-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FZhSabBGRzEVT1WX1BgG65PNtKFR3dXmsGx9QCTojumcWC4wQUBNUQ2YEnfYc0Kf dDxznRxU4jqCrcLTTc0pGw== 0000897101-97-000832.txt : 19970806 0000897101-97-000832.hdr.sgml : 19970806 ACCESSION NUMBER: 0000897101-97-000832 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970805 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ROCHESTER MEDICAL CORPORATION CENTRAL INDEX KEY: 0000868368 STANDARD INDUSTRIAL CLASSIFICATION: SURGICAL & MEDICAL INSTRUMENTS & APPARATUS [3841] IRS NUMBER: 411613227 STATE OF INCORPORATION: MN FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-18933 FILM NUMBER: 97651706 BUSINESS ADDRESS: STREET 1: 1500 SECOND AVE N W CITY: STEWARTVILLE STATE: MN ZIP: 55976 BUSINESS PHONE: 5075334203 MAIL ADDRESS: STREET 1: 1500 SECOND AVE NW CITY: STEWARTVILLE STATE: MN ZIP: 55976 10-Q 1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997 COMMISSION FILE NUMBER: 0-18933 ROCHESTER MEDICAL CORPORATION (Exact name of small business issuer as specified in its charter) MINNESOTA 41-1613227 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 1500 SECOND AVENUE N. W., STEWARTVILLE, MN 55976 (Address of principal executive offices) (507) 533-4203 Issuer's Telephone Number Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes __X__ No _____ Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date: 4,133,500 Common Shares as of August 4, 1997. ================================================================================ ROCHESTER MEDICAL CORPORATION REPORT ON FORM 10-QSB FOR QUARTER ENDED JUNE 30, 1997
TABLE OF CONTENTS PART I FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Balance Sheets -- June 30, 1997 and September 30, 1996 ................... 1 Statements of Operations -- Three months ended June 30, 1997 and 1996; Nine months ended June 30, 1997 and 1996 ................................. 2 Statements of Cash Flows -- Nine months ended June 31, 1997 and 1996 ..... 3 Notes to the Financial Statements ........................................ 4 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ................................................... 5 PART II OTHER INFORMATION ........................................................ 8
PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
ROCHESTER MEDICAL CORPORATION BALANCE SHEETS JUNE 30, SEPTEMBER 30, 1997 1996 ------------ ------------ ASSETS CURRENT ASSETS: Cash and Cash Equivalents .............................. $ 3,714,281 $ 8,394,607 Marketable Securities .................................. 7,341,472 9,013,522 Accounts Receivable .................................... 1,279,584 1,513,577 Inventories ............................................ 1,526,047 1,191,283 Prepaid Expenses And Other Assets ...................... 220,704 84,194 ------------ ------------ TOTAL CURRENT ASSETS .................................. 14,082,088 20,197,183 PROPERTY AND EQUIPMENT Land and Buildings ..................................... 4,366,957 815,075 Equipment and Fixtures ................................. 5,856,618 3,929,507 ------------ ------------ 10,223,575 4,744,582 Less: Accumulated Depreciation ......................... (1,753,448) (1,432,257) ------------ ------------ TOTAL PROPERTY AND EQUIPMENT .......................... 8,470,127 3,312,325 INTANGIBLE ASSETS Patents, Less Accumulated Amortization ................. 352,325 378,232 ------------ ------------ TOTAL ASSETS .......................................... $ 22,904,540 $ 23,887,740 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts Payable ....................................... $ 724,165 $ 957,951 Accrued Expenses ....................................... 833,184 377,813 ------------ ------------ TOTAL CURRENT LIABILITIES ............................. 1,557,349 1,335,764 LONG-TERM DEBT ........................................... 3,534,375 3,320,625 SHAREHOLDERS' EQUITY Common Stock, no par value: Authorized -- 20,000,000 Issued and Outstanding Shares -- 4,133,500 -- June, 1997 and 4,127,500 -- Sept, 1996 ............................ 24,697,199 24,648,913 Accumulated Deficit .................................... (6,884,383) (5,417,562) ------------ ------------ TOTAL SHAREHOLDERS' EQUITY ............................. 17,812,816 19,231,351 ------------ ------------ TOTAL LIABILITIES & SHAREHOLDERS' EQUITY ............... $ 22,904,540 $ 23,887,740 ============ ============ - --------------------------- Note -- The Balance Sheet at September 30, 1996 was derived from the audited financial statements at that date, but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. See Notes to Financial Statements
