relates to the
ability of such distributors to distribute the Company's products). As described
below, the Company's Year 2000 program involves (i) an assessment of the Year
2000 problems that may affect the Company, (ii) the development of remedies to
address the problems discovered in the assessment phase, (iii) the testing of
such remedies and (iv) the preparation of contingency plans to deal with worst
case scenarios.
Assessment Phase - As part of the assessment phase of its program, the Company
has attempted to identify substantially all of the major components of the
systems described above. In order to determine the extent to which such systems
are vulnerable to the Year 2000 issue, a Y2K three tier matrix was applied to
MMT systems. Tier-one systems are mission critical and tier-two systems are
critical business operations. Mission-critical (Tier 1) can be defined as
extended downtime (1+ hr.) for 30 or more employees. Downtime for 5-30 employees
lasting from 2 to 24 hours is categorized as critical (Tier 2). The last tier,
three, is for productivity systems that are important to the ongoing improvement
of the business; MMT however, could operate without these systems for a period
of time (days).
Remediation and Testing Phase - Based upon the results of its assessment
efforts, the Company has undertaken remediation and testing activities which are
intended to address potential Year 2000 problems in computer software used by
the Company in its information technology and non-information technology systems
in an attempt to demonstrate that this software will be made substantially Year
2000 compliant on a timely basis. In this phase, the Company first evaluated a
program application and, if a potential Year 2000 problem was identified, it
took steps to remediate the problem and individually test the application to
confirm that the remediating changes were effective and did not adversely affect
the functionality of that application.
<PAGE>
25
It was determined that all MMT systems had a completed plan and are Y2K
compliant, as of the date of this filing, with the exception of minor
remediation efforts that will be completed during November 1999. The following
summarizes the efforts being made:
a. MMT will not risk the possibility of downtime based on vendor assurances
of Y2K compliant systems in Tier 1 and 2 systems. Y2K has been completed
for all Tier 1 systems. One Tier 2 item is in its final phase of
remediation that will be completed during November 1999.
b. MMT is a medium-sized company with packaged software purchased from
reliable vendors. Y2K compliant programs are supplied by the vendor.
c. MMT has no Tier 1 or 2 systems which are proprietary or custom designed
that need to be fixed internally. All new systems have passed an internal
Y2K validation for Tier 1, 2 and 3.
d. All Tier 1 and 2 systems are supported by vendor contracts or through
excellent relationships with MMT. All contracts for Tier 1 and 2 systems
are through the year 2000.
e. Vendors supplying components or PLCs have submitted documentation to MMT
concerning their Y2K compliance.
f. Programmable Logic Controllers (PLC), Lab and testing equipment used with
machinery that produces MMT product could malfunction and stop
production. All PLCs, Lab and testing equipment is Y2K compliant or in
the final phase of remediation that will be completed during November
1999.
g. Low risk Tier 3 systems have been addressed. Y2K compliance will be
completed for Tier 3 during November 1999.
With the above items completed by November 1999, MMT will still be dependent on
some suppliers, such as utility and telecommunication companies. To address this
risk, MMT's current forecast and orders have been adjusted with our customers'
input. MMT believes that all customer orders will be unaffected during the
transition to the Year 2000.
Contingency Plans - The Company developed a contingency plan to handle its most
likely worst case Year 2000 non-compliant scenarios. The sales forecast was then
adjusted to reflect these scenarios.
Costs Related to the Year 2000 Issue - To date, the Company's costs, which have
been expensed as incurred, have amounted to $148,000. Additional costs to be
incurred in the future are not expected to exceed $30,000. The costs and
timetable in which the Company completes the Year 2000 readiness activities are
based on management's best estimates, which are derived using numerous
assumptions of future events including the continued availability of certain
resources, third-party readiness plans and other factors. The Company can make
no guarantee that these estimates will be achieved, and actual results could
differ from such plans.
Risks Related to the Year 2000 Issue - Although the Company's Year 2000 efforts
are intended to minimize the adverse effects of the Year 2000 issue on the
Company's business and operations, the actual effects of the issue and the
success or failure of the Company's efforts described above cannot be known
until the year 2000 occurs. Failure by the Company and its major suppliers,
other material service providers and major distributors to address adequately
their respective Year 2000 issues in a timely manner (insofar as such issues
relate to the Company's business) could have a material adverse effect on the
Company's business, results of operations and financial condition.
<PAGE>
26
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's earnings are affected by fluctuations in the value of the U.S.
dollar, as compared to foreign currencies, as a result of transactions in
foreign markets. At July 31, 1999, the result of a uniform 10% strengthening in
the value of the dollar relative to the currencies in which the Company's
transactions are denominated would have resulted in an increase in operating
income of approximately $89,000 for the year ended July 31, 1999. This
calculation assumes that each exchange rate would change in the same direction
relative to the U.S. dollar. In addition to the direct effects of changes in
exchange rates, which are a changed dollar value of the resulting sales, changes
in exchange rates also affect the volume of sales or the foreign currency sales
price as competitors' services become more or less attractive. The Company's
sensitivity analysis of the effects of changes in foreign currency exchange
rates does not factor in a potential change in sales levels or local currency
prices.
While the Company is exposed to changes in interest rates as a result of its
outstanding debt, the Company does not currently utilize any derivative
financial instruments related to its interest rate exposure. Total short-term
and long-term debt outstanding at July 31, 1999 was $26.4 million, consisting of
$12.2 million in variable rate borrowing and $14.2 million in fixed rate
borrowing. At this level of variable rate borrowing, a hypothetical 10% increase
in interest rates would have decreased pre-tax earnings by approximately
$113,700 for the year ended July 31, 1999. At July 31, 1999, the fair value of
the Company's fixed rate debt outstanding was estimated at $15.0 million. A
hypothetical 10% change in interest rates would not result in a material change
in the fair value of the Company's fixed rate debt.
<PAGE>
27
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
MERIDIAN MEDICAL TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
July 31,
Assets 1999 1998
------
-------- --------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 227 $ 284
Restricted cash 278 271
Receivables, less allowances of $467
and $325, respectively 9,557 6,787
Inventories 6,889 8,612
Deferred income taxes 1,965 1,661
Prepaid income taxes 546 -
Other current assets 771 681
-------- --------
Total current assets 20,233 18,296
-------- --------
Property, plant and equipment 21,407 19,914
Less - Accumulated depreciation 5,581 3,525
-------- --------
Net property, plant and equipment 15,826 16,389
-------- --------
Deferred financing fees 749 836
Capitalized software costs 1,588 545
Excess of cost over net assets acquired, net 7,403 8,325
Other intangible assets, net 1,952 2,456
-------- --------
Total assets $ 47,751 $ 46,847
======== ========
Liabilities and Shareholders' Equity
------------------------------------
Current liabilities:
Accounts payable and other accrued liabilities $ 7,080 $ 7,255
Note payable to bank 7,317 3,988
Customer deposits 54 221
Current portion of long-term debt 1,409 786
-------- --------
Total current liabilities 15,860 12,250
-------- --------
Long-term debt - notes payable, net of discount 17,582 18,453
Long-term debt - other 57 397
Deferred income taxes 1,793 1,769
Other non-current liabilities 721 640
-------- --------
Total liabilities 36,013 33,509
-------- --------
Shareholders' equity:
Common stock (voting and non-voting)-
Par value $.10 per share; 18,000,000 shares
authorized; 2,994,930 and 2,990,930 shares issued 299 299
and outstanding
Additional capital 32,187 32,083
Cumulative translation adjustment (14) (15)
Accumulated deficit (20,451) (18,711)
Unearned stock option compensation (70) (105)
Treasury stock, at cost (213) (213)
-------- --------
Total shareholders' equity 11,738 13,338
-------- --------
Total liabilities and shareholders' equity $ 47,751 $ 46,847
======== ========
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
<PAGE>
28
MERIDIAN MEDICAL TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
<TABLE>
<CAPTION>
Year Ended July 31,
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Net sales $ 40,730 $ 44,668 $ 40,665
Cost of sales 28,020 27,091 25,621
-------- -------- --------
Gross profit 12,710 17,577 15,044
Selling, general, and administrative expenses 6,245 6,928 5,331
Research and development expenses 1,248 1,300 2,783
Depreciation and amortization 3,476 3,538 3,142
Write-off in-process R&D - - 2,702
Write-off merger transaction costs - - 1,246
Product exchange/recall expense 454 2,744 1,539
-------- -------- --------
11,423 14,510 16,743
-------- -------- --------
Operating income (loss) 1,287 3,067 (1,699)
Other (expense) income:
Interest expense (3,367) (2,885) (2,567)
Other income 340 256 172
-------- -------- --------
(3,027) (2,629) (2,395)
-------- -------- --------
(Loss) income before income taxes, minority
interest and extraordinary loss (1,740) 438 (4,094)
Provision for income taxes - 343 45
Minority interest in income of consolidated
subsidiary - - 266
-------- -------- --------
(Loss) income before extraordinary loss (1,740) 95 (4,405)
Extraordinary loss on debt extinguishment (net
of an income tax benefit of $317) - (494) -
-------- -------- --------
Net loss $ (1,740) $ (399) $ (4,405)
======== ======== ========
Earnings per common share:
(Loss) income before extraordinary item $ (0.58) $ 0.03 $ (2.16)
Extraordinary loss - (0.16) -
-------- -------- --------
Net loss per common share $ (0.58) $ (0.13) $ (2.16)
======== ======== ========
Earnings per common share assuming dilution:
(Loss) income before extraordinary item $ (0.58) $ 0.03 $ (2.16)
Extraordinary loss - (0.15) -
-------- -------- --------
Net loss per common share assuming dilution $ (0.58) $ (0.12) $ (2.16)
======== ======== ========
Weighted average shares:
Basic 2,993 2,971 2,040
Diluted 2,993 3,328 2,040
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
<PAGE>
29
MERIDIAN MEDICAL TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Year Ended July 31,
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (1,740) $ (399) $ (4,405)
Adjustments to reconcile net income (loss) to
net cash provided by (used for) operating
activities:
Depreciation and amortization 3,476 3,538 3,142
Amortization of unearned stock compensation 35 35 36
Amortization of notes payable discount 246 876 459
Non-cash charge to modify warrant terms 75 166 -
Loss on fixed asset disposal - - 346
Deferred income taxes (280) 28 (305)
Write off of in-process R&D - - 2,702
Write off of patents and other intangibles - - 340
Minority interest - - 266
Extraordinary loss on debt extinguishment - 811 -
Changes in assets and liabilities
Receivables (2,912) 720 (68)
Inventories 1,723 (2,565) (716)
Other current assets (636) (150) 203
Accounts payable and other accrued
liabilities (261) (1,299) 795
Other 149 (101) 774
-------- -------- --------
Net cash provided by (used for) operating (125) 1,660 3,569
activities
INVESTING ACTIVITIES
Purchase of fixed assets (1,493) (2,668) (3,287)
(Increase) decrease in restricted cash (7) (7) 697
Capitalized software costs (1,043) (545) -
Sale of short-term investments - - 258
Other - - (56)
-------- -------- --------
Net cash used for investing activities (2,543) (3,220) (2,388)
FINANCING ACTIVITIES
Net (payment) proceeds from line of credit 3,329 (125) 40
Payment on long-term debt (717) (12,447) (1,726)
Proceeds on long-term debt - 14,070 -
Proceeds from issuance of warrants - 930 -
Payment of financing fees (30) (868) -
Proceeds from issuance of common stock 29 261 -
-------- -------- --------
Net cash provided by (used for) financing
activities 2,611 1,821 (1,686)
-------- -------- --------
Net increase (decrease) in cash (57) 261 (505)
Cash at beginning of period 284 23 528
-------- -------- --------
Cash at end of period $ 227 $ 284 $ 23
======== ======== ========
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
<PAGE>
30
MERIDIAN MEDICAL TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In thousands)
<TABLE>
<CAPTION>
Convertible
Redeemable
Preferred
Stock Common Stock
Series A-F Treasury Stock Unearned
------------- ------------- -------------- Stock
Number Number Accumu- Cumulative Number Option Share-
of Par of Par Additional lated Translation of Compen- holders'
Shares Value Shares Value Capital Deficit Adjustment Shares Cost sation Equity
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at July 31, 1996 747 $ 8 68 $ 1 $17,939 $(13,907) $ (9) 2 $ (12) $(176) $ 3,844
Merger with STI (747) (8) 2,844 291 12,794 - - - - - 13,077
Exchange of treasury stock - - - - - - - - (201) - (201)
for assets
Foreign currency - - - - - - (58) - - - (58)
translation
Amortization of stock
option compensation - - - - - - - - - 36 36
Net loss - - - - - (4,405) - - - - (4,405)
----------------------------------------------------------------------------------------------------
Balance at July 31, 1997 - - 2,912 292 30,733 (18,312) (67) 2 (213) (140) 12,293
Warrants issued with notes - - - - 930 - - - - - 930
payable
Modification of warrant - - - - 166 - - - - - 166
terms
Issuance of common stock
from the exercise of
stock options and - - 79 7 254 - - - - - 261
warrants
Foreign currency - - - - - - 52 - - - 52
translation
Amortization of stock
option compensation - - - - - - - - - 35 35
Net loss - - - - (399) - - - - (399)
----------------------------------------------------------------------------------------------------
Balance at July 31, 1998 - - 2,991 299 32,083 (18,711) (15) 2 (213) (105) 13,338
Issuance of common stock
from the exercise of
stock options and - - 4 - 29 - - - - - 29
warrants
Modification of warrant - - - - 75 - - - - - 75
terms
Foreign currency - - - - - - 1 - - - 1
translation
Amortization of stock
option compensation - - - - - - - - - 35 35
Net loss - - - - - (1,740) - - - - (1,740)
----------------------------------------------------------------------------------------------------
Balance at July 31, 1999 - $ - 2,995 $299 $32,187 $(20,451) $ (14) 2 $(213) $ (70) $11,738
====================================================================================================
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
<PAGE>
31
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 FDA current Good Manufacturing Practice (cGMP)-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.
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.
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.
<PAGE>
32
Intangible Assets
Intangible assets consist of the following (in thousands):
July 31,
1999 1998
---- ----
Excess of cost over net assets acquired $ 10,351 $ 10,351
Patents and licenses 2,418 2,418
Other 1,805 1,805
-------- --------
14,574 14,574
Less: accumulated amortization (5,219) (3,793)
-------- --------
$ 9,355 $ 10,781
======== ========
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.
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. Relating to the merger transaction, 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 had not yet been established. These research and
development projects had no alternative future use and, therefore, were charged
to expense as of the date of consummation of the merger.
Income Taxes
The Company accounts for income taxes using the asset and liability method that
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.
<PAGE>
33
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, 1999 and 1998.
Management believes the principal balance of its long-term debt, which is $1.2
million and $1.3 million higher than the carrying value at July 31, 1999 and
1998, respectively, is a better estimate of the fair value of that liability.
The debt is carried net of unamortized discount.
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.
Net Income (Loss) Per Common Share
The following table sets forth the computation of basic and diluted earnings per
share (in thousands):
Year Ended July 31,
1999 1998 1997
---- ---- ----
Numerator:
Income (loss) before extraordinary loss $(1,740) $ 95 $(4,405)
Extraordinary loss on debt extinguishment (net
of an income tax benefit of $317) - (494) -
------- ------- -------
Net loss $(1,740) $ (399) $(4,405)
======= ======= =======
Denominator:
Denominator for basic earnings per share -
weighted average shares outstanding 2,993 2,971 2,040
Stock options and warrants - 357 -
------- ------- -------
Denominator for diluted earnings per share 2,993 3,328 2,040
======= ======= =======
Comprehensive Income (Loss)
A reconciliation of net loss to comprehensive income (loss) is as follows:
Year Ended July 31,
1999 1998 1997
---- ---- ----
Net loss $(1,740) $ (399) $(4,405)
Foreign exchange translation adjustment 1 52 (58)
------- ------- -------
Comprehensive income (loss) $(1,739) $ (347) $(4,463)
======= ======= =======
Reclassification
Certain reclassifications have been made to prior year financial statements in
order to conform with the current year presentation.