ROCHESTER MEDICAL CORPORATION STATEMENTS OF OPERATIONS (UNAUDITED) THREE MONTHS ENDED JUNE 30, NINE MONTHS ENDED JUNE 30, 1997 1996 1997 1996 ----------- ----------- ----------- ----------- NET SALES .................... $ 2,019,752 $ 1,710,603 $ 5,491,128 $ 3,753,254 Cost Of Sales ................ 1,287,362 1,119,326 3,469,325 2,599,363 ----------- ----------- ----------- ----------- GROSS PROFIT ................. 732,390 591,277 2,021,803 1,153,891 COSTS AND EXPENSE: Marketing and Selling ...... 589,654 388,485 1,562,267 940,747 Research and Development ... 344,594 422,974 1,144,230 819,547 General and Administrative . 411,820 257,861 1,099,312 659,835 ----------- ----------- ----------- ----------- TOTAL OPERATING EXPENSES 1,346,068 1,069,320 3,805,809 2,420,129 ----------- ----------- ----------- ----------- LOSS FROM OPERATIONS ......... (613,678) (478,043) (1,784,006) (1,266,238) OTHER INCOME (EXPENSE): Interest Income ............ 150,022 229,984 530,935 589,624 Interest Expense ........... (71,338) (71,250) (213,750) (213,916) ----------- ----------- ----------- ----------- TOTAL OTHER INCOME (EXP) 78,684 158,734 317,185 375,708 ----------- ----------- ----------- ----------- NET LOSS ..................... $ (534,994) $ (319,309) $(1,466,821) $ (890,530) =========== =========== =========== =========== NET LOSS PER COMMON SHARE .... $ (0.13) $ (0.08) $ (0.36) $ (0.24) =========== =========== =========== =========== WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING ... 4,133,500 4,047,500 4,130,900 3,786,200 =========== =========== =========== =========== See Notes to Financial Statements
ROCHESTER MEDICAL CORPORATION STATEMENTS OF CASH FLOWS (UNAUDITED) NINE MONTHS ENDED JUNE 30, ----------------------------- 1997 1996 ------------ ------------ OPERATING ACTIVITIES Net Loss ....................................... $ (1,466,821) $ (890,530) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization ................. 405,069 339,240 Changes in operating assets and liabilities: Accounts Receivable ......................... 233,993 (596,190) Inventories ................................. (334,764) (327,689) Other Current Assets ........................ (136,510) 295,130 Accounts Payable ............................ (233,786) 220,215 Other Current Liabilities ................... 455,371 56,553 ------------ ------------ NET CASH USED IN OPERATING ACTIVITIES ............ (1,077,448) (903,271) INVESTING ACTIVITY Capital expenditures .......................... (5,478,992) (329,860) Patents ....................................... (57,972) (79,776) Marketable Securities ......................... 1,672,049 (4,559,284) ------------ ------------ NET CASH USED IN INVESTING ACTIVITIES ............ (3,864,915) (4,968,920) FINANCING ACTIVITIES Interest Expense Added To Note Payable ........ 213,750 213,750 Proceeds from Sale of Common Stock ............ 48,287 16,217,393 ------------ ------------ NET CASH PROVIDED BY FINANCING ACTIVITIES ........ 262,037 16,431,143 ------------ ------------ (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS ..................................... (4,680,326) 10,558,952 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ....................................... 8,394,607 551,142 ------------ ------------ CASH AND CASH EQUIVALENTS AT END OF PERIOD ....... $ 3,714,281 $ 11,110,094 ============ ============ See Notes to Financial Statements
ROCHESTER MEDICAL CORPORATION NOTES TO FINANCIAL STATEMENTS (Unaudited) June 30, 1997 NOTE A -- BASIS OF PRESENTATION The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. These financial statements should be read in conjunction with the financial statements and related notes included in the Company's 1996 Form 10-KSB. In the opinion of management, all adjustments (consisting only of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine month period ended June 30, 1997 are not necessarily indicative of the results that may be expected for the year ending September 30, 1997. NOTE B -- NET LOSS PER SHARE Net loss per share is computed using the weighted average number of common shares outstanding during the period. Common equivalent shares from stock options and convertible debt are excluded from the computation as their effect is antidilutive. In February 1997, the Financial Accounting Standards Board (FASB) issued FASB Statement No. 128, "Earnings Per Share". This Statement replaces the presentation of primary earnings per share (EPS) with basic EPS and also requires dual presentation of basic and diluted EPS for entities with complex capital structures. This statement is effective for financial statements for periods ending after December 15, 1997. For the quarter ended the nine-month period ended June 30, 1997, there is no difference between the basic loss share under Statement No. 128 and net loss per share as reported. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS INTRODUCTION The Company designs, develops, manufactures and markets disposable latex-free continence care and other urological devices. The Company markets its products under its own ROCHESTER MEDICAL(R) brand and through private label arrangements, including its strategic marketing alliance with ConvaTec, a division of the Bristol-Myers Squibb Company. RESULTS OF OPERATIONS The following table sets forth, for the fiscal periods indicated, certain items from the statements of operations of the Company expressed as a percentage of net sales. THREE MONTHS NINE MONTHS ENDED ENDED JUNE 30 JUNE 31 -------------- -------------- 1997 1996 1997 1996 ---- ---- ---- ---- Net Sales Private Label .............. 75% 86% 78% 81% ROCHESTER MEDICAL Brand .... 25% 14% 22% 19% ---- ---- ---- ---- Total Net Sales ............. 100% 100% 100% 100% Cost of Sales ............... 64% 65% 63% 69% ---- ---- ---- ---- Gross Margin ................ 36% 35% 37% 31% Operating Expenses Marketing and Selling ...... 29% 23% 28% 25% Research and Development ... 17% 25% 21% 22% General and Administrative . 20% 15% 20% 18% ---- ---- ---- ---- Total Operating Expenses .... 67% 63% 69% 65% Loss From Operations ........ (30)% (28)% (32)% (34)% Interest Income (Expense) Net 4% 9% 6% 10% ---- ---- ---- ---- Net Loss .................... (26)% (19)% (27)% (24)% === === === === THREE MONTH AND NINE MONTH PERIODS ENDED JUNE 30, 1997 AND JUNE 30, 1996 NET SALES. Net Sales increased 18% to $2,019,752 for the third quarter of fiscal 1997 from $1,710,603 for the third quarter of fiscal 1996. The Company experienced strong sales in its strategic growth segments, namely sales of Company branded products and sales to ConvaTec. Sales of ROCHESTER MEDICAL(R) brand products grew at a rate of 112% during the current quarter compared to last year's comparable quarter. Sales to ConvaTec grew at the rate of 385% for the same period. Sales to Mentor grew at the rate of 38% for the same period. Other private label sales, besides sales to Mentor, were below the comparable period of the prior year. Net Sales increased 46% to $5,491,128 for the nine months ended June 30, 1997, from $3,753,254 for the comparable nine months of the prior year. Progressive growth in branded product sales and sales to ConvaTec account for the increase. Sales of ROCHESTER MEDICAL(R) brand products grew at a rate of 72% during the current nine months compared to last year's comparable period, while sales to ConvaTec grew at the rate of 349% for the same period. Other private label sales, inclusive of sales to Mentor, were relatively flat for the period. GROSS MARGIN. The Company's gross margin as a percentage of net sales was 36% for the third quarter of fiscal 1997 compared with 35% for the third quarter of fiscal 1996. The Company's gross margin during the current quarter is in line with recent trend and reflects product mix with slightly higher material costs. The Company's gross margin as a percentage of