<PAGE>
34
2. Inventories
Inventories as of July 31, 1999 and 1998 consist of the following (in
thousands):
1999 1998
---- ----
Components and subassemblies $ 3,667 $ 6,616
Work in process 3,325 2,262
Finished goods 335 193
------- -------
7,327 9,071
Less: inventory valuation allowance (438) (459)
------- -------
$ 6,889 $ 8,612
======= =======
3. Fixed Assets
Fixed assets as of July 31, 1999 and 1998 consist of the following (in
thousands):
1999 1998
---- ----
Furniture and equipment $ 14,889 $ 13,346
Leasehold improvements 4,862 4,004
Construction in progress 1,656 2,564
-------- --------
21,407 19,914
Less: accumulated depreciation (5,581) (3,525)
-------- --------
$ 15,826 $ 16,389
======== ========
The Company capitalized interest costs of $51,000 and $173,000 on internally
constructed fixed assets in the years ended July 31, 1999 and 1998,
respectively.
Depreciation expense was $2.1, $2.2 and $1.9 million for the years ended July
31, 1999, 1998 and 1997, respectively.
4. Capitalized software costs
During fiscal 1999 and 1998, the Company capitalized $1,043,000 and $545,000,
respectively, of software development costs related to a product under
development, the PRIME ECG(TM) Electrocardiac Mapping System. No further costs
are expected to be capitalized on this project. The Company will begin
amortizing capitalized costs on a per unit sales basis in fiscal 2000.
<PAGE>
35
5. Debt
Senior Subordinated Notes
In April 1998, the Company entered into a note agreement with Nomura Holding
America, Inc. for $15 million of senior subordinated notes, at a 12% fixed rate
of interest, due April 2005. The Company issued a warrant to Nomura to purchase
204,770 shares of the Company's common stock in conjunction with the
transaction. $930,000 of the proceeds was allocated to the value of the warrant;
accordingly, the note is carried net of the related unamortized discount. The
Company is amortizing the discount over the term of the debt. This resulted in a
charge against operations of $132,800 and $33,000 in fiscal 1999 and 1998,
respectively. Subsequent to the refinancing transaction, the Company modified
the terms of the warrant issued to Nomura, lowering the per share exercise price
from $11.988 to $6.25. The Company recorded additional interest expense of
$75,000 and $166,000 in fiscal 1999 and 1998, respectively, relating to the
modification of terms.
Proceeds from the transaction were used for the following (in thousands):
Paydown of ING term note (see below) $ 3,500
Payoff of Sarnoff note (see below) 6,004
Payoff of EM Industries subordinated loan 1,277
Paydown of ING Line of Credit 3,351
Financing fees (deferred) 868
-------
$15,000
=======
An extraordinary loss of $494,000 (net of a $317,000 income tax benefit) was
recorded on the transaction relating to the portion of the unamortized discount
on the ING term note which was paid down. The Company is required to maintain
certain financial covenants and is restricted from paying cash dividends. The
Company has obtained a waiver of covenants for the fourth quarter of fiscal
1999, and has amended the credit agreement to reset financial covenants going
forward.
Lines of Credit
The Company has an agreement with International Nederlanden (U.S.) Capital
Corporation ("ING") for an $8.5 million line of credit and a $5 million
long-term loan.
The ING line of credit accrues interest at either the greater of the prime rate
plus 1.25% (9.25% at July 31, 1999) 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 $7.2 million and $4.0 million at July 31, 1999 and 1998,
respectively. The Company pays a commitment fee to ING of .0025% per month on
the average unused portion of the line of credit. The interest rate on
outstanding borrowings was 9.25% at July 31, 1999 and 9.75% at July 31, 1998.
An additional line of credit exists for the Company's operation in N. Ireland.
The line of credit is for (pound)145,000 and is secured by an irrevocable
standby Letter of Credit. The line of credit matures annually each December and
bears interest on outstanding borrowings at the bank's published rate of
approximately 7.00% at July 31, 1999.
<PAGE>
36
Long -Term Debt (ING)
The term loan with ING accrues interest at either the Eurodollar loan rate plus
3.5%; or the greater of the prime rate plus 1.5% (9.5% at July 31, 1999) or the
federal funds rate plus 2.00%. At July 31, 1997, the principal repayment terms
called for quarterly principal payments of $250,000 beginning in June 1997
increasing to $500,000 in December 1997 and maturing on October 31, 2001. The
Company made the first three principal payments ($1,250,000) prior to the Nomura
refinancing transaction, at which time the terms were amended. The new terms
call for quarterly principal payments of $250,000 beginning in June 1999
increasing to $500,000 in June 2002 and maturing on March 31, 2003. As noted
above, a portion of the proceeds of the Nomura note were used to pay down this
term debt in April 1998. The outstanding balance was $4,750,000 and $5,000,000
at July 31, 1999 and 1998, respectively.
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. $811,000 of the remaining
unamortized discount ($494,000 after the tax benefit of $317,000) was written
off as an extraordinary loss on extinguishment of debt in April 1998. The
Company is amortizing the discount over the term of the debt. This resulted in a
charge against operations of $108,000 and $181,000 in fiscal 1999 and 1998,
respectively. The Company is required to maintain certain financial covenants
and is restricted from paying cash dividends. The Company has obtained a waiver
of covenants for the fourth quarter of fiscal 1999, and has amended the credit
agreement to reset financial covenants going forward.
Other Long-Term Debt
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
$294,000 and $731,000 as of July 31, 1999 and 1998, 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 Dey Laboratories (Dey), STI's exclusive distributor for the
EpiPen(R). The proceeds from this loan assisted the Company in purchasing
high-speed filling and automated packaging equipment. 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 balance at July 31, 1999 and 1998 was
$172,000 and $201,900, respectively.
Maturities of all long term-debt are as follows (in thousands):
2000 $ 1,409
2001 1,057
2002 1,250
2003 1,500
2004 -
Thereafter 15,000
--------
Subtotal 20,216
Discounts on term loans (1,168)
--------
Total debt per balance sheet $ 19,048
========
Interest paid for the years ended July 31, 1999, 1998 and 1997 was $2,882,000,
$2,314,000 and $2,466,700, respectively.
<PAGE>
37
6. Shareholders' Equity
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 to
purchase the Company's common stock.
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 years ended July 31, 1999 and 1998
was equivalent to the market value of the Company's stock on the date of grant.
The Company recognized $35,000 of expense in each of fiscal 1999 and 1998 as a
result of options issued in prior years with exercise prices less than fair
market value at the date of grant.
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.
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 1999, 1998 and 1997. Risk-free interest rate of 6.5%, 4.2% and
6.5%, respectively; no dividends; a volatility factor of the expected market
price of the Company's common stock of .49, .53 and .53, respectively, and a
weighted-average expected life of the options of approximately 4-10 years. The
weighted average fair value of options granted during 1999, 1998 and 1997 was
$4.89, $3.93 and $5.85, respectively. 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.
<PAGE>
38
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 (in thousands except per share data):
Year Ended July 31,
1999 1998 1997
---- ---- ----
Net income (loss) $(1,740) $ (399) $(4,405)
Pro forma FAS 123 expense (284) (155) (153)
------- ------- -------
Pro forma net income (loss) $(2,024) $ (554) $(4,558)
======= ======= =======
Weighted average shares outstanding 2,993 2,971 2,040
Pro forma net (loss) per share $ (0.68) $ (0.19) $ (2.23)
The following table summarizes stock option activity for the years ended July
31, 1999, 1998 and 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 July 31,
1999 1998 1997
---- ---- ----
Number of shares
Options outstanding at beginning of year 645,100 553,300 551,900
Granted during the year 203,685 163,200 57,600
Exercised during the year (4,067) (40,200) (8,800)
Expired or terminated (49,283) (31,200) (47,400)
-------- -------- --------
Options outstanding at end of year 795,435 645,100 553,300
======== ======== ========
The price range of options outstanding are as follows:
1999 1998 1997
---- ---- ----
Less than $1.00 148,512 148,512 148,512
$1.00 to $5.00 56,950 61,950 111,000
$5.00 to $9.00 353,960 196,075 120,475
$9.00 + 236,013 238,563 173,313
------- ------- -------
795,435 645,100 553,300
======= ======= =======
Options exercisable at July 31, 1999, 1998 and 1997 were 473,800, 383,200 and
380,200, respectively. The average contractual life of the Company's options is
approximately 6-10 years. The weighted average exercise price of the options
granted in fiscal 1999 and 1998 was $7.07 and $8.62.
Common Stock Warrants
Outstanding warrants to acquire the Company's common stock as of July 31, 1999
and 1998 are as follows:
1999 1998
---- ----
Exercise price:
Less than $1.00 83,579 83,579
$1.00 - $10.99 397,302 397,302
@$11.00 513,271 513,271
------- -------
994,152 994,152
======= =======
789,382 of the warrants expire during 2001, and 204,770 expire in 2005.
<PAGE>
39
7. Income Taxes
The provision for federal and state income taxes exclusive of taxes related to
the extraordinary loss consist of the following (in thousands):
Year Ended July 31,
1999 1998 1997
---- ---- ----
Current:
Federal $(230) $ 554 $ 482
State (50) 122 71
Other - - 22
NOL utilization - (358) (225)
----- ----- -----
(280) 318 350
Deferred:
Federal and state 280 25 (294)
Other - - (11)
----- ----- -----
280 25 (305)
----- ----- -----
$ - $ 343 $ 45
===== ===== =====
The following is a reconciliation of the provision for income taxes from
continuing operations to the provision calculated at the statutory rate (in
thousands):
Year Ended July 31,
1999 1998 1997
---- ---- ----
Provision for income taxes at federal statutory
rate $ (592) $ 149 $(1,498)
State taxes, net of federal income tax benefit (122) 20 (265)
Write off non-deductible in process R&D - - 1,025
Non deductible merger costs - - 474
Non-deductible amortization costs 474 512 346
Changes in valuation allowance 172 (358) -
Other 68 20 (37)
------- ------- -------
$ - $ 343 $ 45
======= ======= =======
The Company paid income taxes of $761,700, $508,000, and $551,900 for the years
ended July 31, 1999, 1998, and 1997, respectively.
<PAGE>
40
The Company provides deferred income taxes for temporary differences between the
book basis of assets and liabilities for financial purposes and the basis of
assets and liabilities for tax return purposes. Deferred tax assets and
liabilities were as follows at July 31, 1999 and 1998 (in thousands):
July 31,
1999 1998
---- ----
Net operating loss and tax credits carryforward $ 2,391 $ 1,939
Inventory valuation 113 95
Uniform inventory capitalization 530 427
Postretirement benefits 281 264
Vacation expense 136 83
Restructuring charge 51 47
Product exchange reserve 139 566
Other 233 179
Valuation allowance (1,909) (1,939)
------- -------
Deferred tax asset $ 1,965 $ 1,661
======= =======
Depreciation $(1,666) $(1,594)
Patent costs (127) (137)
Other - (38)
------- -------
Deferred tax liability $(1,793) $(1,769)
======= =======
At July 31, 1999, the Company has net operating losses (NOLs) available for
future use of approximately $5.8 million. These NOLs begin to expire in 2005.
8. Employee Retirement Plans
Pension and Savings Plans
The Company maintains a profit sharing thrift plan covering all full-time
employees. Annual contributions under the plan may be made up to 6.6% of the
base annual salary of all plan participants not covered by a collective
bargaining agreement. Plan benefit allocations are based on the participants'
annual compensation. The Company made no contributions in fiscal 1999, 1998, 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 contributions by employees not covered by a collective bargaining
agreement. The Company match amounted to $153,600, $151,300, and $152,000 in
fiscal years 1999, 1998, and 1997, respectively.
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 $103,400, $101,700, and $92,000 in fiscal
years 1999, 1998, and 1997, respectively.
<PAGE>
41
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 reached age 50 prior to April
1, 1992, who retire after March 31, 1992 before reaching age 65 and who have at
least 2 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 (in thousands):
1999 1998
---- ----
Benefit obligation at the beginning of the year $ 945 $ 828
Service cost 34 29
Interest cost 71 67
Actuarial (gain)/loss (13) 61
Benefits paid (46) (40)
----- -----
Benefit obligation at the end of the year 991 945
Unrecognized prior service cost (33) (42)
Unrecognized net gain 391 446
Unrecognized transition obligation (628) (673)
----- -----
Accrued benefit costs $ 721 $ 676
===== =====
The Company recognized net periodic postretirement expense of $111,000, $91,000
and $153,000 for the years ended July 31, 1999, 1998 and 1997, respectively, as
follows (in thousands):
1999 1998 1997
---- ---- ----
Service cost-benefits attributed to service during
periods $ 34 $ 29 $ 48
Interest cost on accumulated postretirement benefit
obligation 71 67 112
Amortization of prior service 9 9 9
Amortization of net gain (48) (59) (61)
Amortization of transition obligation 45 45 45
----- ----- -----
Net periodic postretirement benefit cost $ 111 $ 91 $ 153
===== ===== =====
For measurement purposes, an 8.5% annual rate of increase in cost of health care
was assumed for fiscal 1999; 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, 1999 by $204,000
and the aggregate of the service and interest cost component of net periodic
postretirement benefit cost by $30,000 for the year ended July 31, 1999. The
weighted average discount rate used in determining the accumulated
postretirement benefit obligation was 7.5% for 1999 and 1998.
<PAGE>
42
9. Commitments and Contingencies
Leases
The Company has various commitments under operating leases through 2014 relating
to computer hardware and software, its pharmaceutical manufacturing facility and
warehouses in St. Louis, Missouri, its facility in the United Kingdom, a new
facility in Belfast, Northern Ireland, and administrative offices in Columbia,
Maryland and St. Louis, Missouri.
Future minimum rentals as of July 31, 1999 under noncancellable leases are as
follows (in thousands):
Operating Sublease
Year Ending July 31, Leases Revenue
-------------------- ------ -------
2000 $1,443 $ 330
2001 1,298 330
2002 913 165
2003 574 -
2004 574 -
Thereafter 3,933 -
------ ------
$8,735 $ 825
====== ======
The Company incurred net rental expense of $1,066,200, $986,200 and $825,400 in
1999, 1998 and 1997, respectively.
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 $154,000 in 1999
(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 has an agreement with a key employee which provides for certain
benefits should the employee be terminated within the term of the agreement for
other than specified reasons. The Company also has agreements with certain key
employees which provide for certain benefits should the employees 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,
<PAGE>
43
disability, accident and health insurance coverage for a period of two years and
a severance payment up to 100-200% 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 three-year periods unless
timely notice of non-renewal is given. The maximum contingent liability under
these agreements at July 31, 1999 aggregates $1,380,000.
10. Industry Segment Information
The Company operates in two industry segments: injection therapy and cardiac
monitoring. Both segments include the design, development, manufacture and sale
of medical products and related services, with a major focus on safe and
convenient participation by the patient. The cardiac monitoring business unit
operates in N. Ireland with most of its revenue generated overseas. At this
time, the cardiac monitoring segment does not qualify for separate segment
reporting due to immateriality.
11. Significant Customers & Foreign Operations
Financial information relating to major customers and export sales follows (in
thousands):
1999 1998 1997
---- ---- ----
Sales to major U.S. customers:
U.S. Department of Defense $20,698 $16,939 $13,116
Dey L.P. 11,449 20,734 15,028
Other 4,270 1,730 5,051
------- ------- -------
Total 36,417 39,403 33,195
Export sales:
Contract sales to the Governments of foreign
countries 2,474 1,565 4,709
Other 1,839 3,700 2,761
------- ------- -------
Total export sales 4,313 5,265 7,470
------- ------- -------
Total net sales $40,730 $44,668 $40,665
======= ======= =======
The Company extends credit to domestic customers and generally requires a letter
of credit for export sales.
At July 31, 1999 and 1998, the Company had 56% and 78%, respectively, of its
accounts receivable from two customers, Dey and the U.S. government. Dey's
parent is a shareholder of the Company.
The Company operates subsidiaries in the U.K which represent 8.5% and 8.1% of
the Company's sales and total assets, respectively.
<PAGE>
44
12. Product Exchange/Recall
On May 8, 1998, the Company announced a voluntary Class I recall of 47 lots of
its EpiPen and EpiPen Jr. auto-injectors (approximately 1,000,000 units) because
some may not provide effective doses of medication. The original estimated cost
of the recall was $2.2 million and was included in third quarter 1998 results.
During the fourth quarter, management revised the estimate and increased the
provision by $0.5 million, bringing the total expense for fiscal 1998 to $2.7
million. Included in this cost is the direct cost of the actual returned
products as well as cash costs incurred by the distributor which are paid for by
shipment of additional product units. The provision provides for the Company's
expense at its cost. Management has performed an analysis of potential costs of
the recall and made their best estimate regarding these costs. Actual costs
could differ materially from management's estimates. The Company has provided
$454,000 in the fourth quarter of fiscal 1999 for what its believes to be the
final costs of the recall.
The Company had $3.2 million and $1.3 million of EpiPen shipments during fiscal
1999 and 1998, respectively, to satisfy cash costs incurred by the distributor
for the 1998 EpiPen recall and the 1997 EpiEZPen voluntary exchange program.
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
.001 percent) were returned for premature activation in the package. The
estimated cost of the exchange program was $1.5 million and was included in
fiscal 1997 results of operations. Actual costs through July 31, 1999 have not
differed materially from management's estimates.
<PAGE>
45
13. Quarterly Operating Results (unaudited)
<TABLE>
<CAPTION>
(in thousands, except per share data)
Quarter Ended
----------------------------------------------------------------------
Fiscal Year 1999 Oct. 31, 1998 Jan. 31, 1999 Apr. 30, 1999 Jul. 31, 1999
- ---------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net sales $ 10,850 $ 9,824 $ 9,620 $ 10,436
Cost of sales 6,673 7,422 7,937 5,988
-------- -------- -------- --------
Gross profit 4,177 2,402 1,683 4,448
Operating expenses 2,980 2,816 2,309 3,318
-------- -------- -------- --------
Operating income (loss) 1,197 (414) (626) 1,130
Other expense, net (838) (453) (705) (1,031)
-------- -------- -------- --------
Income (loss) before income tax 359 (867) (1,331) 99
Provision for income tax 93 (93) - -
-------- -------- -------- --------
Net income (loss) $ 266 $ (774) $ (1,331) $ 99
======== ======== ======== ========
Net income (loss) per share $ 0.08 $ (0.26) $ (0.44) $ 0.03
======== ======== ======== ========
<CAPTION>
Fiscal Year 1998 Oct. 31, 1997 Jan. 31, 1998 Apr. 30, 1998 Jul. 31, 1998
- ---------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net sales $ 10,643 $ 10,723 $ 13,430 $ 9,872
Cost of sales 6,508 6,388 8,324 5,871
-------- -------- -------- --------
Gross profit 4,135 4,335 5,106 4,001
Operating expenses 2,629 2,852 5,340 3,689
-------- -------- -------- --------
Operating income (loss) 1,506 1,483 (234) 312
Other expense, net (705) (490) (707) (727)
-------- -------- -------- --------
Income (loss) before income tax and
extraordinary item 801 993 (941) (415)
Provision for income tax 186 354 (223) 26
Extraordinary loss, net of income taxes (494)
-------- -------- --------
Net income (loss) $ 615 $ 639 $ (1,212) $ (441)
======== ======== ======== ========
Net income (loss) per share $ 0.20 $ 0.20 $ (0.41) $ (0.15)
======== ======== ======== ========
</TABLE>
During the quarters ended April 30, 1998, July 31, 1998 and July 31, 1999, the
Company recorded charges of $2.2 million, $500,000 and $454,000, respectively,
for the estimated cost of a recall of the Company's EpiPen product.
Gross Margins for the quarters ended January 31, 1999 and April 30, 1999 were
both negatively impacted by the shipment of free units to satisfy recall
obligations. In addition, the gross margin for the quarter ended January 31,
1999 was affected by product mix, and that of the quarter ended April 30, 1999
was affected by a planned upgrade and renovation of the Company's clean room
manufacturing facility, which caused a temporary closure of the plant.
<PAGE>
46
REPORT OF INDEPENDENT AUDITORS
- ------------------------------
Board of Directors and Shareholders
Meridian Medical Technologies, Inc.
We have audited the accompanying consolidated balance sheets of Meridian Medical
Technologies, Inc. and subsidiaries as of July 31, 1999 and 1998 and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the three years in the period ended July 31, 1999. 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 consolidated 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, 1999 and 1998,
and the results of their operations and their cash flows for each of the three
years in the period ended July 31, 1999, 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
October 22, 1999
<PAGE>
47
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, 1999, 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, 1999 and 1998
Consolidated Statements of Operations for the years ended July
31, 1999, 1998, and 1997.
Consolidated Statements of Shareholders' Equity for the years
ended July 31, 1999, 1998, and 1997.
Consolidated Statements of Cash Flows for the years ended July
31, 1999, 1998, and 1997.
Notes to Consolidated Financial Statements
Report of Independent Auditors
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
precedes the signatures to this report:
Schedule II - Valuation and Qualifying Accounts
Allother 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>
48
3. Exhibits:
Exhibit No. Description of Exhibit
- ----------- ----------------------
(3.1) The Company's Bylaws (As Amended). Incorporated by reference
to the Company's Annual Report on Form 10-K for the year ended
July 31, 1997.
(3.2) First Amended and Restated Certificate of Incorporation and
certification of the amendment of first amended and restated
Certificate of Incorporation. Incorporated by reference to the
Company's Annual Report on Form 10-K for the year ended July
31, 1997.
(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).
(10.5) 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.*
(10.7) 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).
(10.10) 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).
<PAGE>
49
(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).
(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).
(10.15) 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. Incorporated by
reference to the Company's Annual Report on Form 10-K for the
year ended July 31, 1997 (File No. 0-5958).
(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).
<PAGE>
50
(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).
(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).
(10.28) Note and Warrant Purchase Agreement dated as of April 30,
1998. Incorporated by reference to the Company's Form 10-Q for
the quarter ended April 30, 1998.
(10.29) Registration Rights Agreement dated as of April 30, 1998.
Incorporated by reference to the Company's Form 10-Q for the
quarter ended April 30, 1998.
(10.30) Warrant Agreement dated as of April 30, 1998. Incorporated by
reference to the Company's Form 10-Q for the quarter ended
April 30, 1998.
(10.31) First Amendment to the Note and Warrant Purchase Agreement
dated October 15, 1998. Incorporated by reference to the
Company's Form 10-K for the year ended July 31, 1998.
(10.32) Fifth Amendment to the Credit Agreement dated October 15,
1998. Incorporated by reference to the Company's Form 10-K for
the year ended July 31, 1998.
(10.33) Contract SP0200-99-D-0007 dated July 30, 1990 between the U.S.
Government (Defense Personnel Support Center) and the Company.
Filed herewith.
(10.34) Form of Change of Control Agreement between the Company and
Dr. Gerald L. Wannarka and Mr. Peter A. Garbis dated October
26, 1998, and between the Company and Mr. Dennis P. O'Brien
dated March 8, 1999. Filed herewith. *
(10.35) Sixth Amendment to the Credit Agreement dated November 6, 1998
between the Company and and Internationale Nederlanden (U.S.)
Capital Corporation. Filed herewith.
<PAGE>
51
(10.36) Waiver and Amendment Agreement dated June 14, 1999 between the
Company and Nomura Holding America Inc. Filed herewith.
(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.
(23.1) Consent of Independent Auditors. Filed herewith.
(24.0) Power of Attorney of the Company's Directors. Filed herewith.
(27.0) Financial Data Schedule dated July 31, 1999. Filed herewith.
*Management contract, compensatory plan or arrangement.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the quarter ended
July 31, 1999.
<PAGE>
52
SCHEDULE II
MERIDIAN MEDICAL TECHNOLOGIES, INC.
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Additions Additions
Balance at Charged to Charged to
Beginning of other Costs and Write-off Balance at
Period Accounts Expenses Deductions End of Period
------------ -------- -------- ---------- -------------
<S> <C> <C> <C> <C> <C>
For the year ended July 31, 1999
Allowance for doubtful accounts $324,800 $ - $141,700 $ - $466,500
Inventory reserves $458,900 $ - $ 45,800 $ 66,700 $438,000
Restructuring reserves $121,800 $ - $ 80,000 $ 67,500 $134,300
======== =========== ======== ======== ========
For the year ended July 31, 1998
Allowance for doubtful accounts $247,800 $ - $ 76,980 $ - $324,800
Inventory reserves $546,300 $ - $ 92,600 $180,000 $458,900
Restructuring reserves $123,800 $ - $ - $ 2,000 $121,800
======== =========== ======== ======== ========
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>
<PAGE>
53
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 29, 1999
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:
<TABLE>
<S> <C> <C>
/S/ JAMES H. MILLER Chairman of the Board October 29, 1999
- ----------------------------- President and Director
James H. Miller (Principal Executive Officer)
/S/ DENNIS P. O'BRIEN Vice President of Finance October 29, 1999
- ----------------------------- (Principal Financial and
Dennis P. O'Brien Accounting Officer)
* Director October 29, 1999
- -----------------------------
Bruce M. Dresner
* Director October 29, 1999
- -----------------------------
Robert G. Foster
* Director October 29, 1999
- -----------------------------
David L. Lougee
* Director October 29, 1999
- -----------------------------
E. Andrews Grinstead, III
* - By: /S/ JAMES H. MILLER October 29, 1999
- -----------------------------
James H. Miller
Attorney-in-fact
</TABLE>
<PAGE>
54
EXHIBIT INDEX
-------------
Exhibit No. Description of Exhibit
- ----------- ----------------------
(3.1) The Company's Bylaws (As Amended). Incorporated by reference
to the Company's Annual Report on Form 10-K for the year ended
July 31, 1997.
(3.2) First Amended and Restated Certificate of Incorporation and
certification of the amendment of first amended and restated
Certificate of Incorporation. Incorporated by reference to the
Company's Annual Report on Form 10-K for the year ended July
31, 1997.
(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).
(10.5) 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.*
(10.7) 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).
(10.10) 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).
<PAGE>
55
(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).
(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).
(10.15) 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. Incorporated by
reference to the Company's Annual Report on Form 10-K for the
year ended July 31, 1997 (File No. 0-5958).
(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).
<PAGE>
56
(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).
(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).
(10.29) Note and Warrant Purchase Agreement dated as of April 30,
1998. Incorporated by reference to the Company's Form 10-Q for
the quarter ended April 30, 1998.
(10.29) Registration Rights Agreement dated as of April 30, 1998.
Incorporated by reference to the Company's Form 10-Q for the
quarter ended April 30, 1998.
(10.30) Warrant Agreement dated as of April 30, 1998. Incorporated by
reference to the Company's Form 10-Q for the quarter ended
April 30, 1998.
(10.31) First Amendment to the Note and Warrant Purchase Agreement
dated October 15, 1998. Incorporated by reference to the
Company's Form 10-K for the year ended July 31, 1998.
(10.32) Fifth Amendment to the Credit Agreement dated October 15,
1998. Incorporated by reference to the Company's Form 10-K for
the year ended July 31, 1998.
(10.33) Contract SP0200-99-D-0007 dated July 30, 1990 between the U.S.
Government (Defense Personnel Support Center) and the Company.
Filed herewith.
(10.34) Form of Change of Control Agreement between the Company and
Dr. Gerald L. Wannarka and Mr. Peter A. Garbis dated October
26, 1998, and between the Company and Mr. Dennis P. O'Brien
dated March 8, 1999. Filed herewith. *
<PAGE>
57
(10.35) Sixth Amendment to the Credit Agreement dated November 6, 1998
between the Company and Internationale Nederlanden (U.S.)
Capital Corporation. Filed herewith.
(10.36) Waiver and Amendment Agreement dated June 14, 1999 between the
Company and Nomura Holding America Inc. Filed herewith.
(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.
(23.1) Consent of Independent Auditors. Filed herewith.
(24.0) Power of Attorney of the Company's Directors. Filed herewith.
(27.0) Financial Data Schedule dated July 31, 1999. Filed herewith.
*Management contract, compensatory plan or arrangement.
Exhibit 10.33
- --------------------------------------------------------------------------------
AWARD/CONTRACT 1. This contract is rated order Rating Page of Pages
under DPAS (15 CFR 350) DO C9 1 of 34
- --------------------------------------------------------------------------------
2. Contract No. 3. Effective Date 4. Requisition/Purchase Request/
Project No.
SP0200-99D-0007 7-30-99 DD#80004______________________
5. Issued by Code SP0200 6. Administered by (if other than Item 5) Code S2101A
DEFENSE SUPPLY CENTER PHILADELPHIA DCMC BALTIMORE
ATTN: DSCP-MGAA (BLDG #6) 217 EAST REDWOOD STREET
700 ROBBINS AVENUE SUITE 1800
PHILA., PA 19111-5092 BALTIMORE, MD 21202-5299
ATTN: A. PODLAS (DSCP-MGAA-PGC)
215-737-5768
------------------------------------
7. Name and Address if Contractor 8. Delivery
(No.,Street,city,county,state,zipcode)
MERIDIAN MEDICAL TECHNOLOGIES, INC.
10240 OLD COLUMBIA ROAD / / FOB ORIGIN / / OTHER
COLUMBIA, MD 21046
------------------------------------
ATTN: MS. CRISTINA D'ERASMO 9. Discount for Prompt Payment
- -------------------------------------------- .5% 10 DAYS
CODE 54452 FACILITY CODE ------------------------------------
10. SUBMIT INVOICES ITEM
11. SHIP TO/MARK FOR CODE _______________ (4 copies unless otherwise
ADDRESS SHOWN IN:
------------------------------------
CODE HQ0338
------------------------------------
12. PAYMENT WILL BE MADE BY
DFAS-COLUMBUS CENTER
DFAS-CO/SOUTH ENTITLEMENT OPERATIONS
P.O. BOX 182264
SEE INDIVIDUAL DELIVERY ORDER COLUMBUS, OH 43218-2264
- --------------------------------------------------------------------------------
13. AUTHORITY FOR USING OTHER THAN FULL 14. ACCOUNTING AND APPROPRIATION
AND OPEN COMPETITION: DATA
/ / 10USC2304(C) ( 3 ) / / 41USC253(C)( ) MG97X4930 5CMO 01 26.0 S33150
- --------------------------------------------------------------------------------
15.A. 15B. 15C. 15D. 15E. 15F.