net sales was 37% for the nine months ended June 30, 1997 compared with 31% for the nine months ended June 30, 1996. Year to date margins have benefited from manufacturing efficiencies associated with higher production volumes. MARKETING AND SELLING. Marketing and selling expense increased 52% to $589,654 for the third quarter of fiscal 1997 from $388,485 for the third quarter of fiscal 1996 due to expansion of domestic field sales force for branded products. Marketing and selling expense increased 66% to $1,562,267 for the nine months ended June 30, 1997 from $940,747 for the nine months ended June 30, 1996, The increased expense reflects expansion of the domestic field sales force and increased product promotion spending year to date. RESEARCH AND DEVELOPMENT. Research and development expense decreased 19% to $344,594 for the third quarter of fiscal 1997 from $422,974 for the third quarter of fiscal 1996. The decrease is due to the completion of clinical studies of the Company's Antibacterial Foley catheter. Research and development expense increased 40% to $1,144,230 for the nine months ended June 30, 1997 from $819,547 for the nine months ended June 30, 1996, due to costs of clinical studies of the FEMSOFT(TM) insert. GENERAL AND ADMINISTRATIVE. General and administrative expense increased 60% to $411,820 for the third quarter of fiscal 1997 from $257,861 for the third quarter of fiscal 1996. The expense increase relates to spending requirements for business and administrative infrastructure development to support current and anticipated growth. General and administrative expense increased 67% to $1,099,312 for the nine months ended June 30, 1997 from $659,835 for the nine months ended June 30, 1996, due to the factors noted above for the current quarter. INTEREST INCOME (EXPENSE). Interest income decreased to $150,022 for the third quarter of fiscal 1997 from $229,984 for the third quarter of fiscal 1996, and to $530,935 for the nine months ended June 30, 1997, from $589,624 for the nine months ended June 30, 1996, as a result of earnings on lower levels of cash available for investment. Interest expense remained constant for the three and nine month periods. The interest expense relates to the $3 million convertible subordinated loan from ConvaTec. LIQUIDITY AND CAPITAL RESOURCES The Company's cash and marketable securities at June 30, 1997 were $11,055,753 compared to $17,408,129 at September 30, 1996, a net decrease of $6,352,376. Cash of $5,478,992 was used for capital expenditures during the current nine month period relating to expansion of the existing production facility and construction of the Company's new production and administrative facility. Substantially all of the remaining cash used was to fund operating activities. Trade accounts receivable at June 30, 1997 decreased 15% to $1,279,584 as compared to September 30, 1996, reflecting an increased focus on collection activities. Inventories increased 28% to $1,526,047 as compared to September 30, 1996, reflecting anticipated future sales. Changes in other asset and liability balances relate primarily to timing of expense recognition, including an increase of $300,000 of accrued clinical project costs. BUSINESS OUTLOOK The following discussion contains forward looking statements that involve risks and uncertainties, including the timing of purchases by customers, manufacturing capacities for both current products and new products, the timing of clinical preference testing and product introductions, FDA review and response times, the timing and ultimate outcome of clinical tests, the scope and effect of patent opinions, as well as other risk factors listed from time to time in the Company's SEC reports, including, without limitation, the sections entitled "Business Outlook" and "Risk Factors" in the Company's Annual Report on Form 10-KSB (Part II, Item 6) for the year ended September 30, 1996. Strong growth in sales of ROCHESTER MEDICAL(R) brand products reflects expanded international distribution, and an expanding domestic account base resulting from implementation of the Company's marketing strategy for the domestic health care market. The Company