ITEM No. SUPPLIES/SERVICES QUANTITY UNIT UNIT PRICE AMOUNT
SEE ATTACHED PAGES
- --------------------------------------------------------------------------------
15G. TOTAL AMOUNT OF CONTRACT $
- --------------------------------------------------------------------------------
16. TABLE OF CONTENTS
- --------------------------------------------------------------------------------
(X) SEC DESCRIPTION PAGE(S)
- --------------------------------------------------------------------------------
PART I - THE SCHEDULE
- --------------------------------------------------------------------------------
A SOLICIATION/CONTRACT FORM
- --------------------------------------------------------------------------------
X B SUPPLIES OR SERVICES AND PRICES/COST
- --------------------------------------------------------------------------------
X C DESCRIPTION/SPECS/WORK STATEMENT
- --------------------------------------------------------------------------------
D PACKAGING AND MARKING
- --------------------------------------------------------------------------------
E INSPECTION AND ACCEPTANCE
- --------------------------------------------------------------------------------
F DELIVERIES OR PERFORMANCE
- --------------------------------------------------------------------------------
G CONTRACT ADMINISTRATION DATA
- --------------------------------------------------------------------------------
H SPECIAL CONTRACT REQUIREMENTS
- --------------------------------------------------------------------------------
PART II - CONTRACT CLAUSES
- --------------------------------------------------------------------------------
X I CONTRACT CLAUSES
- --------------------------------------------------------------------------------
PART III - LIST OF DOC. EXHIBITS & OTHER ATTACH.
- --------------------------------------------------------------------------------
J LIST OF ATTACHMENTS
- --------------------------------------------------------------------------------
PART IV - REPRESENTATIONS AND INSTRUCTIONS
- --------------------------------------------------------------------------------
K REPRESENTATION,CERTIFICATION AND OTHER STATEMENTS OF OFFERORS
- --------------------------------------------------------------------------------
L INSTRS.,CONDS., & NOTICES TO OFFERORS
- --------------------------------------------------------------------------------
M EVALUATION FACTORS FOR AWARD
- --------------------------------------------------------------------------------
CONTRACTING OFFICER WILL COMPLETE ITEM 17 OR 18 AS APPLICABLE
- --------------------------------------------------------------------------------
17. / / CONTRACTOR'S NEGOTIATED AGREEMENT (Contractor is required to sign this
document and return _______copies to issuing office.) Contractor agrees to
furnish and deliver all items or perform all the services set forth or otherwise
identified above and on any continuation sheets for the consideration stated
herein. The rights and obligations of the parties to this contract shall be
subject to and governed by the following documents (a) this award/contract,(b)
the solicitation, if any, and (C) such provisions, representations,
certifications, and specifications, as are attached or incorporated by reference
herein. (Attachments are listed herein.)
18. / / AWARD (Contractor is not required to sign this document) Your offer on
Soliciation Number SP0200-98R-1002 (see page 13), including the additions or
changes made by you which additions or changes are set forth in full above, is
hereby accepted as to the items listed above and on any continuation sheets.
This award consummate the contract which consists of the following documents:
(a) the Government's solicitation and your offer, and (b) this award/contract.
No further contractual document is necessary.
- --------------------------------------------------------------------------------
19A. NAME AND TITLE OF SIGNER (Type or print) 20A. NAME OF CONTRACTING OFFICER
DENNIS P. O'BRIEN - VP-FINANCE/CFO ANNA PODLAS
- --------------------------------------------------------------------------------
19B. NAME OF CONTRACTOR 19C. DATED SIGNED
- --------------------------------------------------------------------------------
20B. UNITED STATES OF AMERICA 20C. DATED SIGNED
- --------------------------------------------------------------------------------
<PAGE>
BY BY
----------------------------------- ---------------------------------
(Signature of person auth. to sign) (Signature of Contracting Officer
- --------------------------------------------------------------------------------
nsn 7540-01-152-8069 26-107 STANDARD FORM 28 (REV.4-85) (EG)/
PRESCRIBED BY GSA
PREVIOUS EDITION UNUSABLE PERFORM (DLA) FAR (48 CFR) 43.214 (a)
- --------------------------------------------------------------------------------
CONTINUATION SHEET: SP0200-99D-0007 Page 2 of 34
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CONTRACTOR: MERIDIAN MEDICAL TECHNOLOGIES INC.
- --------------------------------------------------------------------------------
SECTION B
---------
0001 BASE MAINTENANCE/SERVICE
To provide labor, services and incremental production as directed by
the Government in accordance with statement of work.
0002 LOGISTICS MAINTENANCE
To provide segregation of goods, disassembly into components, shelf
life extension program, and storage in accordance with statement of work.
0003 DIVISION-READY BRIGADE SET PROGRAM
To provide on-site support for the storage, assembly, and shipment of
Division-Ready Brigade Sets in accordance with statement of work.
0004 BASE MAINTENANCE/MATERIAL
To provide completely assembled Mark I Kits, Atropine, Pralidoxime,
Diazepam, and Morphine Auto Injectors using refurbished and/or new components in
accordance with statement of work.
0005 MOBILIZATION SURGE OPTION
To provide material in the event of a mobilization surge contingency or
other Government need. The contractor will ship to those locations identified by
the Contracting Officer up the maximum quantities indicated.
0006 VENDOR VALIDATION
Validation testing and direct plant support costs for new Pralidoxime
supplier.
<PAGE>
- --------------------------------------------------------------------------------
CONTINUATION SHEET: SP0200-99D-0007 Page 3 of 34
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CONTRACTOR: MERIDIAN MEDICAL TECHNOLOGIES INC.
- --------------------------------------------------------------------------------
SCHEDULE
<TABLE>
<CAPTION>
ITEM NO. SUPPLIES QTY U/I U/P TOTAL
- -------- -------- --- --- --- -----
<S> <C> <C> <C> <C>
0001 BASE MAINTENANCE/SERVICE
0001AA BASE YEAR 1 LT $7,657,018 $7,657,018
0001AB OPTION YEAR ONE 1 LT $8,005,263 $8,005,263
0001AC OPTION YEAR TWO 1 LT $8,309,044 $8,309,044
0002 LOGISTICS MAINTENANCE
0002AA BASE YEAR 1 LT $2,052,506 $2,052,506
0002AB BASE YEAR ONE 1 LT $2,128,455 $2,128,455
0002AC BASE YEAR TWO 1 LT $2,206,383 $2,206,383
0003 DIVISION-READY BRIGADE SET PROGRAM
0003AA BASE YEAR 1 LT $0 $0
0003AB OPTION YEAR ONE 1 LT $0 $0
0003AC OPTION YEAR TWO 1 LT $0 $0
<CAPTION>
0004 BASE MAINTENANCE/MATERIAL ANNUAL ESTIMATE
---------------
0004AA BASE YEAR
---------
<S> <C> <C> <C> <C>
MARK I (6505-01-174-9919) 462,000 EA $8.44 $3,899,280
1 thru 499,999 $8.44
500,000 thru 749,999 $8.05
750,000 thru 999,999 $7.84
1,000,000 thru 1,200,000* $7.72
ATROPINE (6505-00-926-9083) 400,000 EA $2.69 $1,076,000
1 thru 499,999 $2.69
500,000 thru 749,999 $2.60
750,000 thru 999,999 $2.52
1,000,000 thru 1,200,000* $2.49
PRALIDOXIME (6505-01-125-3248) 250,000 EA $5.39 $1,347,500
1 thru 499,999 $5.39
500,000 thru 749,999 $5.09
750,000 thru 999,999 $4.96
1,000,000 thru 1,200,000* $4.88
DIAZEPAM (6505-01-274-0951) 400,000 EA $4.71 $1,884,000
1 thru 499,999 $4.71
500,000 thru 749,999 $4.43
750,000 thru 999,999 $4.30
1,000,000 thru 1,200,000* $4.21
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
CONTINUATION SHEET: SP0200-99D-0007 Page 4 of 34
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CONTRACTOR: MERIDIAN MEDICAL TECHNOLOGIES INC.
- --------------------------------------------------------------------------------
SCHEDULE
<TABLE>
<CAPTION>
ITEM NO. SUPPLIES QTY U/I U/P TOTAL
- -------- -------- --- --- --- -----
<S> <C> <C> <C> <C>
MORPHINE (6505-01-302-5530) 300,000 EA $2.94 $882,000
1 thru 499,999 $2.94
500,000 thru 749,999 $2.84
750,000 thru 999,999 $2.76
1,000,000 thru 1,200,000* $2.72
0004AB OPTION YEAR ONE
---------------
MARK I (6505-01-174-9919) 462,000 EA $8.71 $4,024,020
1 thru 499,999 $8.71
500,000 thru 749,999 $8.30
750,000 thru 999,999 $8.09
1,000,000 thru 1,200,000* $7.97
ATROPINE (6505-00-926-9083) 400,000 EA $2.78 $1,112,000
1 thru 499,999 $2.78
500,000 thru 749,999 $2.69
750,000 thru 999,999 $2.61
1,000,000 thru 1,200,000* $2.57
PRALIDOXIME (6505-01-125-3248) 250,000 EA $5.55 $1,387,500
1 thru 499,999 $5.55
500,000 thru 749,999 $5.24
750,000 thru 999,999 $5.11
1,000,000 thru 1,200,000* $5.03
DIAZEPAM (6505-01-274-0951) 400,000 EA $4.87 $1,948,000
1 thru 499,999 $4.87
500,000 thru 749,999 $4.58
750,000 thru 999,999 $4.45
1,000,000 thru 1,200,000* $4.36
MORPHINE (6505-01-302-5530) 300,000 EA $3.04 $912,000
1 thru 499,999 $3.04
500,000 thru 749,999 $2.93
750,000 thru 999,999 $2.85
1,000,000 thru 1,200,000* $2.81
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
CONTINUATION SHEET: SP0200-99D-0007 Page 5 of 34
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CONTRACTOR: MERIDIAN MEDICAL TECHNOLOGIES INC.
- --------------------------------------------------------------------------------
SCHEDULE
<TABLE>
<CAPTION>
ITEM NO. SUPPLIES QTY U/I U/P TOTAL
- -------- -------- --- --- --- -----
<S> <C> <C> <C> <C>
0004AC OPTION YEAR TWO
---------------
MARK I (6505-01-174-9919) 462,000 EA $8.98 $4,148,760
1 thru 499,999 $8.98
500,000 thru 749,999 $8.56
750,000 thru 999,999 $8.35
1,000,000 thru 1,200,000* $8.22
ATROPINE (6505-00-926-9083) 400,000 EA $2.88 $1,152,000
1 thru 499,999 $2.88
500,000 thru 749,999 $2.78
750,000 thru 999,999 $2.70
1,000,000 thru 1,200,000* $2.66
PRALIDOXIME (6505-01-125-3248) 250,000 EA $5.71 $1,427,500
1 thru 499,999 $5.71
500,000 thru 749,999 $5.39
750,000 thru 999,999 $5.26
1,000,000 thru 1,200,000* $5.17
DIAZEPAM (6505-01-274-0951) 400,000 EA $5.05 $2,020,000
1 thru 499,999 $5.05
500,000 thru 749,999 $4.74
750,000 thru 999,999 $4.60
1,000,000 thru 1,200,000* $4.51
MORPHINE (6505-01-302-5530) 300,000 EA $3.15 $945,000
1 thru 499,999 $3.15
500,000 thru 749,999 $3.04
750,000 thru 999,999 $2.95
1,000,000 thru 1,200,000* $2.91
</TABLE>
*Pricing limited to quantities, excluding Pre-stock units, of 1.2 million each
of Mark I Injectors or 1.2 million injectors Atropine and/or Morphine Injectors
and 1.2 million Pralidoxime and/or Diazepam Injectors.
<PAGE>
- --------------------------------------------------------------------------------
CONTINUATION SHEET: SP0200-99D-0007 Page 6 of 34
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CONTRACTOR: MERIDIAN MEDICAL TECHNOLOGIES INC.
- --------------------------------------------------------------------------------
SCHEDULE
ADDITIONAL AVAILABLE QUANTITIES UNDER LINE ITEM 0004
During any contract year, if the Government has reached the 2.4 million unit
autoinjector limit under item 0004 (1.2 million each of Mark 1 injectors or 1.2
million Atropine and/or Morphine injectors and 1.2 million Pralidoxime and/or
Diazepam injectors), the Government is entitled to purchase up to an additional
499,999 units during that year, without exercising Line Item 0005, Mobilization
Surge Option. The pricing is as follows, for these non mobilization surge
quantities exceeding the 2.4 million annual threshold:
Base Period Option Year One Option Year Two
----------- ----------- -------------------
MARK 1 $10.85 $11.13 $11.47
ATROPINE $3.51 $3.61 $3.73
PRALIDOXIME $6.88 $7.04 $7.25
DIAZEPAM $6.38 $6.55 $6.76
MORPHINE $3.85 $3.96 $4.08
These extra quantities above the 2.4 million will be delivered 150 days after
date of delivery order, but Contractor will not be required to deliver these
additional quantities during the months of June, July, and August. If delivery
of the 499,999 falls after the end of the contract year in which the delivery
order was issued, the price will not be increased to the next years pricing, nor
will the quantities be subtracted from the next years 2.4 million available
quantity.
This in no way limits the Government's rights to purchase quantities against
Line Item 0004, or to exercise Line Item 0005, or any other rights under this
contract
<PAGE>
- --------------------------------------------------------------------------------
CONTINUATION SHEET: SP0200-99D-0007 Page 7 of 34
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CONTRACTOR: MERIDIAN MEDICAL TECHNOLOGIES INC.
- --------------------------------------------------------------------------------
SCHEDULE
PRESTOCK COMPONENT PRICING
<TABLE>
<CAPTION>
ITEM NO. SUPPLIES QTY U/I U/P TOTAL
- -------- -------- --- --- --- -----
<S> <C> <C> <C> <C>
0004AD BASE YEAR
---------
MARK I (6505-01-174-9919)
1 thru 499,999 EA $6.44
500,000 thru 749,999 EA $6.17
750,000 thru 999,999 EA $6.00
1,000,000 thru 1,200,000 EA $5.91
ATROPINE (6505-00-926-9083)
1 thru 499,999 EA $2.01
500,000 thru 749,999 EA $1.95
750,000 thru 999,999 EA $1.89
1,000,000 thru 1,200,000 EA $1.86
PRALIDOXIME (6505-01-125-3248)
1 thru 499,999 EA $4.13
500,000 thru 749,999 EA $3.92
750,000 thru 999,999 EA $3.82
1,000,000 thru 1,200,000 EA $3.76
DIAZEPAM (6505-01-274-0951)
1 thru 499,999 EA $3.53
500,000 thru 749,999 EA $3.33
750,000 thru 999,999 EA $3.22
1,000,000 thru 1,200,000 EA $3.16
MORPHINE (6505-01-302-5530)
1 thru 499,999 EA $2.18
500,000 thru 749,999 EA $2.11
750,000 thru 999,999 EA $2.05
1,000,000 thru 1,200,000 EA $2.02
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
CONTINUATION SHEET: SP0200-99D-0007 Page 8 of 34
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CONTRACTOR: MERIDIAN MEDICAL TECHNOLOGIES INC.
- --------------------------------------------------------------------------------
SCHEDULE
PRESTOCK COMPONENT PRICING
<TABLE>
<CAPTION>
ITEM NO. SUPPLIES QTY U/I U/P TOTAL
- -------- -------- --- --- --- -----
<S> <C> <C> <C> <C>
0004AE OPTION YEAR ONE
---------------
MARK I (6505-01-174-9919)
1 thru 499,999 EA $6.64
500,000 thru 749,999 EA $6.36
750,000 thru 999,999 EA $6.19
1,000,000 thru 1,200,000 EA $6.09
ATROPINE (6505-00-926-9083)
1 thru 499,999 EA $2.08
500,000 thru 749,999 EA $2.02
750,000 thru 999,999 EA $1.96
1,000,000 thru 1,200,000 EA $1.93
PRALIDOXIME (6505-01-125-3248)
1 thru 499,999 EA $4.25
500,000 thru 749,999 EA $4.03
750,000 thru 999,999 EA $3.93
1,000,000 thru 1,200,000 EA $3.86
DIAZEPAM (6505-01-274-0951)
1 thru 499,999 EA $3.65
500,000 thru 749,999 EA $3.45
750,000 thru 999,999 EA $3.34
1,000,000 thru 1,200,000 EA $3.27
MORPHINE (6505-01-302-5530)
1 thru 499,999 EA $2.26
500,000 thru 749,999 EA $2.19
750,000 thru 999,999 EA $2.12
1,000,000 thru 1,200,000 EA $2.09
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
CONTINUATION SHEET: SP0200-99D-0007 Page 9 of 34
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CONTRACTOR: MERIDIAN MEDICAL TECHNOLOGIES INC.