anticipates continued growth in branded product sales. The Company also anticipates continued growth in sales to ConvaTec as ConvaTec further develops its world-wide markets for incontinence products. Other private label sales fluctuate by customer from quarter to quarter, with the overall trend presently appearing to be relatively flat. The Company recently received ISO 9001/EN 46001 Certification documenting the Company's compliance with international quality system standards, including requirements for use of the CE mark which become mandatory in 1998 for marketing medical products in the European Economic Community. The Company is awaiting formal FDA response to a 510(K) Premarket Notification under which the Company seeks marketing approval for its Antibacterial Foley catheter. The filing is based on clinical tests conducted at the University of Wisconsin which show a three-fold reduction in catheter induced bacterial urinary tract infections as compared to a control catheter in a large, prospective, randomized, double-blinded study. In addition to a lower rate of bacterial infections, the patient group using the Antibacterial catheter had a lower number of infections from bacterial strains likely to be resistant to antibiotics. The Company expects to receive formal FDA response in due course. The Company's clinical study of its FEMSOFT(TM) female continence insert is proceeding at eight clinical sites throughout the US with encouraging results to date. The Company's installation of automated manufacturing capacity for liquid encapsulation at its new manufacturing facility, and the plant expansion for manufacturing male external catheters both continue on schedule and will both become operational later this year. The Company intends to address the prospect of additional financing when appropriate from a timing and valuation standpoint. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The Company is not a party to any material legal proceedings. ITEM 2. CHANGES IN SECURITIES Not Applicable. ITEM 3. DEFAULTS UPON SENIOR SECURITIES Not Applicable ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None ITEM 5. OTHER INFORMATION None ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: 10.13 First Amendment to Amended UF Catheter Exclusive OEM/Private Label Agreement dated May 7, 1997, between the Company and Hollister Incorporated 27 Financial Data Schedule (b) Reports on Form 8-K: None SIGNATURES In accordance with the requirements of the Exchange Act, the registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Rochester Medical Corporation Date: August 5, 1997 By: /s/ ANTHONY J. CONWAY -------------------------------------------- Anthony J. Conway Chief Executive Officer Date: August 5, 1997 By: /s/ BRIAN J. WIERZBINSKI -------------------------------------------- Brian J. Wierzbinski Chief Financial Officer Exhibits Page ---- 10.13 First Amendment to Amended UF Catheter Exclusive OEM/Private Label Agreement dated May 7, 1997, between the Company and Hollister Incorporated. 27 Financial Data Schedule EX-10.13 2 FIRST AMENDMENT Exhibit 10.13 FIRST AMENDMENT TO AMENDED UF CATHETER EXCLUSIVE OEM/PRIVATE LABEL AGREEMENT THIS FIRST AMENDMENT TO AMENDED UF CATHETER EXCLUSIVE OEM/PRIVATE LABEL AGREEMENT ("Amendment") is made this seventh day of May l997 between ROCHESTER MEDICAL CORPORATION, a Minnesota corporation (herein, "RMC") and HOLLISTER INCORPORATED, an Illinois corporation (herein, "HOLLISTER"). RECITALS: Whereas, RMC and HOLLISTER are parties to an Amended UF Catheter Exclusive OEM Private Label Agreement dated March 18, 1994 (the "1994 Agreement"); and Whereas, Section 3.2 of 1994 Agreement provides that RMC and HOLLISTER shall negotiate in good faith for the extension of the 1994 Agreement for a Successive Term of three (3) years commencing May 1, 1998. Whereas, the provisions of Section 3.2 of the 1994 Agreement to the contrary notwithstanding, the parties desire to record their agreement to extend the 1994 Agreement for a first Successive Term of four (4) years upon the terms and conditions set forth in this Amendment. NOW, THEREFORE, the parties hereby agree as follows; SECTION 1 DEFINITIONS: Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the 1994 Agreement, as amended herein. SECTION 2 TERM 2.1 The 1994 Agreement is hereby extended for a first Successive Term (the "First Successive Term") commencing May 1, 1998 and expiring April 30, 2002. 2.2 Any further extension of the 1994 Agreement shall be made in accordance with Section 3.2 thereof, and shall be for the Successive Term(s) of three (3) years each, unless the parties otherwise expressly agree in the future to a different duration for any Successive Term. SECTION 3 PURCHASES; PRICES; ORDERS; FULFILLMENT 3.1. Purchases. During the First Successive Term, HOLLISTER shall purchase Non-Latex Male External Catheters from RMC as provided herein. 3.1.1. During the First Successive Term, HOLLISTER shall purchase from RMC all of HOLLISTER's requirements of Non-Latex Male External Catheters. 3.1.2. During the First Successive Term, HOLLISTER shall purchase from RMC a minimum of Four Million (4,000,000) UF Catheters (the "Overall Quota") at the rate of at least One Million (1,000,000) Catheters per year (the "Annual Quota"). HOLLISTER shall purchase the Annual Quota in increments of at least Two Hundred Thousand (200,000) UF Catheters per Term Quarter. 3.1.3. HOLLISTER's obligation to purchase any part of the Annual Quota of UF Catheters during the First Successive Term shall be abated during the pendency of an Extenuating Circumstance. The amount of abatement in any Term Year shall be equal to the Annual Quota multiplied by a fraction whose denominator is three hundred sixty-five (365) and whose numerator is the number of days of duration of the Extenuating Circumstance during that same Term Year. 3.1.4. The provisions of ss.4.1.1 of the 1994 Agreement to the contrary notwithstanding, HOLLISTER may acquire, manufacture and/or sell from a source other than RMC, including HOLLISTER itself, another or different non-latex male external catheter(s) having an integral adhesive means upon twelve (12) months' prior notice to RMC and payment to RMC of an amount (the "Amount") equal to one hundred ten percent (110%) of the then current remaining Overall Quota. HOLLISTER may elect to pay the Amount to RMC in cash or to apply the Amount toward the purchase of UF Catheters at their then current Transfer Price(s) or toward the purchase of Sheaths at the then agreed price (if HOLLISTER and RMC have by then agreed to terms and prices for Sheaths). HOLLISTER may pay the Amount over the duration of the First Successive Term, or such other time as the parties agree (the "Termination Period"). Payment of the Amount shall be in lieu of, and not in addition to, HOLLISTER's purchase obligations. Upon HOLLISTER's notice of intent to sell such other non-latex male external catheter(s) having an integral adhesive means, HOLLISTER shall relinquish its exclusive rights set forth in ss.2.1 of the 1994 Agreement, and RMC shall be immediately released from the limitations on it set forth in ss.2.2 and ss.2.3 of the 1994 Agreement, but RMC shall continue to fill HOLLISTER's purchase orders, if any, during the Termination Period. Upon payment of the Amount or the expiration of the Termination Period, whichever comes first, RMC shall be relieved of any further obligation to sell any Non-Latex Male External Catheters to HOLLISTER, and HOLLISTER shall be relieved of any further obligation to purchase any Non-Latex Male External Catheters from RMC. 3.2. Purchase Orders. By April 15, 1998, and by the fifteenth (15th) day of the first month of each Term Quarter thereafter during the First Successive Term, HOLLISTER shall provide to RMC a purchase order ("Quarterly Order") for HOLLISTER's UF Catheter requirements for the immediately following Term Quarter. HOLLISTER may furnish RMC, from time to time, with additional or supplemental purchase orders ("Supplemental Order") for delivery within the same Term Quarter during which such Supplemental Orders are given. RMC will use its best efforts to fill Supplemental Orders within the same Term Quarter as received. By the first day of each Term Quarter, RMC shall furnish HOLLISTER with a shipment schedule for such Term Quarter showing estimated quantities and shipment dates for deliveries during such Term Quarter and, subject to RMC's production schedule, reasonably accommodating HOLLISTER's requested shipment schedule. 