- --------------------------------------------------------------------------------
SCHEDULE
PRESTOCK COMPONENT PRICING
<TABLE>
<CAPTION>
ITEM NO. SUPPLIES QTY U/I U/P TOTAL
- -------- -------- --- --- --- -----
<S> <C> <C> <C> <C>
0004AF OPTION YEAR TWO
---------------
MARK I (6505-01-174-9919)
1 thru 499,999 EA $6.85
500,000 thru 749,999 EA $6.56
750,000 thru 999,999 EA $6.39
1,000,000 thru 1,200,000 EA $6.28
ATROPINE (6505-00-926-9083)
1 thru 499,999 EA $2.16
500,000 thru 749,999 EA $2.09
750,000 thru 999,999 EA $2.03
1,000,000 thru 1,200,000 EA $2.00
PRALIDOXIME (6505-01-125-3248)
1 thru 499,999 EA $4.38
500,000 thru 749,999 EA $4.15
750,000 thru 999,999 EA $4.05
1,000,000 thru 1,200,000 EA $3.98
DIAZEPAM (6505-01-274-0951)
1 thru 499,999 EA $3.78
500,000 thru 749,999 EA $3.57
750,000 thru 999,999 EA $3.45
1,000,000 thru 1,200,000 EA $3.38
MORPHINE (6505-01-302-5530)
1 thru 499,999 EA $2.34
500,000 thru 749,999 EA $2.26
750,000 thru 999,999 EA $2.19
1,000,000 thru 1,200,000 EA $2.16
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
CONTINUATION SHEET: SP0200-99D-0007 Page 10 of 34
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CONTRACTOR: MERIDIAN MEDICAL TECHNOLOGIES INC.
- --------------------------------------------------------------------------------
SCHEDULE
<TABLE>
<CAPTION>
ITEM NO. SUPPLIES QTY U/I U/P TOTAL
- -------- -------- --- --- --- -----
<S> <C> <C> <C> <C>
0005 MOBILIZATION SURGE OPTION
0005AA BASE YEAR (FULL QTY)
MARK I (6505-01-174-9919) 2,244,762 EA $11.59 $26,016,792
ATROPINE (6505-00-926-9083) 1,079,426 EA $3.74 $4,037,053
PRALIDOXIME (6505-01-125-3248) 583,507 EA $7.51 $4,382,138
DIAZEPAM (6505-01-274-0951) 689,788 EA $7.05 $4,863,005
MORPHINE (6505-01-302-5530) 1,517,225 EA $4.23 $6,417,862
0005AB OPTION YEAR ONE (FULL QTY)
MARK I (6505-01-174-9919) 2,244,762 EA $11.88 $26,667,773
ATROPINE (6505-00-926-9083) 1,079,426 EA $3.87 $4,177,379
PRALIDOXIME (6505-01-125-3248) 583,507 EA $7.68 $4,481,334
DIAZEPAM (6505-01-274-0951) 689,788 EA $7.27 $5,014,759
MORPHINE (6505-01-302-5530) 1,517,225 EA $4.37 $6,630,273
0005AC OPTION YEAR TWO (FULL QTY)
MARK I (6505-01-174-9919) 2,244,762 EA $12.28 $27,565,677
ATROPINE (6505-00-926-9083) 1,079,426 EA $4.00 $4,317,704
PRALIDOXIME (6505-01-125-3248) 583,507 EA $7.94 $4,633,046
DIAZEPAM (6505-01-274-0951) 689,788 EA $7.52 $5,187,206
MORPHINE (6505-01-302-5530) 1,517,225 EA $4.52 $6,857,857
0005AA BASE YEAR TIER PRICING VOLUMES
(UP TO 3,000,000 UNITS)
MARK I (6505-01-174-9919) 1,101,326 EA $11.79 $12,984,634
ATROPINE (6505-00-926-9083) 529,589 EA $3.81 $2,017,734
PRALIDOXIME (6505-01-125-3248) 286,280 EA $7.64 $2,187,179
DIAZEPAM (6505-01-274-0951) 338,424 EA $7.17 $2,426,500
MORPHINE (6505-01-302-5530) 744,381 EA $4.31 $3,208,282
0005AB OPTION YEAR ONE TIER PRICING VOLUMES
(UP TO 3,000,000 UNITS)
MARK I (6505-01-174-9919) 1,101,326 EA $12.04 $13,259,965
ATROPINE (6505-00-926-9083) 529,589 EA $3.93 $2,081,285
PRALIDOXIME (6505-01-125-3248) 286,280 EA $7.81 $2,235,847
DIAZEPAM (6505-01-274-0951) 338,424 EA $7.40 $2,504,338
MORPHINE (6505-01-302-5530) 744,381 EA $4.45 $3,312,495
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
CONTINUATION SHEET: SP0200-99D-0007 Page 11 of 34
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CONTRACTOR: MERIDIAN MEDICAL TECHNOLOGIES INC.
- --------------------------------------------------------------------------------
SCHEDULE
<TABLE>
<CAPTION>
ITEM NO. SUPPLIES QTY U/I U/P TOTAL
- -------- -------- --- --- --- -----
<S> <C> <C> <C> <C>
0005AC OPTION YEAR TWO TIER PRICING VOLUMES
(UP TO 3,000,000 UNITS)
MARK I (6505-01-174-9919) 1,101,326 EA $12.50 $13,766,575
ATROPINE (6505-00-926-9083) 529,589 EA $4.07 $2,155,427
PRALIDOXIME (6505-01-125-3248) 286,280 EA $8.07 $2,310,280
DIAZEPAM (6505-01-274-0951) 338,424 EA $7.65 $2,588,944
MORPHINE (6505-01-302-5530) 744,381 EA $4.60 $3,424,153
0005AA BASE YEAR TIER PRICING VOLUMES
(3,000,001 TO 6,114,708)
MARK I (6505-01-174-9919) 2,244,762 EA $11.39 $25,567,839
ATROPINE (6505-00-926-9083) 1,079,426 EA $7.26 $7,836,633
PRALIDOXIME (6505-01-125-3248) 583,507 EA $3.60 $2,100,625
DIAZEPAM (6505-01-274-0951) 689,788 EA $6.80 $4,690,558
MORPHINE (6505-01-302-5530) 1,517,225 EA $4.11 $6,235,795
0005AB OPTION YEAR ONE TIER PRICING VOLUMES
(3,000,001 TO 6,114,708)
MARK I (6505-01-174-9919) 2,244,762 EA $11.69 $26,241,268
ATROPINE (6505-00-926-9083) 1,079,426 EA $3.80 $4,101,819
PRALIDOXIME (6505-01-125-3248) 583,507 EA $7.55 $4,405,478
DIAZEPAM (6505-01-274-0951) 689,788 EA $7.15 $4,931,984
MORPHINE (6505-01-302-5530) 1,517,225 EA $4.30 $6,524,068
0005AC OPTION YEAR TWO TIER PRICING VOLUMES
(3,000,001 TO 6,114,708)
MARK I (6505-01-174-9919) 2,244,762 EA $12.08 $27,116,725
ATROPINE (6505-00-926-9083) 1,079,426 EA $3.93 $4,242,144
PRALIDOXIME (6505-01-125-3248) 583,507 EA $7.80 $4,551,355
DIAZEPAM (6505-01-274-0951) 689,788 EA $7.39 $5,097,533
MORPHINE (6505-01-302-5530) 1,517,225 EA $4.44 $6,736,479
0006 NEW VENDOR VALIDATION
0006AA 1 LT $270,528 270,528
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
CONTINUATION SHEET: SP0200-99D-0007 Page 12 of 34
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CONTRACTOR: MERIDIAN MEDICAL TECHNOLOGIES INC.
- --------------------------------------------------------------------------------
Variation in Quantity:
Plus or Minus 2%
Inspection and Acceptance:
Origin
FOB:
Origin
Manufacturing and Packaging/Packing Location:
Meridian Medical Technologies, Inc.
2555 Hermelin Dr.
St. Louis, MO 63144
Source of Raw Materials:
Atropine: Boeringer-Ingelheim, Germany
Pralidoxime: Nycomed Amersham, Rensselear, NY
Diazepam: SST Corp., Clifton, NJ
Morphine: Mallincroft, St. Louis, MO
Payment Address:
Meridian Medical Technologies, Inc.
10240 Old Columbia Road
Columbia, MD 21046
Guaranteed Minimum:
Delivery Order SP0200-99D-0007-8001 covering the base year annual
services under lines 0001, 0002, and 0006 of the contract will be issued as a
separate document concurrently with the issuance of this basic contract. The
guaranteed minimum for line 0004 (2% of the estimated dollar value of line 0004:
$181,776) will be issued during the base year.
Annual Maximum Order Quantities under line item 0004:
2,899,999 equivalent injectors. Quantities up to 2,400,000 will be priced under
Line 0004AA (AB and AC for option year one and two, respectively). The
additional 499,999 will be priced at the unit prices stated in the contract
schedule.
<TABLE>
<CAPTION>
Delivery:
<S> <C>
For items with available pre-stocked components: 30 days after award of delivery order.
For items without available pre-stocked components: 135 days after award of delivery order.
</TABLE>
Option Provision:
Option Clause 52.217-9P12 is a part of this contract with two one-year
option periods available at the unit prices stated on the contract schedule
pages. The contracting officer shall give the contractor a preliminary written
notice of intent to extend at least 15 days before expiration of the contract.
<PAGE>
- --------------------------------------------------------------------------------
CONTINUATION SHEET: SP0200-99D-0007 Page 13 of 34
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CONTRACTOR: MERIDIAN MEDICAL TECHNOLOGIES INC.
- --------------------------------------------------------------------------------
Pre-Stocking of Component Parts:
The Government may purchase component parts for each injector
throughout the life of this contract as excess War Stopper funds become
available. This material shall be purchased against line item 0004 (at the
stated prices shown for Pre-stock). This material shall be stored and rotated by
the contractor to fill given delivery orders. No additional costs for storage
and rotation shall apply.
Government Furnished Material:
The following will be considered Government Furnished Material under
this contract:
1) Expired or extended material shipped to MMT for shelf life
extension in accordance with line item 0002 and Logistics Maintenance/DRB
Program Statement of Work.
2) Material purchased under line item 0004 specifically for
the Army's DRB Program to be stored at MMT in accordance with line item 0003 and
Logistics Maintenance/DRB Program Statement of Work.
3) Material purchased under line item 0004 specifically to
support the Army's Unit Deployment Package (UDP) Potency and Dated (P&D) Program
to be stored at MMT in accordance with Logistics Maintenance/DRB Program
Statement of Work.
4) Components purchased under line item 0004 identified as
pre-stocking components.
Effective Date of Award:
Effective date of Base Year shall be from 1 Aug 1999 through 31 Jul 2000.
The payment schedule will be as follows for Line Items 0001 and 0002:
Value per Month: $809,127.00
24 Payments of: $404,563.50
Invoices for payment of Lines 0001 and 0002 shall be submitted on the 15 and 30
of each month commencing Aug 15, 1999 and ending July 31, 2000.
Line 0006 may be invoiced upon award of this delivery order.
Invoices for Line Item 0004 will be submitted after issuance of each Delivery
Order. The same shall apply for Line Items 0005, if exercised.
Continuation from Block 18 Page 1:
Amendments 0001 through 0004
Contractor Correspondence dated:
29 Jun 1998 Initial offer
15 Jan 1999 Second offer
16 Jul 1999 Revised offer (faxed 7/19/99) 39 Pages
23 Jul 1999 Revised offer (faxed 7/26/99) 33 Pages
29 Jul 1999 Revised offer (faxed 7/29/99) 18 Pages
30 Jul 1999 Correction to Line 0001 (Option 1 and 2)
<PAGE>
- --------------------------------------------------------------------------------
CONTINUATION SHEET: SP0200-99D-0007 Page 14 of 34
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CONTRACTOR: MERIDIAN MEDICAL TECHNOLOGIES INC.
- --------------------------------------------------------------------------------
Mobilization Surge Cost Reconciliation Procedure
A full cost accounting and reconciliation against billings is required upon
completion of a declared Mobilization Surge (MS).
The procedure is as follows:
1. Declaration and Termination:
a. Mobilization Surge (MS) will be officially declared via a
Delivery Order from DSCP requesting products under CLIN 0005 for
immediate delivery under Mobilization Surge provisions. MMT will
immediately become obligated to terminate in a reasonable fashion
production for non-DoD customers and proceed as rapidly as
possible to devote all production resources to manufacture and
deliver the requested MS products. CLIN 0001 payments shall
continue IAW the original contract payment schedule after MS has
been declared. If the MS continues after eight (8) CLIN 0001
biweekly payments have been made, CLIN 0001 payments shall then
be suspended for the duration of the MS. CLIN 0001 payments shall
resume IAW the original contract payment schedule upon the
termination of the MS.
b. Termination of Mobilization Surge requires written confirmation from
DSCP. Termination notification is expected to be noted on the last MS Delivery
Order. However, DSCP may terminate MS by separate written notification to the
Contractor. Since MMT will likely be in a full production, 3 shift operation,
notification of Mobilization Surge termination will be received prior to
completion and delivery of the last quantities requested on a Mobilization Surge
Delivery Order. This prompt notification will allow for orderly phase down and
return to commercial production. If CLIN 0001 payments were suspended in
accordance with paragraph 1.a. immediately above, CLIN 0001 payments shall
resume IAW the original contract payment schedule upon the termination of the
MS. NOTE: Failure to provide timely MS termination notice may result in
additional charges billable to DoD for idle time and idle facilities.
2. Accounting for Mobilization Surge (MS):
a. To determine the full cost of Mobilization Surge, costs incurred for
MS from the initial MS Delivery Order through the later of delivery of the final
MS Delivery Order or notice of the termination of MS, shall be treated as a
single "job-order" under a job-order costing system. The "job-order" will
accumulate the full MS cost for all MS production made during the surge; i.e.,
the full accounting during MS adjusted for any non-MS production. Cost to
complete production lots in progress at the time Mobilization Surge is started
will be deducted from the total costs during MS. Likewise, cost continuations
beyond termination of MS which are the result of MS will be charged to the MS.
b. Cost will be accumulated and summarized in a format consistent with
the CLIN 0005 cost proposal. Product cost will include manufacturing variances
against standards. Variances attributable to non-DoD production will be excluded
from the MS costing.
<PAGE>
- --------------------------------------------------------------------------------
CONTINUATION SHEET: SP0200-99D-0007 Page 15 of 34
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CONTRACTOR: MERIDIAN MEDICAL TECHNOLOGIES INC.