3.3. Order Fulfillment. RMC will fulfill HOLLISTER's Quarterly Orders in three (3) or fewer shipments, depending on RMC's manufacturing schedule for the applicable Term Quarter, and consistently with the previously furnished shipment schedule. Provided HOLLISTER is not then in breach of any of its obligations under the 1994 Agreement, as amended herein, RMC will not place any Quarterly Order or Supplemental Order received from HOLLISTER on a back-order status if RMC is then manufacturing the same size and types of UF Catheters for its own customers. In the event of manufacturing capacity constraints, RMC shall allocate UF Catheter production reasonably among customers. Provided, further, that if HOLLISTER's Quarterly Order and Supplemental Orders, in the aggregate, for delivery in any Term Quarter are reasonably consistent as to sizes and quantities with its prior purchases during preceding Term Quarters, then, in the event that RMC is unable to fill any HOLLISTER Quarterly or Supplemental Orders (i) within thirty (30) days following the end of the Term Quarter for which a Quarterly Order was placed or (ii) within thirty (30) days following the end of the Term Quarter succeeding the Term Quarter in which a Supplemental Order was placed, then HOLLISTER shall be relieved prorata of its purchase obligation under this Amendment to the extent of the unfilled Quarterly or Supplemental Orders remaining unshipped at the expiration of those respective periods. Notwithstanding the foregoing, RMC shall only be required to use its best efforts to fill such portions of any Quarterly or Supplemental Order that, alone or when aggregated with all other Quarterly or Supplemental Orders received for delivery in any Term Quarter during the First Successive Term, is greater than Four Hundred Thousand (400,000) UF Catheters, and HOLLISTER shall not be relieved of any purchase obligation for a Term Quarter under this Amendment for undelivered UF Catheters in excess of Four Hundred Thousand (400,000) UF Catheters ordered for delivery in any Term Quarter. 3.4. Forecasts. During the First Successive Term, no forecasts are required under Section 4.4 of the 1994 Agreement. SECTION 4. NOTICES The addresses for notices specified in Section 14.1 of the 1994 Agreement are hereby designated as follows: Anthony J. Conway, President Rochester Medical Corporation One Rochester Medical Drive Stewartville, Minnesota 55976 Telefacsimile Number: (507) 533-9725 Jerome A. Saxon, Secretary Hollister Incorporated 2000 Hollister Drive Libertyville, Illinois 60048 Telefacsimile Number: (847) 918-3494 SECTION 5. CONTINUATION The 1994 Agreement, as amended herein and except as otherwise inconsistent with the terms hereof, shall continue in full force and effect during the First Successive Term. Paragraphs one (1) through five (5) inclusive and paragraph nine (9) of that Supplemental Agreement dated March 18, 1994, shall continue in full force and effect during the First Successive Term. IN WITNESS WHEREOF, each of the parties has caused this Amendment to be executed by its duly authorized representatives as of the day and year first above written. ROCHESTER MEDICAL CORPORATION, HOLLISTER INCORPORATED, a Minnesota corporation an Illinois corporation By: /s/ Anthony J. Conway By: /s/ Lew Fisher ------------------------------- ------------------------------ Anthony. J. Conway Lew Fisher, President and Secretary Senior Group Vice President ATTEST: ATTEST: By: /s/Brian J. Wierzbinski By: /s/ Jerome A. Saxon ------------------------------- ------------------------------ Brian J. Wierzbinski Jerome A. Saxon Chief Financial Officer Secretary EX-27 3 FINANCIAL DATA SCHEDULE
5 YEAR SEP-30-1997 APR-01-1997 JUN-30-1997 3,714,281 7,341,472 1,338,584 59,000 1,526,045 14,082,088 10,223,575 1,753,448 22,904,540 1,557,348 0 0 0 24,697,199 0 22,904,540 5,491,128 5,491,128 3,469,325 7,275,134 0 (1,784,006) 213,750 0 0 0 0 0 0 (1,466,821) (0.36) (0.36)
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