- --------------------------------------------------------------------------------
3. Reconciliation of cost against billings and settlement of charges:
a. MS total costs will consist of the full costs incurred, (and
accounted for in accordance with Section 2.a. above), for MS from implementation
to the later of delivery of the final MS Delivery Order or notice of the
termination of MS, plus any costs incurred (idle time and idle facilities) due
to failure of timely termination of MS.
b. Progress payments for Direct Materials will be liquidated against
invoiced product.
c. Amounts due will result when total actual incurred costs, including
costs incurred (idle time and idle facilities) from untimely MS termination,
exceed the total payments. The Government's maximum liability for Mobilization
Surge may not exceed the combined value of product ordered during the MS at the
CLIN 0005 prices and the total amount available under CLIN 0001 Base Maintenance
for the entire duration of the MS. A refund will result if total payments exceed
actual costs incurred. Refund will be limited to CLIN 0001 payments less any
costs (idle time and idle facilities) of untimely termination.
<PAGE>
- --------------------------------------------------------------------------------
CONTINUATION SHEET: SP0200-99D-0007 Page 16 of 34
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CONTRACTOR: MERIDIAN MEDICAL TECHNOLOGIES INC.
- --------------------------------------------------------------------------------
ADJUSTMENT OF COST OF PRALIDOXIME CHLORIDE IN MARK I KITS AND
PRALIDOXIME
(a) This clause applies only to the CLIN 0004 (both up to and beyond 2.4
million equivalent Autoinjectors), CLIN 0005, and Prestock contract
prices for Mark I Kits and Pralidoxime (a/k/a Combopen or 2-Pam) for
each contract year as listed in Section B, Schedule of Supplies and
Services. These unit prices may be adjusted upward or downward as
appropriate.
(b) The contract award prices for these items were based on the most
current, accurate and complete information available at the time of
award. These contract award prices are firm-fixed priced for the Base
Year and Option Years One and Two except for the costs outlined in
paragraph (c) below.
(c) At the time of contract award, the Direct Material cost of Pralidoxime
Chloride in Mark I Kits and Pralidoxime anticipated in the performance
of this contract could not be established with any reasonable certainty
due to ongoing negotiations between Meridian Medical Technologies, Inc.
(MMT) and their new Pralidoxime Chloride supplier, Nycomed Amersham
Imaging Americas (Nycomed). It is hereby agreed that the Direct Material
cost of Pralidoxime Chloride per Mark I Kit and per Pralidoxime shall be
subject to one adjustment under this clause. It is further agreed that
the adjustment will be limited to the change in the Direct Material cost
of Pralidoxime Chloride per Mark I Kit and per Pralidoxime with no
adjustment for Material Handling, Variable Overhead, Plant Overhead,
Corporate Overhead/General and Administrative (G & A), and Profit. The
contract award prices for these items were based on the most recent
written quote provided to the Government by MMT, i.e., Nycomed's quote
of April 6, 1998 of $516.56 per kilogram of Pralidoxime Chloride. The
Direct Material cost of Pralidoxime Chloride at each quantity/price tier
in the negotiated contract prices for Mark I Kits and Pralidoxime was
determined by entering that quote on a per gram basis into the
negotiated Component Quotations furnished by MMT in support of Component
Cost and Detail Schedules H and J. The calculation and the value of the
Direct Material cost of Pralidoxime Chloride at each quantity/price tier
for Mark I Kits and Pralidoxime for each contract year currently
included in the contract prices are shown on the attached schedules
entitled "Effect of Pralidoxime Chloride Costs" and "Material Cost".
<PAGE>
- --------------------------------------------------------------------------------
CONTINUATION SHEET: SP0200-99D-0007 Page 17 of 34
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CONTRACTOR: MERIDIAN MEDICAL TECHNOLOGIES INC.
- --------------------------------------------------------------------------------
(d) When MMT and their supplier reach an agreement on the price(s) for
Pralidoxime Chloride, MMT shall furnish a copy of said agreement to the
Contracting Officer. To determine the adjusted Direct Material cost of
Pralidoxime Chloride at each quantity/price tier for Mark I Kits and
Pralidoxime for each contract year, the newly negotiated price for
Pralidoxime Chloride applicable to each contract year shall be entered
on a per gram basis into the schedule entitled "Effect of Pralidoxime
Chloride Costs." For each quantity/price tier for Mark I Kits and
Pralidoxime for each contract year, the increase or decrease (carried or
rounded to five decimal places) in Direct Material cost of Pralidoxime
Chloride from that included in the contract prices (as shown on the
attached schedule entitled "Material Cost") will be calculated. That
increase or decrease will then be added to or subtracted from (as
appropriate) the contract award total unit price (carried or rounded to
five decimal places) for each quantity/price tier for Mark I Kits and
Pralidoxime for each contract year. The resulting unit prices will then
be rounded to the nearest cent to establish the adjusted contract unit
prices
(e) Once the adjusted contract prices are determined, the Contracting
Officer shall issue a modification adjusting the unit prices for all
three contract years for Mark I Kits and Pralidoxime for CLIN 0004 (both
up to and beyond 2.4 million equivalent Autoinjectors), CLIN 0005, and
Prestock. The modification shall include the adjusted unit prices and
all calculations used to determine the adjusted unit prices. All
delivery orders issued on or after the date of this adjustment
modification shall be priced at the adjusted contract unit prices.
Payment on this contract shall be at the contract award prices pending
issuance of the adjustment modification. The modification establishing
the adjusted contract unit prices or a subsequent modification shall (as
appropriate) increase or reduce payment under this contract for all
delivery orders of Mark I Kits and Pralidoxime issued prior to the
effective date of the adjustment modification. Price adjustment will not
apply to any quantities under this contract that have already been
shipped.
End of clause
<PAGE>
- --------------------------------------------------------------------------------
CONTINUATION SHEET: SP0200-99D-0007 Page 18 of 34
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CONTRACTOR: MERIDIAN MEDICAL TECHNOLOGIES INC.
- --------------------------------------------------------------------------------
Combopen
-----------------------------------------------------------
1 thru 500,000 750,000 1,000,000 over
Quantity 499,999 749,999 999,999 1,200,000 1,200,000
-----------------------------------------------------------
Base Year Costs
- ---------------
Other Material 2.48052 2.34552 2.28053 2.23845 2.23845
Pral. Chlor Cost 0.48011 0.46534 0.45795 0.45426 0.45426
------- ------- ------- ------- -------
Total DM 2.96063 2.81086 2.73848 2.69271 2.69271
======= ======= ======= ======= =======
Option 1 Costs
- --------------
Other Material 2.56734 2.42761 2.36035 2.31679 2.31679
Pral. Chlor Cost 0.48011 0.46534 0.45795 0.45426 0.45426
------- ------- ------- ------- -------
Total DM 3.04745 2.89295 2.81830 2.77105 2.77105
======= ======= ======= ======= =======
Option 2 Costs
- --------------
Other Material 2.65720 2.51258 2.44296 2.39788 2.39788
Pral. Chlor Cost 0.48011 0.46534 0.45795 0.45426 0.45426
------- ------- ------- ------- -------
Total DM 3.13731 2.97792 2.90091 2.85214 2.85214
======= ======= ======= ======= =======
<PAGE>
- --------------------------------------------------------------------------------
CONTINUATION SHEET: SP0200-99D-0007 Page 19 of 34
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CONTRACTOR: MERIDIAN MEDICAL TECHNOLOGIES INC.
- --------------------------------------------------------------------------------
Mark I
-----------------------------------------------------------
1 thru 500,000 750,000 1,000,000 Over
Quantity 499,999 749,999 999,999 1,200,000 1,200,000
-----------------------------------------------------------
Base Year Costs
- ---------------
Other Material 4.13684 3.95693 3.84692 3.78005 3.78005
Pral. Chlor Cost 0.48011 0.46534 0.45795 0.45426 0.45426
------- ------- ------- ------- -------
Total DM 4.61695 4.42227 4.30487 4.23431 4.23431
======= ======= ======= ======= =======
Option 1 Costs
- --------------
Other Material 4.28163 4.09542 3.98156 3.91235 3.91235
Pral. Chlor Cost 0.48011 0.46534 0.45795 0.45426 0.45426
------- ------- ------- ------- -------
Total DM 4.76174 4.56076 4.43951 4.36661 4.36661
======= ======= ======= ======= =======
Option 2 Costs
- --------------
Other Material 4.43149 4.23876 4.12092 4.04928 4.04928
Pral. Chlor Cost 0.48011 0.46534 0.45795 0.45426 0.45426
------- ------- ------- ------- -------
Total DM 4.91160 4.70410 4.57887 4.50354 4.50354
======= ======= ======= ======= =======
<PAGE>
- --------------------------------------------------------------------------------
CONTINUATION SHEET: SP0200-99D-0007 Page 19 A of 34
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CONTRACTOR: MERIDIAN MEDICAL TECHNOLOGIES INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 to 500000 to 750000 to 1000000 to OVER
499999 units 749999 units 999999 units 1200000 units 1200000 units
------------ ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C> <C>
Pral. Chlor Requirements 278,832 450,421 664,907 879,394 1,055,273
Pral. Chlor Unit Price [0.51656] 0.51656 0.51656 0.51656 0.51656
---------- ---------- ---------- ------------ ------------
Total Pral Chlor per Production Batch 144,033.46 232,669.47 343,464.36 454,259.76 545,111.82
Divided by number of units produced 300,000.00 500,000.00 750,000.00 1,000,000.00 1,200,000.00
---------- ---------- ---------- ------------ ------------
Pral. Chlor price per product unit 0.48011 0.46534 0.45795 0.45426 0.45426
========== ========== ========== ============ ============
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
CONTINUATION SHEET: SP0200-99D-0007 Page 20 of 34
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CONTRACTOR: MERIDIAN MEDICAL TECHNOLOGIES INC.
- --------------------------------------------------------------------------------
PROGRESS PAYMENTS
If Mobilization Surge is officially declared via a Delivery Order from DSCP for
products under CLIN 0005 for immediate delivery pursuant to the Mobilization
Surge provisions of this contract, Progress Payments are authorized for only
Direct Material costs incurred in the performance of the Mobilization Surge, by
Meridian Medical Technology, and supported by vendor invoices. Progress Payments
will cease upon written notification to Meridian Medical Technology that the
Mobilization Surge is ended.
The following additional clauses are hereby incorporated by reference and apply
only to Direct Material costs incurred for CLIN 0005 end items ordered pursuant
to the Mobilization Surge provisions of this contract:
52.232-16 Progress Payments (Jul 1991) ALTERNATE 1 (Aug 1987)
252.232-7004 DOD Progress Payment Rates (Feb 1996) DFARS
The following clauses are also included by reference:
52.233-1 Disputes (Oct 1995) ALTERNATE 1 (Dec 1991)
52.215-17 Waiver of Facilities Capital Cost of Money (Oct 1997)
Funds from this contract pay the salary expenses of most of Meridian's NAA labor
force and a significant portion of NAA plant overhead. Therefore, for the
duration of this contract and unless otherwise authorized in writing by the DSCP
Contracting Officer, the contractor shall not accept orders for autoinjectors
for the US military unless those orders are placed by DSCP under this contract.
If contractor has any non-DoD federal agency sales for the items covered under
this contract, then the price charged to that agency (s) shall not be less than
two (2) times the price established in Line Item 0004.
<PAGE>
- --------------------------------------------------------------------------------
CONTINUATION SHEET: SP0200-99D-0007 Page 21 of 34
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CONTRACTOR: MERIDIAN MEDICAL TECHNOLOGIES INC.
- --------------------------------------------------------------------------------
STATEMENT OF WORK
-----------------
Base Maintenance (Line Item 0001)
Page 1 of 5
I. This is a supply/service contract to provide labor and services as necessary
and directed by the Government and in accordance with the enclosed Statement of
Work and the DoD Industrial Preparedness Program Production Planning Schedule.
II. The Contractor agrees from the effective date of contract to perform the
following:
a. Maintain existing facilities and equipment and technical expertise
in a state of readiness for immediate production start up to achieve the
Government's current mobilization requirements, as set forth in the Contractor's
Industrial Preparedness Planning Agreement (DD Form 1519) for the
following products:
NSN: 6505-01-174-9919 Antidote Kit, Nerve Agent, Mark I
NSN: 6505-01-125-3248 Pralidoxime Chloride Injection, Automatic,
300 mg per ml, 2 ml
NSN: 6505-00-926-9083 Atropine Injection, Automatic, 2 mg
NSN: 6505-01-274-0951 Diazepam Automatic Injector, USP, 10 mg
NSN: 6505-01-302-5530 Morphine Sulfate Injector, 10 Mg per 0.7 Ml
b. Maintain in readiness the following tasks, functions and activities
to produce the above cited products:
1) An aseptic sterile production facility in accordance with
the Federal Food, Drug and Cosmetic Act and regulations promulgated thereunder
including FDA's current good manufacturing practices.
2) A cleaning and preparation of piece parts function required
for assembly as relates to aseptic sterilization production.
3) A product formulation department consistent with the
products processing requirements and to exercise the formulation process for the
Atropine, Pralidoxime, Diazepam, and Morphine Injection solutions on a periodic
basis that validates the capability to produce the products in compliance with
all regulatory, technical and quality assurance specifications; the current
technical packages for the above cited products, as of the effective date of
this contract, are incorporated into the solicitation.
4) A clean room and product filling operation.
<PAGE>
- --------------------------------------------------------------------------------
CONTINUATION SHEET: SP0200-99D-0007 Page 22 of 34
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CONTRACTOR: MERIDIAN MEDICAL TECHNOLOGIES INC.
- --------------------------------------------------------------------------------
STATEMENT OF WORK
-----------------
Base Maintenance (Line Item 0001)
Page 2 of 5
5) An inspection, assembly, labeling and packaging capability
to effectively meet the Government's mobilization requirements.
6) A warehouse facility to insure adequate control and
accountability of new supplies and materials during the receipt, storage and
issue phases and of components and fully assembled injectors being
stored/rotated for the Government.
7) A quality assurance and FDA regulatory compliance function
to insure compliance with all quality and performance requirements of the
applicable specifications and the Government's "shelf life enhancement" program
for all products.
8) A cost accounting system in accordance with generally
accepted accounting principles that will be acceptable to the Government to
insure trackability of contractor costs.
9) A qualified management team, supervisory staff and
administrative personnel to insure effective and efficient operation of the
Contractor's facilities.
10) An acceptable training program to insure that qualified
skill levels are retained in order to meet the Government's mobilization
requirements.
11) Sub-contractor business relationships to insure that the
necessary sub-contractor's production capability, capacity, technical expertise
and management commitment will meet the Contractor's Industrial Preparedness
Planning Agreement
provisions.
c. Dedicate those best efforts to maintain a qualified sub-contractor
component base for the manufacture of components and sub-components needed to
produce the end items.
d. In the event that prime contractor-owned component molds, tooling
and assembly molds, pre-positioned at various subcontractor plants, require
replacement, the Contractor will replace or issue a contract to replace these
items at no additional cost to the Government. Furthermore, the Contractor
agrees that in the event of a third party or other said agreements, the
Contractor, or the liable third party, agrees to replace, repair, or refurbish
all Contractor owned molds, tooling and assembly molds prepositioned at various
sub-contractor's plants at no additional cost to the Government.
<PAGE>
- --------------------------------------------------------------------------------
CONTINUATION SHEET: SP0200-99D-0007 Page 23 of 34
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CONTRACTOR: MERIDIAN MEDICAL TECHNOLOGIES INC.
- --------------------------------------------------------------------------------
STATEMENT OF WORK
-----------------
Base Maintenance (Line Item 0001)
Page 3 of 5
e. In the course of performing said labor and services in accordance
with Statement of Work, the Contractor will produce an end item product listed
as line item 0004 of the schedule to the services performed. The Government
recognizes these incidental products to be, but not limited to, the following:
NSN: 6505-01-174-9919 Antidote Kit, Nerve Agent, Mark I
NSN: 6505-01-125-3248 Pralidoxime Chloride Injection, Automatic,
300 mg per ml, 2 ml
NSN: 6505-00-926-9083 Atropine Injection, Automatic, 2 mg
NSN: 6505-01-274-0951 Diazepam Automatic Injector, USP, 10 mg
NSN: 6505-01-302-5530 Morphine Sulfate Injector, 10 Mg per 0.7 Ml
f. The Contractor agrees to advise the Government through the
Contracting Officer of changes which may or will adversely impact production
capability to meet the production rate and schedule requirements of the current
mobilization planning agreement. The Contractor shall advise the Contracting
Officer of changes required to the agreement and/or proposals which may
favorably impact the Government and/or the contractor from achieving
mobilization production delivery requirements.
g. The Contractor also agrees to enter into future yearly Industrial
Preparedness Agreements with the Government covering the above cited products
for the duration of this
contract.
III. Required standards of workmanship:
a. Unless otherwise specifically provided in this contract, the quality
of all services rendered hereunder shall conform to the highest standards in the
relevant profession, trade or field of endeavor. All services shall be rendered
or supervised directly by individuals fully qualified in the relevant
profession, trade or field, and holding any licenses required by law.
b. The Defense Supply Center Philadelphia (DSCP) reserves the option to
conduct in-process reviews (IPRs) at the Contractor's facility. These must be
scheduled by DSCP personnel at least seven (7) days in advance of the IPR.
Requests for IPRs by any other personnel will be referred to DSCP.
<PAGE>
- --------------------------------------------------------------------------------
CONTINUATION SHEET: SP0200-99D-0007 Page 24 of 34
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CONTRACTOR: MERIDIAN MEDICAL TECHNOLOGIES INC.
- --------------------------------------------------------------------------------
STATEMENT OF WORK
-----------------
Base Maintenance (Line Item 0001)
Page 4 of 5
Packaging and Marking
---------------------
1. Marking of Reports
All reports shall prominently show on the cover of the report:
a. Name and business address of the contractor.
b. Contract number.
2. Preparation for Delivery (Incidental Product - End Item)
Preparation for delivery shall be in accordance with Section 5 of the end item
specification, the latest edition at time of manufacture, required by Section C
of the contract.
Inspection and Acceptance
-------------------------
1. Inspection of Services
Definition "Services", as used in this clause, includes services performed,
workmanship, and material furnished or used in performing services.
2. Inspection and Acceptance
a. Inspection and acceptance of services to be furnished hereunder
shall be made, upon completion of the services, by DCMC Saint Louis. Inspection
and acceptance of material shall be made by FDA Kansas City.
b. The Contractor shall provide and maintain an inspection system
acceptable to the Government covering services under this contract in accordance
with all Federal Food Drug and Cosmetic Act and regulations. Complete records of
all inspection work performed by the Contractor shall be maintained and made
available to the Government during contract performance and for as long
afterwards as the contract requires.
c. The Government has the right to inspect and test all services called
for by the contract, to the extent practicable at all places and times during
the term of the contract.
<PAGE>
- --------------------------------------------------------------------------------
CONTINUATION SHEET: SP0200-99D-0007 Page 25 of 34
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CONTRACTOR: MERIDIAN MEDICAL TECHNOLOGIES INC.
- --------------------------------------------------------------------------------
STATEMENT OF WORK
-----------------
Base Maintenance (Line Item 0001)
Page 5 of 5
The Government shall perform inspections and tests in a manner that will not
unduly delay the work.
d. If any of the services performed do not conform with contract
requirements, the Government may require the Contractor to perform the services
again in conformity with the contract requirements, for no additional fee. When
the defects in services cannot be corrected by re-performance, the Government
may (1) require the Contractor to take necessary action to ensure that future
performance conforms to contract requirements, and (2) reduce any fee payable
under the contract to reflect the reduced value of the services performed.
e. If the Contractor fails to promptly perform the services again or
take the necessary actions to ensure future performance in conformity with the
contract requirements, the Government may (1) by contract or otherwise, perform
the services and reduce any fee payable by an amount that is equitable under the
circumstances or, (2) terminate the contract for default.
<PAGE>
- --------------------------------------------------------------------------------
CONTINUATION SHEET: SP0200-99D-0007 Page 26 of 34
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CONTRACTOR: MERIDIAN MEDICAL TECHNOLOGIES INC.
- --------------------------------------------------------------------------------
STATEMENT OF WORK
-----------------
LOGISTICS MAINTENANCE AND DRB PROGRAM (LINE ITEMS 0002 AND 0003)
Page 1 of 9
1. Background
The Army has established several programs to centrally manage Medical Chemical
Defense Materiel (MCDM). USAMMA has been designated as the Program Manager for
these programs.
2. Description of Work Required
Manufacturing of new MCDM and the storage of materiel (both new and extended
materiel). The storage requirement encompasses receipt processing, storage (i.e.
vault, refrigeration, controlled room temp), record keeping, Care of Supplies in
Storage (COSIS), remarking, assembly, packing, and shipment.
A. The Army intends to store:
(1) A maximum of 3 DRBs of new materiel (not extended materiel).
Each DRB consists of 15,000 Mark I Kits, 5,000 CANA and
1,000 packages of PBT.
(2) 1 DRB of extended materiel that has been remarked.
(3) MCDM to support the Unit Deployment Package (UDP) Potency
and Dated (P&D) Program. The items under this program are
the Atropine, Diazepam, and Pralidoxime Auto-injectors. This
material will be remarked as it is extended.
(4) MCDM in the Shelf Life Extension Program (SLEP). This
materiel will only be remarked as required.
B. The following NSNs apply to the MCDM covered by this SOW:
(1) Antidote Kit Nerve Agent, (Mark I Kits, NAAK) NSN
6505-01-174-9919 (consists of one Atropine and one
Pralidoxime Chloride Injector)
(2) Diazepam Injector (CANA) NSN 6505-01-274-0951
(3) Pyridostigmine Bromide Tablets (PBT or NAPP) NSN
6505-01-178-7903 (consisting of 210 tablets per Package)
<PAGE>
- --------------------------------------------------------------------------------
CONTINUATION SHEET: SP0200-99D-0007 Page 27 of 34
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CONTRACTOR: MERIDIAN MEDICAL TECHNOLOGIES INC.
- --------------------------------------------------------------------------------
STATEMENT OF WORK
-----------------
LOGISTICS MAINTENANCE AND DRB PROGRAM (LINE ITEMS 0002 AND 0003)
Page 2 of 9
(4) Atropine Autoinjector NSN 6505-00-926-9083
(5) Pralidoxime Chloride Injection (2-Pam) NSN 6505-01-125-3248
(6) Morphine Sulfate Injector, 10 Mg per 0.7 Ml NSN
6505-01-302-5530
3. Manufacturing
Based on receipt of funded Army requisitions passed through the Defense Supply
Center Philadelphia (DSCP), the contractor shall produce the required materiel
(Delivery Orders for this material will be issued under Line Item 0004).
Material required to fill regular requisitions shall be shipped to a DLA depot
specified in the order. Materiel manufactured for the UDP P&D Program will
remain at the contractor's facility. DRB materiel will either be shipped to the
activity, DLA depot or retained at the contractor's facility as part of the
three DRBs of new materiel. A maximum of three different lot numbers can be
provided for each 15,000 Mark I Kits and two different lot numbers can be
provided for each 5,000 CANA (1 DRB's worth). Ideally only one lot number would
be shipped for each DRB. If the contractor must produce additional lots of Mark
I Kits and CANA to satisfy this requirement, the Government has no
responsibility or liability to procure these additional quantities. Any
deviation from this requirement for minimum lots must be approved in writing by
USAMMA, MCMR-MMS-M.
Work must be consistent with good business practices and government regulations.
After 90 days of contract award, or implementation of an option to the contract,
the quantity of Army/OTSG MCMD reflected in USAMMA's accountable records (as
reflected in the MCDM database) must match the quantity of MCDM physically on
hand (in inventory) at the contractor's site.
<PAGE>
- --------------------------------------------------------------------------------
CONTINUATION SHEET: SP0200-99D-0007 Page 28 of 34
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CONTRACTOR: MERIDIAN MEDICAL TECHNOLOGIES INC.
- --------------------------------------------------------------------------------
STATEMENT OF WORK
-----------------
LOGISTICS MAINTENANCE AND DRB PROGRAM (LINE ITEMS 0002 AND 0003)
Page 3 of 9
4. Storage of Army Owned MCDM
A. Receipt Processing
(1) In addition to the MCDM currently on-hand at the
contractor's facility, the contractor will accept annually
the below quantities. Quarterly shipments will be on average
1/4 of the yearly amount stated.
(a) 600,000 Mark I Kits (NSN 6505-01-174-9919) and/or stand
alone autoinjectors of Atropine and 2-Pam (NSNs
6505-00-926-9083 and 6505-01-125-3248).
(b) 200,000 CANA (NSN 6505-01-274-0951). However, due to
limited secure storage the maximum number of CANA that
can be stored is approximately 576,000 EA.
(c) 40,000 Packages of PBT (NSN 6505-01-178-7903). However,
due to limited refrigerated storage the maximum number
of PBT that can be stored is approximately 109,560
Packages.
(2) Materiel will be shipped to the contractor in quarterly
shipments to be placed in the Industrial Base Maintenance
Contract (IBMC) for the life of the contract. USAMMA,
MCMR-MMO, will provide 30 days advance notification to the
contractor of expected shipments of materiel. Contractor has
30 working days to inventory incoming shipments. Contractor
will request extension from USAMMA (MCMR-MMO) if additional
time is required.
(3) If necessary, substitution may be made for the shipment and
quantity of one item for another item. For example, in lieu
of shipping 10,000 of PBT during a quarterly shipment, the
Army can substitute 10,000 CANA, Mark Is, Atropine or 2-Pam.
(4) Army will request that activities not send loose materiel
mixed together to the contractor. In the event the
contractor receives loose shipments, the contractor will
place the materiel on a shelf, and notify USAMMA, MCMR-MMO.
During the quarterly site visit, USAMMA, MCMR-MMO, will
provide appropriate guidance for the loose materiel.
(5) Contractor will forward USAMMA, MCMR-MMO, copies of any DD
Forms 1348-1 received with shipments.
<PAGE>
- --------------------------------------------------------------------------------
CONTINUATION SHEET: SP0200-99D-0007 Page 29 of 34
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CONTRACTOR: MERIDIAN MEDICAL TECHNOLOGIES INC.
- --------------------------------------------------------------------------------
STATEMENT OF WORK
-----------------
LOGISTICS MAINTENANCE AND DRB PROGRAM (LINE ITEMS 0002 AND 0003)
Page 4 of 9
B. Storage
(1) Mark I Kits, Atropine and 2-Pam requires room temperature
storage with approximately 59-86 degrees Fahrenheit or 15-30
degrees Celsius and should not be allowed to freeze. Mark I
Kits received (above the requirements for the 3 new and 1
extended DRB) will be broken down by separate components.
Usable pouches and clips will be stored in case the Mark I
Kits would need to be assembled from extended materiel to
support a contingency. Quantity of pouches and clips should
not exceed the number of individual extended Atropine/2-PAM
on hand.
(2) CANA requires special storage due to its note Q rating
(safekeeping in a safe or vault) and temperature control of
59-86 degrees Fahrenheit or 15-30 degrees Celsius.
(3) PBT requires refrigeration between 35-46 degrees Fahrenheit
or 2-8 degrees Celsius. Moreover, PBT cannot be outside of
refrigerated conditions for more than a cumulative period of
six months. Therefore, the contractor shall assure this item
is continuously stored in refrigeration except when USAMMA
directs the assembly/shipment of materiel. Note: The
contractor will not be responsible for the referenced
cumulative period, since the material has been in the
possession of others prior to arriving at the contractor's
location.
(4) All MCMD will be segregated by lot number and activity until
inventory is verified by MCMR-MMO. Lots will be stored in a
manner that will ensure materiel from one lot can not be
confused with any other lot in the container. Lot integrity
will be maintained at all times following MCMR-MMO
inspection.
(5) The new DRB materiel will be kept separate from the extended
DRB materiel, other material being stored at the
contractor's location and the UDP P&D materiel.
<PAGE>
- --------------------------------------------------------------------------------
CONTINUATION SHEET: SP0200-99D-0007 Page 30 of 34
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CONTRACTOR: MERIDIAN MEDICAL TECHNOLOGIES INC.
- --------------------------------------------------------------------------------
STATEMENT OF WORK
-----------------
LOGISTICS MAINTENANCE AND DRB PROGRAM (LINE ITEMS 0002 AND 0003)
Page 5 of 9
(6) Contractor has elected not to store the DRB material in the
TRI-Walls. TRI-Walls currently on hand shall be shipped to:
SR USAMMA
Bldg 348
103 Guidance Road
Goose Creek, SC 29445-5000
DODAAC: W90KEW
C. Record Keeping
Accurate data from receipt processing will be loaded into the
contractor's ACCESS/EXCEL database within 15 days after completion of
the inspection and inventory.
(1) Contractor will maintain a database of all Army owned
materiel stored. The database will reflect the NSN,
nomenclature, manufacturer, quantity, lot number, activity
who shipped the materiel, expiration date, an indicator if
materiel has been extended, ship date, and receipt date.
(2) Contractor shall provide a copy of the ACCESS/EXCEL database
on a quarterly basis to USAMMA (both MCMR-MMO and
MCMR-MMS-M) via electronic mail using existing software.
Updates should be provided after the data has been modified
based on the quarterly shipments.
(3) USAMMA will provide the contractor copies of the FDA reports
for materiel in the SLEP. Codes on the report will indicate
if the materiel has been extended or failed testing.
(4) USAMMA will furnish the contractor a copy of the EXCEL
database on a quarterly basis.
(5) USAMMA will provide lot numbers and quantity of materiel to
be sent for destruction. Product will be scheduled and
shipped for destruction within 90 days after materiel failed
FDA testing. If only a small quantity has failed (i.e., less
than 1,000 units total), this materiel may be held and
accumulated until an economical quantity is available for
destruction. Shipment should occur within 30 days of
verification by the contractor that the materiel has been
staged and quantities and lot numbers verified.
<PAGE>
- --------------------------------------------------------------------------------
CONTINUATION SHEET: SP0200-99D-0007 Page 31 of 34
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CONTRACTOR: MERIDIAN MEDICAL TECHNOLOGIES INC.
- --------------------------------------------------------------------------------
STATEMENT OF WORK
-----------------
LOGISTICS MAINTENANCE AND DRB PROGRAM (LINE ITEMS 0002 AND 0003)
Page 6 of 9
(a) USAMMA will be fully responsible for all costs
associated with the destruction of Army owned MCDM.
Unless, the contractor reclaims the components of an
injector (with the exception of the Mark I pouches and
clips), the contractor shall be responsible for the
disposal of the remaining components and active
ingredient. Contractor will provide USAMMA, MCMR-MMO
documentation citing that the active ingredient was
destroyed IAW the local, state and federal regulations.
(b) USAMMA, MCMR-MMO will be responsible for funding and
coordinating the shipments for destruction and for
obtaining a Certificate of Destruction. MCMR-MMO will
provide the contractor with a copy of the Certificate
of Destruction for Controlled Substances upon
destruction of these items.
D. Government Visits
The contractor shall agree to allow USAMMA's Strategic Capabilities and
Materiel Directorate (MCMR-MMS-M) and/or the Operations and Support
(MCMR-MMO) COTRs to inspect, inventory, and audit all Government owned
property at any time (at least quarterly) throughout the period of the
contract. These inspections will be directed by the Contracting
Officer, but may be requested by the COTR. If during such inspection
(audit) the on-hand quantity is less than indicated in the MCDM
database, USAMMA will select one of two replacement alternatives:
(a) The contractor replaces in kind all shortages within 20
weeks.
(b) The contractor reimburses the Government in full within
20 days.
USAMMA retains the right to choose the replacement alternative based
upon the needs of the Government at the time.
E. Over-label
(1) The DRB of extended materiel shall be remarked with the
latest expiration date, i.e. month/year as instructed by the
COTR. Lot numbers within the DRB will be limited to a
maximum of 3 for the Mark I Kits and 2 for the CANA.
Ideally, only one lot number will be allocated for the
extended DRB.
<PAGE>
- --------------------------------------------------------------------------------
CONTINUATION SHEET: SP0200-99D-0007 Page 32 of 34
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CONTRACTOR: MERIDIAN MEDICAL TECHNOLOGIES INC.
- --------------------------------------------------------------------------------
STATEMENT OF WORK
-----------------
LOGISTICS MAINTENANCE AND DRB PROGRAM (LINE ITEMS 0002 AND 0003)
Page 7 of 9
(2) The MCDM for the UDP P&D program will require over-labeling
with the latest expiration date, i.e. month/year.
(3) Other MCDM will be over-labeled on an as required basis. 30
days advance notice will be provided.
(4) Due to the potential recall requirements, when
over-labeling, the contractor will at no time combine
separate lots to make larger lots.
(5) The over-label will always contain the original NSN,
Manufacturer, and lot number. The only change to the
over-label will be the new expiration date. Whenever any
MCDM is over-labeled, USAMMA will be immediately notified
with the actual number of assets of extended/issuable
material. This shall take into account the units which are
held for QC, not to exceed 5 per lot, and the numbers of
units lost as rejects.
(6) Only lot sizes of 1,000 (+) units will be considered
candidates for over-labeling. Contractor will first
over-label lots which are 5,000 (+) units. Once lot sizes of
5,000 (+) have been over-labeled, contractor will over-label
smaller lots.
(7) Contractor will only over-label MCDM which contractor has
manufactured.
F. Assembly/Packing/Shipping
(1) The DRB and UDP P&D MCDM will need to be assembled, packed
and received at a consolidation point within 72 hours after
notification during an contingency situation. This includes
weekends. USAMMA (either MCMR-MMO or MCMR-MMS-M) will
provide the quantity, type, ship to destination, and other
applicable details. Transportation funding for the DRB
shipment would be provided by USAMMA, MCMR-MMS-M.
Transportation funding for the UDP P&D materiel will be
provided by DSCP. Packing, packaging, and storage will be to
a degree of protection that precludes loss, damage, or
destruction to containers and contents under normal
transportation.
<PAGE>
- --------------------------------------------------------------------------------
CONTINUATION SHEET: SP0200-99D-0007 Page 33 of 34
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CONTRACTOR: MERIDIAN MEDICAL TECHNOLOGIES INC.
- --------------------------------------------------------------------------------
STATEMENT OF WORK
-----------------
LOGISTICS MAINTENANCE AND DRB PROGRAM (LINE ITEMS 0002 AND 0003)
Page 8 of 9
(2) Assembly steps will ensure that only those lots and
quantities required are packed and prepared for shipment.
Lot integrity will be maintained at all times. Under no
circumstances will MCDM materiel from different lot be
placed loosely in containers and shipped. If more than one
lot is placed in a container, lots will be packaged so as to
ensure materiel from one lot could not be confused with any
other lot in the container.
(3) Assembly/packing and shipment of MCDM (including UDP P&D
material) in support of non-emergency situations will be
accomplished within 10 calendar days after receipt of
request.
(4) Shipment will occur by Government Bill of Lading (GBL) and
will conform to applicable Defense Transportation System
(DTS) and commercial carrier rules and regulations. Materiel
shall be packaged in accordance with (IAW) commercial
practices, and intermediate package(s) and shipping
container(s) shall be marked IAW MIL-STD-129. Contractor
shall be a Procedure A Contractor.
(5) The contractor shall coordinate and make arrangements with
commercial firms specializing in overnight or rapid
delivery, as well as the Defense Transportation System
(DTS), for the timely shipment of DRB and MCDM within the
United States.
(6) Shipment of materiel to the FDA for shelf life testing will
be processed for shipment within 10 days from receipt of
request from USAMMA, MCMR-MMO.
(7) The MCDM that requires over-labeling before shipment will be
processed and shipped within 60 days after receipt of
request.
G. Testing
USAMMA, MCMR-MMS-M, will test the contractor's ability to provide MCDM
to a designated consolidation point within 72 hours. Such tests could
range from simply a paper exercise to the packing and shipment of
actual MCMD to selected locations anywhere in the world. USAMMA plans
to perform these drills twice a year. Further, at the direction of
USAMMA, MCMR-MMS-M, DTS will also be used to ship MCDM.
<PAGE>
- --------------------------------------------------------------------------------
CONTINUATION SHEET: SP0200-99D-0007 Page 34 of 34
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CONTRACTOR: MERIDIAN MEDICAL TECHNOLOGIES INC.
- --------------------------------------------------------------------------------
STATEMENT OF WORK
-----------------
LOGISTICS MAINTENANCE AND DRB PROGRAM (LINE ITEMS 0002 AND 0003)
Page 9 of 9
H. Contractor's Documentation Requirements.
Within 30 days of execution of the agreement to which this Statement of
Work is applicable, the Program Manager for these programs as defined
in section 1 of this Statement of Work, must provide to Contractor
coordination documentation reflecting FDA's approval process for the
Shelf-Life Extension Program, to include, but not limited to,
o a Memorandum of Understanding or any other formal agreement among
the parties
o product testing procedures and guidelines
Contractor will be provided with copies of any updates or changes to
the referenced documentation.
USAMMA shall continue to provide copies of the documentation received
from FDA regarding extended product as stated in paragraph 4.C.(3) of
this Statement of Work.
Exhibit 10.34
CHANGE OF CONTROL AGREEMENT
---------------------------
AGREEMENT made as of this _____th 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>
1. 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.
2. 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.
3. 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.
4. 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.
5. 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.
6. 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.
7. 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.
8. 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.
9. 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.
10. 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 may be obligated to
pay hereunder or provide the final benefit which it
-5-
<PAGE>
may be obligated to provide hereunder. This Agreement supersedes and replaces
any earlier agreement on the subject matter hereof.
11. Counterparts.
------------
This Agreement may be made and executed in counterparts, each of which
may be considered an original for all purposes.
12. 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:
------------------------------------
"EXECUTIVE"
------------------------------------
-6-
Exhibit 10.35
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 1.1I 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;
-3-
<PAGE>
Fiscal Year Amount
----------- ------
1998 $3,800,000
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. 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 5. Cost and Expenses. The Borrower agrees to pay all
out-of-pocket expenses of the Agent for the negotiation, 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 and notice thereof shall have been given 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:
-------------------------------
James H. Miller
President
[CORPORATE SEAL]
ING (U.S.) CAPITAL CORPORATION, in
its capacity as Agent and Lender
By:
-------------------------------
Michael Garvin
Vice President
[SIGNATURE PAGE TO SIXTH AMENDMENT]
Exhibit 10.36
WAIVER AND AMENDMENT AGREEMENT
This WAIVER AND AMENDMENT AGREEMENT is made and entered into as of June
14, 1999, by and between MERIDIAN MEDICAL TECHNOLOGIES, INC., a Delaware
corporation (the "Company") and NOMURA HOLDING AMERICA INC., a Delaware
corporation (together with its successors, assigns and transferees, the
"Purchaser").
RECITALS
--------
WHEREAS, the Company and the Purchaser have entered into that certain
Note and Warrant Purchase Agreement dated as of April 30, 1998, as amended by
the Waiver and Amendment dated as of October 15, 1998 (as amended, the "Purchase
Agreement"); capitalized terms used herein but not defined herein shall have the
meanings assigned thereto in the Purchase Agreement;
WHEREAS, the Company and the Purchaser have agreed to further amend the
Purchase Agreement on the terms and conditions set forth herein;
NOW, THEREFORE, the Company and the Purchaser agree as follows:
SECTION 1. Waiver. On the Amendment Effective Date (as defined below),
the Purchaser shall be deemed to have waived, as of April 30, 1999, any
violation of the Company's Financial Covenants set forth in Section 10.16 of the
Purchase Agreement. Nothing herein shall be deemed to waive any violation of
such covenants that arose or came into existence after the Amendment Effective
Date.
SECTION 2. Amendment of Warrants. The Company and the Purchaser hereby
agree to amend the Warrants so that the exercise price thereof shall be the
lesser of (i) $6.25 per share and (ii) the lowest five consecutive trading day
average of the Company's common share price (based on last sales prices) during
the six month period commencing on the date hereof (subject to adjustment as
provided therein). Such amendment may take the form of a replacement warrant
certificate (the "Replacement Warrant"). The Purchaser shall deliver the current
warrant certificate to the Company for cancellation.
SECTION 3. Covenant and Representations.
(a) The Company hereby covenants that it shall use its
reasonable efforts to obtain a commitment, no later than August 31, 1999, to
refinance the Notes or to have a third party purchase the Notes. The Purchaser
hereby agrees to cooperate in the Company's efforts to obtain such commitment.
(b) The Company hereby represents and warrants to the
Purchaser that
<PAGE>
(i) this Waiver and Amendment Agreement and the Replacement Warrant have been
duly authorized by all necessary corporate action, (ii) this Waiver and
Amendment Agreement has been, and the Replacement Warrant will be, duly executed
and delivered by the Company and (iii) this Waiver and Amendment Agreement is,
and the Replacement Warrant when issued, executed and delivered as contemplated
herein will be, the legal, valid and binding obligations of the Company, in each
case enforceable against the Company in accordance with their respective terms,
except, in each of the foregoing cases, as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, or other laws
relative to or affecting the enforcement of creditors' rights generally in
effect from time to time and by general principles of equity.
(c) The Company hereby represents and warrants to the
Purchaser that, other than the occurrence which is being waived under Section 1
above, as of the date hereof no Default or Event of Default has occurred and is
continuing.
SECTION 4. Continuing Effectiveness of Purchase Agreement. Except as
expressly provided herein, no other provision of the Purchase Agreement is
amended hereby. The Purchase Agreement, as amended hereby, is and shall continue
in full force and effect in accordance with the provisions thereof, and this
Waiver and Amendment Agreement shall not by implication or otherwise limit,
impair, constitute a waiver of, or otherwise affect the rights and remedies of
the Purchaser under the Purchase Agreement. This Waiver and Amendment Agreement
shall be effective only in the specific instances and for the purpose for which
it is given and shall be limited precisely as written and shall not constitute a
waiver of any other provision of the Purchase Agreement or a waiver of the
Purchase Agreement for any other purpose or for any other period.
SECTION 5. Cost and Expenses. The Company agrees to pay all
out-of-pocket expenses of the Purchaser for the negotiation, preparation,
execution and delivery of this Waiver and Amendment Agreement (including fees
and expenses of Stroock & Stroock & Lavan LLP, counsel to the Purchaser).
SECTION 6. Effectiveness. This Waiver and Amendment Agreement shall
become effective on the date (the "Amendment Effective Date") when each of the
following conditions have been satisfied:
(a) a copy of this Waiver and Amendment Agreement shall have
been duly executed by each of the Company and the Purchaser and
delivered to the Purchaser; and
(b) delivery to the Purchaser of the Replacement Warrant, duly
executed by the Company, against delivery of the current warrant
certificate.
<PAGE>
SECTION 7. Headings. The various headings of this Waiver and Amendment
Agreement are inserted for convenience only and shall not affect the meaning or
interpretation of this Waiver and Amendment Agreement or any provision hereof.
SECTION 8. Counterparts. This Waiver and Amendment Agreement may be
executed in two or more counterparts, each of which shall be deemed an original
but all of which shall together constitute one and the same instrument.
SECTION 9. References. From and after the Amendment Effective Date, the
term "this Agreement" and the expressions "hereunder and "herein", and words of
similar import when used in or with respect to the Purchase Agreement shall mean
the Purchase Agreement as amended by this Waiver and Amendment Agreement.
SECTION 10. Governing Law. THIS WAIVER AND AMENDMENT AGREEMENT SHALL
BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the Company and the Purchaser have caused this
Waiver and Amendment Agreement to be executed by their duly authorized officers
as of the date first written above.
MERIDIAN MEDICAL TECHNOLOGIES, INC.
By: \S\ James H. Miller
------------------------------------------
Its: President and Chief Executive Officer
NOMURA HOLDING AMERICA, INC.
By: \S\ Salvatore Gentile
------------------------------------------
Its: Attorney-in-fact
MERIDIAN MEDICAL TECHNOLOGIES, INC.
FORM 10-K
JULY 31, 1999
Exhibit 23.1
CONSENT OF 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 prospectuses of Meridian Medical Technologies, Inc. or its
predecessor, Survival Technology, Inc. of our report dated October 22, 1999,
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, 1999.
/s/ Ernst & Young LLP
Washington DC
October 22, 1999
Exhibit 24.0
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned directors
(each, a "Signatory") of Meridian Medical Technologies, Inc., a corporation
organized under the laws of the state of Delaware (the "Company"), hereby
constitutes and appoints James H. Miller, Dennis O'Brien and Michael McGuire
(each, an "Agent", and collectively, "Agents") or any of them, his true and
lawful attorney-in-fact and agent for and in his name, place and stead, in any
and all capacities, to sign the Company's Annual Report on Form 10-K for the
year ended July 31, 1999 and to file the same, with all exhibits thereto, and
all other documents in connection therewith, with the Securities and Exchange
Commission. Each Signatory further grants to the Agents, and each of them, full
power and authority to do and perform each and every act and thing requisite and
necessary, in the judgment of such Agent, to be done in connection with any such
signing and filing, as full to all intents and purposes as he might or could do
in person, and hereby ratifies and confirms all that said Agents, or any of
them, may lawfully do or cause to be done by virtue hereof.
This Power of Attorney may be executed simultaneously in one or more
counterparts, each of which shall be deemed an original, but all of which
constitute but one and the same instrument.
Signature Date
\S\ James H. Miller
____________________________ September 28, 1999
James H. Miller
\S\ Bruce M. Dresner
____________________________ September 28, 1999
Bruce M. Dresner
\S\ Robert G. Foster
____________________________ September 28, 1999
Robert G. Foster
\S\ E. Andrews Grinstead, III
____________________________ September 28, 1999
E. Andrews Grinstead, III
\S\ David L. Lougee
____________________________ September 28, 1999
David L. Lougee
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000095676
<NAME> Meridian Medical Technologies, Inc.
<MULTIPLIER> 1,000
<CURRENCY> US Dollars
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1999
<PERIOD-START> AUG-1-1998
<PERIOD-END> JUL-31-1999
<EXCHANGE-RATE> 1.000
<CASH> 505
<SECURITIES> 0
<RECEIVABLES> 10,024
<ALLOWANCES> (467)
<INVENTORY> 6,889
<CURRENT-ASSETS> 20,233
<PP&E> 21,407
<DEPRECIATION> (5,581)
<TOTAL-ASSETS> 47,751
<CURRENT-LIABILITIES> 15,860
<BONDS> 17,582
0
0
<COMMON> 299
<OTHER-SE> 11,439
<TOTAL-LIABILITY-AND-EQUITY> 47,751
<SALES> 40,730
<TOTAL-REVENUES> 40,730
<CGS> (28,020)
<TOTAL-COSTS> (28,020)
<OTHER-EXPENSES> (11,423)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (3,367)
<INCOME-PRETAX> (1,740)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,740)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,740)
<EPS-BASIC> (0.58)
<EPS-DILUTED> (0.58)
</TABLE>
